67
BANK OF GEORGIA GROUP PLC Investor Presentation 1Q19 Financial Results 14 May 2019 www.bankofgeorgiagroup.com
BANK OF GEORGIA GROUP PLC
Investor Presentation 1Q19 Financial Results
14 May 2019
www.bankofgeorgiagroup.com
DISCLAIMER – FORWARD LOOKING STATEMENTS
2
This presentation contains forward-looking statements, including, but not limited to, statements concerning expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, competitive strengths and weaknesses, plans or goals relating to financial position and future operations and development. Although Bank of Georgia Group PLC believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct. By their nature, these forward-looking statements are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ materially from those currently being anticipated as reflected in such statements. Important factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements, certain of which are beyond our control, include, among other things: currency fluctuations, including depreciation of the Georgian Lari, and macroeconomic risk; regional tensions and instability; loan portfolio quality; regulatory risk; liquidity risk; operational risk, cyber security, information systems and financial crime risk; and other key factors that indicated could adversely affect our business and financial performance, which are contained elsewhere in this document and in our past and future filings and reports of the Group, including the 'Principal Risks and Uncertainties' included in Bank of Georgia Group PLC's Annual Report and Accounts 2018. No part of this presentation constitutes, or shall be taken to constitute, an invitation or inducement to invest in Bank of Georgia Group PLC or any other entity within the Group, and must not be relied upon in any way in connection with any investment decision. Bank of Georgia Group PLC and other entities within the Group undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required. Nothing in this presentation should be construed as a profit forecast.
CONTENTS
Results Discussion
Appendices
Georgian Macro Overview
Group Overview
3
8
52
31
4
Rank Shareholder name Ownership
1 JSC Georgia Capital* 19.90%
2 Harding Loevner LP 4.58%
3 JP Morgan Asset Management 3.11%
4 Dimensional Fund Advisors (DFA) 2.69%
5 Norges Bank Investment Management 2.65%
6 LGM Investments Ltd 2.51%
7 Van Eck Global 2.51%
8 Jupiter Asset Management 2.43%
9 Vanguard Group Inc 2.36%
10 Grandeur Peak Global Advisors LLC 2.06%
Top shareholders
BANK OF GEORGIA GROUP OVERVIEW
4
As of 31 March 2019
The Group has been included
in the FTSE 250 and
FTSE All-share Index Funds
since 18 June 2012
As of 31 March 2019
* JSC Georgia Capital will exercise its voting rights at the Group’s general meetings in accordance with the votes cast by all other Group Shareholders, as long as JSC Georgia Capital’s percentage holding in Bank of Georgia Group PLC is greater than 9.9%
** Includes 19.9% shareholding of JSC Georgia Capital
Shareholder structure
Banking Business
Corporate Investment
Banking
Retail Banking
Wealth Management
BNB (Bank in Belarus)
2%
1%
29%
26%6%
7%
29%
Unvested and unawarded shares
for management and employees
Vested shares held by
management and employees
US
UK/Ireland
Scandinavia
Luxembourg
Other**
5172 80
98 102122 124
3.1%2.7%
3.1% 3.2% 2.4%
4.0% 4.2%
2013 2014 2015 2016 2017 2018 2019
Total dividend paid during the year Dividend yield***
DELIVERING ON GROUP STRATEGY
5
SUCCESSFUL TRACK RECORD OF DELIVERING STRONG RESULTS
BANKING BUSINESS KEY TARGETS
ROAE 20%+
1 Loan book
growth 15%-20%
2
Robust Capital
Management Track
Record
Regular Dividends
Capital position: We aim to maintain +200bps buffer for CET1 and Tier 1 ratios over minimum regulatory requirement
Maintain regular dividend payouts: Aiming 25-40% dividend payout ratio
GEL 500mln+ cash dividend paid since 2013, with payout ratio above 30% over past 6 years
Management trust buybacks: GEL 52.0mln share buy-backs in 2018
✓
* 2018 ROAE adjusted for GEL 30.3mln demerger related costs, GEL 8.0mln demerger related corporate income tax gain, GEL 30.3mln one-off impact of re-measurement of deferred tax balances and GEL 3.9mln (net of income tax) termination costs of the former CEO
** 1Q19 ROAE adjusted for GEL 10.2mln (net of income tax) termination costs of the former CEO and executive management *** Dividend yield for 2013-2018 years is calculated based on the closing price of the shares immediately prior to ex-dividend date. Dividend yield for 2019 is calculated based
on the closing price of the shares on 10 May 2019
3
Payout ratio:
30% 36% 33% 34% 32% 30%
GE
L m
illio
ns
30%
24.5% 15.9%
21.4% 22.4%
2016 2017 2018 1Q19
22.2%
25.2%26.4%
24.5%
2016 2017 2018* 1Q19**
RESULTS HIGHLIGHTS*
6
Income Statement | Quarterly ** Banking Business
GEL thousands unless otherwise noted 1Q19 1Q18 Change
y-o-y 4Q18
Change
q-o-q
Net interest income 182,941 180,249 1.5% 187,438 -2.4%
Net fee and commission income 42,180 34,511 22.2% 41,344 2.0%
Net foreign currency gain 30,025 14,253 110.7% 53,358 -43.7%
Net other income / (expense) 3,568 5,744 -37.9% (9,073) NMF
Operating income 258,714 234,757 10.2% 273,067 -5.3%
Operating expenses (91,927) (87,379) 5.2% (100,857) -8.9%
Profit from associates 188 318 -40.9% 318 -40.9%
Operating profit before cost of risk 166,975 147,696 13.1% 172,528 -3.2%
Cost of risk (42,652) (33,813) 26.1% (40,778) 4.6%
Net operating profit before non-recurring items and income tax 124,323 113,883 9.2% 131,750 -5.6%
Net non-recurring items (1,575) (2,948) -46.6% (2,185) -27.9%
Profit before income tax expense and one-off termination costs 122,748 110,935 10.6% 129,565 -5.3%
Income tax expense (10,536) (9,283) 13.5% (10,888) -3.2%
Profit adjusted for one-off termination costs 112,212 101,652 10.4% 118,677 -5.4%
One-off termination costs of former CEO and executive
management (after tax) (10, 240) - NMF (3,861) NMF
Profit 101,972 101,652 0.3% 114,816 -11.2%
* The detailed financials of the Group are provided on pages 54-55 ** The income statement adjusted profit excludes GEL 10.2mln in 1Q19 (4Q18: GEL 3.9mln) one-off employee costs (net of income tax) related to former CEO and executive management
termination benefits. The amount is comprised of GEL 4.0mln (gross of income tax) excluded from non-recurring items (4Q18: GEL 4.4mln) and GEL 7.8mln (gross of income tax) excluded from salaries and other employee benefits. 1Q19 and 4Q18 ROAE and ROAA have been adjusted accordingly. Full IFRS income statement is presented on page 54
*** For the definition of Key Ratios, refer to page 65 **** 1Q19 cost/income ratio adjusted for GEL 7.8mln one-off employee costs (gross of income tax) related to termination benefits of the former executive management
Balance Sheet
Banking Business
GEL thousands unless otherwise noted Mar-19 Mar-18 Change
y-o-y Dec-18
Change
q-o-q
Liquid assets 4,502,390 4,514,326 -0.3% 4,540,032 -0.8%
Cash and cash equivalents 1,162,168 1,754,920 -33.8% 1,215,799 -4.4%
Amounts due from credit institutions 1,391,630 955,175 45.7% 1,305,216 6.6%
Investment securities 1,948,592 1,804,231 8.0% 2,019,017 -3.5%
Loans to customers and finance lease receivables 9,570,691 7,819,773 22.4% 9,397,747 1.8%
Property and equipment 349,728 324,810 7.7% 344,059 1.6%
Total assets 15,054,570 13,194,528 14.1% 14,798,303 1.7%
Client deposits and notes 8,393,861 7,296,110 15.0% 8,133,853 3.2%
Amounts due to credit institutions 2,463,408 2,642,427 -6.8% 2,994,879 -17.7%
Borrowings from DFI 1,309,976 1,191,605 9.9% 1,302,679 0.6%
Short-term loans from NBG 585,797 729,244 -19.7% 1,118,957 -47.6%
Loans and deposits from commercial banks 567,635 721,578 -21.3% 573,243 -1.0%
Debt securities issued 2,045,428 1,569,404 30.3% 1,730,414 18.2%
Total liabilities 13,135,789 11,597,058 13.3% 13,000,030 1.0%
Total equity 1,918,781 1,597,470 20.1% 1,798,273 6.7%
Key Ratios***
1Q19 1Q18 4Q18
ROAA** 3.1% 3.2% 3.3%
ROAE** 24.5% 26.2% 27.0%
Net Interest Margin 5.8% 7.0% 6.0%
Loan Yield 12.2% 13.9% 12.8%
Liquid assets yield 3.8% 3.6% 3.8%
Cost of Funds 4.8% 4.8% 5.0%
Cost of Client Deposits and Notes 3.3% 3.4% 3.4%
Cost of Amounts Due to Credit Institutions 7.6% 6.9% 7.9%
Cost of Debt Securities Issued 7.8% 7.7% 7.8%
Cost / Income**** 35.5% 37.2% 36.9%
NPLs to Gross Loans to Clients 3.3% 3.5% 3.3%
NPL Coverage Ratio 92.2% 101.2% 90.5%
NPL Coverage Ratio, Adjusted for discounted value of collateral 132.6% 143.2% 129.9%
Cost of Credit Risk 1.7% 1.8% 1.1%
NBG (Basel III) Tier I Capital Adequacy Ratio 12.7% 12.4% 12.2%
NBG (Basel III) Total Capital Adequacy Ratio 17.1% 17.3% 16.6%
CONTENTS
Results Discussion
Appendices
Georgian Macro Overview
Group Overview
7
8
52
31
4
235
102
26.2%253
104(2)
25.4%(2)
269
111
26.8%
273
119(3)
27.0%(3)259
112(4)
24.5%(4)
-
50
100
150
200
250
300
Operating income Profit ROAE
1Q18 2Q18 3Q18 4Q18 1Q19
9.1
5.4 5.0
11.1
6.75.8
12.9
7.77.1
14.8
9.48.1
15.1
9.68.4
0
5
10
15
20
Total assets Net loans Client deposits
31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 31-Mar-19
THE LEADING BANK IN GEORGIA
8
Income Statement Highlights Banking Business
10.2% 10.4%
Top Systemically important financial institution in Georgia
Market position in Georgia by assets (35.1%), loans (33.8%), client deposits (34.6%) and equity (29.9%) as of 31 March 2019(1)
Market with stable growth perspectives: Real GDP average annual growth rate of 4.5 % for 2007-2018; 4.7% real GDP growth in 1Q19 according to Geostat. Loans to GDP increased from 8.8% to 64.2% during 2003-1Q19; Deposits to GDP increased from 8.4% to 55.4% over the same period
Strong brand name recognition and retail banking franchise: Offers the broadest range of financial products to the retail market through a network of 271 branches, 886 ATMs, 3,152 Express Pay Terminals and c.2.5 million customers as of 31 March 2019
Sustainable high profitability with average ROAE of more than 20% over the last three years on the back of strong NIM, low cost of risk and stringent cost control
Resilient credit profile: Well-capitalised, diversified and high quality loan book and strong liquidity profile
High standards of transparency and governance: The first entity from Georgia to be listed on the premium segment of the Main Market of the London Stock Exchange (LSE:BGEO) since February 2012. LSE listed through GDRs since 2006
Balance Sheet Highlights
Strong profitability and growth momentum, on the back of outstanding capital and liquidity positions
16.9% CAGR 19.5% 17.2%
Banking Business
BOG – Leading Bank in Attractive Banking Sector
Credit ratings from global rating agencies
Rating Agency Rating Outlook Affirmed
Ba3/Ba2 Stable 14-Sep-17
BB- Stable 15-Apr-19
(1) Market data based on standalone accounts as published by the National Bank of Georgia (NBG) www.nbg.gov.ge (2) 2Q18 results adjusted for GEL 30.3mln demerger related costs, GEL 8.0mln demerger related corporate income tax gain, and GEL 30.3mln one-off impact of
re-measurement of deferred tax balances (3) 4Q18 results adjusted for GEL 3.9mln (net of income tax) termination costs of the former CEO (4) 1Q19 results adjusted for GEL 10.2mln (net of income tax) termination costs of the former CEO and executive management
GE
L b
illio
ns
GE
L m
illio
ns
Foreign
banks
19.9%
Local
banks
80.1%
34.6%
40.4%
6.5% 4.7% 3.0%
10.9%
0%
10%
20%
30%
40%
50%
BOG TBC LB VTB PCB Others
2017 2018 1Q19
33.8%38.4%
4.3% 4.1% 3.8%
15.6%
0%
10%
20%
30%
40%
50%
BOG TBC LB VTB PCB Others
2017 2018 1Q19
35.1%37.4%
4.9% 4.0% 3.7%
14.9%
0%
10%
20%
30%
40%
50%
BOG TBC LB VTB PCB Others
2017 2018 1Q19
THE COMPETITION
Peer group’s market share in gross loans Peer group’s market share in total assets
Peer group’s market share in client deposits Foreign banks market share by assets
No state
ownership of commercial banks since
1994
Foreign
banks,
32.0% Local
banks,
68.0%
2006 1Q19
Leading market position in Georgia by assets (35.1%), loans (33.8%), client deposits (34.6%) and equity (29.9%)
(1) Market data based on standalone accounts as published by the National Bank of Georgia (NBG) as of 31 March 2019 www.nbg.gov.ge
9
49.5 58.3 52.4
25.6 30.0
22.7
11.5 11.4
15.7 0.8
1.2 1.1
87.4 100.9 91.9
0
20
40
60
80
100
120
1Q18 4Q18 1Q19
Other operating expenses Depreciation and amortisation
Administrative expenses Salaries and other employee benefits
180.2 187.4 182.9
54.6 85.7 75.8
234.8
273.1 258.7
77% 69% 71%
23%31% 29%
0
100
200
300
1Q18 4Q18 1Q19
Net interest income Net non-interest income
STRONG UNDERLYING PERFORMANCE
Net non-interest income | quarterly Operating income growth | quarterly
Cost / Income(1) | quarterly Operating expenses(1) | quarterly
Banking Business
GE
L m
illio
ns
GE
L m
illio
ns
+10.2%
-5.3%
Banking Business
GE
L m
illio
ns
Banking Business Banking Business +5.2%
-8.9%
10
34.5 41.3 42.2
14.3
53.4 30.0 5.8
(9.0)
3.6 54.6
85.7 75.8
-10
10
30
50
70
90
110
1Q18 4Q18 1Q19
Net fee and commission income Net foreign currency gainNet other income
+38.8%
-11.6%
(1) 1Q19 operating expenses, and cost to income ratio and operating leverage, respectively, adjusted for GEL 7.8mln one-off employee costs related to termination benefits of former executive management (excluded from salaries and other employee benefits)
37.2% 36.9%
35.5%
25%
27%
29%
31%
33%
35%
37%
39%
1Q18 4Q18 1Q19
Operating Leverage(1): +5.0% y-o-y +3.6% q-o-q
21.0%19.7%
18.4%
0%
5%
10%
15%
20%
25%
1Q18 4Q18 1Q19
41.2% 38.3% 39.3%
58.8% 61.7% 60.7%
13.9% 12.8% 12.2%
0%
5%
10%
15%
0%
20%
40%
60%
80%
100%
120%
1Q18 4Q18 1Q19Net loans, FC, consolidatedNet loans, GEL, consolidatedCurrency-blended loan yield, annualised
GROWING INCOME NOTWITHSTANDING THE PRESSURE ON YIELDS
Loan Yields, Foreign currency | quarterly Loan Yields, Local currency | quarterly
Banking Business Banking Business
Loan Yields | quarterly Banking Business
11
Loan Yields | full-year Banking Business
28.0% 28.7% 38.3% 38.3%
72.0% 71.3% 61.7% 61.7%
14.7% 14.2% 14.2% 13.5%
0%
5%
10%
15%
0%
20%
40%
60%
80%
100%
120%
2015 2016 2017 2018Net loans, FC, consolidated Net loans, GEL, consolidated
Currency-blended loan yield
9.1%8.3% 8.3%
0%
2%
4%
6%
8%
10%
12%
1Q18 4Q18 1Q19
4.8% 5.0% 4.8%
0%
1%
2%
3%
4%
5%
6%
1Q18 4Q18 1Q19
33.8% 32.5% 32.9%
66.2% 67.5% 67.1%
3.4% 3.4% 3.3%
0%
1%
2%
3%
4%
0%
20%
40%
60%
80%
100%
120%
1Q18 4Q18 1Q19
Client deposits, FC, consolidatedClient deposits, GEL, consolidatedCurrency-blended cost of client deposits, annualised
STABLE COST OF FUNDING
12
Cost of Customer Funds | quarterly Banking Business
Cost of Customer Funds | full-year Banking Business
Banking Business
Cost of Funds | quarterly
Banking Business
Cost of Funds | full-year
5.1%4.7% 4.7%
5.0%
0%
1%
2%
3%
4%
5%
6%
2015 2016 2017 2018
25.1% 23.2% 30.5% 32.5%
74.9% 76.8% 69.5% 67.5%
4.3%3.8% 3.5% 3.5%
0%
1%
2%
3%
4%
5%
0%
20%
40%
60%
80%
100%
120%
2015 2016 2017 2018Client deposits and notes, FC, consolidatedClient deposits and notes, GEL, consolidatedCurrency-blended cost of client deposits and notes
Corporate loans, GEL
2,799.0
mln,
30.0%Retail loans, GEL
6,519.8
mln,
70.0%
Manufacturing32.8%
Trade16.7%Real
estate
10.0%Service
4.1%
Hospitality3.1%Transport &
Communication
1.9%
Electricity, gas and water supply
2.8%
Construction11.4%
Financial intermediation
1.3%
Mining and quarrying
4.1%
Health andsocial work
3.0% Other8.8%
Cash and
equivalents
25.8%
Amounts due
from credit
institutions
30.9%
Government
bonds, treasury
bills, NBG CDs
22.3%
Other liquid
assets
21.0%Liquid assets
29.9%
Loans to
customers, net
63.6%
Other assets
6.5%
DIVERSIFIED ASSET STRUCTURE AND LOAN PORTFOLIO
Liquid assets | 31 March 2019 Total asset structure | 31 March 2019
Loans breakdown | 31 March 2019
Banking Business Banking Business
Bank of Georgia Standalone
Total: GEL 15.1bln Total: GEL 4.5bln
Total Gross Loans breakdown by segments
Total: GEL 9.3bln
Retail Banking Net Loans breakdown by product Total: GEL 6.4bln
1.6% of total clients
3.2% of total clients
21.4% of total clients
18.5% of total clients
Corporate Investment Banking Gross Loans breakdown by sectors
Total: GEL 2.8bln
13
Mortgage loans
40.2%
Micro- and agro-financing loans
and SME loans
32.4%
General consumer
loans
20.7%
Credit cards and overdrafts
4.1%
Other2.6%
Amounts in GEL millions
CB & WM
Loan portfolio
% of total CB
loan portfolio
GEL and other currency loans* 1,143 40.8%
USD loans with USD income 1,130 40.4%
USD loans with non-USD income 526 18.8%
Total 2,799 100.0%
Amounts in GEL millions
RB Loan
portfolio
% of total RB
loan portfolioMortgages
Consumer
loans*SME & Micro
GEL and other currency loans* 4,348 66.7% 1,318 1,623 1,407
USD loans with USD income 397 6.1% 316 58 23
USD loans with non-USD income 1,774 27.2% 945 153 677
Total 6,520 100.0% 2,579 1,835 2,107
2,17118
0.8%
3,396 110
3.2%
9522
0.2%
6,520 130
2.0%
Loan portfolio Allowance for ECL ECL rate
USD GEL Other
1,655 95 5.7%
47625
5.3%667 26
3.9%2,799 146
5.2%
Loan portfolio Allowance for ECL ECL rate
USD GEL Other
LOAN PORTFOLIO BREAKDOWN
Corporate Investment Banking | 31 Mar 2019 Retail Banking | 31 Mar 2019 JSC Bank of Georgia standalone JSC Bank of Georgia standalone
GE
L m
illio
ns
* Includes credit cards Note: Standalone figures derived from management accounts
14
GE
L m
illio
ns
1.8%
1.1%
1.7%
2.7%
2.2%
1.6%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1Q18 4Q18 1Q19 2016 2017 2018
3441 43
168 167160
0
20
40
60
80
100
120
140
160
180
1Q18 4Q18 1Q19 2016 2017 2018
55 68133 145
202 185159 165
38 4927 16
4.2%3.8%
3.3% 3.3%
0%
1%
2%
3%
4%
5%
0
100
200
300
400
500
2016 2017 2018 1Q19
NPLs RB, GEL mln NPLs CIB, GEL mln
NPLs Other, GEL mln NPLs to gross loans
256 279 288 301
4.7%5.1%
4.9%4.1%
7.4% 7.3%6.5%
5.8%
0%
2%
4%
6%
8%
0
100
200
300
400
2016 2017 2018 1Q19
Allowance for ECL, GEL mln Risk Adjusted NIM Net Interest Margin
RESILIENT LOAN PORTFOLIO QUALITY
Expected credit loss and NIM Banking Business Banking Business
NPL composition
Cost of Risk Cost of Credit Risk Banking Business Banking Business -10bps
GE
L m
illio
ns
+26.1%
+4.6%
-4.5% -60bps
15
295 301 318 326
+60bps
NPL coverage
ratio 86.7% 92.7% 90.5% 92.2%
1,318,825 1,255,281
1,009,773
(1,569,484)
(714,154)
1,092,020
8.8% 8.3% 6.7%
-10.4%
-4.7%
7.3%
-15%
-5%
5%
15%
25%
-2,000,000
-1,500,000
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
On
Demand
0-3
Months
3-6
Months
6-12
Months
1-3 Years >3 Years
Maturity gap Maturity gap, as % of total assets
94.9% 92.4%99.6% 98.6%
116.1%109.4%
115.5% 114.0%
60%
70%
80%
90%
100%
110%
120%
130%
140%
31-Dec-16 31-Dec-17 31-Dec-18 31-Mar-19
Net loans to customer funds & DFIs Net loans to customer funds
151.5%
125.5% 120.1%133.1%
97.0% 100.3%
133.6% 139.6%
0%
50%
100%
150%
200%
31-Dec-16 31-Dec-17 31-Dec-18* 31-Mar-19*Liquidity coverage ratio Net stable funding ratio
3,705 4,347 4,540 4,502
9,77111,355
13,000 13,136
37.9% 38.3%34.9% 34.3%
0%
20%
40%
0
3,000
6,000
9,000
12,000
15,000
31-Dec-16 31-Dec-17 31-Dec-18 31-Mar-19
Liquid assets Total liabilities Liquid assets to total liabilities
STRONG LIQUIDITY
Liquidity coverage ratio & net stable funding ratio Liquid assets to total liabilities
Cumulative maturity gap | 31 March 2019 Net loans to customer funds & DFI
Banking Business JSC Bank of Georgia standalone (Basel III Liquidity)
Banking Business Banking Business
16
GE
L m
illio
ns
GE
L t
ho
usa
nd
s
* The ratios at 31 December 2018 and 31 March 2019 are calculated for standalone JSC Bank of Georgia according to the guidelines set by National Bank of Georgia
9,670 9,79010,719
11,339 11,461
0
3,000
6,000
9,000
12,000
1Q18 2Q18 3Q18 4Q18 1Q19
12.4% 12.5%11.0%
12.2% 12.7%
17.3% 17.5%15.9% 16.6% 17.1%
0%
5%
10%
15%
20%
1Q18 2Q18 3Q18 4Q18 1Q19
Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio
STRONG NBG (BASEL III) CAPITAL ADEQUACY POSITION
Capital adequacy requirements introduced by National Bank of Georgia in December 2017
17
Capital Adequacy Ratios
Risk Weighted Assets
GE
L m
illio
ns
Transition to Basel III Standards:
Systemic capital surcharge: 2.5% of risk weighted assets to be phased-in during the following years as per below schedule:
Currency induced credit risk (“CICR”) buffer was introduced instead of additional 75% weighting of FX denominated loans. 56% of CICR buffer should be held on CET1 level, 75% on Tier 1 level and 100% on total capital
General Risk Assessment Program (“GRAPE”) for individual banks: GRAPE buffer is set at 2.2%. GRAPE buffer will be reviewed annually and will be phased-in on different levels of capital according to the below schedule:
Credit Portfolio Concentration buffer, effective from 1 April 2018 and phased in over the four year period on different levels of capital according to the above schedule
Net Stress Test buffer effective from 1 January 2020
In the view of above, Bank of Georgia is subject to the following minimum capital requirements:
* Indicated minimum capital adequacy ratios contain Pillar 1 and Pillar 2 buffer estimates. Range provides our best minimum and maximum estimates of the variable buffers
Transition to Basel III is not expected to affect the Bank’s growth prospects or its ability to maintain dividend distributions within the existing dividend policy payout range
31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21
Systemic Buffer 0% 1.0% 1.5% 2.0% 2.5%
31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21
CET 1 0% 15% 30% 45% 56%
Tier 1 0% 20% 40% 60% 75%
Total Capital 0% 100% 100% 100% 100%
31-Dec-17 31-Dec-18 31-Mar-19 31-Dec-19 Estimate*
31-Dec-20 Estimate*
Fully Loaded range* from
31-Dec-21
CET 1 8.1% 9.5% 9.6% 10.4% 11.1% 11.1% - 11.8%
Tier 1 9.9% 11.4% 11.6% 12.5% 13.3% 13.2% - 14.1%
Total Capital 12.4% 15.9% 16.1% 16.5% 16.7% 16.0% - 17.1%
In March 2019, the Bank issued inaugural US$ 100 million Additional Tier 1 capital perpetual subordinated notes. The regulatory approval on the classification as AT1 instruments was received in April 2019, therefore, it has not been reflected in the capital ratios reported as of 31 March 2019. This issuance added approximately 230 basis points to the Bank’s Tier 1 capital ratio. CET1 and Tier 1 capital adequacy ratios are already above the estimated fully-loaded requirements for 2021
1,454
1,879
161 96
168
0
400
800
1,200
1,600
2,000
NBG Tier 1
Capital
Loan
provisioning
methodology
difference
IP
provisioning
methodology
difference
Other
deductions*
BOG
Equity
(IFRS)
STRONG NBG (BASEL III) CAPITAL ADEQUACY POSITION
18
Fully-loaded Common Equity Tier 1 (CET1) and Tier 1 minimum requirement already achieved
CET1 ratio stood at 12.7% compared to 9.6% minimum requirement at 31 March 2019, and already above the estimated fully-loaded CET1 requirement range of 11.1% to 11.8% for 31 December 2021
Tier 1 ratio stood at 12.7% compared to 11.6% minimum requirement at 31 March 2019. The issuance of US$ 100 million AT1 notes in March 2019, with classification as AT1 instrument since April 2019, will add c.230bps to Tier 1 ratio, therefore, already above the estimated fully-loaded Tier 1 requirement range of 13.2% to 14.1% for 31 December 2021
Capital Adequacy
Robust internal capital generation per annum
Existing additional capital buffers (within c.2.2% of RWAs) reflecting differences in provisioning between NBG methodology and IFRS 9
Capital Buffer
We aim to maintain c.+200bps for CET1 and Tier 1 capital ratios over minimum regulatory requirements
GE
L m
illio
ns
* Other deductions Include revaluation reserve, investments in non-financial subsidiaries and intangible assets
% of RWAs 1.4% 0.8% 1.5%
3.7%
12.7%
BOG Equity vs. Tier 1 Regulatory Capital | 31 Mar 2019
Capital Management
44 69 90 33 84 4 42
65 90
186
339255
487
94
0.8%
4.6%
1.6%
0.6%
8.7%
0.1%
1.7%
0.0%
-10%
-5%
0%
5%
10%
0
100
200
300
400
500
2019 2020 2021 2022 2023 2024 2025 2026
Senior Loans Subordinated Loans Eurobonds % of Total assets
DFIs, GEL 1,310.0 mln,
37.8%
Eurobonds, GEL
1,630.5
mln, 47.1%
Other debt securities,
GEL 414.9 mln,
12.0%
Others borrowings,
GEL 106.6 mln,
3.1%
Client deposits & notes,
GEL 8,393.9
mln,
65.1%
Other amounts due
to credit
institutions,
GEL 1,046.8
mln, 8.1%
Borrowings, GEL 1,416.6
mln, 11.0%
Debt securities issued,
GEL 2,045.4
mln, 15.9%
WELL-ESTABLISHED FUNDING STRUCTURE
Well diversified international borrowings | 1Q19 Interest Bearing Liability structure | 31 March 2019
Highlights for 1Q19 Borrowed funds maturity breakdown*
Banking Business Banking Business
Banking Business
* converted at GEL/US$ exchange rate of 2.6914 as of 31 March 2019 ** source: Bloomberg
Banking Business has a well-balanced funding structure with 65.1% of interest bearing liabilities coming from client deposits and notes, 10.2% from Developmental Financial Institutions (DFIs) and 12.6% from Eurobonds and notes issued, as of 31 March 2019
The Bank has also been able to secure favorable financing from reputable international commercial sources, as well as DFIs, such as EBRD, IFC, EFSE, BSTDB, FMO, DEG, etc.
As of 31 March 2019, GEL 150 million undrawn facilities from DFIs with up to eight years maturity
In July 2016, BGEO Group issued 7 year, US$ 350mln Eurobonds with 6.00% coupon (bonds were pushed down to BOG in March 2018). Bonds were trading at 5.488%** on 10 May 2019
In June 2017, BOG issued 3 year, GEL 500mln local currency international bonds with 11.00% coupon. Bonds were trading at 10.471%** on 10 May 2019
In March 2019, BOG issued US$ 100mln 11.125% Additional Tier 1 capital perpetual subordinated notes callable after 5.25 years and on every subsequent interest payment date, subject to prior consent of the NBG. Notes were trading at 10.689%** on 10 May 2019
19
US
$ m
illio
ns
Interest Bearing Liabilities GEL 12.9bln
Time deposits,
50.7%
Current accounts and
demand
deposits,
49.3%
RETAIL BANKING HIGHLIGHTS Data as at 31 March 2019 for JSC Bank of Georgia standalone
Segments
2 3
4 1
Emerging Retail Mass Retail Mass Affluent MSME
Clients 538 k
GEL 300 mln
GEL 231 mln
GEL 4 mln
GEL 28
3.3
166
1,662 k
GEL 2,068 mln
GEL 1,860 mln
GEL 29 mln
GEL 71
1.7
93
47 k
GEL 1,870 mln
GEL 1,747 mln
GEL 19 mln
GEL 1,625
5.4
12
208 k
GEL 2,281 mln
GEL 682 mln
GEL 17 mln
GEL 346
1.4
n/a
Loans
Deposits
1Q19 Profit*
Profit per client*
P/C ratio
Branches
20 * 1Q19profit adjusted for GEL 10.2mln one-off employee costs (net of income tax) related to former CEO and executive management termination benefits
25.0% 27.9% 30.3% 30.6%
75.0% 72.1% 69.7% 69.4%
3.3% 2.9% 2.9% 3.0%
0%
1%
2%
3%
4%
0%
20%
40%
60%
80%
100%
120%
2016 2017 2018 1Q19Client deposits, RB, FCClient deposits, RB, GELCurrency-blended cost of client deposits, RB
39.2%51.2% 49.7% 51.4%
60.8%48.8% 50.3% 48.6%
16.8% 16.1% 15.1% 13.6%
0%
3%
6%
9%
12%
15%
18%
0%
20%
40%
60%
80%
100%
120%
2016 2017 2018 1Q19
Net loans, RB, FC
Net loans, RB, GEL
Currency-blended loan yield, RB
33.0%
34.6%
36.9%
38.2%
2016 2017 2018 1Q19
34.9% 35.5%
37.5%38.2%
2016 2017 2018 1Q19
RETAIL BANKING HIGHLIGHTS
Deposit Cost Loan Yield
21
* The income statement adjusted profit excludes GEL 7.1mln in 1Q19 (4Q18: GEL 2.9mln) one-off employee costs (net of income tax) related to former CEO and executive management termination benefits. The amount is comprised of GEL 2.9mln (gross of income tax) excluded from non-recurring items (4Q18: GEL 3.3mln) and GEL 5.2mln (gross of income tax) excluded from salaries and other employee benefits
** Market shares by Loans and Deposits to Individuals
GEL thousands unless otherwise noted 1Q19 1Q18 Change
y-o-y 4Q18
Change
q-o-q
Net interest income 130,987 135,454 -3.3% 136,895 -4.3%
Net fee and commission income 32,435 26,141 24.1% 32,915 -1.5%
Net foreign currency gain 13,240 4,349 NMF 24,047 -44.9%
Net other income / (expense) 2,168 3,102 -30.1% (5,421) NMF
Operating income 178,830 169,046 5.8% 188,436 -5.1%
Salaries and other employee benefits (33,874) (32,112) 5.5% (37,052) -8.6%
Administrative expenses (15,796) (19,541) -19.2% (21,620) -26.9%
Depreciation and amortisation (13,287) (9,902) 34.2% (9,857) 34.8%
Other operating expenses (536) (503) 6.6% (638) -16.0%
Operating expenses (63,493) (62,058) 2.3% (69,167) -8.2%
Profit from associate 188 318 -40.9% 318 -40.9%
Operating profit before cost of risk 115,525 107,306 7.7% 119,587 -3.4%
Cost of risk (39,386) (28,453) 38.4% (37,488) 5.1%
Net operating profit before non-recurring items and income tax 76,139 78,853 -3.4% 82,099 -7.3%
Net non-recurring items (276) (1,976) -86.0% (778) -64.5%
Profit before income tax and one-off termination costs 75,863 76,877 -1.3% 81,321 -6.7%
Income tax expense (6,101) (6,060) 0.7% (6,155) -0.9%
Profit adjusted for one off termination costs 69,762 70,817 -1.5% 75,166 -7.2%
One-off termination costs (after tax) (7,075) - NMF (2,939) 140.7%
Profit 62,687 70,817 -11.5% 72,227 -13.2%
Income Statement Highlights* Market Position**
Market Share by Deposits Market Share by Loans
8.2%
6.7% 6.4%
4%
6%
8%
10%
12%
1Q18 4Q18 1Q19
2.8%
4.8%
2.1%2.9%
5.0%
2.1%3.0%
5.2%
2.1%
0%
2%
4%
6%
Cost of deposits Cost of deposits, GEL Cost of deposits, FC
1Q18 4Q18 1Q19
15.8%
22.4%
8.4%14.2%
20.7%
7.4%13.6%
19.3%
7.7%
0%
10%
20%
30%
Loan Yield Loan yield, GEL Loan yield, FC
1Q18 4Q18 1Q19
RETAIL BANKING LOAN YIELD, COST OF DEPOSITS & NIM
RB Loan Yield I quarterly
RB Cost of Deposit I quarterly
RB NIM I quarterly
22
RB Cost of Deposit I full-year
RB Loan Yield I full-year
RB NIM I full-year
16.1%
23.6%
9.1%15.1%
21.5%
7.9%
0%
10%
20%
30%
Loan Yield Loan yield, GEL Loan yield, FC
2017 2018
2.9%
4.5%
2.3%2.9%
4.9%
2.0%
0%
2%
4%
6%
Cost of deposits Cost of deposits, GEL Cost of deposits, FC
2017 2018
8.5%7.5%
4%
6%
8%
10%
12%
2017 2018
Current
accounts and
on demand
deposits
43%
Time
deposits
57%
Client Deposits,
FC
69%
Client Deposits,
GEL
31%
2,414
3,267
4,339 4,521
0
1,000
2,000
3,000
4,000
5,000
2016 2017 2018 1Q19
3,902
5,044
6,267 6,390
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2016 2017 2018 1Q19
Operating Data, GEL mln 1Q19 % of clients 2018 2017 2016
Number of total Retail clients, of which: 2,454,678 2,440,754 2,315,038 2,141,229
Number of Solo clients 47,057 1.9% 44,292 32,104 19,267
Consumer loans & other outstanding, volume 1,546 1,555 1,480 1,104
Consumer loans & other outstanding, number 525,709 21.4% 566,740 738,694 647,441
Mortgage loans outstanding, volume 2,579 2,539 1,706 1,228
Mortgage loans outstanding, number 39,699 1.6% 39,007 26,643 16,300
Micro & SME loans outstanding, volume 2,107 2,005 1,637 1,346
Micro & SME loans outstanding, number 77,833 3.2% 68,832 53,732 36,379
Credit cards and overdrafts outstanding, volume 289 290 308 291
Credit cards and overdrafts outstanding, number 455,158 18.5% 454,512 480,105 442,487
Credit cards outstanding, number, of which: 512,169 20.9% 547,038 673,573 800,621
American Express cards 103,275 4.2% 105,899 97,178 79,567
RETAIL BANKING - LEADING RETAIL BANK IN GEORGIA
RB Client Data
Net Loans by products Total: GEL 6.4bln
1.6% of total clients
3.2% of total clients
21.4% of total clients
18.5% of total clients
GEL millions +2.0% GEL millions +4.2%
Deposits by currency Total: GEL 4.5bln
Deposits by category Total: GEL 4.5bln
23
RB Portfolio | 31 Mar 2019
RB Loans RB Deposits
Mortgage loans
40.2%
Micro- and agro-financing loans
and SME loans
32.4%
General consumer
loans
20.7%
Credit cards and overdrafts
4.1%
Other2.6%
37%
23%
21%
19%
Mass Retail (GEL 10mln)
MSME (GEL 6mln)
Solo (GEL 6mln)
Express Bank (GEL 5mln)
40%
26%
18%
16%
Mass Retail (GEL 52mln)
MSME (GEL 35mln)
Solo (GEL 23mln)
Express Bank (GEL 21mln)
41%
15%
39%
5%
Mass Retail (GEL 1,860mln)
MSME (GEL 682mln)
Solo (GEL 1,747mln)
Express Bank (GEL 231mln)
32%
35%
29%
4%
Mass Retail (GEL 2,068mln)MSME (GEL 2,281mln)Solo (GEL 1,870mln)Express Bank (GEL 300mln)
RETAIL BANKING FINANCIAL DATA
Balance Sheet | 31 March 2019 JSC Bank of Georgia Standalone
Income Statement | 1Q19 JSC Bank of Georgia Standalone
Total Gross Loans GEL 6,520mln
Net Interest Income GEL 131mln
Net Fee & Commission Income GEL 27mln
JSC Bank of Georgia Standalone JSC Bank of Georgia Standalone Total Deposits GEL 4,521mln
24
317 408
539
697 790 2.8
3.2
4.1
5.56.7
1Q18 2Q18 3Q18 4Q18 1Q19
Volume of transactions, GEL millions
# of transactions, millions
427 452 530
620 490
1.5 1.4 1.41.5 1.4
1Q18 2Q18 3Q18 4Q18 1Q19
Volume of transactions, GEL millions
# of transactions, millions
10.5 11.5
12.2
14.2 14.8
2.7 3.6 3.4 3.7 3.2
1Q18 2Q18 3Q18 4Q18 1Q19
Through digital channels Through tellers
239
295 278
207
334
382
1Q18 4Q18 1Q19
Internet Bank Mobile Bank
Android,
552,994
iPhone,
212,183
RETAIL BANKING – DIGITAL PENETRATION
765,177 mBank downloads since May 2017
169,636 mBank downloads in 1Q19
Internet Bank Transactions Mobile Bank Transactions
Number of Active Users | ‘000 Digital vs. Non-digital Transactions
25
Digital Channel Statistics
mBank Downloads
# of transactions in millions
31.2%
33.1%
30.3% 30.3%
2016 2017 2018 1Q19
30.5%
28.9% 28.8% 28.7%
2016 2017 2018 1Q19
16.7% 16.9% 17.7% 17.0%
83.3% 83.1% 82.3% 83.0%
10.4% 10.7% 10.2% 9.1%
0%
3%
6%
9%
12%
0%
20%
40%
60%
80%
100%
120%
2016 2017 2018 1Q19
Net loans, CIB, FCNet loans, CIB, GELCurrency-blended loan yield, CIB
25.2%36.9% 38.8% 39.8%
74.8%63.1% 61.2% 60.2%
3.9% 4.0% 4.1% 3.6%
0%
1%
2%
3%
4%
5%
0%
20%
40%
60%
80%
100%
120%
2016 2017 2018 1Q19
Client deposits, CIB, FCClient deposits, CIB, GELCurrency-blended cost of client deposits, CIB
CORPORATE INVESTMENT BANKING HIGHLIGHTS
Deposit Cost Loan Yield
GEL thousands unless otherwise noted 1Q19 1Q18 Change
y-o-y 4Q18
Change
q-o-q
Net interest income 45,679 38,232 19.5% 43,696 4.5%
Net fee and commission income 8,151 6,198 31.5% 6,939 17.5%
Net foreign currency gain 13,104 6,644 97.2% 23,984 -45.4%
Net other income / (expense) 1,386 2,797 -50.4% (3,451) NMF
Operating income 68,320 53,871 26.8% 71,168 -4.0%
Salaries and other employee benefits (12,439) (12,595) -1.2% (14,645) -15.1%
Administrative expenses (4,027) (3,459) 16.4% (4,921) -18.2%
Depreciation and amortisation (1,701) (1,309) 29.9% (1,122) 51.6%
Other operating expenses (203) (143) 42.0% (347) -41.5%
Operating expenses (18,370) (17,506) 4.9% (21,035) -12.7%
Operating profit before cost of risk 49,950 36,365 37.4% 50,133 -0.4%
Cost of risk (1,824) (4,643) -60.7% (3,407) -46.5%
Net operating profit before non-recurring items and income tax 48,126 31,722 51.7% 46,726 3.0%
Net non-recurring items (72) (272) -73.5% (619) -88.4%
Profit before income tax and one-off termination costs 48,054 31,450 52.8% 46,107 4.2%
Income tax expense (3,864) (2,444) 58.1% (3,571) 8.2%
Profit adjusted for one-off termination costs 44,190 29,006 52.3% 42,536 3.9%
One-off termination costs (after tax) (3,165) - NMF (922) NMF
Profit 41,025 29,006 41.4% 41,614 -1.4%
26
Income Statement Highlights* Market Position**
Market Share by Deposits Market Share by Loans
* The income statement adjusted profit excludes GEL 3.2mln in 1Q19 (4Q18: GEL 0.9mln) one-off employee costs (net of income tax) related to former CEO and executive management termination benefits. The amount is comprised of GEL 1.1mln (gross of income tax) excluded from non-recurring items (4Q18: GEL 1.1mln) and GEL 2.7mln (gross of income tax) excluded from salaries and other employee benefits
** Market shares by Loans and Deposits to Legal entities
Manufacturing32.8%
Trade16.7%Real
estate
10.0%Service
4.1%
Hospitality3.1%Transport &
Communication
1.9%
Electricity, gas and water supply
2.8%
Construction11.4%
Financial intermediation
1.3%
Mining and quarrying
4.1%
Health andsocial work
3.0% Other8.8%
Client
deposits,
GEL,
39.8%Client
deposits,
FC, 60.2%
Current
accounts
and
demand
deposits
62.5%
Time
deposits
37.5%
2,395 2,260 2,618 2,653
3,059
3,457 3,473 3,532
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2016 2017 2018 1Q19
Net loans, CIB Client deposits, CIB
CORPORATE INVESTMENT BANKING LOAN BOOK & DEPOSITS
Highlights Portfolio breakdown | 31 March 2019
Loans & Deposits
Leading corporate bank in Georgia
Integrated client coverage in key sectors c.2,550 corporate clients served by dedicated
relationship bankers
GEL millions
Top 10 CIB borrowers represent 32.2% of total
CIB loan book
Top 20 CIB borrowers represent 45.5% of total
CIB loan book
Loans by sectors
Deposits by category
27
Deposits by currency
3.9%
6.1%
2.5%4.0%
6.2%
2.3%3.6%
5.9%
2.1%
0%
2%
4%
6%
8%
Cost of deposits Cost of deposits, GEL Cost of deposits, FC
1Q18 4Q18 1Q19
3.2% 3.2% 3.4%
0%
1%
2%
3%
4%
1Q18 4Q18 1Q19
9.9%
12.8%
9.4%9.8%12.8%
9.2%9.1%11.5%
8.6%
0%
5%
10%
15%
Loan Yield Loan yield, GEL Loan yield, FC
1Q18 4Q18 1Q19
CIB LOAN YIELD, COST OF DEPOSITS & NIM
CIB Loan Yield I quarterly
CIB Cost of Deposit I quarterly
CIB NIM I quarterly
28
CIB Cost of Deposit I full-year
CIB Loan Yield I full-year
CIB NIM I full-year
10.7%12.8%
10.3%10.2%13.1%
9.6%
0%
5%
10%
15%
Loan Yield Loan yield, GEL Loan yield, FC
2017 2018
4.0%
6.6%
2.7%4.1%
6.4%
2.4%
0%
2%
4%
6%
8%
Cost of deposits Cost of deposits, GEL Cost of deposits, FC
2017 2018
3.4% 3.3%
1%
2%
3%
4%
5%
2017 2018
During 1Q19 Galt & Taggart acted as:
lead manager of JSC Microfinance Organisation Crystal’s GEL 15mln local public bond issuance due in 2021, in February 2019
co-manager of Bank of Georgia’s inaugural US$ 100mln international Additional Tier 1 bond issuance, in March 2019
lead manager of JSC Microfinance Organisation Swiss Capital’s GEL 10mln local public bond issuance due in 2021, in March 2019
lead manager for European Bank for Reconstruction and Development (EBRD), facilitating GEL 90mln local private bond issuance due in 2023, in March 2019
lead manager for Nederlandse Financierings - Maatschappij Voor Ontwikkelingslanden N.V. (FMO), facilitating GEL 26mln local private bond issuance due in 2024, in March 2019
Team with sector expertise and international M&A experience
Proven track record of more than 30 completed transactions over the past 8 years
Galt & Taggart - Largest Investment Bank in Georgia
BUILDING BLOCKS TO BECOME THE FINANCIAL SERVICES HUB
Strong international presence: Israel (since 2008), UK (2010), Hungary (2012), Turkey (2013) and Cyprus (2017)
AUM of GEL 2,371 million, up 29% y-o-y
Diversified funding sources: Georgia 31% Israel 10% UK 4% Germany 2% Other 53%
Wealth Management Vision – Become
the regional hub for wealth management offering
Invest globally Superior service Business friendly environment Favorable tax regime High level of banking secrecy
Brand new office in the centre of Tbilisi,
since January 2019, dedicated to serving wealth management clients
The leading brokerage house in the region
The only international sub-custodian in the region
The leading investment bank in the region
Sector, macro and fixed income coverage
Georgian quarterly macroeconomic update
International distribution
29
Wealth Management
DCM/ECM Brokerage
Research
Wide product coverage and Exclusive partner of SAXO Bank via White Label structure, that provides highly adaptive trading platform with professional tools, insights and world-class execution
Corporate Advisory
CONTENTS
Results Discussion
Appendices
Georgian Macro Overview
Group Overview
30
8
52
31
4
Rating Agency Rating Outlook Affirmed
Ba2 Stable September 2018
BB Stable February 2019
BB- Positive April 2019
Area: 69,700 sq km
Population (2017): 3.7 mln
Life expectancy: 77 years
Official language: Georgian
Literacy: 100%
Capital: Tbilisi
Currency (code): Lari (GEL)
GEORGIA AT A GLANCE
31
Nominal GDP (Geostat) 2017: GEL 38.0 bln (US$15.2 bln)
Real GDP growth rate 2014-2017: 4.6%, 2.9%, 2.8%, 5.0%
Real GDP 2007-2017 annual average growth rate: 4.5%
Real GDP growth rate 9M18 : 4.9%
GDP per capita 2017 (PPP) per IMF: US$ 10,742
Annual inflation (e-o-p) 2017: 6.7%
External public debt to GDP 2017: 35.3%
General Facts
Economy
Sovereign Credit Ratings
Area: 69,700 sq km
Population (2018): 3.7 mln
Life expectancy: 74 years
Official language: Georgian
Literacy: 100%
Capital: Tbilisi
Currency (code): Lari (GEL)
Nominal GDP (Geostat) 2018: GEL 41.1 bln (US$16.2 bln)
Real GDP growth rate 2014-2018: 4.6%, 2.9%, 2.8%, 4.8%, 4.7%
Real GDP 2010-2018 annual average growth rate: 4.8%
GDP per capita 2018 (PPP) per IMF: US$ 11,485
Annual inflation (e-o-p) 2018: 1.5%
External public debt to GDP 2018: 35.4%
GEORGIA’S KEY ECONOMIC DRIVERS
Liberal economic policy
Top performer globally in WB Doing Business over the past 12 years
Liberty Act ensures a credible fiscal and monetary framework: Fiscal deficit/GDP capped at 3%; Government debt/GDP capped at 60% Business friendly environment and low tax regime (attested by favourable international rankings)
Regional logistics and tourism hub
A natural transport and logistics hub, connecting land-locked energy rich countries in the east and European markets in the west
Access to a market of 2.8bn customers without customs duties: Free trade agreements with EU, China, CIS, Turkey, Hong Kong and with EFTA countries. The GSP with USA, Canada and Japan
Tourism revenues on the rise: tourism inflows stood at 19.9% of GDP in 2018 and total arrivals reached 8.7mln visitors in 2018 (up 9.8% y-o-y), out of which tourist arrivals were up 16.9% y-o-y to 4.8mln visitors.
Regional energy transit corridor accounting for 1.6% of the world’s oil and gas transit volumes
Strong FDI
An influx of foreign investors on the back of the economic reforms have boosted productivity and accelerated growth
FDI stood at US$ 1.2bln (7.6% of GDP) in 2018
FDI averaged 8.8% of GDP in 2009-2018
Developed, stable and competitively priced energy sector
Only 25% of hydropower capacity utilized; 150 renewable (HPPs/WPPs/SPPs) energy power plants are in various stages of construction or development
Georgia imports natural gas mainly from Azerbaijan
Significantly boosted transmission capacity with 400 kV line to Turkey and 500 kV line to Azerbaijan built, other transmission lines to Armenia and Russia upgraded
Additional 2,000 MW transmission capacity development in the pipeline, facilitating cross-border electricity trade and energy swaps to Eastern Europe
Georgia underscored its commitment to European values by securing a democratic transfer of political power in successive parliamentary, presidential, and local elections and by signing an Association Agreement and free trade agreement with the EU
Constitution amendments passed in 2013 to enhance governing responsibility of Parliament and reduce the powers of the Presidency
Continued economic relationship with Russia, although economic dependence is relatively low
Russia began issuing visas to Georgians in March 2009; Georgia abolished visa requirements for Russians -The Russian side announced to ease visa procedures for Georgians citizens effective December 23, 2015
Direct flights between the two countries resumed in January 2010
Member of WTO since 2000, allowed Russia’s access to WTO; In 2013 trade restored with Russia
In 2018, Russia accounted for 13.0% of Georgia’s exports and 10.3% of imports; just 3.7% of cumulative FDI over 2003-18
Georgia and the EU signed an Association Agreement and DCFTA in June 2014
Visa-free travel to the EU is another major success in Georgian foreign policy. Georgian passport holders were granted free entrance to the EU countries from 28 March 2017
Discussions commenced with the USA to drive inward investments and exports
Strong political support from NATO, EU, US, UN and member of WTO since 2000; Substantial support from DFIs, the US and EU
Electricity transit hub potential
Political environment stabilised
Support from international community
32
42% 38% 38%
34% 29% 29%
27% 24% 24%
18% 17%
16% 15%
12% 9%
7% 7%
3%
MoldovaAzerbaijan
UkraineRussia
KazakhstanRomania
Bosnia & Herz.Armenia
LithuaniaTurkey
BulgariaMontenegro
LatviaSlovakia
Czech Rep.Poland
GeorgiaGermany
2 3
7 12 15 18
21 23
27 32
36 39
77 79
95 105 108
127 130
177
SwedenNorway
UKSingapore
EstoniaUSA
FranceLithuania
GeorgiaCzech rep.
PolandLatvia
ArmeniaBulgaria
AzerbaijanUkraine
RussiaKazakhstan
TurkeyUzbekistan
147 98
80 71
68 64
60 59
47 46
42 37
35 23
21 16 15
12 7
UkraineRussia
ItalyFrance
TukeyHungary
AzerbaijanKazakhstan
ArmeniaPoland
RomaniaBulgaria
LatviaCzech rep.Lithuania
GeorgiaEstonia
USAUK
1 2 3
6 7 8 9
14 16
19 24 25
28 31
33 35
41 43
71
New ZealandSingaporeDenmark
GeorgiaNorway
USAUK
LithuaniaEstonia
LatviaGermany
AzerbaijanKazakhstan
RussiaPoland
Czech Rep.Armenia
TurkeyUkraine
GROWTH ORIENTED REFORMS
Source: WB-IFC Doing Business Report Source: Heritage Foundation
Top 8 in Europe region out of 44 countries up from 9th in 2018
% admitting having paid a bribe last year
Georgia is on a par with EU member states
Source: Transparency International Source: Trace International
Ease of Doing Business | 2019 Economic Freedom Index | 2019
Global Corruption Barometer | 2017 Business Bribery Risk | 2018
33
GOVERNMENT’S ONGOING REFORMS
34
Structural Reforms
Tax Reform Corporate income tax reform Enhancing easiness of tax compliance
Capital Market Reform Boosting stock exchange activities Developing of local bond market
Pension Reform Introduction of private pension system
PPP Reform Introduction of transparent and efficient PPP framework
Public Investment Management Framework Improved efficiency of state projects
Deposit Insurance Boosting private savings Enhancing trust to financial system
Accounting Reform Increased transparency and financial accountability Enhanced protection of shareholder rights
Association Agreement Agenda
Promoting Transit & Tourism Hub
Roads Plan to finish all spinal projects by 2020 – East-West Highway, other
supporting infrastructure
Rail Baku – Tbilisi Kars new railroad line Railway modernization project
Air Tbilisi International Airport
− 2nd runway to be constructed − International Cargo terminal
Maritime Anaklia deep water Black Sea port
− Strategic location − Capable of accommodating Panamax type cargo vessels − High capacity – up to 100mln tons turnover annually
Up to USD 1bln for first phase (out of 9) in Georgia
1 2
Promoting Open Governance
Improvement of public services offered to the private sector Creation of “Front Office” Application of “Single Window Principle”
Involvement of the private sector in legislative process Discussion of draft legislation at an early stage
Strict monitoring of implementation of government decisions Creation of a special unit for monitoring purposes
3 Education Reform
General Education Reform Maximizing quality of teaching in secondary schools
Fundamental Reform of Higher Education Based on the comprehensive research of the labor market needs
Improvement of Vocational Education Increase involvement of the private sector in the professional
education
4
Trade
17.0%
Industry
17.0%
Transport &
commun.
10.2% Construction
9.3%
Public
administration
8.2%
Agriculture
7.7%
Real estate
7.4%
Healthcare
5.8%
Financial
interm.
4.4%
Hotels &
restaurants
3.1%
Other
9.9%
1,010 1,305 1,643 2,000 2,635
3,326 2,823 3,073
3,844 4,250 4,341 4,438 3,755
3,857 4,047 4,346 3,746 4,099
4,656 5,288
6,137 6,450 6,292 6,815
7,512 8,217
8,692 9,270 9,626 9,991
10,679 11,485
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Nominal GDP per capita, US$ GDP per capita, PPP, US$
DIVERSIFIED RESILIENT ECONOMY
Source: Geostat
Source: IMF, Geostat
Gross domestic product Diversified nominal GDP structure, 2018
Comparative real GDP growth rates, % (2010-2018 average) GDP per capita
Source: Geostat
Source: IMF, Geostat
35
0.2%
1.5% 1.9% 2.2% 2.3%
2.8% 3.0% 3.4% 3.5% 3.7%
4.5% 4.3% 4.8%
6.4%
0%
1%
2%
3%
4%
5%
6%
7%
Ukra
ine
Az
erb
aija
n
Ru
ssia
Bu
lga
ria
Cz
ech
re
p.
La
tvia
Ro
ma
nia
Lit
hu
an
ia
Po
lan
d
Est
on
ia
Arm
en
ia
Mo
ldo
va
Ge
org
ia
Tu
rke
y
11.1%
5.8%
9.6%
9.4%
12.6%
2.4%
-3.7%
6.2% 7.2%
6.4%
3.4%
4.6% 2.9%
2.8%
4.8% 4.7%
-4%
0%
4%
8%
12%
16%
-5
0
5
10
15
20
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Nominal GDP, US$ bn Real GDP growth, %
Growth was 4.7% in 1Q19
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19F
20
20
F
20
21F
20
22
F
Georgia
CIS
Eastern Europe
-2.5%
1.6% 1.8% 2.7% 2.9% 2.9% 3.0% 3.1% 3.2% 3.3% 3.4% 3.5% 3.8%
4.6% 4.6%
-4%
-2%
0%
2%
4%
6%
Tu
rke
y
Ru
ssia
Be
laru
s
Ukra
ine
Cz
ech
Re
p.
Lit
hu
an
ia
Est
on
ia
Ro
ma
nia
La
tvia
Bu
lga
ria
Az
erb
aija
n
Mo
ldo
va
Po
lan
d
Arm
en
ia
Ge
org
ia
Capital stock
2.6%
Labor force
0.5%
TFP growth
1.6%
Source: Geostat, G&T calculation Source: Geostat, G&T calculation
PRODUCTIVITY AND CAPITAL HAVE BEEN THE MAIN ENGINE OF GROWTH SINCE 2004
Source: IMF, Geostat Source: IMF
Overall contribution of capital, labor, and Total Factor Productivity (TFP) to growth, 2010-2018
Contributions of capital, labor, and TFP to growth during periods
Real GDP growth projection, 2019 Real GDP growth: Georgia, CIS, Eastern EU
36
-2%
0%
2%
4%
6%
8%
10%
2004-07 2008-09 2010-13 2014-18
TFP growth Labor force Capital stock
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Public sector (hired workers) Non-public sector (hired workers)
Source: Geostat
Source: Geostat
Source: Geostat
FURTHER JOB CREATION IS ACHIEVABLE
Unemployment rate down 1.3ppts y/y to 12.7% in 2018
Share of services in total employment on the rise
Average monthly wages and income per household
Hired workers accounted for 48.3% in total employment in 2017
Source: Geostat
37
0
500
1,000
1,500
2,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Services (incl. construction) Agriculture Manufacturing
0
100
200
300
400
500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Wages, US$ Total income, US$
0%
5%
10%
15%
20%
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Employed, 000' persons Unemployment rate, %
-1.2%
3.1%
2.0%
2.2%
0.4%
-2.9%
-6.9% -5.6%
-2.1%
-1.7%
-2.1%
-2.8%
-2.7%
-3.0%
-2.9%
-2.5%
-2.6%
-2.5%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19F
20
20
F
Fiscal deficit / surplus (IMF program definition)
Domestic
21%
Multilateral
56%
Bilateral
13% Eurobond
8%
External
79%
Note: Deficit calculated as net lending / borrowing minus budget lending
Source: Ministry of Finance of Georgia, as of Dec-2018
LOW PUBLIC DEBT
External public debt portfolio
weighted average interest rate 2.2%
Contractual
maturity 22 years
Source: Ministry of Finance of Georgia
Source: MOF, Geostat Source: IMF, MOF, Geostat
Fiscal deficit Breakdown of public debt
Public debt as % of GDP Gross government debt/GDP, 2018E
38
0%
10%
20%
30%
40%
50%
60%
70%
0%
10%
20%
30%
40%
50%
60%
70%
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19F
20
20
F
Total public debt to GDP, % External public debt to GDP, %
Public debt/GDP capped at 60%
45.0%
0%
20%
40%
60%
80%
100%
120%
140%
Ita
ly
Sin
ga
po
re
Sp
ain
Ca
na
da
Cro
ati
a
Mo
nte
ne
gro
Hu
ng
ary
Slo
ve
nia
Ukra
ine
Slo
va
kia
Arm
en
ia
Po
lan
d
Be
laru
s
Ge
org
ia
La
tvia
Ro
ma
nia
Lit
hu
an
ia
Cz
ech
re
p.
Tu
rke
y
Mo
ldo
va
Uz
be
kis
tan
Ka
za
kh
sta
n
Ru
ssia
Source: Ministry of Finance
Source: IMF
INVESTING IN INFRASTRUCTURE AND SPENDING LOW ON SOCIAL
Source: Ministry of Finance, Geostat
Source: IMF
Budget expenditures Expenditure breakdown: current vs. capital
Government social expenditure as % of GDP Government capital expenditure as % of GDP
39
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Tu
rke
y
Arm
en
ia
Ge
org
ia
Be
laru
s
Hu
ng
ary
Ru
ssia
Lit
hu
an
ia
Est
on
ia
Bu
lga
ria
Cro
ati
a
Po
lan
d
2016 2017 2018E 2019F
0%
1%
2%
3%
4%
5%
6%
7%
8%
Arm
en
ia
Tu
rke
y
Cro
ati
a
Ru
ssia
Lit
hu
an
ia
Po
lan
d
Bu
lga
ria
Est
on
ia
Hu
ng
ary
Be
laru
s
Ge
org
ia
2016 2017 2018E 2019F
38.3% 34.0%
30.7% 30.6% 29.4% 30.3% 30.5% 31.0% 30.4% 30.1% 30.5% 30.0%
0%
10%
20%
30%
40%
50%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19F
20
20
F
Expenditures (current + capital), GEL mn
Expenditures (current + capital) as % of GDP
80.4% 76.0%
72.5% 73.4% 80.0% 81.7%
78.1% 80.0% 74.2% 73.1% 74.2% 72.6%
19.6% 24.0%
27.5% 26.6% 20.0% 18.3%
21.9% 20.0% 25.8% 26.9% 25.8% 27.4%
0%
20%
40%
60%
80%
100%
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19F
20
20
F
Current Expenditures Capital Expenditures and net lending
Source: Geostat
Imports, 2018
Source: NBG – BOP statistics Source: NBG – BOP statistics
Source: Geostat
DIVERSIFIED FOREIGN TRADE
Source: GeoStat
Imports of goods and services Exports of goods and services
Exports, 2018 Oil imports
40
6.3 4.3 5.1
6.7 7.7 7.7 8.3
7.0 6.8 7.4 8.6
1.2
1.0 1.1
1.3 1.4 1.6
1.7
1.7 1.7 2.0
2.2
7.5 5.3
6.1
8.0
9.2 9.3 10.1 8.7
8.5 9.4
10.8
0
2
4
6
8
10
12
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Goods imports, US$ bn Services imports, US$ bn
1.3 1.3 1.6 2.0 2.6 3.0 3.0 3.1 3.3 4.0 4.5 2.0 1.5 1.9
2.4 2.5
3.0 3.1 2.5 2.5 3.0
3.5
0.3 0.2
0.5
0.7 0.9
1.1 0.9 0.4 0.3
0.5
0.8
3.6 3.1 3.9
5.1 5.9
7.1 7.0
6.0 6.1 7.5
8.8
0
2
4
6
8
10
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Re-exports, US$ bn Goods exports, Geo-originated, US$ bn
Services exports, US$ bn
864
-50%
-25%
0%
25%
50%
75%
100%
125%
-400
-200
0
200
400
600
800
1,000
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Oil imports, US$ mn Oil imports, % change, y/y
EU
21.8%
Azerbaijan
15.0%
Russia
13.0% Armenia
8.3%
Turkey
6.9%
China
5.9%
Ukraine
5.2%
USA
4.8%
Kazakhstan
2.7%
Uzbekistan
2.4% Other
14.0% EU
countries
28.9%
Turkey
16.1%
Russia
10.3%
China
9.1%
Azerbaija
n
6.4%
Ukraine
5.7%
USA
3.9%
Armenia
3.7%
Other
15.9%
Strong foreign investor interest Tourist arrivals and revenues on the rise
Remittances - steady source of external funding
Source: Geostat Source: NBG, Geostat
Source: NBG, Geostat Source: MOF, Geostat
DIVERSIFIED SOURCES OF CAPITAL
Public external borrowing for capex, % of GDP
41
1.7% 1.8%
1.1% 1.3% 1.0%
5.6%
4.4%
6.1% 5.6%
2.6% 2.2%
3.4% 3.3% 3.2% 3.3%
3.5%
0%
1%
2%
3%
4%
5%
6%
7%
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
8.4%
9.6% 7.1%
15.1%
17.2%
12.3%
6.2% 7.3%
7.8% 6.5%
6.3%
11.0%
11.9%
10.9%
12.6%
7.6%
0%
5%
10%
15%
20%
25%
0.0
0.5
1.0
1.5
2.0
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
FDI, US$ bn FDI as % of GDP
3.7% 3.4%
3.8% 4.0% 3.8% 3.5% 4.4%
5.7% 6.6%
8.9%
10.7% 10.8%
13.4% 14.7%
17.9% 19.9%
0%
5%
10%
15%
20%
25%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Tourism revenues, US$ bn Tourism revenues as % of GDP
0.2 0.3 0.4 0.6
0.9 1.0
0.8
1.1
1.3 1.3 1.5 1.4
1.1 1.2
1.4
1.6
4.9% 5.1%
6.3% 7.1%
8.5% 7.8% 7.8%
9.0% 8.8% 8.4%
9.2% 8.7%
7.7% 8.0%
9.2% 9.7%
0%
2%
4%
6%
8%
10%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Remittances, US$ bn Remittances as % of GDP
Source: NBG, Geostat
Source: Geostat Source: NBG
CURRENT ACCOUNT DEFICIT SUPPORTED BY FDI
Current account balance (% of nominal GDP)
FDI and capital goods import Building international reserves, US$ bn
42
0.2 0.4 0.5
0.9
1.4 1.5
2.1 2.3
2.8 2.9 2.8 2.7 2.5
2.8 3.0
3.3
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
-9.7% -7.0%
-11.1% -15.2%
-19.8% -22.0%
-10.6% -10.3% -12.8% -11.9%
-5.9% -10.8% -12.6% -13.1%
-8.8% -7.7%
8.3% 9.4% 8.5%
15.3% 16.5%
11.1% 6.3% 6.1% 6.8% 4.6% 5.6%
8.5% 9.6% 8.1% 10.8%
5.5%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Goods, net Services, net Income, net Transfers, net CA deficit net FDI
8.4%
9.6%
7.1%
15.1%
17.2%
12.3%
6.2% 7.3%
7.8%
6.5% 6.3%
11.0% 11.9%
10.9%
12.6%
7.6%
5.2% 5.6% 5.8%
7.9%
8.2%
7.9%
5.9% 6.0% 7.6%
8.4% 7.0%
7.7%
8.5%
9.1% 8.2%
9.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
FDI to GDP, % Capital goods imports to GDP, %
Source: World Bank Note: Jan2010=100
Source: Geostat Source: Geostat
Source: Geostat
INFLATION TARGETING SINCE 2009
Annual Inflation Monthly inflation
World commodity prices Average inflation
43
3.7%
-3%-2%-1%0%1%2%3%4%5%6%7%8%9%
-3%-2%-1%0%1%2%3%4%5%6%7%8%9%
Ja
n-1
3
Ma
y-1
3
Au
g-1
3
De
c-1
3
Ap
r-14
Au
g-1
4
De
c-1
4
Ap
r-15
Au
g-1
5
De
c-1
5
Ap
r-16
Au
g-1
6
De
c-1
6
Ap
r-17
Au
g-1
7
De
c-1
7
Ap
r-18
Au
g-1
8
De
c-1
8
Ma
r-19
Headline inflation Core (non-food, non-energy)
1.0%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Ja
n-1
3
Ma
y-1
3
Au
g-1
3
De
c-1
3
Ap
r-14
Au
g-1
4
De
c-1
4
Ap
r-15
Au
g-1
5
De
c-1
5
Ap
r-16
Au
g-1
6
De
c-1
6
Ap
r-17
Au
g-1
7
De
c-1
7
Ap
r-18
Au
g-1
8
De
c-1
8
Ma
r-19
2.5%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Ja
n-1
3
Ma
y-1
3
Au
g-1
3
De
c-1
3
Ap
r-14
Au
g-1
4
De
c-1
4
Ap
r-15
Au
g-1
5
De
c-1
5
Ap
r-16
Au
g-1
6
De
c-1
6
Ap
r-17
Au
g-1
7
De
c-1
7
Ap
r-18
Au
g-1
8
De
c-1
8
Ma
r-19
20
40
60
80
100
120
140
20
40
60
80
100
120
140
Ja
n-1
3
Ma
y-1
3
Au
g-1
3
De
c-1
3
Ap
r-14
Au
g-1
4
De
c-1
4
Ap
r-15
Au
g-1
5
De
c-1
5
Ap
r-16
Au
g-1
6
De
c-1
6
Ap
r-17
Au
g-1
7
De
c-1
7
Ap
r-18
Au
g-1
8
De
c-1
8
Ma
r-19
Energy Non-energy
International reserves Central Bank’s interventions
Monetary policy rate Loan and deposit dollarisation
Source: NBG Source: NBG
Source: NBG Source: NBG
INTERNATIONAL RESERVES SUFFICIENT TO FINANCE MORE THAN 3 MONTHS OF IMPORTS
44
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Ja
n-1
4
Ap
r-14
Ju
l-14
Oct-
14
Ja
n-1
5
Ap
r-15
Ju
n-1
5
Se
p-1
5
De
c-1
5
Ma
r-16
Ma
y-1
6
Au
g-1
6
No
v-1
6
Fe
b-1
7
Ma
y-1
7
Ju
l-17
Oct-
17
Ja
n-1
8
Ap
r-18
Ju
l-18
Se
p-1
8
De
c-1
8
Ma
r-19
Gross international reserves, US$ bn Net foreign assets, US$ bn
-80 -120
40
120
40 27 20
60
-15 -40
-140
-63
60
100
40
-20
-70 -40
-20
-30 -20
-25 -65
-85 -101
-200
-150
-100
-50
0
50
100
150
200
250
Ja
n-1
4
Ap
r-14
Ju
l-14
Oct-
14
Ja
n-1
5
Ap
r-15
Ju
n-1
5
Se
p-1
5
De
c-1
5
Ma
r-16
Ma
y-1
6
Au
g-1
6
No
v-1
6
Fe
b-1
7
Ma
y-1
7
Ju
l-17
Oct-
17
Ja
n-1
8
Ap
r-18
Ju
l-18
Se
p-1
8
De
c-1
8
Ma
r-19
NBG net interventions, US$ mn
US$ sale
US$ purchase
NBG purchased US$ 186mn in 1Q19
6.5%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Ja
n-1
4
Ap
r-14
Ju
n-1
4
Se
p-1
4
De
c-1
4
Ma
r-15
Ju
n-1
5
Se
p-1
5
De
c-1
5
Ma
r-16
Ju
n-1
6
Se
p-1
6
De
c-1
6
Ma
r-17
Ju
n-1
7
Se
p-1
7
De
c-1
7
Ma
r-18
Ju
n-1
8
Se
p-1
8
De
c-1
8
Ma
r-19
56.3%
62.0%
50%
55%
60%
65%
70%
75%
80%
50%
55%
60%
65%
70%
75%
80%
Ja
n-1
4
Ap
r-14
Ju
n-1
4
Se
p-1
4
De
c-1
4
Ma
r-15
Ju
n-1
5
Se
p-1
5
De
c-1
5
Ma
r-16
Ju
n-1
6
Se
p-1
6
De
c-1
6
Ma
r-17
Ju
n-1
7
Se
p-1
7
De
c-1
7
Ma
r-18
Ju
n-1
8
Se
p-1
8
De
c-1
8
Ma
r-19
Loan dollarization Deposit dollarization
FX reserves
M2 and annual inflation M2 and USD/GEL
Source: NBG Source: NBG
Source: NBG
FLOATING EXCHANGE RATE - POLICY PRIORITY
depreciation
appreciation
Nominal and Real effective exchange rate (Jan2003=100)
Source: NBG
45
90
100
110
120
130
140
150
160
90
100
110
120
130
140
150
160
Ja
n-0
3
Se
p-0
3
Ma
y-0
4
Ja
n-0
5
Se
p-0
5
Ma
y-0
6
Ja
n-0
7
Se
p-0
7
Ma
y-0
8
Fe
b-0
9
Oct-
09
Ju
n-1
0
Fe
b-1
1
Oct-
11
Ju
n-1
2
Fe
b-1
3
Oct-
13
Ju
l-14
Ma
r-15
No
v-1
5
Ju
l-16
Ma
r-17
No
v-1
7
Ju
l-18
Ma
r-19
Real effective exchange rate Nominal effective exchange rate
-6%
-3%
0%
3%
6%
9%
12%
15%
-30%
-10%
10%
30%
50%
70%
Ja
n-0
3
Se
p-0
3
Ma
y-0
4
Ja
n-0
5
Se
p-0
5
Ma
y-0
6
Ja
n-0
7
Se
p-0
7
Ma
y-0
8
Fe
b-0
9
Oct-
09
Ju
n-1
0
Fe
b-1
1
Oct-
11
Ju
n-1
2
Fe
b-1
3
Oct-
13
Ju
l-14
Ma
r-15
No
v-1
5
Ju
l-16
Ma
r-17
No
v-1
7
Ju
l-18
Ma
r-19
M2, % change, y/y (LHS) Annual inflation, eop (RHS)
-30%
-20%
-10%
0%
10%
20%
30%
40%
-60%
-40%
-20%
0%
20%
40%
60%
80%
Ja
n-0
3
Se
p-0
3
Ma
y-0
4
Ja
n-0
5
Se
p-0
5
Ma
y-0
6
Ja
n-0
7
Se
p-0
7
Ma
y-0
8
Fe
b-0
9
Oct-
09
Ju
n-1
0
Fe
b-1
1
Oct-
11
Ju
n-1
2
Fe
b-1
3
Oct-
13
Ju
l-14
Ma
r-15
No
v-1
5
Ju
l-16
Ma
r-17
No
v-1
7
Ju
l-18
Ma
r-19
M2, % change, y/y (LHS) GEL/USD, % change (RHS)
0.2 0.4 0.5 0.9
1.4 1.5
2.1 2.3
2.8 2.9 2.8 2.7 2.5
2.8 3.0 3.3
3.5 0.90
0.99 1.10
1.16 1.26 1.22 1.24
1.42 1.30 1.25
1.36 1.31 1.16
1.03
1.23 1.24 1.29
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
1Q19
Official FX reserves, US$ bn M2 multiplier
11.3% 11.1%
10.7% 9.4%
8.8% 8.7%
6.3% 6.0%
5.6% 4.1% 4.0%
3.0% 2.9%
2.7% 2.7%
1.9%
PortugalCroatia
RussiaBosnia & Herz.
KazakhstanBulgariaArmenia
LatviaRomania
BelarusPolandTurkey
HungaryLithuania
GeorgiaCzech Rep.
66.5%
64.7%
64.2%
64.1%
61.4%
56.0%
54.8%
54.5%
52.8%
52.7%
52.2%
51.5%
Israel
Georgia
Turkey
Estonia
Slovakia
Croatia
Armenia
Bosnia & Herz
Czech Rep.
Poland
Russia
Bulgaria
1.3 1.7 2.5 4.2 7.2 8.9 8.3
10.6 12.7
14.4 17.3
20.6 25.2
30.1
34.6
39.7
0.8 0.9 1.7 2.7 4.6 6.0 5.2 6.3
7.7 8.7 10.5
13.0 16.0
18.9 22.3
26.6
0.7 1.0 1.3 2.1 3.2 3.6 4.0 5.5 6.7 7.6 9.7 11.6 14.3 17.0 19.8
23.0
0
5
10
15
20
25
30
35
40
45
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Assets, GEL bn Loans, GEL bn Deposits, GEL bn
25.4% CAGR
Source: National Bank of Georgia, GeoStat
Source: NBG
Source: IMF, NBG
GROWING AND WELL-CAPITALISED BANKING SECTOR
Prudent regulation and oversight ensuring financial stability
Demonstrated strong resilience towards both domestic and external shocks without single bank going bankrupt
No nationalization of the banks and no government ownership since 1994
Resilient to different shocks to the economy, room for healthy credits growth with retail loans at 35.6% of GDP and total loans at 64.7% of GDP in 2018
Summary Banking sector assets, loans and deposits
Non-performing loans, Latest-2018
46
Source: IMF, NBG
Banking Sector loans to GDP, 2018
50
100
150
Ja
n-0
7
Ma
y-0
7
Se
p-0
7
Ja
n-0
8
Ma
y-0
8
Se
p-0
8
Ja
n-0
9
Ma
y-0
9
Se
p-0
9
Ja
n-1
0
Ma
y-1
0
Se
p-1
0
Ja
n-1
1
Ma
y-1
1
Se
p-1
1
Ja
n-1
2
Ma
y-1
2
Se
p-1
2
Ja
n-1
3
Ma
y-1
3
Se
p-1
3
Ja
n-1
4
Ma
y-1
4
Se
p-1
4
Ja
n-1
5
Ju
n-1
5
Oct-
15
Fe
b-1
6
Ju
n-1
6
Oct-
16
Fe
b-1
7
Ju
n-1
7
Oct-
17
Fe
b-1
8
Ju
n-1
8
Oct-
18
Fe
b-1
9
Inflation adjusted real estate price index (2010=100, GEL)
Source: NBG, Geostat
GROWING ECONOMY SUPPORTS HEALTHY CREDIT GROWTH
Banking sector corporate & retail loans to GDP
47
Mortgage loans Source: NBG
12.8% 8.3% 19.9% 21.0%
87.2% 91.7%
80.1%
79.0%
2,156
3,099
3,838
5,444
2015 2016 2017 2018
FX-denominated mortgage loans, share in total
GEL-denominated mortgage loans, share in total
Total mortgage loans, GEL mn
9,041 8,422
24,698
39,160 28,431 33,331
29,840
32,870
37,472 41,753
54,538
72,030
2015 2016 2017 2018
Number of mortgage loans in FX
Number of mortgage loans in GEL
Total number of mortgage loans
Source: NBG, Geostat
Real estate price index
6% 7% 10% 14% 17% 18% 17% 18% 18% 18% 20% 22% 26% 27% 27% 29% 29%
3% 3% 4%
6%
9% 13% 11% 11% 13% 14%
18% 21%
25% 28% 32%
36% 35%
0%
10%
20%
30%
40%
50%
60%
0%
10%
20%
30%
40%
50%
60%
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
1Q19
Retail loans to GDP Corporate loans to GDP
16.4% 16.4% 19.9%
35.6%
45.6% 51.8% 51.9% 53.9% 54.9%
61.7%
Eu
ro
Arm
en
ia
Mo
ldo
va
Ge
org
ia
Ru
ssia
Be
laru
s
Ka
za
kh
sta
n
Az
erb
aija
n
Ukra
ine
Tu
rke
y
Source: Bloomberg Note: US$ per unit of national currency, period 1-Aug-2014 – 31-Mar-2019
Source: National Statistics Offices Source: Central banks
FLEXIBLE FX REGIME SUPPORTS TO MACRO STABILITY
Currency weakening vs. US$
Inflation remains low in Georgia Monetary policy rate low vs. peers
48
1.9% 2.4%
3.7% 4.8% 5.3% 5.8%
8.6%
19.7%
0%
5%
10%
15%
20%
25%
Arm
en
ia
Az
erb
aija
n
Ge
org
ia
Ka
za
kh
sta
n
Ru
ssia
Be
laru
s
Ukra
ine
Tu
rke
y
End-2018 Mar-19
5.75% 6.50% 7.75% 9.00% 9.25% 10.00%
18.00%
24.00%
0%
5%
10%
15%
20%
25%
30%
Arm
en
ia
Ge
org
ia
Ru
ssia
Az
erb
aija
n
Ka
za
kh
sta
n
Be
laru
s
Ukra
ine
Tu
rke
y
End-2018 Mar-19
Source: NBG, G&T Source: NBG
Source: Geostat Source: Geostat
RECENT TREND – TOURIST ARRIVALS, EXPORTS AND REMITTANCES UP
Tourism revenues up 4.4% y/y in 1Q19 Remittances up 6.5% y/y in 1Q19
Exports up 12.8% y/y in 1Q19 Trade deficit down 14.2% y/y in 1Q19
49
0%
10%
20%
30%
40%
50%
60%
0
100
200
300
400
500
Ja
n-1
7
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Ju
n-1
7
Ju
l-17
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Ja
n-1
8
Fe
b-1
8
Ma
r-18
Ap
r-18
Ma
y-1
8
Ju
n-1
8
Ju
l-18
Au
g-1
8
Se
p-1
8
Oct-
18
No
v-1
8
De
c-1
8
Ja
n-1
9
Fe
b-1
9
Ma
r-19
Exports, US$ mn % change y/y
10% 9%
2%
-3% -3%
-14%
1%
-7% -4% -1%
22%
-1%
17%
4%
40%
33%
14% 15% 21%
6%
-3%
20%
-11% -11% -5%
-8%
-25% -30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Ja
n-1
7
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Ju
n-1
7
Ju
l-17
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Ja
n-1
8
Fe
b-1
8
Ma
r-18
Ap
r-18
Ma
y-1
8
Ju
n-1
8
Ju
l-18
Au
g-1
8
Se
p-1
8
Oct-
18
No
v-1
8
De
c-1
8
Ja
n-1
9
Fe
b-1
9
Ma
r-19
0%
10%
20%
30%
40%
0
40
80
120
160
Ja
n-1
7
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Ju
n-1
7
Ju
l-17
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Ja
n-1
8
Fe
b-1
8
Ma
r-18
Ap
r-18
Ma
y-1
8
Ju
n-1
8
Ju
l-18
Au
g-1
8
Se
p-1
8
Oct-
18
No
v-1
8
De
c-1
8
Ja
n-1
9
Fe
b-1
9
Ma
r-19
Remittances, US$ mn Total remittances, % change y/y
0%5%10%15%20%25%30%35%40%45%50%
0
50
100
150
200
250
300
350
400
Ja
n-1
7
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Ju
n-1
7
Ju
l-17
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Ja
n-1
8
Fe
b-1
8
Ma
r-18
Ap
r-18
Ma
y-1
8
Ju
n-1
8
Ju
l-18
Au
g-1
8
Se
p-1
8
Oct-
18
No
v-1
8
De
c-1
8
Ja
n-1
9
Fe
b-1
9
Ma
r-19
Tourism revenues, US$ mn % change y/y
EU
12.9%
Russia
9.3%
Azerbaijan
6.0%
Turkey
4.6%
Armenia
3.3%
Ukraine
1.9%
Other countries
20.0%
4.6%
9.3%
44.0%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Turkey Russia Other countries
Source: Geostat, NBG, GNTA, G&T Source: Geostat, NBG, GNTA, G&T
EXPOSURE TO PARTNER COUNTRIES WELL DIVERSIFIED
Exports, tourism, FDI and remittances, % of GDP
Summary
50
Source: Geostat, NBG, GNTA, G&T
Economic linkages breakdown
In 2018: • The EU became the largest source of remittances, replacing Russia (35%
vs. 29% share in total)
• The EU remains Georgia’s largest FDI provider
• Azerbaijan became the top export market again, accounting for 15% of the total and replacing Russia
• Russia became Georgia’s largest source of tourism revenues, replacing Turkey.
% of GDP, 2018 Exports Tourism FDI Remittances Total
Total 20.7% 19.9% 7.6% 9.7% 57.9%
EU 4.5% 1.4% 3.5% 3.4% 12.9%
Russia 2.7% 3.4% 0.4% 2.8% 9.3%
Turkey 1.4% 2.6% -0.1% 0.7% 4.6%
Ukraine 1.1% 0.5% 0.1% 0.2% 1.9%
Azerbaijan 3.1% 1.3% 1.5% 0.1% 6.0%
Armenia 1.7% 1.4% 0.1% 0.1% 3.3%
Other countries 6.2% 9.2% 2.1% 2.5% 20.0%
Note: Negative FDI from Turkey reflects purchase of Turkish company Geocell by resident Georgian company Silknet
Well diversified economic linkages (exports, tourism, FDI and remittances), 2018
CONTENTS
Results Discussion
Appendices
Georgian Macro Overview
Group Overview
51
8
52
31
4
BOARD OF DIRECTORS
52
Robust Corporate Governance based on UK Corporate Governance Code
Archil Gachechiladze, Chief Executive Officer
Experience: with the Group since 2009; originally joined as Deputy CEO, Corporate Banking; formerly: CEO of Georgian Global Utilities. Over 17 years’ experience in the financial services
Al Breach, Independent Non-Executive Director
Experience: Director of Gemsstock Ltd, The Browser and
Furka Holdings AG, and advisor to East Capital; formerly:
Head of Research, Strategist & Economist at UBS Russia and
CIS, economist at Goldman Sachs
Jonathan Muir, Independent Non-Executive Director
Experience: CEO of LetterOne Holdings SA and of LetterOne
Investment Holdings; formerly: CFO and Vice President of
Finance and Control of TNK-BP, Partner at Ernst & Young
Hanna Loikkanen, Senior Independent
Non-Executive Director Experience: currently advisor to East Capital Private Equity AB;
Non-Executive Director of PJSC Rosbank; formerly: Senior
executive at East Capital, FIM Group Russia, Nordea Finance,
SEB
Tamaz Georgadze, Independent Non-Executive Director
Experience: Executive Director and founder of Raisin GmbH
(formerly SavingGlobal GmbH); formerly: Partner at McKinsey
& Company in Berlin, aide to President of Georgia
Neil Janin, Independent Non-Executive Chairman
Experience: formerly Director at McKinsey & Company in
Paris; formerly co-chairman of the commission of the French
Institute of Directors (IFA); formerly Chase Manhattan Bank
in New York and Paris
Cecil Quillen, Independent Non-Executive Director
Experience: Partner at Linklaters LLP with nearly 29 years of
experience in working on a broad spectrum of securities and
finance matters
Andreas Wolf, Independent Non-Executive Director
Experience: Head of Strategy and Business Development for
MHB-Bank AG in Germany and an advisor to Raisin, a
European deposit brokerage marketplace;
formerly: Partner at McKinsey & Company in Frankfurt
Véronique McCarroll, Independent Non-Executive
Director
Experience: 30 years’ experience in Financial Services; formerly:
Executive Director at Crédit Agricole CIB, Partner at McKinsey
& Company, Oliver Wyman and Andersen/ Ernst & Young
HIGHLY EXPERIENCED MANAGEMENT TEAM
53
Senior Executive Compensation Policy applies to top executives and envisages long-term deferred and discretionary awards of securities and no cash bonuses to be paid to such executives
Archil Gachechiladze, Chief Executive Officer
With the Group since 2009. Previously, CEO of Georgian Global Utilities. Held various positions with the Group, such as Deputy CEO, Corporate Banking, Deputy CEO, Investment Management, CFO of BGEO Group, Deputy CEO, Corporate Investment Banking. More than 17 years of experience of senior roles at TBC Bank, Lehman Brothers Private Equity, Salford Equity Partners, KPMG, World Bank. Holds an MBA from Cornell University.
Sulkhan Gvalia, Chief Financial Officer
With the Group since 2004. Previously, founder and CEO of E-Space Limited, Tbilisi. Held various positions with the Group, such as Chief Risk Officer and Head of Corporate Banking. Prior to joining the Group, served as Deputy Chairman of the management board of TbilUniversalBank, prior to its acquisition by the Bank. Also, serves as non-executive independent director at Inecobank (Armenia). Holds a law degree from Tbilisi State University.
Levan Kulijanishvili, Deputy CEO, Operations
With the Group since 1997. Joined as a Junior Financial Analyst of the Bank. Held various senior positions, including Deputy CEO in charge of finance, Head of Internal Audit, Head of Financial Monitoring, Head of Strategy and Planning, and Head of the Financial Analysis. Holds an MBA from Grenoble Graduate School of Business.
George Chiladze, Deputy CEO, Chief Risk Officer
With the Group since 2008. Joined as a Deputy CEO in charge of finance at the Bank. Left the Group in 2011 and rejoined in 2013 as Deputy CEO, Chief Risk Officer. Prior to rejoining the Group, he was Deputy CEO at the Partnership Fund. Prior to returning to Georgia in 2003, he worked at the programme trading desk at Bear Stearns in New York City. Holds a PhD in physics from Johns Hopkins University in Baltimore, Maryland.
Mikheil Gomarteli, Deputy CEO, Emerging and Mass Retail Banking
With the Group since 1997. Mikheil is a textbook professional growth story made possible in our Group – he developed his way from selling debit cards door-to-door to successfully leading our Retail Banking franchise for over ten years now. Holds an undergraduate degree in Economics from Tbilisi State University.
Vasil Khodeli, Deputy CEO With the Group since 1998. Previously served as Deputy CEO, Corporate Investment Banking since 2017 and Head of Corporate Banking of the Bank since 2004. He has more than 20 years of banking experience and has held various roles with the Group. Holds an MBA from Grenoble Business School.
Vakhtang Bobokhidze, Deputy CEO, Information Technologies
With the Group since 2005. Joined as Quality Control Manager. Left the Group in 2010 and rejoined the Group in December 2010. Prior to being appointed as Deputy CEO, served as Head of IT Department since 2016. Holds an MBA from Tbilisi State University.
BANK OF GEORGIA GROUP INCOME STATEMENT
54
Bank of Georgia Group Consolidated Banking Business Discontinued Operations Eliminations
GEL thousands, unless otherwise noted 1Q19 1Q18 Change
y-o-y 4Q18
Change
q-o-q 1Q19 1Q18
Change
y-o-y 4Q18
Change
q-o-q 1Q19 1Q18
Change
y-o-y 4Q18
Change
q-o-q 1Q19 1Q18 4Q18
Interest income 334,735 311,275 7.5% 345,760 -3.2% 334,735 313,679 6.7% 345,760 -3.2% - - - - - - (2,404) -
Interest expense (151,794) (130,035) 16.7% (158,322) -4.1% (151,794) (133,430) 13.8% (158,322) -4.1% - - - - - - 3,395 -
Net interest income 182,941 181,240 0.9% 187,438 -2.4% 182,941 180,249 1.5% 187,438 -2.4% - - - - - - 991 -
Fee and commission income 62,531 50,673 23.4% 62,350 0.3% 62,531 51,213 22.1% 62,350 0.3% - - - - - - (540) -
Fee and commission expense (20,351) (16,488) 23.4% (21,006) -3.1% (20,351) (16,702) 21.8% (21,006) -3.1% - - - - - - 214 -
Net fee and commission income 42,180 34,185 23.4% 41,344 2.0% 42,180 34,511 22.2% 41,344 2.0% - - - - - - (326) -
Net foreign currency gain 30,025 13,151 128.3% 53,358 -43.7% 30,025 14,253 110.7% 53,358 -43.7% - - - - - - (1,102) -
Net other income / (expense) 3,568 5,518 -35.3% (9,073) NMF 3,568 5,744 -37.9% (9,073) NMF - - - - - - (226) -
Operating income 258,714 234,094 10.5% 273,067 -5.3% 258,714 234,757 10.2% 273,067 -5.3% - - - - - - (663) -
Salaries and other employee benefits (excluding one-offs) (52,418) (48,818) 7.4% (58,331) -10.1% (52,418) (49,453) 6.0% (58,331) -10.1% - - - - - - 635 -
One-off termination costs of executive management (7,842) - NMF - NMF (7,842) - NMF - NMF - - - - - - - -
Salaries and other employee benefits (60,260) (48,818) 23.4% (58,331) 3.3% (60,260) (49,453) 21.9% (58,331) 3.3% - - - - - - 635 -
Administrative expenses (22,741) (25,168) -9.6% (30,010) -24.2% (22,741) (25,633) -11.3% (30,010) -24.2% - - - - - - 465 -
Depreciation and amortisation (15,688) (11,522) 36.2% (11,365) 38.0% (15,688) (11,522) 36.2% (11,365) 38.0% - - - - - - - -
Other operating expenses (1,080) (771) 40.1% (1,151) -6.2% (1,080) (771) 40.1% (1,151) -6.2% - - - - - - - -
Operating expenses (99,769) (86,279) 15.6% (100,857) -1.1% (99,769) (87,379) 14.2% (100,857) -1.1% - - - - - - 1,100 -
Profit from associates 188 318 -40.9% 318 -40.9% 188 318 -40.9% 318 -40.9% - - - - - - - -
Operating profit before cost of risk 159,133 148,133 7.4% 172,528 -7.8% 159,133 147,696 7.7% 172,528 -7.8% - - - - - - 437 -
Expected credit loss / impairment charge on loans to customers (40,117) (36,676) 9.4% (25,783) 55.6% (40,117) (36,676) 9.4% (25,783) 55.6% - - - - - - - -
Expected credit loss / impairment charge on finance lease
receivables (446) 13 NMF 514 NMF (446) 13 NMF 514 NMF - - - - - - - -
Other expected credit loss / impairment charge on other assets
and provisions (2,089) 2,850 NMF (15,509) -86.5% (2,089) 2,850 NMF (15,509) -86.5% - - - - - - - -
Cost of risk (42,652) (33,813) 26.1% (40,778) 4.6% (42,652) (33,813) 26.1% (40,778) 4.6% - - - - - - - -
Net operating profit before non-recurring items and income tax 116,481 114,320 1.9% 131,750 -11.6% 116,481 113,883 2.3% 131,750 -11.6% - - - - - - 437 -
Net non-recurring items (excluding one-offs) (1,575) (2,948) -46.6% (2,185) -27.9% (1,575) (2,948) -46.6% (2,185) -27.9% - - - - - - - -
One-off termination costs of former CEO (3,985) - NMF (4,401) -9.5% (3,985) - NMF (4,401) -9.5% - - - - - - - -
Net non-recurring items (5,560) (2,948) 88.6% (6,586) -15.6% (5,560) (2,948) 88.6% (6,586) -15.6% - - - - - - - -
Profit before income tax 110,921 111,372 -0.4% 125,164 -11.4% 110,921 110,935 0.0% 125,164 -11.4% - - - - - - 437 -
Income tax expense (excluding one-offs) (10,536) (9,283) 13.5% (10,888) -3.2% (10,536) (9,283) 13.5% (10,888) -3.2% - - - - - - - -
Income tax benefit related to one-off termination costs 1,587 - NMF 540 NMF 1,587 - NMF 540 NMF - - - - - - - -
Income tax expense (8,949) (9,283) -3.6% (10,348) -13.5% (8,949) (9,283) -3.6% (10,348) -13.5% - - - - - - - -
Profit from continuing operations 101,972 102,089 -0.1% 114,816 -11.2% 101,972 101,652 0.3% 114,816 -11.2% - - - - - - 437 -
Profit from discontinued operations - 28,938 NMF - - - - - - - - 29,375 NMF - - - (437) -
Profit 101,972 131,027 -22.2% 114,816 -11.2% 101,972 101,652 0.3% 114,816 -11.2% - 29,375 NMF - - - - -
Attributable to: – shareholders of the Group 101,512 118,420 -14.3% 114,240 -11.1% 101,512 101,252 0.3% 114,240 -11.1% - 17,168 NMF - - - - -
– non-controlling interests 460 12,607 -96.4% 576 -20.1% 460 400 15.0% 576 -20.1% - 12,207 NMF - - - - -
Profit from continuing operations attributable to: – shareholders of the Group 101,512 101,689 -0.2% 114,240 -11.1% 101,512 101,252 0.3% 114,240 -11.1% - - - - - - 437 -
– non-controlling interests 460 400 15.0% 576 -20.1% 460 400 15.0% 576 -20.1% - - - - - - - -
Profit from discontinued operations attributable to: – shareholders of the Group - 16,731 NMF - - - - - - - - 17,168 NMF - - - (437) -
– non-controlling interests - 12,207 NMF - - - - - - - - 12,207 NMF - - - - -
Earnings per share (basic) 2.12 3.15 -32.7% 2.40 -11.7%
– earnings per share from continuing operations 2.12 2.71 -21.8% 2.40 -11.7%
– earnings per share from discontinued operations - 0.44 NMF - -
Earnings per share (diluted) 2.11 3.04 -30.6% 2.40 -12.1%
– earnings per share from continuing operations 2.11 2.61 -19.2% 2.40 -12.1%
– earnings per share from discontinued operations - 0.43 NMF - -
BANK OF GEORGIA GROUP BALANCE SHEET
55
Bank of Georgia Group Consolidated Banking Business Discontinued Operations Eliminations
GEL thousands, unless otherwise noted Mar-19 Mar-18 Change
y-o-y Dec-18
Change
q-o-q Mar-19 Mar-18
Change
y-o-y Dec-18
Change
q-o-q Mar-19 Mar-18
Change
y-o-y Dec-18
Change
q-o-q Mar-19 Mar-18 Dec-18
Cash and cash equivalents 1,162,168 1,754,920 -33.8% 1,215,799 -4.4% 1,162,168 1,754,920 -33.8% 1,215,799 -4.4% - - - - - - - -
Amounts due from credit institutions 1,391,630 941,804 47.8% 1,305,216 6.6% 1,391,630 955,175 45.7% 1,305,216 6.6% - - - - - - (13,371) -
Investment securities 1,948,592 1,748,728 11.4% 2,019,017 -3.5% 1,948,592 1,804,231 8.0% 2,019,017 -3.5% - - - - - - (55,503) -
Loans to customers and finance lease
receivables 9,570,691 7,755,233 23.4% 9,397,747 1.8% 9,570,691 7,819,773 22.4% 9,397,747 1.8% - - - - - - (64,540) -
Accounts receivable and other loans 3,134 3,453 -9.2% 2,849 10.0% 3,134 6,537 -52.1% 2,849 10.0% - - - - - - (3,084) -
Prepayments 31,621 79,600 -60.3% 44,294 -28.6% 31,621 79,600 -60.3% 44,294 -28.6% - - - - - - - -
Inventories 11,756 10,371 13.4% 13,292 -11.6% 11,756 10,371 13.4% 13,292 -11.6% - - - - - - - -
Right-of-use assets 91,248 - NMF - NMF 91,248 - NMF - NMF - - - - - - - -
Investment property 169,328 218,142 -22.4% 151,446 11.8% 169,328 218,142 -22.4% 151,446 11.8% - - - - - - - -
Property and equipment 349,728 324,810 7.7% 344,059 1.6% 349,728 324,810 7.7% 344,059 1.6% - - - - - - - -
Goodwill 33,352 33,351 0.0% 33,351 0.0% 33,352 33,351 0.0% 33,351 0.0% - - - - - - - -
Intangible assets 87,005 57,139 52.3% 83,366 4.4% 87,005 57,139 52.3% 83,366 4.4% - - - - - - - -
Income tax assets 19,446 13,189 47.4% 19,451 0.0% 19,446 13,189 47.4% 19,451 0.0% - - - - - - - -
Other assets 144,343 113,824 26.8% 126,008 14.6% 144,343 117,290 23.1% 126,008 14.6% - - - - - - (3,466) -
Assets held for sale 40,528 - NMF 42,408 -4.4% 40,528 - NMF 42,408 -4.4% - - - - - - - -
Assets of disposal group held for distribution
- 2,447,592 NMF - - - - - - - - 3,841,004 NMF - - - (1,393,412) -
Total assets 15,054,570 15,502,156 -2.9% 14,798,303 1.7% 15,054,570 13,194,528 14.1% 14,798,303 1.7% - 3,841,004 NMF - - - (1,533,376) -
Client deposits and notes 8,393,861 6,762,071 24.1% 8,133,853 3.2% 8,393,861 7,296,110 15.0% 8,133,853 3.2% - - - - - - (534,039) -
Amounts due to credit institutions 2,463,408 2,521,291 -2.3% 2,994,879 -17.7% 2,463,408 2,642,427 -6.8% 2,994,879 -17.7% - - - - - - (121,136) -
Debt securities issued 2,045,428 1,524,600 34.2% 1,730,414 18.2% 2,045,428 1,569,404 30.3% 1,730,414 18.2% - - - - - - (44,804) -
Lease liabilities 78,364 - NMF - NFM 78,364 - NMF - NMF - - - - - - - -
Accruals and deferred income 48,449 27,478 76.3% 47,063 2.9% 48,449 27,478 76.3% 47,063 2.9% - - - - - - - -
Income tax liabilities 37,396 19,763 89.2% 28,855 29.6% 37,396 19,763 89.2% 28,855 29.6% - - - - - - - -
Other liabilities 68,883 41,073 67.7% 64,966 6.0% 68,883 41,876 64.5% 64,966 6.0% - - - - - - (803) -
Liabilities of disposal group held for
distribution - 1,837,869 NMF - - - - - - - - 1,964,463 NMF - - - (126,594) -
Total liabilities 13,135,789 12,734,145 3.2% 13,000,030 1.0% 13,135,789 11,597,058 13.3% 13,000,030 1.0% - 1,964,463 NMF - - - (827,376) -
Share capital 1,618 1,151 40.6% 1,618 0.0% 1,618 1,151 40.6% 1,618 0.0% - - - - - - - -
Additional paid-in capital 495,452 64,530 NMF 480,555 3.1% 495,452 - NMF 480,555 3.1% - 64,530 NMF - - - - -
Treasury shares (42) (57) -26.3% (51) -17.6% (42) (57) -26.3% (51) -17.6% - - - - - - - -
Other reserves 36,474 101,967 -64.2% 30,515 19.5% 36,474 (117,684) NMF 30,515 19.5% - 797,564 NMF - - - (577,913) -
Retained earnings 1,376,834 2,273,536 -39.4% 1,277,732 7.8% 1,376,834 1,706,937 -19.3% 1,277,732 7.8% - 694,686 NMF - - - (128,087) -
Reserves of disposal group held for
distribution - 15,828 NMF - - - - - - - - 15,828 NMF - - - - -
Total equity attributable to shareholders
of the Group 1,910,336 2,456,955 -22.2% 1,790,369 6.7% 1,910,336 1,590,347 20.1% 1,790,369 6.7% - 1,572,608 NMF - - - (706,000) -
Non-controlling interests 8,445 311,056 -97.3% 7,904 6.8% 8,445 7,123 18.6% 7,904 6.8% - 303,933 NMF - - - - -
Total equity 1,918,781 2,768,011 -30.7% 1,798,273 6.7% 1,918,781 1,597,470 20.1% 1,798,273 6.7% - 1,876,541 NMF - - - (706,000) -
Total liabilities and equity 15,054,570 15,502,156 -2.9% 14,798,303 1.7% 15,054,570 13,194,528 14.1% 14,798,303 1.7% - 3,841,004 NMF - - - (1,533,376) -
Book value per share * 39.88 65.64 -39.2% 37.59 6.1%
* The y-o-y decline in Book value per share as at 31 March 2019 is driven by the demerger of Investment Business to Georgia Capital PLC on 29 May 2018 and the issuance and allotment of additional 9,784,716 Bank of Georgia Group shares (equivalent to 19.9% of Bank of Georgia Group's issued ordinary share capital) to Georgia Capital
BNB FINANCIAL HIGHLIGHTS
56
INCOME STATEMENT, HIGHLIGHTS GEL thousands, unless otherwise stated
1Q19 1Q18 Change
y-o-y 4Q18
Change
q-o-q
Net interest income 6,585 6,544 0.6% 6,471 1.8%
Net fee and commission income 1,812 2,277 -20.4% 1,356 33.6%
Net foreign currency gain 3,955 3,277 20.7% 5,261 -24.8%
Net other income 147 117 25.6% 332 -55.7%
Operating income 12,499 12,215 2.3% 13,420 -6.9%
Operating expenses (7,847) (7,721) 1.6% (8,785) -10.7%
Operating profit before cost of risk 4,652 4,494 3.5% 4,635 0.4%
Cost of risk (1,442) (717) 101.1% 670 NMF
Net non-recurring items (50) (700) -92.9% (8) NMF
Profit before income tax 3,160 3,077 2.7% 5,297 -40.3%
Income tax expense (571) (779) -26.7% (1,162) -50.9%
Profit 2,589 2,298 12.7% 4,135 -37.4%
BALANCE SHEET, HIGHLIGHTS GEL thousands, unless otherwise stated
Mar-19 Mar-18 Change
y-o-y Dec-18
Change
q-o-q
Cash and cash equivalents 79,497 77,403 2.7% 110,340 -28.0%
Amounts due from credit institutions 20,556 10,387 97.9% 19,664 4.5%
Investment securities 116,082 40,819 NMF 67,734 71.4%
Loans to customers and finance lease receivables 451,665 377,680 19.6% 432,657 4.4%
Other assets 54,001 37,731 43.1% 50,155 7.7%
Total assets 721,801 544,020 32.7% 680,550 6.1%
Client deposits and notes 425,563 288,337 47.6% 389,001 9.4%
Amounts due to credit institutions 144,314 144,208 0.1% 162,823 -11.4%
Debt securities issued 53,846 30,726 75.2% 38,163 41.1%
Other liabilities 9,477 7,331 29.3% 5,300 78.8%
Total liabilities 633,200 470,602 34.6% 595,287 6.4%
Total equity 88,601 73,418 20.7% 85,263 3.9%
Total liabilities and equity 721,801 544,020 32.7% 680,550 6.1%
BANKING BUSINESS KEY RATIOS
57 * For the description of Key Ratios, refer to page 65 ** 1Q19 and 4Q18 results adjusted for one-off employee costs related to termination benefits of the former CEO and executive management *** 1Q19 results adjusted for one-off employee costs related to termination benefits of the former executive management
1Q19 1Q18 4Q18
Profitability
ROAA, annualised ** 3.1% 3.2% 3.3%
ROAA, annualised (unadjusted) 2.8% 3.2% 3.2%
ROAE, annualised ** 24.5% 26.2% 27.0%
RB ROAE ** 25.3% 31.8% 28.4%
CIB ROAE ** 27.1% 19.8% 28.5%
ROAE, annualised (unadjusted) 22.2% 26.2% 26.2%
Net interest margin, annualised 5.8% 7.0% 6.0%
RB NIM 6.4% 8.2% 6.7%
CIB NIM 3.4% 3.2% 3.2%
Loan yield, annualised 12.2% 13.9% 12.8%
RB Loan yield 13.6% 15.8% 14.2%
CIB Loan yield 9.1% 9.9% 9.8%
Liquid assets yield, annualised 3.8% 3.6% 3.8%
Cost of funds, annualised 4.8% 4.8% 5.0%
Cost of client deposits and notes, annualised 3.3% 3.4% 3.4%
RB Cost of client deposits and notes 3.0% 2.8% 2.9%
CIB Cost of client deposits and notes 3.6% 3.9% 4.0%
Cost of amounts due to credit institutions, annualised 7.6% 6.9% 7.9%
Cost of debt securities issued 7.8% 7.7% 7.8%
Operating leverage, y-o-y *** 5.0% -3.6% 3.8%
Operating leverage, q-o-q *** 3.6% 2.6% -2.3%
Efficiency
Cost / Income *** 35.5% 37.2% 36.9%
RB Cost / Income *** 35.5% 36.7% 36.7%
CIB Cost / Income *** 26.9% 32.5% 29.6%
Cost / Income (unadjusted) 38.6% 37.2% 36.9%
Liquidity
NBG liquidity ratio (minimum requirement 30%) 36.7% 36.5% 31.9%
NBG liquidity coverage ratio (minimum requirement 100%) 133.1% 135.2% 120.1%
Liquid assets to total liabilities 34.3% 38.9% 34.9%
Net loans to client deposits and notes 114.0% 107.2% 115.5%
Net loans to client deposits and notes + DFIs 98.6% 92.1% 99.6%
Leverage (times) 6.8 7.3 7.2
Asset Quality:
NPLs (in GEL) 326,127 279,754 318,356
NPLs to gross loans to clients 3.3% 3.5% 3.3%
NPL coverage ratio 92.2% 101.2% 90.5%
NPL coverage ratio, adjusted for discounted value of collateral 132.6% 143.2% 129.9%
Cost of credit risk, annualised 1.7% 1.8% 1.1%
RB Cost of credit risk 2.4% 2.2% 1.7%
CIB Cost of credit risk 0.1% 1.3% -0.2%
Capital Adequacy:
NBG (Basel III) Tier I capital adequacy ratio 12.7% 12.4% 12.2%
Minimum regulatory requirement 11.6% 10.2% 11.4%
NBG (Basel III) Total capital adequacy ratio 17.1% 17.3% 16.6%
Minimum regulatory requirement 16.1% 14.4% 15.9%
KEY OPERATING DATA
58
Mar-19 Mar-18 Dec-18
Selected operating data:
Total assets per FTE 2,017 1,858 1,995
Number of active branches, of which: 276 282 276
- Express branches (including Metro) 166 156 165
- Bank of Georgia branches 98 114 99
- Solo lounges 12 12 12
Number of ATMs 886 842 876
Number of cards outstanding, of which: 2,139,239 2,246,396 2,177,273
- Debit cards 1,627,070 1,597,662 1,630,235
- Credit cards 512,169 648,734 547,038
Number of POS terminals* 17,684 12,571 16,870
FX Rates:
GEL/US$ exchange rate (period-end) 2.6914 2.4144 2.6766
GEL/GBP exchange rate (period-end) 3.5147 3.3932 3.3955
Full time employees (FTE), of which: 7,465 7,102 7,416
- Full time employees, BOG standalone 5,886 5,505 5,828
- Full time employees, BNB 644 708 669
- Full time employees, BB other 935 889 919
Shares outstanding
Ordinary shares 47,899,817 37,431,257 47,626,147
Treasury shares 1,269,611 1,953,455 1,543,281
Total shares outstanding 49,169,428 39,384,712 49,169,428
* Includes 2,650 POS terminals operating in public transportation network in 1Q19 and 4Q18
EXPRESS BANKING
59
166 Express Branches 825,710 Express Cards for Transport payments
17,684* POS Terminals at 5,902 Merchants
3,152 Express Pay Terminals
Opening accounts and deposits Issuing loans and credit cards Credit card and loan repayments Cash deposit into accounts Money transfers Utility and other payments
Acts as payments card in metro, buses and mini-buses
Credit card repayments Loan repayments Cash deposit into accounts Loan activation Utility and other payments Mobile top-ups Payments via cards and points
P2P transactions between merchant and supplier
Credit limit with 0% interest rate
1 2
3 4
* Includes 2,650 POS terminals operating in public transportation network
3,237
980 1,719
9,231 9,742
5,138
8,608
25,160
2,714 2,818 1,487
9,770
13,207
5,973
10,911
25,835
3,220
6,698
1,421
9,501
16,530
6,518
11,043
26,751
Tellers Mobile banking Internet banking Express cards POS terminals ATMs Express branches Express Payterminals
1Q17 1Q18 1Q19
EXPRESS - CAPTURING EMERGING MASS MARKET CUSTOMERS
60
Number of Transactions ‘000s
-1% x6.8
-17%
+3%
+70 %
+27%
+28%
+6%
SOLO - A FUNDAMENTALLY DIFFERENT APPROACH TO PREMIUM BANKING
61
SOLO Lounges
The target of 40,000 Solo clients (currently 47,057) already achieved ahead of time. We target growth through increasing engagement of existing clients and maximising the Profit per client and Product per client measures.
Solo Club Launched in 2Q17, a membership group within Solo, which
offers exclusive access to Solo
products and offers ahead of other Solo clients, continues to
increase its client base. At 31 March
2019, Solo Club had 4,446 members, up
16.2% q-o-q
New Solo offers: • Tailor made
banking solutions • New financial
products such as bonds
• Concierge-style environment
• Access to exclusive products and events
• Lifestyle opportunities
SOLO – EDUCATION, TRAVEL, HEALTH, ENTERTAINMENT
62
RETAIL BANKING – CLIENT-CENTRIC MODEL
63
As of 31 March 2019, we have 76 branches operating on our client-centric model
64
RETAIL BANKING - LOYALTY PROGRAMME
NOTES TO KEY RATIOS
65
Cost of funds Interest expense of the period divided by monthly average interest bearing liabilities;
Cost of credit risk Expected loss/ impairment charge for loans to customers and finance lease receivables for the period divided by monthly average gross loans to customers and finance lease receivables over the same period;
Cost to income ratio Operating expenses divided by operating income;
Interest bearing liabilities Amounts due to credit institutions, client deposits and notes, and debt securities issued;
Interest earning assets (excluding cash) Amounts due from credit institutions, investment securities (but excluding corporate shares) and net loans to customers and finance lease receivables;
Leverage (times) Total liabilities divided by total equity;
Liquid assets Cash and cash equivalents, amounts due from credit institutions and investment securities;
Liquidity coverage ratio (LCR) High quality liquid assets (as defined by NBG) divided by net cash outflows over the next 30 days (as defined by NBG);
Loan yield Interest income from loans to customers and finance lease receivables divided by monthly average gross loans to customers and finance lease receivables;
NBG liquidity ratio Daily average liquid assets (as defined by NBG) during the month divided by daily average liabilities (as defined by NBG) during the month;
NBG (Basel III) Tier I capital adequacy ratio Tier I capital divided by total risk weighted assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions;
NBG (Basel III) Total capital adequacy ratio Total regulatory capital divided by total risk weighted assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions;
Net interest margin (NIM) Net interest income of the period divided by monthly average interest earning assets excluding cash for the same period;
Non-performing loans (NPLs) The principal and interest on loans overdue for more than 90 days and any additional potential losses estimated by management;
NPL coverage ratio Allowance for expected credit loss/impairment loss of loans and finance lease receivables divided by NPLs;
NPL coverage ratio adjusted for discounted value of collateral Allowance for expected credit loss/impairment loss of loans and finance lease receivables divided by NPLs (discounted value of collateral is added back to allowance for expected credit loss/impairment loss);
Operating leverage Percentage change in operating income less percentage change in operating expenses;
Return on average total assets (ROAA) Profit for the period divided by monthly average total assets for the same period;
Return on average total equity (ROAE) Profit for the period attributable to shareholders of the Group divided by monthly average equity attributable to shareholders of the Group for the same period;
NMF Not meaningful
COMPANY INFORMATION
66
Registered Address 84 Brook Street
London W1K 5EH United Kingdom
Registered under number 10917019 in England and Wales
Secretary Link Company Matters Limited
65 Gresham Street London EC2V 7NQ
United Kingdom
Stock Listing London Stock Exchange PLC’s Main Market for listed securities
Ticker: “BGEO.LN”
Contact Information Bank of Georgia Group PLC Investor Relations
Telephone: +44 (0) 203 178 4052; +995 322 444444 (9282) E-mail: [email protected]
www.bankofgeorgiagroup.com
Auditors Ernst & Young LLP 25 Churchill Place
Canary Wharf London E14 5EY United Kingdom
Registrar Computershare Investor Services PLC
The Pavilions Bridgwater Road Bristol BS13 8AE United Kingdom
Please note that Investor Centre is a free, secure online service run by our Registrar, Computershare, giving you convenient access to information on your shareholdings.
Investor Centre Web Address - www.investorcentre.co.uk Investor Centre Shareholder Helpline - +44 (0)370 873 5866
Share price information Shareholders can access both the latest and historical prices via the website,
www.bankofgeorgiagroup.com
