October Bank of Georgia 1H 2014 Results Presentation

Transcription

1 Bank of Georgia 1H 214 Results Presentation

2 Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 214 and 1H 214 Results Overview and Analyses Business Segment Discussion Appendices Page 2

3 The leading bank in Georgia Leading market position: No. 1 bank in Georgia by assets (32.8%), loans (31.6%), client deposits (29.) and equity (32.1%) 1 Underpenetrated market with stable growth perspectives: Real GDP average growth rate of 5.9% for Geostat estimates 3.2% GDP growth in 213 and 6. in 1H 214. Loans/GDP grew from 8.8% to 39.1% from , still below regional average; Deposits/GDP grew from 8.4% to 36.1% over the period Strong brand name recognition and retail banking franchise: Offers the broadest range of financial products to the retail market through a branch network of 26 branches, 51 ATMs and 2,38 Express Pay Terminals to more than 1.3 million customers as of 3 June 214 The only Georgian company with credit ratings from all three global rating agencies: S&P: BB-, Moody's: B1/Ba3 (foreign and local currency), Fitch Ratings: BB- ; outlooks are Stable High standards of transparency and governance: The only entity from Georgia to be listed on the premium segment of the Main Market of the London Stock Exchange (LSE:BGEO) since February 212. LSE listed through GDRs since 26. Only private entity to issue Eurobonds from the Caucasus: US$4 million Eurobonds outstanding including US$15 raised through a tap issue in November 213. The bonds are currently trading at a historical low yield of c.5.3% Sustainable growth combined with strong capital, liquidity and robust profitability US$ mln 2 1H Change /212 3 Total assets 3,769. 3, , , % Loans to customers, net 2,68.5 2,29. 1, , % Customer funds 4 1,738. 1, , , % Total equity % Revenue % Profit % Experienced management with deep understanding of local market and a strong track record: 1H Sep 24 Change Market capitalisation (US$ mln) 1,47.7* x Total assets (US$ mln) 3, x Market share by total assets 33% 18% 15ppts * Market capitalisation for Bank of Georgia Holdings PLC, the Bank s holding company, as of 8 September 214, GBP/USD exchange rate of Market data based on standalone accounts as published by the National Bank of Georgia (NBG) as of 3 June US$/GEL , , and as at 31 March 214, 3 June 213, 31 December 212 and 31 December 211, respectively 3 Changes in GEL 4 Amounts due to customers 5 Revenue adjusted for one-off currency gain by BNB in 212 and one-off BYR hedge in Page 3

4 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Shareholder structure and share price Bank of Georgia Holdings PLC (BGH) (LSE: BGEO) a UK-incorporated holding company of JSC Bank of Georgia. As of 3 June 214, BGH s shareholder structure was as follows: 4.4% 1.9% 38.7% 55. Unvested/unawarded shares for management and employees Vested shares held by management and employees UK and US institutional investors* Emerging market institutional investors GBP Share price performance Up 27% since premium listing *** Third largest growth stock in FTSE 25 in 213 BGEO is included in the FTSE 25 and FTSE All Share Index Funds as of 18 June 212 BGEO LN GDR Average daily number of shares traded 275, Average daily trading volume $11,1, 118, 195, $5,3, 55, $95, $2,, H H 214 *Mostly non-emerging market shareholders since premium listing; management estimates **Share price change calculated from the last price of BGEO LI on 27 February 212 to the price of BGEO LN on 8 September Page 4

5 3x2: Growth story over time with dividends UK corporate governance FTSE 25 ROE c.2 TIER I c.2 Growth c.2 Dividends Record profitability: Revenue up 7.3% y-o-y to GEL mln in 1H 214 and up 3.2% y-o-y to GEL mln in Q2 214 Profit up 17.7% y-o-y to GEL 112. mln in 1H 214, up 9.8% y-o-y to GEL 58.3 mln in Q2 214 Non-interest income increased by 8.3% y-o-y to GEL mln in 1H 214 and in Q2 214 increased by 3. y-o-y to GEL 63.6 mln Adjusted ROAE 1 stood at 18.7% in 1H 214 and at 19.7% in Q2 214 Operational efficiency and scale: Cost to Income ratio at 43.8% in 1H 214 and Q1 214 Cost to Income of 44.6% Prudent risk management: Cost of Risk 2 of 1. in 1H 214, compared to 1.5% in 1H 213. Cost of Risk stood at.9% in Q2 214 compared to 1.5% in Q2 213 and 1. in Q1 214 Conservative National Bank of Georgia (NBG) regulation: Risk weighting of FX assets at 175%. Bank s leverage stayed largely flat year-to-date at 4.3x as of 3 June 214 Strong internal cash generation to support loan growth without compromising capital ratios: BIS Tier I Capital Adequacy Ratio (CAR) of 22.5% and BIS Total CAR of 26.3% as of 3 June 214 NBG (Basel 2/3) Tier I CAR and Total CAR stood at 1.8% and 14. as of 3 June 214 Net loan book 3 grew 17.2% y-o-y to GEL 3,659.4 million, while client deposits increased 7.4% y-o-y to GEL 3,46.8 million Cost of client deposits declined to 4.4% in 1H 214 from 6.2% in 1H 213. RB Cost of Client Deposits: 4. in 1H 214 vs 5.7% in 1H 213; CB Cost of Client Deposits: 3. in 1H 214 vs 5.5% Consumer driven franchise with robust sales force Strong growth across the board supported by synergistic businesses Increase in contribution from synergistic business in the group s profit. Insurance & healthcare and real estate businesses contributed 14.4% to the Group s revenue and 15.5% to profit in 1H 214 Two types of dividends are targeted: Recurring - linked to recurring profit One-off(s) linked to divestments & de-dollarisation An annual dividend of GEL 2. per share was paid for 213, up 33% y- o-y translating into a payout ratio of 33.7% and dividend yield of 2.7% The Board will aim to maintain a dividend payout ratio in the 25%- 4 range 1 Adjusted for one-off impairment of available-for-sale investments in BG Bank in Ukraine 2 Equals 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 3 Including finance lease receivables Page 5

6 Leveraged play on the growing Georgian economy through an LSE premium listed company With one third of the Georgian market by assets, loans and client deposits, Bank of Georgia is a uniquely placed growth bank in an underpenetrated, highly capitalised and profitable banking market, which has been growing in terms of assets at 3 CAGR Strategic business Synergistic business Non-core business Well established brand Retail Banking Largest retail franchise: c.1.3 million Retail Banking clients, 26 branches, 51 ATMs, 1,75,134 cards outstanding as of 3 June 214 Market shares of 28.5% by individual loans and 29.6% by individual deposits as of 3 June 214 Corporate Banking Largest corporate bank with c.7,1 corporate clients; 28.4% market share by corporate deposits and 34.5% by corporate loans as of 3 June 214 Investment Management Investment Management AUM* grew by 15.9% y-o-y to GEL 91. million International representative office network in Israel, UK, Hungary and Turkey *Includes AUM of BG Capital and Aldagi Pension Fund Growth opportunities to support strategic business Insurance and Healthcare 1 Strongly positioned to benefit from the growth of the insurance and healthcare sectors through its healthcare business and its property and casualty (P&C) business (Aldagi). Market share in healthcare grew to 19.9% as of June 214 from 14.3% as of 31 December 213 based on hospital beds. Health insurance and P&C insurance market shares stood at 37.6% and 37.8%, respectively, as of 3 June 214 The largest healthcare provider in Georgia with 36 healthcare facilities and 1,892 hospital beds as of 3 June 214 Contributed 1.8% to BGH revenues and 9.9% to BGH profit in 1H 214 Affordable Housing Positioned to stimulate mortgage lending and improve liquidity of repossessed real estate assets through housing development; Completed the second housing project and construction of three projects is underway. Posted profit of GEL 6.2 million in 1H 214 Number of mortgages sold in all m2 Real Estate projects totalled 393 amounting to GEL 42.2 million Intention to exit from non-core business over time BNB Belarus banking operation accounting for 4.9% of total assets as of 3 June 214 The Bank owns 8, the remainder owned by IFC/World Bank Assets of US$184.9 mln and equity of US$36.3 mln as of 3 June 214 Fully written off goodwill (GEL 23.4 mln) 1 On 1 August 214, the Group announced the split of Aldagi into two separate business units. One business unit is JSC Georgia Healthcare Group, a pure play healthcare business that will provide healthcare services (through Evex Medical Corporation) and health insurance products (through Imedi L) in Georgia. The second unit is JSC Insurance Company Aldagi, a P&C insurance business that will continue providing life and non-life business insurance products and services in Georgia, it will also retain the brand name of Aldagi. Page 6

7 Robust corporate governance compliant with UK Corporate Governance Code 7 7 Board of Directors of Bank of Georgia Holdings PLC 7 non-executive Supervisory Board members; 5 Independent members, including the Chairman and Vice Chairman Neil Janin, Chairman of the Supervisory Board, Independent Director 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 (now JP Morgan Chase) in New York and Paris; Procter & Gamble in Toronto Irakli Gilauri, formerly EBRD banker; MS in banking from CASS Business School, London; BBS from University of Limerick, Ireland David Morrison, Chairman of the Audit Committee, Vice Chairman of the Supervisory Board, Independent Director experience: senior partner at Sullivan & Cromwell LLP prior to retirement Kim Bradley*, Chairman of Risk Committee, Independent Director experience: Goldman Sachs AM, SeniorExecutive at GE Capital, President of Societa Gestione Crediti, Board Chairman at Archon Capital Deutschland Kaha Kiknavelidze, Independent Director currently managing partner of Rioni Capital, London based investment fund; experience: previously Executive Director of Oil and Gas research team for UBS Al Breach, Chairman of the Remuneration Committee, Independent Director experience: Head of Research, Strategist & Economist at UBS: Russia and CIS economist at Goldman Sachs Bozidar Djelic, Independent Director experience: EBRD s Transition to Transition senior advisory group, Deputy Prime Minister of Serbia, Governor of World Bank Group and Deputy Governor of EBRD, Director at Credit Agricole Tamaz Georgadze, Independent Director experience: Partner at McKinsey & Company in Berlin, Founded SavingGlobal GmbH, aide to President of Georgia Members of management boards of JSC Bank of Georgia and major subsidiaries Irakli Gilauri, CEO; formerly EBRD banker; MS in banking from CASS Business School, London; BBS from University of Limerick, Ireland Nikoloz Gamkrelidze, Group CFO; previously CEO of Aldagi BCI and JSC My Family Clinic; World Bank Health Development Project; Masters degree in International Health Management from Imperial College London, Tanaka Business School Archil Gachechiladze, Deputy CEO, Investment Management; formerly Deputy CEO in charge of Corporate Banking, Deputy CEO of TBC Bank, Georgia; Lehman Brothers Private Equity, London; MBA from Cornell University Mikheil Gomarteli, Deputy CEO, Retail Banking; 15 years work experience at BOG Sulkhan Gvalia, Deputy CEO, Corporate Banking; formerly Chief Risk Officer, c.2 years banking experience founder of TUB, Georgian bank acquired by BOG in 24 Avto Namicheishvili, Deputy CEO, Group Legal Counsel; previously partner at Begiashvili &Co, law firm in Georgia; LLM from CEU, Hungary George Chiladze, Deputy CEO, Chief Risk Officer; formerly Deputy CEO in Finance, Deputy CEO at Partnership Fund, Programme trading desk at Bear Stearns NY, Ph.D. in physics from John Hopkins University in Baltimore Irakli Burdiladze, Deputy CEO, Affordable Housing; previously CFO at GMT Group, Georgian real estate developer; Masters degree from Johns Hopkins University Sascha Ternes, Deputy CEO, Special Projects; previously CEO at Procredit Bank; Honorary doctorate, affirmed by the German Ministry of Education & Science Murtaz Kikoria, CEO Group s healthcare business (CEO of GHG); c.2 years banking experience including various senior positions at Bank of Georgia Group, Senior Banker at EBRD and Head of Banking Supervision at the National Bank of Georgia. 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 Page 7

8 Competitive landscape Peer group s market share in total assets Peer group s market share in gross loans 4 35% 3 25% 2 15% 1 5% 36.7% 35.6% 33.8% 32.8% 25.8% 25.4% 23.7% 23.9% 19.2% 17.9% 16.6% 14.7% 7.7% 8.2% 7.3% 6.1% 7.7% % 5.6% 5.9% 6.3% 4.8% 5.5% 5.4% 3.8% 4.7% 3.4% BOG TBC PCB BR LB VTB Others Others 4 35% 3 25% 2 15% 1 5% 35.4% 34.5% 32.5% 31.6% 26.2% 26.1% 25.3% 24.5% 19.1% % 14.7% 8.3% 8.8% 6.7% 6.2% 6.7% 6.6% 6.7% 4.6% 6.6% 4.2% % 6.4% 4.6% 3.9% 4.8% BOG TBC PCB BR LB VTB Others Others Q Q2 214 Foreign banks market share by assets Peer group s market share in client deposits No state ownership of commercial banks since 1994 Local banks, Foreign banks, 32. Q2 214 Local banks, 71.2% Foreign banks, 28.8% 4 35% 3 25% 2 15% 1 5% 36.9% 33.1% 31.5% 3.4% % 28.8% 27.7% 12.7% 14.4% 11.8% 12.6% % 8.7% % 5.8% 5.6% 5.7% 5.4% % 5.1% 5.4% 3.8% 2.7% BOG TBC PCB BR LB VTB Others Others Q2 214 Note: all data based on standalone accounts as reported to the National Bank of Georgia and as published by the National Bank of Georgia Page 8

9 Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 214 and 1H 214 Results Overview and Analyses Business Segment Discussion Appendices Page 9

10 Country overview Area: 69,7 sq km Population (212): 4.5 mln Life expectancy: 77 years Official language: Georgian Literacy: 1 Capital: Tbilisi Currency (code): Lari (GEL) GDP (Geostat): 213E GEL 26.8 bn (US$16.1 bn) GDP growth rate 211: 7.2%, 212: 6.2%, 213E: 3.2% GDP growth rate Q1 214E: 7.1%, Q1 214E 5.1% (1H 214E 6.) Real GDP average 1 yr growth rate: 6. GDP per capita 213E (PPP) per IMF: US$6,145 Inflation rate (e-o-p) % External public debt to GDP 213E: 27. Sovereign ratings: S&P BB-/B/Stable/ upgraded in November 211, affirmed in May 214 Moody s Ba3/NP/Stable Fitch BB-/B/Stable upgraded in December 211 Sources: Ministry of Finance of Georgia, Geostat, IMF, Government of Georgia Presentation (Georgia.gov.ge) Page 1

11 Liberal economic policy Georgia s key economic drivers Liberty Act, which became effective in January 214 ensures a credible fiscal and monetary framework: Government expenditure/gdp capped at 3 Budget deficit/gdp capped at 3% Government debt/gdp capped at 6 Regional logistics and tourism hub Strong FDI Support from international community Cheap electricity Political environment stabilised Proceeds from foreign tourism estimated at US$1,72 mln in 213 up 22% y-o-y, 5.4 million visitors in 213, up 22% y-o-y; 2.2 million visitors in 6M 214, up 2% y-o-y Regional energy transit corridor with approx. 1.6% of world s oil production and diversified gas supply passing through the country Strong FDI inflows diversified across different sectors (213E: US$942 mln, 212: US$912, 211: US$1,117 mln), US$26 mln in Q1 214, up 14.9% y-o-y Net remittances of US$1,322 mln in 213, up 8% y-o-y; US$54 mln in 5M 214, up 3% y-o-y FDI averaged 1 of GDP in Georgia and the EU signed an Association Agreement in June 214 and Georgia s parliament ratified the agreement in July 214. The deal includes a DCFTA, which is the major vehicle for Georgia s economic integration with the EU Discussions commenced with the USA to drive inward investments and exports Strong political support from NATO, EU, US, UN and member of WTO since 2 Substantial support from DFIs, the US and EU Diversified trade structure across countries and products Only 18% of hydropower capacity utilized; 4 hydropower stations are being built/developed Net electricity exporter from (net importer in 212 and 213 due to low precipitation), net electricity importer for more than a decade before 27 Significantly boosted transmission capacity in recent years, having rehabilitated a 5kV line to Azerbaijan and built a 5/4 kv line to Turkey. Another 5 kv line to Armenia is under construction and Georgia s transmission capacity to Russia is expected to rise 1.7x to 1,48 MW by 216 after a new 5 kv line becomes operational Healthy operating environment for business and low tax regime Parliamentary elections in 212 led to a democratic transition of power giving victory to Georgian Dream coalition and the subsequent presidential elections in October 213 gave victory to the candidate of the ruling Georgian Dream coalition New constitution amendments passed in 213 to enhance governing responsibility of Parliament and reduce the powers of the Presidency Continued economic relationship with Russia Russia began issuing visas to Georgians in March 29; Georgia abolishes visa requirements for Russians Direct flights between the two countries resumed in January 21 Member of WTO since 2, allowed Russia s access to WTO In 213 trade restored with Russia Page 11

12 Growth oriented reforms Ease of Doing Business, 214 (WB-IFC Doing Business Report) Economic Freedom Index, 214 (Heritage Foundation) USA Norway UK GEORGIA Estonia Armenia Kazakhstan Montenegro Bulgaria Azerbaijan Belarus Turkey Romania Serbia Russia Ukraine Up from 113 in USA Estonia UK GEORGIA Hungary Latvia Romania Bulgaria France Turkey Italy Azerbaijan Russia Ukraine Denmark Norway GEORGIA UK Estonia US Romania Bulgaria Czech Republic Armenia Latvia Turkey Greece Serbia Lithuania Kazakhstan Ukraine TI 213 Global Corruption Barometer 1% 3% 4% 5% 6% 7% 7% 8% % admitting having paid a bribe last year 15% 18% 19% 21% 22% 26% 26% 32% 37% GEORGIA - No 1 Reformer (WB-IFC Doing Business Report) Sources: Transparency International, Heritage Foundation, World Bank Page 12

13 Positive economic outlook Gross domestic product 11.1% % 5.1 Sources: Geostat 9.6% % 9.4% % Real GDP growth rate of 6. in 1H % % % 6.2% 3.2% P Nominal GDP (USD bln) Real GDP growth (%) 14% 12% 1 8% 6% 4% 2% -2% -4% -6% GDP composition, FY 213 Health and social work 6% Education 5% Public administration 1 Real Estate 6% Financial intermediation 3% Communication 3% Source: Geostat Other 1 Transport 8% Agriculture, hunting and forestry; fishing 9% Manufacturing 11% Hotels and restaurants 2% Electricity, gas and water supply 3% Construction 7% Wholesale and retail trade 17% 7% 6% 5% 4% 3% 2% 1% Comparative real GDP growth rates, % (24-213).8% 2.5% 2.7% % 3.5% % 4.9% 5.9% 7, 6, 5, 4, 3, 2, 1, GDP per capita 2,966 4,659 4,874 4,722 5,846 6,145 5,445 5,2 4,34 3,644 2,92 2,455 2,623 3,23 3,523 3,597 3,242 2, ,188 1,484 1, E GDP per capita, USD GDP (PPP) per capita, current international dollar Sources: IMF, Geostat Sources: IMF, Geostat Page 13

14 -1% -2% -3% -4% -5% -6% -7% -8% -9% -1 Demonstrated fiscal discipline and low public debt Fiscal deficit as % of GDP F -.3% -2.6% -3.4% -4.8% Source: Ministry of Finance of Georgia -6.5% Public debt as % of GDP -6.7% -9.2% Fiscal deficit as % of GDP -3.6% -2.9% -2.6% Breakdown of public debt Affordable public debt stock and very low interest rate on external public debt Domestic 22% External 78% Source: Ministry of Finance of Georgia Multilateral 54% Bilateral 15% Eurobond 9% Government external debt service External public debt portfolio weighted average interest rate as 1.9% (contractual maturity 25 years) 7 63% 6 51% 5 45% 4 41% 42% 37% 4 35% 32% 35% 35% 31% 27% 26% 32% 34% 29% 3 28% 27% 21% 17% 24% Total public debt as % of GDP External public debt as % of GDP Sources: Ministry of Finance of Georgia, Geostat US$ mln % % Source: Ministry of Finance of Georgia, IMF % 3.1% Other multilateral IMF budget support Bilateral Eurobonds* External Debt Service as % of Budget Revenues *Coupon payments only, Eurobonds mature in 221 9% 8% 7% 6% 5% 4% 3% 2% 1% Page 14

15 Revenues and expenditures dynamics 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 25% 2 15% 1 5% Revenues and expenditures 6, , , , % 33.9% 7, , , , , , % 3.6% 29.3% Total Budget Receipts Expenditures Expenditures (Capital + Current) as % of Nominal GDP Source: Ministry of Finance Government social expenditure as % of GDP % 8% 7% 6% 5% 4% 3% 2% 1% Current and capital expenditure 77.9% 78.1% % 22.1% 21.9% Sources: Ministry of Finance % Current Expenditure Capital Expenditure Government capital expenditure as % of GDP Source: IMF *Current expenditure Source: IMF Page 15

16 US$ bln 2,5 2, 1,5 1, 5 FDI inflows 8.5% 9.7% Four main sources of capital inflow 15.3% 19.8% 12.2% 1,19 2,15 1, % 6.1% % 5.8% 1, Net FDI US$26 mln in Q1 214, up 14.9% y-o-y Net FDI as % of GDP 25% 2 15% 1 5% 6, 5, 4, 3, 2, 1, Number of tourists 2.2 mln visitors in 6M 214, up 2% y-o-y 2,822 2,32 DISBURSED 1,52 1,29 1,5 ~$2.5 Billion ,428 5,392 1,411 1, Foreign visitors (thousands persons) Tourism revenues (mln USD) 14% from Russia US$ bln 1,4 1,2 1, Sources: Geostat, Bank of Georgia 4.2% 213 Net remittances 4.9% % % 7.2% 7.1% Source: National Bank of Georgia, Bank of Georgia % 8.1% 949 1, % 8.2% 1,226 1, Net remittances US$697 mln in 6M 214, up 3% y-o-y Net remittances as % of GDP 9% 8% 7% 6% 5% 4% 3% 2% 1% US$ mln 1,2 Donor inflows 1, Sources: Georgian National Tourism Agency, National Bank of Georgia, Bank of Georgia estimates Sources: Ministry of Finance, Bank of Georgia estimates , E Donor Inflows Brussels Pledge Implementation c.us$2. bn of the total US$4.5 bn pledged remains to be drawn down Page 16

17 US$ 's FX reserves US$bn Source: National Bank of Georgia Controllable CAD and strong FDI High, but well capitalised CAD. Remittances and FDI cover CAD. FX rate (GEL/US$) and CPI Current account deficit % -11.1% -1.5% -1.3% -5.9% -12.7% -11.7% % -19.8% Net capital inflows to other sectors Net capital inflows to banking sector Current account balance Source: National Bank of Georgia Jun-14 FX reserves In 1H 214 NBG was net seller of US$14 mln M2 multiplier % 1 5% -5% -1-15% -2-25% Net capital inflows to government sector Net FDI C/A balance as % of GDP 12% % 1.2 6% 1. 4%.8 2%.6.4-2%.2-4% % 8.8% % % % H 214 CPI (e-o-p) Source: National Bank of Georgia\ Electricity generation Consumption Export Hydro Thermal Import Source: Bank of Georgia Research **Assuming price of US$.75 per Kw/h By 221 Electricity generation will increase by 8.4 Tw/h (US$65 mln**) GEL/USD Rate (period average) Page 17

18 Growing and well capitalised banking sector Summary Banking Sector loans and deposits YE 213 Prudent regulation ensuring financial stability Sector total capital ratio (NBG standards) 17% in 21 High level of liquidity requirements from NBG at 3 of liabilities, resulting in banking sector liquid assets to client deposits of 56% as of 3 June 214 Resilient banking sector 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 Excess liquidity and excess capital accumulated by the banking sector to help boost the financing of the economic growth Very low leverage with retail loans 18. of GDP and total loans at 39.1% of GDP as at 31 December 213 resulting in low number of defaults during the global crisis Source: National Bank of Georgia, Geostat Banking sector assets, loans and deposits Source: NBG, Central Banks Georgia* Moldova Romania Lithuania Russia Turkey Ukraine Bulgaria Serbia Latvia Estonia 39.1% Gross loans/gdp 36.1% 43.5% Deposits/GDP 53.5% 44.3% 57.8% 48.8% 4.1% 53.4% 39.1% 55.6% 53.8% 63.8% 46.9% 68.1% 67.3% 74.9% 56.3% 78.2% 45.9% 78.8% 74.5% NPLs as % of total gross loans, YE 213 GEL bln Source: National Bank of Georgia CAGR 26% June-214 Assets Deposits Loans Georgia Poland Russia Latvia Moldova Lithuania Ukraine Croatia Hungary Romania 3.9% 5.2% % Lower than the banking sector NIM of c.7% 12.4% 12.5% 12.9% 15.4% 17.6% Source: IMF, Global Financial Stability Report, National Bank of Georgia 21.6% Page 18

19 One of the highest level of capital and low debt level compared to other frontier markets 2 16% 12% 8% 4% Bank Capital/Assets, YE % 12% 1 8% 9% 9% 7% 15% 17% Dollarisation 8 73% 73% 68% 64% 74% 69% 67% 6 59% 64% 6 61% Jun-14 FC Deposits/Total Deposits Source: IMF, Global Stability Report Source: National Bank of Georgia Public debt / GDP, frontier markets, YE % 37% 38% Georgia Ukraine Romania Czech Republic 46% 48% 51% Argentina Vietnam 64% Pakistan Sources: IMF, Ministry of Finance Page 19

20 Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 214 and 1H 214 Results Overview and Analyses Business Segment Discussion Appendices Page 2

21 P&L results highlights Q2 214 Q2 213 Change Q1 214 Change 1H 214 1H 213 Change GEL thousands unless otherwise noted Unaudited Unaudited Y-O-Y Unaudited Q-O-Q Unaudited Unaudited Y-O-Y Net interest income 8,554 77, % 79,74 1.1% 16,258 15, % Net fee and commission income 26,127 21, , % 46,47 42, % Net insurance revenue 6,352 1, % 9, % 16,58 22, % Net healthcare revenue 11,939 5, % 7, % 19,736 8, % Other operating non-interest income 19,23 23, % 2, ,413 37, % Revenue 144, , % 137, , , % Operating expenses (64,27) (55,693) 15.4% (59,43) 8.9% (123,314) (19,364) 12.8% Operating income before cost of credit risk 79,95 83,96-4.8% 78, % 158, ,55 3.4% Cost of credit risk (13,847) (18,984) -27.1% (13,316) 4. (27,162) (36,261) -25.1% Net operating income 66,58 64, % 64, % 131,36 116, % Net non-recurring items* (7,77) (4,88) 73.1% (1,12) NMF (8,198) (5,453) 5.3% Profit for the period 58,318 53,15 9.8% 53, % 111,981 95, % Earnings per share (basic) % % % *Includes full impairment of BG Bank,Ukraine Page 21

22 Balance Sheet results highlights and key ratios Q2 214 Q2 213 Change Q1 214 Change GEL thousands unless otherwise noted Unaudited Unaudited Y-O-Y Unaudited Q-O-Q Net loans to customers* 3,659,427 3,122, % 3,489, % Total assets 6,667,681 5,671, % 6,619,775.7% Liquid assets, Currency Blended 1,921,384 1,578, % 1,948, % Liquid assets, GEL 817, , % 82, % Liquid assets, FC 1,14,17 792, % 1,146,7-3.7% Liquid assets as percent of total assets 27.6% 26.8% 29.6% -2. Liquid assets as percent of total liabilities % 36.8% -2.8% Customer Funds, of which: 3,74,71 2,85, % 3,65,536.3% Client deposits, of which 3,46,845 2,838, % 3,37,12.3% CDs 366, ,86 NMF 273, % Promissory notes 27,865 12, % 28, % Amounts due to credit institutions, of which: 1,24,128 1,5, ,26, % Subordinated debt 132,8 28, % 131, % Other amounts due to credit institutions 1,17, , % 1,75, % Debt securities issued, of which: 786, , % 734, Eurobonds 74, , % 718, Other 46, , % Total liabilities 5,41,85 4,568, % 5,332, % Total equity 1,256,876 1,12, ,287,27-2.3% Book value per share (basic) % % Net loans/customer funds % 113.8% Net loans/customer funds +DFIs 1.3% % Excess liquidity 255, , % 439, % NBG liquidity ratio 38.1% 44.8% 43.5% KEY RATIOS Q2 214 Q2 213 Q1 214 ROAA 3.5% 3.8% 3.3% ROAE 18.6% 19.3% 17.7% ROAA, adjusted 3.7% 3.8% 3.3% ROAE, adjusted 19.7% 19.3% 17.7% Cost/Income 44.6% 39.9% 43. NIM 7.3% 7.9% 7.4% Loan yield 14.5% % Cost of client deposits 4.3% 5.9% 4.6% Cost of funds 4.8% 6.2% 5.1% Cost of risk.9% 1.5% 1. NPL coverage 74.5% 89.1% 92. NPL coverage ratio adjusted for discounted value of collateral 116.8% 117.4% 121.4% 1H 214 1H 213 ROAA 3.4% 3.4% ROAE 18.2% 17.6% ROAA, adjusted 3.5% 3.4% ROAE, adjusted 18.7% 17.6% Cost/Income 43.8% 41.7% NIM 7.3% 7.8% Loan yield 14.7% 16.9% Cost of client deposits 4.4% 6.2% Cost of funds % Cost of risk % NPL coverage 74.5% 89.1% NPL coverage ratio adjusted for discounted value of collateral 116.8% 117.4% BIS Tier I Capital Adequacy Ratio 22.5% 22.9% 23.7% BIS Total Capital Adequacy Ratio 26.3% 27.8% 27.7% NBG Tier I Capital Adequacy Ratio 14.8% 15.4% 16.4% NBG Total Capital Adequacy Ratio 13.8% 16.3% 15.5% NBG (Basel II) Tier I Capital Adequacy Ratio 1.8% 12.9% NBG (Basel II) Total Capital Adequacy Ratio % *includes finance lease receivables Page 22

23 GEL mln 3 2 Strong revenue growth Revenue growth, half-year % +7.3% y-o-y % Revenue growth, quarterly +3.2% y-o-y GEL mln % % % 1 GEL mln % 57% H 213 1H 214 Net interest income Net non-interest income Net non-interest income, half-year Net fee and commission income Net healthcare revenue H 213 1H % y-o-y Net insurance revenue Other operating non-interest income % 58% 56% Q2 213 Q1 214 Q2 214 Net interest income Net non-interest income Net non-interest income, quarterly GEL mln y-o-y Q2 213 Q1 214 Q2 214 Net fee and commission income Net insurance revenue Net healthcare revenue Other operating non-interest income Page 23

24 Expenses GEL mln Operating expenses, half-year % y-o-y 1H 213 1H 214 Other operating expenses Depreciation and amortisation expenses General and administrative expenses Salaries and other employee benefits GEL mln Net non-recurring items, operating income before cost of credit, half-year H 213 1H 214 (41.7) (35.4) Net non-recurring items +3.4% y-o-y Operating income before cost of credit risk Operating expenses, quarterly +15.4% y-o-y GEL mln Q2 213 Q1 214 Q2 214 Salaries and other employee benefits General and administrative expenses Depreciation and amortisation expenses Other operating expenses Net non-recurring items, operating income before cost of credit, quarterly -4.8% y-o-y GEL mln Q2 213 Q1 214 Q (14.4) (23.1) (2.9) -4 Net non-recurring items Operating income before cost of credit risk Page 24

25 Efficiency Cost / Income ratio, half-year Cost / Income ratio, quarterly 5 45% 48% 46% 44% 42% % 43.8% 44% 43% 42% 41% 4 39% 39.9% % 38% 38% 36% 1H 213 1H 214 Cost/Income Ratio 37% Q2 213 Q1 214 Q2 214 Cost/Income Ratio Revenue and operating expenses, half-year Revenue and operating expenses, quarterly GEL mln % +12.8% GEL mln H 213 1H 214 Revenue Operating expenses Q2 213 Q1 214 Q2 214 Revenue Operating expenses Page 25

26 Diversified asset structure, consolidated Total assets: GEL 6,668 mln Total asset structure, 3 June 214 Other assets 17.5% Liquid assets 27.6% Liquid assets, 3 June 214 Government bonds, treasury bills, NBG CDs 28.8% Other liquid assets 2.2% Cash and equivalents 49.2% Liquid assets GEL 1,838 mln, 27.6% of total assets and 34. of total liabilities Loans to customers, net 54.9% Gross loans breakdown*, 3 June 214 Amounts due from credit institutions 19.8% Gross loan portfolio structure, 3 June 214 Total gross loans: GEL 3,768 mln Retail loans, GEL 1,889.8 mln, 5.2% Corporate loans, GEL 1,878.1 mln, 49.8% Residential mortgage loans, GEL mln, 13.1% Legacy retail loans, GEL 6. mln, 1.6% Micro and SME loans, GEL 646. mln, 17.1% Corporate loans, GEL 1,878.1 mln, 49.8% Consumer loans and credit card balances, GEL 69.2 mln, 18.3% *Retail loans include loans of Retail Banking segment, BNB retail loans, Investment Management and Affordable Housing Mortgages, Corporate loans include Corporate Banking Segment and BNB Corporate loans Page 26

27 GEL mln GEL mln Loan portfolio quality Consolidated NPLs % 7.9% 7.8% % 3.7% 3.9% % H 214 NPLs NPLs to gross loans Net Interest Margin Consolidated loan loss reserve, NPLs to gross loans % 4.2% % % 3.3% % 2.9% H 214 Loan loss reserves (LLR) NPLs to gross loans LLR as % of gross loans 12% 1 8% 6% 4% 2% 5% 4% 3% 2% 1% Consolidated NPL composition & coverage ratio GEL mln % NPL coverage ratio adjusted for discounted value of collateral: 116.8% 3 Jun 14, 121.4% 31 Mar % 3 Jun % % 83.8% H 214 NPLs RB & WM NPLs CB NPLs Other NPL coverage ratio Consolidated cost of credit risk & cost of risk ratio GEL mln % 22.2 Cost of risk:.9% in Q2 214, 1. Q1 214 and 1.5% in Q % 1.4% H 214 Cost of credit risk Cost of risk ratio, annualised % 1% 1% 1% 1% 1% Page 27

28 GEL mln 6, 5, 4, 3, 2, 1, Strong liquidity Liquid assets to total liabilities 1,339 3, % 1,624 4, % Net loans to customer funds 36.4% *Customer funds includes client deposits and promissory notes 5,28 5,411 1,922 1, % 38% 37% 36% 35% 34% 33% 32% 31% H 214 Liquid assets Total liabilities Liquid assets to total liabilities 95.7% 114.8% H 214 Net loans to customer funds*, consolidated NBG liquidity ratio Bank Standalone, GEL mln Q Liquid Assets (NBG) 1,195 1,562 1,32 1,242 Liabilities (NBG) 3,134 3,415 3,166 3,286 Liquid Assets / Liabilities % 45.7% 41.1% 37.8% Excess liquidity Net loans to customer funds & DFIs 76.9% 91.9% 96.2% 1.3% H 214 Net loans to customer funds & DFIs, consolidated Page 28

29 GEL mln GEL ' 1,4, 1,2, 1,, 8, 6, 4, 2, Strong liquidity Liquidity coverage ratio & net stable funding ratio 149.6% 118.9% 16.8% 15.9% % 115.8% 11.3% H 214 Liquidity coverage ratio Net stable funding ratio Cumulative Maturity gap, 3 June 214** 854, % 1,142,498 1,221, % 18.3% 213,411 48,534.7% 3.2% 397, % On Demand -3 Months 3-6 Months 6-12 Months 1-3 Years >3 Years Maturity gap Maturity gap, as % of total assets *Daily VaR time series averaged for each respective month **GEL 1,168.3 mln of current accounts and demand deposits are placed in 6-12 months bucket 25% 2 15% Foreign currency VaR analysis* Open currency position STANDALONE GEL ', Daily 5% VAR Analysis ' GEL 6, 5, 4, 51, % Monthly VaR GEL (Average) VaR Limit 3, 4% 2, 12,173 1, 1.4% 5,48 2%.6% -1, H 214-2, -11,394-2% -1.3% FC net position, on and off balance, total As % of NBG total regulatory capital 8% 6% Page 29

30 Promissory notes, GEL 27.9 mln,.5% USD mln Funding structure is well-balanced Liability structure, 3 June 214 Debt securities issued, GEL mln, 14.5% Borrowings, GEL mln, 11.4% Other amounts due to credit institutions, GEL 623. mln, 11.5% Other liabilities, GEL 39.5 mln, 5.7% Client deposits, GEL 3,46.8 mln, 56.3% Borrowed funds maturity breakdown* Time deposits 51% Total Liabilities GEL 5,411 mln Current accounts & demand deposits, 49% Excl. US$ 4 mln Eurobonds maturing in 217.9% % 1.7% 1.6% %.2% Senior Loans Promissory Notes Subordinated Loans % of Total assets Well diversified international borrowings, 3 June 214 Other debt securities, GEL 46.2 mln, 3.3% 5% -5% -1 Eurobonds, GEL 74.2 mln, 52.7% Others borrowings, GEL 43. mln, 3.1% DFIs, GEL mln, 4.9% Amounts due to credit institutions The Bank has a well-balanced funding structure with 56.3% of total liabilities coming from client deposits, 1.6% from Developmental Financial Institutions (DFIs) and 13.7% from Eurobonds, as of 3 June 214 The Bank has also been able to secure favorable financing from reputable international commercial sources, as well as DFIs, such as EBRD, IFC, DEG, Asian Development Bank, etc. As of 3 June 214, US$49.6 mln undrawn facilities from DFIs with four to nine year maturities * Consolidated, converted at GEL/US$ exchange rate of of 3 June 214 ** Total Assets as of 3 June Page 3

31 Yield dynamics Loan Yields, annual Loan Yields, quarterly % 17.5% 16.2% 14.7% 69.4% 71.1% 66.4% 68.5% 2 15% % 14.5% 69.6% 66.7% 68.5% 2 15% % 28.9% 33.6% 31.5% H 214 Gross loans, GEL, consolidated Gross loans, FC, consolidated Currency-blended loan yield 5% % 33.3% 31.5% Q2 213 Q1 214 Q2 214 Gross loans, FC, consolidated Gross loans, GEL, consolidated Currency-blended loan yield, annualised 5% Loan Yields, GEL, quarterly 15% Loan Yields, foreign currency, quarterly 14.2% 24% 23% 22% 21% 2 19% 18% 17% % 19.2% Q2 213 Q1 214 Q2 214 Loan yield, GEL 13% 11% 9% 7% 5% 12.3% 12. Q2 213 Q1 214 Q2 214 Loan yield, FC Loan yields excluding provisions Page 31

32 1 8% 6% 4% 2% Cost of funds and loans to deposits Cost of Funds, annual Cost of Funds, quarterly 7% 6.2% % 6% 5.9% 5. 6% 5.1% 5% 5% 4.8% H 214 Cost of funds, consolidated Cost of Client Deposits, annual 4% Q2 213 Q1 214 Q2 214 Cost of funds, consolidated Cost of Client Deposits, quarterly % 7.3% 59.1% 4.9% 5.6% 4.4% 68.7% 67.9% 72.5% 31.3% 32.1% 27.5% 8% 6% 4% 2% % 65.6% 4.6% 7.7% 4.3% 72.5% 34.4% 29.3% 27.5% 7% 6% 5% 4% 3% 2% 1% Client deposits, FC, consolidated 1H 214 Client deposits, GEL, consolidated Currency-blended cost of client deposits Q2 213 Q1 214 Q2 214 Client deposits, FC, consolidated Client deposits, GEL, consolidated Currency-blended cost of client deposits, annualised Page 32

33 Risk weighting of FX denominated loans at 175% according to the National Bank of Georgia standards NBG requires that investments in subsidiaries of more than 5 to be deducted from Total Capital 3 25% 2 15% 1 Excellent capital adequacy position Basel I capital adequacy ratios, consolidated 5% 19.9% 28.5% 21.2% 26.1% 27.1% 26.3% % H 214 Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio 18% 16% 14% 12% 1 8% 6% 4% 2% NBG (Basel 2/3), capital adequacy ratios standalone 16.4% 16.2% 13.1% 12.9% 1.8% 14. Q4 213 Q1 214 Q2 214 Tier I Capital Ratio Total Capital Ratio GEL mln 7, 6, 5, 4, 3, 2, 1, Risk Weighted Assets Basel I vs NBG (Basel 2/3) 5,734 5,92 5,81 5,23 5,373 6,23 Q4 213 Q1 214 Q2 214 Basel I NBG Basel 2/3 NBG (Basel 2/3)Tier I Capital and Total Capital GEL mln June 214 March 214 June 213 Tier I Capital (Core) 669, , ,29 Tier 2 Capital (Supplementary) 197,832 19,1 189,824 Total Capital 867, , ,114 Risk weighted assets 6,22,897 5,91,857 5,733,683 Tier 1 Capital ratio 1.8% 12.9% 13.1% Total Capital ratio % 16.4% Page 33

34 Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 214 and 1H 214 Results Overview and Analyses Business Segment Discussion Appendices Page 34

35 Retail Banking (RB): Strong growth of deposits despite rate cuts GEL thousands unless otherwise stated Q2 214 Q2 213 Change Q1 214 Change 1H 214 1H 213 Change Y-O-Y Q-O-Q Y-O-Y Net interest income 51,342 48,77 6.8% 48, ,22 91,65 1.1% Net fee and commission income 14,39 12, % 12, % 26,56 25, % Net gain from foreign currencies 4,392 3,64 2.7% 4, % 8,619 7, Other operating non-interest income 1,386 1, % % 1,863 2, Revenue 71,429 66,35 8.2% 65, % 137, , Operating expenses (31,672) (32,237) -1.8% (3,295) 4.5% (61,967) (6,375) 2.6% Operating income before cost of credit risk 39,757 33, % 35, % 75,295 65, % Cost of credit risk (2,291) (7,881) -7.9% 1,949 NMF (342) (17,47) -98. Net non-recurring items (4,375) (274) NMF (392) NMF (4,767) (539) NMF Profit before income tax expense 33,91 25, ,95-1.8% 7,186 47, % Income tax expense (641) (2,675) -76. (5,617) -88.6% (6,258) (6,15) 4. Profit 32,45 22, % 31, % 63,928 41, % Retail Banking loan yields % 52.6% 49.4% 19.8% 17.8% 4.3% 45.2% 25% 2 1 Retail Banking client deposit costs 15% 73.2% 69.4% % % 59.7% 47.4% 5.6% 54.8% 5% % 3.6% 36.4% 32.9% H H 214 Gross loans, RB, GEL Client deposits, RB, FC Gross loans, RB, FC Client deposits, RB, GEL Currency-blended loan yield, RB Currency-blended cost of client deposits, RB *The loss experience used to determine appropriate general risk provision was changed from seven to three years in Retail Banking in % 6.1% 5.3% 8% 6% 4% 2% Page 35

36 Retail Banking (RB) No. 1 retail bank in Georgia RB gross loan portfolio consolidated, 3 June 214 Volumes are in GEL millions 1H 214 % of clients Number of total Retail clients, of which: 1,336,629 1,245,48 1,54, ,794 Number of Solo clients ( Premier Banking ) 7,89.5% 6,81 5,413 3,728 Consumer loans & other outstanding, volume Consumer loans & other outstanding, number 486, % 455,557 46, ,652 Mortgage loans outstanding, volume* Mortgage loans outstanding, number* 1,737.8% 1,212 9,85 9,162 Micro & SME loans outstanding, volume Micro & SME loans outstanding, number 14, % 13,317 11,136 9,86 Credit cards and overdrafts outstanding, volume Credit cards and overdrafts outstanding, number 191, % 174,57 142,72 131,119 Credit cards outstanding, number*, of which: 117, % 117,913 17, ,82 American Express cards 11,42 8.2% 18,68 99,292 97,1 GEL mln 2, 1,5 1, 5 RB gross loans and deposits, consolidated 1, , ,62 1,751 1,87 1, H 214 Retail Banking gross loans Retail Banking client deposits Pawn loans 3.4% Credit cards and overdrafts 8.1% Automobile loans.9% General consumer loans 25.5% POS loans 3.5% Mortgage loans 26.4% Micro- and agro-financing loans and SME loans 32.3% RB client deposits, 3 June 214 GEL 32.9% Time deposits 6.8% Current accounts & demand deposits 39.2% Total retail gross loans: GEL 1,751.2 mln FC 67.1% *Includes m2 mortgages Page 36

37 Retail Banking 3 25% 2 15% 1 5% Loan Yield, quarterly 26.4% 19.3% 14.1% 21.3% % 21.8% % 6% 5% 4% Cost of Deposits, quarterly 5.5% 5.4% 5.2% 4.6% 4.2% % 3.9% 3.7% Q2 213 Q1 214 Q2 214 RB Loan Yield, GEL RB Loan Yield, FC RB Loan Yield, Currency Blended NIM, quarterly 3% Q2 213 Q1 214 Q2 214 RB Cost of deposits, GEL RB Cost of deposits, FC RB Cost of deposits, currency blended 12% 11% 1 9% 1.4% % 8% 7% 6% 5% Q2 213 Q1 214 Q2 214 RB NIM Page 37

38 Corporate Banking (CB) GEL thousands unless otherwise stated Q2 214 Q2 213 Change Q1 214 Change 1H 214 1H 213 Change Y-O-Y Q-O-Q Y-O-Y Net interest income 23,94 25, % 24,67-2.9% 48,511 5,46-3.9% Net fee and commission income 6,292 7, % 5, ,14 14, % Net gain from foreign currencies 5,216 7, % 6, % 11,542 12, % Other operating non-interest income 1,46 1, % % 1,531 3, % Revenue 36,458 42,2-13.2% 37,14-1.8% 73,598 8,52-8.6% Operating expenses (12,528) (8,477) 47.8% (11,426) 9.6% (23,954) (2,75) 15.4% Operating income before cost of credit risk 23,93 33, % 25, % 49,644 59, % Cost of credit risk (1,737) (1,275) 4.5% (12,919) -16.9% (23,656) (17,191) 37.6% Net non-recurring items (2,229) (763) 192.1% (223) NMF (2,453) (1,17) 141.2% Profit before income tax expense 1,964 22, % 12, % 23,535 41, % Income tax expense (416) (2,68) -84.5% (1,96) -78.2% (2,32) (5,973) -61.2% Profit 1,548 19, % 1, % 21,215 35, % Corporate Banking loan yields Corporate Banking deposit costs % 13.9% 12.4% 1.8% 83.3% 85.2% % 16.7% 14.8% % H 214 Gross loans, CB, GEL Gross loans, CB, FC Currency-blended loan yield, CB 16% 14% 12% 1 8% 6% 4% 2% % 7.2% 38.4% 61.6% 5.2% 5.9% 4.4% 49.8% 49.1% 58.3% % H 214 Client deposits, CB, FC Client deposits, CB, GEL Currency-blended cost of client deposits, CB 8% 6% 4% 2% Page 38

39 Corporate Banking (CB) Total corporate deposits: GEL 1,117 Highlights No.1 corporate bank in Georgia Circa 28.4% market share based on client deposits 1 as of 3 June 214 Integrated client coverage in key sectors c.7,1 clients served by dedicated relationship bankers Corporate banking client deposits consolidated, 3 June 214 GEL 41.7% Time Deposits 23.7% Current accounts & demand deposits 76.3% 1 source: National Bank of Georgia, does not include interbank deposits FC 58.3% Total gross loan portfolio GEL 1,793 mln Corporate gross loan portfolio, standalone, 3 June 214 Telecommun Healthcare ication 3.5% 4.7% Agriculture 4.9% Tourism & Hospitality 5.9% Infrastructure Development 1.2% Energy 8.7% Services 2.6% Other 4.7% Heavy Industry 14.6% Consumer Production 16. Trade 13.4% Real Estate Development 1.7% Corporate gross loan and deposit growth, consolidated GEL mln 2, 1,5 1, 5 1,58 1,384 1,725 1,148 1,854 1,825 1,22 1, H 214 Corporate gross loans Corporate client deposits Page 39

40 Corporate banking Loan yield, quarterly Cost of deposits, quarterly 15% 14% 13% 12% 11% 1 9% 8% 7% 13.7% % 11.3% 1.8% 1.7% 1.8% 1.8% 1.6% Q2 213 Q1 214 Q2 214 CB Loan Yield, GEL CB Loan Yield, FC CB Loan Yield Currency Blended 6% 5% 4% 3% 2% 5.6% 5.3% 4.9% 3.2% 3.2% 3.1% Q2 213 Q1 214 Q2 214 CB Cost of deposits, GEL CB Cost of deposits, FC CB Cost of deposits, currency blended 3.3% 2.8% 2.4% NIM, quarterly 6% 5% 4% 5.1% 4.1% 4.4% 3% 2% 1% Q2 213 Q1 214 Q2 214 CB NIM Page 4

41 Investment Management results overview Highlights Strengthening presence internationally through representative offices in Israel (since 28), the UK (21), Hungary (212) and Turkey (213). Preparing to launch Mezzanine Fund, Renewable Energy Fund and Caucasus Money Market Fund Executed its first sizeable M&A deal and received a success fee in the amount of US$1.9 million Successfully placed US$8 million, EUR 8 million and GBP 5 million Euroclearable CDs. CDs issued to IM clients stood at GEL 314. million. BG Capital (the Bank s brokerage subsidiary) acted as lead arranger for two bond offerings for m2 issued in June 214. A US$1 million 1-year bond placement at par with a coupon rate of 8.42% and a US$5 million 1 year bond with a coupon rate of 9.5% Bank of Georgia Research IM client deposits growth GEL mln IM AUM* of GEL 91 mln as of 3 June 214, up 15.9% y-o-y H 214 Client Deposits, IM IM client geographical distribution, June 214 The Bank of Georgia Research Department was launched in June 212 with a view of supporting Investment Management and Corporate Banking businesses to attract more clients and investments into Georgia through Bank of Georgia. Bank of Georgia Research has initiated research coverage of the Georgian economy and Azeri economies, including a report analysing the impact of Russia-Ukraine standoff on the Georgian economy, the Georgian Retail Real Estate Market, the Georgian Wine Sector, Georgian Agricultural Sector, Georgian Electricity Sector, Georgian Oil and Gas Corporation, Georgian Railway, and has issued notes on Georgian State Budget and the Tourism Sector Hungary, 4% USA, 4% UK, 5% Germany, 6% British Virgin Islands, 7% Others, 2 Israel, 14% Georgia, 39% * Includes AUM of BG Capital and Aldagi Pension Fund Page 41

42 Insurance & healthcare Healthcare business Income Statement Property and Casualty Income Statement y-o-y changes 2 22% 5% 15% -3% 61,228 5,14-98% -13% 91,842 29% 13,931 7% 35% ,642 5,862 NMF NMF -49% -18.3% 2,723 1, ,147 13,652 3,643 NMF NMF 99% 7% % 4,8 Revenue* COGS SG&A Other operating income Depreciation Net interest expense Gain on currency exchange Non-recurring income Income tax expense Profit Revenue* COGS SG&A Other operating income Depreciation Net interest income Gain on currency exchange Non-recurring income Income tax expense Profit Healthcare business revenue breakdown P&C business revenue breakdown State funded health insurance programmes, 22,281, 21% Ambulance and rural primary care, 2,862, 3% Private health insurance products, 2,288, 19% Referral and specialty hospitals, 51,62, 49% Community hospitals, 5,971, 6% Financial Risks & Guarantees Insurance, GEL.7 mln, 5% Ambulatory clinics, 2,265, 2% *Insurance revenue is calculated as gross insurance premium revenue less premiums ceded to reinsurers and commission expenses Credit Life Insurance, GEL 1.6 mln, 12% Other, GEL 1.8 mln, 13% Property Insurance, GEL 2. mln, 15% Motor Insurance, GEL 7.5 mln, 55% Page 42

43 Insurance and Healthcare, cont d Market GPW to nominal GDP Healthcare and P&C market shares* Healthcare market share (hospital beds) of 19.9% as of 3 June % 1.3% % % 27.3% 31.5% 34.4% 26.2% % 28.9% 37.6% % 13.3% 14.7% Market GPW to Nominal GDP Clinics and beds by regions, June Q1 214 P&C Insurance Health Insurance Region Geography Population TOTAL Referral & Specialty Hospitals Community Clinic Ambulatory Hospitals & mln persons Clinics Beds Hospitals Beds Hospitals Bed Clinic Tbilisi Capital Imereti West Georgia Adjara West Georgia Samegrelo West Georgia Kakheti East Georgia Samtskhe South-East Georgia , , * 212 Aldagi market share includes Imedi L, which was acquired by Aldagi in Page 43

44 Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 214 and 1H 214 Results Overview and Analyses Business Segment Discussion Appendices Express Banking Analyst Coverage Financial Statements Page 44

45 Express Branch How Express works Transport Opening accounts and deposits Issuing loans and credit cards Credit card and loan repayments Cash deposit into accounts Money transfers Utility and other payments Express Pay Credit card repayments Loan repayments Cash deposit into accounts Loan activation Utility and other payments Mobile top-ups MetroMoney top-ups Acts as payments card in metro, buses and mini-buses 1 Payments Express Merchant Payments via cards and Express points P2P transactions between merchant and supplier = 1 Free Ride on Bus or Metro Credit limit with interest rate Page 45

46 Express Card Number of transactions 613,159 cards outstanding 4,967,755 Balance of GEL 66 mln > 1 mln payments in transport per month 696,674 1,5,394 1,596,996 2,131,861 2,817,749 3,625,149 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Number of cards outstanding Volume of transactions GEL mln 141, , ,53 345, , ,77 613, Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q Page 46

47 Express Branch GEL Loans and deposits 27% 98% 22,784,925 18,886,557 18% 22% 22,229,447 27,746, small format branches 14,874,185 11,491,295 GEL 1.5 mln net profit per month Average capex per one express branch: US$5K Dec-12 Dec-13 Jun-14 Number of transactions Fee income Thousands 5,191 1,19 4,82 4, ,411 4,893 4, ,86 4,148 6,167 5, ,244 4,949 7,15 1,357 5,747 GEL 1,968,948 2,271,95 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Express Pay terminals and ATMs Teller-cashiers 1H 213 1H Page 47

48 Express Pay Terminal 1,423 terminals 16 merchants and 182 services Cost of one Express Pay Terminal: US$2,5 Number of transactions Thousands 24,938 17,615 19,41 15,456 13,164 23,447 12,511 14,65 16,675 17,96 2,593 3,434 2,292 3,72 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Other transactions Banking transactions Number of Express Pay Terminals GEL thousands Volume of transactions 2,38 1, Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Other places BoG service centers and Metro station 276, ,456 18,18 141,61 142, , ,519 92,748 72,433 73,274 56,772 64,21 135,435 19,14 3,139 37,668 42,295 53,498 68,994 87,432 12,284 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Other transactions Banking transactions Page 48

49 Express Merchant 5.7K POS Terminals >5 Market Share Market Size 1, Merchants Thousands Number of transactions 22% 7% 21% 16% 2, , ,63.3 1, , % 33% 4,51.8 3,58. Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 GEL mln Number of POS Terminals Volume of transactions 3,725 3,899 4,259 4,541 4,836 4,99 5,689 9% -1 99,327 89,552 18% 115,11 97,668 9% -4% 125,479 12,245 21% 145,618 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q Page 49

50 A rise of distance channels Internet banking:6, active users POS terminals: 5.7K throughout Georgia 47,+ No. of transactions No. of transactions 1H 214 Internet Banking 2,186 1H 214 POS Terminals 7,11 1H 213 1,29 +69% 1H 213 2, % Mobile banking: 2, active users No. of transactions Mobile Banking 1H H x4 Standard Branches (tellers): 23 branches No. of transactions Standard Branches (Tellers) 1H 214 5, % 1H 213 6,66 ATMs: 51 throughout Georgia Digital corners 1H 214 ATMs No. of transactions s 7,5 Digital corners provide free tutorials for internet and mobile banking services 1H 213 5, % Uniquely placed to benefit from internet and mobile banking s huge upside potential Page 5

51 Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 214 and 1H 214 Results Overview and Analyses Business Segment Discussion Appendices Express Banking Analyst Coverage Financial Statements Page 51

52 Analyst coverage of Bank of Georgia Holdings PLC Consensus Target Price: GBP GBP 3. GBP GBP 3. GBP 27.8 GBP 28.2 GBP 24.5 GBP 31.6 GBP 28.5 GBP GBP 27.2 GBP 28.5 GBP 28.2 GBP Page 52