Capturing Growth Opportunities. Investor Presentation: 2Q15 & 1H15 results

Transcription

1 Capturing Growth Opportunities Investor Presentation: 2Q15 & 1H15 results

2 Disclaimer Forward Looking Statements This presentation contains forward-looking statements that are based on current beliefs or expectations, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forwardlooking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning. Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and JSC Bank of Georgia and/or the Bank of Georgia Holdings plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are various factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in the global, political, economic, legal, business and social environment. The forward-looking statements in this presentation speak only as of the date of this presentation. JSC Bank of Georgia and Bank of Georgia Holdings undertake no obligation to revise or update any forward-looking statement contained within this presentation, regardless of whether those statements are affected as a result of new information, future events or otherwise. page 2

3 Contents Bank of Georgia Holdings PLC Overview Results Discussion Bank of Georgia Holdings PLC Results Discussion Results Discussion Segments Georgian Macro Overview Appendices 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 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 GBP US$ US$ millions BGH Shareholder structure and share price BGH shareholder structure As of 3 June 215 2% 3% 7% 19% 42% UK/Ireland US/Canada Scandinavia Unvested and unawarded shares for management and employees Vested shares held by management and employees BGH has been included in the FTSE 25 and FTSE All-share Index Funds since 18 June 212 Others 27% Note: Bank of Georgia Holdings PLC (BGH) (LSE: BGEO) is a UKincorporated holding company of JSC Bank of Georgia Share price performance x5 growth in market capitalisation Up 141% since premium listing 1 1,, 9,, 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, Average daily trading volume 95, 2,, 5,3, 9,5, 21 1,2 BGEO LN GDR Average daily trading volume Sep-4 3-Aug-15 1 Share price change calculated from the last price of BGEO LI on 27 February 212 to the price of BGEO LN on 31 July Market capitalisation for Bank of Georgia Holdings PLC, the Bank s holding company, as of 31 July 215, GBP/USD exchange rate of page 4

5 BGH at a glance Group Structure In August Bank of Georgia completed its legal restructuring in accordance with the National Bank of Georgia s intention to regulate banks in Georgia on a standalone basis and thereby limit investments in non-banking subsidiaries by locally regulated banking entities. Investment Business GGU Water utility and hydro Retail Banking Corporate Banking Other Banking Businesses Healthcare Business Real Estate Business Utilities (GGU) Legacy Investments #1 Retail Bank in Georgia 1.9mln retail clients 246 branches 685 ATMs 2,284 Express Pay terminals 7,668 POS terminals 928,999 Express cards 1.9mln cards GEL 2,623.6mln net loans GEL 1,736.5mln client deposits #1 Corporate Bank in Georgia 5k clients GEL 2,174.1mln loans GEL 1,371.9mln client deposits Investment Management Wealth management, research, advisory, brokerage, private equity AUM of GEL 1,231.4mln WM client deposits GEL 94.8mln P&C Insurance Leasing Payment Services IB BNB Plans to divest from BNB #1 Healthcare company in Georgia Revenue ogel 17.4mln in 1H15 EBITDA 23.1mln Healthcare services 41 healthcare facilities 2,22 beds Over 2/3 of population covered Market share of 22.1% by beds, HTMC acquisition increased to 26.6% Health insurance 38.3% market share Insuring 256k people #1 Real Estate company in Georgia 2 completed projects and 4 under construction Total sales of 1,376 appartments US$115.8mln since 211, of which US$58.9 mln to be recognised upon completion of projects 99% sale in completed projects 72% pre-sales for ongoing 4 projects Total BOG mortgages sold GEL 66.3mln Major player on the market Provides water and wastewater services to 1.4mln people (1/3 of Georgia) Operates 3 hydro facilities with 143MW capacity Acquired 25% share with an option to acquire additional 24.9% 214 EBITDA of GEL51.6mln 1 GGU profit (BOG share) of GEL 2. mln in 2Q15 and GEL.7 mln in 1H15 1 Per GGU management accounts, neither audited or reviewed by auditors or Bank of Georgia Source: Company, financial and operating data is for FY 214 page 5

6 BGH Updated our strategy from 3x2 to 4x2 Earlier Strategy Current Strategy Georgia Focused Banking Group with an Investment Arm Leading Georgian bank with investments in noncore sectors with a divestment strategy ROAE c.2 TIER I c.2 Growth c.2 Dividend Policy: Payout Ratio 25-4 One-off dividends from divestments over time Capital Allocation, 1H15 (GELm) 21.6% 14.2% Underpenetrated Retail Banking Sector Provides Room for Further Growt % % ROE c.2 Tier I c.2 Growth c.2 ROAE of 19.3% in 2Q15 ROAE of 19.3% in 1H15 Strong internal cash generation to support loan growth without compromising capital ratios Tier I ratio of 2.4% as of 3 Jun 215 Aiming 2 growth in retail banking business 19.8% y-o-y constant currency growth excluding Privatbank as of 3 Jun Investment Business Min. IRR of 2 Investment Approach Highly disciplined approach to unlock value through selective investments in Georgia, which have a well defined exit path Target investments with min. 2 IRR and partial or full exit in max 6 years Opportunistic investments Staging and small capital commitments EBITDA potential of at least GEL6m (c.us$3m) in 3-4 years Clear exit path RB RoAE CB Retail Loans / Corporate Loans / GDP GDP External corporate indebtedness Target Current contribution Target Current contribution Profit Contribution At least 8 2Q15: GEL 61mln or 85% Up to 2 2Q15: GEL 11mln or 15% For 214, paid dividend of GEL 2.1 per share, a 5. y-o-y increase implying 31.2% payout ratio Recurring: linked to recurring profit from banking business Aiming 25-4 dividend payout ratio Ongoing Dividends Aiming for at least 3 special dividends in next 5 years, representing at least 5 of regular dividend from banking business 1 Ratios calculated based on NBG Data as at 31 December214. page 6

7 BGH Robust corporate governance compliant with UK Corporate Governance Code Board of Directors of Bank of Georgia Holdings PLC 8 non-executive Supervisory Board members; 8 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, Group CEO experience: formerly EBRD banker; MS in banking from CASS Business School, London; BBS from University of Limerick, Ireland Hanna Loikkanen, Independent Director experience: Currently advisor to Representative office of East Capital international; previously: Senior executive at East Capital, FIM Group Russia, Nordea Finance, SEB Kaha Kiknavelidze, Independent Director experience: currently managing partner of Rioni Capital, London based investment fund; previously Executive Director of Oil and Gas research team for UBS 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 Tamaz Georgadze, Independent Director experience: Partner at McKinsey & Company in Berlin, Founded SavingGlobal GmbH, aide to President of Georgia Al Breach, Chairman of the Remuneration Committee, Independent Director experience: Head of Research, Strategist & Economist at UBS: Russia and CIS economist at Goldman Sachs 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 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 page 7

8 BGH New Management Structure 8 8 Bank of Georgia Holdings PLC No changes New Holding Company BGEO group Irakli Gilauri, Group CEO, formerly EBRD banker; MS in banking from CASS Business School, London; BBS from University of Limerick, Ireland Archil Gachechiladze, Group CFO and Deputy CEO, Investment Management of JSC Bank of Georgia; formerly Deputy CEO in charge of Corporate Banking, Deputy CEO of TBC Bank, Georgia; Lehman Brothers Private Equity, London; MBA from Cornell University Avto Namicheishvili, Deputy CEO, Group Legal Counsel; previously partner at Begiashvili &Co, law firm in Georgia; LLM from CEU, Hungary JSC Bank of Georgia Murtaz Kikoria, CEO of Bank of Georgia; previously CEO of Group s healthcare business; 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 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 Georgia Healthcare Group m2 Real Estate Nikoloz Gamkrelidze, CEO, Georgia Healthcare Group; previously Group CFO, 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 Irakli Burdiladze, CEO, m2 Real Estate; previously CFO at GMT Group, Georgian real estate developer; Masters degree from Johns Hopkins University 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 Levan Kulijanishvili, Chief Financial Officer 15 year of experience at BOG. Formerly Head of Security and Internal Audit at Bank of Georgia; Holds MBA from Grenoble School of Business, in Grenoble, France Tornike Gogichaishvili, Chief Operating Officer Previously CEO of Aldagi and CFO of BG Bank, Ukraine; Holds Executive Diploma from Said Business School, Oxford 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 8

9 Contents Bank of Georgia Holdings PLC Overview Results Discussion Bank of Georgia Holdings PLC Results Discussion Results Discussion Segments Georgian Macro Overview Appendices page 9

10 2Q15 P&L BGH Consolidated * Investment Business* QUARTERLY INCOME STATEMENT Change Change Change Change Change Change GEL thousands 2Q15 2Q14 Y-O-Y 1Q15 Q-O-Q 2Q15 2Q14 Y-O-Y 1Q15 Q-O-Q 2Q15 2Q14 Y-O-Y 1Q15 Q-O-Q Net banking interest income 122,789 82, % 12, % 126,43 83, % 123,58 2.7% Net fee and commission income 29,121 26, , % 3,172 27,8 11.4% 28,9 7.4% Net banking foreign currency gain 19,765 11, % 18, % 19,765 11, % 18, % Net other banking income 2,481 2, % 1, % 2,81 2, % 2, % Gross insurance profit 5,817 6, % 7, % 3,473 3, % 5, % 2,799 2, , Gross healthcare profit 18,99 13, % 16, % ,99 13, % 16, % Gross real estate profit (41) 3,476 NMF 1,29 NMF (41) 3,476 NMF 1,29 NMF Gross other investment profit 4,734 3, % 1,398 NMF ,79 3, ,543 NMF Revenue 22, , % 195, % 182, , , % 25,566 23, % 22, % Operating expenses (76,848) (63,948) 2.2% (76,58) 1. (65,244) (54,26) 2.2% (65,277) -.1% (12,381) (1,333) 19.8% (11,654) 6.2% Operating income before cost of credit risk / EBITDA 125,917 85, % 119, % 117,379 74, % 112, % 13,185 13,34 1.2% 1, % Profit from associates 1, (1,31) NMF , (1,31) NMF Depreciation and amortization of investment business (2,579) (2,256) 14.3% (2,688) -4.1% (2,579) (2,256) 14.3% (2,688) -4.1% Net foreign currency gain (loss) from investment business 2,689 (1,433) NMF 3, % ,689 (1,433) NMF 3, % Interest income from investment business 622 (71) NMF 617.8% NMF % Interest expense from investment business (2,632) (1,718) 53.2% (2,463) 6.9% (7,51) (3,994) 87.8% (5,969) 25.7% Cost of credit risk (41,867) (13,846) NMF (41,841).1% (4,764) (13,279) NMF (4,771). (1,13) (567) 94.5% (1,7) 3.1% Profit 72,3 58, % 62, % 61,453 53, % 58,81 4.5% 1,577 4, , % Earnings per share (basic, diluted) % % 1H15 P&L BGH P&L results highlights HALF-YEAR INCOME STATEMENT BGH Consolidated * Investment Business* Change Change Change GEL thousands 1H15 1H14 Y-O-Y 1H15 1H14 Y-O-Y 1H15 1H14 Y-O-Y Net banking interest income 243, , % 249, , % Net fee and commission income 55,975 46, % 58,262 47, % Net banking foreign currency gain 38,727 22,7 7.6% 38,727 22,7 7.6% Net other banking income 4,272 3, % 4,96 3, % Gross insurance profit 13,391 16, % 8,777 8,19 7.2% 5,492 8, % Gross healthcare profit 34,975 22, % ,975 22, % Gross real estate profit 1,168 9, % ,168 9, % Gross other investment profit 6,133 5, % ,253 5, % Revenue 398, , % 36, , % 47,888 47,65 1.7% Operating expenses (152,98) (122,23) 25.1% (13,52) (13,775) 25.8% (24,38) (19,735) 21.8% Operating income before cost of credit risk / EBITDA 245, , % 229, , % 23,85 27, % Profit from associates Depreciation and amortization of investment business (5,266) (4,485) 17.4% (5,266) (4,485) 17.4% Net foreign currency gain (loss) from investment business 6,379 (1,849) NMF ,379 (1,849) NMF Interest income from investment business 1, % , % Interest expense from investment business (5,94) (3,749) 35.9% (13,469) (7,835) 71.9% Cost of credit risk (83,78) (27,163) NMF (81,536) (26,8) NMF (2,172) (1,83) 1.6% Profit 134, , ,264 99, % 14,15 12, % Earnings per share (basic) % * Note: and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes. page 1

11 BGH Balance sheet highlights 3 June 215 Balance Sheet Bank of Georgia Holdings PLC Investment Business Balance Sheet Jun-15 Jun-14 Change Mar-15 Change Jun-15 Jun-14 Change Mar-15 Change Jun-15 Jun-14 Change Mar-15 Change Y-O-Y Q-O-Q Y-O-Y Q-O-Q Y-O-Y Q-O-Q Liquid assets 2,741,533 1,837, % 2,427, % 2,726,749 1,817, ,42, % 127,58 92, % 199, Loans to customers and finance lease receivables 5,52,752 3,65, % 5,156, ,142,221 3,714, % 5,248, Accounts receivable and other loans 77,866 6, % 73, % 15,474 9, % 13, % 7,343 51, % 64, % Insurance premiums receivable 58,142 52, % 58, % 26,519 14, % 22, % 32,23 37, % 37, % Prepayments 52,145 28, , ,779 18, % 24, % 21,366 9, % 17, % Inventories 131,534 9, % 113, % 1,379 6, % 7, % 121,155 83,8 44.6% 15, % Investment property 221,56 152, % 194, % 143, , , % 77,633 24, % 66, % Property and equipment 669, , % 618, % 338, , % 334, % 33,295 24, % 283, % Total assets 9,375,59 6,667, % 9,3,53 3.8% 8,712,71 6,232, % 8,447, % 883, , % 864,53 2.2% Client deposits and notes 4,14,417 3,74, % 4,99,29.1% 4,212,822 3,148, % 4,271, % Amounts due to credit institutions 2,139,517 1,24, % 1,78, % 2,45,93 1,145, % 1,694, % 189, , % 181, Debt securities issued 1,63, , % 1,26, % 99,257 76, % 962, % 79,894 26, % 66, % Accruals and deferred income 132,832 83, % 124, % 14,369 9, % 2, % 118,463 73, % 13, % Insurance contracts liabilities 73,1 6, % 7, % 42,91 25, % 34, % 3,91 34, % 35, % Total liabilities 7,719,116 5,41, % 7,329,95 5.3% 7,463,969 5,213, % 7,163, % 476, , % 448,93 6.3% Total equity 1,655,943 1,256, % 1,7, % 1,248,741 1,19, % 1,284, % 47,22 237, % 415,96-2.1% Book value per share % % Key Ratios Note reporting format change Ratios 2Q15 1Q15 2Q14 1H15 1H14 Profitability ROAA 2.9% % 2.9% 3.3% ROAE 19.3% 19.2% % 19.3% Net Interest Margin 7.6% 7.8% 7.4% 7.8% 7.5% Loan Yield 14.6% 14.5% 14.3% 14.6% 14.5% Cost of Funds % % Cost of Customer Funds 4.4% 4.4% 4.2% 4.4% 4.4% Cost of Amounts Due to Credit Institutions 5.3% 5.2% 4.7% 5.3% 4.8% Cost / Income 35.7% 36.8% 42.2% 36.2% 41.9% NPLs To Gross Loans To Clients 4.1% 3.5% 3.8% 4.1% 3.8% NPL Coverage Ratio 82.2% 74.2% 73.8% 82.2% 73.8% NPL Coverage Ratio, adjusted for discounted value of collateral 115.1% % 115.1% 116.1% Cost of Risk 2.7% 3.1%.9% 2.9%.9% Tier I capital adequacy ratio (BIS) 2.4% 19.9% 22.5% 2.4% 22.5% Total capital adequacy ratio (BIS) 26.7% 23.9% 26.3% 26.7% 26.3% Tier I capital adequacy ratio (New NBG, Basel II) 1.4% 9.8% 1.8% 1.4% 1.8% Total capital adequacy ratio (New NBG, Basel II) 15.9% 12.9% % 14. Effective 1Q15, we have changed our reporting format to reflect our recently updated strategy. As a result, we now present our consolidated Group financial statements as a combination of our and Investment Business, with corresponding interbusiness eliminations. comprises: Retail Banking, Corporate Banking, Investment Management, P&C insurance, and Belarusky Narodny Bank ( BNB ) Investment Business comprises: Healthcare Business (GHG) including healthcare services ( Evex ) and health insurance ( Imedi L ), Real Estate Business (m 2 Real Estate), Water & Utility Business (GGU) other legacy investments (including wine subsidiary Teliani Valley) * Note: and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes. **Pro-forma for 1Q15, implying allocation of US$ 3mln capital earmarked for and held at the holding company. Ratios reported to NBG are reported in the appendix page 11

12 GEL millions GEL millions GEL millions GEL millions Revenue, quarterly BGH % growth ex-privatbank BGH Strong revenue growth, with positive operating leverage % Investment Business growth without m (2.7) (5.4) Revenue 2Q14 Investment Business Revenue 2Q15 Change y-o-y +9.4% +35.8% 22.8 Investment business Banking business Eliminations Operating Expenses, quarterly BGH (.6) Operating expenses 2Q % % Eliminations (.8) Investment Business Operating expenses 2Q15 Change y-o-y +2.2% 76.8 Investment business Banking business Revenue, half-year BGH % growth ex-privatbank % Investment Business growth without m % Banking business (5.1) (9.6) Eliminations Revenue 1H14 Investment Business Revenue 1H15 Change y-o-y +1.7% +37.5% Investment business Operating Expenses, half-year BGH (1.3) Operating expenses 1H % +21.8% % Investment business Banking business Eliminations (1.6) Investment Business Operating expenses 1H15 Change y-o-y page 12

13 GEL millions GEL millions BGH Strong profitability Profit, quarterly Profit, half-year BGH +23.5% BGH % n/a 118.4% -31.7% -32.7% 121.6% NMF NMF -8.9% n/a 85.7% % 99. NMF NMF Investment business Banking business RB Privatbank CB IM Other BB GHG m2 Other IB 2Q15 Change y-o-y 2 RB Privatbank CB IM Other BB GHG m2 Other IB 1H15 Change y-o-y Equity BGH 2, 1,8 1,6 1,4 1,2 1, % 13.3% 14.2% NMF 18.5% 14.1% NMF NMF RB Privatbank CB IM Other BB GHG M2 Other IB 3-Jun-15 ROAE 1H k 47.2 Investment business Banking business 1,248.7 *Proforma: US$3 million capital allocated to Retail Banking (from other ) page 13

14 GEL millions GEL millions Assets BGH Balance Sheet, 3 June 215 BGH Assets Assets GHG Assets M2 Real Estate Assets 9,7 7,7 5,7 3,7 1,7-3 Liabilities 6, , ,712.7 (138.4) (221.) 3-Jun-14 3-Jun-15 assets Investment Business assets 9, % 92.9% 9, 8, 7, 6, 5, 4, 3, 2, 1, Liquid assets Net loans Other assets 6, , , Jun-14 8, , , Jun % % Loan book growth: Privatbank loans GEL 245.6mln 31.8% gowth ex- Privatbank 11.2% growth of loans on constant currency basis, ex- Privatbank Jun-15 PPE Other assets 36.5% 63.5% Jun-15 Other assets Investment properties Inventories 26.1% 31.7% 42.2% BGH Liabilities Liabilities GHG Liabilities M2 Real Estate Liabilities 9,7 7,7 5,7 3,7 1,7-3 5, , , ,464. (138.4) (221.) 3-Jun-14 3-Jun-15 liabilities Investment Business liabilities 6.2% 96.7% 8, 7, 6, 5, 4, 3, 2, 1, 5, , , , % % 2, % 4, Jun-14 3-Jun-15 Other liabilities Debt securities issued Amounts due from credit institutions Client Deposits 56.4% Deposits growth: Privatbank deposits GEL 267mln 25.3% growth ex- Privatbank 5.1% growth of deposits on constant currency basis, ex- Privatbank % 67.7% 3-Jun-15 Borrowed funds Other liabilities % 65.9% 32.4% 3-Jun-15 Other liabilities Accruals and deferred income Borrowed funds page 14

15 Contents Bank of Georgia Holdings PLC Overview Results Discussion Bank of Georgia Holdings PLC Results Discussion Results Discussion Segments Georgian Macro Overview Appendices page 15

16 GEL million GEL million BOG The leading bank in Georgia Leading market position: No. 1 bank in Georgia by assets (36.), loans (33.4%), client deposits (31.6%) and equity (34.7%) 1 Sustainable growth combined with strong capital, liquidity and robust profitability Underpenetrated market with stable growth perspectives: Real GDP average growth rate of 5.8% for Geostat estimates 4.8% GDP growth in 214. Loans/GDP grew from 9% to 44% in the period of , still below regional average; Deposits/GDP grew from 8% to 4 over the period Balance Sheet +14.9% +8.4% +19.2% +13.1% +16.7% Strong brand name recognition and retail banking franchise: Offers the broadest range of financial products to the retail market through a network of 246 branches, 658 ATMs, 2,284 Express Pay Terminals and c.1.9 million customers (includingc.4, Privatbank customers) as of 3 June 215 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 yield of c.5.4% 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 7,44 6,185 5,333 8,713 Income Statement ,727 1,939 1,875 1,596 5,142 4,441 3,535 3,127 Total assets Liquid assets Net loans to customers Revenue ,213 3,482 3,16 2, Client deposits 31-Dec Dec Dec-14 3-Jun % Profit +14.5% Revenue 2Q14 1Q15 2Q15 1,249 1,231 1,56 89 Total equity CAGR % Profit Change y-o-y 1 Market data based on standalone accounts as published by the National Bank of Georgia (NBG) as of 31 March (215 BOG figures include Privatbank) 2 Amounts due to customers page 16

17 BOG Leading the competition across the board 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% 33.8% % +2.6% from Privatbank % 24.5% 23.7% 7.8% 7.3% 6.1% 7.7% % 5.5% 5.8% 5.8% 6.3% 6.6% 4.8% 4.9% 4.9% 3.8% 4.8% #1 BOG 19.3% 17.9% 15.9% 14.7% 4 35% 3 25% 2 15% 1 5% 35.4% 33.4% 32.5% 32.2% 26.2% 27.8% 25.2% 25.3% +2.3% from Privatbank 8.3% % 6.7% % % 5.8% 6.6% 6.2% 4.8% 4.6% 5.4% 4.2% 4.8% #1 BOG 19.1% 17.7% 14.7% 15.6% BOG TBC PCB BR LB VTB Others Q2 June 215 Others BOG TBC PCB BR LB VTB Others Q2 June 215 Others Foreign banks market share by assets Peer group s market share in client deposits 26 3-Jun % % 31.6% 31.5% 3.4% % 28.8% 27.8% #1 BOG No state ownership of commercial banks since 1994 Local banks, 68. Foreign banks, 32. Local banks, 75. Foreign banks, % 2 15% 1 5% +2.9% from Privatbank 15.2% % 12.5% 11.8% 1.4% % % 5.6% 6.1% 5.3% 5.1% 5.4% 4.9% 5.3% 5.4% 5.2% 3.8% BOG TBC PCB BR LB VTB Others Others June Q2 215 Note: - All data based on standalone accounts as reported to the National Bank of Georgia and as published by the National Bank of Georgia - BOG includes Privatbank. Privatbank market shares as of 1Q15, TBC includes Constanta page 17

18 Diversified asset structure Total asset structure 3 June 215 Liquid assets 3 June 215 Total: GEL 8.7 bn Total: GEL 2.7 bn Other assets 9.7% Loans to customers, net 59. Liquid assets 31.3% Includes: Privatbank total assets of GEL 416.2mln, of which 59% loans Includes: Privatbank liquid assets of GEL 147.4mln (5.4% of total liquid assets) Investment securities 33. Amounts due from credit institutions 21.1% Cash and cash equivalents 45.9% * Amounts due from credit institutions consists of obligatory reserves with central banks (NBG & NBRB), time deposits with credit institutions with original maturities of over 9 days and interbank loans receivable Loans breakdowns 3 June 215 Total Loans breakdown by segments Total: GEL 5.1bn Retail Banking Loans breakdown by product Total: GEL 2.6bn Corporate Banking Loans breakdown by sectors Total: GEL 2.2bn Investment Management loans.3% Corporate Banking loans 42.8% BNB loans 5.9% Retail Banking loans 51. Includes Privatbank GEL mln loans, predominantly consumer loans and credit card loans Automobile loans.9% Pawn loans 2.3% Credit cards and overdrafts 11.9% General consumer loans 21.9% POS loans 3.8% Mortgage loans 27.7% Micro- and agrofinancing loans and SME loans 31.4% Mining and quarrying Financial 4.7% intermediation 2.7% Construction 4.6% Electricity, gas and water supply 3.7% Transport & Communication 5.6% Hospitality 5.2% Health and social work 4.3% Other 8.9% Real estate 17.7% Manufacturing 25.5% Trade 17.2% *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 18

19 US$ loan portfolio breakdown Highlights 44.8% of Retail Banking Loans were denominated in USD loans with non-usd income We offered re-profiling* in Feb-215. Since, 81 loans (out of 14,) were re-profiled, with total value of US$28.9mln For RB: Loans 15 days past due were 1.4% at 3 June 215, compared to 1.6% a year ago and 1. as of 31 March % of Corporate Banking Loans denominated in USD loans with non-usd income Retail Banking and Wealth Management 3 June 15 Total GEL mln 2, % % % 1,352 Other 5.1% 6 1. GEL , % USD % Loan portfolio Provision amount LLR rate Corporate Banking 3 June 15 Total GEL mln , % % 2 1.5% % 31 1, % % 3.7% Loan portfolio Provision amount LLR rate Other GEL USD Amounts in GEL million RB Loan Portfolio % of total RB Loan portfolio 2 Mortgages Consumer loans (incl Credit Cards) GEL and other currency loans 1 1, % USD loans with USD income % USD loans with non-usd income 1, % Total 2, , includes credit cards 2 includes Privatbank loans of which 87% is denominated in GEL SME & Micro Amounts in GEL million CB Loan Portfolio % of total CB Loan portfolio GEL and other currency loans % USD loans with USD income 1, % USD loans with non-usd income % Total 2, Note: standalone BOG figures from management accounts (non-ifrs) *Re-profiling implies effectively increasing the tenor of the loan so that monthly payment in Lari stays at the same level it was prior to the recent devaluation of the Lari. When re-profiling, we do not change the interest rate of the loan. We offered reprofiling in Feb 215 page 19

20 GEL thousand GEL thousand GEL thousand Resilient loan portfolio quality (1/2) NPLs NPL composition % 7.9% 7.6% % 9% 8% 7% % 3.9% % 4.1% 6% 5% 4% 3% 2% H 215 NPLs NPLs to gross loans Net Interest Margin 1% H 215 NPLs RB & WM NPLs CB NPLs Other Loan loss reserve NPL coverage ratio % 3.9% 3.4% 3.3% 2.3% 3.4% 4.1% 3.4% 5% 4% 3% 2% % 11.6% 111.1% 87.5% 83.8% % 82.2% H 215 Loan loss reserves (LLR) NPLs to gross loans LLR as % of gross loans 1% Jun-15 NPL coverage ratio NPL coverage ratio, discounted for value of collateral *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 2

21 GEL millions GEL millions Resilient loan portfolio quality (2/2) Cost of Credit Risk, quarterly Cost of Credit Risk, half year Q14 1Q15 Devaluation Privatbank 1Q15 2Q15 Privatbank 2Q H14 1H15 Devaluation Privatbank 1H15 Like-for-like Like-for-like Cost of Risk ratio, quarterly Cost of Risk ratio, half-year 3% 2% 1%.9% 1.6%.9%.6% 3.1% 2.2%.5% 2.7% 3% 2% 1% 1.3% 1.3% 1.2%.9% 2..4%.5% 2.9% 2Q14 1Q15 Devaluation Privatbank 1Q15 2Q15 Privatbank 2Q H14 1H15 Devaluation Privatbank 1H15 Like-for-like Like-for-like page 21

22 GEL millions Bank Standalone, GEL mln Strong liquidity (1/2) Liquid assets to total liabilities NBG liquidity ratio 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 36. 1,596 4, % 5,94 1,94 1, % 5, % 2,727 7, Jun-15 Liquid assets Total liabilities Liquid assets to total liabilities 4 35% 3 25% 2 15% 1 5% 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 1, % 3, , % 3, ,558 1,245 1,523 4, % Jun-15 Liquid assets (NBG) Liabilities (NBG) Excess liquidity NBG min requirement 5 45% 4 35% 3 25% 2 15% 1 5% Net loans to customer funds Net loans to customer funds & DFIs % 122.1% 114.8% 113.6% Jun-15 Net loans to customer funds, consolidated % 12.4% 96.8% 92.5% Jun-15 Net loans to customer funds & DFIs, consolidated Pro-forma, implying allocation of US$ 3mln capital earmarked for and held at the holding company. Ratios reported to NBG are reported in the appendix page 22

23 GEL thousands GEL thousands GEL thousands Strong liquidity (2/2) Liquidity coverage ratio & net stable funding ratio JSC Bank of Georgia standalone % 15.9% % 163.8% 178.6% 14.5% 15.6% Jun-15 Liquidity coverage ratio Net stable funding ratio Foreign currency VaR analysis* JSC Bank of Georgia standalone 4, 3,5 3, 2,5 2, 1,5 1, Monthly VaR GEL (Average) VaR Limit 2, ,24.7 2, ,571. 2, , , , Cumulative maturity gap, 3 June 215** 1,, 934, ,148 8,49 25% 8, 2 62,799 6, 11.4% 15% 4, 12.3% 1.6% 1 8.2% 2, 5% -2.1% -3.2% -2, On Demand -3 Months 3-6 Months 6-12 Months 1-3 Years >3 Years -5% (162,367) -4, (239,761) -1 Maturity gap Maturity gap, as % of total assets Open currency position JSC Bank of Georgia standalone 1.4% 15, 1, 5, -5, -1, -15, 12, % -1.4% -11,394-12,578 FC net position, on and off balance, total As % of NBG total regulatory capital (old).6% 7, Jun-15 2% 2% 1% 1% -1% -1% -2% -2% *Daily VaR time series averaged for each respective month **GEL 1,248.3 mln of current accounts and demand deposits are placed in 6-12 months bucket page 23

24 USD millions Funding structure is well established Interest Bearing Liability structure 3 June 215 Well diversified international borrowings 2Q15 Borrowings, GEL 1,5.8 mln, 13.9% Interest Bearing Liabilities GEL 7.3 bn Debt securities issued, GEL 99.3 mln, 13.7% Other amounts due to credit institutions, GEL 1,39.3 mln, 14.3% Client deposits & notes, GEL 4,212.8 mln, 58.1% Of which, GEL 316.2mln or 4.4% Privatbank Current account & demand deposits, 42. Time deposits, 57.9% Other debt securities, GEL 51.6 mln, 2.6% Others borrowings, GEL 198. mln, 9.9% Eurobonds, GEL mln, 47. DFIs, GEL 87.8 mln, 4.5% Borrowed funds maturity breakdown* % 1.5% - Excl. US$4 mln Eurobonds maturing in 217.9%.7% % Senior Loans Subordinated Loans % of Total assets 9 2.3% 5% 4% 3% 2% 1% -1% Interest bearing liabilities has a well-balanced funding structure with 58.1% of interest bearing liabilities coming from client deposits and notes, 11.1% from Developmental Financial Institutions (DFIs) and 13. from Eurobonds, as of 3 June 215 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 215, US$31.6 million undrawn facilities from DFIs with four to eight year maturity * Consolidated, converted at GEL/US$ exchange rate of of 3 June 215 ** Total Assets as of 3 June 215 page 24

25 GEL millions GEL millions GEL millions GEL millions Strong revenue growth Revenue growth half-year % +35.5% +5.1% Revenue growth quarterly % H14 Net interest income 1H15 Net non-interest income 2Q14 1Q15 2Q15 Net interest income Net non-interest income Net non-interest income half-year H14 Net fee and commission income Net other banking income +35.5% +7.3% +41.2% +7.6% +23.3% H15 Net banking foreign currency gain Gross insurance profit Net non-interest income quarterly +25.4% +3.3% Q14 1Q15 2Q15 Net fee and commission income Net banking foreign currency gain Net other banking income Gross insurance profit page 25

26 GEL millions GEL millions keeping a tight grip on costs Operating expenses half-year Operating expenses quarterly +25.7% +2.1% H14 Other operating expenses Banking depreciation and amortisation Administrative expenses Salaries and other employee benefits Net non-recurring items & operating income before cost of credit half-year H GEL millions GEL millions Q14 1Q15 2Q15 Salaries and other employee benefits Administrative expenses Banking depreciation and amortisation Other operating expenses % Net non-recurring items & operating income before cost of credit quarterly H Operating income before cost of credit risk 1H Cost of credit risk Q14 1Q15 2Q Operating income before cost of credit risk Cost of credit risk page 26

27 GEL millions GEL millions Focus on efficiency Cost / Income ratio half-year Cost / Income ratio quarterly 44% 44% 42% 4 38% 36% 34% 41.9% 36.2% 42% 4 38% 36% 34% 42.2% 36.8% 35.7% 32% 1H14 Cost/Income Ratio 1H15 32% 2Q14 1Q15 2Q15 Cost/Income Ratio Revenue and operating expenses half-year Operating Leverage +19.5% y-o-y H14 1H15 Revenue Operating expenses Revenue and operating expenses quarterly Operating Leverage % q-o-q % y-o-y Q14 1Q15 2Q15 Revenue Operating expenses page 27

28 growing income notwithstanding the pressure on yields Loan Yields annual Loan Yields quarterly % 16.2% 14.3% 14.6% % 72.8% % 16% 14% 12% 1 8% % 14.5% 14.6% 72.8% % % 27.2% H 215 Net loans, GEL, consolidated Net loans, FC, consolidated Currency-blended loan yield 6% 4% 2% % Q2 214 Q1 215 Q2 215 Net loans, FC, consolidated Net loans, GEL, consolidated Currency-blended loan yield, annualised 5% Loan Yields, GEL quarterly Loan Yields, foreign currency quarterly 22% 21.4% 21.6% 14% 12% 11.6% 11.6% 11.4% 21% 1 8% % 4% 2% 19% Q2 214 Q1 215 Q2 215 Q2 214 Q1 215 Q2 215 Loan yield, GEL Loan yield, FC Loan yields excluding provisions page 28

29 Stable Cost of Funding Cost of Funds half-year 6% 4.9% 5. 5% 4% 3% 2% 1% Cost of Funds quarterly 6% % 5% 4% 3% 2% 1% 1H14 Cost of funds 1H15 Q2 214 Q1 215 Q2 215 Cost of funds Cost of Customer Funds annual Cost of Customer Funds quarterly % 5.5% 69.9% 68.2% 4.2% 4.4% 71.2% 72. 8% 7% 6% 5% 4% 3% % 4.4% 4.4% 71.2% 72.2% 72. 5% 4% 3% 2% 2 3.1% 31.8% 28.8% H 215 Client deposits and notes, FC, consolidated Client deposits and notes, GEL, consolidated Currency-blended cost of client deposits 2% 1% % 27.8% 28. Q2 214 Q1 215 Q2 215 Client deposits, FC, consolidated Client deposits, GEL, consolidated Currency-blended cost of client deposits 1% page 29

30 Excellent capital adequacy position Basel I capital adequacy ratios JSC Bank of Georgia consolidated NBG (Basel 2/3), capital adequacy ratios JSC Bank of Georgia standalone 3 25% % 26.1% % 22.1% 26.1% 26.7% 2.4% 18% 16% 14% 12% % 14.1% 1.8% 11.2% 11.1% 9.8% 12.9% 1.4% 15.9% 1.5% 15% 8% 8.5% 1 6% 5% 4% 2% Jun-15 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Tier I Capital Adequacy Ratio Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio Total Capital Adequacy Ratio NBG Tier I CAR min requirement NBG Total CAR min requirement Risk Weighted Assets Basel I vs NBG (Basel 2/3) JSC Bank of Georgia consolidated (BIS I), standalone (BIS 2/3) NBG (Basel 2/3)Tier I Capital and Total Capital JSC Bank of Georgia standalone 9, 8, 7, 6, 5, 4, 3, 2, 1, 8,359 8,351 7,24 7,172 7,253 6,23 6,471 6,253 5,373 5,628 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 BIS NBG Basel 2/3 GEL 3 Jun 215* Dec 214 Sep 214 Jun 214 Mar 214 Dec 213 Tier I Capital (Core) Tier 2 Capital (Supplementary) Total Capital 1, , Risk weighted assets 8,35.5 7,24.1 6,47.6 6,22.9 5,91.9 5,733.7 Tier 1 Capital ratio 1.4% 11.1% 11.2% 1.8% 12.9% 13.1% Total Capital ratio 15.9% 14.1% 14.2% % 16.4% reported to NBG are reported in the appendix page 3

31 Contents Bank of Georgia Holdings PLC Overview Results Discussion Bank of Georgia Holdings PLC Results Discussion Results Discussion Segments Georgian Macro Overview Appendices page 31

32 GEL millions Retail Banking (RB) No. 1 retail bank in Georgia Client data RB standalone Volumes are in GEL millions 3-Jun-15 % of clients Number of total Retail clients, of which: 1,933,36 1,451,777 1,245,48 1,54,248 Number of Solo clients ( Premieum Banking ) 9,244.5% 7,971 6,81 5,413 Consumer loans & other outstanding, volume Consumer loans & other outstanding, number 645, % 526, ,557 46,213 Includes c. 4k Mortgage loans outstanding, volume Privatbank clients Mortgage loans outstanding, number 12,295.6% 11,92 1,212 9,85 Micro & SME loans outstanding, volume Micro & SME loans outstanding, number 17,854.9% 16,246 13,317 11,136 Credit cards and overdrafts outstanding, volume Credit cards and overdrafts outstanding, number 458, % 199, ,57 142,72 Credit cards outstanding, number, of which: 756, % 116, ,913 17,261 American Express cards 19, % 11,362 18,68 99,292 Loans by products Total: GEL 2.6 bn Portfolio breakdowns RB standalone Includes Privatbank GEL mln loans, predominantly consumer loans and credit card loans Credit cards and overdrafts 11.9% General consumer loans 21.9% POS loans Automobile 3.8% loans.9% Pawn loans 2.3% Mortgage loans 27.7% Micro- and agro-financing loans and SME loans 31.4% Deposits by category Total: GEL 1.7 bn RB loans RB standalone Loans growth: 35.6% growth ex- Privatbank 19.8% growth on constant currency basis, ex-privatbank RB deposits RB standalone Deposits growth: 28.3% growth ex- Privatbank 9. growth on constant currency basis, ex-privatbank Includes Privatbank GEL [29.] mln mln deposits loans, predominantly consumer loans and credit card loans Current accounts and demand deposits 38.5% Time deposits 61.5% 3, 2,5 2, 1,5 1, 5 2, ,378 2,67 1,348 1, Jun-15 Retail net loans Privatbank 2, 1,8 1,6 1,4 1,2 1, ,87 1,35 1, , Q15 Privatbank Retail Banking deposits Deposits by currency Total: GEL 1.7 bn Client deposits, GEL 28.3% Client deposits, FC 71.7% page 32

33 Retail Banking (RB) Strong loan book growth PL Retail Banking RB Consolidated INCOME STATEMENT HIGHLIGHTS 2Q15 2Q14 GEL thousands, unless otherwise noted Change y-o-y 1Q15 Change q-o-q 1H15 1H14 Change y-o-y Net banking interest income 79,269 51, % 75,15 5.5% 154,42 1, Net fee and commission income 18,46 14, % 18, % 36,972 26, % Net banking foreign currency gain 4,35 4,27 2.3% 3,95 1.2% 8,21 8,24 -.4% Net other banking income 1,384 1,371.9% % 2,347 1, % Revenue 13,364 71, % 98, % 21, , % Salaries and other employee benefits (22,416) (17,45) 31.5% (23,596) -5. (46,12) (33,493) 37.4% Administrative expenses (11,632) (8,754) 32.9% (12,24) -5. (23,872) (17,12) 39.6% Banking depreciation and amortisation (6,818) (4,847) 4.7% (6,831) -.2% (13,649) (9,424) 44.8% Other operating expenses (496) (411) 2.7% (462) 7.4% (959) (739) 29.8% Operating expenses (41,362) (31,57) 33.2% (43,129) -4.1% (84,492) (6,758) 39.1% Operating income before cost of credit risk 62,2 4, % 55, % 117,457 76, Cost of credit risk (2,662) (2,296) NMF (16,66) 24. (37,322) (372) NMF Net non-recurring items (2,875) (4,375) -34.3% (449) NMF (3,323) (4,767) -3.3% Profit before income tax 38,465 33, % 38,346.3% 76,812 71, Income tax expense (5,9) (63) NMF (5,738) 2.8% (11,639) (6,258) 86. Profit 32,565 32, % 32,68 -.1% 65,173 64,867.5% Loan Yields Retail Banking RB standalone Deposit Costs Retail Banking RB standalone % 49.9% 5.1% 19.8% 41.1% 58.9% 17.4% 17.3% 5.5% % H 215 Net loans, RB, GEL Net loans, RB, FC Currency-blended loan yield, RB 25% 2 15% 1 5% % 69.4% 3.6% 5.2% 63.6% 36.4% 3.8% 67.6% 32.4% 4.2% 71.7% 28.3% H 215 Client deposits, RB, FC Client deposits, RB, GEL Currency-blended cost of client deposits, RB 7% 6% 5% 4% 3% 2% 1% page 33

34 Retail Banking Strong loan book growth RB Loan Yield quarterly RB standalone RB Cost of Deposits quarterly RB standalone 25% 2 15% 1 5% % 21.8% 6% 5.5% 17.7% 5% 17.3% 17.3% 4.4% 4.4% 4.6% 3.9% 3.9% 3.7% 3.8% 4% 12.6% 11.4% 11.2% 3% 3.6% 2% 1% 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 Loan yield Loan yield, GEL Loan yield, FC Cost of deposits Cost of deposits, GEL Cost of Deposits, FC RB NIM quarterly RB standalone 1 9% 9.8% 9.7% 8.7% 9.5% 8% 8.2% 7% 2Q14 1Q15 2Q15 NIM incl Privatbank NIM excl Privatbank page 34

35 Acquisition of Privatbank Georgia a value creative transaction Privatbank acquisition GEL92mln consideration for Privatbank constituted 4% of BoGH s market value at the time of acquisition Acquisition of a significant distribution network and retail customer base Accelerated BoG s retail banking growth, particularly in high margin card business Low assets per employee implies significant potential to increase utilization of the franchise Completed the full integration of Privatbank, in under five months compared to our initial integration estimate of 9-12 months We anticipate annualised pre-tax administrative and funding cost synergies to reach c.gel 29mln above our pre-announced GEL 25mln as a result of GEL 18.5mln synergy in operating expenses compared to pre-announced GEL 15mln and GEL 1.5mln synergy in cost of funds, slightly above the pre-announced GEL 1mln Privatbank 1H15 Highlights Privatbank Financials (GEL m) Privatbank Income Statement Summary Q1 215 Q H15 Net banking interest income 14,924 16,84 31,764 Net fee and commission income 3,72 2,683 5,755 Net banking foreign currency gain (loss) ,527 Net other banking income 499 (668) -169 Revenue 19,395 19,482 38,877 Operating expenses 9,888 5,474 15,362 Operating income before cost of credit risk 9,57 14,8 23,515 Cost of credit risk 8,165 5,556 13,721 Net operating income before non-recurring items 1,341 8,452 9,793 Net non-recurring items - 2,621 2,621 Profit before income tax 1,341 5,831 7,172 Income tax (expense) benefit ,76 Profit 1,14 4,956 6,96 GEL 245.6mln of high yielding loan book and GEL 266.8mln client deposits, comprising 4.8% and 6.3% of our loan book and client deposits, respectively Privatbank contributed GEL 38.9mln or 1.8% to the revenue GEL 31.8mln net interest income, which was driven by Privatbank s Loan Yield of 29.3% on the back of 6.5% Cost of Funding Net fee & commission income was GEL5.8mln, and mostly comprised of fees related to credit card transactions As a result NIM stood at 2.5% GEL 15.4mln to operating expenses. Privatbank brought in inefficiencies in 1Q15, which temporarily worsened efficiency ratios in 1Q15. However, successful integration and extensive cost-cutting measures reversed this trend in 2Q15, which resulted in Privatbank s Cost/Income ratio of 28.1% in 2Q15 Privatbank s cost of credit risk was GEL 15.2mln in 1H15 Privatbank posted GEL 6.1mln profit or 5.1% of total profit Privatbank added circa 4, clients, 7, cards, 36 branches, 371ATMs and more than 1, POS terminals Privatbank Balance Sheet Summary Q1 215 Q2 215 Liquid assets 24, ,392 Loans to customers and finance lease receivables 289, ,64 Other assets 22,249 23,181 Total assets 516, ,177 Client deposits and notes 371, ,779 Amounts due to credit institutions 48,89 49,438 Other liabilities 3,921 4,95 Total liabilities 424, ,121 Total equity 92,491 95,56 Total liabilities and equity 516, ,178 Privatbank Selected Ratios Q1 215 Q H15 Loan Yield % 29.3% Cost of funds 7.5% 5.3% 6.5% Cost of client deposits and notes 7.4% 5.8% 6.7% NIM 17.8% 22.9% 2.5% Cost of risk % 9.3% Cost / Income % 39.5% Operating leverage, Q-O-Q % - *Pro-forma assuming that synergies took effect in the beginning of the quarter instead of actual last 5 days in second quarter page 35

36 Corporate Banking (CB) PL Corporate Banking CB Consolidated GEL thousands, unless otherwise noted 2Q15 2Q14 Change y-o-y 1Q15 Change y-o-y 1H15 1H14 Change y-o-y INCOME STATEMENT HIGHLIGHTS Net banking interest income 33,949 22, % 35, % 69,368 47, % Net fee and commission income 8,316 6, % 6,1 38.6% 14,317 12, % Net banking foreign currency gain 9,769 4, % 7, % 17,64 11, % Net other banking income 1,819 1,28 5.6% 1,7 7. 2,888 1, % Revenue 53,853 35, % 5, ,177 72, % Salaries and other employee benefits (8,853) (7,993) 1.8% (8,488) 4.3% (17,341) (15,696) 1.5% Administrative expenses (3,773) (3,39) 11.3% (2,57) 5.5% (6,28) (5,761) 9. Banking depreciation and amortisation (957) (964) -.7% (99) -3.3% (1,947) (1,889) 3.1% Other operating expenses (188) (235) -2. (212) -11.3% (4) (572) -3.1% Operating expenses (13,771) (12,582) 9.5% (12,197) 12.9% (25,968) (23,918) 8.6% Operating income before cost of credit risk 4,82 22, % 38, % 78,29 48, Cost of credit risk (14,146) (1,195) 38.8% (19,381) -27. (33,527) (23,874) 4.4% Net non-recurring items (199) (2,229) -91.1% (598) -66.7% (797) (2,453) -67.5% Profit before income tax 25,737 1, , % 43,885 21, % Income tax expense (4,119) (436) NMF (3,346) 23.1% (7,465) (2,353) NMF Profit 21,618 9, % 14, ,42 19, % Loan Yields Corporate Banking, standalone CB standalone Deposit Costs Corporate Banking, standalone CB standalone % 12.4% 83.6% 83.2% 1.6% 1.8% 86.8% 88.3% 16.4% 16.8% 13.2% 11.7% H 215 Net loans, CB, GEL Net loans, CB, FC Currency-blended loan yield, CB 16% 14% 12% 1 8% 6% 4% 2% % 5.9% 51.4% % 4.6% 2.9% 2.9% 49.7% 49.1% 48.6% H 215 Client deposits, CB, FC Client deposits, CB, GEL Currency-blended cost of client deposits, CB 8% 7% 6% 5% 4% 3% 2% 1% page 36

37 GEL millions Corporate Banking (CB) Highlights Portfolio breakdowns, 3 June 15 CB standalone No.1 corporate bank in Georgia Integrated client coverage in key sectors c.5, clients served by dedicated relationship bankers Mining and quarrying Financial 4.7% intermediation 2.7% Construction 4.6% Health and social work 4.3% Loans by sectors Other 8.9% Manufacturing 25.5% Top 1 CB borrowers represent 14% of total loan book Electricity, gas and water supply 3.7% Transport & Communication 5.6% Trade 17.2% Top 2 CB borrowers represent 2 of total loan book Loans & Deposits CB standalone Hospitality 5.2% Real estate 17.7% Deposits by category 2,5 2,161 2,174 2, 1,5 1, 1,696 1,149 1,819 1,221 1,186 1,372 Time Deposits, 38. FC, 49. GEL, 51. Current Accounts & Demand Deposits, H 215 Corporate net loans Corporate client deposits page 37

38 Corporate Banking (CB) CB Loan Yield quarterly CB standalone CB Cost of Deposits quarterly CB standalone 14% 12% 1 8% 6% 4% 2% 12.9% 1.8% 1.7% 1.7% 1.6% 1.9% 1.8% 1.6% 1.4% 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 2Q14 1Q15 2Q15 Loan yield Loan yield, GEL Loan yield, FC Cost of deposits Cost of deposits, GEL Cost of Deposits, FC 5% 4% 3% 2% 1% 2.8% 2.8% % 3.9% 4.4% 2.4% 1.8% 1.7% CB NIM quarterly CB standalone 7% 5% 4.4% 4.9% 4.5% 3% 1% -1% 2Q14 1Q15 2Q15 page 38

39 GEL millions Investment Management results overview Highlights Client deposits June 215 Strong presence internationally through representative offices in Israel (since 28), the UK (21), Hungary (212) and Turkey (213). Preparing to launch funds: Mezzanine, Renewable Energy and Caucasus Money Market Successfully placed CDs worth US$8 million, EUR 8 million and GBP 5 million Euroclearable CDs. CDs issued to IM clients stood at GEL472.6 million. Galt & Taggart hosted first investor conference dedicated to the equity and bond market development in the region. The conference brought together 6 institutional investors and analysts and 2 one-onone meetings were held with Georgian and Azeri companies UK, 4% Bahamas, 5% Germany, 5% US, 3% Others, 24% Israel, 12% AUM* of GEL 1,231.4 million as of 3 June 215 up 31.8% y-o-y Georgia, 46% 1, H 215 Client Deposits, WM * Wealth Management client deposits, Galt &Taggart client assets, Aldagi Pension Fund and Wealth Management client assets at Bank of Georgia Custody Galt & Taggart - Investment Bank Galt &Taggart - Research Executed its first sizeable M&A deal in 214 and received a success fee. IM segment s fee and commission income totalled GEL 8.8 million (GEL 1.2 million in 213) Acted as lead arranger in 1H15 for bond offerings for o US$15 mln bonds issued by Evex o GEL 25 mln floating notes issued by EBRD o GEL 3 mln bonds issued by IFC o US$2 mln bonds issued by m 2 Sector coverage Energy Tourism Agriculture Wine Commercial Real Estate Macro coverage Georgia Azerbaijan Fixed Income Coverage GOGC Georgian Railway page 39

40 E 216F 217F 218F E 216F 217F 218F E 216F 217F 218F 219F 22F 4.8% 5.1% 5.3% 5.3% 5.5% 6.1% 6.4% % 7.6% 7.8% Capacity Revenue Georgia healthcare market & GHG market share evolvement GHG strategy Hospitals Ambulatories Pharmaceuticals Maintain dominant market share in hospitals by capacity and revenue GHG Replicating hospital consolidation experience in outpatient segment, with a first mover advantage Redistribution of funds expected from pharmaceuticals to ambulatory services GHG Market shares In 1H15* GEL 1.2bln (1) GEL.9bln (1) GEL 1.3bln (1) [V AL U % Bed market share Long-term target 33. % 33. % In 1H15*.5 % 17. % Long-term target % Year % Share in total Healthcare spending % 25 % medium term target 2, 1,5 1, Market Hospitals, GEL mln CAGR'3-14: 13.7% '14-18: 11% 1,23 1, ,647 1,489 1,341 2, 1,5 1, 5 - Ambulatories, GEL mln CAGR'3-14: 17.9% '14-18: 16% , , , GDP nominal, GEL bln CAGR'3-14: 11.8% '15-2: 9% Growth drivers Low utilisation (5-6) Low equipment penetration Fragmented market System inefficiency (low nurse-to-doctor ratio) GHG: accelerated revenue market share growth on the back of well-invested asset base Low outpatient encounters Fragmented market New prescription policy GHG: replicating hospital cluster model and consolidation experience in ambulatory sector new prescription policy introduced in 214 ambulatory market consolidation Weakening of existing pharma-duopoly spending on pharma Georgia s 38% vs 16-17% in Europe; decreasing trend in comparable countries (1) 215E market value Sources: GHG internal reporting; Frost & Sullivan analysis, 215; NHA, Ministry of Labor, Health and Social Affairs of Georgia; NCDC; OECD, World Health Organisation and World Bank, 213 data * pro-forma 1H15 result, based on Frost & Sullivan forecast for 215 and includes HTMC (1H results and 45 beds) page 4

41 GHG Long-term, High-growth Story Medium-term Target (5-1 Year Horizon) Long-term Target (Beyond 1 Year Horizon) Georgia 214 or most recent year (1) Georgia medium-term (1) EM 214 or most recent year (2) Spending per capita (US$) 217 (Georgia) 52 1,76 Price inflation (heart surgery, US$) $ $ 6,5 (GHG) 9, 25, $ GHG Revenue per bed (US$) Outpatient Encounters per capita 4, (GHG) 2.7 (Georgia) Significant expansion of capacity by k 5.4 Substantial room to grow beyond k 8.9 Nurse to doctor ratio 1:1.6 (Georgia) 4:1 (Georgia, WHO recommendation) 3.4:1 Pharmaceuticals share in total healthcare spending 38% (Georgia) 25% 15.4% Sources: (1) Bed utilisation for referral hospitals; World Bank; GHG internal reporting; Management Estimates; Ministry of Finance of Georgia; Frost & Sullivan 215 (2) WHO: Average of countries: Chile, Costa Rica, Czech Republic, Estonia, Croatia, Hungary, Lithuania, Latvia, Poland, Russian Federation, Slovak Republic; BAML Global Hospital Benchmark, August 214 page 41

42 GHG Maintain dominant market share in hospitals by capacity and revenue Hospital Competition Key takeaways: (1) GHG is more than four times larger than next largest competitor Highly fragmented with top 5 players having 4 market share and average number of beds per hospital at 45 84% of national bed capacity is privately owned 64% of beds are renovated in Georgia, compared to 86% of GHG s beds that are renovated National bed capacity, % breakdown (1) National bed capacity (# of Beds, # of Hospitals) (1) Soviet-era legacy Renovated Evex 2, % # % 64 % Renovated beds Soviet-era beds 86% of GHG beds are renovated (2) Revenue market share growth drivers: Key Georgian Hospitals (1) HTMC Vienna Insurance Group Gudushauri-Chachava Aversi PSP Other c.3 market share by capacity to be achieved after renovation of Deka and Sunstone (additional c.5 beds) increasing presence in Tbilisi hospital market (from 24. to 3.2% by beds) that has1.9x higher hospitalization rate vs Georgian average. Continuing to optimise service mix at recently acquired, less efficient hospitals (Avante, Traumatology, Sunstone, Deka, HTMC) by adding higher revenue generating services Acquired HTMC in 6,12 X X % % % % % Market share Number of hospitals Average number of beds at hospital Sources: (1) Market share by number of beds. Source: NCDC, data as of December 214, updated by company to include changes before 3 June 215 (2) GHG internal reporting page 42

43 GHG ambulatory clinics Competition GHG Replicating hospital consolidation experience in outpatient segment Ambulatory Competition Key takeaways: GHG has less than 1% market share in ambulatories, targeting 17% (long-term) The rest of the market similarly fragmented, with no single player having more than 1% market share and comparable access to capital and management Potential to grow ambulatory revenue from Imedi L out of GEL c.16mln Imedi L spending on ambulatories (215E), only 34% is spent at GHG ambulatory clinics due to limited footprint in ambulatory segment Clinic facade Reception / registration Doctor s office Clinic facade Reception / registration Doctor s office Sources: GHG internal reporting; Frost & Sullivan analysis, 215, company photos page 43

44 EBITDA Revenue GHG segment overview Key Segments Referral and Specialty Hospitals Evex Community Hospitals Ambulatory Clinics Imedi L Medical Insurance Key Services General and specialty hospitals offering outpatient and inpatient services in Tbilisi and major regional cities Basic outpatient and inpatient services in regional towns and municipalities Outpatient diagnostic and treatment services in Tbilisi and major regional cities Range of private insurance products purchased by individuals and employers Market Size GEL 1.2bln (215E) 14. by revenues 22.1% by beds (2,22), which grew to 26.6% following HTMC acquisition in (45 beds) and is expected to grow to c.3. as a result of renovation of recently acquired hospital facilities (additional c.5 beds); GEL.9bln (215E) GEL.14bln (215E) Market Share.5% 38.1% Selected Operating Data (1H 215) 83% 16 hospitals* 2,29 beds (1) 17% 19 hospitals 461 beds 6 clinics 22,+ outpatients treated 25, insured 67% 8% 2% 23% Financials (1H 215) GEL 75.4mln 212-1H15 CAGR 73% 83% GEL 8.7mln 9% 212-1H15 CAGR 14% GEL 2.5mln 3% 212-1H15 CAGR 9% GEL 26.4mln 5% 212-1H15 CAGR 15% GEL 19.4mln 212-1H15 CAGR 75% GEL 2.2mln 212-1H15 CAGR 24% GEL.8mln 212-1H15 CAGR 35% GEL 1.2mln 212-1H15 CAGR -2 EBITDA Margin (2) : 25.3% EBITDA Margin (2) : 24.5% EBITDA Margin (2) : 31. EBITDA Margin (2) : 4.7% Note: EBITDA margins are based on gross of intercompany eliminations revenue numbers Source: GHG internal reporting (1) Includes HTMC (2) EBITDA margins are calculated based on revenue gross of correction and rebates

45 m 2 Real Estate Leading real estate development company (1/2) Outstanding Track Record Core business activities: the company develops, sells and manages residential apartments 2 Completed Projects 4 On-going Projects Total sales US$56.7mln Number of apartments: 645 Total Project Cost: US$48.6mln Total net income: US$7mln Land value materialized: US$6.3mln Total sales US$58.9mln, yet to be recognised as revenue Number of apartments: 1,24 Total Project Cost: US$65.2mln Total expected net income: US$14mln Land value to be materialized: US$1mln Revenue Dynamics (GEL thousand) 4,574 1,478 13, Fast Growing Company Note: m 2 Affordable Housing Business figures only EBITDA Dynamics (GEL thousand) 51% 2,314 73% 7,6 63% 8, EBITDA EBITDA Margin Value Creation Project Initiation BoG made a cash investment of GEL 5.m (US$3m) with an idea to develop problem land plots seized after 28 into an opportunity Testing the market and potential for value creation After successful completion of two projects and four ongoing projects, M2 has become a leading real estate company with significant potential for growth Value Creation The Group generates an IRR of more than 4. Leveraging on M2 s successful track record of completed projects Source: Company information. Conversion form US$ to GEL was done using current exchange rate as at 31 December 214. page 45

46 Project Sales (US$m) m 2 Real Estate Leading real estate development company (2/2) Total sales of US$115.8mln since 211 Of which, US$58.9mln yet to be recognised as revenue* Tamarashvili Street IRR: 46% Start: May-12 Completion: Jun-14 Apartments sold: 518/ 522 (97%) Sales: US$46.8 mln Kazbegi Street IRR: 165% Start: Dec-13 Completion: Oct-15 Apartments sold: 259/295 (88%) Sales: US$23.5mln Tamarashvili Street II IRR: 71% Start: Jul-14 Completion: Apr-16 Apartments sold: 168/27 (62%) Sales: US$14.5 mln 2 1 Chubinashvili Street IRR: 47% Start: Sep-1; Completion: Aug-12 Apartments sold: 123/123 (1) Sales: US$9.9 mln Nutsubidze Street IRR: 58% Start: Dec-13 Completion: Aug-15 Apartments sold: 186/221 (84%) Sales: US$13.7 mln Moscow Avenue IRR: 31% Start: Sep-14 Completion: Mar-16 Apartments sold: 123/238 (52%) Sales: US$4.6 mln Completed Projects Projects *As per the revenue recognition policy adopted by the company in line with IFRS, revenue is recognised at the full completion of the project instead of in line with percentage construction completion Significant potential of the project from sales of US$29, price apartments with current IRR of c. 31% page 46

47 Acquisition of a minority interest in GGU an Attractive Investment Opportunity Transaction Rationale Company Overview Exit strategy through potential IPO is feasible Strong potential for value generation for shareholders in short term Strong management and streamlined operations but room for potential further improvement exists Attractive Investment Opportunity Potential to improve utilisation A profitable company with significant capacity for growth A natural monopoly Cash generating business, no additional financing required for planned capex Georgian Global Utilities Ltd. ( GGU ) is a privately owned company that supplies water and provides wastewater services to 1.4 million people (approximately 1/3 of Georgia s total population) in Tbilisi, Mtskheta and Rustavi and operates hydropower electricity generation facilities Sales to corporates represented c.7 of water revenue GGU owns and operates 3 hydropower generation facilities with a total capacity of 143MW Most of the milestones committed to the authorities during the privatization have already been achieved with one project remaining before 218 No additional equity financing is required for planned Capex program Transaction Overview Selected Financials Transaction to be structured in several steps Acquisition of 25% shareholding for GEL48.7m (US$26m) Option to acquire an additional 24.9% within 1 months for GEL48.7m (US$26m), plus 2 per annum accrued on the call option consideration over the period from closing date to exercise date less any dividends distributed through the call option period Total consideration of c.gel97m (US$52m) (1) represents c. 1.3% of BoGH s assets and 4.5% of its market capitalisation (2) Attractive valuation with GGU valued at EV / EBITDA 214E deal multiple of 4.7x, while industry peers are trading at 8.5x average EV / EBITDA 214E multiple (3) BoGH provided a US$25mn loan to GGU with proceeds to be paid as dividend to the selling shareholders The transaction is earnings accretive Commercial terms have been agreed, transaction will be subject to certain conditions Revenue Dynamics (4) (GEL m) EBITDA Dynamics (4) (GEL m) Source: Company information. Conversion form US$ to GEL was done using current exchange rate as at 27 November, 214 for the consideration amounts. (1) Net of accrued interest and dividends for the second tranche. (2) Market Capitalisation as of 1 December 214. (3) Universe of comparable companies includes Pennon Group, Acea, Artesian Resources, American State Water Company, Athens Water and Thessaloniki Water Supply. (4) Group companies unconsolidated IFRS financial statements % 52.5% 44.3% 48.2% % page 47

48 Contents Bank of Georgia Holdings PLC Overview Results Discussion Bank of Georgia Holdings PLC Results Discussion Results Discussion Segments Georgian Macro Overview Appendices page 48

49 Georgia at a glance General Facts 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) Economy Nominal GDP (Geostat) 214: GEL 29.2 bn (US$16.5 bn) Real GDP growth rate 211: 7.2%, 212: 6.2%, 213: 3.3% 214P:4.7%, 1H15: 2.6% Real GDP average 1 yr growth rate: 5.8% GDP per capita 214E (PPP) per IMF: US$7,653 Inflation rate (e-o-p) 214: 2. External public debt to GDP 214: 26.8% Sovereign ratings: S&P BB-/B/Stable, affirmed in November 214 Moody s Ba3/NP/Positive, affirmed August 214 Fitch BB-/B/Stable, affirmed in April 215 page 49

50 Georgia s key economic drivers Liberal economic policy Regional logistics and tourism hub Strong FDI Support from international community Outstanding progress in governance and business reforms, eliminating corruption, strengthening public finances, and streamlining tax and customs procedures. These economic and structural improvements have been institutionalized. Liberty Act (effective January 214) ensures a credible fiscal and monetary framework: Public expenditure/gdp capped at 3; Fiscal deficit/gdp capped at 3%; Public debt/gdp capped at 6 Productivity gains accounted for 66% of the average 5.6% growth over , according to the World Bank Business friendly environment and low tax regime A natural transport and logistics hub, connecting land-locked energy rich countries in the east and European markets in the west, with a total population of 9mn. Proceeds from foreign tourism at US$1,787mln in 214, up 3.9% y-o-y; 5.5mln visitors in 214, up 2% y-o-y; 3.9mln visitors in 8M15, up 5.9% y-o-y Regional energy transit corridor; c.2 of state budget is spent on infrastructure development An influx of foreign investors on the back of the economic reforms have boosted productivity and accelerated growth. FDI diversified across sectors (214: US$1,758mln 213: US$942mln, 212: US$912mln, 211: US$1,117mln); FDI averaged 1 of GDP in FDI up 4.8% y-o-y in 1H15 to US$53.mln Net remittances of US$1,262.6mln in 214, 19.5% CAGR 4-14, US$454.2mln in 1H15 Georgia and the EU signed an Association Agreement in June 214. The deal includes a DCFTA, which is the major vehicle for Georgia s economic integration with the EU, a common customs zone of c.5mn customers and a US$ 18.5tn economy, spurring exports and enhancing the diversification and competitiveness of Georgian products. 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 Cheap electricity Political environment stabilised Georgia is a net electricity exporter, while it imports natural gas mainly from Azerbaijan Only 2 of hydropower capacity utilized; 88 hydropower plants are in various stages of construction or development 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 Maintaining healthy economic growth is a priority (GDP growth: 6.3% 23-14, 8.9% CAGR F by IMF, 5. real annual long-term, IMF) 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 New constitution amendments passed in 213 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 29; Georgia abolished 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 In 7M15, Russia and Ukraine together accounted for 9.2% of Georgia s exports and 13.2% of imports; just 4.1% of cumulative FDI over page 5

51 Growth oriented reforms Ease of Doing Business 215 (WB-IFC Doing Business Report) Economic Freedom Index 215 (Heritage Foundation) Norway USA UK GEORGIA Estonia Montenegro Bulgaria Armenia Romania Turkey Belarus Russia Kazakhstan Azerbaijan Serbia Ukraine #1 world leader in property registration USA Estonia UK GEORGIA Hungary Latvia Romania Bulgaria France Turkey Italy Azerbaijan Russia Ukraine Global Corruption Barometer TI 213 Denmark Norway GEORGIA UK Estonia US Romania Bulgaria Czech Republic Armenia Latvia Turkey Greece Serbia Lithuania Kazakhstan Ukraine 1% 3% 4% 5% 6% 7% 7% 8% % admitting having paid a bribe last year 15% 18% 19% 21% 22% 26% 26% 32% 37% Business Bribery Risk, 214 Trace International Germany USA Georgia Norway Netherlands UK Estonia Poland Czech Rep. Serbia Turkey Montenegro Romania Armenia Russia Azerbaijan Sources: Transparency International, Heritage Foundation, World Bank page 51

52 Diversified resilient economy Gross domestic product GDP composition, FY % % % % 12.6% % % 6.2% % % 3.3% 4.8% E Nominal GDP (US$bn) Real GDP growth, y/y (%) 1H15 GDP growth of 2.6% 14% 12% 1 8% 6% 4% 2% -2% -4% Financial interm. 3.3% Healthcare 5.7% Real Estate 6. Construction 7.3% Hotels & restaurants 2.3% Agriculture 9.2% Other 11.2% Public administr. 9.9% Trade 17.4% Manufacturing 17.1% Transport & commun. 1.5% Source: Geostat, Galt & Taggart Research (nominal GDP estimate) Source: Geostat Comparative real GDP growth rates, % (24-214) GDP per capita 7% 6% 5% 4% 3% 2% 1% 2.2% % 3.8% 3.8% % 4.4% 5.1% 5.1% 5.8% 9, 8, 7, 6, 5, 4, 3, 2, 1, 7,653 7,18 6,826 6,343 5,45 5,671 5,841 5,496 4,669 4,218 3,734 3,411 3,231 3,523 3,6 3,681 2,921 2,315 2,455 2, ,188 1,484 1, P Nominal GDP per capita (USD) GDP per capita (PPP) Sources: IMF, Geostat Sources: IMF page 52

53 Russia Belarus Moldova Armenia Azerbaijan Georgia Turkey 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Productivity gains have been the main engine of growth since 24 Overall contributions of capital, labour, and Total Factor Productivity (TFP) to growth, Contributions of capital, labour, and TFP to growth during periods TFP growth 3.65% Capital stock 1.6 Labor force.32% 1 8% 6% 4% 2% -2% -4% 6.32% 3.86% 3.65% 1.48% 2.25%.67% 1.56% -2.2% Capital stock Labor force TFP growth Source: Georgia Rising (213), WB Source: Georgia Rising (213), WB Real GDP growth projection, 215 Employed persons in business sector, thousands 4% 3% 2% 1% -1% -2% -3% -4% -5% 4% 3% 2% 1% -1% -2% -3% -4% -5% Sources: IMF page 53

54 Further job creation is achievable Georgia s unemployment rate fell 2.2ppts y/y to 12.4% in 214 Average monthly wages and income per household 1,9 1,8 1,7 1,6 1,5 1,4 1,3 1,2 1,1 1, 18% 16% 14% 12% 1 8% 6% 4% 2% Employment (thousands) Unemployment rate Wages, US$ Total income, US$ Sources: Geostat Sources: Geostat Agriculture remains the largest employer, although the share of services in total employment has increased 2, 1,8 1,6 1,4 1,2 1, Hired workers account for about 39.7% in total employment Services Agriculture Industry Source: GeoStat Note: services include construction Sources: Geostat Public sector Non-public sector page 54

55 Demonstrated fiscal discipline and low public debt Fiscal deficit as % of GDP Breakdown of public debt -.3% -2% -4% -6% -8% -2.6% -3.4% -4.8% -6.5% -6.7% -3.6% -2.8% -2.6% Domestic 22% External 78% Multilateral 53% External public debt portfolio weighted average interest rate as 1.9% (contractual maturity 23 years) % E 215F Bilateral 13% Eurobond 9% Fiscal Deficit as % of Nominal GDP Source: Ministry of Finance of Georgia, Galt & Taggart Research (214 and 214 estimates) Source: Ministry of Finance of Georgia, as of end of 214 Public debt as % of GDP % 45% 51% 35% 4 27% 32% 21% 26% 17% 31% 24% Sources: Ministry of Finance of Georgia, Geostat 41% 42% 32% 34% 37% 35% 36% 36% 29% 28% 27% 27% E Total public debt as % of GDP External public debt as % of GDP Government external debt service US$ mln % 3.9% *Coupon payments only, Eurobonds mature in 221 Source: Ministry of Finance of Georgia, IMF 4.8% Multilateral Bilateral Eurobond* External debt service as % of budget revenues 6% 5% 4% 3% 2% 1% page 55

56 Turkey Armenia Georgia Latvia Estonia Belarus Romania Albania Serbia Lithuania Hungary Russia Macedonia Bos and Herz Bulgaria Poland Croatia Croatia Romania Turkey Latvia Lithuania Serbia Poland Macedonia Russia Estonia Armenia Belarus Albania Hungary Bulgaria Georgia Bos and Herz Investing in infrastructure and spending low on social Revenues and expenditures Current and capital expenditure 12, 1, 8, 6, 4, 2, 6,765 6, % 1,644 9,857 8,618 8,813 9,335 7,592 7,963 8,315 7,994 7,861 7,23 7, % 3.7% 3.6% 29.3% 3.2% 3.4% E 215F % 81.7% 8.4% 77.9% 78.1% % 21.9% % 18.3% 19.6% F Total Budget Receipts, GEL mn Current Expenditure Capital Expenditure Expenditures (Capital + Current), GEL mn Expenditures (Capital + Current) as % of GDP Source: Ministry of Finance Sources: Ministry of Finance Government social expenditure as % of GDP Government capital expenditure as % of GDP Source: IMF F 215F F 215F Source: IMF page 56

57 Diversified foreign trade Import of goods and services Export of goods and services 12, 1, 8, 6, 4, 2, 2,472 1, ,426 1,986 3, ,631 4, ,643 5, ,944 7,471 1,246 6,224 5, ,27 6,114 1,93 5,21 7,988 1,265 6,723 9,133 9,259 1,447 1,562 7,685 7,697 8, Goods imports, US$ mn Services imports, US$ mn 9,918 1,683 8, 7, 6, 5, 4, 3, 2, 1, 2,5 2,152 1, , ,37 1,39 3, ,17 3, ,271 1,839 2,16 3, ,329 4, ,641 1,625 1,938 5, ,19 6, ,562 2,535 2,545 7,175 7,38 1, ,984 3,43 3,1 3, Georgia originated exports, US$ mn Serveces exports, US$ mn Re-exports, US$ mn Note: Foreign trade data for goods imports and exports are adjusted to BOP statistics Source: Geostat, NBG, Galt & Taggart Research Note: Foreign trade data for goods imports and exports are adjusted to BOP statistics Source: Geostat, NBG, Galt & Taggart Research Imports, 1H15 Excluding re-exports Exports, 1H15 Originating from Georgia Oil imports Japan 3% USA 3% Ukraine 6% Russia 7% Armenia 2% Azerbaijan 8% Other 13% China 9% EU 31% Turkey 18% Ukraine 3% Canada 4% Azerbaijan 5% USA 7% Armenia 8% Other 19% Russia 9% EU 31% Turkey 14% 1,2 1, M15 imports US$317.2mln, down 29.8% y-o-y Oil imports, US$ mn Oil imports, % change, y/y Sources: Geostat, Galt & Taggart Research Sources: GeoStat page 57

58 F Diversified sources of capital inflow FDI inflows US$ bln 2,5 2, 1,5 1, 5 8.5% % ,19 2, % 19.8% 1, % 1,787 1, % % 6.1% 5.8% 5.8% E Sources: Geostat FDI inflows FDI as % of GDP US$53. mln in 1H15, up 4.8% 25% 2 15% 1 5% Number of tourists 6, 5, 4, 3, 2, 1, 3.9mln visitors in 8M15, up 5.9% 2,32 1,5 1,29 1, , ,428 1,155 5,392 5,493 1,426 1, E Foreign visitors (thousands persons) Net tourist revenue (mln USD) Sources: Georgian National Tourism Agency, National Bank of Georgia, Galt & Taggart estimates Net remittances Public donor funding 1,4 1,2 1, US$ bln % 4.9% % % 7.2% 7.1% Source: National Bank of Georgia, Galt & Taggart Research (214 GDP estimate) % 8.1% 949 1, % 1, % 1, % 1, Net remittances Net remittances as % of GDP US$714.3 mln in 8M15, down 25.9% 9% 8% 7% 6% 5% 4% 3% 2% 1% US$mln Investment projects, credits, US$ mn Investment projects, grants, US$ mn page 58

59 Azerbaijan Georgia Turkey Armenia Russia Moldova Belarus Current account deficit supported by FDI Current account deficit and FDI FDI and capital goods import 2 15% 1 5% -5% -1-15% -2-25% 2 18% 16% 14% 12% 1 8% 6% 4% 2% 8.4% 3.7% 15.1% 9.6% 7.1% 3.9% 5.3% 6.5% 17.2% 6.7% 12.2% 6.2% % 7.8% 6.7% 6.1% 5.8% 5.9% % 6.9% 7.3% 6.9% CA deficit to GDP Sources: Geostat, NBG, Galt & Taggart Net FDI to GDP FDI to GDP, % Capital goods imports to GDP, % Sources: Geostat, NBG, Galt & Taggart Currency devaluation by countries* Monetary policy rates % 22% Armenia Kazakhstan USD/AMD USD/KZT 32% 33% 34% Turkey USD/TRY Georgia USD/GEL LHS: Devaluation Azerbaijan USD/AZN 46% Moldova USD/MDL 65% Belarus USD/BYR RHS: Inflation 96% Russia USD/RUB 164% Ukraine USD/UAH % 2 15% 1 5% end-214 latest-215 *from 1 January 214 to 7 Source: Source: Central banks 24.9% page 59

60 Jan-3 May-3 Oct-3 Mar-4 Jul-4 Dec-4 May-5 Sep-5 Feb-6 Jul-6 Nov-6 Apr-7 Sep-7 Jan-8 Jun-8 Oct-8 Mar-9 Aug-9 Dec-9 May-1 Oct-1 Mar-11 Jul-11 Dec-11 May-12 Sep-12 Feb-13 Jul-13 Nov-13 Apr-14 Aug-14 Jan-15 Jun-15 Jan-3 May-3 Oct-3 Mar-4 Jul-4 Dec-4 May-5 Sep-5 Feb-6 Jul-6 Nov-6 Apr-7 Sep-7 Jan-8 Jun-8 Oct-8 Mar-9 Aug-9 Dec-9 May-1 Oct-1 Mar-11 Jul-11 Dec-11 May-12 Sep-12 Feb-13 Jul-13 Nov-13 Apr-14 Aug-14 Jan-15 Jun-15 Jan-3 Jun-3 Nov-3 Apr-4 Sep-4 Feb-5 Jul-5 Dec-5 May-6 Oct-6 Mar-7 Aug-7 Jan-8 Jun-8 Nov-8 Apr-9 Sep-9 Feb-1 Jul-1 Dec-1 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Floating exchange rate policy and stronger market fundamentals FX reserves US$bn FX reserves M2 multiplier Source: National Bank of Georgia US$ 2.5 bln reserves as of NBG was a net seller of US$2 mln in 8M Sources: NBG REER Sources: NBG M2 and annual inflation 16% 14% 12% 1 8% 6% 4% 2% -2% -4% -6% M2 and GEL/USD Lari depreciation Lari appreciation 35% 3 25% 2 15% 1 5% -5% -1-15% -2-25% -3-35% M2, % change, y/y Annual inflation, eop Source: MOF * Preliminary data for January 215 M2 % change, y/y USD/GEL % change, y/y Source: MOF * Preliminary data for January 215 page 6

61 Turkey Georgia Austria Belgium Belarus Denmark Slovakia Latvia Czech Rep. Armenia Russia Kosovo Malta Lithuania Macedonia Moldova Slovenia Ukraine Bos. & Herz. Croatia Hungary Kazakhstan Romania 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 213 High level of liquidity requirements from NBG at 3 of liabilities, resulting in banking sector liquid assets to client deposits of 53% as of 31 Dec 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 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 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% Source: National Bank of Georgia, Geostat Source: NBG, Central Banks Banking sector assets, loans and deposits NPLs, 214 GEL bln % CAGR % % 1 5% Assets Loans Deposits Source: WB, IMF Source: National Bank of Georgia page 61

62 Turkey Georgia Belarus Macedonia Romania Lithuania Armenia Czech Rep. Denmark Bos. & Herz. Switzerland Slovakia Finland Montenegro Croatia Ukraine Netherlands Germany Slovenia Hungary Austria Canada UK Belgium 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 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 USA Italy Jan-11 Jun-11 Dec-11 May-12 Nov-12 Apr-13 Oct-13 Mar-14 Sep-14 Feb-15 Aug-15 One of the highest level of capital and low debt level compared to other frontier markets Bank Capital to Assets, YE 214 Dollarisation 2 18% 16% 14% 12% 1 8% 6% 4% 2% 7% 8% Czech Republic 9% 9% 11% 11% 12% 12% 18% Romania Russia Poland Ukraine Turkey Bulgaria Kazakhstan Georgia 8 75% 7 65% 6 55% 8 75% 7 65% 6 55% Deposit dollarization Loan dollarization Sources: IMF Sources: National bank of Georgia Government debt / GDP, YE 214 NBG FX interventions % Sources: IMF, Ministry of Finance NBG monthly net interventions US$mn page 62

63 Contents Bank of Georgia Holdings PLC Overview Results Discussion Bank of Georgia Holdings PLC Results Discussion Results Discussion Segments Georgian Macro Overview Appendices Analyst Coverage Express Banking Privatbank acquisition Solo Banking Healthcare comps Financial Statements page 63

64 Analyst coverage Bank of Georgia Holdings PLC Consensus Target Price: GBP 23.4 GBP 2. GBP 2: GBP 24. GBP 25.4 GBP GBP 23: GBP GBP 26. GBP 25.6 GBP 22.4 GBP 18.7 GBP page 64

65 How Express works 97 Express Branches 928,999 Express Cards for Transport payments 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 2,284 Express Pay Terminals 7,668 POS Terminals at 3,418 Merchants Credit card repayments Loan repayments Cash deposit into accounts Loan activation Utility and other payments Mobile top-ups MetroMoney top-ups Payments via cards and Express points P2P transactions between merchant and supplier Credit limit with interest rate page 65

66 No. of transitions s Express Banking Capturing Emerging Mass Market Customers Express Pay terminals 16,598 43,979 54,212 x3 Express branches 12,5 1,37 7,497 61% ATMs 8,529 7,5 5,843 46% POS terminals 9,294 7,11 2,967 x3 1H15 1H14 1H13 Express cards 2,62 11,446 8,593 x4 Internet banking 2,15 2,186 1,29 67% Mobile banking x7 1, 2, 3, 4, 5, 6, Tellers 7,98 8,341 8,833 +6% page 66

67 Acquisition of Privatbank Georgia a value creative transaction Company Overview At the date of transaction, Privatbank Georgia was the 9 th largest bank in Georgia by total assets with a focus on retail banking Retail loans represented 85% of the loan book, credit cards account for 69% of loans (1) Countrywide distribution network with 92 branches, 431 ATMs and 1,937 POS terminals Over 1,1 employees Privatbank Georgia had a 2.8% market share in Georgia by total assets, 4.9% by retail loans and 3. by customer deposits (2) Operated captive insurance and leasing franchise Privatbank Georgia was a subsidiary of PJSC Commercial Bank Privatbank ( Privatbank Ukraine ), ultimately owned by Igor Kolomoisky and Gennady Bogolyubov Geographical Footprint Branches & Distribution Outlets Regions of Tbilisi s presence 92 ATMs 431 Points of Sale 1,937 Employees 1,154 Shareholders (Before acquisition) Management 2.5% Unimain Holdings 4.2% PrivatBank Ukraine 57.3% Privatbank Georgia was ultimately controlled by Privatbank Ukraine Strong Transaction Rationale The acquisition of Privatbank is expected to be earnings accretive on a run rate basis before the end of year one Strong Strategic Fit Market Share Enhancement Distribution Network Enhancement Synergistic Transaction Privatbank Georgia operated in an Express branch model; loans to individuals represented 85% of its total loan book The transaction fits BoG s strategy to further grow its Express business. BoG had c.56, Express clients by the time of this transaction. Transaction increased BoG s market share in loans to individuals by 4.9% and in deposits from individuals by 2.6% (2) Privatbank Georgia operated a large distribution network of 92 branches across the country, which was 42% of BoG s distribution network as at 31 December 214 Strengthened BoG s Express branch distribution network Strong payment platform (431 ATMs and 1,937 POS) Significant cost and funding synergy potential: BoGH s Cost of Funding of 4.9% (4) vs 8.1% (4) for Privatbank implies estimated annualized pre-tax funding synergies of approximately GEL1m realizable within 9-12 months Substantial cost synergies estimated pre-tax of at least GEL15m on an annual basis and realizable within 9-12 months expected from back office and distribution network optimisation initiatives Up to GEL3m of integration costs Significant potential to increase utilization of Privatbank franchise (e.g. assets per employee of Privatbank Georgia is GEL436k vs. GEL2,16k (5) of BoGH) Opportunity to cross-sell BoG banking products to customers of Privatbank Georgia, which has limited portfolio of banking products due to strategic focus on credit cards Transaction Overview c.gel92m (US$49.6m) cash consideration for 1 of Privatbank (1.11x P/BV (4) ) Definitive agreements have been signed and the deal is closed. 7 of the consideration has already been paid, 2 will be paid upon successful migration of Privatbank data and records to BoG systems and the remaining 1 will be paid on the first anniversary of the closing (January 216), subject to representations and warranties / holdback provisions. Pro forma capital position of BoG broadly unchanged (NBG Tier 1 ratio slightly declines to 11. from 11.2%) Source: Company. (1) Based on 213 IFRS consolidated financial statements. (2) Market data based on standalone accounts as published by the National Bank of Georgia ( NBG ) as of 31 December 214. (3) Calculated excluding any branch optimization initiatives.(4) IFRS as per BoG estimates derived by applying auditor IFRS transformations for 213 numbers to 9M 214 data. (5) BoG number of employees are taken for the calculation of BoGH assets per employee. page 67

68 Solo a fundamentally different approach to premium banking Through the recently launched Solo, we target to attract new clients (currently only c.8,) to significantly increase market share in premium banking from c.13% SOLO Lounges New Solo offers: Tailor made banking solutions New financial products such as bonds Concierge-style environment Access to exclusive products and events Lifestyle opportunities New clients attracted per banker ratio was three-times higher for Solo Lifestyle, compared to regular Solo for the same period last year page 68

69 USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi US$ GHG LONG-TERM HIGH-GROWTH PROSPECTS / Comps (1/4) Low expenditure on healthcare services Per capita expenditure on healthcare services, current US$ (1) Expenditure on healthcare services % of GDP (1) 8, 6, 4, 2, 1, 5 - Growth opportunities: US$ 217 expenditure per capita on healthcare services % 14% 12% 1 8% 6% 4% 2% Growth opportunities: 5.8% of GDP spent on healthcare services 5.8% Note: Healthcare services expenditure for other countries is pro-forma, based on assumption that pharmaceuticals is 17% of total spending Source: (1) World Bank 213 data page 69

70 USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi GHG LONG-TERM HIGH-GROWTH PROSPECTS / Comps (2/4) Government spending on healthcare is only 6.7% of state budget and 2% of GDP General government expenditure on health as % of total government expenditure (1) 25% 2 15% 1 6.7% 5% Government expenditure on health as % of GDP (1) 1 9% 8% 7% 6% 5% 4% 3% 2% 1% 2. Government finances only c.2 of total healthcare costs General government expenditure on health as % of total expenditure on health (1) % With c.2 of government tax revenues spent on capex Total government budget, breakdown by operating and capital expenditures (2) GELm 1,. 9,. 8,. 7,. 6,. 5,. 4,. 3,. 2,. 1,.. 3,947 5,719 6,92 7,23 7,462 7,9947,861 6,685 8,813 9,335 2,993 22% 26% 22% 22% 22% 25% 24% 1,446 1,977 18% 16% 19% 22% 22% 13% Capital Expenditures Current Expenditures Capital Expenditure as % of total expenditure Sources: (1) World Health Organisation and World Bank, 213 data (2) Ministry of Finance of Georgia page 7

71 USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi USA UK France Germany Japan Russia Turkey Estonia Poland Bulgaria Thailand Malaysia Georgia UAE S.Africa Saudi GHG LONG-TERM HIGH-GROWTH PROSPECTS / Comps (3/4) Capacity-wise Georgia stands alongside US, UK and Turkey Physician overcapacity yet to be addressed Beds per 1, people (1) 84% of national bed capacity is privately owned Highly fragmented with top 5 players having 4 market share and average number of beds per hospital at Number of physicians per 1, people (1) :1.6 Nurse to Doctor ratio 4.3 With significant room for improvement in terms of service mix and quality, as indicated by: under 5 mortality rate and life expectancy at birth Under 5 mortality per 1, live births (1) Total (years) (1) Source: (1) World Bank 212, 213 data page 71