Capturing Growth Opportunities. Investor Presentation: 2Q16 & 1H16 results

Transcription

1 Capturing Growth Opportunities Investor Presentation: 2Q16 & 1H16 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 similar meaning. Undue reliance should not be placed on any such statement 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 BGEO Group plc and its subsidiaries (the "BGEO Group") s 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. The BGEO Group undertakes 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 BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices page 3

4 Amount (GEL, mln) 2Q ROAE BGEO Capital allocation, as of 3 June 216 Data as of 3 June, 216 unless otherwise stated GEL 2,462mln 1 Banking Business Investment Business Cash buffer 5 At a glance 56% 4 4% GEL 1,373mln GEL 1mln GEL 181mln Capital allocation 1, % 17.2% 19.6% % 9.9% , As of 12-Aug-216 Cash buffer was GEL 253.1mln, which included proceeds from US$ 35mln Eurobonds issued by BGEO in July 216. US$ 25mln of those proceeds were on lent to BOG RB CIB BNB P&C Other BB GHG m2 GGU Teliani Valley 3. Hydro 2.5 Other IB Cash Buffer 1) Adjusted shareholder equity based on GHG market value 2) GHG market value as of August 8, 216 3) GHG Equity attributable to shareholders of the BGEO Group 4) Adjusted for deferred tax correction 5) Total cash buffer of GEL 181.1mln of which GEL 91.9mln earmarked for dividend payment in July 216 and GEL 89mln is capital cash page 4

5 (GEL, mln) (GEL, mln) BGEO Profit contribution, 1H 216 Data as of 3 June, 216 unless otherwise stated GEL 198.3mln Banking Business Investment Business At a glance 73% 27% GEL 144.4mln GEL 53.9mln Profit breakdown by businesses (.9) RB CIB BNB P&C Other BB 1 - (1) GHG m2 GGU Teliani Valley Hydro Other IB page 5

6 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 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 GBP US$ US$ millions BGEO Shareholder structure and share price BGEO shareholder structure BGEO top shareholders As of 3 June 216 As of 3 June 216 8% 16% 3% 2% 36% Unvested and unawarded shares for management and employees Vested shares held by management and employees UK/Ireland US/Canada Rank Shareholder name Ownership % 1 Harding Loevner Management LP Schroders Investment Management Artemis Investment Management 3.96 Scandinavia 4 Westwood International Advisors % Others BGEO has been included in the FTSE 25 and FTSE All-share Index Funds since 18 June 212 BGEO share price performance X62 growth in market capitalisation BGEO LN Up 255% since premium listing 1 GDR 29. 1,, 8,, 6,, 4,, 2,, - Average daily trading volume 2,, 95, 5,3, 9,5, 5,, 3,667, ` 215 as of 9 August 216 1,8 1,6 1,4 1,2 1, Market Capitalisation 21 3-Sep-4 1,569 9-August-16 1 Share price change calculated from the last price of BGEO LI on 27 February 212 to the price of BGEO LN on 9 th 2 Market capitalisation for BGEO Group PLC, the Bank s holding company, as of 9 th, GBP/USD exchange rate of page 6

7 4x2 strategy We are a Georgia Focused Banking Group with an Investment Arm Banking Business Investment Business 1 ROE c.2 ROAE 2Q16 1H16 RB 29.2% 26.6% CIB 17.2% 17.4% Banking Business 22.5% 21.7% 3 Min. IRR of 2 121% IRR from GHG IPO 65% IRR from m2 Real Estate projects 2 Retail loan book growth c % y-o-y growth in 2Q16 4 Profit up to 2 Investment business profit 1 2Q16 1H16 Profit (GEL mln) Share in BGEO Group profit 12.8% 15.2% Dividends Ordinary dividends: linked to recurring profit from banking business Capital Return: Aiming for at least 3 capital returns within 5 years ( period) Aiming for Capital Return to represent at least 5 of regular dividend paid from banking business within period 1 Excluding deferred tax adjustments, the provision for expected accounting losses arising from the buyback of the Bank s Eurobond and other net nonrecurring items. Including the deferred tax adjustments and the provision for expected accounting losses arising from the buyback of the Bank s Eurobond, the investment Business contributed GEL 36.5mln or 32.8% to the Group s profit in 2Q16, up from GEL 1.6mln and GEL 17.4mln in 2Q15 and 1Q16, respectively. For the half-year, the contribution was GEL 53.9mln or 27.2% to the Group s profits, up from GEL 14.1mln in 1H15 page 7

8 GEL thousands GEL thousands Solid regular dividend and capital return track record Regular dividends Regular dividends: GEL 331.1mln cash dividend paid since 21 DPS CAGR 1-15: 51.6% Payout Ratio: 1 15% 3 36% 33% 34% 2.4 1, , , ,35 4, 8, ,633 51,235 2, ,618 9, Capital return Capital return: GEL 33.8mln share buy-backs since 215 Crystallised value: BGEO holds GEL 785.1mln worth of GHG shares 1 4, 3, 2, 1, 19,162 14, * Additional US$ 5.mln remaining at trust for further purchases Total dividend paid for the year Dividend per Share BGEO share buy-backs (management trust) * Data for January-July Calculation based on GHG stock market price as of 12-Aug 216 and BGEO ownership of GHG of 65% page 8

9 Capital Returns: 3-forms, 5-year cycle 3-forms of capital return Cash Dividends Stock dividends Share buy-back 5-year cycle for capital return Strategy Announced capital returns during capital returns during years 5 years page 9

10 BGEO Robust corporate governance compliant with UK Corporate Governance Code Board of Directors of BGEO Group 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, BGEO Group PLC and JSC BGEO 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 East Capital Private Equity AB; 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 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 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 page 1

11 JSC Bank of Georgia Teliani Valley BGEO Group PLC m2 Real Estate Georgia Healthcare Group JSC Bank of Georgia 11 BGEO Robust corporate governance compliant with UK Corporate Governance Code 11 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 Irakli Gilauri, Group CEO, formerly EBRD banker; MS in banking from CASS Business School, London; BBS from University of Limerick, Ireland 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 Avto Namicheishvili, Deputy CEO, Group Legal Counsel; previously partner at Begiashvili &Co, law firm in Georgia; LLM from CEU, Hungary 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 Levan Kulijanishvili, Deputy CEO and CFO at BOG, Group CFO. With the Group since Formerly Head of Security and Internal Audit at Bank of Georgia; Holds MBA from Grenoble School of Business, in Grenoble, France Ekaterina Shavgulidze Head of Investor Relations and Funding at BGEO Group, previously Supervisory Board Member and Chief Executive Officer of healthcare services business. Before joining the Group she was an Associate Finance Director at AstraZeneca, UK. Holds MBA from Wharton Business School Irakli Burdiladze, CEO, m2 Real Estate; previously CFO at GMT Group, Georgian real estate developer; Masters degree from Johns Hopkins University Shota Kobelia, CEO of Teliani Valley. With the Group since 29. Previously Chief Commercial Officer in Pernod Ricard Georgia; Masters degree in international sales marketing from Bordeaux Business School, France. Murtaz Kikoria, CEO of Bank of Georgia. With the Group since 28. 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 George Chiladze, Deputy CEO, Chief Risk Officer. With the Group since 28. 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, Deputy CEO, CFO. With the Group since 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, Deputy CEO, Chief Operating Officer. With the Group since 26. Previously CEO of Aldagi and CFO of BG Bank, Ukraine; Prior to joining the bank, CFO of UEDC PA consulting; Holds Executive Diploma from Said Business School, Oxford Mikheil Gomarteli, Deputy CEO, Retail Banking. With the Group since years work experience at BOG, including co-head of retail banking, head of business development and head of strategy and planning; Undergraduate degree in economics from Tbilisi State University Alexander Katsman, Deputy CEO, HRM and Branding. With the Group since 21. Previously Head of Branding Department at the Bank. Before joining the bank he was a partner at Sarke, the largest communications group in Georgia. Holds EMBA from the Berlin School of Creative Leadership Archil Gachechiladze, Deputy CEO, Corporate Investment Banking. With the Group since 29. Formerly BGEO Group CFO, Deputy CEO of TBC Bank, Georgia; Lehman Brothers Private Equity, London; MBA from Cornell University page 11

12 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices page 12

13 BGEO P&L results highlights Quarterly P&L BGEO Consolidated Banking Business Investment Business INCOME STATEMENT 2Q16 2Q15 Change 1Q16 Change 2Q16 2Q15 Change 1Q16 Change 2Q16 2Q15 Change 1Q16 Change GEL thousands unless otherwise noted Y-O-Y Q-O-Q Y-O-Y Q-O-Q Y-O-Y Q-O-Q Net banking interest income 128, , % 128, % 129, ,43 2.5% 13, % Net fee and commission income 29,343 29,121.8% 27, % 29,639 3, % 28,15 5.8% Net banking foreign currency gain 15,56 19, % 17,39-1.8% 15,56 19, % 17,39-1.8% Net other banking income 2,63 2, , % 2,824 2,81.5% 3, % Gross insurance profit 8,49 5, % 6, % 6,496 3, , % 2,565 2, % 1, % Gross healthcare profit 25,199 18, % 26, % ,199 18, % 26, % Gross real estate profit 2,466 (41) NMF 6, % ,466 (41) NMF 6, % Gross other investment profit 8,437 4, % 3, ,445 4, % 3, % Revenue 22,517 22, % 219,26.6% 183, ,623.7% 184, % 38,675 25, % 37, % Operating expenses (88,684) (76,848) 15.4% (83,288) 6.5% (69,919) (65,244) 7.2% (69,863).1% (19,777) (12,381) 59.7% (14,456) 36.8% Operating income before cost of credit risk / EBITDA 131, , % 135, ,68 117, % 114, % 18,898 13, % 23, % Profit from associates 1,952 1, % 1, % ,952 1, % 1, % Depreciation and amortization of investment business (4,775) (2,579) 85.1% (4,91) -2.7% (4,775) (2,579) 85.1% (4,91) -2.7% Net foreign currency gain (loss) from investment business (1,597) 2,689 NMF (766) 18.5% (1,597) 2,689 NMF (766) 18.5% Interest income from investment business (283) 622 NMF 956 NMF % % Interest expense from investment business (2,497) (2,632) -5.1% (1,382) 8.7% (3,971) (7,51) -47.1% (2,947) 34.7% Operating income before cost of credit risk 124, , % 131, % ,567 8, % 17, % Cost of credit risk (29,387) (41,867) -29.8% (36,143) -18.7% (28,151) (4,764) -3.9% (35,12) -19.6% (1,236) (1,13) 12.1% (1,131) 9.3% Profit 111,237 72,3 54.4% 87, % 74,76 61, % 69, % 36,533 1, % 17, % Earning per share (basic) % % % % % % * Note: Banking Business and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes. page 13

14 BGEO P&L results highlights Half-year P&L BGEO Consolidated Banking Business Investment Business INCOME STATEMENT 1H16 1H15 Change 1H16 1H15 Change 1H16 1H15 Change GEL thousands unless otherwise noted Y-O-Y Y-O-Y Y-O-Y Net banking interest income 257,38 243, % 259, , % Net fee and commission income 57,157 55, % 57,654 58, Net banking foreign currency gain 32,896 38, % 32,896 38, % Net other banking income 5,497 4, % 5,992 4, % Gross insurance profit 14,825 13, % 11,838 8, % 4,289 5, % Gross healthcare profit 51,49 34, % ,49 34, % Gross real estate profit 8,489 1, % ,489 1, % Gross other investment profit 12,43 6, % ,12 6, % Revenue 439, , % 368,122 36, % 76,388 47, % Operating expenses (171,971) (152,98) 12.5% (139,782) (13,52) 7.1% (34,232) (24,38) 42.4% Operating income before cost of credit risk / EBITDA 267,86 245, % 228,34 229, % 42,156 23, % Profit from associates 3, NMF , NMF Depreciation and amortization of investment business (9,685) (5,266) 83.9% (9,685) (5,266) 83.9% Net foreign currency gain (loss) from investment business (2,363) 6,379 NMF (2,363) 6,379 NMF Interest income from investment business 673 1, % ,24 1, % Interest expense from investment business (3,88) (5,94) -23.8% (6,919) (13,469) -48.6% Cost of credit risk (65,529) (83,78) -21.7% (63,162) (81,536) -22.5% (2,367) (2,172) 9. Profit 198, , % 144,369 12, ,917 14, % Earnings per share (basic) % % * Note: Banking Business and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes. page 14

15 BGEO Balance sheet highlights Balance Sheet BGEO Consolidated Banking Business Investment Business BALANCE SHEET Jun-16 Jun-15 Change Mar-16 Change Jun-16 Jun-15 Change Mar-16 Change Jun-16 Jun-15 Change Mar-16 Change GEL thousands unless otherwise noted Y-O-Y Q-O-Q Y-O-Y Q-O-Q Y-O-Y Q-O-Q Liquid assets 2,925,345 2,741, % 2,948, % 2,887,978 2,726, % 2,876,357.4% 277, , % 337, % Loans to customers and finance lease receivables 5,469,12 5,52, % 5,359, ,57,414 5,142, % 5,394, % Total assets 1,323,223 9,375,59 1.1% 1,77, % 9,171,34 8,712,71 5.3% 9,3,55 1.6% 1,437, , % 1,353, % Client deposits and notes 4,554,12 4,14, ,698, % 4,791,979 4,212, % 4,962, % Amounts due to credit institutions 1,892,437 2,139, % 1,719, ,766,999 2,45, % 1,63, % 163,73 189, % 124, % Debt securities issued 1,65,516 1,63,123.2% 1,33, % 99,37 99, , % 81,88 79, % 81,116. Total liabilities 8,113,842 7,719, % 7,926,74 2.4% 7,773,54 7,463, % 7,751,85.3% 625, , % 481, Total equity 2,29,381 1,655, % 2,15, % 1,397,98 1,248, ,278,25 9.4% 811,43 47, % 872, Key Ratios Banking Business Ratios 2Q16 2Q15 1Q16 1H16 1H15 ROAA 3.4% 2.9% % 2.9% ROAE 22.5% 19.3% 21.2% 21.7% 19.3% Net Interest Margin 7.5% 7.6% 7.5% 7.5% 7.8% Loan Yield 14.1% 14.6% 14.4% 14.3% 14.6% Liquid assets yield 3.3% 3.1% 3.1% 3.2% 3.2% Cost of Funds 4.8% % 5. Cost of Client Deposits and Notes % 4.3% 4.2% 4.4% Cost of Amounts Due to Credit Institutions 5.9% 5.3% % 5.3% Cost of Debt Securities Issued % 7.2% 7.1% 7.2% Cost / Income % 37.9% % NPLs To Gross Loans To Clients 4.4% 4.1% 4.5% 4.4% 4.1% NPL Coverage Ratio 85.8% 82.2% % 82.2% NPL Coverage Ratio, Adjusted for discounted value of collateral 129.7% 115.1% 122.6% 129.7% 115.1% Cost of Risk % 2.3% 2.1% 2.9% New NBG (Basel II) Tier I Capital Adequacy Ratio 1.2% 1.4% 1.1% 1.2% 1.4% New NBG (Basel II) Total Capital Adequacy Ratio 15.5% 15.9% 15.8% 15.5% 15.9% page 15

16 GEL millions GEL millions BGEO Sound revenue growth & organic growth in operating expenses Revenues +1.4% +8.8% % % % H15 1H16 2Q15 1Q16 2Q16 Banking Business Investment Business Eliminations +12.5% Operating expenses +15.5% % % % H15 1H16 2Q15 1Q16 2Q16 Banking Business Investment Business Eliminations page 16

17 BGEO Balance Sheet, 3 June 216 BGEO Banking Business GHG M2 Real Estate Assets Gel Millions 12, 1, 8, 6, 4, 2, -2, 9, , , , ,171. (221.) (285.) 3-Jun % Banking Business assets Investment Business assets Eliminations 3-Jun % 88.8% 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 8, , , , , Jun-15 Liquid assets Net loans Other assets +5.3% 5, % 3-Jun % 31.5% Jun-16 PPE Other assets Jun % 34.7% 37.8% Other assets Investment properties Inventories BGEO Banking Business GHG M2 Real Estate Liabilities Gel Millions 1, 8, 6, 4, 2, +5.1% 7, , ,464. 7, % 95.8% 8, 6, 4, 2, 7, ,45.1 4, % 7, ,767. 4, % 12.7% 22.7% 61.6% % 46.3% % 53.6% 42.7% -2, (221.) (285.) 3-Jun-15 3-Jun-16 Investment Business liabilities Eliminations 3-Jun-15 3-Jun-16 Other liabilities Debt securities issued Amounts due from credit institutions Client Deposits and Notes 3-Jun-16 Borrowed funds Other liabilities 3-Jun-16 Other liabilities Accruals and deferred income Borrowed funds * Note: Borrowed Funds include - Amounts due to credit institutions and debt securities issued page 17

18 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices page 18

19 GEL million GEL million BOG The leading bank in Georgia Leading market position: No. 1 bank in Georgia by assets (33.5%), loans (32.1%), client deposits (31.8%) and equity (3.5%) 1 Underpenetrated market with stable growth perspectives: Real GDP average growth rate of 5.1 % for % Real GDP growth in 215 from Geostat. Loans/GDP grew from 9% to 5 in the period of , still below regional average; Deposits/GDP grew from 8% to 4 over the period Strong brand name recognition and retail banking franchise: Offers the broadest range of financial products to the retail market through a network of 273 branches, 763 ATMs, 2,681 Express Pay Terminals and c.2. million customers as of 3 June 216 The only Georgian company with credit ratings from all three global rating agencies: S&P: BB- 2, Moody's: B1/Ba3 (foreign and local currency), Fitch Ratings: BB- ; outlooks are Stable Banking Business CAGR : 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 7,44 6,185 5,333 Balance Sheet +16.8% +18.5% +17.5% +17.5% 9,171 9,171 5,57 5,367 4,994 4,441 4,792 3,567 3,482 3,7 3,141 3,127 1,94 2,888 2,724 1,875 1,596 Total assets Liquid assets Net loans to customers Client deposits +13.3% 1,315 1,231 1,64 1, Total equity 31-Dec Dec Dec Dec-15 3-Jun-16 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 Banking Business Change y-o-y: Income Statement +.7% +21.6% In, BOG completed its liability management exercise and redeemed its 217 Eurobonds outstanding in the amount of US$ 362mln In July 216, BGEO Group issued 7 year, US$ 35mln Eurobonds with 6. coupon. Bonds were trading at 5.8% 3 on 11 Sustainable growth combined with strong capital, liquidity and robust profitability Revenue Profit H Revenue Profit 2Q15 3Q15 4Q15 1Q16 2Q16 1 Market data based on standalone accounts as published by the National Bank of Georgia (NBG) as of 3 June S&P credit rating is valid through 3 June as of 5 source: bloomberg.com page 19

20 Targets & priorities Banking Business 3-year Targets FY 215 1H16 1 ROAE % 21.7% 2 Retail Banking Growth % 19. on constant currency basis 18.1% 3 Grow Retail share in loan book 65% Increase Product to Client Ratio De-concentrate CIB Loan Book Top 1 borrowers 1 Top 1 borrowers 12.7% Top 1 borrowers 11.3% 6 NIM 7.25% % 7.7% 7.5% 7 Cost / Income c. 35% 35.7% Cost of Risk 1.5-2% 2.7 % 2.1% page 2

21 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% 33.5% 25.9% #1 BOG 35% 3 25% 32.1% 28.2% #1 BOG % % 15% 15% 1 5% 4.8% 6.6% 6.3% 5.3% 1 5% 5.4% 7.3% 4.8% 5.3% BOG TBC PCB BR LB VTB Others BOG TBC PCB BR LB VTB Others Q Q16 Foreign banks market share by assets No state ownership of commercial banks since 1994 Local banks, Q16 Foreign banks, 32. Local banks, 72.5% Foreign banks, 27.5% Peer group s market share in client deposits 35% 3 25% 2 15% 1 5% 31.8% 29.3% 8.9% 5.3% 5.2% 4.3% BOG 15.3% BOG TBC PCB BR LB VTB Others # Q16 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 21

22 Banking Business Diversified asset structure Total asset structure 3 June 216 Liquid assets 3 June 216 Banking Business Total: GEL 9.2bln Other assets 8.4% Loans to customers, net 6.1% Liquid assets 31.5% Banking Business Government bonds, treasury bills, NBG CDs 25.5% Total: GEL 2.9bln Other liquid assets 8.8% Amounts due from credit institutions 29.9% Cash and equivalents 35.8% Banking Business Total Loans breakdown by segments Total: GEL 5.7bln Retail loans, GEL 3,339. mln, 58.3 % Corporate loans, GEL 2,384.mln, 41.7% 21.5% of total clients Loans breakdown 3 June 216 Automobile loans.9% Pawn loans 2. Credit cards and overdrafts 9.1% 31. of total clients Retail Banking Loans breakdown by product Total: GEL 3.1bln General consumer loans 22. POS loans 3.4% Mortgage loans 3.7% Micro- and agro-financing loans and SME loans 31.9%.7% of total clients 1.2% of total clients Construction 8.1% Electricity, gas and water supply 2.7% Mining and quarrying 4.8% Financial intermediation 3. Transport & Communication 5.5% Corporate Investment Banking Loans breakdown by sectors Total: GEL 2.2bln Health and social work 3. Hospitality 5.8% Other 9. Service 7.8% Real estate 9.6% Manufacturing 25.9% Trade 14.8% *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 22

23 GEL millions GEL millions Banking Business US$ loan portfolio breakdown Highlights 44.3% of Retail Banking loans were denominated in USD with non-usd income* We offered re-profiling in Feb-215. Since, 1,41 loans (out of 18,964) were re-profiled, with total value of US$32.2mln For RB: Loans 15 days past due were 1.2% as of 3 June 216, compared to 1.4% a year ago and 1.1% as of 31 March % of Corporate Investment Banking Loans denominated in USD with non-usd income Retail Banking and Wealth Management 3 June 216 Corporate Investment Banking 3 June 216 Banking Business Banking Business 3,5 3, 2,5 2, 1,5 1, 5 Amounts in GEL millions RB Loan portfolio % of total RB loan portfolio Mortgages Consumer loans* SME & Micro GEL and other currency loans* 1, % USD loans with USD income % USD loans with non-usd income 1, % Total 3, , * includes credit cards 3,182 1,352 1,79 39 Loan portfolio Other denominated USD denominated GEL denominated Provision amount 1.86% 3.25%.83%.93% LLR rate 2,5 2, 1,5 1, 5 2, , Loan portfolio Note: standalone BOG figures from management accounts 5.93% 8.14% 5.34% 9.48% LLR rate Other denominated USD denominated GEL denominated % of total Amounts in GEL millions CB Loan portfolio CB loan portfolio GEL and other currency loans* % USD loans with USD income 1, % USD loans with non-usd income % Total 2, Provision amount *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 23

24 GEL thousand GEL thousand GEL thousand Banking Business Resilient loan portfolio quality (1/2) NPLs and NIM Banking Business 3 7.9% 7.6% 7.7% 7.5% % % 4.4% 3.4% H16 9% 8% 7% 6% 5% 4% 3% 2% 1% NPL composition Banking Business H16 Banking Business NPLs NPLs to gross loans Net Interest Margin Loan loss reserve Banking Business NPLs RB & WM NPLs CB NPLs Other NPL coverage ratio % 3.9% 3.4% 2.3% % 3.6% 3.8% % 5% 5% 4% 4% 3% 3% 2% 82.8% 67.5% 83.4% 85.8% % 1% 1% H16 Loan loss reserves (LLR) NPLs to gross loans LLR as % of gross loans H16 *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 24

25 GEL millions GEL millions Banking Business Resilient loan portfolio quality (2/2) Cost of Credit risk half-year 216 Banking Business % H15 1H16 Banking Business Cost of Credit risk quarterly % Q15 3Q15 4Q15 1Q16 2Q16 Devaluation effect Cost of Risk half-year 216 Banking Business -8 bps % 2.9% 2.5%.3% 2.1% % 1.3% 1.3% 1.2% 1..5% Cost of Risk quarterly Banking Business % -3bps 2.5% 2.4% 2.3% H15 1H16. 2Q15 3Q15 4Q15 1Q16 2Q16 Devaluation effect page 25

26 GEL millions Bank Standalone, GEL millions Banking Business Strong liquidity (1/2) Banking Business 9, 8, 7, 6, 5, 4, 3, 2, 1, Liquid assets to total liabilities 37.4% 5,94 1,94 1, % 5, % 7,856 7,773 3,7 2, % H16 Liquid assets Total liabilities Liquid assets to total liabilities 4 35% 3 25% 2 15% 1 5% Banking Business 6, 5, 4, 3, 2, 1, NBG liquidity ratio 45.7% 46.2% 43.5% 5 45% 35. 4,871 4, ,415 3,558 35% 3 25% 2,251 2,12 2 1,562 1,245 15% % H16 Liquid assets (NBG) Liabilities (NBG) Excess liquidity Liquid assets / liabilities 3 NBG min requirement Banking Business Net loans to customer funds Net loans to customer funds & DFI Banking Business % 127.5% 17.5% 114.9% % 18.6% 9.8% 95.8% H H16 page 26

27 GEL thousands GEL thousands GEL million Banking Business Strong liquidity (2/2) Liquidity coverage ratio & net stable funding ratio Foreign currency VAR analysis* JSC Bank of Georgia standalone % % 14.5% % 111.9% 19.1% 14.4% JSC Bank of Georgia standalone H16 Liquidity coverage ratio Net stable funding ratio Monthly VaR GEL (Average) VaR Limit Banking Business Cumulative maturity gap, 3 June 216 JSC Bank of Georgia standalone Open currency position 1,4, 1,2, 1,, 8, 6, 4, 2, -2, -4, 1,196,264 1,135,895 1,32, % 12.4% 846, % 9.2% -2.9% -2.9% On Demand -3 Months 3-6 Months 6-12 Months 1-3 Years >3 Years (264,598) (263,7) Maturity gap Maturity gap, as % of total assets 25% 2 15% 1 5% -5% -1 15, 1, 5, -5, -1, -15, H16 13,9 9.4% -1.3% -1.4% -11, % -12, ,74 FC net position, on and off balance, total As % of NBG total regulatory capital (old) 15% 1 5% -5% -1-15% *Daily VaR time series averaged for each respective month page 27

28 USD millions Banking Business Funding structure is well established Banking Business Interest Bearing Liability structure 2Q16 Debt securities issued, GEL 99.4mln, 12.7% Interest Bearing Liabilities GEL 7.8 bn Other liabilities, GEL 223.7mln, 2.9% Well diversified international borrowings 2Q16 Banking Business Other debt securities, GEL 16.2 mln, 5. Others borrowings, GEL mln, 8.8% Borrowings, GEL 1,144.3mln, 14.7% Other amounts due to credit institutions, GEL 622.7mln, 8. Client deposits & notes, GEL 4,792. mln, 61.6% Time deposits 49.3% Current account & demand deposits 5.7% Eurobonds, GEL mln, 41.4% DFIs, GEL 957.2mln, 44.8% Banking Business % Borrowed funds maturity breakdown* % Excl. c.us$362mln Eurobonds maturing in 217, that were redeemed in % % %.1%.1% % 2.3% Senior Loans Subordinated Loans % of Total assets 15% 1 5% -5% -1 Highlights for 1H16 Banking Business has a well-balanced funding structure with 61.6% of interest bearing liabilities coming from client deposits and notes, 12.3% from Developmental Financial Institutions (DFIs) and 11.4% from Eurobonds, as of 3 June 216 The Bank has also been able to secure favorable financing from reputable international commercial sources, as well as DFIs, such as EBRD, IFC, DEG, Asian Development Bank, etc. As of 3 June 216, US$ 13.1 million indrawn facilities from DFIs with up to seven year maturity In July 216, BGEO Group issued 7 year, US$ 35mln Eurobonds with 6. coupon. Bonds were trading at 5.8% on 11 * Consolidated, converted at GEL/US$ exchange rate of as of 3 June 216 page 28

29 GEL millions GEL millions GEL millions GEL millions Banking Business Revenue growth Revenue growth half year 216 Revenue growth quarterly Banking Business +2.2% Banking Business +.8% -.1% % % 1H15 Net interest income Net non-interest income +4.1% 1H16 29% 71% % 29% % 71% 7 2Q15 1Q16 2Q16 Net interest income Net non-interest income Net non-interest income half year 216 Banking Business % Net non-interest income quarterly -3. Banking Business H15 1H16 2Q15 1Q16 2Q16 Net fee and commission income Net banking foreign currency gain Gross insurance profit Net other banking income Net fee and commission income Net banking foreign currency gain Gross insurance profit Net other banking income page 29

30 GEL millions GEL millions GEL millions GEL millions Banking Business Strong underlying performance Banking Business Operating expenses half year % Operating expenses quarterly Banking Business +7.2% H15 1H16 Salaries and other employee benefits Administrative expenses Banking depreciation and amortisation Other operating expenses Q15 1Q16 2Q16 Salaries and other employee benefits Administrative expenses Banking depreciation and amortisation Other operating expenses Operating income before cost of credit risk half year 216 Banking Business Operating income before cost of credit risk quarterly Banking Business (87.1) (11.9) 1H15 1H16 Cost of credit risk and net non-recurring itemss Operating income before cost of credit risk -5-1 (44.2) (36.4) (74.5) 2Q15 1Q16 2Q16 Cost of credit risk and net non-recurring itemss Operating income before cost of credit risk page 3

31 GEL millions GEL millions Banking Business Focus on efficiency Banking Business Cost / Income half year 216 Banking Business Cost / Income quarterly 5 48% 46% 44% 42% 4 38% 36% 34% 41.3% 39.8% 4.5% 35.7% % 46% 44% 42% 4 38% 36% 34% 39.2% 41.5% 42.2% 4.2% 38.4% 36.8% 35.7% 34.8% 35.4% 37.9% % 32% H16 3 4Q 213 1Q 214 2Q 214 3Q 214 4Q 214 1Q 215 2Q 215 3Q 215 4Q 215 1Q 216 2Q 216 Revenue and operating expenses half year 216 Banking Business Operating Leverage: -4.9% y-o-y H15 Revenue Operating expenses H16 Revenue and operating expenses quarterly Banking Business Operating Leverage: -.1% q-o-q - 6.4% y-o-y Q15 1Q16 2Q16 Revenue Operating expenses page 31

32 Banking Business Growing income notwithstanding the pressure on yields Loan Yields half year 216 Loan Yields quarterly Banking Business Banking Business % 14.3% 14.8% 14.3% 69.1% 72.8% % 3.9% 27.2% % H16 Net loans, GEL, consolidated Net loans, FC, consolidated Currency-blended loan yield 18% 16% 14% 12% 1 8% 6% 4% 2% % 14.4% 14.1% % 72.3% % 27.7% 2Q15 1Q16 2Q16 Net loans, FC, consolidated Net loans, GEL, consolidated Currency-blended loan yield, annualised 16% 14% 12% 1 8% 6% 4% 2% Loan Yields, GEL quarterly Loan Yields, Foreign currency quarterly Banking Business Banking Business 27% 2 25% 23% 21.6% 22.5% 23.8% 18% 16% 14% 12% 11.4% % 21% 1 19% 8% 6% 17% 4% 2% 15% 2Q15 1Q16 2Q16 2Q15 1Q16 2Q16 Loan yields excluding provisions page 32

33 Banking Business Stable Cost of Funding Cost of Funds half year 216 Banking Business Cost of Funds quarterly Banking Business One year US$ deposit rate 1 Banking Business 7% 6% 5% 4% 3% 2% 1% 5.9% 4.8% 5.1% 4.9% 7% 6% 5% 4% 3% 2% 1% % 9% 8% 7% 6% 5% 4% 3% 2% 1% % 6.5% % 3.5% 3.5% H16 2Q15 1Q16 2Q16 Cost of Customer Funds half year 216 Cost of Customer Funds quarterly Banking Business Banking Business % 68.2% 4.2% 4.3% 71.2% 4.2% 74.9% 74.1% 31.8% 28.8% 25.1% 25.9% H16 Client deposits and notes, FC, consolidated Client deposits and notes, GEL, consolidated Currency-blended cost of client deposits and notes 6% 5% 4% 3% 2% 1% % 4.3% % 74.1% 22.4% 25.9% 2Q15 1Q16 2Q16 Client deposits, FC, consolidated Client deposits, GEL, consolidated Currency-blended cost of client deposits, annualised 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 1) One year US$ deposit rates in retail segment page 33

34 Banking Business Excellent capital adequacy position Basel I capital adequacy ratios JSC Bank of Georgia consolidated % 26.1% 26.1% 24.9% 25% % 21.2% % 15% 1 5% Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio JSC Bank of Georgia standalone 18% 16% 14% 12% 1 8% 6% 4% 2% NBG (Basel 2/3), capital adequacy ratios 15.9% 15.8% 1.4% 1.2% 1.9% 16.7% 15.8% 15.5% 1.1% 1.2% 2Q15 3Q15 4Q15 1Q16 2Q16 Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio NBG Tier I CAR min requirement NBG Total CAR min requirement 1.5% 8.5% standalone (BIS 2/3) Risk Weighted Assets NBG (Basel 2/3) NBG (Basel 2/3)Tier I Capital and Total Capital JSC Bank of Georgia standalone 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 8,351 8,473 8,363 8,354 2Q15 3Q15 4Q15 1Q16 2Q16 8,899 GEL Jun 216 Dec 215 Sep 215 Jun 215 Mar 215 Dec 214 Tier I Capital (Core) Tier 2 Capital (Supplementary) Total Capital 1, ,394. 1, , ,17.6 Risk weighted assets 8, , , ,35.5 7, ,24.1 Tier 1 Capital ratio 1.2% 1.9% 1.2% 1.4% 9.1% 11.1% Total Capital ratio 15.5% 16.7% 15.8% 15.9% 12.3% 14.1% reported to NBG are reported in the appendix page 34

35 Total No of Clients 2,22,22 Retail banking Client-Centric, Multi-brand strategy Client-Centric, Multi-brand strategy Brands & target segments Emerging Retail Mass Retail and MSME Mass Affluent 445,118 clients 1,579,829 clients 14,896 clients 22% 77% 1% Selected Operating Data (1H16) P/C ratio: # of branches: Profit / client: GEL 46 GEL 38 GEL 817 Strategic Focus Double number of transactions Product/client ratio growth to 3. Client growth to 4, page 35

36 Retail Banking Financial Data Balance sheet data Income statement data 2 5% Total Loans GEL 3,159mln 19% Net Interest Income GEL 167mln 1 75% Mass Retail & MSME (GEL 2,381.2mln) Solo (GEL 634.6mln) Express Bank (GEL 143.4mln) 71% Mass Retail & MSME (GEL 119.4mln) Solo (GEL 16.mln) Express Bank (GEL 32.1mln) 3% Total Deposits GEL 1,977mln 12% Net Fee & Commission Income GEL 34mln 34% 11% 63% Mass Retail & MSME (GEL 1,25.2mln) Solo (GEL 664.7mln) Express Bank (GEL 62.1mln) 77% Mass Retail & MSME (GEL 26.4mln) Solo (GEL 3.6mln) Express Bank (GEL 4.1mln) page 36

37 GEL millions Retail Banking (RB) No. 1 retail bank in Georgia RB standalone Operating Data, GEL mln Client Data 1H16 % of clients Number of total Retail clients, of which: 2,39,843 1,999,869 1,451,777 1,245,48 Number of Solo clients ( Premier Banking ) 14,896.7% 11,869 7,971 6,81 Consumer loans & other outstanding, volume Consumer loans & other outstanding, number 631, , , ,557 Mortgage loans outstanding, volume Mortgage loans outstanding, number 14,451.7% 12,857 11,92 1,212 Micro & SME loans outstanding, volume Micro & SME loans outstanding, number 24,2 1.2% 19,45 16,246 13,317 Credit cards and overdrafts outstanding, volume Active credit cards and overdrafts outstanding, number 437, % 435,1 199, ,57 Total credit cards outstanding, number, of which: 794, % 754, , ,913 American Express cards 85, % 1,515 11,362 18,68 RB standalone 21.5% of total clients Loans by products Total: GEL 3.1 bn Portfolio breakdown 31. of total clients Pawn loans 2. Credit cards and overdrafts 9.1% Automobile POS loans loans 3.4%.9% General consumer loans 22. Micro- and agrofinancing loans and SME loans 31.9% Mortgage loans 3.7%.7% of total clients 1.2% of total clients RB standalone RB Loans Loans growth: +18.1% y-o-y in 1H16 RB standalone RB Deposits Deposits growth: +13.8% y-o-y in 1H16 Deposits by category Total: GEL 2. bn Current accounts and demand deposits 38.5% Time deposits 61.5% 3,5 3, 2,5 2, 1,5 1, 5 3,98 2,796 2,67 1, H16 2,5 2, 1,5 1, 5 1,88 1,977 1,35 1, H16 Deposits by currency Total: GEL 2. bn Client deposits, GEL 26.4% Client deposits, FC 73.6% page 37

38 Retail Banking (RB) Loan book growth RB Consolidated P&L Income Statement Highlights 2Q16 2Q15 Change 1Q16 Change 1H16 1H15 Change GEL thousands, unless otherwise noted Y-O-Y Q-O-Q Y-O-Y Net banking interest income 84,568 79, % 82, % 167,41 154,42 8.4% Net fee and commission income 21,742 18, % 19, ,981 36, % Net banking foreign currency gain 5,473 4, % 3, % 9,63 8,21 1.4% Net other banking income 1,36 1, % % 1,746 2, % Revenue 112,819 13, % 16, % 219,191 21, % Salaries and other employee benefits (24,325) (22,416) 8.5% (23,67) 3. (47,932) (46,12) 4.2% Administrative expenses (12,756) (11,632) 9.7% (14,521) -12.2% (27,277) (23,872) 14.3% Banking depreciation and amortisation (7,597) (6,818) 11.4% (7,383) 2.9% (14,981) (13,649) 9.8% Other operating expenses (394) (496) -2.6% (496) -2.6% (889) (959) -7.3% Operating expenses (45,72) (41,362) 9. (46,7) -2. (91,79) (84,492) 7.8% Operating income before cost of credit risk 67,747 62,2 9.3% 6, % 128, , % Cost of credit risk (17,542) (2,662) -15.1% (18,184) -3.5% (35,726) (37,322) -4.3% Net non-recurring items (31,819) (2,875) NMF (561) NMF (32,379) (3,323) NMF Profit before income tax 18,391 38, % 41, % 6,12 76, % Income tax expense 28,72 (5,9) NMF (3,844) NMF 24,858 (11,639) NMF Profit 47,93 32, % 37, % 84,87 65, % Loan Yield Deposit Cost RB standalone RB standalone % 41.1% 58.9% 17.4% 17.6% 17.2% 5.5% 54.3% 57.9% 49.5% 45.7% 42.1% 25% 2 15% 1 5% % 63.6% 67.6% 36.4% 32.4% 3.8% 3.9% 3.5% 74.1% 73.6% 25.9% 26.4% 6% 5% 4% 3% 2% 1% H16 Net loans, RB, GEL Net loans, RB, FC Currency-blended loan yield, RB H16 Client deposits, RB, FC Client deposits, RB, GEL Currency-blended cost of client deposits, RB page 38

39 Retail Banking Loan book growth RB Loan Yield RB Cost of Deposit RB standalone RB standalone 3 25% 2 15% % 17.4% 16.9% 25.4% 25.5% 23.6% 11.2% 1.9% 1.2% 6% 5% 4% 3% 2% 3.9% 3.5% 3.4% 4.6% 4.8% 4.9% 3.6% 3.2% 2.9% 5% 1% Loan Yield Loan yield, GEL Loan yield, FC Cost of deposits Cost of deposits, GEL Cost of deposits, FC 2Q15 1Q16 2Q16 2Q15 1Q16 2Q16 RB NIM RB standalone 12% 11% 1 9% 8% 7% 6% 9.5% 9.2% 9.1% 5% 2Q15 1Q16 2Q16 page 39

40 Corporate Investment Banking (CIB) P&L CIB Consolidated Income Statement Highlights 2Q16 2Q15 Change 1Q16 Change 1H16 1H15 Change Gel thousands, unless otherwise notes Y-O-Y Q-O-Q Y-O-Y Net banking interest income 35,238 39, % 38,25-7.9% 73,488 78, % Net fee and commission income 6,13 9, ,2-12.7% 13,15 16, % Net banking foreign currency gain 8,921 1, % 11, % 2,289 19,66 3.5% Net other banking income 1,822 1, % 2, % 4,48 3, % Revenue 52,111 6, % 59, , , % Salaries and other employee benefits (11,357) (11,148) 1.9% (11,155) 1.8% (22,512) (21,29) 6.1% Administrative expenses (3,692) (4,357) -15.3% (3,355) 1. (7,48) (7,243) -2.7% Banking depreciation and amortisation (1,34) (1,69) 22. (1,272) 2.5% (2,576) (2,176) 18.4% Other operating expenses (227) (228) -.4% (231) -1.7% (456) (474) -3.8% Operating expenses (16,58) (16,82) -1.3% (16,13) 3.5% (32,592) (31,12) 4.8% Operating income before cost of credit risk 35,531 43, % 43, % 78,743 87, % Cost of credit risk (9,347) (14,247) -34.4% (14,138) -33.9% (23,485) (33,618) -3.1% Net non-recurring items (14,538) (216) NMF (856) NMF (15,393) (837) NMF Profit before income tax 11,641 29, , % 39,859 52, % Income tax expense 12,89 (4,485) NMF (2,687) NMF 1,121 (8,678) NMF Profit 24,45 24, % 25, % 49,98 44, % Loan Yield Deposit Cost CIB standalone CIB standalone % 83.2% 1.6% 1.7% 86.8% 1.2% % 16.8% 13.2% % H16 Net loans, CIB, GEL Net loans, CIB, FC Currency-blended loan yield, CIB 14% 12% 1 8% 6% 4% 2% % % 4.1% 4.4% % % H16 Client deposits, CIB, FC Client deposits, CIB, GEL Currency-blended cost of client deposits, CIB 6% 5% 4% 3% 2% 1% page 4

41 GEL millions Corporate Investment Banking (CIB) Highlights Portfolio breakdown, 3 June 216 CIB standalone No.1 corporate bank in Georgia Integrated client coverage in key sectors c.3, clients served by dedicated relationship bankers CB standalone Loans & Deposits Construction 8.1% Electricity, gas and water supply 2.7% Mining and quarrying 4.8% Financial intermediation 3. Transport & Communication 5.5% Health and social work 3. Hospitality 5.8% Loans by sectors Other 9. Service 7.8% Real estate 9.6% Deposits by category Manufacturing 25.9% Trade 14.8% Top 1 CB borrowers represent 3 of total CB loan book Top 2 CB borrowers represent 45% of total CB loan book 2,5 2, 1,819 2,161 2,13 1,848 2,45 1,637 CIB standalone 1,5 1, 1,221 1,186 Time Deposits, 4. GEL, H16 Corporate net loans Corporate client deposits FC, 71. Current Accounts & Demand Deposits 6. page 41

42 Corporate Investment Banking (CIB) CIB Loan Yield CIB Cost of Deposit CIB standalone CIB standalone 16% 14% 12% 1 8% 6% 4% 2% 12.9% 13.1% 14.3% 12.1% 1.3% % 1.2% 9.6% Loan Yield Loan yield, GEL Loan yield, FC 9% 8% 7% 6% 5% 4% 3% 2% 1% % 4.5% 4.4% 3.9% 4.2% 3.7% 3.1% 3. Cost of deposits Cost of deposits, GEL Cost of deposits, FC 2Q15 1Q16 2Q16 2Q15 1Q16 2Q16 CIB NIM CIB standalone 1 9% 8% 7% 6% 5% 4% 3% 2% 1% 3.9% 3.7% 3.7% 2Q15 1Q16 2Q16 page 42

43 Investment Management unrivalled platform for profitable growth 1 2 Wealth Management Research Strong international presence: Israel (since 28), UK (21), Hungary (212) and Turkey (213). Planned expansion - Cyprus, Singapore, USA. Sector, macro and fixed income coverage International distribution AUM of GEL 1,31 million, up 5.7% y- o-y Diversified funding sources: Georgia 44% Israel 12% UK 4% Germany 3% Other 35% 4 Brokerage Investment Management Corporate Advisory 3 Wide product coverage Bond placement In March 216, G&T successfully placed a USD 5mn 2-year bond of a non- BGEO Group affiliated company, Nikora Corporate advisory platform Team with sector expertise and international M&A experience Exclusive partner of SAXO Bank via While Label structure, that provides highly adaptive trading platform with professional tools, insights and world-class execution Proven track record of more than 15 completed transactions over the past 8 years with an accumulated transaction value of more than GEL 2 million page 43

44 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business Georgia Healthcare Group (GHG) Georgian Macro Overview Appendices page 44

45 GHG Income Statement Highlights P&L Income Statement, Quarterly GEL thousands; unless otherwise noted 2Q16 2Q15 Change, Y-o-Y 1Q16 Change, Q-o-Q 1H16 1H15 Change, Y-o-Y Revenue, gross 11,673 57, % 72, % 174, , % Corrections & rebates (724) (885) -18.2% (41) 76.6% (1,134) (1,842) -38.4% Revenue, net 1,949 56, % 72, % 173,115 11, % Costs of services (67,395) (33,721) 99.9% (44,151) 52.6% (111,546) (67,759) 64.6% Gross profit 33,554 22, % 28, % 61,569 42, % Total operating expenses (17,223) (9,86) 75.6% (11,15) 55.1% (28,328) (19,398) 46. Other operating income % % % EBITDA 16,882 13, % 17, % 34,11 23, % Depreciation and amortisation (4,581) (2,567) 78.5% (4,465) 2.6% (9,46) (4,889) 85. Net interest income (expense) (3,469) (6,17) -42.3% (1,656) 19.5% (5,125) (1,118) -49.3% Net gains/(losses) from foreign currencies (1,964) 2,45 NMF (26) 655.4% (2,224) 5,449 NMF Net non-recurring income/(expense) (586) (556) NMF (23) 154.8% (816) (767) NMF Profit before income tax expense 6,282 6, % 1, % 16,8 13, % Income tax benefit/(expense) 26, % 1, % 28, NMF GHG of which: Deferred tax adjustments 27, ,198-29, Profit for the period 33,22 7, % 12, % 45,225 13, % Attributable to: - shareholders of the Company 27,755 6, % 9, % 37,676 11, % - non-controlling interests 5, % 2, % 7,549 1, % of which: Deferred tax adjustments 4, , Organic growth of healthcare services revenue was 13. y-o-y in 1H16 Healthcare services EBITDA margin was 29.3% in 1H16 Sources: GHG internal reporting, financials are for 2Q16 Note: healthcare services business and medical insurance business financials do not include inter business eliminations. Detailed financials, including inter business eliminations, are provided in annexes page 45

46 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 GEL 1.2bln (1) GEL.9bln (1) GEL 1.3bln (1) GHG Market shares 1% 18% Market share by revenue Market share by revenue 25.1% Bed market share 3. 2Q16 Long-term target 15. >15. Market share by sales 38. Share in total Healthcare spending 25. 2Q16 Long-term target 2Q16 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) Frost & Sullivan analysis, 215 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 page 46

47 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 39, (GHG) 3.5 (Georgia) Significant expansion of capacity by k 5.4 Substantial room to grow beyond k 8.9 Nurse to doctor ratio 1:1.3 (Georgia) 4:1 (Georgia, WHO recommendation) 3.4:1 Pharmaceuticals share in total healthcare spending 38.4% (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; NCDC healthcare statistical yearbook 214 (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 47

48 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business m2 Real Estate Georgian Macro Overview Appendices page 48

49 m2 Financial Highlights P&L Income Statement Highlights 2Q16 2Q15 Change 1Q16 Change 1H16 1H15 Change Gel thousands, unless otherwise stated Y-O-Y Q-O-Q Y-O-Y Real estate revenue 5,964 1, % 28, % 34,556 5, % Cost of real estate (3,858) (1,757) 119.6% (22,74) -83. (26,598) (4,622) NMF Gross real estate profit 2,16 (162) NMF 5, , % Gross other investment profit 121 (57) NMF 1, % 1, NMF Revenue 2,227 (219) NMF 7, ,895 1, % Salaries and other employee benefits (433) (269) 61. (32) 35.3% (753) (59) 27.6% Administrative expenses (1,519) (1,275) 19.1% (1,135) 33.8% (2,654) (2,316) 14.6% Operating expenses (1,952) (1,544) 26.4% (1,455) 34.2% (3,47) (2,96) 17.2% EBITDA 275 (1,763) NMF 6, % 6,488 (1,833) NMF Depreciation and amortization of investment business (61) (43) 41.9% (53) 15.1% (114) (85) 34.1% Net foreign currency gain from investment business % % 1, % Interest income from investment business Interest expense from investment business (13) (227) -54.6% (125) -17.6% (228) (1,238) -81.6% Net operating income before non-recurring items 88 (99) NMF 6, % 7,229 (2,232) NMF Net non-recurring items (7) (67) -89.6% (23) -69.6% (3) (14) -78.6% Profit before income tax 81 (976) NMF 6, % 7,199 (2,372) NMF Income tax (expense) benefit (15) 147 NMF (96) -89.1% (1,65) 356 NMF Profit 696 (829) NMF 5, % 6,134 (2,16) NMF Balance Sheet Balance Sheet Jun-16 Jun-15 Change Mar-16 Change Y-O-Y Q-O-Q Cash and cash equivalents 42,549 29, % 49, % Investment securities 1,145 1,145. 1,145. Accounts receivable 824 3, % 1,7-18.2% Prepayments 18,741 1, , % Inventories 116,891 98, % 95, % Investment property, of which: 17,33 74,3 44.4% 117, % Land bank 71,489 52, , % Commercial real estate 35,814 21, % 35, % Property and equipment 1,633 1,83-1.8% 1, % Other assets 19,751 14, % 12, % Total assets 38, , % 31,87 2.3% Amounts due to credit institutions 36,39 4, % 37, % Debt securities issued 47,857 45, % 47,38 1. Accruals and deferred income 15,498 12, , % Other liabilities 7,264 2, % 4, % Total liabilities 196, , % 19, % Additional paid-in capital 6,8 2,99 1.9% 5, % Other reserves (4,26) (3,575) 17.7% (3,575) 17.7% Retained earnings 11,377 79, % 19,876.5% Total equity 112,179 78, % 111,378.7% Total liabilities and equity 38, , % 31,87 2.3% page 49

50 At a glance Major player on Georgian real estate market 1 Residential Developments 2 Affordable housing Commercial space (offices, industrial properties, high street retail) Yielding Business Hotels Key Segments & market size Market: US$ 1.2bln 1 As a residential real estate developer, m 2 targets mass market customers by introducing high quality and comfortable living standards in Georgia and making them affordable. Market: US$ 2.5bln 2 As a property manager, m 2 makes opportunistic investments and manages a well diversified portfolio of yielding assets, primarily consisting of high street real estate assets, and also including industrial and office space real estate assets. Market: US$ 1.9bln 3 As a hotel developer and operator, m 2 targets 3-star, mixed use hotels (residential combined with hotel development). m 2 finances equity needs of the hotel from the profits and land value unlocked through sale of the apartments in the same development. Asset base (as of 2Q16) Includes: 1. Inventory of residential real estate 2. Land bank US$ 78 million 4 68% Includes: 1. High street retail 2. Industrial properties: warehouses and logistics centers 3. Offices US$ 15 million 13% Includes: 1. Hotels (mixed use) 2. Land bank US$ 3 million 3% Dollar denominated, inflation hedged cash flow stream Track record - Delivering average 65% IRR on residential projects - Started operations in 21 and since: - Completed 6 projects 1,672 apartments, 91% sold with US$ 128.5mln sales value, land value unlocked US$ 16.4mln - Ongoing 3 projects 1,14 apartments, 25% sold with US$ 23.7mln sales value, land value to be unlocked US$ 13.2mln - All completed projects were on budget and on schedule - Land bank of value US$ 27.9mln, with c.17 apartments - Generated annual yield of 9.7% in 215 on portfolio rented out. Rent earning assets are with capital appreciation upside. - m 2 has developed its current yielding portfolio through: - m 2 retains commercial space (ground floor) at its own residential developments. This constitutes up to 25% of total yielding portfolio - Acquired opportunistically the commercial space. This constitutes over 75% of total yielding portfolio m 2 attained exclusive development agreement with Wyndham to develop Wyndham s 3-star brand Ramada Encore exclusively in Georgia. Plan is to build at least 3 hotels within next 7 years with minimum 37 rooms in total. 3 projects in the pipeline: 1) 2 hotels in Tbilisi land acquired, project design stage 2) 1 hotel in Kutaisi searching for property 1 US$ value of annual transaction in the capital city in 214 (NPRG, Colliers Company own data) 2 trade volume in Georgia in gross tourism inflows in Total Assets are US$ 75mln. Pie charts do not sum-up to 1 due to Cash holdings of US$ 21mln page 5

51 Project highlights Project timeline Start date: Unmatched track record All projects were completed on budget and on schedule 1 SEP apartments 2 MAY apartments 3 4 DEC apartments 295 apartments 5 JUL apartments 6 SEP apartments 7 NOV apartments 8 DEC apartments 9 JUN apartments 152 rooms 2,812 apartments in total: 1,672 apartments completed with 91% sales and 1,14 apartments under construction with 25% pre-sales Chubinishvili street Tamarashvili street Nutsubidze street Kazbegi Street Tamarashvili Street II 123 apartments 525 apartments 221apartments 295 apartments 27 apartments IRR: 47% IRR: 46% IRR: 58% IRR: 165% IRR: 71% Equity multiple: x1.8 Equity multiple: x2.4 Equity multiple: x1.5 Equity multiple: x2.3 Equity multiple: x2.1 Apartments sold: 123/123, 1 Apartments sold: 523/525, 1 Apartments sold: 216/221, 98% Apartments sold: 285/295, 97% Apartments sold: 25/27, 76% Pre-sales 1 was: 92% Pre-sales was: 97% Pre-sales: 89% Pre-sales: 9 Pre-sales: 76% Start date: Sep 21 Start date: May 212 Start date: Dec 213 Start date: Dec 213 Start date: Jul 214 Completion: Aug 212 Completion: Jun 214 Completion: Sep 215 Completion: Feb 216 Completion: Jun 216 Sales: US$ 9.9mln Sales: US$ 48.4mln Sales: US$ 17.1mln Sales: US$ 26.2mln Sales: US$ 19.mln Land value unlocked: US$ Land value unlocked: US$ Land value unlocked: US$ Land value unlocked: US$ Land value unlocked: US$.9mln 5.4mln 2.2mln 3.6mln 2.7mln Moscow avenue Kartozia Street Skyline 238 apartments 819 apartments 19 apartments IRR: 31% IRR: 6 IRR: 329% Equity multiple: x1.5 Equity multiple: x1.7 Equity multiple: x1.1 Apartments sold: 165/238, 69% Pre-sales: 247/819, 3 Pre-sales: 1/19, 53% Pre-sales: 69% Pre-sales: US$ 17.8mln Pre-sales: US$ 4.1mln Start date: Sep 214 Start date: Nov 215 Start date: Dec 215 Completion: Jun 216 Completion exp.: Sep 218 Completion expected: Dec 216 Sales: US$ 7.9mln Construction progress: 12% Construction progress: 2 Land value unlocked: US$ completed completed 1.6mln Land value to be unlocked: US$ Land value to be unlocked: US$ 5.8mln 3.1mln 9 Kazbegi Street II Residential Ramada Encore (Hotel) 32 apartments 152 rooms, 7 sqm (gross) IRR: 51% Start: June-16 Equity multiple: x2.5 Completion: Nov-17 Pre-sales: 24/32, 8% Total completion cost: US$ Pre-sales: US$ 1.9mln 13.2mln Start date: Jun 216 Profit stabilized year: US$ Completion expected: Nov mln Construction progress: 1% completed ADR (stabilized year): US$ Land value to be unlocked: US$ mln N N Completed projects On-going projects Note 1: Pre-sales is defined as sales before project completion page 51

52 m 2 Real Estate Strategy: accelerating growth GOAL Accelerate growth, building on existing track record, to develop m 2 into a sizable player on Georgian real estate market Residential Developments Commercial space Hotels Growth highlights Liquidating all land-plots by developing housing. Start development of third party lands. Currently, own land bank of US$ 27.9mln* Grow portfolio of yielding assets by retaining investment property from own residential developments, and acquiring opportunistically and/or developing high street retail, commercial and office space, with capital gain upside and c.1-12% annual yield. Investment policy: Good location Good tenant Good lease terms 1-12% yield range Develop 3 hotels (3-star, select service mixed-use hotels) in next 7 years in Tbilisi and Kutaisi with minimum roomcount of 37 in total, catering to budget travelers Ramada Encore exclusivity for 7 years Investment per room US$ 7k Occupancy rate 74% (after 3rd year stabilised) ADR US$ 11 (Tbilisi) US$ 15 (Kutaisi) *Excludes hotel lands page 52

53 m 2 Real Estate Hotel strategy 3-star hotel opportunity in Tbilisi Develop 3 hotels in next 7 years in Tbilisi catering to budget travelers Visitors in Georgia 25% CAGR 3-15 Limited supply last Branded hotel opening in Tbilisi in 212 6, 5, 4, 2.6mln visitors in 1H16, up 13. y-o-y 5,898 5,516 5,392 4,428 Distribution of rooms in Tbilisi by accommodation type, 211 Internationally branded hotels 26% Wyndham Ramada Anchor exclusivity for 7 years Equity investment US$ 7 million Number of rooms 37 Investment per room US$ 7k Occupancy rate 65% (3 rd year stabilised) ADR US$ 1 ROE 2 3, 2, 1, 1,5 1,29 1, ,32 2,822 Foreign visitors (thousand persons) Other accommodation units (local) 74% Occupancy rate of international branded hotels was 82% in June 216, while YTD occupancy rate reached 67.1%, up 6.1% y-o-y June 216 ADR US$ 132, down 14% y-o-y. YTD ADR of US$ 136, down 6% y-o-y Source: Galt & Taggart Research page 53

54 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business Renewable Energy Opportunity Georgian Macro Overview Appendices page 54

55 Opportunities Renewable Energy opportunity 1 2 Underpenetrated industry Cheap to develop Only 2-25% of Georgia s hydro resources utilised US$ 1.5mln for 1MW development in Georgia 3 Strategic partnership Strategic partnership with industry specialists RP Global (Austria) 4 5 Small investment to date BGEO planned investment in ongoing projects Only US 1mln invested during first 1.5 years of due-diligence and planning BGEO investment US$ 28mln Total investment US$ 43mln (partnership: 65% BGEO 35% RP Global) Expected IRR 25%+ page 55

56 Renewable Energy 5 year roadmap Goal Establish renewable energy platform, targeting 1MW+ in 4 medium size hydro power plants by 219 Development 2 ongoing projects 15MW, 4 HPPs Projects Mestiachala 1 & 2 Zoti 1 & 2 Pipeline Estimated Capacity 1 MW 5MW 55MW Estimated Project Timeline Note: Project timeline includes only construction period. In general construction period is preceded by a 1-2 year pre-construction period. On average 5% of total project cost is spent during this period on due diligence page 56

57 Renewable Energy 5 year roadmap Goal Establish renewable energy platform, targeting 1MW+ in 4 medium size hydro power plants by 219 Financing Pipeline BGEO contribution US$ 28mln over next 4 years (estimated total equity US$ 43mln) Small investment until now Staged investments 4 years BGEO investment page 57

58 Renewable Energy 5 year roadmap Goal Expected IRR 25%+ Math EBITDA (run rate) Total US$ 15.9mln BGEO share US$ 1.3mln Equity contribution US$ 43mln US$ 28mln Exit opportunities 1 2 Sale in parts Scale up (2 nd stage) and public listing or strategic sale page 58

59 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business GGU Georgian Global Utilities Georgian Macro Overview Appendices page 59

60 Acquisition of remaining 75% interest in GGU Acquired remaining 75% interest in GGU Acquired remaining 75% equity stake in GGU The settlement of the cash consideration of US$ 7. million The transaction values GGU s enterprise value at GEL million, or 4.2x EV / EBITDA 216E GGU distributed dividends in the aggregate amount of GEL 13. million to the existing shareholders The transaction is both, P/E and B/V accretive from day one BGEO funded the acquisition through a combination of the BGEO s existing unallocated cash and additional debt GGU s existing senior management team continues to lead the business following the buy-out 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 Transaction Rationale Attractive Investment Opportunity A profitable company with significant capacity for growth A natural monopoly Cash generating business, no additional equity financing required for planned capex Potential to improve utilisation Overview of 25% acquisition in 214 Transaction was structured in several steps: Acquisition of 25% shareholding for GEL47.6m (US$26m) Option to acquire an additional 24.9% within 1 months for GEL47.6m (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. Subsequently, BGEO did not exercise the call option Attractive valuation with GGU valued at EV / EBITDA 214E deal multiple of 4.7x, while industry peers were trading at 8.5x average EV / EBITDA 214E multiple (1) BGEO also provided a US$25mn loan to GGU with proceeds paid as dividend to the selling shareholders The transaction was earnings accretive GGU s strategy GGU is an established business, targeting further EBITDA growth as a result of its strategy, which implies strong cash flow generation post prudent capital expenditures. Stable cash collection rate. Average collection rates at only 65% in major cities. And average collection rates from households in Georgia only 45% (2). GGU s collection rates are currently 96%. Increase of the energy efficiency and water loss reduction. Cost saving from reduction in water delivery losses to 4, from current 5. Existing high level of water losses is about 4-5 times higher than that in the Western Europe, creating an opportunity for efficiency gains. There is dual-effect from water delivery loss reduction, as freed-up energy can be sold to third parties. Generation of additional income streams. This implies utilizing GGU s existing infrastructure and developing hydropower plants to increase electricity sales to third parties; installing turbinators to achieve more efficient water supply. Notes: (1) Universe of comparable companies includes Pennon Group, Acea, Artesian Resources, American State Water Company, Athens Water and Thessaloniki Water Supply. (2) The latest available data (from 25) page 6

61 GEL millions GGU a privately-owned natural monopoly GGU is the only profitable water-utilities player in Georgia with plenty of efficiency rooms GGU is the largest privately owned water utility company in Georgia 2 core activities: 1. Water supply (including wastewater collection and processing) Provides water to 1.4mln people (1/3 of Georgia) 215A: 52M m3 1. Generation of electric power Owns and operates 3 HPPs with total installed capacity of 143MW. Generated power is primarily used by GGU s water business. The excess amount of generated power is sold to the third party clients every year Revenue 215A: GEL 117.7M EBITDA 215A: GEL 61.5M Company has strong execution track record & financial strength Management team with extensive experience in utility business BB- rating assigned by Fitch Ratings to major subsidiary of GGU Georgian Water and Power in 215 (currently Georgia s sovereign rating is BB- and the country ceiling is BB by Fitch) First bond placement by utility company in Georgia (GEL 8.6mln) through Georgian Water and Power in 215 Strong EBITDA growth in 215 of 1 y-o-y Low leverage (215A Debt/EBITDA: 1.2x) EBITDA (in GEL mln) & EBITDA margin (in %) % % CAGR % % F 217F 218F % 6 55% 5 45% EBITDA growth drivers: Cost saving from reduction in water delivery losses to 4, from current 5 Double effect from water delivery loss reduction selling freed-up energy page 61

62 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business Teliani Valley Georgian Macro Overview Appendices page 62

63 Teliani Valley Business overview Goal Become leading beverages producer and distributor in Caucasus Strong existing franchise New business line Leading wine producer With wide distribution platform Launch beer production Teliani Business Black Sea Poti Batumi Russian Federation Georgia Tbilisi Rustavi Caspian Sea Turkey Armenia Azerbaijan Baku 3 million bottles sold annually US$ 8mln revenue in 215 US$ 1.7mln EBITDA in of sales from export 4,4 sales points Exporting to 26 countries, including all FSU, Poland, Sweden, Finland, USA, Canada, Brazil, China, Thailand, Singapore Launch beer production facility in Georgia 1 year exclusivity with Heineken to sell in Georgia, Armenia and Azerbaijan (17mln population) page 63

64 Teliani Valley Exclusive Heineken producer in Caucasus Exclusive Heineken producer in Caucasus Strong management with proven track record Highly concentrated market Low consumption per capita compared to peers Investment Rationale 1.3 EBITDA Net Income Domestic market segmentation (Q3 215) 31% 12% 6% 51% Effes Georgia Zedazeni Argo Other Beer Consumption in Peer Countries 214 (l/capita) Peer Average page 64

65 Teliani Valley Exclusive Heineken producer in Caucasus Exclusive Heineken producer in Caucasus Investment EBITDA projection Exit options EBITDA Evolution, USDmn ( ) Financials Total investment USD 4.6mln, of which USD 15.3mln is equity BGEO to invest USD 9.8mln in total, amounting to 64% of shares of Teliani % % % 23.1% % 24.2% E 218E 219E 22E 221E 222E Trade sale Teliani Valley EBITDA Global Beer Georgia EBITDA EBITDA margin page 65

66 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices page 66

67 Georgia at a glance General Facts Area: 69,7 sq km Population (215): 3.7 mln Life expectancy: 77 years Official language: Georgian Literacy: 1 Capital: Tbilisi Currency (code): Lari (GEL) Economy Nominal GDP (Geostat) 215: GEL 31.7 bn (US$14. bn) Real GDP growth rate : 7.2%, 6.4%, 3.4%, 4.6%, 2.8% Real GDP average 1 year growth rate: 5.1% GDP per capita 215 (PPP) per IMF: US$ 9,566 Annual inflation (e-o-p) 215: 4.9% External public debt to GDP 215: 32.6% Sovereign ratings: S&P BB-/B/Stable, affirmed in November 215 Moody s Ba3/NP/Stable, affirmed in March 216 Fitch BB-/B/Stable, affirmed in April 216 page 67

68 Georgia s key economic drivers Liberal economic policy Regional logistics and tourism hub Top performer globally in WB Doing Business over the past 12 years 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 Business friendly environment and low tax regime (attested by favourable international rankings) A natural transport and logistics hub, connecting land-locked energy rich countries in the east and European markets in the west Access to a market of 9mn customers without customs duties: Free trade agreements with EU, CIS and Turkey and GSP with USA, Canada, Japan, Norway and Switzerland, negotiations ongoing on Georgia-China free trade agreement Tourism revenues on the rise: tourism inflows stood at 13.9% of GDP in 215 and arrivals reached 5.9mln visitors in 215 (up 6.9% y-o-y) Regional energy transit corridor accounting for 1.6% of the world s oil and gas transit volumes Strong FDI Support from international community An influx of foreign investors on the back of the economic reforms have boosted productivity and accelerated growth FDI at US$1,351mln (9.7% of GDP) in 215 (down 23.2% y-o-y), FDI at US$ 376mln in 1Q16 (up 113% y/y) FDI averaged 1 of GDP in Productivity gains accounted for 66% of the annual average 5.6% growth over , according to the World Bank Georgia and the EU signed an Association Agreement and DCFTA in June 214 Progress in achieving visa-free travel to the EU is another major success in Georgian foreign policy. Georgian passport holders are expected to start free entrance to the EU countries from 2H16 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 Electricity transit hub potential Developed, stable and competitively priced energy sector Only 2 of hydropower capacity utilized; 88 hydropower plants are in various stages of construction or development Georgia imports natural gas mainly from Azerbaijan Significantly boosted transmission capacity in recent years, a new 4 kv line to Turkey built, other transmission lines to Armenia and Russia upgraded Additional 5, MW transmission capacity development in the pipeline, facilitating cross-border electricity trade and energy swaps to Eastern Europe Political environment stabilised 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 -The Russian side announced to ease visa procedures for Georgians citizens effective December 23, 215 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 215, Russia and Ukraine together accounted for 1.1% of Georgia s exports and 14. of imports; just 4.1% of cumulative FDI over page 68

69 Growth oriented reforms Ease of Doing Business 216 (WB-IFC Doing Business Report) Economic Freedom Index 216 (Heritage Foundation) UK USA Sweden Norway Estonia GEORGIA Armenia Czech Rep. Romania Kazakhstan Montenegro Turkey Serbia Azerbaijan Ukraine WB named Georgia top performer globally in doing business over the past 12 years Estonia UK USA Georgia Latvia Hungary Bulgaria Romania France Turkey Italy Azerbaijan Russia Ukraine Global Corruption Barometer TI 213 Business Bribery Risk, 214 Trace International 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% 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 69

70 Government 4-pillar of reform initiatives Structural Reforms Promoting Transit & Tourism Hub Tax Reform Corporate income tax reform Enhancing easiness of tax compliance Roads Plan to finish all spinal projects by 22 East- West Highway, other supporting infrastructure Capital Market Reform Boosting stock exchange activities Developing of local bond market Rail Baku Tbilisi Kars new railroad line Railway modernization project Pension Reform Introduction of private pension system PPP Reform Public Investment Management Framework Deposit Insurance Accounting Reform Association Agreement Agenda Introduction of transparent and efficient PPP framework Improved efficiency of state projects Boosting private savings Enhancing trust to financial system Increased transparency and financial accountability Enhanced protection of shareholder rights Promoting Open Governance Air Maritime Tbilisi International Airport 2 nd runway to be constructed International Cargo terminal Anaklia deep water Black Sea port Strategic location Capable of accommodating Panamax type cargo vessels High capacity up to 1mln tons turnover annually Up to USD 1bln for first phase (out of 9) in Georgia Education Reform Improvement of public services offered to the private sector Creation of Front Office Application of Single Window Principle General Education Reform Maximising quality of teaching in secondary schools Involvement of the private sector in legislative process Discussion of draft legislation at an early stage Fundamental Reform of Higher Education Based on the comprehensive research of the labor market needs Strict monitoring of implementation of government decisions Creation of a special unit for monitoring purposes Improvement of Vocational Education Increase involvement of the private sector in the professional education page 7

71 Ukraine Latvia Estonia Czech Republic Russia Lithuania Romania Moldova Turkey Poland Georgia Diversified resilient economy Gross domestic product Nominal GDP structure, % % 9.6% 9.4% % % % 7.2% 6.4% 3.4% 4.6% 2.8% 2 15% 1 5% Financial interm. 3.7% Healthcare 6. Hotels & restaurants 2.5% Other 11. Trade 16.6% Maufacturing 16.5% -5 Nimonal GDP, US$ bn Real GDP growth, y/y % -3.7% -5% Real Estate 6.6% Construction 8. Agriculture 9.2% Public administration 9.3% Transport & commun. 1.7% Source: Geostat Source: Geostat Comparative real GDP growth rates, % ( average) GDP per capita 6% 5% 4% 3% 2% 1% -1% -2% -.8% 1.8% 1.9% 1.9% 2.5% 2.6% 2.7% 3.6% 3.8% 3.8% 5.1% 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 9,566 9,29 8,6 8,526 7,287 5,788 6,135 6,3 6,571 4,943 4,329 3,711 4,131 4,267 4,434 3,779 3,431 3,743 3,159 2,479 2,694 2,951 1,863 1, , Nominal GDP per capita, US$ GDP per capita, PPP Sources: IMF, Geostat Sources: IMF page 71

72 Georgia Latvia Romania Macedonia Slovak Rep. Lithuania Estonia Kyrgyz Rep. Armenia Moldova Czech Rep. Bulgaria Kazakhstan Azerbaijan Russia Belarus 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Productivity gains have been the main engine of growth since 24 Overall contribution of capital, labour, and Total Factor Productivity (TFP) to growth, Contributions of capital, labour, and TFP to growth during periods TFP growth 3.65% Source: Georgia Rising (213), WB Capital stock 1.6 Labor force.32% 1 8% 6% 4% 2% -2% -4% 3.65% 6.32% 1.48% 2.25% Capital stock Labor force TFP growth Source: Georgia Rising (213), WB 3.86%.67% 1.56% -2.2% Real GDP growth projection, Employed persons in business sector 5% 4% 3% 2% 1% -1% -2% -3% -4% 216F 217F % -13.6% 12.7% % % 12.5% Sources: IMF, WEO April 216 Source: GeoStat, MOF Employment in business sector, ' Pers. income tax revenues, % change y/y page 72

73 Further job creation is achievable Unemployment rate down.4ppts y/y to 12. in 215 Average monthly wages and income per household 19 18% % 14% % % 6% % % Sources: GeoStat Employment (thousands) Unemployment rate Sources: GeoStat Wages, US$ Total income, US$ Share of services in total employment has increased Hired workers account for 42.3% in total employment in 215 2, 1,8 1,6 1,4 1,2 1, Services Agriculture Industry Source: GeoStat Note: services include construction Sources: GeoStat Public sector (hired workers) Non-public sector (hired workers) page 73

74 F 217F Turkey Macedonia Romania Czech Rep. Georgia Lithuania Bosnia & Herz. Switzerland Denmark Armenia Slovakia Belarus Finland Montenegro Netherlands Germany Hungary Ukraine Slovenia Austria Croatia UK Canada USA Belgium Italy F Demonstrated fiscal discipline and low public debt Fiscal deficit as % of GDP Breakdown of public debt -2% -4% -6% -8% % -2.6% -3.4% -4.8% -6.5% Fiscal deficit as % of GDP Fiscal deficit/gdp capped at 3% -9.2% -6.7% -3.6% -2.8% -2.6% % -3. Domestic 21% External 79% Multilateral 56% Bilateral 13% Eurobond 9% External public debt portfolio weighted average interest rate 1.9% (Contractual maturity 23 years) Source: Ministry of Finance of Georgia Source: Ministry of Finance of Georgia, as of end-215 Public debt as % of GDP Gross government debt/gdp, Public debt/gdp capped at % Total public debt to GDP, % External public debt to GDP, % Sources: Ministry of Finance of Georgia, Geostat Source: IMF page 74

75 Turkey Armenia Georgia Belarus Lithuania Estonia Hungary Russia Bulgaria Croatia Poland Turkey Armenia Lithuania Poland Croatia Russia Hungary Estonia Bulgaria Belarus Georgia F Investing in infrastructure and spending low on social Revenues and expenditures Current and capital expenditure 12, 1, Current Expenditures Capital Expenditures 8, 6, 4, 2, 37.2% 33.9% 3.7% 3.6% 29.3% 3.2% 3.5% % 78.1% 22.1% 21.9% % 83.6% 81.6% 83.2% 17.7% 16.4% 18.4% 16.8% F Total Budget Receipts, GEL mn Expenditures (Capital + Current), GEL mn Expenditures (capital + current) as % of GDP Source: Ministry of Finance, GeoStat Sources: Ministry of Finance Government social expenditure as % of GDP Government capital expenditure as % of GDP 2 8% 18% 16% 14% 12% 1 8% 6% 4% 2% 7% 6% 5% 4% 3% 2% 1% 214E 215E 216F 214E 215E 216F Source: IMF Source: IMF page 75

76 GEL millions GEL millions GEL millions Fiscal Performance Consolidated budget tax revenues Consolidated budget - expenditures and privatization % +14.1% 216 Source: Ministry of Finance +11.5% +8.3% +12.3% +8.2% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % 12.7% Current spending, % change y/y 1Q15 1Q16 Sources: Ministry of Finance 82.2% -3.1% Capital spending, % change y/y 53.7% -12.8% Privatization, % change y/y Consolidated budget balance State budget - revenues above plan in 1Q ,5 2, 1,5 1, 5 1,99 2,5 2,378 2,267 Operating Balance, GEL mn 1Q14 1Q15 1Q16 Overall Balance, GEL mn Total inflows, GEL mn 1Q16 plan 1Q16 actual Total outflows, GEL mn Source: Ministry of Finance Source: Ministry of Finance page 76

77 Diversified foreign trade Goods imports, US$ bln Services imports, US$ bln Source: NBG BOP statistics Imports of goods and services Q Source:, NBG BOP statistics Exports of goods and services Q16 Serveces exports, US$ bln Goods exports, Geo-originated, US$ bln Re-exports, US$ bln Imports, 1H16 Exports, 1H16 Oil imports USA 2% Armenia 2% Ukraine 4% Azerbaijan 5% Sources: Geostat China 5% Russia 6% Turkey 14% Other 1 EU 25% Canada 27% USA 4% Switzerlan d 4% Uzbekistan 4% Azerbaijan 4% Other 23% Armenia 8% Russia 9% EU 24% Turkey 11% China 9% 1, Sources: GeoStat 1H16 imports US$ 243.2mln, down 2.2% y-o-y Oil imports, US$ mn Oil imports, % change, y/y 1 75% 5 25% -25% -5 page 77

78 F Diversified sources of capital inflow Strong foreign investor interest Tourist arrivals and revenues on the rise US$ 376mln in 1Q16, up 113% 2.6mln visitors in 1H16, up % 9.7% 19.8% 15.3% 12.2% % % 5.8% 5.8% 1.6% 9.7% 25% 2 15% 1 5% 6, 5, 4, 3, 2, 1, 5,392 5,516 5,898 4,428 2,822 2,32 1,52 1,29 1,5 1,155 1,426 1,489 1, , 5, 4, 3, 2, 1, Sources: Geostat FDI, US$ bn FDI as a % of GDP Foreign visitors (thousand persons, LHS) Net tourist revenue (US$ mn, RHS) Sources: Georgian National Tourism Agency, National Bank of Georgia Remittances - steady source of external funding Donor funding for public infrastructure projects US$ 53.2mln in 1H16, down 1.6% 6 1,4 1,2 1, % 4.9% % % 7.2% 7.1% % 8.1% 8.2% 7.7% 7.6% 1,168 1,226 1,322 1, % 99 9% 8% 7% 6% 5% 4% 3% 2% 1% Net remittances, US$ mn Net remittances as % of GDP Source: National Bank of Georgia Investment projects, credits, US$ mn Investment projects, grants, US$ mn Source: Ministry of Finance of Georgia page 78

79 Current account deficit supported by FDI Current account balance (% of nominal GDP) % 9% 8% Tourism revenues on the rise 15% 16% 11% 6% 6% 6.2% Current transfers - steady source of external funding 3.9% 5.1% 8.1% 8.7% % -9.7% -11.1% -1.5% -1.3% -12.8% -11.7% -1.6% -11.8% -15.1% Trade deficit driven by FDI -19.8% Goods, net Services, net Income, net Transfers, net CA deficit net FDI Sources: Geostat, NBG FDI and capital goods import Building international reserves 2 18% 16% 14% 12% 1 8% 6% 4% 2% 9.7% 8.5% % 5.6% 5.8% 19.8% 15.3% 12.2% 7.9% 8.2% 7.9% 6.1% % % 9.7% 7.7% 5.8% 5.8% 8.4% 7.4% 8.3% 7.7% 6.9% US$ bln FDI to GDP, % Source: Geostat, NBG Capital goods imports to GDP, % Source: NBG page 79

80 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Inflation target - 5% for 216 and 4% for 217 Annual inflation Monthly inflation rate 9% 8% 7% 6% 5% 4% 3% 2% 1% -1% -2% -3% 1.1% 2.9% 9% 8% 7% 6% 5% 4% 3% 2% 1% -1% -2% -3% % 1..5%. -.5% % % 1..5%. -.5% % Core (non-food, non-energy) Headline Inflation Sources: Geostat Sources: Geostat World commodity prices indices Average inflation rate % 6% % 5% % 3% 4.5% 4% 3% % 2% % 1% 5 5-1% -1% Source: IMF Note: Jan25=1 Total Non-energy Energy Source: GeoStat page 8

81 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Dec-4 Jun-5 Dec-5 Jun-6 Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 International reserves-sufficient to finance more than 3 months of imports International reserves US$ 2.9bln reserves as of June 216, up 15. y-o-y US$ sale Central Bank s interventions NBG is net buyer of US$ 198 mln YTD in 6M US$ purchase Sources: NBG Gross International Reserves, US$ bn Net Foreign Assets, US$ bn NBG monthly net interventions US$ mn Sources: NBG Note: May 216 data provided as of 5 May 216 Monetary policy rate Dollarization 9% 8% 7% 6% 5% 6.75% 9% 8% 7% 6% 5% 9 85% 8 75% 9 85% 8 75% 4% 3% 2% 1% 4% 3% 2% 1% 7 65% 6 55% 7 65% 6 55% Loan Dollarization Source: NBG Deposit Dollarization Source: NBG 24.9% page 81

82 Jan-3 Aug-3 Mar-4 Oct-4 May-5 Dec-5 Jul-6 Feb-7 Sep-7 Apr-8 Nov-8 Jun-9 Jan-1 Aug-1 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-3 Aug-3 Mar-4 Oct-4 May-5 Dec-5 Jul-6 Feb-7 Sep-7 Apr-8 Nov-8 Jun-9 Jan-1 Aug-1 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-3 Aug-3 Mar-4 Oct-4 May-5 Dec-5 Jul-6 Feb-7 Sep-7 Apr-8 Nov-8 Jun-9 Jan-1 Aug-1 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Floating exchange rate - Policy priority FX reserves Real effective exchange rate (REER) US$ bln Sources: NBG FX Reserves M2 multiplier Sources: NBG Jan23=1 M2 and annual inflation M2 and USD/GEL % 14% 12% 1 8% 6% 4% 2% -2% -4% -6% Lari depreciation Lari appreciation Source: NBG M2, % change, y/y (LHS) Annual inflation, eop (RHS) M2 % change, y/y (LHS) USD/GEL % change, y/y (RHS) Source: NBG page 82

83 GEL Billions Growing and well capitalised banking sector Summary Prudent regulation ensuring financial stability High level of liquidity requirements from NBG at 3 of liabilities, resulting in banking sector liquid assets to client deposits of 41% as of Dec 215 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 at 25% of GDP and total loans at 5 of GDP as of 215 resulting in low number of defaults during the global crisis Source: National Bank of Georgia, Geostat Banking sector assets, loans and deposits NPLs to Gross loans (%), Assets Loans Deposits Source: NBG 27.7% CAGR Source: WB Turkey Georgia Austria Belgium Denmark Latvia Belarus Slovakia Czech Rep. Lithuania Kosovo Russia Malta Armenia Macedonia Slovenia Kazakhstan Hungary Romania Bos. & Herz. Moldova Croatia Ukraine Source: National Bank of Georgia page 83

84 Belarus Moldova Kazakhstan Azerbaijan Armenia Ukraine Georgia Czech Rep Bulgaria Turkey Underpenetrated retail banking sector provides room for further growth Corporate loans to GDP Households loans to GDP 45% 4 35% 3 25% 2 15% 1 5% 22% 15% 15% 14% 6% 6% 8% 1 1 6% 6% 9% 8% 6% 7% 1 13% 17% 17% 17% 17% 18% 18% 2 22% 23% % 4 35% 3 25% 2 15% 1 5% 25% 3% 3% 4% 6% 9% 13% 11% 11% 13% 14% 18% 21% External corporate indebtedness to GDP Corporate loans to GDP Source: NBG,GeoStat Source: NBG,GeoStat Banking Sector loans to GDP Georgian banks better placed due to sound financials Country Fitch Rating Outlook Sector Outlook Armenia B Negative Negative Azerbaijan B Stable Negative Belarus B Stable Negative Georgia BB- Stable Stable 1 1 Kazakhstan B Stable Negative Russia BB Negative Negative Ukraine CCC None Negative Source: IMF Loans to GDP, 214 Loans to GDP, 215 Uzbekistan B Stable Stable Source: Fitch page 84

85 Armenia Georgia Russia Turkey Ukraine Moldova Azerbaijan Belarus Kazakhstan Georgia Azerbaijan Turkey Armenia Moldova Russia Kazakhstan Ukraine Belarus Armenia Euro Georgia Turkey Moldova Russia Kazakhstan Belarus Ukraine Azerbaijan Georgia Ukraine Turkey Russia Armenia Belarus Moldova Azerbaijan Flexible FX regime shielded reserves and supported to macro stability Currency weakening vs US$ Georgia used less reserves to support GEL % 21.4% 26.1% 29.3% 29.5% 45.6% 48.2% 48.2% 5.3% 51.1% % -15.3% -15.9% -18.2% Reserve loss, % -32.6% -34.6% -37.2% -75.7% Source: Bloomberg, National Statistics Offices Note: US$ per unit of national currency, period 1-Aug Jul-216 Source: IMF Note: Feb-216 vs Aug-214; Armenia s reserves exclude a US$ 5mn Eurobond issued in March 215 Inflation remains low in Georgia and monetary policy rate was cut 45% 4 35% 3 25% 2 15% 1 5% -5% End-214 End-215 Latest % 2 15% 1 5% End-214 End-215 Latest-216 Source: Central banks Source: Central banks page 85

86 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 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 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Recent trends - Tourism on the rise, exports/remittances bottoming out Tourist arrivals growing Remittances down from Russia and Greece % %.3 1 5% % % Source: GNTA International arrivals, mn % change, y/y Source: NBG Inflow, US$ mn % change, y/y Exports suffered mainly due to lower re-exports Trade deficit up since Apr-16 due to capital goods imports % 13% % 8% 2% 29% 2 13% 2% 19% 2 14% 9% 9% 1 12% 5% 18% 12% % -27% % -35% -1-27% -6% -16% -14% -25% -26% -14% -19% Source: GeoStat Exports, US$ mn % change y/y, exports Source: GeoStat Note: Excluding one-offs page 86

87 Contents BGEO Group Overview Results Discussion BGEO Group Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices Analyst Coverage Express Banking Solo Banking Financial Statements page 87

88 Analyst coverage BGEO Group PLC Consensus Target Price: GBP Jul.216 GBP 31. GBP Jul May.216 GBP 24. GBP Jun Jul.216 GBP GBP Jun Feb.215 GBP GBP Feb May.216 GBP 27.9 GBP Dec May.216 GBP 29.5 page 88

89 Express emerging retail banking How Express works Express Branches 2 1,431,557 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 3 2,681 Express Pay Terminals 4 9,44 POS Terminals at 3,848 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 89

90 No. of transitions s Express Banking Capturing Emerging Mass Market Customers Express Pay terminals 43,979 54,212 59,828 36% Express branches 12,5 1,37 15,369 49% ATMs 7,5 1,1 8,529 42% POS terminals 7,11 9,294 12, H16 1H15 1H14 Express cards 8,593 11,446 15,373 79% Internet banking 2,697 2,15 2,186 23% Mobile banking 1, x3-1, 2, 3, 4, 5, 6, 7, 8,618,215 Tellers 7,97,976 8,832,58 +9% page 9

91 Solo a fundamentally different approach to premium banking SOLO Lounges Through the recently launched Solo, we target to attract new clients (currently 14,896) to significantly increase market share in premium banking from c.13% at the beginning of 215 New Solo offers: Tailor made banking solutions New financial products such as bonds Concierge-style environment Access to exclusive products and events Lifestyle opportunities 3x higher new clients attracted per banker ratio, compared to same period last year page 91