Half-yearly Report
Bank of Georgia
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1.42 GEL/US$ 1H 2008 period end
1.50 GEL/US$ 1H 2008 average
1.44 GEL/US$ Q2 2008 average
1.67 GEL/US$ 1H 2007 period end
1.70 GEL/US$ 1H 2007 average
1.69 GEL/US$ Q2 2007 average
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JSC BANK OF GEORGIA ANNOUNCES CONSOLIDATED Q2 2008 & 1H 2008 RESULTS
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Millions, unless otherwise noted Q2 2008 Growth y-o-y
(1)
Bank of Georgia (Consolidated, Unaudited, US$ GEL
IFRS-based)
Total Operating Income (Revenue)(2) 60.6 85.9 64.8%
Recurring Operating Costs 34.5 48.9 74.6%
Normalised Net Operating Income(3) 26.1 37.1 53.4%
Consolidated EPS (Basic), GEL & US$(4) 0.64 0.91 22.7%
Consolidated EPS (Fully Diluted), GEL &
US$(5) 0.64 0.91 22.8%
Net Income 20.0 28.3 51.6%
ROAA,(6 )Annualised, % 3.5%
ROA, (7) Annualised, % 3.3%
ROAE,(8) Annualised, % 14.8%
ROE,(9)Annualised, % 14.5%
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Millions, unless otherwise noted 1H 2008 Growth y-o-y
(1)
Bank of Georgia (Consolidated, Unaudited, US$ GEL
IFRS-based)
Total Operating Income (Revenue)(2) 117.8 167.0 79.2%
Recurring Operating Costs 65.8 93.3 87.1%
Normalised Net Operating Income(3) 52.0 73.7 70.1%
Net Income 42.5 60.3 86.2%
Consolidated EPS (Basic), GEL & US$(4) 1.41 2.00 56.3%
Consolidated EPS (Fully Diluted), GEL &
US$(5) 1.36 1.93 62.4%
ROAA,(6 )Annualised, % 3.8%
ROA, (7) Annualised, % 3.5%
ROAE,(8) Annualised, % 17.3%
ROE,(9)Annualised, % 15.4%
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(1) Compared to the same period in 2007; growth calculations based on GEL
values.
(2) Revenue includes Net Interest Income and Net Non-Interest Income.
(3) Normalised for Net Non-Recurring Costs.
(4) Basic EPS equals Net Income of the period divided by weighted average
outstanding shares for the period.
(5) Fully Diluted EPS equals Net Income of the period divided by the number of
outstanding ordinary shares as of the period end plus number of ordinary shares
in contingent liabilities.
(6) Return on Average Total Assets equals Net Income for the period divided by
the average Total Assets for the period.
(7) Return on Assets equals Net Income for the period divided by the Total
Assets at the end of the period.
(8) Return on Average Total Shareholders' Equity equals Net Income for the
period divided by the average Total Shareholders' Equity for the period.
(9) Return on Equity equals Net Income for the period divided by the Total
Equity at the end of the period.
About Bank of Georgia
Bank of Georgia, the leading universal Georgian bank with operations in Georgia,
Ukraine and Belarus, is the largest bank by assets, loans, deposits and equity
in Georgia, with 34 % market share by total assets (all data according to the
NBG as of July 31, 2008). The bank has 142 branches and over 880,000 retail and
more than 128,000 corporate current accounts. The bank offers a full range of
retail banking and corporate and investment banking services to its customers
across Georgia. The bank also provides a wide range of corporate and retail
insurance products through its wholly-owned subsidiary, Aldagi BCI, as well as
asset & wealth management services.
Bank of Georgia has, as of the date hereof, the following credit ratings:
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Standard & Poor's 'B/B'
FitchRatings 'B/B'
Moody's 'B3/NP' (FC) & 'Ba2/NP' (LC)
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For further information, please visit www.bog.ge/ir or contact:
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Nicholas Enukidze Irakli Gilauri Macca Ekizashvili
Chairman of the Supervisory Board Chief Executive Officer Head of Investor Relations
+995 32 444 800 +995 32 444 109 +995 32 444 256
nenukidze@bog.ge igilauri@bog.ge ir@bog.ge
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This news report is presented for general informational purposes only and should
not be construed as an offer to sell or the solicitation of an offer to buy any
securities. Certain statements in this news report are forward-looking
statements and, as such, are based on the management's current expectations and
are subject to uncertainty and changes in circumstances.
The financial information as of Q2 2008, six months 2008, Q2 2007 and six months
2007 contained in this news report is unaudited and reflects the best estimates
of management. The bank's actual results may differ significantly from the
amounts reflected herein as a result of various factors.
Bank of Georgia (LSE: BGEO, GSE: GEB) (the 'Bank'), Georgia's leading universal
bank, announced today its Q2 2008 and 1H 2008 consolidated results (IFRS-based,
derived from management accounts), reporting a Q2 2008 Net Income of GEL 28.3
million (up 51.6% y-o-y) and Consolidated Basic EPS of US$0.64 (up 22.7% y-o-y)
and a 1H 2008 Net Income of GEL 60.3 million (up 86.2% y-o-y) and Consolidated
Basic EPS of US$1.41 (up 56.3% y-o-y).
Q2 2008 Summary
In Q2 2008 the Bank's Total Operating Income (Revenue) grew by 64.8% y-o-y (up
6.0% q-o-q(1)) to GEL 85.9 million. Net Interest Income increased to GEL 55.8
million (up 80.7% y-o-y and 12.2% q-o-q) and Net Non-Interest Income amounted to
GEL 30.1 million (up 41.6% y-o-y and down 4.0% q-o-q) . The Interest Income
growth during the quarter was mainly driven by the increased interest rates on
banking products and the increased share of higher-yielding retail loans in the
Bank's loan portfolio. The Net Interest Margin increased to 9.1% in Q2 2008 from
8.9% in Q1 2008 and 8.5% in Q2 2007. The q-o-q decrease in Net Non-Interest
Income (includes Foreign Currency Related Income, Net Fee and Commission Income,
Net Income from Documentary Operations and Net Other Non-Interest Income) was
mainly due to the decrease in Foreign Currency Related Income (GEL 10.4 million,
up 71.4 % y-o-y and down 21.3% q-o-q), which was caused by a lower volatility of
Lari in Q2 as compared to high volatility in Q1 2008. Net Fee and Commission
Income stood at GEL 10.2 million (up 81.5% y-o-y and down 0.1% q-o-q] and Net
Income from Documentary Operations increased to GEL 1.9 million (up 39.6% y-o-y
and 29.4% q-o-q). Net Other Non-Interest Income was GEL 7.7 million, down 7.2%
y-o-y and up 18.0% q-o-q).
Consolidated Recurring Operating Costs for the quarter grew 74.6% y-o-y (9.9%
q-o-q) to GEL 48.9 million driven mainly by the increase in personnel costs in
Georgia and Ukraine and costs associated with new branches in Georgia. Net
Normalized Operating Income ('NNOI') increased 53.4% y-o-y (up 1.2% q-o-q) to
GEL 37.1 million.
The Bank's Consolidated Net Non-Recurring Income of GEL 3.4 million in Q2 2008
is comparable to GEL 8.5 million it reported in Q1 2008. In Q1 and Q2 2008 the
Consolidated Net Non-Recurring Income was mainly driven by the revaluation of
the real estate properties held by JSC SB Real Estate, a real estate investment
company managed by Galt & Taggart Asset Management, in which the Bank
beneficially owns a significant equity stake. Currently, SB Real Estate
financial statements are fully consolidated into the Bank's financial
statements. The Bank reported a consolidated Net Income of GEL 28.3 million for
Q2 2008, a 51.6% growth on a year-on-year basis and a 11.2% decrease q-o-q.
The Bank's Consolidated ROAE amounted to 14.8% in Q2 2008 compared with a
consolidated ROAE of 19.6% in Q1 2008 and 14.4% in Q1 2007. Consolidated ROAA
was 3.5% in Q1 2008 compared with 4.2% in Q1 2008 and 3.8% in Q1 2007.
Bank of Georgia's banking operations in Georgia, which are provided through JSC
Bank of Georgia, reported a standalone Net Income of GEL 28.4 million (up 77.6%
y-o-y and 11.9% q-o-q). The Bank's subsidiaries showed mixed results in Q2 2008.
The Bank's Ukrainian subsidiary, Universal Bank for Development and Partnership
('UBDP'), reported a Net Income of GEL 0.7 million in Q2, reversing a Net Loss
of GEL 0.7 million in Q1 2008. Galt & Taggart Securities, the Bank's fully-owned
investment banking subsidiary, which witnessed rapidly deteriorating market
conditions in Ukraine and Georgia in Q2, reported a quarterly Net Loss of GEL
2.6 million. Aldagi BCI, the Bank's fully-owned Georgian Insurance subsidiary,
reported a quarterly Net Income of GEL 36,000 compared with Net Loss of GEL 0.4
million in Q1 2008.
On 13 May 2008 Bank of Georgia announced that it signed an agreement to acquire
70% equity interest in a Belarusian bank, Belarusky Narodny Bank ('BNB'), for
the total consideration of US$34.2 million (P/BV of circa 1.99x based on BNB's
2007 Audited Financial statements). The BNB acquisition was completed just a few
days before the end of the reporting period. Therefore, BNB's 1H 2008 results
were not included in the Bank's consolidated 1H 2008 results and the Bank's
equity interest in BNB was reported as Investments in Other Business Entities on
the Bank's 30 June 2008 consolidated Balance Sheet. As of 30 June 2008 BNB had
total assets of US$45.5 million, net loans of US$25.8 million, client deposits
of US$12.9 million and a total shareholders' equity of US$25.6 million. BNB's
net income for 1H 2008 amounted US$1.9 million.
(1) q-o-q compares Q2 2008 results with Q1 2008 results
In June 2008 Bank of Georgia Bank of Georgia and its fully-owned subsidiary Galt
& Taggart Bank (formerly Cascade Bank-Georgia, acquired by the Bank in July
2007) merged pursuant to the resolution of the Annual General Meeting of
Shareholders ('AGM') of Bank of Georgia, held on 30 May 2008. No consideration
was paid during the merger. Bank of Georgia became JSC Galt & Taggart Bank's
legal successor. Bank of Georgia's authorized share capital, existing
shareholders' ownership interests and the management structure remained
unchanged. The purpose of the merger was to simplify the Bank of Georgia's
corporate structure.
Despite continued difficult market conditions, Bank of Georgia raised US$166
million in debt funding in Q2 2008, including approximately US$26 million in
Lari-denominated short-term promissory notes, a US$30 million subordinated loan
from Dutch and German development banks FMO and DEG and US$110 million two-year
Loan Passthrough Notes (Bloomberg: BKGORG) arranged by JPMorgan (the facility
was increased by a further US$30 million in July 2008).
The Bank's AGM also approved an increase of Bank of Georgia's Authorized Share
Capital by 7,000,000 shares, which will be reserved for general funding
purposes. The issuance of newly authorized shares by the Management Board will
be possible only with the approval of the Supervisory Board within five years of
the AGM.
1H 2008 Summary
In 1H 2008 the Bank's Total Operating Income (Revenue) increased by 79.2% y-o-y
to GEL 167.0 million, driven by a 85.4% increase y-o-y in Net Interest Income
and a 69.4% increase y-o-y in Net Non-Interest Income. Total Recurring Operating
Costs increased by 87.1% y-o-y to GEL 93.3 million. NNOI grew 70.1% y-o-y to GEL
73.7 million and Net Income increased by 86.2% y-o-y to GEL 60.3 million.
On 30 June 2008 the Bank's consolidated Total Assets amounted to GEL 3.4 billion
(up 77.3% y-o-y, up 15.1% year-to-date and an 8.0% increase in Q2 2008 compared
with Q1 2008 or q-o-q). Gross Loans reached GEL 2,107 million (up 98.9% increase
y-o-y, up 20.2% year-to-date and up 13.5% q-o-q). Corporate Gross Loans to
Clients in Georgia stood at GEL 880.6 million (up 54.3% y-o-y, up 9.1%
year-to-date and up 7.2% q-o-q). Retail Gross Loans to Clients in Georgia
reached GEL 921.9 million (up 110.0% y-o-y, 43.1% year-to-date and 22.2% q-o-q).
Wealth Management Gross Loans To Clients in Georgia amounted to GEL 42.6 million
(up 30.3% y-o-y, down 3.6% year-to-date and up 22.3% q-o-q). UBDP accounted for
10.6% and 12.6% of the Bank's Total Assets and Total Gross Loans, respectively.
The combined share of Retail and Wealth Management (excluding UBDP) in Bank of
Georgia's Gross Loans To Clients increased to 52.4% as of 30 June 2008 from
46.0% as of 31 December 2007.
As of 30 June 2008 the Bank's consolidated Total Liabilities reached GEL 2.6
billion (up 72.9% y-o-y, up 9.3% year-to-date and up 9.1% q-o-q). Against the
background of intensifying competition for deposits in Georgia and a 10.9%
appreciation of Georgian Lari against the US dollar in 1H 2008, Client Deposits
in Georgia reached GEL 1.2 billion (up 46.8% y-o-y, up 11.7% year-to-date and up
9.5% q-o-q). Bank of Georgia's Consolidated Client Deposits increased to GEL
1,395 million (up 68.5% y-o-y, up 2.9% year-to-date and up 5.2% q-o-q).
As of 30 June 2008 Bank of Georgia on standalone basis held market share of
34.0%, 33.3% and 29.7% by total assets, gross loans, and deposits, respectively
in Georgia(2) . In 1H 2008 Bank of Georgia accounted for 61.0% of the total Net
Income in the Georgian banking sector compared with 35.5% in 1H 2007.
As of 30 June 2008 the Bank's Shareholders' Equity amounted to GEL 783.1
million, an increase of GEL 225.1 million year-to-date and GEL 379.0 million
y-o-y. The year-to-date growth was mainly due to 1H 2008 Net Income of GEL 60.3
million, as well as a capital increase implemented through the placement of four
million new ordinary shares in the form of GDRs on 13 February 2008, which
raised gross proceeds of US$100 million.
In 1H 2008 the Bank's Consolidated ROAE amounted to 17.3% compared with a
consolidated ROAE of 16.6% in 1H 2007 and 17.7% for the full year 2007.
Consolidated ROAA stood at 3.8% compared with an ROAA of 3.9% in 1H 2007 and
3.8% for the full year 2007. The Bank's equity book value per share stood at GEL
25.06 (US$17.67) as at 30 June 2008, up 57.0% y-o-y and up 22.0% year-to-date.
(2) Market share data are derived from the information published by the National
Bank of Georgia (www.nbg.gov.ge) and represent an aggregation of standalone
financial information (non-IFRS, based on National Bank of Georgia requirements)
filed by Georgian banks. Deposit market share is calculated based on the amount
of total deposits, including client and interbank deposits
Business Unit Overview
Corporate Banking (CB)(3)
Discussion of Results
Allocated Revenues grew 48.9% y-o-y to GEL 46.9 million in 1H 2008, while
Allocated Recurring Costs increased by 59.3% y-o-y. NNOI grew 44.8% y-o-y to GEL
32.7 million, contributing 44.4% to the consolidated NNOI. Net Income grew 49.2%
y-o-y to GEL 22.9 million, contributing 38.0% to the consolidated Net Income.
On a quarterly basis, Allocated Revenues in Q2 2008 grew 28.5% y-o-y to GEL 22.8
million, down 5.2% q-o-q, while Allocated Recurring Costs grew to GEL 7.2
million 36.8% y-o-y, up 3.8% q-o-q. Q2 2008 NNOI grew by 25.0% y-o-y to GEL 15.6
million, down 8.8% q-o-q, while Q2 2008 Net Income increased by 57.4% y-o-y to
GEL 12.4 million, up 18.0% q-o-q.
CB Gross Loans grew 54.3% y-o-y to GEL 880.6 million (up 9.1% year-to-date).
Allocated Client Deposits stood at GEL 681.5 million up 38.4% increase y-o-y and
up by 1.8% year-to-date.
Highlights
-- Major new corporate client acquisitions include Turkish gas station
chain Petrol Ofisi Georgia, a Ukrainian Airlines representative office
and Electricity System Commercial Operator.
-- Increased the number of corporate clients using the Bank's payroll
services from approximately 700 at the end of 2007 to over 850 by 30
June 2008.
-- Approximately 6,000 legal entities opened accounts at the bank in 1H
2008, bringing the total number of CB clients to approximately 71,000.
Retail Banking (RB)
Discussion of Results
Allocated Revenues grew 93.4% y-o-y to GEL 81.5 million in 1H 2008, while
Allocated Recurring Costs increased by 81.6% y-o-y to GEL 38.7 million. NNOI
grew 105.5% y-o-y to GEL 42.8 million, contributing 58.1% to the consolidated
NNOI. Net Income grew 74.6% y-o-y to GEL 25.8 million, contributing 42.7% to the
bank's consolidated Net Income.
On a quarterly basis, Allocated Revenues in Q2 2008 grew 87.4% y-o-y to GEL 43.8
million, up 16.0% q-o-q, while Allocated Recurring Costs grew to GEL 20.6
million 73.9% y-o-y, up 14.4% q-o-q. Q2 2008 NNOI grew by 101.4% y-o-y to GEL
23.1 million, up 17.6% q-o-q, while quarterly Net Income in Q2 2008 increased by
66.0% y-o-y to GEL 12.8 million, a decrease of 0.9% q-o-q.
RB Gross Loans grew 110.0% y-o-y to GEL 921.9 million (up 43.1% year-to-date),
driven by the increased lending activity due to high demand for mortgages, car
loans, consumer loans, credit cards and other retail banking products. Allocated
Client Deposits grew 47.8% y-o-y to GEL 403.4 million (up 18.6% year-to-date).
(3) The Corporate Banking business unit was previously referred to as Corporate
and Investment Banking ('CIB')
Highlights
-- Increased the number of retail current accounts from approximately
705,000 at the beginning of the year to over 880,000 as at 30 June 2008.
-- Launched a new universal remote banking platform for multiple
communication channels, including Internet, voice telephony and mobile.
-- Jointly with Populi, the leading Georgian supermarket chain, launched a
co-branded credit card, Populi Credit, which is targeted at Populi or
any other convenience/grocery store customers; over 4,000 cards were
issued since the launch with a total approved credit limit of GEL 2.1
million.
-- Opened 17 new branches (service centers) in Georgia, bringing the total
number of branches to 134 by 30 June 2008.
-- Stepped up the issuance of credit cards, as the number of credit cards
issued reached approximately 68,800 in 1H 2008 compared with 22,701
credit cards issued in 1H 2007. In 1H 2008 over 144,000 debit cards were
issued, compared with approximately 164,500 debit cards issued during 1H
2007
-- Continued acquiring new merchants as the installed POS terminal
footprint grew to 2,452 compared wtih 1,594 at the end of 2007.
-- The total number of cards serviced by Georgian Card grew from 876,263 at
year end 2007 to approximately 1,054,080 by 30 June 2008, while the
number of transaction authorisations processed by Georgian Card in 1H
2008 grew 120.1% y-o-y to approximately 15.7 million. The volume of
transactions processed grew to GEL 1,035 million, up 149.7% y-o-y.
-- Continued investing in electronic banking channels; the number of ATMs
grew to 363 by 30 June 2008 (up from 250 at the end of 2007), number of
mobile banking users reached 42,119, up 6.1% from the beginning of the
year, and the number of registered Internet banking users grew 256.6%
y-o-y to over 200,000. In Q2 2008, Person- to- Person Money transfer
feature was added to Bank of Georgia's ATM network.
-- Increased car loan originations for 1H 2008 to GEL 41.4 million (up
158.5% y-o-y and 42.6% q-o-q). Car loans outstanding by 30 June 2008
stood at GEL 63.2 million, up 184.2% y-o-y (70.6% year-to-date).
-- Increased mortgage loan originations to GEL 164.4 million in 1H 2008 (up
156.8% y-o-y and 12.1% q-o-q). Mortgage loans outstanding on 30 June
2008 stood at GEL 283.1 million, up 167.7% y-o-y, (up 56.7%
year-to-date).
Wealth Management (WM)
Discussion of Results
Allocated Revenues for WM was GEL 2.9 million in 1H 2008, an increase of 35.2%
y-o-y. Net Income grew 14.0% y-o-y to GEL 1.0 million, contributing 1.6% to
consolidated Net Income.
WM Gross Loans stood at GEL 42.6 million an increase of 30.3% y-o-y and a
decrease of 3.6% year-to-date due to the repayment of several sizeable loans in
Q1 2008. Allocated Client Deposits increased by 44.6% y-o-y and up 17.5%
year-to-date to GEL 81.6 million.
-- Launched Club 24, a private club for Wealth Management clients in
Georgia. At Club 24 the Bank's WM clients have access to a full range of
banking products offered by Bank of Georgia and also benefit from the
club's dining and entertainment facilities, conference rooms, onsite
travel agent, real estate brokerage, tax advisory, insurance and a
concierge services.
-- Purchased office space and recruited head of the office for the Bank's
Wealth Management business in Tel Aviv, Israel. Registration of the
Bank's representative office with Bank of Israel is currently in
progress.
Ukraine
Discussion of Results
UBDP's Total Operating Income (Revenue) amounted to GEL 13.3 million in 1H 2008,
while Recurring Costs stood at GEL 14.3 million), resulting in a Net Loss of GEL
40,000.
On a quarterly basis, UBDP's Revenue increased by 3.7% compared to Q1 2008 to
GEL 6.8 million and Q2 2008 Net Income reached GEL 0.66 million, reversing Q1
2008's Net Loss of GEL 0.70 million.
UBDP's Total Assets grew by 2.9% year-to-date to GEL 360.3 million and Gross
Loans to Clients increased by 17.2% to GEL 265.4 million in 1H 2008. Client
Deposits dropped 31.7% year-to-date to GEL 180.2 million, mostly a result of the
departure of several corporate clients and increased competition for deposits in
1H 2008. UBDP's Total Assets increased to GEL 360.3 million (up 2.9%
year-to-date), while Total Liabilities reached GEL 292.1 million (up 3.0%
year-to-date).
Highlights
-- Shareholders' Meeting of UBDP held on 16 May 2008 approved the increase
of UBDP's capital from UAH 140 million to UAH 265 million through the
issue of 125 million new shares at UAH 1 per share.
-- Launched Micro and Small Enterprise ('MSE') Lending Program, which is
being implemented through a newly-established MSE department, which
currently employs 20 MSE lending managers.
-- Increased number of retail current accounts from approximately 44,000 at
YE 2007 to over 45,7000 as at 30 June 2008
-- Increased number of corporate current accounts from approximately 4,710
at YE 2007 to over 5,000 as at 30 June 2008
-- Launched the program for rationalization of UBDP operations, including
headcount and branch network. An ongoing headcount optimization resulted
in reduction of UBDP's staff from 814 at year-end 2007 to 781 on 30 June
2008 and closure of five unprofitable branches.
Galt & Taggart Securities (GTS)
Discussion of Results
Difficult capital markets in Georgia (GTS Index decreased by 30.9% in 1H 2008)
and Ukraine (the PFTS Index decreased by 34.6% in 1H08) had a negative impact on
Galt & Taggart Securities ('GTS'), Bank of Georgia's fully-owned investment
banking subsidiary. In 1H 2008 GTS Revenue of GEL 0.6 million represents a 94.8%
decrease y-o-y and a Net Loss of GEL 4.4 million, compared with 1H 2007 Net
Income of GEL 7.7 million. GTS' Revenue and Net Loss for 1H 2008 includes the
loss from trading activities of GEL 2.3 million, which reflects loss on GTS'
proprietary trading book in Ukraine. Due to its bearish outlook on markets for
the remainder of 2008, GTS largely disposed of its proprietary trading book in
July and August 2008. GTS also launched a cost optimization program, which it
expects to complete by the end of September.
In 1H 2008 Galt & Taggart Securities continued to hold the leading position in
equities trading in Georgia, with an approximate market share of 84.6% in terms
of trading volume and ranked #4 among broker-dealers with an approximately 7.0%
market share by equities trading volume in Ukraine. In 1H 2008 GTS opened
corporate finance offices in Belarus and Azerbaijan and establishing a trading
presence in Uzbekistan.
Asset Management (AM)
The following key entities are included in the AM segment: Galt & Taggart Asset
Management ('GTAM'), the bank's asset management arm, majority owned by the
Bank; JSC Galt & Taggart Capital ('GTC'), a GSE-listed consumer-and retail-
oriented investment company managed by GTAM in which the Bank owns 65.24% equity
stake; and JSC SB Real Estate ('SBRE'), a real estate investment company managed
by GTAM in which GTC owns 52.08% equity stake. The financial results of GTAM,
GTC and SBRE are fully consolidated in the Bank's financial results. As of 30
June 2008 Assets Under Management of Galt & Taggart Asset Management (GTAM)
stood at approximately US$149 million, an increase of 89.5% since the year end
2007 and 14.7% since 31 March 2008. AM revenues grew to GEL 14.1 million in 1H
2008, up 719.5% y-o-y. Net Income stood at GEL 11.6 million in 1H 2008 and
contributed 19.2% to the consolidated Net Income. A gain of GEL 11.2 million
from the revaluation of real estate properties owned by SBRE is included in AM
revenues and Net Income. The gain has been included in the Net Non-Recurring
Income line of the Bank's Income Statement for 1H 2008.
Insurance
Discussion of Results
Gross Premiums Written of Aldagi BCI, the bank's fully-owned Georgian insurance
subsidiary, increased by 75.0% y-o-y to GEL 29.8 million. Net Premiums Earned
grew 170.9% y-o-y to GEL 17.5 million. Revenues increased by 0.8% y-o-y to GEL
4.4 million. Net Loss for 1H 2008 equaled GEL 0.4 million. The loss was mainly
due to Aldagi BCI's participation in the state healthcare program for socially
vulnerable citizens and school teachers launched in Q4 2007, which brought
84,000 new clients to Aldagi BCI. The program which was originally scheduled to
end in September - December 2008, was extended for another year at increased
premiums per participant. Unlike other major Georgian insurance companies,
Aldagi BCI chose not to participate in a new similar program aimed at 550,000
socially vulnerable citizens announced in Q1 2008.
Highlights
-- Major new corporate client acquisitions include EnergoPro, a leading
energy distribution company in Georgia and Ashtrom, an Israel-based main
subcontractor of the Millennium Challenge Georgia's infrastructure
projects in Georgia.
-- Opened two new branch of Aldagi BCI's My Family Clinic in Tbilisi and
Batumi.
-- Purchased a 55.0% equity stake in a newly opened 35 bed hospital in
Kutaisi, the second largest city in Georgia.
-- Acquired a 19.5% equity interest in JSC GPC, the third largest pharmacy
chain in Georgia on 1 July 2008.
Comments
'We are pleased to report strong Q2 results despite operating in an increasingly
challenging market environment.
On the one hand, strict anti-inflationary measures successfully implemented by
the Georgian government, including a high benchmark interest rate and reduced
government spending, resulted in a slowdown in deposit formation in the Georgian
banking system and increased competition for deposits. On the other hand,
negative news flow from Abkhazia and South Ossetia, which started in April 2008
following the NATO summit in Bucharest, added to investors' concerns caused by
the global credit crisis and worrying macroeconomic news from several countries
in our region. This, in turn, presented further challenges to the Bank in terms
of the cost of wholesale funding and its availability. At the same time, in
Ukraine we witnessed a weakening macroeconomic environment, including a high
rate of inflation and liquidity shortages in the banking system.
Despite the challenging market environment, the Bank's Q2 2008 results were
strong and growth prospects were sound supported by our undisputed leadership
position in both corporate and retail banking segments. The strong development
of our retail business in Georgia was particularly satisfying. We also made good
progress in integrating our Ukrainian operation recruiting an experienced new
CEO for UBDP, as well as several other senior team members, rationalizing the
headcount and the branch network. We were also successful in entering a
promising Belarusian market through the acquisition of BNB.
Responding to the new realities in our target markets and globally, we made
adjustments to the Bank's strategy. In Q2 2008 the Bank's management
increasingly focused on maximizing the value of our key business units, such as
banking operation in Georgia, UBDP and BNB. Following the acquisition of BNB,
the Bank's international acquisition strategy was put on hold until 2009. We
also started reviewing of our positions in several non-core subsidiaries,
including Aldagi BCI, GTAM and GTC, with a view to minimizing our management
resource dedicated to these subsidiaries and optimizing their development
prospects. For example, in Q2 2008 we started searching for a strategic investor
for Aldagi BCI, and considered the sale of GTAM and a partial divestment of the
Bank's stake in GTC.
In the aftermath of the conflict between Russia and Georgia in August 2008,
sharp focus on the Bank's key asset - banking business in Georgia, is even more
important. Fortunately, the Bank's physical assets sustained a very limited
damage during the conflict. Two of our branches were damaged and three ATMs
destroyed. However, significant deposit outflow caused by the conflict and the
impact that the conflict will likely to have on the Bank's ability to raise
financing in the international capital markets in the short-term could have
negative implications for the Bank's short-and medium-term prospects.
Therefore, for the next several months the Bank's management's main focus shall
be on re-building our banking operations in Georgia and strengthening our
funding base.
-- Working with our corporate and retail clients whose ability to repay
loans has been temporarily impaired as the result of the conflict. In
each case our objective is to find a customer-focused solution, which
would allow our clients to resume servicing their loans on normal
schedule;
-- Working with our depositors, who withdrew their funds from Bank of
Georgia and other banks with the goal of restoring the Bank's deposit
base as soon as; and
-- Working with the International Financial Institutions who expressed
their confidence in the Georgian economy during the conflict and
committed to providing considerable amount of financing to Georgian
companies and the banking sector, in particular.
Finally, I would like to note the dedication, professionalism and discipline
demonstrated by our employees, who kept our branches working even during the
tensest days of the conflict', commented Nicholas Enukidze, Chairman of the
Supervisory Board.
In the opinion of Bank of Georgia's management, the report enables investors to
make an informed assessment of the results and activities in the group for the
period.
SEGMENT RESULTS
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*T
Total Operating Income
(Revenue) Growth y-o-y 1H 2008 Share 1H 2007 Share
------------------------------- ------------ ------------ -------- ------------ --------
Corporate & Investment Banking 48.9% 46,926 28.1% 31,512 33.8%
Retail Banking 93.4% 81,508 48.8% 42,143 45.2%
Wealth Management 35.2% 2,888 1.7% 2,137 2.3%
Ukraine NMF 13,248 7.9% n.a. n.a
Galt & Taggart Securities -94.8% 612 0.4% 11,850 12.7%
Asset Management 719.5% 14,081 8.4% 1,718 1.8%
Insurance 0.8% 4,400 2.6% 4,364 4.7%
Corporate Center/Eliminations NMF 3,353 2.0% (516) -0.6%
------------------------------- ------------ ------------ -------- ------------ --------
Total Operating Income
(Revenue) 79.2% 167,016 100.0% 93,207 100.0%
------------------------------- ------------ ------------ -------- ------------ --------
Total Recurring Operating Costs
------------------------------- ------------ ------------ -------- ------------ --------
Corporate & Investment Banking 59.3% 14,198 15.2% 8,914 17.9%
Retail Banking 81.6% 38,699 41.5% 21,311 42.7%
Wealth Management 56.6% 1,333 1.4% 851 1.7%
Ukraine NMF 14,266 15.3% n.a n.a
Galt & Taggart Securities 168.6% 5,929 6.4% 2,207 4.4%
Asset Management 91.0% 4,183 4.5% 2,190 4.4%
Insurance 30.5% 4,429 4.7% 3,395 6.8%
Corporate Center/Eliminations -6.5% 10,303 11.0% 11,016 22.1%
------------------------------- ------------ ------------ -------- ------------ --------
Total Recurring Operating Costs 87.1% 93,339 100.0% 49,885 100.0%
------------------------------- ------------ ------------ -------- ------------ --------
Net Income
------------------------------- ------------ ------------ -------- ------------ --------
Corporate & Investment Banking 49.2% 22,881 38.0% 15,337 47.4%
Retail Banking 74.6% 25,754 42.7% 14,749 45.6%
Wealth Management 14.0% 985 1.6% 864 2.7%
Ukraine NMF (40) -0.1% n.a. n.a.
Galt & Taggart Securities NMF (4,407) -7.3% 7,713 23.8%
Asset Management NMF 11,564 19.2% (393) -1.2%
Insurance NMF (335) -0.6% 762 2.4%
Corporate Center/Eliminations NMF 3,849 6.4% (6,679) -20.6%
------------------------------- ------------ ------------ -------- ------------ --------
Net Income 86.2% 60,253 100.0% 32,352 100.0%
------------------------------- ------------ ------------ -------- ------------ --------
Basic EPS Contribution Growth y-o-y Contribution Share Contribution Share
------------------------------- ------------ ------------ -------- ------------ --------
Corporate & Investment Banking 25.1% 0.76 38.0% 0.61 47.4%
Retail Banking 46.4% 0.86 42.7% 0.58 45.6%
Wealth Management -4.4% 0.03 1.6% 0.03 2.7%
Ukraine NMF (0.00) -0.1% n.a. n.a.
Galt & Taggart Securities NMF (0.15) -7.3% 0.31 23.8%
Asset Management NMF 0.38 19.2% (0.02) -1.2%
Insurance NMF (0.01) -0.6% 0.03 2.4%
Corporate Center/Eliminations NMF 0.13 6.4% (0.26) -20.6%
------------------------------- ------------ ------------ -------- ------------ --------
Total 56.2% 2.00 100.0% 1.28 100.0%
------------------------------- ------------ ------------ -------- ------------ --------
*T
SEGMENT RESULTS CONT'D
-0-
*T
Total Operating Income Growth q-o-
(Revenue) Growth y-o-y Q2 2008 Share Q1 2008 Share Q2 2007 Share q
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Corporate & Investment
Banking 28.5% 22,841 26.6% 24,085 29.7% 17,778 34.1% -5.2%
Retail Banking 87.4% 43,782 51.0% 37,727 46.5% 23,359 44.8% 16.0%
Wealth Management -4.9% 1,247 1.5% 1,641 2.0% 1,311 2.5% -24.0%
Ukraine NMF 6,746 7.9% 6,503 8.0% - 0.0% n.a.
Galt & Taggart Securities NMF (1,006) -1.2% 1,617 2.0% 10,434 20.0% NMF
Asset Management 19.8% 1,678 2.0% 12,402 15.3% 1,401 2.7% -86.5%
Insurance 19.4% 2,600 3.0% 1,801 2.2% 2,177 4.2% 44.4%
Corporate
Center/Eliminations NMF 8,034 9.4% (4,681) -5.8% (4,308) -8.3% NMF
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Total Operating Income
(Revenue) 64.8% 85,921 100.0% 81,094 100.0% 52,152 100.0% 6.0%
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Total Recurring Operating
Costs
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Corporate & Investment
Banking 36.8% 7,230 14.8% 6,968 15.7% 5,287 18.9% 3.8%
Retail Banking 73.9% 20,647 42.3% 18,052 40.6% 11,871 42.4% 14.4%
Wealth Management 26.6% 677 1.4% 656 1.5% 535 1.9% 3.2%
Ukraine NMF 7,098 14.5% 7,168 n.a - 0.0% -1.0%
Galt & Taggart Securities 79.4% 2,130 4.4% 3,799 8.5% 1,187 4.2% -43.9%
Asset Management 11.7% 1,368 2.8% 2,815 6.3% 1,224 4.4% -51.4%
Insurance 49.9% 2,616 5.4% 1,812 4.1% 1,745 6.2% 44.3%
Corporate
Center/Eliminations 15.6% 7,095 14.5% 3,207 7.2% 6,140 21.9% 121.2%
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Total Recurring Operating
Costs 74.6% 48,861 100.0% 44,478 83.9% 27,988 100.0% 9.9%
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Net Income
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Corporate & Investment
Banking 57.4% 12,383 43.7% 10,498 32.9% 7,866 42.1% 18.0%
Retail Banking 66.0% 12,819 45.2% 12,936 40.5% 7,722 41.3% -0.9%
Wealth Management -50.7% 314 1.1% 670 2.1% 638 3.4% -53.1%
Ukraine NMF 657 2.3% (697) n.a. - 0.0% NMF
Galt & Taggart Securities NMF (2,553) -9.0% (1,854) -5.8% 7,396 39.6% 37.7%
Asset Management NMF 3,418 12.1% 8,147 25.5% (237) -1.3% -58.1%
Insurance -89.9% 36 0.1% (371) -1.2% 360 1.9% NMF
Corporate
Center/Eliminations NMF 1,261 4.5% 2,588 8.1% (5,056) -27.1% -51.3%
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Net Income 51.6% 28,335 100.0% 31,918 102.2% 18,690 100.0% -11.2%
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Growth q-o-
Basic EPS Contribution Growth y-o-y Contribution Share Contribution Share Contribution Share q
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Corporate & Investment
Banking 28.8% 0.40 44.1% 0.36 32.9% 0.31 42.1% 11.7%
Retail Banking 35.2% 0.41 45.4% 0.44 40.5% 0.31 41.3% -6.7%
Wealth Management -61.3% 0.01 1.1% 0.02 2.1% 0.03 3.4% -57.3%
Ukraine NMF 0.02 2.5% (0.02) n.a. - 0.0% NMF
Galt & Taggart Securities NMF (0.08) -9.1% (0.06) -5.8% 0.29 39.6% 30.8%
Asset Management NMF 0.11 11.6% 0.28 25.5% (0.01) -1.3% -62.1%
Insurance NMF 0.00 0.2% (0.01) -1.2% 0.01 1.9% NMF
Corporate
Center/Eliminations NMF 0.04 4.3% 0.09 8.1% (0.20) -27.1% -55.6%
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
Total 23.0% 0.91 100.0% 1.09 102.2% 0.74 100.0% -16.7%
-------------------------- ------------ ------------ -------- ------------ -------- ------------ -------- -----------
*T
SEGMENT RESULTS CONT'D
-0-
*T
Total Assets Growth y-o-y 1H 2008 Share 1H 2007 Share
----------------------------- ------------- ------------ -------- ------------ --------
Corporate & Investment
Banking 49.8% 1,451,055 42.7% 968,859 50.5%
Retail Banking 103.8% 1,509,137 44.4% 740,564 38.6%
Wealth Management 27.1% 70,060 2.1% 55,125 2.9%
Ukraine NMF 360,276 10.6% n.a. NMF
Galt & Taggart Securities 100.3% 105,627 3.1% 52,722 2.7%
Asset Management 120.9% 117,629 3.5% 53,239 2.8%
Insurance 60.9% 71,084 2.1% 44,189 2.3%
Corporate Center/Eliminations NMF (284,160) -8.4% 3,135 0.2%
----------------------------- ------------- ------------ -------- ------------ --------
Total Assets 77.3% 3,400,708 100.0% 1,917,833 100.0%
----------------------------- ------------- ------------ -------- ------------ --------
Loans to Clients, Gross
----------------------------- ------------- ------------ -------- ------------ --------
Corporate & Investment
Banking 54.3% 880,574 41.8% 570,618 53.9%
Retail Banking 110.0% 921,933 43.8% 439,112 41.5%
Wealth Management 30.3% 42,627 2.0% 32,712 3.1%
Ukraine NMF 265,360 12.6% n.a. n.a.
Galt & Taggart Securities NMF - 0.0% - 0.0%
Asset Management NMF - 0.0% - 0.0%
Insurance NMF - 0.0% - -
Corporate Center/Eliminations NMF (3,750) -0.2% 16,756 1.6%
----------------------------- ------------- ------------ -------- ------------ --------
Total Loans to Clients 98.9% 2,106,744 100.0% 1,059,197 100.0%
----------------------------- ------------- ------------ -------- ------------ --------
Total Liabilities
----------------------------- ------------- ------------ -------- ------------ --------
Corporate & Investment
Banking 47.4% 1,159,402 44.3% 786,613 52.0%
Retail Banking 80.3% 899,135 34.3% 498,748 32.9%
Wealth Management 42.6% 104,433 4.0% 73,233 4.8%
Ukraine NMF 292,064 11.2% n.a. n.a.
Galt & Taggart Securities 166.6% 54,232 2.1% 20,342 1.3%
Asset Management 21.4% 34,878 1.3% 28,734 1.9%
Insurance 29.5% 52,231 2.0% 40,346 2.7%
Corporate Center/Eliminations NMF 21,284 0.8% 65,810 4.3%
----------------------------- ------------- ------------ -------- ------------ --------
Total Liabilities 72.9% 2,617,659 100.0% 1,513,826 100.0%
----------------------------- ------------- ------------ -------- ------------ --------
Client Deposits
----------------------------- ------------- ------------ -------- ------------ --------
Corporate Banking 38.4% 681,546 48.8% 492,580 59.5%
Retail Banking 47.8% 403,427 28.9% 272,899 33.0%
Wealth Management 44.5% 81,594 5.8% 56,448 6.8%
Ukraine NMF 180,212 12.9% n.a. n.a.
Galt & Taggart Securities 702.7% 48,599 3.5% 6,054 0.7%
Asset Management NMF - 0.0% - 0.0%
Insurance NMF - 0.0% - 0.0%
Corporate Center/Eliminations NMF - 0.0% - 0.0%
----------------------------- ------------- ------------ -------- ------------ --------
Total Client Deposits 68.5% 1,395,376 100.0% 827,981 100.0%
----------------------------- ------------- ------------ -------- ------------ --------
Book Value Per Share Growth y-o-y Contribution Share Contribution Share
----------------------------- ------------- ------------ -------- ------------ --------
Corporate & Investment
Banking 29.5% 9.33 37.2% 7.21 45.1%
Retail Banking 104.2% 19.52 77.9% 9.56 59.9%
Wealth Management 53.6% -1.10 -4.4% -0.72 -4.5%
Ukraine NMF 2.18 8.7% n.a. n.a.
Galt & Taggart Securities 28.5% 1.64 6.6% 1.28 8.0%
Asset Management 173.3% 2.65 10.6% 0.97 6.1%
Insurance 297.1% 0.60 2.4% 0.15 1.0%
Corporate Center/Eliminations 294.4% -9.77 -39.0% -2.48 -15.5%
----------------------------- ------------- ------------ -------- ------------ --------
Book Value Per Share 56.9% 25.06 100.0% 15.97 100.0%
----------------------------- ------------- ------------ -------- ------------ --------
*T
1H 2008 INCOME STATEMENT DATA
-0-
*T
Period Ended 1H 2008 1H 2007 Growth(3)
Consolidated, IFRS Based US$(1) GEL US$(2) GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited)
Interest Income 138,770 196,777 59,377 99,130 98.5%
Interest Expense 64,300 91,177 25,267 42,183 116.1%
Net Interest Income 74,471 105,599 34,110 56,946 85.4%
Fee & Commission Income 17,088 24,230 7,834 13,079 85.3%
Fee & Commission Expense 2,744 3,890 932 1,555 150.2%
Net Fee & Commission Income 14,344 20,340 6,903 11,524 76.5%
Income From Documentary Operations 2,988 4,237 1,807 3,016 40.5%
Expense On Documentary Operations 647 917 601 1,003 -8.6%
Net Income From Documentary Operations 2,341 3,320 1,206 2,013 64.9%
Net Foreign Currency Related Income 16,665 23,631 6,197 10,346 128.4%
Net Insurance Income 2,379 3,373 2,110 3,523 -4.2%
Brokerage Income 2,003 2,841 911 1,521 86.7%
Asset Management Income 629 892 - - NMF
Realized Net Investment Gains (Losses) (528) (748) 1,840 3,072 -124.4%
Other 5,477 7,767 2,552 4,261 82.3%
Net Other Non-Interest Income 9,961 14,125 7,414 12,377 14.1%
Net Non-Interest Income 43,312 61,416 21,719 36,261 69.4%
Total Operating Income (Revenue) 117,782 167,016 55,829 93,207 79.2%
Personnel Costs 37,369 52,989 18,195 30,377 74.4%
Selling, General & Administrative Costs 16,435 23,305 5,934 9,906 135.3%
Procurement & Operations Support
Expenses 4,475 6,346 2,693 4,496 41.1%
Depreciation & Amortization 6,131 8,694 2,540 4,241 105.0%
Other Operating Expenses 1,415 2,006 518 866 131.8%
Total Recurring Operating Costs 65,825 93,339 29,880 49,885 87.1%
Normalized Net Operating Income 51,958 73,676 25,949 43,322 70.1%
Net Non-Recurring Income (Costs) 8,365 11,862 1,157 1,932 513.9%
Profit Before Provisions 60,323 85,538 27,106 45,254 89.0%
Net Provision Expense 10,328 14,645 2,877 4,803 204.9%
Pre-Tax Income 49,995 70,893 24,230 40,452 75.3%
Income Tax Expenses 7,504 10,640 4,851 8,099 31.4%
Net Income 42,491 60,253 19,379 32,352 86.2%
Weighted Average Number of Shares
Outstanding (000s) 30,106 25,258 19.2%
Fully Diluted Number of Shares Period End
(000s) 31,248 27,248 14.7%
EPS (Basic) 1.41 2.00 0.77 1.28 56.3%
EPS (Fully Diluted) 1.36 1.93 0.71 1.19 62.4%
*T
(1 )Converted to U.S. dollars for convenience using a period-end exchange rate
of GEL 1.4180 per U$S1.00, such rate being the official Georgian Lari to U.S.
dollar period-end exchange rate as reported by the National Bank of Georgia as
at 30 June 2008
(2) Converted to U.S. dollars for convenience using a period-end exchange rate
of GEL 1.6695 per U$S1.00, such rate being the official Georgian Lari to U.S.
dollar period-end exchange rate as reported by the National Bank of Georgia as
at 30 June 2007
(3)Growth calculations based on GEL values
(4) Not meaningful
Q2 2008 INCOME STATEMENT DATA
-0-
*T
Period Ended Q2 2008 Q1 2008 Growth(3) Q2 2007 Growth
Consolidated, IFRS Based US$(1) GEL US$(2) GEL Q-O-Q US$(4) GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited)
Interest Income 73,481 104,196 62,724 92,580 12.5% 33,589 56,076 85.8%
Interest Expense 34,106 48,362 29,007 42,815 13.0% 15,080 25,175 92.1%
Net Interest Income 39,375 55,834 33,716 49,765 12.2% 18,509 30,901 80.7%
Fee & Commission Income 8,787 12,460 7,975 11,771 5.9% 3,990 6,661 87.1%
Fee & Commission Expense 1,619 2,296 1,080 1,594 44.1% 636 1,063 116.1%
Net Fee & Commission Income 7,167 10,163 6,895 10,177 -0.1% 3,353 5,598 81.5%
Income From Documentary
Operations 1,615 2,290 1,319 1,947 17.6% 1,105 1,845 24.1%
Expense On Documentary Operations 294 417 339 500 -16.6% 301 503 -17.1%
Net Income From Documentary
Operations 1,321 1,873 980 1,447 29.4% 804 1,342 39.6%
Net Foreign Currency Related
Income 7,338 10,405 8,961 13,226 -21.3% 3,636 6,071 71.4%
Net Insurance Income 1,224 1,736 1,109 1,638 6.0% 859 1,434 21.0%
Brokerage Income 1,104 1,566 864 1,275 22.9% 306 512 206.1%
Asset Management Income 174 246 438 646 -61.9% - - NMF(5)
Realized Net Investment Gains
(Losses) -265 (375) -253 (373) 0.7% 1,797 3,000 -112.5%
Other 3,154 4,472 2,232 3,294 35.8% 1,973 3,294 35.8%
Net Other Non-Interest Income 5,392 7,645 4,390 6,480 18.0% 4,936 8,240 -7.2%
Net Non-Interest Income 21,218 30,087 21,226 31,329 -4.0% 12,729 21,251 41.6%
Total Operating Income (Revenue) 60,593 85,921 54,942 81,094 6.0% 31,238 52,152 64.8%
Personnel Costs 19,224 27,260 17,432 25,729 6.0% 10,471 17,481 55.9%
Selling, General & Administrative
Costs 8,463 12,001 7,659 11,304 6.2% 3,293 5,497 118.3%
Procurement & Operations Support
Expenses 2,286 3,242 2,103 3,104 4.5% 1,393 2,326 39.4%
Depreciation & Amortization 3,289 4,664 2,730 4,029 15.8% 1,363 2,276 105.0%
Other Operating Expenses 1,195 1,695 211 312 443.9% 245 408 314.9%
Total Recurring Operating Costs 34,458 48,862 30,134 44,478 9.9% 16,765 27,988 74.6%
Normalized Net Operating Income 26,135 37,059 24,808 36,617 1.2% 14,473 24,163 53.4%
Net Non-Recurring Income (Costs) 2,393 3,394 5,737 8,468 -59.9% 1,180 1,969 72.3%
Profit Before Provisions 28,528 40,453 30,545 45,085 -10.3% 15,653 26,133 54.8%
Net Provision Expense 5,073 7,194 5,048 7,451 -3.4% 1,669 2,786 158.2%
Pre-Tax Income 23,455 33,259 25,497 37,634 -11.6% 13,984 23,347 42.5%
Income Tax Expenses 3,473 4,924 3,873 5,716 -13.8% 2,790 4,658 5.7%
Net Income 19,982 28,335 21,625 31,918 -11.2% 11,194 18,689 51.6%
Weighted Average Number of Shares
Outstanding (000s) 31,247 29,237 6.9% 25,289 23.6%
Fully Diluted Number of Shares Period
End (000s) 31,248 31,244 0.01% 27,248 14.7%
EPS (Basic) 0.64 0.91 0.74 1.09 -16.9% 0.44 0.74 22.7%
EPS (Fully Diluted) 0.64 0.91 0.69 1.02 -11.2% 0.44 0.74 22.8%
*T
(1 )Converted to U.S. dollars for convenience using a period-end exchange rate
of GEL 1.4180 per U$S1.00, such rate being the official Georgian Lari to U.S.
dollar period-end exchange rate as reported by the National Bank of Georgia as
at 30 June 2008
(2 )Converted to U.S. dollars for convenience using a period-end exchange rate
of GEL 1.4760 per US$1.00, such rate being the official Georgian Lari to U.S.
dollar period-end exchange rate as reported by the National Bank of Georgia as
at 31 March 2008
(3) Growth calculations based on GEL values
(4)Converted to U.S. dollars for convenience using a period-end exchange rate of
GEL 1.6695 per U$S1.00, such rate being the official Georgian Lari to U.S.
dollar period-end exchange rate as reported by the National Bank of Georgia as
at 30 June 2007
(5) Not meaningful
BALANCE SHEET DATA
-0-
*T
30-Jun-08 Growth(2) 31-Dec-07 Growth(2) 30-Jun-07
Consolidated, IFRS Based US$(1) GEL YTD US$(3) GEL Y-O-Y US$(4) GEL
000s, unless otherwise noted (Unaudited) (Audited) (Unaudited)
Cash & Cash Equivalents 110,338 156,460 -57.7% 232,642 370,273 61.4% 58,054 96,922
Loans & Advances To Credit
Institutions 271,852 385,487 102.8% 119,413 190,057 54.4% 149,545 249,666
Mandatory Reserve With
NBG/NBU 66,263 93,962 -35.0% 90,872 144,631 43.4% 39,254 65,534
Other Accounts With NBG/NBU 65,179 92,424 160.4% 22,303 35,497 20.2% 46,073 76,918
Balances With & Loans To
Other Banks 140,410 199,102 1905.3% 6,238 9,929 85.7% 64,219 107,214
Available-For-Sale Securities 58,357 82,750 69.8% 30,616 48,729 1067.9% 4,244 7,085
Treasuries & Equivalents 12,689 17,993 -77.4% 50,111 79,757 -68.6% 34,288 57,244
Other Fixed Income Instruments 61,860 87,717 -22.2% 70,814 112,708 -62.6% 140,610 234,748
Gross Loans To Clients 1,485,715 2,106,744 20.2% 1,100,842 1,752,100 98.9% 634,440 1,059,197
Less: Reserve For Loan Losses (31,289) (44,368) 49.2% -18,689 -29,745 91.5% (13,878) (23,170)
Net Loans To Clients 1,454,426 2,062,376 19.7% 1,082,153 1,722,355 99.1% 620,561 1,036,027
Investments In Other Business
Entities, Net 103,516 146,786 264.5% 25,303 40,273 516.8% 14,255 23,799
Property & Equipment Owned,
Net 183,888 260,752 27.4% 128,585 204,656 119.7% 71,093 118,690
Intangible Assets Owned, Net 5,618 7,967 111.2% 2,370 3,772 168.2% 1,779 2,970
Goodwill 78,842 111,798 -0.4% 70,505 112,216 158.8% 25,880 43,206
Tax Assets - Current &
Deferred 752 1,066 -31.5% 978 1,557 -80.9% 1,273 2,125
Prepayments & Other Assets 56,106 79,559 18.3% 42,258 67,258 76.9% 27,164 45,350
Total Assets 2,398,242 3,400,708 15.1% 1,855,750 2,953,611 77.3% 1,148,747 1,917,832
Client Deposits 984,045 1,395,376 2.9% 851,644 1,355,476 68.5% 495,945 827,981
Deposits & Loans From Banks 88,125 124,962 89.9% 41,349 65,811 129.2% 32,651 54,510
Borrowed Funds 637,266 903,644 8.1% 525,248 835,984 73.0% 312,803 522,225
Issued Fixed Income Securities 3,333 4,726 -5.3% 3,137 4,993 258.4% 790 1,319
Insurance Related Liabilities 33,950 48,141 16.5% 25,968 41,330 89.0% 15,261 25,478
Tax Liabilities - Current &
Deferred 27,390 38,840 4.4% 23,378 37,209 203.1% 7,837 13,084
Accruals & Other Liabilities 71,912 101,971 86.0% 34,441 54,817 47.4% 41,466 69,228
Total Liabilities 1,846,022 2,617,659 9.3% 1,505,165 2,395,620 73.0% 906,753 1,513,825
Ordinary Shares 22,036 31,248 15.1% 17,061 27,155 23.5% 15,157 25,304
Share Premium 319,040 452,399 43.4% 198,175 315,415 81.3% 149,460 249,523
Treasury Shares (882) (1,251) -28.0% (1,091) (1,737) 2.4% (732) (1,222)
Retained Earnings 96,017 136,152 113.2% 40,122 63,858 117.2% 37,541 62,675
Revaluation & Other Reserves 43,619 61,852 -8.2% 42,318 67,354 96.8% 17,120 28,582
Net Income For The Period 42,491 60,253 -20.3% 47,526 75,642 100.8% 19,379 32,352
Shareholders' Equity Excluding
Minority Interest 522,322 740,653 35.2% 344,111 547,687 86.2% 237,924 397,214
Minority Interest 29,899 42,396 311.5% 6,474 10,304 524.1% 4,069 6,793
Total Shareholders' Equity 552,221 783,049 40.3% 350,585 557,991 93.6% 241,993 404,007
Total Liabilities &
Shareholders' Equity 2,398,243 3,400,708 15.1% 1,855,750 2,953,611 77.3% 1,148,746 1,917,832
Shares Outstanding 31,247,511 27,154,918 25,304,087
Book Value Per Share 17.67 25.06 21.4% 12.95 20.62 56.8% 9.56 15.97
*T
(1) Converted to U.S. dollars for the convenience using a period-end exchange
rate of GEL 1.4180 per US$1.00, such exchange rate being the official Georgian
Lari to U.S. dollar period-end exchange rate as reported by the National Bank of
Georgia on 30 June 2008
(2) Growth calculations based on GEL values
(3) Converted to U.S. dollars for the convenience using a period-end exchange
rate of GEL 1.5916 per US$1.00, such exchange rate being the official Georgia
Lari to U.S. dollar period-end exchange rate as reported by the National Bank of
Georgia on 31 December 2007
(4) Converted to U.S. dollars for the convenience using a period-end exchange
rate of GEL 1.6695 per US$1.00, such exchange rate being the official Georgia
Lari to U.S. dollar period-end exchange rate as reported by the National Bank of
Georgia on 30 March 2007
KEY RATIOS
-0-
*T
1H 2008 1H 2007
Profitability Ratios
------------------------------------------------------------------------------- --------- ---------
ROAA( 1), Annualised 3.8% 3.9%
------------------------------------------------------------------------------- --------- ---------
ROA 3.5% 3.4%
------------------------------------------------------------------------------- --------- ---------
ROAE(2), Annualised 17.3% 16.6%
------------------------------------------------------------------------------- --------- ---------
ROE 15.4% 16.0%
------------------------------------------------------------------------------- --------- ---------
Interest Income To Average Interest Earning Assets (3), Annualised 16.3% 14.6%
------------------------------------------------------------------------------- --------- ---------
Cost Of Funds (4), Annualised 8.0% 7.2%
------------------------------------------------------------------------------- --------- ---------
Net Spread (5) 8.3% 7.5%
------------------------------------------------------------------------------- --------- ---------
Net Interest Margin (6), Annualised 8.7% 8.4%
------------------------------------------------------------------------------- --------- ---------
Net Interest Margin Normalized (35), Annualised 8.7% 8.4%
------------------------------------------------------------------------------- --------- ---------
Loan Yield (7), Annualised 19.2% 21.0%
------------------------------------------------------------------------------- --------- ---------
Interest Expense To Interest Income 46.3% 42.6%
------------------------------------------------------------------------------- --------- ---------
Net Non-Interest Income To Average Total Assets, Annualised 3.9% 4.4%
------------------------------------------------------------------------------- --------- ---------
Net Non-Interest Income To Revenue (8) 36.8% 38.9%
------------------------------------------------------------------------------- --------- ---------
Net Fee And Commission Income To Average Interest Earning Assets (9),
Annualised 1.7% 1.7%
------------------------------------------------------------------------------- --------- ---------
Net Fee And Commission Income To Revenue 12.2% 12.4%
------------------------------------------------------------------------------- --------- ---------
Operating Leverage (10) 9.3% 13.9%
------------------------------------------------------------------------------- --------- ---------
Total Operating Income (Revenue) To Total Assets, Annualised 9.8% 9.7%
------------------------------------------------------------------------------- --------- ---------
Recurring Earning Power (11), Annualised 5.4% 7.0%
------------------------------------------------------------------------------- --------- ---------
Net Income To Revenue 36.1% 34.7%
------------------------------------------------------------------------------- --------- ---------
Efficiency Ratios
------------------------------------------------------------------------------- --------- ---------
Operating Cost To Average Total Assets (12), Annualised 5.9% 4.5%
------------------------------------------------------------------------------- --------- ---------
Cost To Average Total Assets (13), Annualised 5.1% 5.8%
------------------------------------------------------------------------------- --------- ---------
Cost / Income (14) 48.8% 51.4%
------------------------------------------------------------------------------- --------- ---------
Cost / Income, Normalized (37) 55.9% 53.5%
------------------------------------------------------------------------------- --------- ---------
Cost/Income Distributed Non-Recurring 53.0% 51.5%
------------------------------------------------------------------------------- --------- ---------
Cost / Income, Bank of Georgia, Standalone (15) 43.0% 48.3%
------------------------------------------------------------------------------- --------- ---------
Cost/Income, Normalized, Bank of Georgia, Standalone 43.7% 50.7%
------------------------------------------------------------------------------- --------- ---------
Cash Cost / Income 43.6% 46.9%
------------------------------------------------------------------------------- --------- ---------
Total Employee Compensation Expense To Revenue (16) 31.7% 32.6%
------------------------------------------------------------------------------- --------- ---------
Total Employee Compensation Expense To Cost 65.0% 63.3%
------------------------------------------------------------------------------- --------- ---------
Total Employee Compensation Expense To Average Total Assets, Annualised 3.3% 3.7%
------------------------------------------------------------------------------- --------- ---------
Liquidity Ratios
------------------------------------------------------------------------------- --------- ---------
Net Loans To Total Assets (17) 60.6% 54.0%
------------------------------------------------------------------------------- --------- ---------
Average Net Loans To Average Total Assets 58.4% 52.7%
------------------------------------------------------------------------------- --------- ---------
Interest Earning Assets To Total Assets 75.1% 82.3%
------------------------------------------------------------------------------- --------- ---------
Average Interest Earning Assets To Average Total Assets 76.0% 81.6%
------------------------------------------------------------------------------- ---------
Liquid Assets To Total Assets (18) 18.7% 30.2%
------------------------------------------------------------------------------- --------- ---------
Net Loans To Client Deposits 147.8% 125.1%
------------------------------------------------------------------------------- --------- ---------
Average Net Loans To Average Client Deposits 136.2% 129.7%
------------------------------------------------------------------------------- --------- ---------
Net Loans To Total Deposits (19) 135.7% 117.4%
------------------------------------------------------------------------------- --------- ---------
Net Loans To Total Liabilities 78.8% 68.4%
------------------------------------------------------------------------------- --------- ---------
Total Deposits To Total Liabilities 58.1% 58.3%
------------------------------------------------------------------------------- --------- ---------
Client Deposits To Total Deposits 91.8% 93.8%
------------------------------------------------------------------------------- --------- ---------
Client Deposits To Total Liabilities 53.3% 54.7%
------------------------------------------------------------------------------- --------- ---------
Current Account Balances To Client Deposits 39.3% 56.4%
------------------------------------------------------------------------------- --------- ---------
Demand Deposits To Client Deposits 5.5% 10.0%
------------------------------------------------------------------------------- --------- ---------
Time Deposits To Client Deposits 55.2% 33.7%
------------------------------------------------------------------------------- --------- ---------
Total Deposits To Total Assets 44.7% 46.0%
------------------------------------------------------------------------------- --------- ---------
Client Deposits To Total Assets 41.0% 43.2%
------------------------------------------------------------------------------- --------- ---------
Client Deposits To Total Equity (Times) (20) 1.78 2.05
------------------------------------------------------------------------------- --------- ---------
Due From Banks / Due To Banks (21) 308.5% 458.0%
------------------------------------------------------------------------------- --------- ---------
Total Equity To Net Loans 38.0% 39.0%
------------------------------------------------------------------------------- --------- ---------
Leverage (Times) (22) 3.3 3.7
------------------------------------------------------------------------------- --------- ---------
*T
KEY RATIOS CONT'D
-0-
*T
1H 2008 1H 2007
Asset Quality
------------------------------------------------------------------------------ ----------- -----------
NPLs (in GEL) (23) 32,086 18,012
------------------------------------------------------------------------------ ----------- -----------
NPLs To Gross Loans To Clients (24) 1.5% 1.7%
------------------------------------------------------------------------------ ----------- -----------
Cost of Risk (25), Annualized 1.5% 1.1%
------------------------------------------------------------------------------ ----------- -----------
Cost of Risk Normalized (36), Annualized 1.5% 1.1%
------------------------------------------------------------------------------ ----------- -----------
Reserve For Loan Losses To Gross Loans To Clients (26) 2.1% 2.2%
------------------------------------------------------------------------------ ----------- -----------
NPL Coverage Ratio (27) 138.3% 128.6%
------------------------------------------------------------------------------ ----------- -----------
Equity To Average Net Loans To Clients 42.2% 46.1%
------------------------------------------------------------------------------ ----------- -----------
Capital Adequacy
------------------------------------------------------------------------------ ----------- -----------
Equity To Total Assets 23.0% 21.1%
------------------------------------------------------------------------------ ----------- -----------
BIS Tier I Capital Adequacy Ratio, consolidated (28) 25.0% 24.7%
------------------------------------------------------------------------------ ----------- -----------
BIS Total Capital Adequacy Ratio, consolidated (29) 25.8% 24.5%
------------------------------------------------------------------------------ ----------- -----------
NBG Tier I Capital Adequacy Ratio (30) 15.8% 15.8%
------------------------------------------------------------------------------ ----------- -----------
NBG Total Capital Adequacy Ratio (31) 15.1% 19.2%
------------------------------------------------------------------------------ ----------- -----------
Per Share Values
------------------------------------------------------------------------------ ----------- -----------
Basic EPS (GEL) (32) 2.00 1.28
------------------------------------------------------------------------------ ----------- -----------
Basic EPS (US$) 1.41 0.77
------------------------------------------------------------------------------ ----------- -----------
Fully Diluted EPS (GEL) (33) 1.93 1.19
------------------------------------------------------------------------------ ----------- -----------
Fully Diluted EPS (US$) 1.36 0.71
------------------------------------------------------------------------------ ----------- -----------
Book Value Per Share (GEL) (34) 25.06 15.97
------------------------------------------------------------------------------ ----------- -----------
Book Value Per Share (US$) 17.67 9.56
------------------------------------------------------------------------------ ----------- -----------
Ordinary Shares Outstanding - Weighted Average, Basic 30,106,091 25,258,491
------------------------------------------------------------------------------ ----------- -----------
Ordinary Shares Outstanding - Period End 31,247,511 25,304,087
------------------------------------------------------------------------------ ----------- -----------
Ordinary Shares Outstanding - Fully Diluted 31,247,511 27,248,162
------------------------------------------------------------------------------ ----------- -----------
Selected Operating Data
------------------------------------------------------------------------------ ----------- -----------
Full Time Employees (FTEs) 5,909 2,796
------------------------------------------------------------------------------ ----------- -----------
FTEs, Bank of Georgia Standalone 3,619 2,103
------------------------------------------------------------------------------ ----------- -----------
Total assets per FTE (23 )(GEL Thousands) 576 686
------------------------------------------------------------------------------ ----------- -----------
Total Assets per FTE, Bank of Georgia Standalone (GEL Thousands) 940 912
------------------------------------------------------------------------------ ----------- -----------
Number Of Active Branches 134 104
------------------------------------------------------------------------------ ----------- -----------
Number Of ATMs 363 166
------------------------------------------------------------------------------ ----------- -----------
Number Of Cards (Thousands) 847 432
------------------------------------------------------------------------------ ----------- -----------
Number Of POS Terminals 2,452 616
------------------------------------------------------------------------------ ----------- -----------
*T
NOTES TO KEY RATIOS
-0-
*T
Return On Average Total Assets (ROAA) equals Net Income of the period divided by quarterly
1 Average Total Assets for the same period;
Return On Average Total Equity (ROAE) equals Net Income of the period divided by quarterly
2 Average Total Equity for the same period;
Average Interest Earning Assets are calculated on a quarterly basis; Interest Earning Assets
include: Loans And Advances To Credit Institutions, Treasuries And Equivalents, Other Fixed
3 Income Instruments and Net Loans to Clients;
Cost Of Funds equals Interest Expense of the period divided by quarterly Average Interest
Bearing Liabilities; Interest Bearing Liabilities Include: Client Deposits, Deposits And
4 Loans From Banks, Borrowed Funds and Issued Fixed Income Securities;
5 Net Spread equals Interest Income To Average Interest Earning Assets less Cost Of Funds;
Net Interest Margin equals Net Interest Income of the period divided by quarterly Average
6 Interest Earning Assets of the same period;
Loan Yield equals Interest Income, less Net Provision Expense, divided by quarterly Average
7 Gross Loans To Clients;
8 Revenue equals Total Operating Income;
9 Net Fee And Commission Income includes Net Income From Documentary Operations of the period ;
10 Operating Leverage equals percentage change in Revenue less percentage change in Total Costs;
Recurring Earning Power equals Profit Before Provisions of the period divided by average
11 Total Assets of the same period;
12 Operating Cost equals Total Recurring Operating Costs;
13 Cost includes Total Recurring Operating Costs and Net Non-Recurring Costs (Income);
14 Cost/Income Ratio equals Costs of the period divided by Total Operating Income (Revenue);
Cost/ Income, Bank of Georgia, standalone, equals non-consolidated Total Costs of the bank of
15 the period divided by non-consolidated Revenue of the bank of the same period;
16 Total Employee Compensation Expense includes Personnel Costs;
17 Net Loans equal Net Loans To Clients;
Liquid Assets include: Cash And Cash Equivalents, Other Accounts With NBG, Balances With And
Loans To Other Banks, Treasuries And Equivalents and Other Fixed Income Securities as of the
18 period end and are divided by Total Assets as of the same date;
19 Total Deposits include Client Deposits and Deposits And Loans from Banks;
20 Total Equity equals Total Shareholders' Equity;
Due From Banks/ Due To Banks equals Loans And Advances To Credit Institutions divided by
21 Deposits And Loans From Banks;
Leverage (Times) equals Total Liabilities as of the period end divided by Total Equity as of
22 the same date;
NPLs (in GEL) equals total gross non-performing loans as of the period end; non-performing
23 loans are loans that have debts in arrears for more than 90 calendar days;
24 Gross Loans equals Gross Loans To Clients;
Cost Of Risk equals Net Provision For Loan Losses of the period, plus provisions for (less
recovery of) other assets, divided by quarterly average Gross Loans To
25 Clients over the same period;
Reserve For Loan Losses To Gross Loans To Clients equals reserve for loan losses as of the
26 period end divided by gross loans to clients as of the same date;
NPL Coverage Ratio equals Reserve For Loan losses as of the period end divided by NPLs as of
27 the same date;
BIS Tier I Capital Adequacy Ratio equals Tier I Capital as of the period end divided by Total
Risk Weighted Assets as of the same date, both calculated in accordance with the
28 requirements of Basel Accord I;
BIS Total Capital Adequacy Ratio equals Total Capital as of the period end divided by Total
Risk Weighted Assets as of the same date, both calculated in accordance with the
29 requirements of Basel Accord I;
NBG Tier I Capital Adequacy Ratio equals Tier I Capital as of the period end divided by Total
Risk Weighted Assets as of the same date, both calculated in accordance with the
30 requirements the National Bank of Georgia;
NBG Total Capital Adequacy Ratio equals Total Capital as of the period end divided by Total
Risk Weighted Assets as of the same date, both calculated in accordance with the
31 requirements of the National Bank of Georgia;
Basic EPS equals Net Income of the period divided by the weighted average number of
32 outstanding ordinary shares over the same period;
Fully Diluted EPS equals net income of the period divided by the number of outstanding
ordinary shares as of the period end plus number of ordinary shares in contingent
33 liabilities;
Book Value Per Share equals Equity as of the period end, plus Treasury Shares, divided by the
34 total number of Outstanding Ordinary shares as of the same date.
Net Interest Margin Normalized equals Net Interest Income of the period, less interest income
generated by non-performing loans through the date of their write-off, divided by quarterly
35 Average Interest Earning Assets of the same period;
Cost Of Risk Normalized equals Net Provision For Loan Losses of the period, less provisions
for the interest income generated by non-performing loans through the date of their write-
off, plus provisions for (less recovery of) other assets, divided by quarterly average Gross
36 Loans To Clients over the same period;
Cost / Income Normalized equals Recurring Operating Costs divided by Total Operating Income
37 (Revenue) for the same period
*T
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