Half-yearly Report

Bank of Georgia

1.84 GEL/US$ 30 June 2010
1.76 GEL/US$ 1 H 2010 average1.76 GEL/US$ 1 H 2010 average
1.80 GEL/US$ Q2 2010 average1.80 GEL/US$ Q2 2010 average
1.75 GEL/US$ 31 March 20101.75 GEL/US$ 31 March 2010
1.72 GEL/US$ Q1 2010 average1.72 GEL/US$ Q1 2010 average
1.66 GEL/US$ 30 June 20091.66 GEL/US$ 30 June 2009
1.66 GEL/US$ 1 H 2009 average1.66 GEL/US$ 1 H 2009 average
1.66 GEL/US$ Q2 2009 average1.66 GEL/US$ Q2 2009 average

JSC BANK OF GEORGIA REPORTS Q2 2010 AND 1H RESULTS

Millions, unless otherwise noted	Â	Q2 2010			Â	Growth q-o-q¹
Bank of Georgia (Consolidated, Unaudited, IFRS-based)		US$	Â	GEL
Total Operating Income (Revenue)³		44.9		82.8		9.1%
Recurring Operating Costs		25.9		47.8		3.3%
Normalised Net Operating Income⁴		19.0		35.0		18.1%
Net Non-Recurring Income / (Costs)		1.0		1.9		NMF
Profit/(Loss) Before Provisions		20.0		36.8		39.8%
Net Provision Expenses		7.1		13.1		77.6%
Net Income/(Loss)		10.6		19.5		16.3%
							Â
		1H 2010				Growth y-o-y²
		US$		GEL
Total Operating Income (Revenue)³		86.0		158.6		-2.2%
Recurring Operating Costs		51.0		94.1		3.4%
Normalised Net Operating Income(NNOI) ⁴		35.0		64.6		-9.4%
Net Non-Recurring Income / (Costs)		(0.8)		(1.4)		NMF
Profit/(Loss) Before Provisions		34.3		63.2		-10.7%
Net Provision Expenses		11.1		20.4		-71.9%
Net Income/(Loss)		19.7		36.2		NMF
							Â
Total Assets		1,882.6		3,471.9		19.4%
Loans To Clients, Net		1,070.1		1,973.5		12.8%
Client Deposits		812.6		1,498.5		46.2%
Tier I Capital Adequacy Ratio (BIS)⁵				19.6%
Total Capital Adequacy Ratio (BIS)⁶				32.5%
Tier I Capital Adequacy Ratio (NBG)				15.8%
Total Capital Adequacy Ratio (NBG)				14.5%

Bank of Georgia (LSE:BGEO)(GSE:GEB) (the â€œBankâ€), Georgiaâ€™s leading bank, announced today its Q2 2010 and 1H 2010 consolidated results (IFRS based, derived from management accounts), reporting a Q2 2010 Net Income of GEL 19.5 million and 1H 2010 Net Income of GEL 36.2 million.

Q2 2010 highlights

Consolidated Net Normalized Operating Income (NNOI) increased 18.1% q-o-q to GEL 35.0 million, up 2.1% y-o-y and Consolidated Profit Before Provisions increased 39.8% q-o-q to GEL 36.8 million, up 8.5% y-o-y
Net Interest Margin (NIM) improved from 8.0% in Q1 2010 to 8.3% in Q2 2010 as Cost of Funds declined from 8.6% in Q1 2010 to 8.3% in Q2 2010, as a result of decline in the Interest expense growth rate due to interest rate cuts on deposits
Positive consolidated operating leverage achieved as Revenue grew 9.1% q-o-q and Total Recurring Operating Cost lagged at 3.3% q-o-q growth. As a result, consolidated Cost/Income ratio declined to 55.5% in Q2 2010 from 65.3% in Q1 2010
Positive standalone operating leverage in Q2 2010 reached 8.4% q-o-q and Standalone Cost/Income ratio declined to 49.9% in Q2 2010 from 53.9% in Q1 2010
Consolidated gross loan portfolio grew 10.9% q-o-q to GEL 2,163.3 million, up 17.2% YTD and up 14.0% y-o-y
Consolidated Client Deposits grew 7.5% q-o-q to GEL 1,498.5 million, up 17.8% YTD and up 46.2% y-o-y
Extended approximately GEL 501.1 million, (up 149.4% y-o-y and up 40.5% q-o-q), in new loans to an estimated 21,500 clients (through credit cards, mortgages, consumer and other loans) and to small-and-medium sized companies and corporate clients
Bank of Georgia standalone NPLs declined 5.6% q-o-q to GEL 129.2 million, while BG Bankâ€™ (Ukraine) NPLs grew 45.6% q-o-q to GEL 41.9 million. Consolidated NPL coverage ratio stood at 109.3% in Q2 2010 compared to 102.6% in Q1 2010
The Balance Sheet growth since the beginning of the year in 1H 2010 resulted in 2.1% market share gain by assets, 1.1% market share gain by gross loans and 2.5% market share gain by client deposits⁷.

â€œBankâ€™s Q2 2010 results reflect the solid balance sheet growth during the quarter. Bankâ€™s loan portfolio grew by 10.9%, while Client Deposits grew by 7.5% on quarterly basis. Consequently, the Interest Income grew by 9.6% during the quarter. At the same time Interest Expense growth rate was significantly lower at 5.4% q-o-q. The q-o-q growth rate of Interest Expense slowed down because of interest rate cuts on deposits during the past nine months, which led to the decrease of Cost of Funds from 8.6% in Q1 2010 to 8.3% in Q2 2010. This also contributed to the improvement of NIM from 8.0% in Q1 2010 to 8.3% in Q2 2010 and a 9.1% quarterly growth of consolidated Revenue to GEL 82.8 million. The Recurring Operating Cost grew by only 3.3% q-o-q, despite the headcount increase and 9.7% growth in personnel costs, resulting in the positive operating leverage for the quarter. This translated into 18.1% q-o-q growth on NNOI to GEL 35.0 million, and to 16.3% q-o-q growth of consolidated Net Income to GEL 19.5 million. Last but not least, the Bankâ€™s consolidated ROAE increased to 12.5% in Q2 from 11.1% in Q1 2010â€, commented Giorgi Chiladze, Deputy Chief Executive Officer, Finance.

Q2 2010 summary of the Bankâ€™s consolidated results

In Q2 2010 the Bankâ€™s Total Operating Income (Revenue) increased 9.1% q-o-q to GEL 82.8 million, (up 2.7% y-o-y), due to 14.2% q-o-q growth of Net Interest Income to GEL 51.7 million (up 4.5% y-o-y), and 1.6% q-o-q growth of Net Non-Interest Income to GEL 31.1 million (down 0.1% y-o-y). The Net Interest Income growth rate was driven by the 9.6% q-o-q growth of Interest Income (GEL 104.1 million), which more than offset the 5.4% q-o-q increase in Interest Expense (GEL 52.4 million) that was affected by several rounds of deposit rate cuts in Georgia during previous quarters. NIM of 8.3% for the quarter strengthened compared to the NIM of 8.0% in Q1 2010. On a year-on-year basis, Interest Income grew by 10.1%, while Interest Expense increased by 16.3% y-o-y in Q2 2010 compared to Q2 2009, when the Bankâ€™s Client Deposits were down by 46.2% from the current level. In Q2 2010 The Bankâ€™s Net Non-Interest Income remained essentially flat compared to the same period last year and grew 1.6% to GEL 31.1 million compared to Q1 2010. The quarterly growth of Net Non-Interest Income in Q2 2010 was largely driven by the 20.5% q-o-q growth of Net Foreign Currency Related Income to GEL 8.8 million, a result of high FX volumes during the quarter and the 5.2% q-o-q growth of Net Fee and Commission Income to GEL 10.9 million, in line with the increased lending activity. Net Other Non-Interest Income decreased by 14.3% q-o-q, a result of the decline in Net Investment Gains by GEL 1.8 million in Q2 2010. The Bankâ€™s insurance operations grew during the quarter, posting Net Insurance Income of GEL 4.2 million, up 1.0% q-o-q.

Total Consolidated Recurring Operating Costs for the quarter increased by 3.3% q-o-q to GEL 47.8 million, (up 3.2% y-o-y), a result of 9.7% q-o-q increase in Personnel Costs due to the increase in headcount and 3.2% q-o-q decline in non-personnel expenses. NNOI for the quarter increased 18.1% q-o-q to GEL 35.0 million, while Cost/Income ratio decreased to 55.5% in Q2 2010 from 65.3% in Q1 2010.

The Bankâ€™s Consolidated Net Provision Expense for the quarter was GEL 13.1 million, up from Net Provision Expense of GEL 7.4 million in Q1 2010, with the increase largely attributed to the devaluation effect of Lari against US$ of GEL 5.0 million and the Georgian loan book growth effect of GEL 3.9 million. The increase of Net Provision Expense of BG Bank by GEL 3.5 million q-o-q to GEL 2.0 million also contributed to the increase of Consolidated Net Provision Expense during the quarter. Bank of Georgiaâ€™s Q2 2010 standalone Net Provision Expense of GEL 6.2 million declined 49.8% q-o-q due to the loan repayments by subsidiaries. Cost of Risk for the quarter grew to 2.5% from 1.6% in Q1 2010, respectively.

Net Provision Expense	Â	Consolidated					Â	Standalone
GEL thousands		Q2 2010	Â	Q1 2010	Â	Q-O-Q		Q2 2010	Â	Q1 2010	Â	Q-O-Q
Effect of Lari devaluation against US$		5,002		3,778		1,224		5,002		3,778		1,224
Effect of loan book growth in Georgia		3,944		4,237		(294)		3,944		4,237		(294)
Effect of subsidiary loan repayments		-		-		-		(3,988)		-		(3,988)
Ukraine (BG Bank) expense / (reversal)		1,956		(1,563)		3,519		-		-		-
Belarus (BNB) expense / (reversal)		234		421		(187)		-		-		-
Remaining expense / (reversal)		1,933		486		1,447		1,224		4,293		(3,069)
Net Provision Expense		13,069		7,360		5,709		6,181		12,309		(6,127)

On 30 June 2010 the Bankâ€™s Consolidated Total Assets stood at GEL 3,471.9 million, up 11.1% from 31 March 2010 and up 19.2% from 31 December 2009. As a result of the increase in lending activity in Q2 2010, the gross loan book increased by 10.9% q-o-q to GEL 2,163.3 million as of the end of the second quarter, up 14% y-o-y and up 17.2% YTD.

In Q2 2010 Loan Loss Reserves amounted to GEL 189.8 million or 8.8% of consolidated gross loan book, largely flat compared to 8.9% in Q1 2010. Consolidated Net Loans increased by 11.0% q-o-q (up 12.8% y-o-y and up 17.6% YTD) to GEL 1,973.5 million. Consolidated NPLs of GEL 173.7 million grew by 2.9% q-o-q, representing 8.0% of the consolidated gross loans as of 30 June 2010, down from the same ratio of 8.7% in Q1 2010. In Q2 2010, Bank of Georgia NPLs on a standalone basis amounted to GEL 129.2 million, down 5.6% q-o-q, NPLs of BG Bank stood at GEL 41.9 million, up 45.6% q-o-q and NPLs of BNB amounted to GEL 2.6 million, down 19.3% q-o-q.

Client deposits continued to grow during the quarter, resulting in the 7.5% q-o-q growth of the Bankâ€™s Total Client Deposits to GEL 1,498.5 million as of 30 June 2010, a 17.8% increase from 31 December 2009 and a 46.2% increase since 30 June 2009. As of 30 June 2010, the Bankâ€™s consolidated Net Loans/Client Deposits ratio stood at 131.7%, down from 170.6% same period last year.

The Bankâ€™s Borrowed funds stood at GEL 945.6 million. As of 31 July 2010, the outstanding Eurobonds maturing in February 2012 amounted to US$149 million, out of original US$ 200 million, following the gradual buy-backs by the Bank. The Bank is aiming to raise up to US$ 150 million of long-term wholesale funding from IFIs. In the context of wholesale funding strategy the Bank already signed agreements for US$ 50 million 5-year credit facilities with EBRD, as announced in August 2010.

1H 2010 Summary of the Bankâ€™s Consolidated Results

The Bank reported the Net Income of GEL 36.2 million for 1H 2010. In the 1H 2010, the Bankâ€™s Total Operating Income (Revenue) decreased 2.2% y-o-y to GEL 158.6 million, largely attributable to 4.9% y-o-y decrease in Net Interest Income to GEL 96.9 million. The decline is a result of lower average loan book in 1H 2010 compared to the average loan book in 1H 2009, higher average client deposits in 1H 2010 compared to the average client deposits in 1H 2009 and higher liquidity level in 1H 2010. Net Non-Interest Income of GEL 61.7 million increased by 2.2% y-o-y, mainly as a result of 12.3% growth of Net Other Non-Interest Income to GEL 20.0 million. In 1H 2010, Net Foreign Currency Related Income increased by 2.2% y-o-y to GEL 16.2 million, predominantly due to the high FX volumes in Georgia. The Bankâ€™s Net Fees and Commission Income decreased 6.8% y-o-y to GEL 21.2 million, while Net Income from Documentary Operations grew by 7.8% y-o-y to GEL 4.3 million.

The Bankâ€™s Net Provision Expense declined from GEL 72.8 million in 1H 2009 to GEL 20.4 million in 1H 2010. The Bank had Net Provision Expense of GEL 18.5 million in Georgia and GEL 0.4 million in Ukraine. The Bank reported the Net Income of GEL 36.2 million for 1H 2010 compared to the Net Income of GEL 0.8 million in 1H 2009.

The Bankâ€™s consolidated Book Value per Share on 30 June 2010 stood at GEL 20.73 (US$ 11.24), compared to GEL 19.53 (US$ 11.17) as at 31 March 2010 and GEL 19.12 (US$ 11.34) as of 31 December 2009.

JSC Bank of Georgia (Standalone) results

Bank of Georgia on a standalone basis reported Q2 2010 Net Income of GEL 24.0 million, which compares to the Standalone Net Income of GEL 12.8 million in Q1 2010 and GEL 0.9 million in Q2 2009. The increase in Net Income for the quarter reflects the healthy growth of the Bankâ€™s standalone Revenue and the decline in standalone Net Provision Expenses both on a quarter-on-quarter and year-on-year basis.

In Q2 2010, Total Operating Income amounted to GEL 68.7 million, up 15.7 % q-o-q (up 10.3% y-o-y). Net Interest Income grew 12.5% q-o-q to GEL 47.9 million, driven by 9.3 % q-o-q increase of Interest Income to GEL 95.6 million, outpacing the 6.2 % q-o-q growth of Interest Expense to GEL 47.6 million. Interest Income growth during the quarter was driven by the healthy loan book growth of the past two quarters, while interest expense growth rate slowed down compared to the previous quarters, benefiting from the interest rate cuts on deposits in Georgia. On a year-on-year basis, the 5.4% increase of Net Interest Income was predominantly related to the increase in loan book since the beginning of 2010. In Q2 2010 Net Non-Interest Income amounted to GEL 20.8 million, up 23.9% q-o-q and up 23.6 % y-o-y, with the growth mainly attributed to the 39.3 % q-o-q increase of the Net Foreign Currency Related Income to GEL 7.8 million and the 18.2% q-o-q growth of Net Fees and Commission Income to GEL 10.0 million, a result of increased FX income due to increase in volumes and increase in lending activity, respectively. On a standalone basis, Bank of Georgiaâ€™s Total Recurring Operating Costs increased 5.6 % q-o-q to GEL 32.5 million (up 9.4 % y-o-y), mostly due to the increase of the Personnel Costs driven by the headcount increase to GEL 17.2 million up 11.3% q-o-q (up 16.1% y-o-y), which more than offset a 0.2% q-o-q decrease of non-personnel costs on a standalone basis to GEL 15.3 million. On a standalone basis, Bank of Georgia achieved positive operating leverage of 8.4% on a consecutive q-o-q basis and 1.8% on a y-o-y basis.

The Bankâ€™s Net Provision Expense on a standalone basis declined from GEL 12.3 million in Q1 2010 to GEL 6.2 million in Q1 2010. Net Provision Expense was attributed mostly to the Bankâ€™s Retail Banking loans.

Bank of Georgiaâ€™s 1H 2010 standalone Total Operating Income on a standalone basis stood at GEL 128.1 million, almost flat compared to the Total Operating Income of GEL 128.9 million in 1H 2009. In 1H 2010 Interest Income (GEL 183.0 million) grew 3.7% y-o-y, compared to the 14.6% y-o-y growth rate of Interest Expense (GEL 92.5 million), as the Bankâ€™s average loan book was lower in 1H 2010 compared to 1H 2009, and the Bank maintained higher average client deposits and higher liquidity in 1H 2010 compared the same period last year. As a result, Net Interest Income in the 1H 2010 declined by 5.5% y-o-y to GEL 90.5 million. Net Non-Interest Income increased by 13.5% y-o-y to GEL 37.5 million, with the increase driven by 12.4% y-o-y increase of Net Foreign Currency Related Income to GEL 13.5 million and 14.2% y-o-y increase in Net Fees and Commission Income to GEL 18.5 million. Net Income from Documentary Operations reached GEL 4.2 million, up 4.7% y-o-y. The Total Recurring Cost of Bank of Georgia on a standalone basis increased by 8.1% y-o-y, driven by a 10.7% increase of Personnel Costs on a y-o-y basis, a result of increased headcount in line with the increase in lending activity during the period. Net Provision Expense in 1H 2010 reached GEL 18.5 million, compared to GEL 53.6 million Net Provision Expense in the 1H 2009, resulting in 1H 2010 Standalone Net Income of GEL 36.8 million, up 201.9% y-o-y.

As of 30 June 2010, Bank of Georgiaâ€™s Total Assets on a standalone basis stood at GEL 3.4 billion, up 11.5 % q-o-q, up 25.9% y-o-y and up 19.0% YTD. Gross loans increased 7.9 % q-o-q (up 15.5 % y-o-y and up 14.3% YTD) to GEL 2.0 billion driven by 7.0 % q-o-q increase of the corporate gross loan book to GEL 1,017.4 million and 9.8% q-o-q growth of retail gross book to GEL 929.6 million. NPLs stood at GEL 129.2 million and represented 6.5 % of the total gross loan book, a decrease from the same ratio of 7.4 % in Q1 2010, when the NPLs amounted to GEL 136.8 million on a standalone basis.

In Q2 2010, the Bankâ€™s Client Deposits in Georgia stood at GEL 1,346.6 million as compared to GEL 1,251.5 million in Q1 2010, GEL 1,126.8 million as of 31 December 2009 and GEL 909.3 million as of 30 June 2009. The growth of Client Deposits during the period was mostly driven by the increase of Wealth Management client deposits that reached GEL 212.3 million as of 30 June 2010, up 96.9 % y-o-y, up 17.5 % q-o-q and up 30.2% YTD. Retail Banking client deposits amounted to GEL 450.8 million, up 59.3 % y-o-y, up 8.7% q-o-q and up 15.2% YTD. Corporate Banking client deposits stood at GEL 683.5 million, up 31.8% y-o-y, up 4.2 % q-o-q and up 16.3% YTD.

As of 30 June 2010 Bank of Georgia on a standalone basis held market share of 35%, 33%, and 30% by total assets, gross loans, and client deposits, respectively in Georgia. Since the year-end 2009, the Bank gained market shares of 2.1% by assets, 1.1% by gross loans and 2.5% by client deposits⁷.

IT Projects Implementation Report

The Bank has made the following progress in implementing the IT projects launched in line with its goal to further improve efficiency through technological enhancements.

Completed the first phase of implementation of CRIF loan origination and credit scoring system, launched in Q2 2010. The first phase entailed the migration of retail overdraft product underwriting into the system that results in improvements in operational efficiency and speed of service.
Started to deploy Softscape, fully automated talent management system acquired in October 2009. Renewed 360Â° Employee Evaluation System has been launched in 1H 2010, with approximately 1,500 employees participating in this process as raters 130 key employees were assessed. Employee Administration module, which centralizes, consolidates and integrates all HR information is scheduled go-live in October 2010.
Deployed SafeWatch, AML (Anti-Money Laundering) screening software, in line with AML regulations. SafeWatch further improves the Bankâ€™s capability to filter banking transactions and customer database against the official watch lists.
Temenos T-24, core-banking system to replace existing system, launched in Q4 2009. Completed the following key stages:
- The initial build of the system was completed by Temenos team in Chennai in Q1 2010;
- The analysis of key business processes against T24 model bank functionality has been completed and keyÂ gaps have been identified;
- Initial analysis of the main interfaces undertaken to scope the integration efforts for implementation of T24 core system

However, due unsatisfactory and slow progress on subsequent phases of the project, Bank of Georgia has suspended its relationship with Temenos interation partner Foranx and is now in direct commercial and legal negotiation with Temenos with respect to the next steps. The project is currently on hold pending the completion of these discussions.

The business segment discussion set forth below is derived from IFRS-based management reports. Business segment results of RB, CB and WM represent Bank of Georgiaâ€™s standalone performance and do not include intercompany eliminations.

In 2010 the Bank introduced new model for standalone segment reporting. The comparative numbers for Q2 2009 business segment reporting have been adjusted respectively.

Retail Banking (RB)

GEL millions, unless otherwise noted	Â	Q2 2010	Â	Q1 2010	Â	Q2 2009	Â	Change Q-O-Q	Â	Change Y-O-Y
Total operating income (Revenue)		37.2		32.8		39.8		13.3%		-6.6%
Total recurring operating costs		21.0		20.2		20.2		3.9%		3.9%
Net income / (Loss)		1.9		2.1		(8.6)		-7.4%		NMF
Loans to clients, gross		929.6		846.6		860.7		9.8%		8.0%
Loans to clients, net		849.0		772.5		788.0		9.9%		7.7%
Client deposits		450.8		414.7		283.1		8.7%		59.3%

Discussion of results

RB Revenues increased 13.3 % q-o-q (down 6.6% y-o-y) to GEL 37.2 million, a result of the growth of all RB revenue items in Q2 2010. RB Net Interest Income increased by 11.6% q-o-q (down 11.3% y-o-y) to GEL 26.3 million, as RB Interest Income growth of 8.3% q-o-q outpaced the 4.7% q-o-q growth rate of RB Interest Expense. RB Net Non-Interest Income during the quarter increased by 17.6 % q-o-q (up 7.3% y-o-y) to GEL 10.8 million, mostly driven by 16.3% q-o-q increase of RB Net Fee and Commission Income to GEL 8.4 million (up 17.6%- y-o-y). RB Recurring Operating Costs increased by 3.9% q-o-q to GEL 21.0 million (up 3.9 % y-o-y), translating into a positive operating leverage for the quarter. RB Net Provision Expense amounted to GEL 12.6 million in Q2 2010 an increase from GEL 9.4 million, or 33.4%, compared to Q1 2010, the growth mostly attributable to the mortgage and credit card portfolios and the effect of 5.4% devaluation of Lari against US$ during the quarter. On a year-on-year basis, the Q2 2010 RB Net Provision Expense improved by 55.9%, reflecting the upturn of the operating environment. Net Income for Q2 2010 amounted to GEL 1.9 million, contributing 8.1 % to the standalone Net Income and 9.9% to the consolidated Net Income.

On a YTD basis, RB Revenues decreased 16.5 % y-o-y to GEL 69.9 million, driven predominantly by the 22.0% y-o-y decrease in RB Net Interest Income to GEL 49.9 million and 11.6% y-o-y growth of Net Fee and Commission income to GEL 15.7 million. 1H 2010 RB Recurring Operating Costs grew by 2.9% y-o-y to GEL 41.2 million, leading to the 36.9% y-o-y decrease of RB Profit Before Provisions. The Net Provision Expense for RB in 1H 2010 reached GEL 22.0 million, down 60.4% from 1H 2009.

RB gross loans increased 9.8% q-o-q to GEL 929.6 million (up 8.0 % y-o-y and up 15.2% YTD), as a result of a pick-up in the retail lending activity during 1H 2010. RB Client Deposits grew 19.9% YTD and 59.3 % y-o-y to GEL 450.8 million, driven primarily by the growth of time deposits.

Highlights

Launched new pilot branch concept with reduced back-office operations with a view to increase sales, branch effectiveness and speed of service.
Launched the American Express Blue Credit Card on the Georgian market on an exclusive basis in July 2010. AmEx Blue Credit Card is the third AmEx card launched by the Bank.
Issued 68,462 debit cards in Q2 2010 bringing the total debit cards outstanding to 459,408.
Issued 14,312 credit cards of which 7,046 American Express cards in Q2 2010. A total of 19,600 American Express cards were issued since the launch in November 2009. The total number of credit cards outstanding amounted to 74,510 as of 30 June 2010.
Outstanding number of RB clients reached 714,484 up 2.8 y-o-y%.
Acquired 643 new clients in Solo business line, Bank of Georgiaâ€™s mass affluent sub-brand. As of 30 June, the number of Solo clients reached 1,043.
Stepped up mortgage loan originations to GEL 45.9 million in Q2 2010 (up 77.9 % q-o-q) resulting in mortgage loans outstanding by 30 June 2010 of GEL 378.3 million, up 1.2% y-o-y and up 10.8% YTD.
Consumer loan originations of GEL 64.3 million (up 33.9% q-o-q and up 69.4% y-o-y) resulted in consumer loans outstanding in the amount of GEL 130.9 million as of 30 June 2010, down 9.3% y-o-y and up 14.8% YTD.
Micro loan originations of GEL 71.7 million (up 38.9 % q-o-q and up 327.2% y-o-y) resulted in micro loans outstanding in the amount of GEL 156.8 million as of 30 June 2010, up 54.8% y-o-y and up 58.6% YTD.
Car loan originations of GEL 5.0 million (up 80.7% q-o-q and up 49.0% y-o-y) resulted in car loans outstanding in the amount of GEL 52.5 million as of 30 June 2010, down 28.1% y-o-y and down 7.2% YTD.

Corporate Banking (CB)

GEL millions, unless otherwise noted	Â	Q2 2010	Â	Q1 2010	Â	Q2 2009	Â	Change Q-O-Q	Â	Change Y-O-Y
Total operating income (Revenue)		30.8		25.3		21.4		21.8%		44.2%
Total recurring operating costs		10.6		9.5		8.4		11.2%		26.4%
Net income		22.2		8.4		9.8		164.9%		126.0%
Loans to clients, gross		1,017.4		951.0		806.4		7.0%		26.2%
Loans to clients, net		963.0		890.0		767.0		8.2%		25.6%
Client deposits		683.5		656.1		518.4		4.2%		31.8%

Discussion of results

CB Revenues increased 21.8 % q-o-q to GEL 30.8 million (up 44.2% y-o-y). CB Net Interest Income increased by 18.0% q-o-q (up 41.6% y-o-y) to GEL 21.3 million, as CB Interest Expense (GEL 23.3 million) growth of 8.1% q-o-q lagged behind the 12.6% q-o-q growth of CB Interest Income (GEL 44.6 million) in Q2 1010. Net Non-Interest Income during the quarter increased by 31.2 % q-o-q (up 50.5% y-o-y) to GEL 9.5 million, mostly driven by 27.0% q-o-q increase of CB Net Fee and Commission Income to GEL 1.5 million (up 52.4%- y-o-y), reflecting the growth of CB loan book. CB Recurring Operating Costs increased by 11.2% q-o-q to GEL 10.6 million (up 26.4 % y-o-y), resulting in a positive operating leverage for the quarter. Reflecting the improved CB loan portfolio quality, CB Net Provision Reversal for the quarter amounted to GEL 6.4 as compared to the CB Net Provision Expense in Q1 2010 which amounted to GEL 5.4 million. Net Income for Q2 2010 amounted to GEL 22.2 million, contributing 92.6% to the standalone Net Income for the quarter.

On a YTD basis, CB Revenues increased 29.9% y-o-y to GEL 56.1 million, driven predominantly by the 28.7% y-o-y increase in CB Net Interest Income to GEL 39.3 million and 47.6% y-o-y growth of Net Foreign Currency Related Income to GEL 9.3 million. 1H 2010 CB Recurring Operating Costs grew by 23.2% y-o-y to GEL 20.1 million, resulting in a 35.3% y-o-y increase of CB Profit Before Provisions. The Net Provision Recovery for CB in 1H 2010 reached GEL 1.0 million as compared to GEL 3.4 million in 1H 2009.

CB Gross Loans increased 7.0% q-o-q to GEL 1,017.4 million (up 26.2 % y-o-y and 15.6% YTD), while CB Client Deposits grew 16.3% YTD and 31.8 % y-o-y to GEL 683.5 million.

Highlights

Major new corporate client acquisitions include Saqkabeli, electric cable producer and Karvasla, largest shopping mall, among others.
Increased the number of corporate clients using the bankâ€™s payroll services from 1,475as of Q1 2010 to 1,567 in Q2 2010. By 30 June 2010, the number of individual clients serviced through the corporate payroll programs administered by the bank increased from approximately 164,931 as of 30 June 2009 to over 167,499 as of 30 June 2010.
More than 5,000 new corporate accounts opened at the Bank in Q2 2010, bringing the total to over 164,800.
The recently restructured SME Unit grew its portfolio from GEL59.7 million in Q1 2010 to GEL 82.0 million in Q2 2010.
Intensified lending in the regions with a view of capturing growing potential in Adjara, Poti and other larger cities of Georgia. In 1H 2010, the regional portfolio increased by 60% since the beginning of the year.

Wealth Management (WM)

GEL millions, unless otherwise noted	Â	Q2 2010	Â	Q1 2010	Â	Q2 2009	Â	Change Q-O-Q	Â	Change Y-O-Y
Total operating income (Revenue)		0.8		1.3		1.2		-41.6%		-35.8%
Total recurring operating costs		0.9		1.0		1.1		-14.3%		-18.8%
Net income / (Loss)		(0.2)		2.3		(0.4)		NMF		NMF
Loans to clients, gross		36.3		40.6		49.7		-10.5%		-27.0%
Loans to clients, net		33.7		37.9		47.0		-11.0%		-28.3%
Client deposits		212.3		180.7		107.8		17.5%		96.9%

Discussion of results

In line with the Bankâ€™s WM strategy of deposit attraction, WM Client deposits grew to GEL 212.3 million, up 17.5% q-o-q, while WM Loan book decreased 10.5% q-o-q to GEL 36.3 million. As a result of the surge of the Client Deposit during the quarter, Interest Expense growth of 15.7% q-o-q to GEL 5.6 million outpaced the 1.9% q-o-q growth of Interest income to GEL 6.0 million, driving down the WM Revenues by 41.6% q-o-q (down 35.8% y-o-y) to GEL 755 thousand. The WM Net Non-Interest Income during the quarter increased by 41.4% q-o-q (up 8.9% y-o-y) to GEL 0.4 million, mostly driven by 61.3% q-o-q increase of Net WM Fee and Commission Income to GEL 122 thousand (up 47.3%- y-o-y) and 64.3% q-o-q increase in Net Foreign Currency Related Income to GEL 275 thousand (up 41.5% y-o-y). WM Total Recurring Operating Costs decreased by 14.3% q-o-q to GEL 898 thousand (down 18.8 % y-o-y). WM Net Provision Expense amounted to GEL 30 thousand in Q2 2010 compared to Q1 2010 Net Provision Reversal of GEL 2.5 million. Net Loss for Q2 2010 amounted to GEL 157 thousand compared to the Net Income of GEL 2.3 million in Q1 2010.

On a YTD basis, WM Revenues increased by 1.6 % y-o-y to GEL 2.0 million, driven predominantly by the 7.3% y-o-y increase in WM Net Non Interest Income to GEL 676 thousand that more than offset the 1.0% y-o-y decline of Net Interest Income. 1H 2010 WM Recurring Operating Costs declined by 7.6% y-o-y to GEL 1.9 million, leading to the WM Profit Before Provisions of GEL 99 thousand compared to the WM Pre-Provison Loss of GEL 148 thousand in 1H 2009. The Net Provision Reversal for WM in 1H 2010 reached GEL 2.5 million compared to the Net Provision Expense of GEL 1.4 million in 1H 2009.

Highlights

WM Assets under management reached GEL 235.7 million as of 30 June 2010, up from GEL 205.6 million as of 31 March 2010, or 14.6% q-o-q.
The number of WM clients amounted to 1,423 clients, of which 460 were non-resident WM clients, up from 341 non-resident WM clients as of 30 June 2009.

BG Bank (Ukraine)

GEL millions, unless otherwise noted	Â	Q2 2010	Â	Q1 2010	Â	Q2 2009	Â	Change Q-O-Q	Â	Change Y-O-Y
Total operating income (Revenue)		4.1		3.1		5.6		33.5%		-26.7%
Total recurring operating costs		4.2		4.0		4.6		7.1%		-7.5%
Net income / (Loss)		(1.7)		0.3		(10.8)		NMF		NMF
Loans to clients, gross		201.0		190.8		190.3		5.4%		5.6%
Loans to clients, net		143.4		131.9		151.3		8.7%		-5.2%
Client deposits		142.0		122.3		114.8		16.1%		23.6%

Discussion of results

In Q2 2010 BG Bankâ€™s Revenue amounted to GEL 4.1 million, up by 33.5% q-o-q (down 26.7% y-o-y). Recurring Costs stood at GEL 4.2 million, compared to GEL 4.0 million in Q1 2010 and down 7.5% y-o-y, a result of the cost-control measures that have been implemented by BG Bank in 2009. BG Bankâ€™s Net Provision Expense for the quarter amounted to GEL 2.0 million as compared to Net Provision Reversal of GEL 1.6 million in Q1 2010. In Q2 2010 BG Bank recorded Net Loss of GEL 1.7 million that compares to the Net Loss of GEL 10.8 million for the same period last year.

On a YTD basis, BG Bank reported a Net Loss of GEL 1.4 million, compared to the Net Loss of GEL 18.1 million in 1H 2009.

BG Bankâ€™s Total Assets increased by 12.8% q-o-q to GEL 215.2 million (up 4.7% y-o-y. In Q2 2010 gross loans to clients increased 5.4% q-o-q to GEL 201.0 million (up 5.6% y-o-y) and Loan Loss Reserves declined 2.1% q-o-q to GEL 57.6 million or 28.7% of BG Bankâ€™s gross loan book. As at 30 June 2010, BG Bankâ€™s NPLs stood at GEL 41.9 million, or 20.2% of BG Bankâ€™s gross loan book. The NPL coverage ratio stood at 137.3% as of 30 June 2010.

BG Bankâ€™s Client Deposits increased by 16.1% q-o-q to GEL 141.9 million, up 23.6% y-o-y. BG Bankâ€™s Total Liabilities stood at GEL 182.1 million in Q2 2010, up 16.0% y-o-y and up by 15.0% q-o-q.

Highlights

Continued the restructuring of BG Bank, reducing the headcount by further 115 full-time employees (FTEs) employees bringing the total number of FTEs to 278 as of 31 July 2010
Closed down one outlet bringing the total to 9 outlets

Belaruskiy Narodniy Bank, Belarus (BNB)

GEL millions, unless otherwise noted	Â	Q2 2010	Â	Q1 2010	Â	Q2 2009	Â	Change Q-O-Q	Â	Change Y-O-Y
Total operating income (Revenue)		3.0		2.9		1.7		1.6%		73.3%
Total recurring operating costs		2.0		1.8		1.5		12.1%		36.7%
Net income		0.6		0.5		0.2		5.9%		190.1%
Loans to clients gross		41.8		33.1		27.3		24.3%		50.2%
Loans to clients, net		39.7		31.1		26.2		28.0%		51.9%
Client deposits		15.7		11.6		16.2		35.9%		-3.2%

Discussion of results

In Q2 2010 BNBâ€™s Total Operating Income increased to GEL 3.0 million, up 1.6% q-o-q, mostly driven by the 1.8% q-o-q growth of Net Interest Income to GEL 2.3 million (up 146.5% y-o-y), a result of the growth of the BNBâ€™s loan book to GEL 41.8 million (up 24.3% q-o-q) in Q2 2010. BNBâ€™s Net Non-Interest Income increased by 1.0% q-o-q to GEL 624 thousand, as the 70.6% q-o-q growth of Net Fee and Commission Income to GEL 394 thousand more than offset the 50.0% decline in Net Foreign Currency Related Income for the quarter. In Q2 2010, BNBâ€™s Recurring Costs increased 12.1% q-o-q to GEL 2.0 million. BNBâ€™s Net Provision Expense for the quarter amounted to GEL 234.0 thousand as compared to GEL 421.0 thousand in Q1 2010. BNB posted Net Income of GEL 571.0 thousand as compared to Net Income of GEL 539.0 thousand in Q1 2010 and Net Income of GEL 196.8 thousand in Q2 2009.

On 30 June 2010 BNBâ€™s Total Assets stood at GEL 90.4 million, up 74.3% y-o-y. Client Deposits amounted to GEL 15.7 million, up 35.9% q-o-q. Total Liabilities of BNB stood at GEL 28.3 million, up 36.6% q-o-q.

Highlights

Increased the number of corporate clients by 6% to 1,256 as of 30 June 2010.
Increased the number of corporate clients using the BNBâ€™s payroll services by 40.5% to 177 as of 30 June 2010.
In July 2010, IFC became a minority shareholder by purchasing 19.99% equity interest in BNB. In addition, IFC extended a US$ 5 million loan to BNB that will support the loan book growth in 2H 2010.

Insurance

GEL millions, unless otherwise noted	Â	Q2 2010	Â	Q1 2010	Â	Q2 2009	Â	Change Q-O-Q	Â	Change Y-O-Y
Total operating income (Revenue)		4.8		4.6		6.3		4.4%		-23.9%
Total recurring operating costs		3.6		3.1		4.0		13.9%		-9.9%
Net income		0.9		1.1		1.7		-16.6%		-47.9%
Gross premiums written		16.8		19.0		15.6		-11.7%		7.4%

Discussion of results

Standalone Revenue of Aldagi BCI (ABCI), the Bankâ€™s wholly-owned insurance subsidiary, increased by 4.4% q-o-q to GEL 4.8 million, impacted by the growth in both corporate and consumer lines of business, with standalone Gross Premiums Written up 7.4% y-o-y to GEL 16.8 million. Standalone Operating Costs were GEL 3.6 million, down 9.9% y-o-y. Total Insurance Assets amounted to GEL 84.7 million, while Total Insurance Liabilities reached GEL 65.4 million as at 30 June 2010.

Highlights

Number of retail clients exceeded 211,800 as of the end of the quarter.
Launched Agency Network, for the first time in Georgia, responsible for selling ABCI retail insurance products.
Completed business process description project, conducted by Ernst & Young and launched a tender to acquire fully-integrated insurance software.
In line with the health insurance strategy to vertically integrate the business, ABCI launched a tender to build six healthcare facilities in the Western Georgia, where ABCI has the largest concentration of the insured under its healthcare plan. As of 30 June 2010, ABCI operates four outpatient clinics and one mid-sized hospital.

BG Capital

In Q2 2009 BG Capital posted Revenue of GEL 1.1 million, that compares to GEL 0.9 million in Q2 2009. Recurring Operating Costs of BG Capital were up 16.1% q-o-q to GEL 2.3 million, up 216.3 % y-o-y. Net Loss for the quarter reached GEL 1.0 million, compared to the Net Income of GEL 0.7 million in Q1 2010 and Net Income of GEL 0.2 million in Q2 2009

BG Capital enjoyed another solid quarter, successfully navigating a volatile period in CIS markets. In line with market trends, the company reduced its exposure to equity markets during the quarter. It also continued the development of its frontier brokerage franchise â€“ Euromoney named BG Capital the Best Frontier Markets Investment Bank in Central and Eastern Europe, and its analysts took two of the top three spots in Thomson Extelâ€™s survey of the best analysts in Ukraine. BG Capitalâ€™s corporate finance team continued its growth, signing two new financing mandates during the period.

On 23-24 September 2010, BG Capital will hold its first international investor conference â€œCatching the B.U.Gâ€ Ukraine and Beyond in Kyiv. The conference will offer one-on-one meetings with companies from Belarus, Ukraine and Georgia and will include site visits in Ukraine and Georgia.

Comment:

â€œI am pleased that the second quarter continued the growth trend set from the beginning of the year and the bank and most of its subsidiaries show improved performance. The growth was achieved on the back of the Georgian economy growth and market share gains, as Bank of Georgia reached 35% market share by assets, the record high point in the Bankâ€™s history.

2010 is the year of turnaround. In the first half we have achieved strong growth and profitability but much remains to be done in terms of further improvement of efficiency and the reduction of cost of risk of retail business in Georgia. I am looking forward to the continuation of the profitable growth in the second half of the year,â€ commented Irakli Gilauri, Chief Executive Officer.

¹ Compared to Q1 2010; growth calculations based on GEL values.

²Compared to the respective period in 2009

³ Revenue includes Net Interest Income and Net Non-Interest Income.

⁴ Normalised for Net Non-Recurring Costs.

⁵ 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 requirements of Basel Accord I.

⁶ 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 requirements of Basel Accord I

⁷ 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.

About Bank of Georgia

Bank of Georgia is the leading Georgian bank offering a broad range of corporate banking, retail banking, wealth management, brokerage and insurance services to its clients in Georgia, Ukraine and Belarus. Bank of Georgia is the largest bank in Georgia by assets, loans, deposits and equity, with 35.1% market share by total assets (all data according to the NBG as of 30 June 2010). The bank has 137 branches and more than one million retail and 164,818 corporate current accounts.

Bank of Georgia has, as of the date hereof, the following credit ratings:

Standard & Poorâ€™s	Â	â€˜B/Bâ€™
FitchRatings		â€˜B+/Bâ€™
Moodyâ€™s		â€˜B3/NPâ€™ (FC) & â€˜Ba3/NPâ€™ (LC)

For further information, please visit www.bog.ge/ir or contact:

Irakli Gilauri	Â	Giorgi Chiladze	Â	Macca Ekizashvili
Chief Executive Officer		Deputy CEO, Finance		Head of Investor Relations
+995 32 444 109		+995 32 444 249		+995 32 444 256
igilauri@bog.ge		gchiladze@bog.ge		ir@bog.ge

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 managementâ€™s current expectations and are subject to uncertainty and changes in circumstances.

The financial information as of Q2 2009, Q1 2010 and Q2 2010 contained in this news report is unaudited, unreviewed,Â derived from IFRS-based management reportsÂ and reflects the best estimates of management. The Bankâ€™sÂ actual results may differ from the amounts reflected herein as a result of various factors

STANDALONE Q2 2010 SEGMENT INCOME STATEMENT DATA

	Â	CB			Â	RB			Â	WM			Â	CC/ Eliminations			Â	Total
GEL millions, unless otherwise noted		Q2 '10	Â	Q2 '09		Q2 '10	Â	Q2 '09		Q2 '10	Â	Q2 '09		Q2 '10	Â	Q2 '09		Q2 '10	Â	Q2 '09
Interest Income		44.6		34.2		49.5		49.4		6.0		3.3		(4.5)		(1.3)		95.6		85.6
Interest Expense		23.3		19.2		23.2		19.7		5.6		2.5		(4.5)		(1.3)		47.6		40.1
Net Interest Income		21.3		15.0		26.3		29.7		0.4		0.8		0.0		0.0		47.9		45.5
Net Non-Interest Income		9.5		6.3		10.8		10.1		0.4		0.4		0.0		0.0		20.8		16.8
Total Operating Income (Revenue)		30.8		21.4		37.2		39.8		0.8		1.2		0.0		0.0		68.7		62.3
Total Recurring Operating Costs		10.6		8.4		21.0		20.2		0.9		1.1		0.0		0.0		32.5		29.7
Normalized Net Operating Income / (Loss)		20.2		13.0		16.1		19.5		(0.1)		0.1		0.0		0.0		36.2		32.6
Net Non-Recurring Income / (Costs)		(0.5)		(0.8)		(1.4)		(1.0)		0.0		(0.1)		0.0		0.0		(1.8)		(1.9)
Net Provision Expense / (Reversal)		(6.4)		0.6		12.6		28.6		0.0		0.4		0.0		0.0		6.2		29.6
Net Income / (Loss)		22.2		9.8		1.9		(8.6)		(0.2)		(0.4)		0.0		0.0		24.0		0.9

STANDALONE Q2 2010 SEGMENT BALANCE SHEET DATA

	Â	CB			Â	RB			Â	WM			Â	CC/ Eliminations			Â	Total
GEL millions, unless otherwise noted		Q2 '10	Â	Q2 '09		Q2 '10	Â	Q2 '09		Q2 '10	Â	Q2 '09		Q2 '10	Â	Q2 '09		Q2 '10	Â	Q2 '09
Loans To Clients, Gross		1,017.4		806.4		929.6		860.7		36.3		49.7		0.0		0.0		1,983.4		1,716.8
Loans To Clients, Net		963.0		767.0		849.0		788.0		33.7		47.0		0.0		0.0		1,845.8		1,602.0
Total Assets		1,468.7		1,033.8		1,537.8		1,284.4		42.0		53.5		332.6		314.5		3,381.1		2,686.2
Client Deposits		683.5		518.4		450.8		283.1		212.3		107.8		0.0		0.0		1,346.6		909.3
Total Liabilities		1,271.9		930.1		1,100.7		938.0		212.3		107.8		0.0		0.0		2,584.9		1,975.9
Total Shareholders Equity		243.2		202.0		210.7		183.7		9.7		10.1		332.6		314.5		796.1		710.3
Total Liabilities And Shareholdersâ€™ Equity		1,515.1		1,132.1		1,311.4		1,121.7		221.9		117.9		332.6		314.5		3,381.1		2,686.2

CONSOLIDATED Q2 2010 INCOME STATEMENT

Period ended	Â	Q2 2010			Â	Q1 2010			Â	Q2 2009			Â	Change⁴	Â	Change⁴
Consolidated, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		US$³	Â	GEL		Q-O-Q		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)				(Unaudited)
																	Â
Interest Income		56,454		104,113		54,320		95,027		57,028		94,547		9.6%		10.1%
Interest Expense		28,439		52,448		28,454		49,777		27,201		45,097		5.4%		16.3%
Net Interest Income		28,015		51,665		25,866		45,250		29,827		49,451		14.2%		4.5%
Fees & Commission Income		7,473		13,782		7,554		13,215		8,494		14,082		4.3%		-2.1%
Fees & Commission Expense		1,585		2,923		1,656		2,897		1,502		2,490		0.9%		17.4%
Net Fees & Commission Income		5,888		10,859		5,898		10,318		6,992		11,592		5.2%		-6.3%
Income From Documentary Operations		1,427		2,632		1,519		2,657		1,434		2,377		-0.9%		10.7%
Expense On Documentary Operations		260		480		274		480		363		601		0.0%		-20.2%
Net Income From Documentary Operations		1,167		2,152		1,244		2,177		1,071		1,776		-1.1%		21.2%
Net Foreign Currency Related Income		4,796		8,844		4,196		7,340		4,261		7,064		20.5%		25.2%
Net Insurance Income / (Loss)		2,278		4,202		2,377		4,159		3,047		5,052		1.0%		-16.8%
Brokerage And Investments Banking Income		134		247		124		217		813		1,348		13.8%		-81.7%
Asset Management Income		29		53		24		42		155		256		26.2%		-79.3%
Net Investment Gains / (Losses)		93		172		1,126		1,969		185		306		-91.3%		-43.8%
Other		2,482		4,577		2,517		4,404		2,255		3,739		3.9%		22.4%
Net Other Non-Interest Income		5,016		9,251		6,168		10,791		6,455		10,701		-14.3%		-13.6%
Net Non-Interest Income		16,867		31,106		17,507		30,626		18,778		31,133		1.6%		-0.1%
Total Operating Income (Revenue)		44,882		82,771		43,373		75,876		48,606		80,583		9.1%		2.7%
Personnel Costs		13,905		25,643		13,365		23,381		13,989		23,193		9.7%		10.6%
Selling, General & Administrative Expenses		5,010		9,240		5,604		9,803		6,017		9,976		-5.7%		-7.4%
Procurement & Operations Support Expenses		1,793		3,306		2,005		3,507		2,345		3,888		-5.7%		-15.0%
Depreciation And Amortization		3,550		6,547		3,802		6,651		3,967		6,576		-1.6%		-0.4%
Other Operating Expenses		1,659		3,060		1,667		2,917		1,623		2,691		4.9%		13.7%
Total Recurring Operating Costs		25,917		47,796		26,443		46,259		27,941		46,324		3.3%		3.2%
Normalized Net Operating Income / (Loss)		18,965		34,975		16,930		29,617		20,664		34,260		18.1%		2.1%
Net Non-Recurring Income / (Costs)		1,016		1,873		(1,867)		(3,266)		(175)		(290)		-157.3%		NMF
Profit / (Loss) Before Provisions		19,980		36,848		15,063		26,351		20,490		33,970		39.8%		8.5%
Net Provision Expense		7,087		13,069		4,207		7,360		24,543		40,690		77.6%		-67.9%
Pre-Tax Income / (Loss)		12,894		23,779		10,856		18,991		(4,053)		(6,720)		25.2%		NMF
Income Tax Expense / (Benefit)		2,325		4,287		1,278		2,236		(1,445)		(2,395)		91.7%		NMF
Net Income / (Loss)		10,569		19,492		9,578		16,755		(2,609)		(4,325)		16.3%		NMF

¹ Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

² Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.7494 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 31 March 2010

³ Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.6579 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 June 2009

⁴ Change calculations based on GEL values

CONSOLIDATED 1H INCOME STATEMENT

Period ended	Â	1H 2010			Â	1H 2009			Â	Change³
Consolidated, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)
											Â
Interest Income		107,982		199,140		118,451		196,380		1.4%
Interest Expense		55,431		102,225		57,003		94,506		8.2%
Net Interest Income		52,551		96,915		61,448		101,874		-4.9%
Fees & Commission Income		14,639		26,997		16,709		27,702		-2.5%
Fees & Commission Expense		3,156		5,820		3,001		4,976		17.0%
Net Fees & Commission Income		11,483		21,177		13,708		22,726		-6.8%
Income From Documentary Operations		2,868		5,289		3,059		5,072		4.3%
Expense On Documentary Operations		521		960		638		1,058		-9.3%
Net Income From Documentary Operations		2,347		4,329		2,421		4,014		7.8%
Net Foreign Currency Related Income		8,776		16,184		9,555		15,842		2.2%
Net Insurance Income / (Loss)		4,534		8,361		4,882		8,094		3.3%
Brokerage And Investments Banking Income		252		464		1,016		1,685		-72.5%
Asset Management Income		52		95		252		418		-77.3%
Net Investment Gains / (Losses)		1,161		2,141		183		303		606.6%
Other		4,870		8,981		4,427		7,340		22.4%
Net Other Non-Interest Income		10,868		20,042		10,761		17,840		12.3%
Net Non-Interest Income		33,474		61,732		36,445		60,422		2.2%
Total Operating Income (Revenue)		86,025		158,647		97,893		162,296		-2.2%
Personnel Costs		26,583		49,024		27,250		45,178		8.5%
Selling, General & Administrative Expenses		10,326		19,043		13,067		21,664		-12.1%
Procurement & Operations Support Expenses		3,694		6,813		4,129		6,845		-0.5%
Depreciation And Amortization		7,156		13,198		7,094		11,761		12.2%
Other Operating Expenses		3,241		5,977		3,330		5,521		8.3%
Total Recurring Operating Costs		51,000		94,055		54,870		90,969		3.4%
Normalized Net Operating Income / (Loss)		35,024		64,592		43,022		71,327		-9.4%
Net Non-Recurring Income / (Costs)		(755)		(1,393)		(312)		(518)		NMF
Profit / (Loss) Before Provisions		34,269		63,199		42,710		70,809		-10.7%
Net Provision Expense		11,077		20,429		43,881		72,751		-71.9%
Pre-Tax Income / (Loss)		23,192		42,770		(1,171)		(1,942)		NMF
Income Tax Expense / (Benefit)		3,537		6,523		(1,627)		(2,697)		NMF
Net Income / (Loss)		19,655		36,247		455		755		NMF

² Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.6579 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 June 2009

³ Change calculations based on GEL values

CONSOLIDATED Q2 2010 BALANCE SHEET

Period ended	Â	Q2 2010			Â	Q1 2010			Â	Q2 2009			Â	Change⁴	Â	Change⁴
Consolidated, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		US$³	Â	GEL		Q-O-Q		Y-O-Y
000s Unless otherwise noted		(Unaudited)								(Unaudited)
Cash And Cash Equivalents		84,152		155,194		101,688		177,893		85,886		142,390		-12.8%		9.0%
Loans And Advances To Credit Institutions		231,660		427,227		184,193		322,227		187,879		311,484		32.6%		37.2%
Investment Securities: AFS & Trading Securities		9,106		16,794		10,146		17,750		17,128		28,396		-5.4%		-40.9%
Investment Securities: HTM, Treasuries		156,042		287,773		142,451		249,203		-		-		15.5%		-
Investment Securities: HTM, Other		-		-		-		-		35,651		59,105		-		-100.0%
Loans To Clients, Gross		1,173,026		2,163,295		1,115,014		1,950,605		1,144,392		1,897,287		10.9%		14.0%
Less: Reserve For Loan Losses		(102,937)		(189,837)		(99,071)		(173,314)		(89,078)		(147,683)		9.5%		28.5%
Loans To Clients, Net		1,070,089		1,973,458		1,015,943		1,777,291		1,055,313		1,749,604		11.0%		12.8%
Insurance Related Assets		19,577		36,104		18,641		32,610		28,569		47,365		10.7%		-23.8%
Investment Property		53,904		99,409		54,522		95,381		31,152		51,647		4.2%		92.5%
Investments In Other Business Entities, Net		2,829		5,217		4,484		7,844		17,635		29,237		-33.5%		-82.2%
Property And Equipment Owned, Net		159,069		293,355		158,054		276,499		171,397		284,159		6.1%		3.2%
Intangible Assets Owned, Net		12,665		23,357		12,662		22,151		7,195		11,928		5.4%		95.8%
Goodwill		37,525		69,204		39,344		68,828		81,604		135,291		0.5%		-48.8%
Tax Assets, Current And Deferred		13,289		24,507		13,616		23,820		4,996		8,283		2.9%		195.9%
Prepayments And Other Assets		32,702		60,309		30,063		52,592		29,515		48,933		14.7%		23.2%
Total Assets		1,882,609		3,471,908		1,785,806		3,124,089		1,753,919		2,907,822		11.1%		19.4%
Client Deposits		812,553		1,498,510		797,096		1,394,439		618,424		1,025,285		7.5%		46.2%
Deposits And Loans From Banks		135,205		249,345		44,725		78,242		24,805		41,124		NMF		NMF
Borrowed Funds		512,737		945,589		521,304		911,970		610,037		1,011,380		3.7%		-6.5%
Issued Fixed Income Securities		1,980		3,651		0		-		119		198		-		NMF
Insurance Related Liabilities		24,352		44,910		24,415		42,712		35,987		59,663		5.1%		-24.7%
Tax Liabilities, Current And Deferred		17,029		31,404		15,602		27,295		11,679		19,362		15.1%		62.2%
Accruals And Other Liabilities		26,703		49,247		33,015		57,757		24,675		40,908		-14.7%		20.4%
Total Liabilities		1,530,558		2,822,656		1,436,158		2,512,415		1,325,725		2,197,920		12.3%		28.4%
Share Capital - Ordinary Shares		16,985		31,324		17,901		31,316		18,862		31,272		0.0%		0.2%
Share Premium		260,387		480,206		274,190		479,668		277,125		459,446		0.1%		4.5%
Treasury Shares		(754)		(1,390)		(913)		(1,597)		(1,081)		(1,793)		-13.0%		-22.5%
Revaluation And Other Reserves		26,905		49,619		11,874		20,773		28,653		47,504		138.9%		4.5%
Retained Earnings		19,595		36,138		27,095		47,400		73,081		121,161		-23.8%		-70.2%
Net Income / (Loss) For The Period		19,655		36,247		9,578		16,755		455		755		116.3%		NMF
Shareholders' Equity Excluding Minority		342,774		632,144		339,725		594,315		397,096		658,345		6.4%		-4.0%
Minority Interest		9,277		17,108		9,923		17,359		31,098		51,557		-1.4%		-66.8%
Total Shareholders' Equity		352,051		649,252		349,648		611,674		428,194		709,902		6.1%		-8.5%
Total Liabilities And Shareholders Equity		1,882,609		3,471,908		1,785,806		3,124,089		1,753,919		2,907,822		11.1%		19.4%

⁴ Change calculations based on GEL values

STANDALONE Q2 2010 INCOME STATEMENT

Period ended	Â	Q2 2010			Â	Q1 2010					Â	Q2 2009			Â	Change⁴	Â	Change⁴
Standalone, IFRS-based		US$¹	Â	GEL		US$²			Â	GEL		US$³	Â	GEL		Q-O-Q		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)						(Unaudited)
							Â
Interest Income		51,816		95,560		49,997		87,465				51,621		85,582		9.3%		11.7%
Interest Expense		25,820		47,618		25,642		44,859				24,179		40,087		6.2%		18.8%
Net Interest Income		25,996		47,942		24,355		42,607				27,441		45,495		12.5%		5.4%
Fees & Commission Income		7,078		13,052		6,349		11,106				6,298		10,442		17.5%		25.0%
Fees & Commission Expense		1,633		3,012		1,491		2,608				1,334		2,212		15.5%		36.2%
Net Fees & Commission Income		5,444		10,040		4,858		8,498				4,964		8,230		18.2%		22.0%
Income From Documentary Operations		1,401		2,584		1,472		2,576				1,433		2,376		0.3%		8.7%
Expense On Documentary Operations		260		480		274		480				363		601		0.0%		-20.1%
Net Income From Documentary Operations		1,141		2,104		1,198		2,096				1,071		1,775		0.4%		18.5%
Net Foreign Currency Related Income		4,248		7,835		3,215		5,624				3,856		6,392		39.3%		22.6%
Net Other Non-Interest Income		431		795		314		549				244		404		44.9%		96.9%
Net Non-Interest Income		11,265		20,774		9,584		16,766				10,134		16,801		23.9%		23.6%
Total Operating Income (Revenue)		37,261		68,716		33,939		59,373				37,576		62,297		15.7%		10.3%
Personnel Costs		9,337		17,219		8,847		15,476				8,949		14,836		11.3%		16.1%
Selling, General & Administrative Expenses		3,059		5,642		3,459		6,051				3,603		5,974		-6.8%		-5.6%
Procurement & Operations Support Expenses		1,417		2,614		1,629		2,849				1,551		2,571		-8.3%		1.7%
Depreciation And Amortization		3,004		5,540		3,141		5,495				3,154		5,229		0.8%		6.0%
Other Operating Expenses		793		1,462		510		892				652		1,082		63.9%		35.1%
Total Recurring Operating Costs		17,610		32,477		17,586		30,764				17,909		29,692		5.6%		9.4%
Normalized Net Operating Income / (Loss)		19,650		36,239		16,354		28,609				19,666		32,605		26.7%		11.1%
Net Non-Recurring Income / (Costs)		(998)		(1,840)		(697)		(1,220)				(1,169)		(1,938)		50.8%		-5.1%
Profit / (Loss) Before Provisions		18,653		34,400		15,656		27,389				18,497		30,666		25.6%		12.2%
Net Provision Expense		3,352		6,181		7,036		12,309				17,852		29,598		-49.8%		-79.1%
Pre-Tax Income / (Loss)		15,301		28,218		8,620		15,080				645		1,069		87.1%		NMF
Income Tax Expense / (Benefit)		2,295		4,233		1,293		2,262				97		160		87.1%		NMF
Net Income / (Loss)		13,006		23,985		7,327		12,818				548		908		87.1%		NMF

⁴ Change calculations based on GEL values

STANDALONE 1H INCOME STATEMENT

Period ended	Â	1H 2010			Â	1H 2009			Â	Change³
Standalone, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)
											Â
Interest Income		99,244		183,025		106,499		176,564		3.7%
Interest Expense		50,144		92,476		48,680		80,706		14.6%
Net Interest Income		49,099		90,549		57,819		95,858		-5.5%
Fees & Commission Income		13,100		24,159		12,469		20,673		16.9%
Fees & Commission Expense		3,048		5,620		2,680		4,443		26.5%
Net Fees & Commission Income		10,052		18,538		9,790		16,230		14.2%
Income From Documentary Operations		2,798		5,160		3,057		5,068		1.8%
Expense On Documentary Operations		521		960		637		1,057		-9.2%
Net Income From Documentary Operations		2,277		4,200		2,420		4,012		4.7%
Net Foreign Currency Related Income		7,298		13,459		7,223		11,975		12.4%
Net Other Non-Interest Income		728		1,343		515		854		57.3%
Net Non-Interest Income		20,356		37,541		19,948		33,071		13.5%
Total Operating Income (Revenue)		69,455		128,090		77,766		128,929		-0.7%
Personnel Costs		17,729		32,695		17,812		29,531		10.7%
Selling, General & Administrative Expenses		6,340		11,693		7,418		12,299		-4.9%
Procurement & Operations Support Expenses		2,962		5,463		3,194		5,296		3.2%
Depreciation And Amortization		5,984		11,036		5,625		9,326		18.3%
Other Operating Expenses		1,276		2,354		1,222		2,026		16.1%
Total Recurring Operating Costs		34,292		63,241		35,273		58,479		8.1%
Normalized Net Operating Income / (Loss)		35,164		64,849		42,493		70,450		-8.0%
Net Non-Recurring Income / (Costs)		(1,659)		(3,060)		(1,493)		(2,476)		23.6%
Profit / (Loss) Before Provisions		33,504		61,789		41,000		67,974		-9.1%
Net Provision Expense		10,026		18,490		32,348		53,630		-65.5%
Pre-Tax Income / (Loss)		23,478		43,299		8,652		14,344		201.9%
Income Tax Expense / (Benefit)		3,522		6,495		1,298		2,152		201.9%
Net Income / (Loss)		19,957		36,804		7,354		12,192		201.9%

³ Change calculations based on GEL values

STANDALONE Q2 2010 BALANCE SHEET

Period ended	Â	Q2 2010			Â	Q1 2010			Â	Q2 2009			Â	Change⁴	Â	Change⁴
Standalone, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		US$³	Â	GEL		Q-O-Q		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)				(Unaudited)
																	Â
Cash And Cash Equivalents		62,198		114,706		72,796		127,350		66,203		109,758		-9.9%		4.5%
Loans And Advances To Credit Institutions		241,278		444,965		179,742		314,441		193,733		321,190		41.5%		38.5%
Investment Securities: HTM, Treasuries		145,449		268,238		142,451		249,203		-		-		7.6%		-
Investment Securities: HTM, Other		-		-		-		-		34,537		57,259		-		-100.0%
Loans To Clients, Gross		1,075,465		1,983,373		1,050,756		1,838,192		1,035,549		1,716,837		7.9%		15.5%
Less: Reserve For Loan Losses		(74,604)		(137,585)		(78,727)		(137,725)		(69,257)		(114,821)		-0.1%		19.8%
Loans To Clients, Net		1,000,861		1,845,788		972,029		1,700,468		966,292		1,602,016		8.5%		15.2%
Investment Property		34,125		62,932		21,633		37,844		-		-		66.3%		-
Investments In Other Business Entities, Net		180,333		332,570		181,931		318,270		189,709		314,518		4.5%		5.7%
Property And Equipment Owned, Net		125,472		231,396		123,457		215,976		135,255		224,240		7.1%		3.2%
Intangible Assets Owned, Net		9,873		18,208		9,653		16,887		4,379		7,260		7.8%		150.8%
Goodwill		12,335		22,748		13,003		22,748		13,742		22,783		0.0%		-0.2%
Tax Assets, Current And Deferred		3,306		6,097		3,485		6,097		-		-		0.0%		-
Prepayments And Other Assets		18,114		33,406		13,636		23,856		16,379		27,155		40.0%		23.0%
Total Assets		1,833,345		3,381,054		1,733,817		3,033,139		1,620,230		2,686,180		11.5%		25.9%
Client Deposits		730,169		1,346,579		715,416		1,251,549		548,436		909,252		7.6%		48.1%
Deposits And Loans From Banks		127,461		235,063		33,702		58,958		9,811		16,265		298.7%		NMF
Borrowed Funds		512,737		945,589		521,304		911,970		609,036		1,009,720		3.7%		-6.4%
Issued Fixed Income Securities		1,980		3,651		-		-		-		-		-		-
Insurance Related Liabilities		-		-		-		-		-		-		-		-
Tax Liabilities, Current And Deferred		16,184		29,846		14,651		25,631		10,274		17,033		16.4%		75.2%
Accruals And Other Liabilities		13,119		24,195		18,949		33,150		14,245		23,620		-27.0%		2.4%
Total Liabilities		1,401,650		2,584,923		1,304,023		2,281,258		1,191,802		1,975,889		13.3%		30.8%
Share Capital - Ordinary Shares		16,985		31,324		17,901		31,316		18,862		31,272		0.0%		0.2%
Share Premium		260,537		480,482		273,609		478,651		283,702		470,349		0.4%		2.2%
Treasury Shares		(642)		(1,184)		(817)		(1,430)		(677)		(1,123)		-17.2%		5.4%
Revaluation And Other Reserves		35,831		66,079		21,890		38,294		35,750		59,269		72.6%		11.5%
Retained Earnings		99,028		182,627		109,885		192,232		83,438		138,332		-5.0%		32.0%
Net Income / (Loss) For The Period		19,957		36,804		7,327		12,818		7,354		12,192		187.1%		201.9%
Total Shareholders' Equity		431,695		796,131		429,794		751,881		428,428		710,291		5.9%		12.1%
Total Liabilities And Shareholders Equity		1,833,345		3,381,054		1,733,817		3,033,139		1,620,230		2,686,180		11.5%		25.9%

⁴ Change calculations based on GEL values

BG BANK (UKRAINE) Q2 2010 INCOME STATEMENT

Period ended	Â	Q2 2010			Â	Q2 2009			Â	Change³
Standalone, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)
											Â
Interest Income		4,415		8,143		5,518		9,148		-11.0%
Interest Expense		2,481		4,576		2,902		4,812		-4.9%
Net Interest Income		1,934		3,567		2,615		4,336		-17.7%
Fees & Commission Income		248		458		649		1,077		-57.5%
Fees & Commission Expense		37		68		134		221		-69.5%
Net Fees & Commission Income		212		390		516		855		-54.4%
Income From Documentary Operations		12		22		-		-		-
Expense On Documentary Operations		-		-		-		-		-
Net Income From Documentary Operations		12		22		-		-		-
Net Foreign Currency Related Income		53		98		235		390		-74.9%
Net Other Non-Interest Income		8		14		-		-		-
Net Non-Interest Income		284		524		751		1,245		-57.9%
Total Operating Income (Revenue)		2,219		4,092		3,366		5,581		-26.7%
Personnel Costs		1,386		2,556		1,952		3,236		-21.0%
Selling, General & Administrative Expenses		379		699		277		459		52.4%
Procurement & Operations Support Expenses		233		430		653		1,082		-60.3%
Depreciation And Amortization		82		151		167		278		-45.4%
Other Operating Expenses		219		404		(284)		(470)		-185.9%
Total Recurring Operating Costs		2,300		4,241		2,765		4,584		-7.5%
Normalized Net Operating Income / (Loss)		(81)		(150)		601		997		-115.0%
Net Non-Recurring Income / (Costs)		(64)		(118)		(314)		(521)		-77.3%
Profit / (Loss) Before Provisions		(145)		(268)		287		476		NMF
Net Provision Expense		1,061		1,956		6,649		11,023		-82.3%
Pre-Tax Income / (Loss)		(1,206)		(2,224)		(6,362)		(10,547)		-78.9%
Income Tax Expense / (Benefit)		(296)		(546)		147		243		NMF
Net Income / (Loss)		(910)		(1,678)		(6,508)		(10,790)		-84.4%

³ Change calculations based on GEL values

BG BANK (UKRAINE) 1H INCOME STATEMENT

Period ended	Â	1H 2010			Â	1H 2009			Â	Change³
Standalone, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)
											Â
Interest Income		8,281		15,271		12,215		20,251		-24.6%
Interest Expense		4,865		8,972		7,873		13,053		-31.3%
Net Interest Income		3,415		6,299		4,342		7,198		-12.5%
Fees & Commission Income		485		894		1,145		1,899		-52.9%
Fees & Commission Expense		151		278		257		426		-34.7%
Net Fees & Commission Income		334		615		888		1,473		-58.2%
Income From Documentary Operations		55		102		-		-		-
Expense On Documentary Operations		-		-		-		-		-
Net Income From Documentary Operations		55		102		-		-		-
Net Foreign Currency Related Income		66		121		1,436		2,381		-94.9%
Net Other Non-Interest Income		10		18		-		-		-
Net Non-Interest Income		465		857		2,324		3,854		-77.8%
Total Operating Income (Revenue)		3,880		7,155		6,666		11,052		-35.3%
Personnel Costs		2,766		5,101		3,904		6,472		-21.2%
Selling, General & Administrative Expenses		704		1,298		1,079		1,788		-27.4%
Procurement & Operations Support Expenses		451		832		653		1,082		-23.1%
Depreciation And Amortization		194		358		294		487		-26.3%
Other Operating Expenses		332		611		249		412		48.3%
Total Recurring Operating Costs		4,447		8,201		6,177		10,241		-19.9%
Normalized Net Operating Income / (Loss)		(567)		(1,046)		489		811		NMF
Net Non-Recurring Income / (Costs)		(251)		(462)		(206)		(342)		35.1%
Profit / (Loss) Before Provisions		(818)		(1,508)		283		469		NMF
Net Provision Expense		214		394		12,309		20,407		-98.1%
Pre-Tax Income / (Loss)		(1,031)		(1,902)		(12,026)		(19,938)		-90.5%
Income Tax Expense / (Benefit)		(258)		(475)		(1,099)		(1,823)		-73.9%
Net Income / (Loss)		(773)		(1,426)		(10,927)		(18,116)		NMF

³ Change calculations based on GEL values

BNB (BELARUS) Q2 2010 INCOME STATEMENT

Period ended	Â	Q2 2010			Â	Q2 2009			Â	Change³
Standalone, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)
											Â
Interest Income		1,379		2,543		862		1,428		78.0%
Interest Expense		109		201		288		478		-58.0%
Net Interest Income		1,270		2,342		573		950		146.5%
Fees & Commission Income		260		480		241		400		20.0%
Fees & Commission Expense		47		86		35		57		50.2%
Net Fees & Commission Income		214		394		207		343		14.9%
Income From Documentary Operations		14		26		0		1		NMF
Expense On Documentary Operations		-		-		(0)		(0)		NMF
Net Income From Documentary Operations		14		26		0		1		NMF
Net Foreign Currency Related Income		99		183		172		284		-35.6%
Net Other Non-Interest Income		11		21		81		134		-84.3%
Net Non-Interest Income		338		624		459		762		-18.1%
Total Operating Income (Revenue)		1,608		2,966		1,033		1,712		73.3%
Personnel Costs		614		1,133		463		768		47.5%
Selling, General & Administrative Expenses		140		259		94		156		66.4%
Procurement & Operations Support Expenses		142		262		142		235		11.7%
Depreciation And Amortization		75		138		83		138		-0.1%
Other Operating Expenses		108		200		97		161		24.4%
Total Recurring Operating Costs		1,080		1,992		879		1,457		36.7%
Normalized Net Operating Income / (Loss)		528		974		153		254		282.8%
Net Non-Recurring Income / (Costs)		(11)		(21)		6		9		NMF
Profit / (Loss) Before Provisions		517		953		159		264		261.5%
Net Provision Expense		127		234		(17)		(28)		NMF
Pre-Tax Income / (Loss)		390		719		176		292		146.4%
Income Tax Expense / (Benefit)		80		148		57		95		55.8%
Net Income / (Loss)		310		571		119		197		190.1%

³ Change calculations based on GEL values

BNB (BELARUS) 1H INCOME STATEMENT

Period ended	Â	1H 2010			Â	1H 2009			Â	Change³
Standalone, IFRS-based		US$¹	Â	GEL		US$²	Â	GEL		Y-O-Y
000s Unless otherwise noted		(Unaudited)				(Unaudited)
											Â
Interest Income		2,790		5,145		1,839		3,049		68.7%
Interest Expense		273		503		666		1,104		-54.4%
Net Interest Income		2,517		4,642		1,174		1,946		138.6%
Fees & Commission Income		416		767		447		741		3.5%
Fees & Commission Expense		77		142		65		107		32.6%
Net Fees & Commission Income		339		625		383		634		-1.5%
Income From Documentary Operations		15		27		2		3		NMF
Expense On Documentary Operations		-		-		1		1		-100.0%
Net Income From Documentary Operations		15		27		1		2		NMF
Net Foreign Currency Related Income		298		549		880		1,459		-62.4%
Net Other Non-Interest Income		22		41		62		102		-59.8%
Net Non-Interest Income		673		1,242		1,326		2,198		-43.5%
Total Operating Income (Revenue)		3,191		5,884		2,499		4,143		42.0%
Personnel Costs		1,165		2,149		922		1,528		40.6%
Selling, General & Administrative Expenses		244		450		190		314		43.1%
Procurement & Operations Support Expenses		280		517		282		467		10.6%
Depreciation And Amortization		144		265		183		304		-12.9%
Other Operating Expenses		210		388		211		349		11.1%
Total Recurring Operating Costs		2,044		3,769		1,787		2,963		27.2%
Normalized Net Operating Income / (Loss)		1,147		2,115		712		1,180		79.3%
Net Non-Recurring Income / (Costs)		(7)		(13)		12		19		-168.1%
Profit / (Loss) Before Provisions		1,140		2,102		723		1,199		75.3%
Net Provision Expense		355		655		1		1		NMF
Pre-Tax Income / (Loss)		785		1,447		723		1,198		20.8%
Income Tax Expense / (Benefit)		183		337		205		340		-1.0%
Net Income / (Loss)		602		1,110		517		858		29.4%

³ Change calculations based on GEL values

KEY RATIOS

Profitability Ratios	Â	Q2 2010	Â	Q1 2010	Â	Q2 2009
Â		Â		Â		Â
ROAA ¹, Annualised		2.4%		2.2%		-0.6%
ROAE², Annualised		12.5%		11.1%		-2.4%
Interest Income / Average Interest Earning Assets, Annualised³		16.6%		16.8%		17.3%
Cost Of Funds ⁴, Annualised		8.3%		8.6%		8.3%
Net Spread, Annualised ⁵		8.3%		8.1%		8.9%
Net Interest Margin ⁶, Annualised		8.3%		8.0%		9.0%
Loan Yield Excluding Provisions⁷, Annualised		20.2%		20.2%		19.4%
Loan Yield Including Provisions⁷, Annualised		17.7%		18.6%		11.1%
Interest Expense To Interest Income		50.4%		52.4%		47.7%
Net Non-Interest Income To Average Total Assets, Annualised		3.8%		4.0%		4.1%
Net Non-Interest Income To Revenue ⁸		37.6%		40.4%		38.6%
Net Fee And Commission Income To Average Interest Earning Assets ⁹, Annualised		1.7%		1.8%		2.1%
Net Fee And Commission Income To Revenue		13.1%		13.6%		14.4%
Operating Leverage, Y-O-Y ¹⁰		4.2%		-17.5%		-8.5%
Operating Leverage, Consecutive Q-O-Q ¹⁰		16.4%		65.8%		-5.3%
Total Operating Income (Revenue) To Total Assets, Annualised		9.5%		9.7%		11.1%
Recurring Earning Power ¹¹, Annualised		4.5%		3.5%		4.5%
Net Income To Revenue		23.5%		22.1%		-5.4%
							Â
Efficiency Ratios		Â		Â		Â
Operating Cost To Average Total Assets ¹², Annualised		5.8%		6.1%		6.2%
Cost To Average Total Assets ¹³, Annualised		5.6%		6.5%		6.2%
Cost / Income ¹⁴		55.5%		65.3%		57.8%
Cost / Income, Normalized ¹⁵		57.7%		61.0%		57.5%
Cash Cost / Income		43.8%		45.9%		38.3%
Total Employee Compensation Expense To Revenue ¹⁶		31.0%		30.8%		28.8%
Total Employee Compensation Expense To Cost		55.8%		47.2%		49.8%
Total Employee Compensation Expense To Average Total Assets, Annualised		3.1%		3.1%		3.1%
							Â
Liquidity Ratios
Net Loans To Total Assets ¹⁷		56.8%		56.9%		60.2%
Average Net Loans To Average Total Assets		57.3%		56.6%		60.3%
Interest Earning Assets To Total Assets		77.4%		75.2%		72.9%
Average Interest Earning Assets To Average Total Assets		76.5%		74.9%		73.0%
Liquid Assets To Total Assets ¹⁸		25.5%		24.6%		18.6%
Liquid Assets To Total Short-Term Liabilities, NBG Stand-Alone		34.8%		38.8%		38.0%
Liquid Assets To Total Liabilities, IFRS Consolidated		31.4%		30.5%		24.6%
Net Loans To Client Deposits		131.7%		127.5%		170.6%
Average Net Loans To Average Client Deposits		130.7%		128.4%		174.8%
Net Loans To Total Deposits ¹⁹		112.9%		120.7%		164.1%
Net Loans To (Total Deposits + Equity)		82.3%		85.3%		98.5%
Net Loans To Total Liabilities		69.9%		70.7%		79.6%
Total Deposits To Total Liabilities		61.9%		58.6%		48.5%
Client Deposits To Total Deposits		85.7%		94.7%		96.1%
Client Deposits To Total Liabilities		53.1%		55.5%		46.6%
Current Account Balances To Client Deposits		44.4%		44.1%		42.4%
Demand Deposits To Client Deposits		9.0%		9.0%		9.8%
Time Deposits To Client Deposits		46.6%		46.9%		47.8%
Total Deposits To Total Assets		50.3%		47.1%		36.7%
Client Deposits To Total Assets		43.2%		44.6%		35.3%
KEY RATIOS CONTâ€™D		Â		Â		Â
Liquidity Ratios contâ€™d		Â		Â		Â
Client Deposits To Total Equity (Times) ²⁰		2.31		2.28		1.44
Due From Banks / Due To Banks ²¹		171.3%		411.8%		757.4%
Total Equity To Net Loans		32.9%		34.4%		40.6%
Leverage (Times) ²²		4.3		4.1		3.1
							Â
Asset Quality
NPLs (in GEL) ²³		173,743		168,892		148,767
NPLs To Gross Loans To Clients ²⁴		8.0%		8.7%		7.8%
NPL Coverage Ratio ²⁵		109.3%		102.6%		99.3%
Cost of Risk ²⁶, Annualised		2.5%		1.6%		8.4%
Reserve For Loan Losses To Gross Loans To Clients ²⁷		8.8%		8.9%		7.8%
% Of Loans To Clients Collateralized		92.1%		93.8%		89.7%
Equity To Average Net Loans To Clients		36.1%		35.7%		53.3%
							Â
Capital Adequacy:
Equity To Total Assets		18.7%		19.6%		24.4%
BIS Tier I Capital Adequacy Ratio, Consolidated ²⁸		19.6%		21.4%		23.4%
BIS Total Capital Adequacy Ratio, Consolidated ²⁹		32.5%		33.8%		35.6%
BIS Tier I Capital Adequacy Ratio, Stand-alone ²⁸		24.6%		26.7%		25.5%
BIS Total Capital Adequacy Ratio, Stand-alone ²⁹		31.5%		32.6%		32.0%
NBG Tier I Capital Adequacy Ratio ³⁰		15.8%		17.7%		17.8%
NBG Total Capital Adequacy Ratio ³¹		14.5%		15.9%		18.4%
							Â
Per Share Values:
Basic EPS (GEL) ³²		0.62		0.54		(0.14)
Basic EPS (US$)		$0.22		$0.13		$0.14
Fully Diluted EPS (GEL) ³³		0.56		0.48		(0.12)
Fully Diluted EPS (US$)		$0.19		$0.12		$0.13
Book Value Per Share (GEL) ³⁴		20.73		19.53		22.70
Book Value Per Share (US$)		$11.24		$11.17		$13.69
Ordinary Shares Outstanding - Weighted Average, Basic		31,321,662		31,315,960		31,271,525
Ordinary Shares Outstanding - Period End		31,324,466		31,315,960		31,271,525
Ordinary Shares Outstanding - Fully Diluted		34,796,276		34,790,574		34,746,139
							Â
Selected Operating Data:
Full Time Employees, Group		5,118		5,048		4,914
Full Time Employees, BOG Stand-Alone		2,963		2,825		2,660
Total Assets Per FTE ³⁵(thousands)		678		619		592
Total Assets Per FTE, BOG Stand-Alone (thousands)		1,141		1,074		1,010
Number Of Active Branches		137		140		140
Number Of ATMs		387		379		394
Number Of Cards Outstanding		551,741		570,637		594,617
Number Of POS Terminals		2,225		2,067		1,861

NOTES TO KEY RATIOS

1	Â	Return On Average Total Assets (ROAA) equals Net Income of the period divided by quarterly Average Total Assets for the same period;
2		Return On Average Total Equity (ROAE) equals Net Income of the period divided by quarterly Average Total Equity for the same period;
3		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 Income Instruments and Net Loans to Clients;
4		Cost Of Funds equals Interest Expense of the period divided by quarterly Average Interest Bearing Liabilities; Interest Bearing Liabilities Include: Client Deposits, Deposits And 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;
6		Net Interest Margin equals Net Interest Income of the period divided by quarterly Average Interest Earning Assets of the same period;
7		Loan Yield equals Interest Income, less Net Provision Expense, divided by quarterly Average 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;
11		Recurring Earning Power equals Profit Before Provisions of the period divided by average 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);
15		Cost/Income Normalized equals Total Recurring Operating cost (excludes net non-recurring costs) divided by total operating income.
16		Total Employee Compensation Expense includes Personnel Costs;
17		Net Loans equal Net Loans To Clients;
18		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 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 Shareholdersâ€™ Equity;
21		Due From Banks/ Due To Banks equals Loans And Advances To Credit Institutions divided by Deposits And Loans From Banks;
22		Leverage (Times) equals Total Liabilities as of the period end divided by Total Equity as of the same date;
23		Operating Cost equals Total Recurring Operating Costs;
24		Cost includes Total Recurring Operating Costs and Net Non-Recurring Costs (Income);
25		Cost/Income Ratio equals Costs of the period divided by Total Operating Income (Revenue);
26		Cost/Income Normalized equals Total Recurring Operating cost (excludes net non-recurring costs) divided by total operating income.
27		Reserve For Loan Losses To Gross Loans To Clients equals reserve for loan losses as of the period end divided by gross loans to clients as of the same date;
28		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 requirements of Basel Accord I;
29		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 requirements of Basel Accord I;
30		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 requirements the National Bank of Georgia;
31		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 requirements of the National Bank of Georgia;
32		Basic EPS equals Net Income of the period divided by the weighted average number of outstanding ordinary shares over the same period;
33		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;
34		Book Value Per Share equals Equity as of the period end, plus Treasury Shares, divided by the total number of Outstanding Ordinary shares as of the same date
35		Equals total consolidated assets divided by total number of full-time employees

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