Half Yearly Report
BANK OF GEORGIA
HOLDINGS PLC
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FORWARD LOOKING STATEMENTS
This document contains statements that constitute "forward-looking statements", including, but not limited to, statements concerning expectations, projections , objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, competitive strengths and weaknesses, plans or goals relating to financial position and future operations and development.
While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other factors could cause actual developments and results to differ materially from our expectations.
These factors include, but are not limited to the following: (1) general market, macroeconomic, governmental, legislative and regulatory trends; (2) movements in local and international currency exchange rates; interest rates and securities markets; (3) competitive pressures; (4) technological developments; (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties and developments in the market in which they operate; (6) management changes and changes to our group structure; and (7) other key factors that we have indicated could adversely affect our business and financial performance, which are contained elsewhere in this document and in our past and future filings and reports, including those filed with the respective authorities.
When relying on forward-looking statements, investors should carefully consider the foregoing factors and other uncertainties and events. Accordingly, we are under no obligations (and expressly disclaim such obligations) to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise.
Bank of Georgia Holdings PLC (LSE: BGEO LN), the holding company of Georgia's leading bank JSC Bank of Georgia (the "Bank") and its subsidiaries (together, the "Group"), announces the Group's 2Q15 and 1H15 consolidated results. Unless otherwise mentioned, figures are for 2Q15 and comparisons are with 2Q14. The results are based on IFRS, are unaudited and derived from management accounts.
Bank of Georgia Holdings highlights
§ 2Q15 profit was GEL 72.0mln (US$ 32.0mln/GBP 20.4mln), up 23.5% y-o-y and up 15.5% q-o-q
§ 2Q15 earnings per share ("EPS") were GEL 1.84 (US$ 0.82 per share/GBP 0.52 per share), up 12.2% y-o-y and up 12.9% q-o-q
§ 1H15 profit was GEL 134.4mln (US$ 59.8mln/GBP 38.1mln), up 20.0% y-o-y
§ 1H15 EPS was GEL 3.47 (US$ 1.54 per share/GBP 0.98 per share), up 10.2% y-o-y
§ Book value per share was GEL 41.74, up 19.4% y-o-y, with total equity attributable to shareholders of GEL 1,597.0mln, up 32.9% y-o-y
§ Total assets increased to GEL 9,375.1mln, up 40.6% y-o-y and up 3.8% q-o-q
§ Leverage remained low at 4.7 times
§ In addition to the capital in the regulated Banking Business (JSC Bank of Georgia), GEL 114.4mln cash is held at the holding company level as of the date of this report
Banking Business highlights
2Q15 performance
§ Revenue was GEL 182.6mln (up 42.0% y-o-y and up 2.9% q-o-q)
§ Net Interest Margin ("NIM") was 7.6% (+20 basis points "bps" y-o-y and -20 bps q-o-q)
§ Loan Yield stood at 14.6% (+30 bps y-o-y and +10 bps q-o-q)
§ Cost of Customer Funds stood at 4.4% (up 20 bps y-o-y and flat q-o-q)
§ Cost to Income ratio improved to 35.7% (36.8% in 1Q15 and 42.2% in 2Q14)
§ Operating leverage was positive y-o-y and q-o-q, at 21.7% and 2.9%, respectively
§ Cost of credit risk stood at GEL 40.8mln (up 207.0% y-o-y and flat q-o-q)
§ Cost of Risk ratio was 2.7% (3.1% in 1Q15 and 0.9% in 2Q14)
§ Profit increased to GEL 61.5mln (up 14.6% y-o-y and up 4.5% q-o-q)
§ Return on Average Assets ("ROAA") was 2.9% (3.0% in 1Q15 and 3.5% in 2Q14)
§ Return on Average Equity ("ROAE") was 19.3% (19.2% in 1Q15 and 21.0% in 2Q14)
1H15 performance
§ Revenue was GEL 360.1mln (up 45.3% y-o-y)
§ NIM was 7.8%; (+30 bps y-o-y)
§ Loan Yield was 14.6% (+10 bps y-o-y)
§ Cost of Client Deposits was 4.4% (flat y-o-y)
§ Cost to Income ratio improved to 36.2% (41.9% in 1H14)
§ Operating leverage was positive at 19.5%
§ Cost of credit risk stood at GEL 81.5mln (up 212.6% y-o-y)
§ Cost of Risk ratio stood at 2.9% (0.9% in 1H14)
§ Profit increased to GEL 120.3mln (up 20.4% y-o-y)
§ ROAA was 2.9% (3.3% in 1H14)
§ ROAE was 19.3% (19.3% in 1H14)
Balance sheet strength supported by solid capital and liquidity positions
§ The net loan book reached a record GEL 5,142.2mln (up 38.4% y-o-y and down -2.0% q-o-q); without Privatbank effect ("ex-Privatbank") it was GEL 4,896.6mln; ex-Privatbank growth on constant currency basis was 11.2% y-o-y
§ Client deposits increased to GEL 4,212.8mln (up 33.8% y-o-y and down 1.4% q-o-q); ex-Privatbank it was GEL 3,946.0mln; ex-Privatbank growth on constant currency basis was 5.1% y-o-y
§ Net Loans to Customer Funds and DFI ratio stood at 102.4% (105.2% at 31 March 2015 and 100.0% at 30 June 2014)
§ Tier I and Total Capital Adequacy ratios (CAR) (Basel I) stood at 20.4% and 26.7%, respectively
§ NBG (Basel 2/3) Tier I and Total CAR stood at 10.4% and 15.9%, respectively
§ NBG Liquidity Ratio was 35.1%
Resilient growth momentum sustained across all major business lines
§ Retail Banking continues to deliver strong franchise growth, primarily supported by the Express Banking strategy and Privatbank acquisition. Retail Banking revenue reached GEL 103.4mln in 2Q15, up 44.9% y-o-y
§ Retail Banking net loan book reached a record GEL 2,623.6mln, up 49.6% y-o-y; ex-Privatbank it was GEL 2,378.0mln; ex-Privatbank growth on constant currency basis was 19.8% y-o-y
§ Retail Banking client deposits increased to GEL 1,736.5mln up 53.1% y-o-y; ex-Privatbank it was GEL 1,469.7mln; ex-Privatbank growth on constant currency basis was 9.0% y-o-y
§ The Privatbank acquisition has enhanced our position in the significantly more profitable retail banking franchise and posted revenue of GEL 38.9mln and profit of GEL 6.1mln in 1H15. Privatbank increased our market share in retail loans by 4.3 percentage points and in retail deposits by 2.5ppts (market data as of 31 March 2015). For more information on Privatbank acquisition see page 19
§ We launched Solo - a new strategy for our premium banking segment - a fundamentally different approach to premium banking. We have already opened five new Solo lounges and our goal is to significantly increase our market share in this segment, which now stands below 13%, over the next three to four years
§ Corporate Banking net loan book growth rate slowed down in the first half of 2015, as a result of slower economic activity in the country's corporate sector in 2015, and was GEL 2,174.1mln
§ Investment Management's Assets Under Management ("AUM")* increased to GEL 1,231.4mln, up 31.8% y-o-y, reflecting increased bond issuance activity
*Wealth Management client deposits, Galt & Taggart client assets, Aldagi Pension Fund and Wealth Management client assets at Bank of Georgia Custody
Investment Business Highlights
§ Our healthcare business, Georgia Healthcare Group ("GHG") reported standalone profit that almost tripled y-o-y, increasing to GEL 13.0mln in 1H15 (GEL 5.5mln in 1H14). As at 30 June 2015, the healthcare services business had a 22.1% market share, 5 times that of the Company's nearest competitor in Georgia, by number of beds (2,220 beds), which grew to 26.6% following High Technology Medical Center University Clinic ("HTMC") acquisition in July 2015 (450 beds). The market share is expected to grow up to c.30.0% as a result of the renovation of recently acquired hospital facilities, scheduled for completion in 2016 and 2017 (additional c.500 beds).
- In 2015, GHG completed two major acquisitions, HTMC and Deka LLC ("Deka"), adding 530 beds and bringing market share in beds to 26.6% and 24.0% nationwide and in Tbilisi, respectively. However, our financial results do not yet include their results of operations, as Deka was consolidated as of 30 June 2015 with no effect on the income statement of GHG in 1H15 and HTMC will be consolidated in 3Q15. HTMC revenue was GEL 38.4mln in 2014, and GEL 21.7mln in 1H15
§ Our real estate business, m2 Real Estate ("m2 Real Estate") recognised revenue of GEL 1.1mln in 1H15, with US$ 58.9mln sales revenue yet to be recognised as revenue upon completion of the on-going projects in 2015-2016. Since its establishment in 2010, m2 Real Estate has generated total sales of US$ 115.8mln, of which US$ 56.9mln has already been recognised as revenue and the remaining will be recognized upon completion of the ongoing construction during 2015-2016
§ Profits in associates, which comprises profit from our water and utilities business - Georgian Global Utilities ("GGU") - recorded strong 2Q15 results, with GEL 2.0mln profit (reported in gain from associates). Strong 2Q15 performance drove 1H15 profit to GEL 0.7mln, recovering from 1Q15 loss of GEL 1.3mln that was primarily driven by the weaker Lari, which lost 21.3% of its value against the U.S. dollar since 30 June 2014 (the "GEL devaluation effect")
- For the past several months we have focused on enhancing the management capabilities at GGU, and as a result we have appointed a new CFO - a long-standing professional within the Group - and recruited senior management with substantial industry experience in charge of technical and commercial functions
CHIEF EXECUTIVE OFFICER'S STATEMENT
"I am pleased to report another set of solid half year results that reflect the strong performance of our banking operations and the increasing impact from our diversified non-banking businesses in which we have made a number of opportunistic investments over the last few years. The Group posted 1H 2015 revenue of GEL 398.4 million and profit of GEL 134.4 million, up 37.5% and 20.0%, respectively. Earnings per share increased by 10.2% to GEL 3.47. This performance was driven by strong levels of balance sheet growth, partly reflecting the acquisition and rapid integration of Privatbank Georgia and the devaluation of the Lari, particularly during the first quarter, as well as positive operating leverage of 19.5 percentage points in the Banking Business. Asset quality remained robust during the first six months of the year despite the impact of the Lari devaluation. We expect a lower cost of risk ratio in the second half of 2015 and the full year cost of risk ratio at c.2.5%.
Within our Banking Business, revenue growth was 42.0% year on year, and 2.9% quarter on quarter. This reflected strong growth in net interest income, up 50.9% y-o-y, as a result of a 38.4% increase in customer lending over the last 12 months, as well as the acquisition and full integration of Privatbank. In addition, net fee and commission income grew by 11.4%, driven by a 31.3% increase in Retail Banking net fee and commission income, which largely reflects the ongoing success of the Bank's Express strategy. The net interest margin at 7.6% was 20 basis points higher than last year, reflecting the impact of the acquisition of Privatbank and our efforts to focus on lower risk retail banking products in our lending activities.
Excluding the impact of the Privatbank acquisition, customer lending increased by 31.8%, implying 11.2% growth on constant currency basis. Our client deposit balances increased by 33.8% despite the continuing reduction in deposit rates. We intend to further decrease interest rates on US dollar deposits from 5% to 4% in September. Excluding the impact of the Privatbank acquisition, client deposits increased by 25.3% and 5.1% on a constant currency basis.
Costs remained well controlled, and the Banking Business Cost/Income ratio improved further to 36.2% in the first half of 2015, compared to 41.9% in the first half of 2014. In the second quarter of 2015 the Banking Cost/Income ratio improved further to 35.7%. Positive operating leverage at 19.5 percentage points reflected the impact of some targeted cost reduction initiatives in the first half of 2015.
Asset quality during the first half of the year has remained robust, with both retail arrears and the NPL ratio remaining low. This remains a good performance against the backdrop of the 17.1% Lari devaluation against the US dollar during the half year, and reflects our conservative lending policy that takes into account, at the time of the initial lending decision, any potential currency mismatch. During the first quarter we offered retail clients affected by the devaluation the opportunity to re-profile their borrowings, however the take-up of this offer has been limited with only 799 customers, with loans totaling US$ 28.2 million, taking advantage of the offer. The currency devaluation itself created an increased provision of GEL 11.9 million during the first half of the year. As a result of these effects, the cost of credit risk for the first six months of the year totalled GEL 81.5 million (Cost of Risk ratio 2.9%), compared to GEL 26.1 million in 1H 2014 (Cost of Risk ratio 0.9%). The cost of credit risk in the second quarter was the same as that in the first quarter, as the absence of a Lari devaluation impact was offset by provisions which came from a small number of Corporate Banking customers. Going forward we do not see the need for similar provisioning. We believe that the cost of risk has peaked in the second quarter and will reduce in the second half of 2015. We continue to expect our cost of risk ratio for the year to be c.2.5%.
During the first half of the year, we completed the acquisition and subsequent full integration of Privatbank. This has created significant franchise enhancement for our mass market retail business and has contributed GEL 6.1 million or 5.1% to our Banking Business profit in 1H15. The integration of Privatbank has already been completed, significantly ahead of schedule, and we are now 6 months ahead of capturing our previously announced pre-tax administrative and funding cost synergies of GEL 25 million. Although Privatbank has nearly halved its operating expenses in 2Q15, the full effect of integration efficiencies have not been reflected in the quarterly results, as synergies only materialised in the last 50 days of the quarter. Additionally, Privatbank was focused on a mono-product of an all-in-one debit and credit card, which we further developed in-house by adding the contactless transport and payment capabilities of our Express Card. We are aiming to leverage the enhanced capabilities of Express Banking, to capture increased revenue from cross-selling banking products to the c.400,000 newly acquired customers. We now expect more synergies than we did at the time of the acquisition. You will find full details of the Privatbank integration and performance in the Retail Banking segment discussion of this announcement.
Within our Investment Businesses, GHG, our healthcare business, delivered another record half year results, with revenues totalling GEL 107.4 million, reflecting both good levels of organic growth and the impact of the benefits of last year's acquisitions starting to be captured. In addition, GHG has recently completed a number of further acquisitions in Tbilisi and now has a total of 41 healthcare facilities, 2,670 hospital beds and a 26.6% market share in terms of hospital beds, which is expected to grow up to c.30% as a result of the renovation of recently acquired hospital facilities, scheduled for completion in 2016 and 2017 (additional c.500 beds). Furthermore, GHG has a unique first mover advantage in the highly fragmented and underpenetrated outpatient segment, with an addressable market of GEL 0.9 billion in 2015, where GHG currently has under 1% market share. GHG has all the enablers - bed capacity, competitive advantages and a clear growth strategy - for strong medium-to-long term growth. GHG is now very well positioned for its planned international stock market listing in the next few months. Our real estate business, m2 Real Estate, continues to develop its apartment projects successfully, with apartments continuing to be pre-sold notwithstanding the Lari devaluation. In 2Q15, we posted strong results in our water and utilities business, GGU, with GEL 2.0 million in profit. We have continued to strengthen GGU's management and hired more professionals with substantial industry experience both in Georgia and the West.
The Group's capital position remains strong, with capital being held both in the regulated Banking Business (JSC Bank of Georgia) and at the holding company level (Bank of Georgia Holdings Plc). Within the bank, the BIS Tier 1 Capital Adequacy ratio was 20.4%, and the NBG (Basel 2/3) Tier 1 Capital Adequacy ratio was 10.4%
In August, we completed our corporate legal restructuring as announced in December 2014 and created a unique platform to extend our reach to different industries on the Georgian corporate market. The need for restructuring was created by our recently updated strategy as well as NBG's intention to regulate banks in Georgia on a standalone basis. The new structure is now clearly aligned to our strategy and will facilitate our continued commitment to growing Bank of Georgia's strong retail and corporate banking franchise and allows us to capture compelling investment opportunities in Georgia's corporate sector.
From a macroeconomic perspective Georgia has continued to perform well in the light of the recent macroeconomic and currency pressures in many of Georgia's trading partners. Much of the volatility of the first quarter was significantly reduced in the second quarter of the year, particularly in terms of the Lari/Dollar exchange rate, which has now seen a period of stability in the 2.2-2.3 range. GDP growth in Georgia during the first half of 2015 remained relatively resilient with 2.6% y-o-y growth, and inflation remained well contained at 4.9% y-o-y in July 2015, partly as a result of the beneficial impact of lower oil prices on the Georgian economy. In addition, international arrivals (an important component of capital inflows for the country) continue to be strong, with a 9.5% year on year increase in July supporting overall growth of 4.9% in the first seven months of the year. The Lari has stayed competitive compared to our main trading partners' currencies. Exports are turning the corner with the signs that the negative growth is coming to a halt: Georgia originated exports increased 2.3% year on year in June (first time since August 2014), while re-exported commodities remain the major drag in total exports. The Lari's real depreciation of 8.1% since December 2014 has helped the imports adjustment, which decreased 9.6% year on year in 1H15.
Against the challenging regional macroeconomic backdrop, the Group has continued to perform well. We believe we remain well positioned to deliver a strong performance in the second half of 2015 and beyond, from both good levels of organic business growth in each of our Banking and Investment Businesses, and from the benefits of recent strategic initiatives and acquisitions.
Irakli Gilauri,
Chief Executive Officer of Bank of Georgia Holdings PLC
Re-profiling implies effectively increasing the tenor of the loan so that monthly payment in Lari stays at the same level it was prior to the recent devaluation of the Lari. When re-profiling, we do not change the interest rate of the loan. In Retail Banking, our clients with mortgage loans are most likely to apply for re-profiling, as in total we have 7,500 mortgage loans worth GEL 400mln which are US Dollar loans to Retail Banking clients with non-US Dollar income.
FINANCIAL SUMMARY
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BGH Consolidated |
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Banking Business* |
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Investment Business* |
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QUARTERLY INCOME STATEMENT |
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Change |
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Change |
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Change |
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Change |
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Change |
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Change |
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GEL thousands |
2Q15 |
2Q14 |
Y-O-Y |
1Q15 |
Q-O-Q |
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2Q15 |
2Q14 |
Y-O-Y |
1Q15 |
Q-O-Q |
|
2Q15 |
2Q14 |
Y-O-Y |
1Q15 |
Q-O-Q |
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Net banking interest income |
122,789 |
82,513 |
48.8% |
120,989 |
1.5% |
|
126,403 |
83,779 |
50.9% |
123,058 |
2.7% |
|
- |
- |
- |
- |
- |
|
|
Net fee and commission income |
29,121 |
26,228 |
11.0% |
26,854 |
8.4% |
|
30,172 |
27,080 |
11.4% |
28,090 |
7.4% |
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- |
- |
- |
- |
- |
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Net banking foreign currency gain |
19,765 |
11,395 |
73.5% |
18,962 |
4.2% |
|
19,765 |
11,395 |
73.5% |
18,962 |
4.2% |
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- |
- |
- |
- |
- |
|
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Net other banking income |
2,481 |
2,241 |
10.7% |
1,790 |
38.6% |
|
2,810 |
2,433 |
15.5% |
2,095 |
34.1% |
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- |
- |
- |
- |
- |
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Gross insurance profit |
5,817 |
6,352 |
-8.4% |
7,574 |
-23.2% |
|
3,473 |
3,931 |
-11.7% |
5,306 |
-34.5% |
|
2,799 |
2,827 |
-1.0% |
2,691 |
4.0% |
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Gross healthcare profit |
18,099 |
13,627 |
32.8% |
16,877 |
7.2% |
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- |
- |
- |
- |
- |
|
18,099 |
13,627 |
32.8% |
16,877 |
7.2% |
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Gross real estate profit |
(41) |
3,476 |
NMF |
1,209 |
NMF |
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- |
- |
- |
- |
- |
|
(41) |
3,476 |
NMF |
1,209 |
NMF |
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Gross other investment profit |
4,734 |
3,498 |
35.3% |
1,398 |
NMF |
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- |
- |
- |
- |
- |
|
4,709 |
3,437 |
37.0% |
1,543 |
NMF |
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Revenue |
202,765 |
149,330 |
35.8% |
195,653 |
3.6% |
|
182,623 |
128,618 |
42.0% |
177,511 |
2.9% |
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25,566 |
23,367 |
9.4% |
22,320 |
14.5% |
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Operating expenses |
(76,848) |
(63,948) |
20.2% |
(76,058) |
1.0% |
|
(65,244) |
(54,260) |
20.2% |
(65,277) |
-0.1% |
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(12,381) |
(10,333) |
19.8% |
(11,654) |
6.2% |
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Operating income before cost of credit risk / EBITDA |
125,917 |
85,382 |
47.5% |
119,595 |
5.3% |
|
117,379 |
74,358 |
57.9% |
112,234 |
4.6% |
|
13,185 |
13,034 |
1.2% |
10,666 |
23.6% |
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Profit from associates |
1,979 |
- |
- |
(1,310) |
NMF |
|
- |
- |
- |
- |
- |
|
1,979 |
- |
- |
(1,310) |
NMF |
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Depreciation and amortization of investment business |
(2,579) |
(2,256) |
14.3% |
(2,688) |
-4.1% |
|
- |
- |
- |
- |
- |
|
(2,579) |
(2,256) |
14.3% |
(2,688) |
-4.1% |
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Net foreign currency gain (loss) from investment business |
2,689 |
(1,433) |
NMF |
3,690 |
-27.1% |
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- |
- |
- |
- |
- |
|
2,689 |
(1,433) |
NMF |
3,690 |
-27.1% |
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Interest income from investment business |
622 |
(71) |
NMF |
617 |
0.8% |
|
- |
- |
- |
- |
- |
|
844 |
195 |
NMF |
818 |
3.2% |
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Interest expense from investment business |
(2,632) |
(1,718) |
53.2% |
(2,463) |
6.9% |
|
- |
- |
- |
- |
- |
|
(7,501) |
(3,994) |
87.8% |
(5,969) |
25.7% |
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Cost of credit risk |
(41,867) |
(13,846) |
NMF |
(41,841) |
0.1% |
|
(40,764) |
(13,279) |
NMF |
(40,771) |
0.0% |
|
(1,103) |
(567) |
94.5% |
(1,070) |
3.1% |
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Profit ** |
72,030 |
58,317 |
23.5% |
62,339 |
15.5% |
|
61,453 |
53,617 |
14.6% |
58,810 |
4.5% |
|
10,577 |
4,700 |
125.0% |
3,529 |
199.7% |
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Earnings per share (basic, diluted) |
1.84 |
1.64 |
12.2% |
1.63 |
12.9% |
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HALF-YEAR INCOME STATEMENT |
BGH Consolidated |
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Banking Business* |
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Investment Business* |
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Change |
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Change |
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Change |
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GEL thousands |
1H15 |
1H14 |
Y-O-Y |
|
1H15 |
1H14 |
Y-O-Y |
|
1H15 |
1H14 |
Y-O-Y |
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Net banking interest income |
243,778 |
163,448 |
49.1% |
|
249,461 |
166,231 |
50.1% |
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- |
- |
- |
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Net fee and commission income |
55,975 |
46,062 |
21.5% |
|
58,262 |
47,292 |
23.2% |
|
- |
- |
- |
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Net banking foreign currency gain |
38,727 |
22,700 |
70.6% |
|
38,727 |
22,700 |
70.6% |
|
- |
- |
- |
|
Net other banking income |
4,272 |
3,107 |
37.5% |
|
4,906 |
3,420 |
43.5% |
|
- |
- |
- |
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Gross insurance profit |
13,391 |
16,058 |
-16.6% |
|
8,777 |
8,190 |
7.2% |
|
5,492 |
8,727 |
-37.1% |
|
Gross healthcare profit |
34,975 |
22,938 |
52.5% |
|
- |
- |
- |
|
34,975 |
22,938 |
52.5% |
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Gross real estate profit |
1,168 |
9,579 |
-87.8% |
|
- |
- |
- |
|
1,168 |
9,659 |
-87.9% |
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Gross other investment profit |
6,133 |
5,861 |
4.6% |
|
- |
- |
- |
|
6,253 |
5,741 |
8.9% |
|
Revenue |
398,419 |
289,753 |
37.5% |
|
360,133 |
247,833 |
45.3% |
|
47,888 |
47,065 |
1.7% |
|
Operating expenses |
(152,908) |
(122,203) |
25.1% |
|
(130,520) |
(103,775) |
25.8% |
|
(24,038) |
(19,735) |
21.8% |
|
Operating income before cost of credit risk / EBITDA |
245,511 |
167,550 |
46.5% |
|
229,613 |
144,058 |
59.4% |
|
23,850 |
27,330 |
-12.7% |
|
Profit from associates |
668 |
- |
- |
|
- |
- |
- |
|
668 |
- |
- |
|
Depreciation and amortization of investment business |
(5,266) |
(4,485) |
17.4% |
|
- |
- |
- |
|
(5,266) |
(4,485) |
17.4% |
|
Net foreign currency gain (loss) from investment business |
6,379 |
(1,849) |
NMF |
|
- |
- |
- |
|
6,379 |
(1,849) |
NMF |
|
Interest income from investment business |
1,239 |
732 |
69.3% |
|
- |
- |
- |
|
1,662 |
980 |
69.6% |
|
Interest expense from investment business |
(5,094) |
(3,749) |
35.9% |
|
- |
- |
- |
|
(13,469) |
(7,835) |
71.9% |
|
Cost of credit risk |
(83,708) |
(27,163) |
NMF |
|
(81,536) |
(26,080) |
NMF |
|
(2,172) |
(1,083) |
100.6% |
|
Profit ** |
134,369 |
111,982 |
20.0% |
|
120,264 |
99,893 |
20.4% |
|
14,105 |
12,089 |
16.7% |
|
Earnings per share (basic) |
3.47 |
3.15 |
10.2% |
|
|
|
|
|
|
|
|
* Banking Business and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes.
** As of 30 June 2015, Privatbank integration costs totaled GEL 2.6mln and are recorded in non-recurring expenses
|
|
Bank of Georgia Holdings PLC |
|
Banking Business |
|
Investment Business |
||||||||||||
|
Balance Sheet |
Jun-15 |
Jun-14 |
Change |
Mar-15 |
Change |
|
Jun-15 |
Jun-14 |
Change |
Mar-15 |
Change |
|
Jun-15 |
Jun-14 |
Change |
Mar-15 |
Change |
|
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
1,261,805 |
903,734 |
39.6% |
1,000,713 |
26.1% |
|
1,252,758 |
895,287 |
39.9% |
997,547 |
25.6% |
|
107,511 |
73,488 |
46.3% |
110,578 |
-2.8% |
|
Amounts due from credit institutions |
583,888 |
363,468 |
60.6% |
545,714 |
7.0% |
|
575,534 |
353,559 |
62.8% |
523,663 |
9.9% |
|
18,844 |
17,964 |
4.9% |
87,478 |
-78.5% |
|
Investment securities |
895,840 |
569,937 |
57.2% |
880,799 |
1.7% |
|
898,457 |
568,784 |
58.0% |
881,098 |
2.0% |
|
1,153 |
1,153 |
0.0% |
1,153 |
0.0% |
|
Loans to customers and finance lease receivables |
5,052,752 |
3,650,791 |
38.4% |
5,156,386 |
-2.0% |
|
5,142,221 |
3,714,213 |
38.4% |
5,248,559 |
-2.0% |
|
- |
- |
- |
- |
- |
|
Accounts receivable and other loans |
77,866 |
60,677 |
28.3% |
73,315 |
6.2% |
|
15,474 |
9,622 |
60.8% |
13,063 |
18.5% |
|
70,343 |
51,903 |
35.5% |
64,947 |
8.3% |
|
Insurance premiums receivable |
58,142 |
52,043 |
11.7% |
58,816 |
-1.1% |
|
26,519 |
14,728 |
80.1% |
22,337 |
18.7% |
|
32,023 |
37,436 |
-14.5% |
37,205 |
-13.9% |
|
Prepayments |
52,145 |
28,188 |
85.0% |
42,748 |
22.0% |
|
30,779 |
18,417 |
67.1% |
24,969 |
23.3% |
|
21,366 |
9,771 |
118.7% |
17,779 |
20.2% |
|
Inventories |
131,534 |
90,489 |
45.4% |
113,322 |
16.1% |
|
10,379 |
6,689 |
55.2% |
7,697 |
34.8% |
|
121,155 |
83,800 |
44.6% |
105,625 |
14.7% |
|
Investment property |
221,506 |
152,292 |
45.4% |
194,623 |
13.8% |
|
143,873 |
127,374 |
13.0% |
128,376 |
12.1% |
|
77,633 |
24,918 |
211.6% |
66,247 |
17.2% |
|
Property and equipment |
669,153 |
534,289 |
25.2% |
618,474 |
8.2% |
|
338,858 |
293,626 |
15.4% |
334,516 |
1.3% |
|
330,295 |
240,663 |
37.2% |
283,958 |
16.3% |
|
Goodwill |
60,056 |
48,721 |
23.3% |
51,745 |
16.1% |
|
48,092 |
38,538 |
24.8% |
39,781 |
20.9% |
|
11,964 |
10,183 |
17.5% |
11,964 |
0.0% |
|
Intangible assets |
36,894 |
28,490 |
29.5% |
33,443 |
10.3% |
|
33,260 |
26,596 |
25.1% |
31,761 |
4.7% |
|
3,634 |
1,894 |
91.9% |
1,682 |
116.1% |
|
Income tax assets |
29,080 |
32,204 |
-9.7% |
24,943 |
16.6% |
|
21,686 |
24,835 |
-12.7% |
17,602 |
23.2% |
|
7,394 |
7,369 |
0.3% |
7,341 |
0.7% |
|
Other assets |
244,398 |
152,360 |
60.4% |
235,012 |
4.0% |
|
174,820 |
140,452 |
24.5% |
176,982 |
-1.2% |
|
80,058 |
12,784 |
526.2% |
68,096 |
17.6% |
|
Total assets |
9,375,059 |
6,667,683 |
40.6% |
9,030,053 |
3.8% |
|
8,712,710 |
6,232,720 |
39.8% |
8,447,951 |
3.1% |
|
883,373 |
573,326 |
54.1% |
864,053 |
2.2% |
|
Client deposits and notes |
4,104,417 |
3,074,710 |
33.5% |
4,099,029 |
0.1% |
|
4,212,822 |
3,148,729 |
33.8% |
4,271,854 |
-1.4% |
|
- |
- |
- |
- |
- |
|
Amounts due to credit institutions |
2,139,517 |
1,240,128 |
72.5% |
1,780,636 |
20.2% |
|
2,045,093 |
1,145,875 |
78.5% |
1,694,668 |
20.7% |
|
189,124 |
156,753 |
20.7% |
181,773 |
4.0% |
|
Debt securities issued |
1,063,123 |
786,432 |
35.2% |
1,026,689 |
3.5% |
|
990,257 |
760,144 |
30.3% |
962,587 |
2.9% |
|
79,894 |
26,690 |
199.3% |
66,964 |
19.3% |
|
Accruals and deferred income |
132,832 |
83,784 |
58.5% |
124,344 |
6.8% |
|
14,369 |
9,917 |
44.9% |
20,949 |
-31.4% |
|
118,463 |
73,867 |
60.4% |
103,395 |
14.6% |
|
Insurance contracts liabilities |
73,001 |
60,537 |
20.6% |
70,156 |
4.1% |
|
42,910 |
25,890 |
65.7% |
34,685 |
23.7% |
|
30,091 |
34,647 |
-13.1% |
35,471 |
-15.2% |
|
Income tax liabilities |
111,387 |
92,617 |
20.3% |
96,761 |
15.1% |
|
87,392 |
77,942 |
12.1% |
79,343 |
10.1% |
|
23,995 |
14,675 |
63.5% |
17,418 |
37.8% |
|
Other liabilities |
94,839 |
72,599 |
30.6% |
132,290 |
-28.3% |
|
71,126 |
44,634 |
59.4% |
99,677 |
-28.6% |
|
34,604 |
29,407 |
17.7% |
43,072 |
-19.7% |
|
Total liabilities |
7,719,116 |
5,410,807 |
42.7% |
7,329,905 |
5.3% |
|
7,463,969 |
5,213,131 |
43.2% |
7,163,763 |
4.2% |
|
476,171 |
336,039 |
41.7% |
448,093 |
6.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
1,655,943 |
1,256,876 |
31.8% |
1,700,148 |
-2.6% |
|
1,248,741 |
1,019,589 |
22.5% |
1,284,188 |
-2.8% |
|
407,202 |
237,287 |
71.6% |
415,960 |
-2.1% |
|
Book value per share |
41.74 |
34.95 |
19.4% |
42.71 |
-2.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking Business Ratios |
2Q15 |
1Q15 |
2Q14 |
|
1H15 |
1H14 |
|
Profitability |
|
|
|
|
|
|
|
ROAA |
2.9% |
3.0% |
3.5% |
|
2.9% |
3.3% |
|
ROAE |
19.3% |
19.2% |
21.0% |
|
19.3% |
19.3% |
|
Net Interest Margin |
7.6% |
7.8% |
7.4% |
|
7.8% |
7.5% |
|
Loan Yield |
14.6% |
14.5% |
14.3% |
|
14.6% |
14.5% |
|
Cost of Funds |
5.0% |
5.0% |
4.7% |
|
5.0% |
4.9% |
|
Cost of Customer Funds |
4.4% |
4.4% |
4.2% |
|
4.4% |
4.4% |
|
Cost of Amounts Due to Credit Institutions |
5.3% |
5.2% |
4.7% |
|
5.3% |
4.8% |
|
Cost / Income |
35.7% |
36.8% |
42.2% |
|
36.2% |
41.9% |
|
NPLs To Gross Loans To Clients |
4.1% |
3.5% |
3.8% |
|
4.1% |
3.8% |
|
NPL Coverage Ratio |
82.2% |
74.2% |
73.8% |
|
82.2% |
73.8% |
|
NPL Coverage Ratio, Adjusted for discounted value of collateral |
115.1% |
118.0% |
116.1% |
|
115.1% |
116.1% |
|
Cost of Risk |
2.7% |
3.1% |
0.9% |
|
2.9% |
0.9% |
|
Tier I capital adequacy ratio (BIS) |
20.4% |
19.9% |
22.5% |
|
20.4% |
22.5% |
|
Total capital adequacy ratio (BIS) |
26.7% |
23.9% |
26.3% |
|
26.7% |
26.3% |
|
Tier I capital adequacy ratio (New NBG, Basel II) |
10.4% |
9.8% |
10.8% |
|
10.4% |
10.8% |
|
Total capital adequacy ratio (New NBG, Basel II) |
15.9% |
12.9% |
14.0% |
|
15.9% |
14.0% |
* Note: Banking Business and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes.
DISCUSSION OF RESULTS
Discussion of Banking Business Quarterly Results
The following discussion refers to the Banking Business only
Revenue
|
GEL thousands, unless otherwise noted |
2Q15 |
2Q14 |
Change, Y-o-Y |
1Q15 |
Change, Q-o-Q |
|
Banking interest income |
215,313 |
143,025 |
50.5% |
202,353 |
6.4% |
|
Banking interest expense |
(88,910) |
(59,246) |
50.1% |
(79,295) |
12.1% |
|
Net banking interest income |
126,403 |
83,779 |
50.9% |
123,058 |
2.7% |
|
Fee and commission income |
40,160 |
35,581 |
12.9% |
37,343 |
7.5% |
|
Fee and commission expense |
(9,988) |
(8,501) |
17.5% |
(9,253) |
7.9% |
|
Net fee and commission income |
30,172 |
27,080 |
11.4% |
28,090 |
7.4% |
|
Net banking foreign currency gain |
19,765 |
11,395 |
73.5% |
18,962 |
4.2% |
|
Net other banking income |
2,810 |
2,433 |
15.5% |
2,095 |
34.1% |
|
Gross insurance profit |
3,473 |
3,931 |
-11.7% |
5,306 |
-34.5% |
|
Revenue |
182,623 |
128,618 |
42.0% |
177,511 |
2.9% |
|
|
|
|
|
|
|
|
Net Interest Margin |
7.6% |
7.4% |
+20 bps |
7.8% |
-20 bps |
|
Average interest earning assets |
6,638,429 |
4,517,479 |
46.9% |
6,370,469 |
4.2% |
|
Average interest bearing liabilities |
7,128,014 |
5,005,868 |
42.4 % |
6,441,353 |
10.7% |
|
Average net loans, currency blended |
5,225,895 |
3,584,404 |
45.8% |
5,056,404 |
3.4% |
|
Average net loans, GEL |
1,564,867 |
1,122,031 |
39.5% |
1,490,531 |
3.0% |
|
Average net loans, FC |
3,661,028 |
2,462,373 |
48.7% |
3,565,873 |
2.7% |
|
Average client deposits, currency blended |
4,313,076 |
3,139,182 |
37.4% |
4,034,063 |
6.9% |
|
Average client deposits, GEL |
1,216,653 |
885,205 |
37.4% |
1,199,627 |
1.4% |
|
Average client deposits, FC |
3,096,423 |
2,253,977 |
37.4% |
2,834,435 |
9.2% |
|
Average liquid assets, currency blended |
2,588,219 |
1,903,216 |
36.0% |
2,111,126 |
21.8 % |
|
Average liquid assets, GEL |
1,173,577 |
813,289 |
44.3% |
1,110,790 |
5.7% |
|
Average liquid assets, FC |
1,414,642 |
1,089,927 |
29.8% |
1,000,336 |
41.4% |
|
Excess liquidity (NBG) |
219,562 |
255,123 |
-13.9% |
199,690 |
10.0% |
|
Liquid assets yield, currency blended |
3.1% |
2.3% |
|
3.2% |
|
|
Liquid assets yield, GEL |
6.1% |
5.0% |
|
5.6% |
|
|
Liquid assets yield, FC |
0.5% |
0.4% |
|
0.5% |
|
|
Loan yield, total |
14.6% |
14.3% |
|
14.5% |
|
|
Loan yield, GEL |
21.6% |
20.0% |
|
21.4% |
|
|
Loan yield, FC |
11.4% |
11.6% |
|
11.6% |
|
|
Cost of funding, total |
5.0% |
4.7% |
|
5.0% |
|
|
Cost of funding, GEL |
4.8% |
3.9% |
|
4.8% |
|
|
Cost of funding, FC |
5.0% |
5.0% |
|
5.1% |
|
§ Our Banking Business delivered record quarterly revenue of GEL 182.6mln, up 42.0% y-o-y and up 2.9% q-o-q. The y-o-y revenue growth was driven by:
- An increase of our net banking interest income to GEL 126.4mln, up 50.9%, driven by GEL 72.3mln or a 50.5% increase in Banking interest income, outpacing the growth of GEL 29.7mln or 50.1% in Banking interest expense
- The Privatbank acquisition, which added GEL 19.5mln to our Banking Business revenues, most of it (over 85% of the total in 2Q15) to net banking interest income on the back of adding GEL 245.6mln or 4.8% to the net loan book
- Strong y-o-y growth of the net loan book to GEL 5,142.2mln, up 38.4%; ex-Privatbank net loan book increased to GEL 4,896.6mln, up 31.8% y-o-y
- Our Cost of Funds was 5.0%, up 30 bps y-o-y and Cost of Customer Funds was 4.4%, up 20 bps y-o-y. The increase in liability costs was largely due to the Privatbank acquisition. Standalone Privatbank Cost of Funds and Cost of Client Deposits stood at 5.3% and 5.8% respectively in 2Q15
- Our average interest bearing liabilities increased to GEL 7,128.0mln, up 42.4% y-o-y
- Increased Cost of Funding was offset by Privatbank's high yielding loan portfolio. Standalone Privatbank Loan Yield stood at 29.6% in 2Q15. As a result, Banking Business loan yield was 14.6% in 2Q15, up 30 bps y-o-y
- Our net fee and commission income was GEL 30.2mln, up 11.4% y-o-y and 7.4% q-o-q; despite a high base in 2Q14 as a result of Investment Management's M&A deal
- Robust growth of our net fee and commission income reflects the ongoing success of our Express Banking service, which has expanded substantially in 1H15 as a result of the rebranding of Privatbank branches as Express branches. This resulted in the addition of 81,338 Express Banking customers y-o-y and triggered a significant increase in the volume of banking transactions - the growth of transactions was achieved largely through cost-effective remote channels.
- Net gain from foreign currencies increased to GEL 19.8mln, up 73.5% from GEL 11.4mln a year ago reflecting increased client activity as a result of the increased GEL volatility
- Our P&C insurance business was a small negative to overall revenue. Gross insurance profit was GEL 3.5mln which for the Banking Business comprises revenue from the Bank's Property & Casualty subsidiary Aldagi was down 11.7% y-o-y. Although Aldagi posted strong growth in net insurance premiums earned both on y-o-y and q-o-q basis, corresponding claims up by 115.5% y-o-y, more than offset the growth. This was largely due to an increase in claims related to floods in Tbilisi in 2Q15, which resulted in approximately GEL 1.5mln claims and higher motor vehicle insurance claims following an overall decrease in the amount of insurance deductible on the market. For P&C insurance segment financials please see page 35
§ Our NIM stood at 7.6% up 20 bps y-o-y and down 20 bps q-o-q, reflecting:
- The addition of Privatbank's high yielding loan portfolio, with a Loan Yield of 29.6% and comparatively low Cost of Funds of 5.3% in 2Q15 down from 7.5% in 1Q15, which is a result of our active liability optimization measures. Privatbank's high margin is primarily driven by its mono-product of an all-in-one debit and credit card. Additionally, we have realized cost synergies and are working to further reduce Privatbank's Cost of Funds
- The ex-Privatbank Loan Yield of 13.7%, which was down 60 bps, driven by a 35.0% increase in banking interest income that lagged behind a 40.4% growth in average interest earning assets; the downward trend also reflects our efforts to focus on lower risk retail banking products in our lending activities. Loan Yield including Privatbank was 14.6%
- This was partially offset by Liquid Assets Yield of 3.1%, which was up 80 bps y-o-y, largely reflecting higher yield on the Government issued securities
- Our liquidity levels as a percentage of total assets increased both y-o-y and q-o-q basis in 2Q15 as a result of slower growth of the loan book and an increased liquidity pool
Operating income before non-recurring items; cost of credit risk; profit for the period
|
|
|
Change |
|
Change |
|
|
GEL thousands, unless otherwise noted |
2Q15 |
2Q14 |
y-o-y |
1Q15 |
q-o-q |
|
|
|
|
|
|
|
|
Salaries and other employee benefits |
(38,066) |
(31,347) |
21.4% |
(38,606) |
-1.4% |
|
Administrative expenses |
(17,899) |
(15,746) |
13.7% |
(17,506) |
2.2% |
|
Banking depreciation and amortisation |
(8,338) |
(6,364) |
31.0% |
(8,373) |
-0.4% |
|
Other operating expenses |
(941) |
(803) |
17.2% |
(792) |
18.8% |
|
Operating expenses |
(65,244) |
(54,260) |
20.2% |
(65,277) |
-0.1% |
|
Operating income before cost of credit risk |
117,379 |
74,358 |
57.9% |
112,234 |
4.6% |
|
Impairment charge on loans to customers |
(35,105) |
(7,816) |
NMF |
(38,928) |
-9.8% |
|
Impairment charge on finance lease receivables |
(1,779) |
(387) |
NMF |
(119) |
NMF |
|
Impairment charge on other assets and provisions |
(3,880) |
(5,076) |
-23.6% |
(1,724) |
125.1% |
|
Cost of credit risk |
(40,764) |
(13,279) |
NMF |
(40,771) |
0.0% |
|
Net operating income before non-recurring items |
76,615 |
61,079 |
25.4% |
71,463 |
7.2% |
|
Net non-recurring items |
(3,409) |
(7,951) |
-57.1% |
(2,167) |
57.3% |
|
Profit before income tax |
73,206 |
53,128 |
37.8% |
69,296 |
5.6% |
|
Income tax (expense) benefit |
(11,753) |
489 |
NMF |
(10,486) |
12.1% |
|
Profit |
61,453 |
53,617 |
14.6% |
58,810 |
4.5% |
§ Our efficiency further improved in 2Q15, with operating leverage at 21.7% y-o-y and cost/income at 35.7% in 2Q15 compared to 42.2% in 2Q14; ex-Privatbank, operating leverage stood at 16.7% and Cost/Income ratio stood at 36.6%. Improved efficiency was a result of:
- Our ongoing efforts to keep a tight grip on costs
- The integration of Privatbank and the respective synergies realised in 2Q15
§ Operating expenses increased to GEL 65.2mln in 2Q15, up 20.2% y-o-y and flat q-o-q; ex-Privatbank it was GEL 59.8mln, up by GEL 5.5mln or 10.2% y-o-y, reflecting:
- The Privatbank acquisition that added GEL 5.5mln to our operating expenses in 2Q15
- Salaries and employee benefits that increased to GEL 38.1mln, up GEL 6.7mln or 21.4%, reflecting the increased revenue base
- Administrative expenses increased to GEL 17.9mln, up GEL 2.2mln or 13.7%, largely driven by expenses on rent, predominantly due to the appreciation of the US$, the listing currency of rentals in Georgia, in addition to an increase in the number of leased branches
§ On a q-o-q basis, our operating expenses decreased 0.1%, which was predominantly due to synergies extracted from Privatbank's integration. Privatbank's operating expenses nearly halved on a q-o-q basis to GEL 5.5mln despite synergies taking effect only in the last 50 days of 2Q15
§ The Banking Business like-for-like Cost of Risk ratio was 2.2% in 2Q15 (1.6% in 1Q15 and 0.9% in 2Q14) and cost of credit risk was GEL 33.7mln in 2Q15 (GEL 20.7mln in 1Q15 and GEL 13.3mln in 2Q14). Overall, Cost of Risk ratio was 2.7% and cost of credit risk was GEL 40.8mln (GEL 40.8mln and 3.1% in 1Q15). The Privatbank acquisition added GEL 7.1mln and 50 bps to the cost of credit risk and Cost of Risk ratio, respectively. We also increased our provisioning levels generally on both corporate and retail books to account mainly for the increased post-devaluation risk.
§ NPLs to gross loans increased by 30 bps to 4.1%, compared to 3.5% as of 31 March 2015 and 3.8% as of 30 June 2015
§ NPLs increased to GEL 219.2mln, up 50.6% y-o-y , reflecting the first time inclusion of Privatbank's NPLs
§ NPL coverage ratio adjusted for the discounted value of collateral stood at 115.1% compared to 118.0% as of 31 March 2015 and 116.1% as of 30 June 2014
§ The NPL coverage ratio improved to 82.2% compared to 74.2% as of 31 March 2015 and 73.8% as of 30 June 2014
§ Our 15 days past due rate for retail loans stood at 1.4% as of 30 June 2015 compared to 1.0% as of 31 March 2015 and 1.6% as of 30 June 2014
§ Non-recurring items decreased to GEL 8.0mln from GEL 3.4mln, as a result of high base due to provisioning of legacy investment in Ukrainian subsidiary BG bank in 2Q14. The Banking Business 2Q15 profit was GEL 61.5mln, up 14.6% y-o-y and up 4.5% q-o-q; Privatbank contributed GEL 5.0mln to this profit
§ The Banking Business profit was supported by its banking subsidiary in Belarus - BNB, which added GEL 1.7mln profit in 2Q15. Strong growth was supported by a 40.7% growth of the BNB loan book to GEL 305.8mln, mostly consisting of SME loans. BNB client deposits increased 52.5% to GEL 242.2mln, reflecting BNB's strong franchise. BNB is well capitalised, with Capital Adequacy Ratios well above the requirements of its regulating Central Bank. For BNB standalone financials please see page 35
Banking Business Balance Sheet highlights
|
|
|
Change |
|
Change |
||
|
GEL thousands, unless otherwise noted |
30 June 2015 |
30 June 2014 |
y-o-y |
30 March 2015 |
q-o-q |
|
|
|
|
|
|
|
|
|
|
Liquid assets |
2,726,749 |
1,817,630 |
50.0% |
2,402,308 |
13.5% |
|
|
Liquid assets, GEL |
1,257,220 |
753,416 |
66.9% |
1,154,634 |
8.9% |
|
|
Liquid assets, FC |
1,469,529 |
1,064,214 |
38.1% |
1,247,674 |
17.8% |
|
|
Net loans |
5,142,221 |
3,714,213 |
38.4% |
5,248,559 |
-2.0% |
|
|
Net loans, GEL |
1,546,104 |
1,167,711 |
32.4% |
1,523,976 |
1.5% |
|
|
Net loans, FC |
3,596,117 |
2,546,502 |
41.2% |
3,724,583 |
-3.4% |
|
|
|
|
|
|
|
|
|
|
Client deposits and notes |
4,212,822 |
3,148,729 |
33.8% |
4,271,854 |
-1.4% |
|
|
Amounts due to credit institutions, of which: |
2,045,093 |
1,145,875 |
78.5% |
1,694,668 |
20.7% |
|
|
Borrowings from DFIs |
807,809 |
565,829 |
42.8% |
718,540 |
12.4% |
|
|
Short-term loans from central banks |
674,701 |
317,031 |
112.8% |
518,400 |
30.2% |
|
|
Loans and deposits from commercial banks |
562,583 |
263,015 |
113.9% |
457,728 |
22.9% |
|
|
Debt securities issued |
990,257 |
760,144 |
30.3% |
962,587 |
2.9% |
|
|
|
|
|
|
|
|
|
|
Liquidity & CAR Ratios |
|
|
|
|
|
|
|
Net Loans / Customer Funds |
122.1% |
118.0% |
|
122.9% |
|
|
|
Net Loans / Customer Funds + DFIs |
102.4% |
100.0% |
|
105.2% |
|
|
|
Liquid assets as percent of total assets |
31.3% |
29.2% |
|
28.4% |
|
|
|
Liquid assets as percent of total liabilities |
36.5% |
34.9% |
|
33.5% |
|
|
|
NBG liquidity ratio |
35.1% |
38.1% |
|
34.7% |
|
|
|
Excess liquidity (NBG) |
219,562 |
255,123 |
-13.9% |
199,690 |
|
|
|
Tier I Capital Adequacy Ratio (BIS) |
20.4% |
22.5% |
|
19.9% |
|
|
|
Total Capital Adequacy Ratio (BIS) |
26.7% |
26.3% |
|
23.9% |
|
|
|
Tier I Capital Adequacy Ratio (NBG Basel 2/3) |
10.4% |
10.8% |
|
9.8% |
|
|
|
Total Capital Adequacy Ratio (NBG Basel 2/3 ) |
15.9% |
14.0% |
|
12.9% |
|
|
Our Banking Business balance sheet remained very liquid (NBG Liquidity ratio of 35.1%1) and well-capitalised (BIS Tier I of 20.4%1) with a well-diversified funding base (Client Deposits to Liabilities of 56.4%).
§ Liquid assets increased to GEL 2,726.7mln, up 50.0%, reflecting the GEL devaluation as nearly half of liquid assets is held in US$
§ Additionally, liquid assets as a percentage of total assets increased q-o-q to 31.3%, up from 28.4% and liquid assets as a percentage of total liabilities also increased q-o-q to 36.5%, up from 33.5%
§ The NBG liquidity ratio stood at 35.1% as of 30 June 2015 compared to 34.7% as of 31 March 2015, against a regulatory requirement of 30.0%
§ As we further diversified our funding base, our share of amounts due to credit institutions to total liabilities increased q-o-q from 23.7% to 27.4%, with the share of client deposits and notes to total liabilities declining q-o-q from 59.6% to 56.4%. Net Loans to Customer Funds and DFIs ratio, a ratio closely observed by management, stood at 102.4%, up slightly from 100.0% a year ago
§ Improvement in our total capital adequacy ratios reflects a US$ 90mln subordinated loan raised from IFC at the end of 2Q 2015, which qualifies as Tier II capital under the Basel 2 framework and will allow us to support further growth without compromising capital ratios
Discussion of Banking Business 1H15 Results
The following discussion refers to the Banking Business only
Revenue
|
GEL thousands, unless otherwise noted |
1H15 |
1H14 |
Change, Y-o-Y |
|
Banking interest income |
417,666 |
287,011 |
45.5% |
|
Banking interest expense |
(168,205) |
(120,780) |
39.3% |
|
Net banking interest income |
249,461 |
166,231 |
50.1% |
|
Fee and commission income |
77,503 |
64,045 |
21.0% |
|
Fee and commission expense |
(19,241) |
(16,753) |
14.9% |
|
Net fee and commission income |
58,262 |
47,292 |
23.2% |
|
Net banking foreign currency gain |
38,727 |
22,700 |
70.6% |
|
Net other banking income |
4,906 |
3,420 |
43.5% |
|
Gross insurance profit |
8,777 |
8,190 |
7.2% |
|
Revenue |
360,133 |
247,833 |
45.3% |
|
Salaries and other employee benefits |
(76,672) |
(61,681) |
24.3% |
|
Administrative expenses |
(35,404) |
(27,947) |
26.7% |
|
Banking depreciation and amortisation |
(16,711) |
(12,523) |
33.4% |
|
Other operating expenses |
(1,733) |
(1,624) |
6.7% |
|
Operating expenses |
(130,520) |
(103,775) |
25.8% |
|
Operating income before cost of credit risk |
229,613 |
144,058 |
59.4% |
|
Impairment charge on loans to customers |
(74,033) |
(16,927) |
NMF |
|
Impairment charge on finance lease receivables |
(1,899) |
(358) |
NMF |
|
Impairment charge on other assets and provisions |
(5,604) |
(8,795) |
-36.3% |
|
Cost of credit risk |
(81,536) |
(26,080) |
NMF |
|
Net operating income before non-recurring items |
148,077 |
117,978 |
25.5% |
|
Net non-recurring items |
(5,575) |
(9,601) |
-41.9% |
|
Profit before income tax |
142,502 |
108,377 |
31.5% |
|
Income tax expense |
(22,238) |
(8,484) |
162.1% |
|
Profit |
120,264 |
99,893 |
20.4% |
|
|
|
|
|
|
Ratios |
|
|
|
|
GEL thousands, unless otherwise noted |
1H15 |
1H14 |
Change, Y-o-Y |
|
Net Interest Margin |
7.8% |
7.5% |
|
|
Liquid assets yield, currency blended |
3.2% |
2.3% |
|
|
Liquid assets yield, GEL |
5.9% |
4.9% |
|
|
Liquid assets yield, FC |
0.6% |
0.4% |
|
|
Loan yield, total |
14.6% |
14.5% |
|
|
Loan yield, GEL |
21.5% |
20.1% |
|
|
Loan yield, FC |
11.5% |
11.8% |
|
|
Cost of funding, total |
5.0% |
4.9% |
|
|
Cost of funding, GEL |
4.8% |
4.0% |
|
|
Cost of funding, FC |
5.0% |
5.1% |
|
§ Our Banking Business delivered another record half year revenue of GEL 360.1mln, up 45.3%y-o-y. The revenue growth was diversified across all the revenue items:
- Net banking interest income was GEL 249.5mln, up 50.1% y-o-y
- Our net fee and commission income was GEL 58.3mln, up 23.2% The Privatbank acquisition added GEL 38.9mln to our Banking Business revenues
- Net banking foreign currency gain was GEL 38.7mln, up 70.6%
- Gross insurance profit was GEL 8.8mln, up 7.2% y-o-y
§ Our NIM stood at 7.8%, increased 30 bps y-o-y, reflecting:
- Privatbank NIM of 20.5%, a result of Privatbank's high yielding loan portfolio with a Loan Yield of 29.3% vs a comparatively low Cost of Funds of 6.5%. Privatbank Cost of Funds declined from 7.5% in 1Q15 to 5.3% in 2Q15, which is a result of our active liability optimization measures.
- Loan Yield of 14.6%, up 10 bps y-o-y, offset by 10 bps increase in Cost of Funds to 5.0%
- Liquid Assets Yield of 3.2%, up 90 bps y-o-y
§ Our efficiency improved in 1H15, with operating leverage at 19.5% y-o-y and Cost to Income at 36.2% in 1H15
§ Operating expenses increased to GEL 130.5mln, up GEL 26.7mln or 25.8%, compared to 45.3% increase in revenues, reflecting:
- The Privatbank acquisition, which added GEL 15.4mln to our operating expenses in 1H15
- Ex-Privatbank salaries and employee benefits increased by GEL 7.4mln or 12.0%
- Administrative expenses increased by GEL 2.2mln or 7.9%
§ The Banking Business like-for-like Cost of Risk ratio was 2.0% in 1H15 (0.9% in 1H14) and cost of credit risk was GEL 54.4mln (GEL 26.1mln in 1H14). Overall, Banking Business Cost of Risk ratio and cost of credit risk was 2.9% and GEL 81.5mln, respectively in 1H15, which was driven by:
- GEL devaluation, which contributed GEL 11.9mln to the cost of credit risk and 40bps to Cost of Risk
- The Privatbank acquisition, which added GEL 15.2mln to the cost of credit risk and 50 bps to Cost of Risk
- Like-for-like cost of credit risk increase by GEL 28.3mln or by 110 bps
§ As a result of the foregoing, Banking Business 1H15 profit was GEL 120.3mln, up 20.4% y-o-y; Privatbank contributed GEL 6.1mln to this profit, of which GEL 5.0 million was achieved in 2Q15 despite the synergies taking effect only in the last 50 days of 2Q15
Discussion of Segment Results
The segment results discussion is presented for Retail Banking (RB), Corporate Banking (CB), Investment Management, Healthcare Business (GHG), Real Estate Business (m2 Real Estate)
Banking Business Segment Result Discussion
Retail Banking (RB)
Retail Banking provides consumer loans, mortgage loans, overdrafts, credit card facilities and other credit facilities as well as funds transfer and settlement services and handling customer deposits for both individuals and legal entities, encompassing the mass affluent segment, retail mass markets, SME and micro businesses.
|
GEL thousands, unless otherwise noted |
2Q15 |
2Q14 |
Change y-o-y |
1Q15 |
Change q-o-q |
1H15 |
1H14 |
Change y-o-y |
|
|
|
|
|
|
|
|
|
|
|
INCOME STATEMENT HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net banking interest income |
79,269 |
51,742 |
53.2% |
75,150 |
5.5% |
154,419 |
100,945 |
53.0% |
|
Net fee and commission income |
18,406 |
14,021 |
31.3% |
18,566 |
-0.9% |
36,971 |
26,009 |
42.1% |
|
Net banking foreign currency gain |
4,305 |
4,207 |
2.3% |
3,905 |
10.2% |
8,209 |
8,240 |
-0.4% |
|
Net other banking income |
1,384 |
1,371 |
0.9% |
963 |
43.7% |
2,348 |
1,828 |
28.5% |
|
Revenue |
103,364 |
71,341 |
44.9% |
98,584 |
4.8% |
201,947 |
137,022 |
47.4% |
|
Salaries and other employee benefits |
(22,416) |
(17,045) |
31.5% |
(23,596) |
-5.0% |
(46,012) |
(33,493) |
37.4% |
|
Administrative expenses |
(11,632) |
(8,754) |
32.9% |
(12,240) |
-5.0% |
(23,872) |
(17,102) |
39.6% |
|
Banking depreciation and amortisation |
(6,818) |
(4,847) |
40.7% |
(6,831) |
-0.2% |
(13,649) |
(9,424) |
44.8% |
|
Other operating expenses |
(496) |
(411) |
20.7% |
(462) |
7.4% |
(956) |
(739) |
29.8% |
|
Operating expenses |
(41,362) |
(31,057) |
33.2% |
(43,129) |
-4.1% |
(84,489) |
(60,758) |
39.1% |
|
Operating income before cost of credit risk |
62,002 |
40,284 |
53.9% |
55,455 |
11.8% |
117,458 |
76,264 |
54.0% |
|
Cost of credit risk |
(20,662) |
(2,296) |
NMF |
(16,660) |
24.0% |
(37,323) |
(372) |
NMF |
|
Net non-recurring items |
(2,875) |
(4,375) |
-34.3% |
(449) |
NMF |
(3,323) |
(4,766) |
-30.3% |
|
Profit before income tax |
38,465 |
33,613 |
14.4% |
38,346 |
0.3% |
76,812 |
71,126 |
8.0% |
|
Income tax expense |
(5,900) |
(630) |
NMF |
(5,738) |
2.8% |
(11,639) |
(6,258) |
86.0% |
|
Profit |
32,565 |
32,983 |
-1.3% |
32,608 |
-0.1% |
65,173 |
64,866 |
0.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
Net loans, standalone, Currency Blended |
2,623,615 |
1,754,248 |
49.6% |
2,639,808 |
-0.6% |
2,623,615 |
1,754,248 |
49.6% |
|
Net loans, standalone, GEL |
1,285,013 |
941,327 |
36.5% |
1,290,587 |
-0.4% |
1,285,013 |
941,327 |
36.5% |
|
Net loans, standalone, FC |
1,338,602 |
812,921 |
64.7% |
1,349,221 |
-0.8% |
1,338,602 |
812,921 |
64.7% |
|
Client deposits, standalone, Currency Blended |
1,736,508 |
1,134,186 |
53.1% |
1,874,262 |
-7.3% |
1,736,508 |
1,134,186 |
53.1% |
|
Client deposits, standalone, GEL |
491,104 |
372,846 |
31.7% |
618,118 |
-20.5% |
491,104 |
372,846 |
31.7% |
|
Client deposits, standalone, FC |
1,245,404 |
761,340 |
63.6% |
1,256,144 |
-0.9% |
1,245,404 |
761,340 |
63.6% |
|
Time deposits, standalone, Currency Blended |
1,067,316 |
689,776 |
54.7% |
1,182,396 |
-9.7% |
1,067,316 |
689,776 |
54.7% |
|
Time deposits, standalone, GEL |
209,735 |
169,414 |
23.8% |
296,790 |
-29.3% |
209,735 |
169,414 |
23.8% |
|
Time deposits, standalone, FC |
857,581 |
520,362 |
64.8% |
885,606 |
-3.2% |
857,581 |
520,362 |
64.8% |
|
Current accounts and demand deposits, standalone, Currency Blended |
669,192 |
444,410 |
50.6% |
691,866 |
-3.3% |
669,192 |
444,410 |
50.6% |
|
Current accounts and demand deposits, standalone, GEL |
281,369 |
203,432 |
38.3% |
321,328 |
-12.4% |
281,369 |
203,432 |
38.3% |
|
Current accounts and demand deposits, standalone, FC |
387,823 |
240,978 |
60.9% |
370,538 |
4.7% |
387,823 |
240,978 |
60.9% |
|
|
|
|
|
|
|
|
|
|
|
KEY RATIOS |
|
|
|
|
|
|
|
|
|
Net interest margin, currency blended |
9.5% |
9.8% |
|
9.7% |
|
9.6% |
9.9% |
|
|
Loan yield, currency blended |
17.3% |
17.7% |
|
17.3% |
|
17.3% |
17.8% |
|
|
Loan yield, GEL |
23.6% |
21.8% |
|
23.0% |
|
23.3% |
21.5% |
|
|
Loan yield, FC |
11.2% |
12.6% |
|
11.4% |
|
10.0% |
12.9% |
|
|
Cost of deposits, currency blended |
3.9% |
3.9% |
|
4.4% |
|
4.2% |
4.0% |
|
|
Cost of deposits, GEL |
4.6% |
4.4% |
|
5.5% |
|
5.1% |
4.5% |
|
|
Cost of deposits, FC |
3.6% |
3.7% |
|
3.8% |
|
3.7% |
3.8% |
|
|
Cost of time deposits, currency blended |
5.7% |
5.7% |
|
5.3% |
|
5.8% |
5.9% |
|
|
Cost of time deposits, GEL |
7.9% |
8.2% |
|
7.2% |
|
8.7% |
8.5% |
|
|
Cost of time deposits, FC |
5.0% |
4.9% |
|
4.6% |
|
4.9% |
5.1% |
|
|
Current accounts and demand deposits, currency blended |
1.2% |
1.0% |
|
2.8% |
|
1.4% |
1.0% |
|
|
Current accounts and demand deposits, GEL |
1.4% |
1.1% |
|
4.0% |
|
2.0% |
1.0% |
|
|
Current accounts and demand deposits, FC |
1.1% |
1.0% |
|
1.8% |
|
1.0% |
1.0% |
|
|
Cost / income ratio |
40.0% |
43.5% |
|
43.7% |
|
41.7% |
44.3% |
|
Performance highlights
§ Our Retail Banking revenue increased to GEL 103.4mln in 2Q15, up 44.9% y-o-y from GEL 71.3mln a year ago. The revenue growth reflected strong performance of Retail Banking segment:
- Net banking interest income was GEL 79.3mln, up 53.2%, mostly a result of the significant growth of the Retail Banking loan book, particularly the mortgage, micro & SME loan portfolios
- The Retail Banking net loan book reached a record GEL 2,623.6mln up 49.6% y-o-y; ex-Privatbank it was GEL 2,378.0mln; ex-Privatbank growth on constant currency basis was 19.8% y-o-y. The growth was a result of strong loan origination performance delivered across all segments in 2Q5:
- Consumer loan originations of GEL 163.2mln resulted in consumer loans outstanding totalling GEL 597.0mln as of 30 June 2015, up 33.9% y-o-y
- Micro loan originations of GEL 144.1mln resulted in micro loans outstanding totalling GEL 525.3mln as of 30 June 2015, up 39.9% y-o-y
- SME loan originations of GEL 76.2mln resulted in SME loans outstanding totalling GEL 301.9mln as of 30 June 2015, up 59.0% y-o-y
- Mortgage loans originations of GEL 53.9mln resulted in mortgage loans outstanding of GEL 732.0mln as of 30 June 2015, 49.5% y-o-y
- Privatbank added GEL 245.6mln to the net loan book, mostly credit card and consumer loans
- Retail Banking client deposits increased to GEL 1,736.5mln, up 53.1% y-o-y; ex-Privatbank it was GEL 1,469.7mln; ex-Privatbank growth on constant currency basis was 9.0% y-o-y. Growth of Client Deposits on a y-o-y basis was due to increasing number of Express Banking clients, who bring with them the cheapest source of deposits for the bank - current accounts and demand deposits
- The Privatbank acquisition, which added GEL 19.5mln to our Retail Banking Business revenues in 2Q15, including GEL 16.8mln net banking interest income, on the back of adding GEL 245.6mln or 4.8% to retail banking net loan book
- Our Retail Banking net fee and commission income increased to GEL 18.4mln up 31.3%; ex-Privatbank it was GEL 15.7mln, up 12.1% from GEL 14.0mln a year ago. Net fee and commission income reflects our continued Express Banking franchise growth. Our Express Banking franchise attracted 401,753 previously unbanked emerging mass market customers since its launch 3 years ago as well as another c.400,000 as a result of Privatbank acquisition. This has driven the number of client related foreign currency and other banking transactions substantially higher
§ The NIM was 9.5% in 2Q15. Ex-Privatbank it was 8.2%, down 160 bps y-o-y. NIM reflected:
- The Privatbank NIM of 22.9% in 2Q15 driven by a high Privatbank Loan Yield at 29.6% and a relatively low Cost of Funds at 5.3% in 2Q15. Privatbank contributed 130 bps to RB NIM
- The Loan Yield at 17.3%; ex-Privatbank it was 15.7%, which declined 200 bps y-o-y, largely as a result of a higher share of lower yielding consumer loans in our portfolio, which is a result of our focus on low risk retail products in our lending activities
- Cost of Client Deposits at 3.9%; ex-Privatbank it was 3.6%, which was down 30 bps y-o-y, largely as a result of GEL devaluation against the USD, which increased the share of low cost USD deposits in the loan book
§ Operating expenses increased to GEL 41.4mln, up 33.2% y-o-y, resulting in Cost to Income ratio of 40.0% and y-o-y operating leverage of 11.7 percentage points, which reflects:
- The acquisition of Privatbank, which added GEL 5.5mln in operating expenses to the retail banking segment in 2Q15 with a Privatbank Cost to Income ratio of 28.1%. Privatbank 2Q15 operating expenses on a pro-forma bases (assuming that synergies took effect in the beginning of the quarter instead of actual last 50 days) would have been GEL 3.4mln
- Ex-Privatbank, salaries and other employee benefits of GEL 19.7mln, up GEL 2.7mln or 15.6% y-o-y, which was principally driven by the growing revenue base on y-o-y basis, reflecting the growth in headcount and associated payroll
§ Cost of credit risk was GEL 20.7mln in 2Q15 which is a result of:
- Privatbank adding GEL 7.1mln
- GEL devaluation against the US Dollar, which resulted in an increase of loan loss provisions in Lari terms on US Dollar loan provisions, adding GEL 1.8mln
- The impact of the retail banking loan book growth of 49.6%
§ As a result, Retail Banking profit reached GEL 32.6mln, down 1.3% y-o-y
§ Our Express Banking continues to deliver strong growth as we follow our mass retail banking strategy:
- 928,999 Express Cards have been issued since their launch on 5 September 2012, in essence replacing pre-paid metro cards in circulation since July 2009
- Increased number of Express Pay terminals to 2,284 from 2,038 a year ago. Express Pay terminals are an alternative to tellers, placed at bank branches as well as various other venues (groceries, shopping malls, bus stops, etc.), and are used for bank transactions such as credit card and consumer loan payments, utility bill payments and mobile telephone top-ups
- In 2Q15, utilisation of Express Pay terminals increased significantly, with the number of transactions growing to 28.3mln, up 13.4% y-o-y
- Increased Point of Sales (POS) footprint to 320 desks and 3,418 contracted merchants as of 30 June 2015, up from 309 desks and 891 merchants as of 30 June 2014
- POS terminals outstanding reached 7,668 up 34.8% y-o-y, including Privatbank's 1,016 POS terminals
- The volume of transactions through the Bank's POS terminals grew to GEL 176.4mln, up 21.1% y-o-y, while the number of POS transactions increased to 5.1mln in 2Q15, up 25.5%
- POS loans outstanding reached GEL 83.2mln as of 30 June 2015, up 37.2% y-o-y
§ In April 2015, we launched Solo Lifestyle - a fundamentally different approach to premium banking. Through Solo Lifestyle, our Solo clients are given access to exclusive products and the finest lounge-style environment at our newly designed Solo lounges and are provided with new lifestyle opportunities, such as exclusive events and handpicked lifestyle products. In our Solo lounges, Solo clients are offered, at cost, a selection of luxury products and accessories that are currently not available in the country. Solo clients enjoy tailor-made solutions including new financial products such as bonds, which pay a significantly higher yield compared to deposits, and other securities developed by Galt & Taggart, the Bank's Investment Banking arm.
With Solo we are targeting the mass affluent retail segment and aim to build brand loyalty through exclusive experiences offered through the new Solo Lifestyle. New-clients-attracted-per-banker ratio was three-times higher for Solo Lifestyle, compared to regular Solo for the same period last year. As of 30 June 2015, the number of Solo clients reached 9,244, up 30.4% from 7,089 a year ago.
§ The number of Retail Banking clients totalled 1,933,360, up 44.6% y-o-y and up 29.7% q-o-q. This includes Privatbank's c.400,000 clients
§ The total number of cards reached 1,964,374, up 82.7% y-o-y
§ The total number of debit cards outstanding increased to 1,207,573, up 26.1% y-o-y as a result of issuing 126,684 debit cards, including Express cards in 2Q15
§ We issued 27,546 credit cards of which 4,858 were American Express cards in 2Q15. A total of 241,046 American Express cards have been issued since the launch in November 2009. The total number of outstanding credit cards amounted to 756,801 (of which 109,132 were American Express Cards)
§ Additionally, total number of Privatbank's all-in-one debit and credit cards totalled 694,000
§ We have now added 2,284 Express Pay Terminals and 928,999 Express Cards since the launch of the Express Banking service in 2012
Privatbank story: strategic acquisition and flawless integration execution
December 2014 - the Board made the decision to acquire Privatbank as it represented a strong strategic fit with our target to increase our share of retail loans. Privatbank was essentially a credit card business with retail loans making up 85% of its loan book. In addition, Privatbank with its vast branch network (43% of the Bank's network at that time) represented a particularly strong fit for the Bank's Express branch (self-service) format. This was also complemented with Privatbank's strong payment platform.
January 2015 - we completed the acquisition of Privatbank for c.GEL92mln cash consideration for 100% of Privatbank (1.11x P/BV), of which 10% or GEL 9.2mln will be paid on the first anniversary of the closing (January 2016), subject to representations and warranties / holdback provisions. During five months following the acquisition, our integration team focused on IT integration, optimisation of costs and number of branches, Privatbank product development and relevant trainings. Our IT integration team spent two months in Dnepropetrovsk, Ukraine at Privatbank headquarters to migrate Privatbank's information systems into our banking software, which we completed with just 24 hours of downtime for Privatbank clients. This represents an exceptionally short period of time for full IT integration in the banking industry. All of the data associated with the customers and transaction histories, including the data of c.800,000 customers (of which c.400,000 are active customers), over 1.1 million cards with respective transaction histories, c.150,000 loans and c.75,000 deposits, have been successfully migrated onto our banking software.
During this period, we rebranded 35 Privatbank branches into our self-service format Express Banking branches; and completed the in-house development of Privatbank's trademark mono-product of an all-in-one debit and credit card to add the transport and payment capabilities of our Express card. Privatbank customers continue to use Privatbank cards, which are now serviced by our card processing platform, without the need to change them into Bank of Georgia cards. In order to optimise Pirvatbank's branch network, we pilot tested utilisation of our Express Pay terminals by Privatbank's clients. The results showed that the terminals, which act as self-service substitute to branches, had proved very popular with Privatbank clients. Consequently, we closed more branches than initially expected - 58 out of 93 - and reduced Privatbank employee numbers by c.50%, which contributed to a significant reduction in Privatbank operating costs, down 44.6% q-o-q in 2Q15 despite only having effect for last 50 days in 2Q15. Active liability optimisation measures resulted in a significantly reduced Cost of Funding to 5.3% in 2Q15 (7.5% in 1Q15).
May 2015 - we announced the completion of the full integration of Privatbank, in under five months compared to our initial integration estimate of 9-12 months. Integration costs totalled GEL 2.6mln as of 30 June 2015, less compared to our expectation of up to GEL 3mln. We anticipate annualised pre-tax administrative and funding cost synergies to reach c.GEL 29mln - above our pre-announced GEL 25mln - as a result of GEL 18.5mln synergy in operating expenses compared to pre-announced GEL 15mln and GEL 10.5mln synergy in cost of funds, slightly above the pre-announced GEL 10mln. Privatbank, which at the time of acquisition was the 9th largest bank in Georgia by assets, increased our market share in retail loans by 4.3 percentage points and in retail deposits by 2.5ppts (Market data as of 31 March 2015). The acquisition added circa 400,000, predominantly emerging mass market, customers. We plan to leverage the enhanced capabilities of our Express Banking franchise to capture increased revenue from cross-selling banking products to these newly acquired customers, who currently have very low product to client ratios.
|
Privatbank Income Statement Summary |
Actual |
Actual |
|
|
|
Q1 2015 |
Q2 2015 |
1H15 |
|
Net banking interest income |
14,924 |
16,840 |
31,764 |
|
Net fee and commission income |
3,072 |
2,683 |
5,755 |
|
Net banking foreign currency gain (loss) |
900 |
627 |
1,527 |
|
Net other banking income |
499 |
(668) |
-169 |
|
Revenue |
19,395 |
19,482 |
38,877 |
|
Operating expenses |
9,888 |
5,474 |
15,362 |
|
Operating income before cost of credit risk |
9,507 |
14,008 |
23,515 |
|
Cost of credit risk |
8,165 |
5,556 |
13,721 |
|
Net operating income before non-recurring items |
1,341 |
8,452 |
9,793 |
|
Net non-recurring items |
- |
2,621 |
2,621 |
|
Profit before income tax |
1,341 |
5,831 |
7,172 |
|
Income tax (expense) benefit |
201 |
875 |
1,076 |
|
Profit |
1,140 |
4,956 |
6,096 |
|
|
Actual |
|
|
Privatbank Balance Sheet Summary |
Q1 2015 |
Q2 2015 |
|
|
|
|
|
Liquid assets |
204,462 |
147,392 |
|
Loans to customers and finance lease receivables |
289,965 |
245,604 |
|
Other assets |
22,249 |
23,181 |
|
Total assets |
516,676 |
416,177 |
|
Client deposits and notes |
371,454 |
266,779 |
|
Amounts due to credit institutions |
48,809 |
49,438 |
|
Other liabilities |
3,921 |
4,905 |
|
Total liabilities |
424,185 |
321,121 |
|
Total equity |
92,491 |
95,056 |
|
Total liabilities and equity |
516,676 |
416,178 |
|
|
Actual |
Actual |
|
|
Privatbank Selected Ratios |
Q1 2015 |
Q2 2015 |
1H15 |
|
Loan Yield |
29.0% |
29.6% |
29.3% |
|
Cost of funds |
7.5% |
5.3% |
6.5% |
|
Cost of client deposits and notes |
7.4% |
5.8% |
6.7% |
|
NIM |
17.8% |
22.9% |
20.5% |
|
Cost of risk |
10.0% |
8.6% |
9.3% |
|
Cost / Income |
51.0% |
28.1% |
39.5% |
|
Operating leverage, Q-O-Q |
- |
45.1% |
- |
Privatbank 1H15 Highlights:
§ GEL 245.6mln of high yielding loan book and GEL 266.8mln client deposits, comprising 4.8% and 6.3% of our loan book and client deposits, respectively
§ Privatbank contributed GEL 38.9mln or 10.8% to the Banking Business revenue
§ GEL 31.8mln net interest income, which was driven by Privatbank's Loan Yield of 29.3% on the back of 6.5% Cost of Funding
§ Net fee & commission income was GEL5.8mln, and mostly comprised of fees related to credit card transactions
§ As a result NIM stood at 20.5%
§ GEL 15.4mln to operating expenses. Privatbank brought in inefficiencies in 1Q15, which temporarily worsened efficiency ratios in 1Q15. However, successful integration and extensive cost-cutting measures reversed this trend in 2Q15, which resulted in Privatbank's Cost/Income ratio of 28.1% in 2Q15
§ Privatbank's cost of credit risk was GEL 15.2mln in 1H15
§ Privatbank posted GEL 6.1mln profit or 5.1% of total Banking Business profit
§ Privatbank added circa 400,000 clients, 700,000 cards, 36 branches, 371ATMs and more than 1,000 POS terminals
Corporate Banking (CB)
The Corporate Banking business in Georgia comprises loans and other credit facilities to the country's large corporate clients as well as other legal entities, excluding SME and micro businesses. The services include fund transfers and settlements services, currency conversion operations, trade finance services and documentary operations as well as handling savings and term deposits for corporate and institutional customers. The Corporate Banking Business also includes finance lease facilities provided by the Bank's leasing operations (Georgian Leasing Company).
|
GEL thousands, unless otherwise noted |
2Q15 |
2Q14 |
Change y-o-y |
1Q15
|
Change y-o-y |
1H15 |
1H14 |
Change y-o-y |
|
|
|
|
|
|
|
|
|
|
|
INCOME STATEMENT HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
Net banking interest income |
33,949 |
22,866 |
48.5% |
35,418 |
-4.1% |
69,368 |
47,487 |
46.1% |
|
Net fee and commission income |
8,316 |
6,292 |
32.2% |
6,001 |
38.6% |
14,317 |
12,014 |
19.2% |
|
Net banking foreign currency gain |
9,769 |
4,976 |
96.3% |
7,835 |
24.7% |
17,604 |
11,011 |
59.9% |
|
Net other banking income |
1,819 |
1,208 |
50.6% |
1,070 |
70.0% |
2,888 |
1,693 |
70.6% |
|
Revenue |
53,853 |
35,342 |
52.4% |
50,324 |
7.0% |
104,177 |
72,205 |
44.3% |
|
Salaries and other employee benefits |
(8,853) |
(7,993) |
10.8% |
(8,488) |
4.3% |
(17,341) |
(15,696) |
10.5% |
|
Administrative expenses |
(3,773) |
(3,390) |
11.3% |
(2,507) |
50.5% |
(6,280) |
(5,761) |
9.0% |
|
Banking depreciation and amortisation |
(957) |
(964) |
-0.7% |
(990) |
-3.3% |
(1,947) |
(1,889) |
3.1% |
|
Other operating expenses |
(188) |
(235) |
-20.0% |
(212) |
-11.3% |
(400) |
(572) |
-30.1% |
|
Operating expenses |
(13,771) |
(12,582) |
9.5% |
(12,197) |
12.9% |
(25,968) |
(23,918) |
8.6% |
|
Operating income before cost of credit risk |
40,082 |
22,760 |
76.1% |
38,127 |
5.1% |
78,209 |
48,287 |
62.0% |
|
Cost of credit risk |
(14,146) |
(10,195) |
38.8% |
(19,381) |
-27.0% |
(33,527) |
(23,874) |
40.4% |
|
Net non-recurring items |
(199) |
(2,229) |
-91.1% |
(598) |
-66.7% |
(797) |
(2,453) |
-67.5% |
|
Profit before income tax |
25,737 |
10,336 |
149.0% |
18,148 |
41.8% |
43,885 |
21,960 |
99.8% |
|
Income tax expense |
(4,119) |
(436) |
NMF |
(3,346) |
23.1% |
(7,465) |
(2,353) |
NMF |
|
Profit |
21,618 |
9,900 |
118.4% |
14,802 |
46.0% |
36,420 |
19,607 |
85.7% |
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
Letters of credit and guarantees, standalone1 |
542,463 |
499,362 |
8.6% |
525,409 |
3.2% |
542,463 |
499,362 |
8.6% |
|
Net loans, standalone, currency blended |
2,174,111 |
1,802,752 |
20.6% |
2,381,348 |
-8.7% |
2,174,111 |
1,802,752 |
20.6% |
|
Net loans, standalone, GEL |
254,234 |
268,270 |
-5.2% |
319,760 |
-20.5% |
254,234 |
268,270 |
-5.2% |
|
Net loans, standalone, FC |
1,919,877 |
1,534,482 |
25.1% |
2,061,588 |
-6.9% |
1,919,877 |
1,534,482 |
25.1% |
|
Client deposits, standalone, currency blended |
1,371,927 |
1,118,359 |
22.7% |
1,341,794 |
2.2% |
1,371,927 |
1,118,359 |
22.7% |
|
Client deposits, standalone, GEL |
699,262 |
465,636 |
50.2% |
575,468 |
21.5% |
699,262 |
465,636 |
50.2% |
|
Client deposits, standalone, FC |
672,665 |
652,723 |
3.1% |
766,326 |
-12.2% |
672,665 |
652,723 |
3.1% |
|
Time deposits, standalone, currency blended |
521,031 |
264,479 |
97.0% |
502,835 |
3.6% |
521,031 |
264,479 |
97.0% |
|
Time deposits, standalone, GEL |
309,891 |
105,742 |
193.1% |
222,459 |
39.3% |
309,891 |
105,742 |
193.1% |
|
Time deposits, standalone, FC |
211,140 |
158,737 |
33.0% |
280,376 |
-24.7% |
211,140 |
158,737 |
33.0% |
|
Current accounts and demand deposits, standalone, currency blended |
850,896 |
853,880 |
-0.3% |
838,959 |
1.4% |
850,896 |
853,880 |
-0.3% |
|
Current accounts and demand deposits, standalone, GEL |
389,371 |
359,894 |
8.2% |
353,009 |
10.3% |
389,371 |
359,894 |
8.2% |
|
Current accounts and demand deposits, standalone, FC |
461,525 |
493,986 |
-6.6% |
485,950 |
-5.0% |
461,525 |
493,986 |
-6.6% |
|
|
|
|
|
|
|
|
|
|
|
RATIOS |
|
|
|
|
|
|
|
|
|
Net interest margin, currency blended |
4.5% |
4.4% |
|
4.9% |
|
4.7% |
4.3% |
|
|
Loan yield, currency blended |
10.7% |
10.8% |
|
10.7% |
|
10.8% |
10.8% |
|
|
Loan yield, GEL |
12.9% |
10.6% |
|
10.9% |
|
12.2% |
10.8% |
|
|
Loan yield, FC |
10.4% |
10.8% |
|
10.6% |
|
10.6% |
10.8% |
|
|
Cost of deposits, currency blended |
3.0% |
2.8% |
|
2.8% |
|
2.9% |
3.0% |
|
|
Cost of deposits, GEL |
4.4% |
3.3% |
|
3.9% |
|
4.1% |
3.2% |
|
|
Cost of deposits, FC |
1.7% |
2.4% |
|
1.8% |
|
1.8% |
2.8% |
|
|
Cost of time deposits, currency blended |
5.8% |
6.4% |
|
6.1% |
|
6.0% |
6.5% |
|
|
Cost of time deposits, GEL |
8.0% |
7.9% |
|
7.5% |
|
7.2% |
8.1% |
|
|
Cost of time deposits, FC |
3.9% |
5.7% |
|
4.8% |
|
4.6% |
6.0% |
|
|
Current accounts and demand deposits, currency blended |
1.2% |
1.4% |
|
0.9% |
|
1.1% |
1.7% |
|
|
Current accounts and demand deposits, GEL |
2.4% |
2.2% |
|
1.8% |
|
2.1% |
2.3% |
|
|
Current accounts and demand deposits, FC |
0.3% |
0.7% |
|
0.2% |
|
0.3% |
1.0% |
|
|
Cost / income ratio |
25.6% |
35.6% |
|
24.2% |
|
24.9% |
33.1% |
|
1Off-balance sheet items
Performance highlights
§ Revenue for the Corporate Banking segment increased by 52.4% y-o-y to GEL 53.9mln as a result of:
§ A 20.6% y-o-y increase of the Corporate Loan book to GEL 2,174.1mln. On a constant currency basis, the Corporate Banking loan book decreased 2.1% y-o-y
§ The NIM increased to 4.5%, up 10 bps y-o-y, as a result of resilient Loan Yield
§ Loan yield stood at 10.7%, down 10 bps y-o-y on the back of slower loan issuance activity. Cost of Customer Funds increased marginally to 3.0%, up 20 bps y-o-y
§ Net fee and commission income increased 32.2% to GEL 8.3mln
§ Corporate Banking cost of credit risk rose to GEL 14.1mln, up 38.8% y-o-y
Investment Management
Investment Management consists of Bank of Georgia Wealth Management and the brokerage arm of the Bank, Galt & Taggart. Bank of Georgia Wealth Management provides private banking services to high-net-worth individuals and offers investment management products internationally through representative offices in London, Budapest, Istanbul and Tel Aviv. Galt & Taggart brings under one brand corporate advisory, private equity and brokerage services.
Investment Management financial highlights (includes Galt&Taggart)
|
INCOME STATEMENT |
|
|
Change |
|
Change |
|
Change |
|
|
|
|
2Q15 |
2Q14 |
Y-O-Y |
1Q15 |
Q-O-Q |
1H15 |
1H14 |
Y-O-Y |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net banking interest income |
5,252 |
3,129 |
67.8% |
4,082 |
28.7% |
9,334 |
6,052 |
54.2% |
|
|
Net fee and commission income |
834 |
4,192 |
-80.1% |
1,341 |
-37.8% |
2,175 |
4,663 |
-53.4% |
|
|
Net banking foreign currency gain |
335 |
287 |
16.7% |
1,667 |
-79.9% |
2,002 |
467 |
NMF |
|
|
Net other banking income |
73 |
76 |
-3.9% |
530 |
-86.2% |
604 |
222 |
172.1% |
|
|
Revenue |
6,494 |
7,684 |
-15.5% |
7,620 |
-14.8% |
14,115 |
11,404 |
23.8% |
|
|
Salaries and other employee benefits |
(2,296) |
(2,021) |
13.6% |
(1,573) |
46.0% |
(3,868) |
(3,998) |
-3.3% |
|
|
Administrative expenses |
(584) |
(353) |
65.4% |
(380) |
53.7% |
(963) |
(746) |
29.1% |
|
|
Banking depreciation and amortisation |
(112) |
(87) |
28.7% |
(117) |
-4.3% |
(229) |
(177) |
29.4% |
|
|
Other operating expenses |
(39) |
(18) |
116.7% |
(33) |
18.2% |
(75) |
(38) |
97.4% |
|
|
Operating expenses |
(3,031) |
(2,479) |
22.3% |
(2,103) |
44.1% |
(5,135) |
(4,959) |
3.5% |
|
|
Operating income before cost of credit risk |
3,463 |
5,205 |
-33.5% |
5,517 |
-37.2% |
8,980 |
6,445 |
39.3% |
|
|
Cost of credit risk |
(101) |
29 |
NMF |
10 |
NMF |
(91) |
94 |
NMF |
|
|
Net operating income before non-recurring items |
3,362 |
5,234 |
-35.8% |
5,527 |
-39.2% |
8,889 |
6,539 |
35.9% |
|
|
Net non-recurring items |
(17) |
(245) |
-93.1% |
(22) |
-22.7% |
(39) |
(267) |
-85.4% |
|
|
Profit before income tax |
3,345 |
4,989 |
-33.0% |
5,505 |
-39.2% |
8,850 |
6,272 |
41.1% |
|
|
Income tax expense |
(365) |
(629) |
-42.0% |
(849) |
-57.0% |
(1,214) |
(856) |
41.8% |
|
|
Profit |
2,980 |
4,360 |
-31.7% |
4,656 |
-36.0% |
7,636 |
5,416 |
41.0% |
|
Wealth Management financial highlights (excludes Galt&Taggart)
|
GEL thousands, unless otherwise noted |
2Q15 |
2Q14 |
Change Y-O-Y |
1Q15 |
Change Q-O-Q |
1H15 |
1H14 |
Change y-o-y |
|
BALANCE SHEET HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
Client deposits, standalone, currency blended |
904,775 |
736,074 |
22.9% |
913,344 |
-0.9% |
904,775 |
736,074 |
22.9% |
|
Client deposits, standalone, GEL |
22,704 |
23,879 |
-4.9% |
19,971 |
13.7% |
22,704 |
23,879 |
-4.9% |
|
Client deposits, standalone, FC |
882,071 |
712,195 |
23.9% |
893,373 |
-1.3% |
882,071 |
712,195 |
23.9% |
|
Time deposits, standalone, currency blended |
623,353 |
496,253 |
25.6% |
660,970 |
-5.7% |
623,353 |
496,253 |
25.6% |
|
Time deposits, standalone, GEL |
12,046 |
14,102 |
-14.6% |
12,960 |
-7.1% |
12,046 |
14,102 |
-14.6% |
|
Time deposits, standalone, FC |
611,307 |
482,151 |
26.8% |
648,010 |
-5.7% |
611,307 |
482,151 |
26.8% |
|
Current accounts& demand deposits, standalone, currency blended |
281,422 |
239,821 |
17.3% |
252,374 |
11.5% |
281,422 |
239,821 |
17.3% |
|
Current accounts and demand deposits, standalone, GEL |
10,658 |
9,777 |
9.0% |
7,011 |
52.0% |
10,658 |
9,777 |
9.0% |
|
Current accounts and demand deposits, standalone, FC |
270,764 |
230,044 |
17.7% |
245,363 |
10.4% |
270,764 |
230,044 |
17.7% |
|
Assets under management |
1,231,406
|
934,472
|
31.8% |
1,213,828 |
1.4% |
1,231,406
|
934,472
|
31.8% |
|
|
|
|
|
|
|
|
|
|
|
RATIOS |
|
|
|
|
|
|
|
|
|
Cost of deposits, currency blended |
5.3% |
6.4% |
|
5.6% |
|
5.5% |
6.5% |
|
|
Cost of deposits, GEL |
5.5% |
6.5% |
|
5.9% |
|
5.6% |
6.7% |
|
|
Cost of deposits, FC |
5.3% |
6.4% |
|
5.6% |
|
5.4% |
6.5% |
|
|
Cost of time deposits, currency blended |
6.5% |
8.0% |
|
6.7% |
|
6.6% |
8.0% |
|
|
Cost of time deposits, GEL |
8.0% |
9.5% |
|
8.6% |
|
8.4% |
9.3% |
|
|
Cost of time deposits, FC |
6.4% |
7.9% |
|
6.6% |
|
6.6% |
8.0% |
|
|
Current accounts and demand deposits, currency blended |
2.5% |
2.6% |
|
2.6% |
|
2.5% |
2.4% |
|
|
Current accounts and demand deposits, GEL |
1.5% |
1.4% |
|
1.4% |
|
1.4% |
1.4% |
|
|
Current accounts and demand deposits, FC |
2.5% |
2.7% |
|
2.6% |
|
2.6% |
2.4% |
|
Performance highlights
§ The AUM of the Investment Management segment increased 31.8% y-o-y to GEL 1,231.4mln, which includes Wealth Management clients' deposits and assets held at Bank of Georgia Custody, Galt & Taggart brokerage client assets and Aldagi pension scheme assets
§ Investment Management posted GEL 3.0mln profit, which was largely driven by net interest income, which increased 67.8% y-o-y to GEL 5.3mln. Net fee and commission income decreased on y-o-y basis to GEL 0.8mln from GEL 4.2mln in 2Q14. Galt & Taggart executed a sizable M&A deal in 1H14, which resulted in a high base last year
§ Wealth Management deposits increased 22.9% y-o-y to GEL 904.8mln, but declined by 2.6% on constant currency basis on the back of a 110 bps decline in Cost of Client deposits to 5.3% in 2Q15. The decrease was partially due to a number of bond issuances by Galt & Taggart, offered to Wealth Management clients, yielding higher rates than deposits
§ We served over 1,400 wealth management clients from 70 countries as of 30 June 2015. Client deposits have grown at a compound annual growth rate (CAGR) of 33.8% over the last five year period, to GEL 904.8mln as of 30 June 2015
§ As of 30 June 2015, the amount of the Bank's Certificates of Deposits issued to Investment Management clients increased by 50.5% to GEL 472.6mln
§ Galt & Taggart is succeeding in developing local capital markets, and acted as a placement agent for:
§ GEL 25mln floating rate notes issued by the European Bank for Reconstruction and Development (EBRD) and GEL 30mln bonds issued by IFC. Both transactions were completed in February 2015
§ US$ 20mln 2-year bonds for m2 Real Estate, the largest non-IFI issue to date. The transaction was met with considerable interest particularly from Wealth Management clients. The transaction was completed in March 2015
§ US$ 15mln 2-year bonds for the Bank's wholly-owned subsidiary Evex, the healthcare services company of BGH's healthcare business GHG. This was the first bond placement by our healthcare subsidiary. The proceeds from the transaction are intended to be used by the healthcare subsidiary to invest in organic growth opportunities. The transaction was completed in May 2015
§ Since its launch in June 2012, Galt & Taggart Research has initiated research coverage of the Georgian and Azeri economies, including a report analysing the impact of Russia-Ukraine standoff on the Georgian economy, the Georgian Retail Real Estate Market, the Georgian Wine Sector, Georgian Agricultural Sector, Georgian Electricity Sector, Georgian Oil and Gas Corporation, Georgian Railway, and has issued notes on the Georgian State Budget and the Tourism Sector
Investment Business Segment Result Discussion
Healthcare business (Georgia Healthcare Group - GHG)
Standalone results
For the purposes of the results discussion below, healthcare business refers to the Group's pure-play healthcare businesses, Georgia Healthcare Group (GHG), which includes healthcare services (Evex) and medical insurance (Imedi L). The results are based on management accounts and refer to standalone numbers.
Income Statement
|
|
Healthcare Services |
|
Medical Insurance |
|
Eliminations |
|
Total |
||||||||
|
|
|
|
|
||||||||||||
|
GEL thousands, unless otherwise noted |
1H15 |
1H14 |
Change, Y-o-Y |
|
1H15 |
1H14 |
Change, Y-o-Y |
|
1H15 |
1H14 |
|
1H15 |
1H14 |
Change, Y-o-Y |
|
|
Revenue |
85,258 |
65,728 |
29.7% |
|
26,355 |
42,539 |
-38.0% |
|
4,188 |
13,402 |
|
107,425 |
94,865 |
13.2% |
|
|
COGS, insurance claims expense |
48,167 |
38,610 |
24.8% |
|
21,872 |
37,637 |
-41.9% |
|
4,024 |
13,291 |
|
66,015 |
62,956 |
4.9% |
|
|
Direct salary |
31,022 |
25,047 |
23.9% |
|
- |
- |
|
|
1,800 |
5,714 |
|
29,222 |
19,333 |
51.2% |
|
|
Materials, including medicines and medical disposables |
12,379 |
7,804 |
58.6% |
|
- |
- |
|
|
718 |
1,780 |
|
11,661 |
6,023 |
93.6% |
|
|
Direct healthcare provider expenses |
1,032 |
2,362 |
-56.3% |
|
- |
- |
|
|
60 |
539 |
|
972 |
1,823 |
-46.7% |
|
|
Utilities and other expenses |
3,734 |
3,397 |
9.9% |
|
- |
- |
|
|
217 |
775 |
|
3,518 |
2,622 |
34.1% |
|
|
Medical insurance claims expense |
- |
- |
|
|
21,872 |
37,637 |
-41.9% |
|
1,229 |
4,483 |
|
20,642 |
33,154 |
-37.7% |
|
|
Gross profit |
37,090 |
27,118 |
36.8% |
|
4,483 |
4,902 |
-8.5% |
|
163 |
111 |
|
41,410 |
31,909 |
29.8% |
|
|
Salaries and other employee benefits |
10,578 |
7,320 |
44.5% |
|
2,082 |
2,692 |
-22.6% |
|
163 |
111 |
|
12,497 |
9,901 |
26.2% |
|
|
General and Administrative expenses |
3,790 |
2,961 |
28.0% |
|
1,232 |
1,251 |
-1.6% |
|
- |
- |
|
5,022 |
4,212 |
19.2% |
|
|
Impairment Charge |
1,737 |
833 |
108.5% |
|
204 |
262 |
-22.1% |
|
- |
- |
|
1,941 |
1,095 |
77.3% |
|
|
Other operating income |
1,120 |
(602) |
- |
|
51 |
86 |
-40.9% |
|
- |
- |
|
1,171 |
(517) |
- |
|
|
EBITDA |
22,106 |
15,402 |
43.5% |
|
1,015 |
782 |
29.8% |
|
- |
- |
|
23,121 |
16,184 |
42.9% |
|
|
EBITDA margin* |
25.4% |
23.1% |
|
|
3.9% |
1.8% |
|
|
|
|
|
|
|
|
|
|
Depreciation |
(4,550) |
(3,397) |
33.9% |
|
(289) |
(310) |
-6.7% |
|
- |
- |
|
(4,839) |
(3,707) |
30.5% |
|
|
Net interest income (expense) |
(10,049) |
(6,157) |
63.2% |
|
(34) |
295 |
- |
|
- |
- |
|
(10,083) |
(5,862) |
72.0% |
|
|
(Losses) gains on currency exchange |
4,880 |
(2,017) |
- |
|
569 |
234 |
143.0% |
|
- |
- |
|
5,449 |
(1,783) |
- |
|
|
Net non-recurring items |
(402) |
1,333 |
- |
|
- |
- |
- |
|
- |
- |
|
(402) |
1,333 |
- |
|
|
Profit before income tax |
11,985 |
5,165 |
132.1% |
|
1,261 |
1,001 |
26.0% |
|
- |
- |
|
13,246 |
6,166 |
114.8% |
|
|
Income tax expense |
(79) |
(465) |
-83.0% |
|
(185) |
(230) |
-19.7% |
|
- |
- |
|
(264) |
(695) |
-62.0% |
|
|
Profit |
11,906 |
4,699 |
153.3% |
|
1,077 |
771 |
39.6% |
|
- |
- |
|
12,982 |
5,471 |
137.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- shareholders of the Company |
10,444 |
3,706 |
181.8% |
|
1,077 |
771 |
39.6% |
|
- |
- |
|
11,520 |
4,478 |
157.3% |
|
|
- minority interest |
1,462 |
993 |
47.2% |
|
- |
- |
- |
|
- |
- |
|
1,462 |
993 |
- |
|
Note: the table above does not include intercompany eliminations on the Group consolidated level.
*EBITDA margin is calculated on gross revenue (excluding corrections & rebates)
GHG is the largest, integrated healthcare and medical insurance provider in Georgia and is rapidly growing, with double digit revenue and EBITDA growth for the past 3 years. Our healthcare business, a wholly owned subsidiary Georgia Healthcare Group (GHG), is the single large scale player in the fast-growing, predominantly privately-owned, Georgian healthcare services market. GHG primarily focuses on the mass market segment through a network of 41 healthcare facilities (35 hospitals and six ambulatory clinics). Organised in geographic clusters with ambulatory clinics, community hospitals and referral hospitals, GHG's network of healthcare facilities (under the "Evex" brand) captures patients along the treatment pathway and offers services ranging from basic outpatient and inpatient care to complex specialist services, positioned to complement each other and GHG's medical insurance business (under the "Imedi L" brand). As at 30 June 2015, the healthcare services business had a 22.1% market share, 5 times that of the Company's nearest competitor in Georgia, by number of beds as at 30 June 2015 (2,220 beds), which grew to 26.6% following the HTMC acquisition in July 2015 (450 beds) and is expected to grow up to c.30% as a result of the renovation of recently acquired hospital facilities, scheduled for completion in 2016 and 2017 (an additional c.500 beds). We also have the widest geographic coverage network relative to our competitors, with facilities currently located in six regions covering two thirds of the 4.5 million population of Georgia. We are also the largest provider of medical insurance in Georgia with c.250,000 persons insured and a 38.3% market share based on gross premiums revenue, as at 31 March 2015.
Our integrated network of referral hospitals, community hospitals and ambulatory clinics provides substantial benefits derived from economies of scale. We have centralised certain functions across our healthcare services facilities and our medical insurance business, and have focussed on implementing other efficient cost management practices.
GHG also stands out as a leader in the industry for its strong business management team and corporate governance, exceptional in Georgia's healthcare sector. Our senior management team is comprised of individuals recruited from leading healthcare facilities and medical insurance providers in Georgia and internationally. They have been instrumental in delivering our organic growth strategy and identifying stategic acquisitions to grow the business and create its current market leadership position.
Our healthcare business operates in a fast-growing predominantly privately-owned, Georgian healthcare market which is characterised by low utilisation and high fragmentation, leaving significant room for medium to long term growth. In terms of spending on healthcare, pricing and incidence levels Georgia lags significantly behind its emerging market ("EM") peers, with a medium term (5-10 year horizon) target to catch up with Turkey, which according to the World Bank spent US$ 608 on health per capita in 2013, compared to US$ 350 spent by Georgia in the same year and a longer-term target of catching up with more developed EMs (Estonia, Czech Republic, Croatia, Hungary, Lithuania, Latvia, Poland, Russian Federation, Chile, Costa Rica, Slovak Republic), whose average spend was US$ 1,076 in 2013. The historically high growth of 15% CAGR between 2011 and 2014 of the healthcare services market is expected to continue at 13% CAGR between 2014 and 2018, supported by both the hospital and the ambulatory clinics segments, which are expected to total GEL 1.2bln and GEL 0.9bln in 2015, respectively.
Supportive government reforms and the engagement of private players in the sector has resulted in a significant improvement in the overall standard of infrastructure and boosted demand for quality healthcare services. 150 new, primarily private hospitals opened between 2007 and 2013 that replaced soviet-era run-down facilities. Since 1992 and as a result of the infrastructure reforms, Georgia has reached UK and United States capacity levels: 2.6 beds per 1,000 people, reduced by c.70% from soviet-era cold war legacy overcapacity. Continued investments, mainly by private healthcare providers, to address the growing demand and to improve access to healthcare facilities are also favourable for the development of health tourism. Increasing government financing of healthcare services (State Health Insurance programs - "SIP" and Universal Healthcare Reform - "UHC") allowed a wider population to access quality healthcare and is expected to help increase demand for medical care. Recent amendments to pharmaceuticals regulations (the introduction of prescriptions) are also supportive for the healthcare services market.
In 1H15, GHG reported strongest results yet, despite not yet including the results of operations of our recent acquisitions of HTMC and Deka:
§ Our healthcare business delivered record half year revenue of GEL 107.4mln in 1H15, which was primarily driven by 29.7% growth of our healthcare services revenue, of which 21.9%was organic and 7.8%through acquisitions and other. Our 1H15 healthcare business performance is a result of our strategy, and reinforced by external factors as described below:
§ Favorable government policy that increased spending on healthcare and improved access to the healthcare services in Georgia. Following the introduction of the UHC by the government, all Georgian citizens are eligible for the new Government-funded basic health coverage, with co-payment elements required for certain services. Since the full introduction of the UHC in mid-2014, government expenditures on healthcare have increased over 65% from GEL 414.5mln in 2012 to GEL 692.9mln in 2014 and are expected to be further increased to GEL 768.3mln in 2015 according to the government budget for 2015 announced by the Ministry of Finance of Georgia, although it is still modest in terms of percentage to the total budget expenditures (7.9% in 2014), and in terms of expenditures as a percentage of GDP (2.0%), which remains low compared to Emerging Market and European peers that on average exceed 5% of GDP.
Revenue from healthcare services by sources of payment
|
(GEL thousands, unless otherwise noted) |
1H15 |
1H14 |
Change, Y-o-Y |
|
Government-funded healthcare programs |
62,496 |
27,371 |
128.3% |
|
Out-of-pocket payments by patients |
17,195 |
16,819 |
2.2% |
|
Private medical insurance companies, of which: |
5,566 |
21,538 |
-74.2% |
|
Imedi L medical insurance |
4,024 |
13,291 |
-69.7% |
|
Total |
85,258 |
65,728 |
29.7% |
- The growth in revenue from government-funded healthcare programs to GEL 62.5mln, up 128.3%, was primarily driven by the UHC and was partially offset by an anticipated decline in revenues from private medical insurance companies, resulting in a 74.2% decrease in these revenues to GEL 5.6mln in 1H15. Our organic revenue growth of 21.9% was largely sourced from government-funded healthcare programs
- Notably, out-of-pocket payments by patients increased 2.2% to GEL 17.2mln. The UHC places coverage limits on medical treatments, co-payments and has certain exclusions. Any charges in excess of the limit and co-payments are covered by patients on an out-of-pocket basis
- As a result, c.70% of our healthcare services revenue was sourced from the government (up from c.40% a year ago), c.20% was sourced from out-of-pocket payments (largely flat y-o-y) and slightly over 6% was sourced from private medical insurance companies (down from c.33% a year ago)
§ Increasing number of hospital beds, primarily in Tbilisi, the capital city of Georgia, where revenue per bed is significantly higher. The implementation of the expansion strategy that resulted in the acquisition of nine hospitals with the total of 1,380 beds since the end of 2013 has brought the number of total healthcare facilities to 41 and hospital beds to 2,670 as of the date of this report, up from 36 and 1,892, respectively in the previous year
- Our footprint increased in Tbilisi, where our market share in beds grew from 13.6% as of 30 June 2014 to 24.0% as of the date of this report. Although our two recent acquisitions, HTMC and Deka, added 530 in beds, our financial results do not yet include their results of operations, as Deka was consolidated as of 30 June 2015 with no effect on the income statement of GHG in 1H15 and HTMC will be consolidated in 3Q15. HTMC revenue was GEL 38.4mln in 2014, and GEL 21.7mln in 1H15
- Together with acquiring operating beds, we acquired additional development capacities of c.500 beds, that will become operational following renovations that are planned in 2016 and 2017, increasing our national and Tbilisi market share in beds up to c.30%
- Although our market share by number of beds is close to our target of 1/3, we have significant room to catch up in terms of market share by hospital revenue, which currently stands at c.14%, and is expected to grow to 21% following abovementioned renovations, still leaving room for further growth
§ Launch of ambulatory clinics, with plans to open 20-30 ambulatory clinics within 2-3 years. Currently we are predominantly a hospital provider, with under 3% of our healthcare services revenue coming from ambulatory clinics. We aim to tap the highly fragmented and under-penetrated outpatient segment that represents c.40% of national spending on healthcare services, where no single player has more than 3% of the market. There is currently very low utilisation of outpatient services in the country (Georgia has the lowest average number of outpatient encounters per capita in the region - Georgia: 2.7, CIS: 8.9, EU: 7.7) and this, combined with higher margins make this sector even more attractive
- We have already launched one cluster of ambulatory clinics in Tbilisi's central neighbourhood, Saburtalo, and two additional clusters are under renovation and will be opened during the second half of 2015
- We believe that our medical insurance business will play a feeder role for newly launched ambulatory clinics, guaranteeing stable stream of revenue and increasing the number of ambulatory clinic claims retained within GHG (only 33.6% of Imedi L's outpatient claims were retained within GHG for 1H15)
- In addition, a recent initiative of the Ministry of Health, Labour and Social Affairs ("MoLHSA") extended the prescription requirement to over 50% of all medicines registered in Georgia with effect from 1 September 2014 (whereas no more than 2% of all medicines registered in Georgia required a prescription before this date). We believe this initiative will have a favourable impact on revenues in 2015 and beyond as outpatient visits to clinics increase
§ We invest in medical technology, on the back of renovated infrastructure, enhancing our service mix and catering to unfulfilled demand, as indicated by low incidence levels that lag far behind peer benchmarks. We have completed a number of such projects in 2014 and 2015, including liver transplantation service in Batumi referral hospital; launching a catheterisation laboratory and an emergency department in Zugdidi referral hospital; opening neonatology intensive care departments in Telavi and Zugdidi referral hospitals; and an oncology centre in Kutaisi, which is equipped with the most up-to-date technology including the only linear accelerator in west Georgia. Yet, there are still significant shortages in equipment supply (MRIs, oncology diagnostics and treatment, cardiology diagnostics and treatment, etc.) and service gaps (no pathology laboratory (samples are sent abroad for testing), very limited pediatric oncology services, very limited rehabilitation services, no proper IVF center, no bone marrow transplant, no molecular laboratory, no proper genetic laboratory), which leaves significant room for further growth
§ Healthcare services revenue, which includes revenue from hospitals and ambulatory clinics, increased to GEL 85.3mln, up 29.7% driven primarily by referral hospitals, that grew 36.7% y-o-y and represent c.85% of healthcare services revenue:
Revenue from healthcare services by business lines
|
(GEL thousands, unless otherwise noted) |
1H15 |
1H14 |
Change, Y-o-Y |
|
Referral and specialty hospitals |
74,262 |
54,343 |
36.7% |
|
Community hospitals |
8,518 |
6,177 |
37.9% |
|
Ambulatory clinics |
2,478 |
2,345 |
5.7% |
|
Ambulance and rural primary care |
- |
2,862 |
-100.0% |
|
Total |
85,258 |
65,728 |
29.7% |
- Revenue from referral hospitals grew to GEL 74.3mln, up 36.7% y-o-y, driven by strong organic growth and acquisitions. We expect a significant portion of the growth of our hospital revenue to come from referral hospitals, in line with our strategy to increase our market share to 1/3 across Georgia through further investments. Our organic revenue growth of 21.9% was largely sourced from referral hospitals
- 37.9% y-o-y growth of revenue from the community hospitals was the result of organic growth alone and was driven by the introduction of UHC, which made healthcare services, both outpatient and inpatient, more accessible and affordable for the population of Georgia
- 5.7% y-o-y growth of revenue from ambulatory clinics was the result of organic growth alone and was mainly driven by our ambulatory clinics in Tbilisi. We expect ambulatory clinics revenue to grow faster, in line with our strategy of launching additional outpatient clinics in the next 2-3 years
§ Our private medical insurance has shown resilience and revenue from private medical insurance products grew by 29.9%, with approximately 250,000 people holding our medical insurance policies as at 30 June 2015. The growth is a result of improved pricing, as well as an increase in the number of people insured:
Revenue from medical insurance by sources of payment
|
(GEL thousands, unless otherwise noted) |
1H15 |
1H14 |
Change, Y-o-Y |
|
government funded medical insurance products |
- |
22,252 |
-100.0% |
|
Private medical insurance products |
26,355 |
20,287 |
29.9% |
|
Total |
26,355 |
42,539 |
-38.0% |
- High double-digit growth in our healthcare service revenues was partially offset by the anticipated decline in medical insurance revenues. As government spending on healthcare was consolidated under the UHC (the UHC involves direct payments to healthcare facilities by the government, compared to the previous programmes under which the government bought private medical insurance for targeted groups of the population) our revenue from our medical insurance business decreased to GEL 26.4mln, down 38.0%
- Within the changed private insurance landscape that resulted from the introduction of the UHC, our medical insurance business strengthened its market share and now accounts for 38.3% of the total medical insurance sector of Georgia based on gross premiums revenue as of 31 March 2015, up from 37.6% as of 31 March 2014
§ We have improving margins with the increasing scale of our healthcare business as a result of our continuous focus on efficiency. Margins improved, as a result of increasing utilisation and scale of our healthcare services business, as well as the on-going integration of recently acquired healthcare facilities, with the 24.8% increase in COGS lagging behind 29.7% revenue growth
- In 1H15, gross profit of our healthcare services business increased to GEL 37.1mln, up 36.8% y-o-y and supported by the 24.8% growth in COGS on the back of 29.7% increase in revenue during the same period
- The headcount of our healthcare services business reached c.8,300 full-time employees, up 22.9% y-o-y, as a result of new acquisitions in 1H15
§ As a result, our healthcare business EBITDA reached GEL 23.1mln in 1H15, mostly driven by healthcare services EBITDA, which was up 43.5% y-o-y. Our EBITDA margin for healthcare services in 1H15 was 25.4%, up 2.3% toward our longer-term target of at least 30%. The improvement is mostly a result of extracting inefficiencies brought in through acquisition of the new hospitals in 2014, notwithstanding the costs of the new governance structure that was put in place in the end of 2014 in preparation for the planned stock exchange listing in 2015.
§ We expect significant improvement in our EBIDTA margin, as a result of:
- The integration of the acquired healthcare facilities which is ongoing, including centralisation of some of the back-office functions and we expect significant further synergy gains in 2015 as management shifts its focus from acquisition to integration mode. Further cost synergies are expected mainly as a result of reducing inefficiencies in the acquired hospitals, as benchmarked against the previously managed healthcare facilities in the areas of procurement, process standardisation and payroll
- The increased contribution from ambulatory clinics to our revenues, which have EBITDA margin above 30% and now represent only 3% of our healthcare services revenues
- Consolidation of HTMC results starting in 3Q15, which is a strong margin business, posting 36.4% EBITDA in 2014
- Our recently launched services, listed above, picking-up and reaching the annual run-rates
§ Net interest expense of the healthcare services business grew by 63.2% y-o-y as a result of a 51.5% increase in borrowed funds raised for acquisitions as well as new project financing
§ The increase in depreciation costs by 33.9% was primarily driven by the acquisitions completed during the past year
§ As a result, net income of our healthcare services business increased to GEL 11.9mln, up 153.3% y-o-y
§ Our healthcare business balance sheet increased substantially over the last year with assets growing to GEL 501.6mln, up 45.8% The growth of total assets (up GEL 157.7mln y-o-y) was largely driven by a GEL 91.0mln, or a 40.1%, increase in the premises and equipment of our healthcare business, reflecting the acquisition of new hospitals during 2014
Healthcare business selected balance sheet items
|
(GEL thousands, unless otherwise noted) |
1H15 |
1H14 |
Change, Y-o-Y |
|
Total assets, of which: |
501,583 |
343,905 |
45.8% |
|
Premises and equipment, net |
317,701 |
226,731 |
40.1% |
|
Total liabilities, of which: |
288,419 |
208,947 |
38.0% |
|
Borrowed Funds |
195,519 |
129,038 |
51.5% |
|
Total shareholders' equity |
213,164 |
134,958 |
57.9% |
Project and development highlights:
§ GHG acquired a 95% equity interest in Deka. Deka owns an 80 bed hospital located on 2.4 hectares of land in a prime location in Tbilisi, with an estimated additional development capacity of 270 beds that we aim to develop within 2016-2017
§ GHG also acquired a 50.0% equity interest in GNCo, with effective control over the company. GNCo is a holding company that owns 100% of HTMC, a 450-bed major and well-established referral hospital in Tbilisi, which is also the single largest hospital in Georgia, providing a wide-range of in-patient and out-patient services, including the largest department of oncology radiotherapy in Georgia
§ GHG launched a new Training Centre in Batumi to continue to support internal skills development and human resource capacity at our healthcare facilities. In total we operate three training centres, of which two were opened in 2014 and are located in Tbilisi and Kutaisi. Through these centres we provide regular training and education for all our medical personnel. We established our own nursing training curriculum and we guarantee employment at our facilities to successful candidates
§ GHG continue to actively work on adopting Joint Commission International (JCI) standards
§ GHG launched a new ambulatory clinic in Tbilisi as part of our strategy to increase our share in highly fragmented and under-penetrated outpatient market in capital city
§ GHG completed a paediatric cardiology department at children's referral hospital in Tbilisi, which will become the second healthcare facility in Georgia to provide full scale cardiac services, including cardiac surgeries for children in Georgia
§ GHG launched West-Georgia Oncology Center, which is equipped with the most up-to-date technology including the only linear accelerator in west Georgia
§ Evex successfully completed a US$15 million 2-year bond placement. The bond was issued at par and carries a coupon rate of 9.5% payable semi-annually. The proceeds from the transaction are intended to be used by the healthcare subsidiary to invest in organic growth opportunities, primarily to accelerate the launch of ambulatory clinics, thus increasing our market share in the fast-growing, highly-fragmented and under-penetrated outpatient market through rapid launch of 20-30 ambulatory clinics, within the next 2-3 years
Real estate business (m2 Real Estate)
Our Real Estate business is operated through the Bank's wholly-owned subsidiary m2 Real Estate, which develops residential property in Georgia. m2 Real Estate outsources the construction and architecture works while itself focusing on project management and sales. The Bank's Real Estate business is in place to meet the unsatisfied demand for housing through its well-established branch network and sales force, while stimulating our mortgage lending business.
|
GEL thousands, unless otherwise noted |
2Q15 |
2Q14 |
Change y-o-y |
1Q15
|
Change q-o-q |
1H15 |
1H14 |
Change, y-o-y |
|
|
|
|
|
|
|
|
|
|
|
Real estate revenue |
1,595 |
11,128 |
-85.7% |
3,938 |
-59.5% |
5,533 |
33,123 |
-83.3% |
|
Cost of real estate |
(1,757) |
(7,657) |
-77.1% |
(2,865) |
-38.7% |
(4,622) |
(23,465) |
-80.3% |
|
Gross real estate profit |
(162) |
3,471 |
NMF |
1,073 |
NMF |
911 |
9,658 |
-90.6% |
|
Gross other investment profit |
(57) |
16 |
NMF |
219 |
NMF |
162 |
54 |
200.0% |
|
Revenue |
(219) |
3,487 |
NMF |
1,292 |
NMF |
1,073 |
9,712 |
-89.0% |
|
Salaries and other employee benefits |
(269) |
(407) |
-33.9% |
(321) |
-16.2% |
(590) |
(612) |
-3.6% |
|
Administrative expenses |
(1,275) |
(824) |
54.7% |
(1,041) |
22.5% |
(2,316) |
(1,936) |
19.6% |
|
Operating expenses |
(1,544) |
(1,231) |
25.4% |
(1,362) |
13.4% |
(2,906) |
(2,548) |
14.1% |
|
EBITDA |
(1,763) |
2,256 |
NMF |
(70) |
NMF |
(1,833) |
7,164 |
NMF |
|
Depreciation and amortization of investment business |
(43) |
(42) |
2.4% |
(42) |
2.4% |
(85) |
(226) |
-62.4% |
|
Net foreign currency gain from investment business |
903 |
173 |
NMF |
(371) |
NMF |
532 |
72 |
NMF |
|
Interest income from investment business |
221 |
8 |
NMF |
171 |
29.2% |
392 |
8 |
NMF |
|
Interest expense from investment business |
(227) |
(486) |
-53.3% |
(1,011) |
-77.5% |
(1,238) |
(546) |
126.7% |
|
Net operating income before non-recurring items |
(909) |
1,909 |
NMF |
(1,323) |
-31.3% |
(2,232) |
6,472 |
NMF |
|
Net non-recurring items |
(67) |
15 |
NMF |
(73) |
-8.2% |
(140) |
18 |
NMF |
|
Profit before income tax |
(976) |
1,924 |
NMF |
(1,396) |
-30.1% |
(2,372) |
6,490 |
NMF |
|
Income tax (expense) benefit |
147 |
(296) |
NMF |
209 |
-29.7% |
356 |
(974) |
NMF |
|
Profit |
(829) |
1,628 |
NMF |
(1,187) |
-30.2% |
(2,016) |
5,516 |
NMF |
Performance highlights
§ m2 Real Estate has enjoyed strong demand of its apartments since its establishment in 2010 and has sold a total of 1,376 apartments to date, generating total sales of US$ 115.8mln, of which US$ 56.9mln has already been recognised as revenue and US$ 58.9mln will be recognised upon completion of the on-going projects
§ The decline in revenues from 2014 is due to revenue recognition policy adopted by m2 Real Estate, pursuant to which revenue is recognised at the full completion of the project instead of in line with the percentage of the construction that has been completed
§ Interest expense, decreased significantly q-o-q to GEL 0.2mln as the 1Q15 interest expense of GEL 1.0mln comprised transaction costs associated with the US$ 20mln bond issuance in March 2015 which was fully expensed in 1Q15. The bond proceeds will be used for funding future projects
Project performance highlights
§ Project 1, "Chubinashvili street", construction completed - 123 (100%) of 123 apartments sold by the end of 2Q15, with total sales of US$ 9.9mln, which is fully recognized as revenue. The project was started in September 2010 and completed in August 2012. We unlocked the land value of US$ 0.9mln and realized Internal Rate of Return ("IRR") of 47% from this project
§ Project 2, "Tamarashvili street", construction completed - 517 (99%) of 522 apartments sold by end of 2Q15, with total sales of US$ 46.8mln, of which US$ 45.9mln was recognized as revenue. The project was started in May 2012 and completed in June 2014, four months ahead of completion deadline. We unlocked the land value of US$ 5.4mln and realized IRR of 46% from this project
§ Project 3, "Kazbegi Street", construction on-going - 259 (88%) of 295 apartments sold by end of 2Q15, with total sales of US$ 23.5mln, which is not yet recognized as revenue. The project was started in December 2013, construction is 75% completed as of the date of this release and is expected to be fully completed in December 2015. Upon the completion of the construction of this project, we expect to unlock the land value of US$ 3.6mln and realize IRR of 165% from this project
§ Project 4, "Nutsubidze Street", construction on-going - 186 (84%) of 221 apartments sold by end of 2Q15, with total sales of US$ 14.9mln, which is not yet recognized as revenue. The project was started in December 2013, construction is 82% completed as of the date of this release and is expected to be fully completed in October 2015. Upon the completion of the construction of this project, we expect to unlock the land value of US$ 2.2mln and realize IRR of 58% from this project
§ Project 5, "Tamarashvili Street II", construction on-going - 168 (62%) of 270 apartments sold by end of 2Q15, with total sales of US$ 15.6mln, which is not yet recognized as revenue. The project was started in July 2014, construction is 47% completed as of the date of this release and is expected to be fully completed in April 2016. Upon the completion of the construction of this project, we expect to unlock the land value of US$ 2.7mln and realize IRR of 71% from this project
§ Project 6, "Moscow avenue", construction on-going - 123 (52%) of 238 apartments sold by end of 2Q15, with total sales of US$ 4.6mln, which is not yet recognized as revenue. This project was launched within m2 Real Estate's new low-cost apartment initiative and offers unprecedented affordable price of as low as US$ 29,000 for refurbished 1 bedroom apartments. The project was started in September 2014, construction is 61% completed as of the date of this release and is expected to be fully completed in March 2016. Upon the completion of the construction of this project, we expect to unlock the land value of US$ 1.6mln and realize IRR of 31% from this project
§ In summary, m2 Real Estate has started 6 projects since its establishment in 2010, of which two have been completed and construction on four is on-going. Since establishment, total sales have been US$ 115.8mln, of which US$ 58.9mln will be recognized as revenue upon completion of the on-going four projects, two of which expected to be completed in 2015 and the other two expected to be completed in 2016. Currently, only 293 out of total 1,669 apartments are available for sale. We have unlocked total land value of US$ 6.3mln from the two completed projects and additional US$ 10.1mln in land value is expected to be unlocked from the four on-going projects
§ The number of apartments financed with our mortgages in all m2 Real Estate projects as of the date of this announcement totalled 653, with an aggregate amount of GEL 66.3mln
SELECTED FINANCIAL INFORMATION
|
|
Bank of Georgia Holdings PLC |
|
Banking Business |
|
|
|
Investment Business |
|
Eliminations |
||||||||||||
|
INCOME STATEMENT QUARTERLY |
Q2 2015 |
Q2 2014 |
Change |
Q1 2015 |
Change |
|
Q2 2015 |
Q2 2014 |
Change |
Q1 2015 |
Change |
|
Q2 2015 |
Q2 2014 |
Change |
Q1 2015 |
Change |
|
Q2 2015 |
Q2 2014 |
Q1 2015 |
|
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking interest income |
211,869 |
141,483 |
49.7% |
199,698 |
6.1% |
|
215,313 |
143,025 |
50.5% |
202,353 |
6.4% |
|
- |
- |
- |
- |
- |
|
(3,444) |
(1,542) |
(2,655) |
|
Banking interest expense |
(89,080) |
(58,970) |
51.1% |
(78,709) |
13.2% |
|
(88,910) |
(59,246) |
50.1% |
(79,295) |
12.1% |
|
- |
- |
- |
- |
- |
|
(170) |
276 |
586 |
|
Net banking interest income |
122,789 |
82,513 |
48.8% |
120,989 |
1.5% |
|
126,403 |
83,779 |
50.9% |
123,058 |
2.7% |
|
- |
- |
- |
- |
- |
|
(3,614) |
(1,266) |
(2,069) |
|
Fee and commission income |
38,944 |
34,729 |
12.1% |
35,991 |
8.2% |
|
40,160 |
35,581 |
12.9% |
37,343 |
7.5% |
|
- |
- |
- |
- |
- |
|
(1,216) |
(852) |
(1,352) |
|
Fee and commission expense |
(9,823) |
(8,501) |
15.6% |
(9,137) |
7.5% |
|
(9,988) |
(8,501) |
17.5% |
(9,253) |
7.9% |
|
- |
- |
- |
- |
- |
|
165 |
- |
116 |
|
Net fee and commission income |
29,121 |
26,228 |
11.0% |
26,854 |
8.4% |
|
30,172 |
27,080 |
11.4% |
28,090 |
7.4% |
|
- |
- |
- |
- |
- |
|
(1,051) |
(852) |
(1,236) |
|
Net banking foreign currency gain |
19,765 |
11,395 |
73.5% |
18,962 |
4.2% |
|
19,765 |
11,395 |
73.5% |
18,962 |
4.2% |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
|
Net other banking income |
2,481 |
2,241 |
10.7% |
1,790 |
38.6% |
|
2,810 |
2,433 |
15.5% |
2,095 |
34.1% |
|
- |
- |
- |
- |
- |
|
(329) |
(192) |
(305) |
|
Net insurance premiums earned |
22,566 |
25,228 |
-10.6% |
21,709 |
3.9% |
|
9,777 |
6,856 |
42.6% |
9,242 |
5.8% |
|
13,244 |
18,778 |
-29.5% |
12,890 |
2.7% |
|
(455) |
(406) |
(423) |
|
Net insurance claims incurred |
(16,749) |
(18,876) |
-11.3% |
(14,135) |
18.5% |
|
(6,304) |
(2,925) |
115.5% |
(3,936) |
60.2% |
|
(10,445) |
(15,951) |
-34.5% |
(10,199) |
2.4% |
|
- |
- |
- |
|
Gross insurance profit |
5,817 |
6,352 |
-8.4% |
7,574 |
-23.2% |
|
3,473 |
3,931 |
-11.7% |
5,306 |
-34.5% |
|
2,799 |
2,827 |
-1.0% |
2,691 |
4.0% |
|
(455) |
(406) |
(423) |
|
Healthcare revenue |
41,217 |
29,843 |
38.1% |
40,017 |
3.0% |
|
- |
- |
- |
- |
- |
|
41,217 |
29,843 |
38.1% |
40,017 |
3.0% |
|
- |
- |
- |
|
Cost of healthcare services |
(23,118) |
(16,216) |
42.6% |
(23,140) |
-0.1% |
|
- |
- |
- |
- |
- |
|
(23,118) |
(16,216) |
42.6% |
(23,140) |
-0.1% |
|
- |
- |
- |
|
Gross healthcare profit |
18,099 |
13,627 |
32.8% |
16,877 |
7.2% |
|
- |
- |
- |
- |
- |
|
18,099 |
13,627 |
32.8% |
16,877 |
7.2% |
|
- |
- |
- |
|
Real estate revenue |
1,716 |
11,133 |
-84.6% |
4,074 |
-57.9% |
|
- |
- |
- |
- |
- |
|
1,716 |
11,133 |
-84.6% |
4,074 |
-57.9% |
|
- |
- |
- |
|
Cost of real estate |
(1,757) |
(7,657) |
-77.1% |
(2,865) |
-38.7% |
|
- |
- |
- |
- |
- |
|
(1,757) |
(7,657) |
-77.1% |
(2,865) |
-38.7% |
|
- |
- |
- |
|
Gross real estate profit |
(41) |
3,476 |
NMF |
1,209 |
NMF |
|
- |
- |
- |
- |
- |
|
(41) |
3,476 |
NMF |
1,209 |
NMF |
|
- |
- |
- |
|
Gross other investment profit |
4,734 |
3,498 |
35.3% |
1,398 |
NMF |
|
- |
- |
- |
- |
- |
|
4,709 |
3,437 |
37.0% |
1,543 |
NMF |
|
25 |
61 |
(145) |
|
Revenue |
202,765 |
149,330 |
35.8% |
195,653 |
3.6% |
|
182,623 |
128,618 |
42.0% |
177,511 |
2.9% |
|
25,566 |
23,367 |
9.4% |
22,320 |
14.5% |
|
(5,424) |
(2,655) |
(4,178) |
|
Salaries and other employee benefits |
(45,044) |
(37,462) |
20.2% |
(45,742) |
-1.5% |
|
(38,066) |
(31,347) |
21.4% |
(38,606) |
-1.4% |
|
(7,460) |
(6,282) |
18.8% |
(7,531) |
-0.9% |
|
482 |
167 |
395 |
|
Administrative expenses |
(22,102) |
(19,235) |
14.9% |
(21,056) |
5.0% |
|
(17,899) |
(15,746) |
13.7% |
(17,506) |
2.2% |
|
(4,498) |
(3,967) |
13.4% |
(4,028) |
11.7% |
|
295 |
478 |
478 |
|
Banking depreciation and amortisation |
(8,338) |
(6,364) |
31.0% |
(8,373) |
-0.4% |
|
(8,338) |
(6,364) |
31.0% |
(8,373) |
-0.4% |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
|
Other operating expenses |
(1,364) |
(887) |
53.8% |
(887) |
53.8% |
|
(941) |
(803) |
17.2% |
(792) |
18.8% |
|
(423) |
(84) |
NMF |
(95) |
NMF |
|
- |
- |
- |
|
Operating expenses |
(76,848) |
(63,948) |
20.2% |
(76,058) |
1.0% |
|
(65,244) |
(54,260) |
20.2% |
(65,277) |
-0.1% |
|
(12,381) |
(10,333) |
19.8% |
(11,654) |
6.2% |
|
777 |
645 |
873 |
|
Operating income before cost of credit risk / EBITDA |
125,917 |
85,382 |
47.5% |
119,595 |
5.3% |
|
117,379 |
74,358 |
57.9% |
112,234 |
4.6% |
|
13,185 |
13,034 |
1.2% |
10,666 |
23.6% |
|
(4,647) |
(2,010) |
(3,305) |
|
Profit from associates |
1,979 |
- |
- |
(1,310) |
NMF |
|
- |
- |
- |
- |
- |
|
1,979 |
- |
- |
(1,310) |
NMF |
|
- |
- |
- |
|
Depreciation and amortization of investment business |
(2,579) |
(2,256) |
14.3% |
(2,688) |
-4.1% |
|
- |
- |
- |
- |
- |
|
(2,579) |
(2,256) |
14.3% |
(2,688) |
-4.1% |
|
- |
- |
- |
|
Net foreign currency gain from investment business |
2,689 |
(1,433) |
NMF |
3,690 |
-27.1% |
|
- |
- |
- |
- |
- |
|
2,689 |
(1,433) |
NMF |
3,690 |
-27.1% |
|
- |
- |
- |
|
Interest income from investment business |
622 |
(71) |
NMF |
617 |
0.8% |
|
- |
- |
- |
- |
- |
|
844 |
195 |
NMF |
818 |
3.2% |
|
(222) |
(266) |
(201) |
|
Interest expense from investment business |
(2,632) |
(1,718) |
53.2% |
(2,463) |
6.9% |
|
- |
- |
- |
- |
- |
|
(7,501) |
(3,994) |
87.8% |
(5,969) |
25.7% |
|
4,869 |
2,276 |
3,506 |
|
Operating income before cost of credit risk |
125,996 |
79,904 |
57.7% |
117,441 |
7.3% |
|
117,379 |
74,358 |
57.9% |
112,234 |
4.6% |
|
8,617 |
5,546 |
55.4% |
5,207 |
65.5% |
|
- |
- |
- |
|
Impairment charge on loans to customers |
(35,105) |
(7,816) |
NMF |
(38,928) |
-9.8% |
|
(35,105) |
(7,816) |
NMF |
(38,928) |
-9.8% |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
|
Impairment charge on finance lease receivables |
(1,779) |
(387) |
NMF |
(119) |
NMF |
|
(1,779) |
(387) |
NMF |
(119) |
NMF |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
|
Impairment charge on other assets and provisions |
(4,983) |
(5,643) |
-11.7% |
(2,794) |
78.3% |
|
(3,880) |
(5,076) |
-23.6% |
(1,724) |
125.1% |
|
(1,103) |
(567) |
94.5% |
(1,070) |
3.1% |
|
- |
- |
- |
|
Cost of credit risk |
(41,867) |
(13,846) |
NMF |
(41,841) |
0.1% |
|
(40,764) |
(13,279) |
NMF |
(40,771) |
0.0% |
|
(1,103) |
(567) |
94.5% |
(1,070) |
3.1% |
|
- |
- |
- |
|
Net operating income before non-recurring items |
84,129 |
66,058 |
27.4% |
75,600 |
11.3% |
|
76,615 |
61,079 |
25.4% |
71,463 |
7.2% |
|
7,514 |
4,979 |
50.9% |
4,137 |
81.6% |
|
- |
- |
- |
|
Net non-recurring items |
(413) |
(7,078) |
-94.2% |
(2,447) |
-83.1% |
|
(3,409) |
(7,951) |
-57.1% |
(2,167) |
57.3% |
|
2,996 |
873 |
NMF |
(280) |
NMF |
|
- |
- |
- |
|
Profit before income tax |
83,716 |
58,980 |
41.9% |
73,153 |
14.4% |
|
73,206 |
53,128 |
37.8% |
69,296 |
5.6% |
|
10,510 |
5,852 |
79.6% |
3,857 |
172.5% |
|
- |
- |
- |
|
Income tax expense |
(11,686) |
(663) |
NMF |
(10,814) |
8.1% |
|
(11,753) |
489 |
NMF |
(10,486) |
12.1% |
|
67 |
(1,152) |
NMF |
(328) |
NMF |
|
- |
- |
- |
|
Profit |
72,030 |
58,317 |
23.5% |
62,339 |
15.5% |
|
61,453 |
53,617 |
14.6% |
58,810 |
4.5% |
|
10,577 |
4,700 |
125.0% |
3,529 |
199.7% |
|
- |
- |
- |
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- shareholders of the Group |
70,601 |
56,421 |
25.1% |
62,640 |
12.7% |
|
60,963 |
52,702 |
15.7% |
58,247 |
4.7% |
|
9,638 |
3,719 |
159.2% |
4,393 |
119.4% |
|
- |
- |
- |
|
- non-controlling interests |
1,429 |
1,896 |
-24.6% |
(301) |
NMF |
|
490 |
915 |
-46.4% |
563 |
-13.0% |
|
939 |
981 |
-4.3% |
(864) |
NMF |
|
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (basic) |
1.84 |
1.64 |
12.2% |
1.63 |
12.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of Georgia Holdings PLC |
|
Banking Business |
|
Investment Business |
|
Eliminations |
|
|
|||||||||||||||||||||
|
|
INCOME STATEMENT HALF YEAR |
Jun-15 |
Jun-14 |
Change |
|
Jun-15 |
Jun-14 |
Change |
|
Jun-15 |
Jun-14 |
Change |
|
Jun-15 |
Jun-14 |
Change |
|
||||||||||||||
|
|
|
|
|
Y-O-Y |
|
|
|
Y-O-Y |
|
|
|
Y-O-Y |
|
|
|
Y-O-Y |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Banking interest income |
411,567 |
283,913 |
45.0% |
|
417,666 |
287,011 |
45.5% |
|
- |
- |
- |
|
(6,099) |
(3,098) |
96.9% |
|
||||||||||||||
|
|
Banking interest expense |
(167,789) |
(120,465) |
39.3% |
|
(168,205) |
(120,780) |
39.3% |
|
- |
- |
- |
|
416 |
315 |
32.1% |
|
||||||||||||||
|
|
Net banking interest income |
243,778 |
163,448 |
49.1% |
|
249,461 |
166,231 |
50.1% |
|
- |
- |
- |
|
(5,683) |
(2,783) |
104.2% |
|
||||||||||||||
|
|
Fee and commission income |
74,935 |
62,815 |
19.3% |
|
77,503 |
64,045 |
21.0% |
|
- |
- |
- |
|
(2,568) |
(1,230) |
108.8% |
|
||||||||||||||
|
|
Fee and commission expense |
(18,960) |
(16,753) |
13.2% |
|
(19,241) |
(16,753) |
14.9% |
|
- |
- |
- |
|
281 |
- |
- |
|
||||||||||||||
|
|
Net fee and commission income |
55,975 |
46,062 |
21.5% |
|
58,262 |
47,292 |
23.2% |
|
- |
- |
- |
|
(2,287) |
(1,230) |
85.9% |
|
||||||||||||||
|
|
Net banking foreign currency gain |
38,727 |
22,700 |
70.6% |
|
38,727 |
22,700 |
70.6% |
|
- |
- |
- |
|
- |
- |
- |
|
||||||||||||||
|
|
Net other banking income |
4,272 |
3,107 |
37.5% |
|
4,906 |
3,420 |
43.5% |
|
- |
- |
- |
|
(634) |
(313) |
102.6% |
|
||||||||||||||
|
|
Net insurance premiums earned |
44,275 |
54,618 |
-18.9% |
|
19,019 |
13,034 |
45.9% |
|
26,134 |
42,443 |
-38.4% |
|
(878) |
(859) |
2.2% |
|
||||||||||||||
|
|
Net insurance claims incurred |
(30,884) |
(38,560) |
-19.9% |
|
(10,242) |
(4,844) |
111.4% |
|
(20,642) |
(33,716) |
-38.8% |
|
- |
- |
- |
|
||||||||||||||
|
|
Gross insurance profit |
13,391 |
16,058 |
-16.6% |
|
8,777 |
8,190 |
7.2% |
|
5,492 |
8,727 |
-37.1% |
|
(878) |
(859) |
2.2% |
|
||||||||||||||
|
|
Healthcare revenue |
81,234 |
52,591 |
54.5% |
|
- |
- |
- |
|
81,234 |
52,591 |
54.5% |
|
- |
- |
- |
|
||||||||||||||
|
|
Cost of healthcare services |
(46,259) |
(29,653) |
56.0% |
|
- |
- |
- |
|
(46,259) |
(29,653) |
56.0% |
|
- |
- |
- |
|
||||||||||||||
|
|
Gross healthcare profit |
34,975 |
22,938 |
52.5% |
|
- |
- |
- |
|
34,975 |
22,938 |
52.5% |
|
- |
- |
- |
|
||||||||||||||
|
|
Real estate revenue |
5,790 |
33,044 |
-82.5% |
|
- |
- |
- |
|
5,790 |
33,124 |
-82.5% |
|
- |
(80) |
-100.0% |
|
||||||||||||||
|
|
Cost of real estate |
(4,622) |
(23,465) |
-80.3% |
|
- |
- |
- |
|
(4,622) |
(23,465) |
-80.3% |
|
- |
- |
- |
|
||||||||||||||
|
|
Gross real estate profit |
1,168 |
9,579 |
-87.8% |
|
- |
- |
- |
|
1,168 |
9,659 |
-87.9% |
|
- |
(80) |
-100.0% |
|
||||||||||||||
|
|
Gross other investment profit |
6,133 |
5,861 |
4.6% |
|
- |
- |
- |
|
6,253 |
5,741 |
8.9% |
|
(120) |
120 |
NMF |
|
||||||||||||||
|
|
Revenue |
398,419 |
289,753 |
37.5% |
|
360,133 |
247,833 |
45.3% |
|
47,888 |
47,065 |
1.7% |
|
(9,602) |
(5,145) |
86.6% |
|
||||||||||||||
|
|
Salaries and other employee benefits |
(90,786) |
(73,146) |
24.1% |
|
(76,672) |
(61,681) |
24.3% |
|
(14,991) |
(12,084) |
24.1% |
|
877 |
619 |
41.7% |
|
||||||||||||||
|
|
Administrative expenses |
(43,158) |
(34,773) |
24.1% |
|
(35,404) |
(27,947) |
26.7% |
|
(8,527) |
(7,514) |
13.5% |
|
773 |
688 |
12.4% |
|
||||||||||||||
|
|
Banking depreciation and amortisation |
(16,711) |
(12,523) |
33.4% |
|
(16,711) |
(12,523) |
33.4% |
|
- |
- |
- |
|
- |
- |
- |
|
||||||||||||||
|
|
Other operating expenses |
(2,253) |
(1,761) |
27.9% |
|
(1,733) |
(1,624) |
6.7% |
|
(520) |
(137) |
NMF |
|
- |
- |
- |
|
||||||||||||||
|
|
Operating expenses |
(152,908) |
(122,203) |
25.1% |
|
(130,520) |
(103,775) |
25.8% |
|
(24,038) |
(19,735) |
21.8% |
|
1,650 |
1,307 |
26.2% |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Operating income before cost of credit risk / EBITDA |
245,511 |
167,550 |
46.5% |
|
229,613 |
144,058 |
59.4% |
|
23,850 |
27,330 |
-12.7% |
|
(7,952) |
(3,838) |
107.2% |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Profit from associates |
668 |
- |
- |
|
- |
- |
- |
|
668 |
- |
- |
|
- |
- |
- |
|
||||||||||||||
|
|
Depreciation and amortization of investment business |
(5,266) |
(4,485) |
17.4% |
|
- |
- |
- |
|
(5,266) |
(4,485) |
17.4% |
|
- |
- |
- |
|
||||||||||||||
|
|
Net foreign currency gain from investment business |
6,379 |
(1,849) |
NMF |
|
- |
- |
- |
|
6,379 |
(1,849) |
NMF |
|
- |
- |
- |
|
||||||||||||||
|
|
Interest income from investment business |
1,239 |
732 |
69.3% |
|
- |
- |
- |
|
1,662 |
980 |
69.6% |
|
(423) |
(248) |
70.6% |
|
||||||||||||||
|
|
Interest expense from investment business |
(5,094) |
(3,749) |
35.9% |
|
- |
- |
- |
|
(13,469) |
(7,835) |
71.9% |
|
8,375 |
4,086 |
105.0% |
|
||||||||||||||
|
|
Operating income before cost of credit risk |
243,437 |
158,199 |
53.9% |
|
229,613 |
144,058 |
59.4% |
|
13,824 |
14,141 |
-2.2% |
|
- |
- |
- |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Impairment charge on loans to customers |
(74,033) |
(16,927) |
NMF |
|
(74,033) |
(16,927) |
NMF |
|
- |
- |
- |
|
- |
- |
- |
|
||||||||||||||
|
|
Impairment charge on finance lease receivables |
(1,899) |
(358) |
NMF |
|
(1,899) |
(358) |
NMF |
|
- |
- |
- |
|
- |
- |
- |
|
||||||||||||||
|
|
Impairment charge on other assets and provisions |
(7,776) |
(9,878) |
-21.3% |
|
(5,604) |
(8,795) |
-36.3% |
|
(2,172) |
(1,083) |
100.6% |
|
- |
- |
- |
|
||||||||||||||
|
|
Cost of credit risk |
(83,708) |
(27,163) |
NMF |
|
(81,536) |
(26,080) |
NMF |
|
(2,172) |
(1,083) |
100.6% |
|
- |
- |
- |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Net operating income before non-recurring items |
159,729 |
131,036 |
21.9% |
|
148,077 |
117,978 |
25.5% |
|
11,652 |
13,058 |
-10.8% |
|
- |
- |
- |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Net non-recurring items |
(2,860) |
(8,197) |
-65.1% |
|
(5,575) |
(9,601) |
-41.9% |
|
2,715 |
1,404 |
93.4% |
|
- |
- |
- |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Profit before income tax |
156,869 |
122,839 |
27.7% |
|
142,502 |
108,377 |
31.5% |
|
14,367 |
14,462 |
-0.7% |
|
- |
- |
- |
|
||||||||||||||
|
|
Income tax expense |
(22,500) |
(10,857) |
107.2% |
|
(22,238) |
(8,484) |
162.1% |
|
(262) |
(2,373) |
-89.0% |
|
- |
- |
- |
|
||||||||||||||
|
|
Profit |
134,369 |
111,982 |
20.0% |
|
120,264 |
99,893 |
20.4% |
|
14,105 |
12,089 |
16.7% |
|
- |
- |
- |
|
||||||||||||||
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
- shareholders of the Group |
133,241 |
108,347 |
23.0% |
|
119,211 |
98,102 |
21.5% |
|
14,030 |
10,245 |
36.9% |
|
- |
- |
- |
|
||||||||||||||
|
|
- non-controlling interests |
1,128 |
3,635 |
-69.0% |
|
1,053 |
1,791 |
-41.2% |
|
75 |
1,844 |
-95.9% |
|
- |
- |
- |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Earnings per share (basic) |
3.47 |
3.15 |
10.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Bank of Georgia Holdings PLC |
|
Banking Business |
|
Investment Business |
|
Eliminations |
|
|||||||||||||||||||||||
|
Balance Sheet |
Jun-15 |
Jun-14 |
Change |
Mar-15 |
Change |
|
Jun-15 |
Jun-14 |
Change |
Mar-15 |
Change |
|
Jun-15 |
Jun-14 |
Change |
Mar-15 |
Change |
|
Jun-15 |
Jun-14 |
Mar-15 |
||||||||||
|
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Cash and cash equivalents |
1,261,805 |
903,734 |
39.6% |
1,000,713 |
26.1% |
|
1,252,758 |
895,287 |
39.9% |
997,547 |
25.6% |
|
107,511 |
73,488 |
46.3% |
110,578 |
-2.8% |
|
(98,464) |
(65,041) |
(107,412) |
||||||||||
|
Amounts due from credit institutions |
583,888 |
363,468 |
60.6% |
545,714 |
7.0% |
|
575,534 |
353,559 |
62.8% |
523,663 |
9.9% |
|
18,844 |
17,964 |
4.9% |
87,478 |
-78.5% |
|
(10,490) |
(8,055) |
(65,427) |
||||||||||
|
Investment securities |
895,840 |
569,937 |
57.2% |
880,799 |
1.7% |
|
898,457 |
568,784 |
58.0% |
881,098 |
2.0% |
|
1,153 |
1,153 |
0.0% |
1,153 |
0.0% |
|
(3,770) |
- |
(1,452) |
||||||||||
|
Loans to customers and finance lease receivables |
5,052,752 |
3,650,791 |
38.4% |
5,156,386 |
-2.0% |
|
5,142,221 |
3,714,213 |
38.4% |
5,248,559 |
-2.0% |
|
- |
- |
- |
- |
- |
|
(89,469) |
(63,422) |
(92,173) |
||||||||||
|
Accounts receivable and other loans |
77,866 |
60,677 |
28.3% |
73,315 |
6.2% |
|
15,474 |
9,622 |
60.8% |
13,063 |
18.5% |
|
70,343 |
51,903 |
35.5% |
64,947 |
8.3% |
|
(7,951) |
(848) |
(4,695) |
||||||||||
|
Insurance premiums receivable |
58,142 |
52,043 |
11.7% |
58,816 |
-1.1% |
|
26,519 |
14,728 |
80.1% |
22,337 |
18.7% |
|
32,023 |
37,436 |
-14.5% |
37,205 |
-13.9% |
|
(400) |
(121) |
(726) |
||||||||||
|
Prepayments |
52,145 |
28,188 |
85.0% |
42,748 |
22.0% |
|
30,779 |
18,417 |
67.1% |
24,969 |
23.3% |
|
21,366 |
9,771 |
118.7% |
17,779 |
20.2% |
|
- |
- |
- |
||||||||||
|
Inventories |
131,534 |
90,489 |
45.4% |
113,322 |
16.1% |
|
10,379 |
6,689 |
55.2% |
7,697 |
34.8% |
|
121,155 |
83,800 |
44.6% |
105,625 |
14.7% |
|
- |
- |
- |
||||||||||
|
Investment property |
221,506 |
152,292 |
45.4% |
194,623 |
13.8% |
|
143,873 |
127,374 |
13.0% |
128,376 |
12.1% |
|
77,633 |
24,918 |
211.6% |
66,247 |
17.2% |
|
- |
- |
- |
||||||||||
|
Property and equipment |
669,153 |
534,289 |
25.2% |
618,474 |
8.2% |
|
338,858 |
293,626 |
15.4% |
334,516 |
1.3% |
|
330,295 |
240,663 |
37.2% |
283,958 |
16.3% |
|
- |
- |
- |
||||||||||
|
Goodwill |
60,056 |
48,721 |
23.3% |
51,745 |
16.1% |
|
48,092 |
38,538 |
24.8% |
39,781 |
20.9% |
|
11,964 |
10,183 |
17.5% |
11,964 |
0.0% |
|
- |
- |
- |
||||||||||
|
Intangible assets |
36,894 |
28,490 |
29.5% |
33,443 |
10.3% |
|
33,260 |
26,596 |
25.1% |
31,761 |
4.7% |
|
3,634 |
1,894 |
91.9% |
1,682 |
116.1% |
|
- |
- |
- |
||||||||||
|
Income tax assets |
29,080 |
32,204 |
-9.7% |
24,943 |
16.6% |
|
21,686 |
24,835 |
-12.7% |
17,602 |
23.2% |
|
7,394 |
7,369 |
0.3% |
7,341 |
0.7% |
|
- |
- |
- |
||||||||||
|
Other assets |
244,398 |
152,360 |
60.4% |
235,012 |
4.0% |
|
174,820 |
140,452 |
24.5% |
176,982 |
-1.2% |
|
80,058 |
12,784 |
526.2% |
68,096 |
17.6% |
|
(10,480) |
(876) |
(10,066) |
||||||||||
|
Total assets |
9,375,059 |
6,667,683 |
40.6% |
9,030,053 |
3.8% |
|
8,712,710 |
6,232,720 |
39.8% |
8,447,951 |
3.1% |
|
883,373 |
573,326 |
54.1% |
864,053 |
2.2% |
|
(221,024) |
(138,363) |
(281,951) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Client deposits and notes |
4,104,417 |
3,074,710 |
33.5% |
4,099,029 |
0.1% |
|
4,212,822 |
3,148,729 |
33.8% |
4,271,854 |
-1.4% |
|
- |
- |
- |
- |
- |
|
(108,405) |
(74,019) |
(172,825) |
||||||||||
|
Amounts due to credit institutions |
2,139,517 |
1,240,128 |
72.5% |
1,780,636 |
20.2% |
|
2,045,093 |
1,145,875 |
78.5% |
1,694,668 |
20.7% |
|
189,124 |
156,753 |
20.7% |
181,773 |
4.0% |
|
(94,700) |
(62,500) |
(95,805) |
||||||||||
|
Debt securities issued |
1,063,123 |
786,432 |
35.2% |
1,026,689 |
3.5% |
|
990,257 |
760,144 |
30.3% |
962,587 |
2.9% |
|
79,894 |
26,690 |
199.3% |
66,964 |
19.3% |
|
(7,028) |
(402) |
(2,862) |
||||||||||
|
Accruals and deferred income |
132,832 |
83,784 |
58.5% |
124,344 |
6.8% |
|
14,369 |
9,917 |
44.9% |
20,949 |
-31.4% |
|
118,463 |
73,867 |
60.4% |
103,395 |
14.6% |
|
- |
- |
- |
||||||||||
|
Insurance contracts liabilities |
73,001 |
60,537 |
20.6% |
70,156 |
4.1% |
|
42,910 |
25,890 |
65.7% |
34,685 |
23.7% |
|
30,091 |
34,647 |
-13.1% |
35,471 |
-15.2% |
|
- |
- |
- |
||||||||||
|
Income tax liabilities |
111,387 |
92,617 |
20.3% |
96,761 |
15.1% |
|
87,392 |
77,942 |
12.1% |
79,343 |
10.1% |
|
23,995 |
14,675 |
63.5% |
17,418 |
37.8% |
|
- |
- |
- |
||||||||||
|
Other liabilities |
94,839 |
72,599 |
30.6% |
132,290 |
-28.3% |
|
71,126 |
44,634 |
59.4% |
99,677 |
-28.6% |
|
34,604 |
29,407 |
17.7% |
43,072 |
-19.7% |
|
(10,891) |
(1,442) |
(10,459) |
||||||||||
|
Total liabilities |
7,719,116 |
5,410,807 |
42.7% |
7,329,905 |
5.3% |
|
7,463,969 |
5,213,131 |
43.2% |
7,163,763 |
4.2% |
|
476,171 |
336,039 |
41.7% |
448,093 |
6.3% |
|
(221,024) |
(138,363) |
(281,951) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Share capital |
1,154 |
1,081 |
6.8% |
1,154 |
0.0% |
|
1,154 |
1,081 |
6.8% |
1,154 |
0.0% |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
||||||||||
|
Additional paid-in capital |
243,482 |
33,409 |
628.8% |
252,568 |
-3.6% |
|
32,277 |
30,635 |
5.4% |
94,886 |
-66.0% |
|
211,205 |
2,774 |
7513.7% |
157,682 |
33.9% |
|
- |
- |
- |
||||||||||
|
Treasury shares |
(36) |
(46) |
-21.7% |
(34) |
5.9% |
|
(36) |
(46) |
-21.7% |
(34) |
5.9% |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
||||||||||
|
Other reserves |
(61,509) |
(82,317) |
-25.3% |
(30,568) |
101.2% |
|
(51,917) |
(72,614) |
-28.5% |
(20,977) |
147.5% |
|
(9,592) |
(9,703) |
-1.1% |
(9,591) |
0.0% |
|
- |
- |
- |
||||||||||
|
Retained earnings |
1,413,870 |
1,249,580 |
13.1% |
1,420,513 |
-0.5% |
|
1,247,508 |
1,042,804 |
19.6% |
1,189,365 |
4.9% |
|
166,362 |
206,776 |
-19.5% |
231,148 |
-28.0% |
|
- |
- |
- |
||||||||||
|
Total equity attributable to shareholders of the Group |
1,596,961 |
1,201,707 |
32.9% |
1,643,633 |
-2.8% |
|
1,228,986 |
1,001,860 |
22.7% |
1,264,394 |
-2.8% |
|
367,975 |
199,847 |
84.1% |
379,239 |
-3.0% |
|
- |
- |
- |
||||||||||
|
Non-controlling interests |
58,982 |
55,169 |
6.9% |
56,515 |
4.4% |
|
19,755 |
17,729 |
11.4% |
19,794 |
-0.2% |
|
39,227 |
37,440 |
4.8% |
36,721 |
6.8% |
|
- |
- |
- |
||||||||||
|
Total equity |
1,655,943 |
1,256,876 |
31.8% |
1,700,148 |
-2.6% |
|
1,248,741 |
1,019,589 |
22.5% |
1,284,188 |
-2.8% |
|
407,202 |
237,287 |
71.6% |
415,960 |
-2.1% |
|
- |
- |
- |
||||||||||
|
Total liabilities and equity |
9,375,059 |
6,667,683 |
40.6% |
9,030,053 |
3.8% |
|
8,712,710 |
6,232,720 |
39.8% |
8,447,951 |
3.1% |
|
883,373 |
573,326 |
54.1% |
864,053 |
2.2% |
|
(221,024) |
(138,363) |
(281,951) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Book value per share |
41.74 |
34.95 |
19.4% |
42.71 |
-2.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Banking Business, excluding Privatbank
|
INCOME STATEMENT |
2Q15 |
2Q14 |
Change |
1Q15 |
Change |
1H15 |
1H14 |
Change |
|
GEL thousands, unless otherwise stated |
|
|
Y-O-Y |
|
Q-O-Q |
|
|
Y-O-Y |
|
|
|
|
|
|
|
|
|
|
|
Banking interest income |
193,068 |
143,025 |
35.0% |
180,512 |
7.0% |
373,581 |
287,011 |
30.2% |
|
Banking interest expense |
(83,505) |
(59,246) |
40.9% |
(72,378) |
15.4% |
(155,883) |
(120,780) |
29.1% |
|
Net banking interest income |
109,563 |
83,779 |
30.8% |
108,134 |
1.3% |
217,698 |
166,231 |
31.0% |
|
Fee and commission income |
36,800 |
35,581 |
3.4% |
33,418 |
10.1% |
70,218 |
64,045 |
9.6% |
|
Fee and commission expense |
(9,311) |
(8,501) |
9.5% |
(8,399) |
10.9% |
(17,710) |
(16,753) |
5.7% |
|
Net fee and commission income |
27,489 |
27,080 |
1.5% |
25,019 |
9.9% |
52,508 |
47,292 |
11.0% |
|
Net banking foreign currency gain |
19,138 |
11,395 |
68.0% |
18,062 |
6.0% |
37,199 |
22,700 |
63.9% |
|
Net other banking income |
3,175 |
2,433 |
30.5% |
1,900 |
67.1% |
5,075 |
3,420 |
48.4% |
|
Net insurance premiums earned |
10,128 |
6,856 |
47.7% |
8,891 |
13.9% |
19,019 |
13,034 |
45.9% |
|
Net insurance claims incurred |
(6,352) |
(2,925) |
117.2% |
(3,890) |
63.3% |
(10,243) |
(4,844) |
111.5% |
|
Gross insurance profit |
3,776 |
3,931 |
-3.9% |
5,001 |
-24.5% |
8,776 |
8,190 |
7.2% |
|
Revenue |
163,141 |
128,618 |
26.8% |
158,116 |
3.2% |
321,256 |
247,833 |
29.6% |
|
Salaries and other employee benefits |
(35,351) |
(31,347) |
12.8% |
(33,746) |
4.8% |
(69,097) |
(61,681) |
12.0% |
|
Administrative expenses |
(16,184) |
(15,746) |
2.8% |
(13,970) |
15.8% |
(30,154) |
(27,947) |
7.9% |
|
Banking depreciation and amortisation |
(7,370) |
(6,364) |
15.8% |
(6,979) |
5.6% |
(14,349) |
(12,523) |
14.6% |
|
Other operating expenses |
(865) |
(803) |
7.7% |
(694) |
24.6% |
(1,558) |
(1,624) |
-4.1% |
|
Operating expenses |
(59,770) |
(54,260) |
10.2% |
(55,389) |
7.9% |
(115,158) |
(103,775) |
11.0% |
|
Operating income before cost of credit risk |
103,371 |
74,358 |
39.0% |
102,727 |
0.6% |
206,098 |
144,058 |
43.1% |
|
Cost of credit risk |
(35,208) |
(13,279) |
165.1% |
(32,606) |
8.0% |
(67,814) |
(26,080) |
160.0% |
|
Net operating income before non-recurring items |
68,163 |
61,079 |
11.6% |
70,121 |
-2.8% |
138,284 |
117,978 |
17.2% |
|
Net non-recurring items* |
(788) |
(7,951) |
-90.1% |
(2,167) |
-63.6% |
(2,955) |
(9,601) |
-69.2% |
|
Profit before income tax |
67,375 |
53,128 |
26.8% |
67,954 |
-0.9% |
135,329 |
108,377 |
24.9% |
|
Income tax (expense) benefit |
(10,878) |
489 |
NMF |
(10,284) |
5.8% |
(21,162) |
(8,484) |
149.4% |
|
Profit |
56,497 |
53,617 |
5.4% |
57,670 |
-2.0% |
114,167 |
99,893 |
14.3% |
*Excluding Privatbank related integration costs
Banking Business, excluding Privatbank
|
BALANCE SHEET |
Jun-15 |
Jun-14 |
Change |
Mar-15 |
Change |
|
GEL thousands, unless otherwise stated |
|
|
Y-O-Y |
|
Q-O-Q |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
1,105,420 |
895,287 |
23.5% |
892,454 |
23.9% |
|
Amounts due from credit institutions |
575,534 |
353,559 |
62.8% |
473,415 |
21.6% |
|
Investment securities |
898,403 |
568,784 |
58.0% |
876,244 |
2.5% |
|
Loans to customers and finance lease receivables |
4,896,616 |
3,714,213 |
31.8% |
4,958,594 |
-1.2% |
|
Accounts receivable and other loans |
15,474 |
9,622 |
60.8% |
13,063 |
18.5% |
|
Insurance premiums receivable |
26,519 |
14,728 |
80.1% |
21,468 |
23.5% |
|
Prepayments |
29,828 |
18,417 |
62.0% |
24,325 |
22.6% |
|
Inventories |
10,379 |
6,689 |
55.2% |
7,697 |
34.8% |
|
Investment property |
143,537 |
127,374 |
12.7% |
128,040 |
12.1% |
|
Property and equipment |
320,925 |
293,626 |
9.3% |
315,564 |
1.7% |
|
Goodwill |
46,848 |
38,538 |
21.6% |
38,537 |
21.6% |
|
Intangible assets |
33,155 |
26,596 |
24.7% |
31,648 |
4.8% |
|
Income tax assets |
21,686 |
24,835 |
-12.7% |
17,229 |
25.9% |
|
Other assets |
263,559 |
140,452 |
87.7% |
268,614 |
-1.9% |
|
Total assets |
8,387,883 |
6,232,720 |
34.6% |
8,066,892 |
4.0% |
|
|
|
|
|
|
|
|
Client deposits and notes |
3,946,043 |
3,148,729 |
25.3% |
3,901,943 |
1.1% |
|
Amounts due to credit institutions |
1,995,655 |
1,145,875 |
74.2% |
1,688,582 |
18.2% |
|
Debt securities issued |
990,257 |
760,144 |
30.3% |
962,587 |
2.9% |
|
Accruals and deferred income |
12,436 |
9,917 |
25.4% |
19,016 |
-34.6% |
|
Insurance contracts liabilities |
42,910 |
25,890 |
65.7% |
33,544 |
27.9% |
|
Income tax liabilities |
86,605 |
77,942 |
11.1% |
79,343 |
9.2% |
|
Other liabilities |
68,941 |
44,634 |
54.5% |
98,830 |
-30.2% |
|
Total liabilities |
7,142,847 |
5,213,131 |
37.0% |
6,783,845 |
5.3% |
|
|
|
|
|
|
|
|
Share capital |
1,154 |
1,081 |
6.8% |
1,154 |
0.0% |
|
Additional paid-in capital |
32,277 |
30,635 |
5.4% |
94,886 |
-66.0% |
|
Treasury shares |
(36) |
(46) |
-21.7% |
(34) |
5.9% |
|
Other reserves |
(51,918) |
(72,614) |
-28.5% |
(20,977) |
147.5% |
|
Retained earnings |
1,243,803 |
1,042,804 |
19.3% |
1,188,225 |
4.7% |
|
Total equity attributable to shareholders of the Group |
1,225,280 |
1,001,860 |
22.3% |
1,263,254 |
-3.0% |
|
Non-controlling interests |
19,756 |
17,729 |
11.4% |
19,793 |
-0.2% |
|
Total equity |
1,245,036 |
1,019,589 |
22.1% |
1,283,047 |
-3.0% |
|
Total liabilities and equity |
8,387,883 |
6,232,720 |
34.6% |
8,066,892 |
4.0% |
P&C Insurance (Aldagi)
|
INCOME STATEMENT GEL thousands, unless otherwise stated |
|
2Q15 |
2Q14 |
Change |
1Q15 |
Change |
1H15 |
1H14 |
Change |
|
|
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
Y-O-Y |
|
|
|
|
|
|
|
|
|
|
|
|
Net banking interest income |
|
567 |
80 |
NMF |
546 |
3.8% |
1,113 |
136 |
NMF |
|
Net fee and commission income |
|
72 |
80 |
-10.0% |
71 |
1.4% |
143 |
155 |
-7.7% |
|
Net banking foreign currency gain |
|
1,687 |
(87) |
NMF |
528 |
NMF |
2,215 |
54 |
NMF |
|
Net other banking income |
|
90 |
152 |
-40.8% |
297 |
-69.7% |
387 |
287 |
34.8% |
|
Gross insurance profit |
|
3,853 |
4,258 |
-9.5% |
5,607 |
-31.3% |
9,460 |
8,765 |
7.9% |
|
Revenue |
|
6,269 |
4,483 |
39.8% |
7,049 |
-11.1% |
13,318 |
9,397 |
41.7% |
|
Operating expenses |
|
(2,524) |
(2,113) |
19.5% |
(2,970) |
-15.0% |
(5,494) |
(4,167) |
31.8% |
|
Operating income before cost of credit risk |
|
3,745 |
2,370 |
58.0% |
4,079 |
-8.2% |
7,824 |
5,230 |
49.6% |
|
Cost of credit risk |
|
(172) |
(118) |
45.8% |
(95) |
81.1% |
(267) |
(327) |
-18.3% |
|
Profit before income tax |
|
3,573 |
2,252 |
58.7% |
3,984 |
-10.3% |
7,557 |
4,903 |
54.1% |
|
Income tax (expense) benefit |
|
(150) |
(383) |
-60.8% |
388 |
NMF |
238 |
(823) |
NMF |
|
Profit |
|
3,423 |
1,869 |
83.1% |
4,372 |
-21.7% |
7,795 |
4,080 |
91.1% |
Belarusky Narodny Bank (BNB)
|
INCOME STATEMENT, HIGHLIGHTS GEL thousands, unless otherwise stated |
2Q15 |
2Q14 |
Change |
1Q15 |
Change |
1H15 |
1H14 |
Change |
|
|
|
|
Y-O-Y |
|
Q-O-Q |
|
|
Y-O-Y |
|
|
|
|
|
|
|
|
|
|
|
Net banking interest income |
6,638 |
5,496 |
20.8% |
7,429 |
-10.6% |
14,067 |
11,175 |
25.9% |
|
Net fee and commission income |
2,699 |
2,367 |
14.0% |
2,217 |
21.7% |
4,916 |
4,342 |
13.2% |
|
Net banking foreign currency gain |
3,668 |
2,012 |
82.3% |
5,017 |
-26.9% |
8,685 |
2,928 |
196.6% |
|
Net other banking income |
137 |
91 |
50.5% |
97 |
41.2% |
234 |
272 |
-14.0% |
|
Revenue |
13,142 |
9,966 |
31.9% |
14,760 |
-11.0% |
27,902 |
18,717 |
49.1% |
|
Operating expenses |
(4,687) |
(4,670) |
0.4% |
(4,254) |
10.2% |
(8,941) |
(8,639) |
3.5% |
|
Operating income before cost of credit risk |
8,455 |
5,296 |
59.6% |
10,506 |
-19.5% |
18,961 |
10,078 |
88.1% |
|
Cost of credit risk |
(5,683) |
(699) |
NMF |
(4,645) |
22.3% |
(10,328) |
(1,601) |
NMF |
|
Net non-recurring items |
(318) |
(1,249) |
-74.5% |
(1,098) |
-71.0% |
(1,416) |
(2,115) |
-33.0% |
|
Profit before income tax |
2,454 |
3,348 |
-26.7% |
4,763 |
-48.5% |
7,217 |
6,362 |
13.4% |
|
Income tax (expense) benefit |
(785) |
2,443 |
NMF |
(1,427) |
-45.0% |
(2,212) |
1,577 |
NMF |
|
Profit |
1,669 |
5,791 |
-71.2% |
3,336 |
-50.0% |
5,005 |
7,939 |
-37.0% |
|
BALANCE SHEET, HIGHLIGHTS GEL thousands, unless otherwise stated |
30-Jun-15 |
30-Jun-14 |
Changes, Y-O-Y |
31-Mar-15 |
Change, Q-O-Q |
|
Cash and cash equivalents |
67,632 |
50,797 |
33.1% |
64,043 |
5.6% |
|
Amounts due from credit institutions |
3,636 |
3,213 |
13.2% |
3,575 |
1.7% |
|
Loans to customers and finance lease receivables |
305,816 |
217,325 |
40.7% |
297,803 |
2.7% |
|
Total assets |
444,377 |
327,100 |
35.9% |
433,438 |
2.5% |
|
Client deposits and notes, of which: |
242,249 |
158,856 |
52.5% |
233,658 |
3.7% |
|
Amounts due to credit institutions, of which: |
114,161 |
83,805 |
36.2% |
110,730 |
3.1% |
|
Debt securities issued |
- |
4,229 |
-100.0% |
- |
- |
|
Total liabilities |
363,782 |
252,335 |
44.2% |
352,204 |
3.3% |
|
Total equity attributable to shareholders of the Group |
66,953 |
61,905 |
8.2% |
67,452 |
-0.7% |
|
Non-controlling interests |
13,642 |
12,860 |
6.1% |
13,782 |
-1.0% |
|
Total equity |
80,595 |
74,765 |
7.8% |
81,234 |
-0.8% |
|
Total liabilities and equity |
444,377 |
327,100 |
35.9% |
433,438 |
2.5% |
Key Ratios Quarterly
|
|
Including Privatbank |
Excluding Privatbank |
|
Including Privatbank |
Excluding Privatbank |
|
|
2Q15 |
2Q15 |
2Q14 |
1Q15 |
1Q15 |
|
|
|
|
|
|
|
|
Profitability |
|
|
|
|
|
|
ROAA, Annualised |
2.9% |
2.7% |
3.5% |
3.0% |
3.1% |
|
ROAE, Annualised |
19.3% |
17.8% |
21.0% |
19.2% |
18.8% |
|
Net Interest Margin, Annualised |
7.6% |
6.9% |
7.4% |
7.8% |
7.3% |
|
Loan Yield, Annualised |
14.6% |
13.7% |
14.3% |
14.5% |
13.7% |
|
Liquid assets yield, Annualised |
3.1% |
3.1% |
2.3% |
3.2% |
3.3% |
|
Cost of Funds, Annualised |
5.0% |
4.9% |
4.7% |
5.0% |
4.8% |
|
Cost of Client Deposits and Notes, annualised |
4.4% |
4.3% |
4.2% |
4.4% |
4.1% |
|
Cost of Amounts Due to Credit Institutions, annualised |
5.3% |
5.2% |
4.7% |
5.2% |
5.1% |
|
Cost of Debt Securities Issued |
7.2% |
7.2% |
7.2% |
7.1% |
7.1% |
|
Operating Leverage, Y-O-Y |
21.7% |
16.7% |
-6.3% |
17.1% |
20.8% |
|
Operating Leverage, Q-O-Q |
2.9% |
-4.7% |
-1.7% |
5.0% |
9.1% |
|
Efficiency |
|
|
|
|
|
|
Cost / Income |
35.7% |
36.6% |
42.2% |
36.8% |
35.0% |
|
Liquidity |
|
|
|
|
|
|
NBG Liquidity Ratio |
35.1% |
34.1% |
38.1% |
34.7% |
34.1% |
|
Liquid Assets To Total Liabilities |
36.5% |
36.1% |
34.9% |
33.5% |
33.1% |
|
Net Loans To Client Deposits and Notes |
122.1% |
124.1% |
118.0% |
122.9% |
127.1% |
|
Net Loans To Client Deposits and Notes + DFIs |
102.4% |
103.0% |
100.0% |
105.2% |
107.3% |
|
Leverage (Times) |
6.0 |
5.7 |
5.1 |
5.6 |
5.3 |
|
Asset Quality: |
|
|
|
|
|
|
NPLs (in GEL) |
219,230 |
208,321 |
145,590 |
187,129 |
183,184 |
|
NPLs To Gross Loans To Clients |
4.1% |
4.1% |
3.8% |
3.5% |
3.6% |
|
NPL Coverage Ratio |
82.2% |
75.9% |
73.8% |
74.2% |
71.7% |
|
NPL Coverage Ratio, Adjusted for discounted value of collateral |
115.1% |
110.6% |
116.1% |
118.0% |
116.5% |
|
Cost of Risk, Annualised |
2.7% |
2.4% |
0.9% |
3.1% |
2.6% |
|
Capital Adequacy: |
|
|
|
|
|
|
BIS Tier I Capital Adequacy Ratio, Consolidated |
20.4% |
20.9% |
22.5% |
19.9% |
20.5% |
|
BIS Total Capital Adequacy Ratio, Consolidated |
26.7% |
27.4% |
26.3% |
23.9% |
24.7% |
|
New NBG (Basel II) Tier I Capital Adequacy Ratio |
10.4% |
9.9% |
10.8% |
9.8% |
9.1% |
|
New NBG (Basel II) Total Capital Adequacy Ratio |
15.9% |
15.7% |
14.0% |
12.9% |
12.3% |
|
Old NBG Tier I Capital Adequacy Ratio |
13.9% |
14.5% |
14.8% |
14.2% |
14.9% |
|
Old NBG Total Capital Adequacy Ratio |
15.8% |
15.2% |
13.8% |
12.9% |
12.3% |
|
Selected Operating Data: |
|
|
|
|
|
|
Total Assets Per FTE, BOG Standalone |
1,995 |
|
1,717 |
|
2,277 |
|
Number Of Active Branches, Of Which: |
246 |
|
206 |
|
219 |
|
- Flagship Branches |
35 |
|
34 |
|
34 |
|
- Standard Branches |
114 |
|
100 |
|
101 |
|
- Express Branches (including Metro) |
97 |
|
72 |
|
84 |
|
Number Of ATMs |
685 |
|
510 |
|
554 |
|
Number Of Cards Outstanding, Of Which: |
1,964,374 |
|
1,075,134 |
|
1,204,662 |
|
- Debit cards |
1,207,573 |
|
957,386 |
|
1,088,878 |
|
- Credit cards |
756,801 |
|
117,748 |
|
115,784 |
|
Number Of POS Terminals |
7,668 |
|
5,689 |
|
6,537 |
Key Ratios Half-Year
|
|
Including Privatbank |
Excluding Privatbank |
|
|
KEY RATIOS |
1H15 |
1H15 |
1H14 |
|
|
|
|
|
|
Profitability |
|
|
|
|
ROAA, Annualised |
2.9% |
2.9% |
3.3% |
|
ROAE, Annualised |
19.3% |
18.3% |
19.3% |
|
Net Interest Margin, Annualised |
7.8% |
7.1% |
7.5% |
|
Loan Yield, Annualised |
14.6% |
13.7% |
14.5% |
|
Liquid assets yield, Annualised |
3.2% |
3.2% |
2.3% |
|
Cost of Funds, Annualised |
5.0% |
4.9% |
4.9% |
|
Cost of Client Deposits and Notes, annualised |
4.4% |
4.2% |
4.4% |
|
Cost of Amounts Due to Credit Institutions, annualised |
5.3% |
5.2% |
4.8% |
|
Cost of Debt Securities Issued |
7.2% |
7.2% |
7.2% |
|
Operating Leverage, Y-O-Y |
19.5% |
18.7% |
-3.2% |
|
Efficiency |
|
|
|
|
Cost / Income |
36.2% |
35.8% |
41.9% |
|
Liquidity |
|
|
|
|
NBG Liquidity Ratio |
35.1% |
34.1% |
38.1% |
|
Liquid Assets To Total Liabilities |
36.5% |
36.1% |
34.9% |
|
Net Loans To Client Deposits and Notes |
122.1% |
124.1% |
118.0% |
|
Net Loans To Client Deposits and Notes + DFIs |
102.4% |
103.0% |
100.0% |
|
Leverage (Times) |
6.0 |
5.7 |
5.1 |
|
Asset Quality: |
|
|
|
|
NPLs (in GEL) |
219,230 |
208,321 |
145,590 |
|
NPLs To Gross Loans To Clients |
4.1% |
4.1% |
3.8% |
|
NPL Coverage Ratio |
82.2% |
75.9% |
73.8% |
|
NPL Coverage Ratio, Adjusted for discounted value of collateral |
115.1% |
110.6% |
116.1% |
|
Cost of Risk, Annualised |
2.9% |
2.5% |
0.9% |
|
Capital Adequacy: |
|
|
|
|
BIS Tier I Capital Adequacy Ratio, Consolidated |
20.4% |
20.9% |
22.5% |
|
BIS Total Capital Adequacy Ratio, Consolidated |
26.7% |
27.4% |
26.3% |
|
New NBG (Basel II) Tier I Capital Adequacy Ratio |
10.4% |
9.9% |
10.8% |
|
New NBG (Basel II) Total Capital Adequacy Ratio |
15.9% |
15.7% |
14.0% |
|
Old NBG Tier I Capital Adequacy Ratio |
13.9% |
14.5% |
14.8% |
|
Old NBG Total Capital Adequacy Ratio |
15.8% |
15.2% |
13.8% |
|
Selected Operating Data: |
|
|
|
|
Total Assets Per FTE, BOG Standalone |
1,995 |
|
1,717 |
|
Number Of Active Branches, Of Which: |
246 |
|
206 |
|
- Flagship Branches |
35 |
|
34 |
|
- Standard Branches |
114 |
|
100 |
|
- Express Branches (including Metro) |
97 |
|
72 |
|
Number Of ATMs |
685 |
|
510 |
|
Number Of Cards Outstanding, Of Which: |
1,964,374 |
|
1,075,134 |
|
- Debit cards |
1,207,573 |
|
957,386 |
|
- Credit cards |
756,801 |
|
117,748 |
|
Number Of POS Terminals |
7,668 |
|
5,689 |
Principal Risks and Uncertainties
Understanding our risks
The table below describes the principal risks and uncertainties relating to the Group's operations and their potential impact, as well the trend and outlook associated with these risks and the mitigating actions we take to address these risks. If any of the following risks actually occur, the Group's business, financial condition, results of operations or prospects could be materially affected. The risks and uncertainties described below may not be the only ones the Group faces. Additional risks and uncertainties, including those that the Group is currently not aware of or deems immaterial, may also result in decreased revenues, incurred expenses or other events that could result in a decline in the value of the Group's securities
|
Risks and uncertainties |
|
Trend and outlook |
|
Mitigation |
|
We may be adversely affected by
Since year-end 2014, the Lari has depreciated against the US Dollar by nearly 20%. Although this devaluation has not adversely affected our business or performance to date, there is a risk that the devaluation that has occurred and/or any future devaluation of the Lari against the US Dollar may adversely affect the quality of our loan portfolio, as our corporate loan book and mortgage portfolio is heavily US Dollar denominated and many of our customers earn Lari.
We are also affected by other macroeconomic and market conditions globally, regionally and in Georgia. Growth has recently slowed in many emerging economies, including Georgia. In addition to currency exchange rates, other macroeconomic factors relating to Georgia, such as GDP, inflation and interest rates may have a material impact on loan losses, our margins and customer demand for our products and services. |
|
Although the Lari has significantly depreciated against the US Dollar since the year-end 2014, Lari depreciation against the Euro has been lower at approximately 10%. We expect that there may be further depreciation of the Lari but are unable to predict whether this will be significant.
Global and regional economic conditions remain volatile and there is significant economic uncertainty notwithstanding general improvement in the financial sector.
The IMF has predicted that GDP growth in the region is expected to decrease significantly in 2015. Real GDP growth in Georgia was 4.8% in 2014, according to Geostat, but the growth slowed in 2015 to 2.6% in 1H15 and we believe that real GDP growth in Georgia will be in the range of 1.5% to 3.0% as a result of weaker external economic environment as reflected in lower net exports from Georgia, weaker remittances and lower FDI.
Average annual inflation was 4.9% as of July 2015 and is expected to remain relatively stable for the rest of 2015. |
|
We continuously monitor market conditions and review market changes. We also perform stress and scenario testing to test our financial position in adverse economic conditions, which include Lari/US Dollar exchange rates of 2.5/1 and 2.7/1.
We also establish limits on possible losses for each type of operation and monitor compliance with such limits.
Given our strong liquidity position, we believe that we will be able to manage risk related to our US Dollar denominated loan book by re-profiling such loans. We are also looking at ways to stimulate growth of our Euro denominated loan book.
In addition, the NBG requires banks to hold additional capital to mitigate potential risk associated with foreign currency loans to customers that earn Lari. |
|
Our loan book is heavily US Dollar denominated, the quality of which may deteriorate as a result of Lari devaluation.
As at 30 June 2015, approximately 88% and 51% of our corporate loan book and retail loan book, respectively, was denominated in foreign currency (predominantly US Dollars), while US Dollar income covered approximately 50% of the total loan book.
The quality of our loan book is affected by changes in the creditworthiness of our customers, the ability of our customers to repay their loans on time, the statutory priority of claims against customers, our ability to enforce our security interests on customers' collateral and the value of such collateral should such customers fail to repay their loans, as well as factors beyond our control such as economic instability. Depreciation of the Lari against the US Dollar may result in customers having difficulty repaying their loans.
Our impairment charges and, in turn, our cost of credit risk, may increase if a single large borrower defaults or a material concentration of smaller borrowers default. |
|
In 2014, we saw significant loan book growth of 23.8%, as a result of the success of our Express Banking strategy. Growth slowed down however in 2015 on the back of slower economic growth, Cost of Risk increased to 2.9% in 1H15 from 0.9% in 1H14. NPLs to gross loans increased to 4.1% as of 30 June 2015 from 3.8% as of 30 June 2014
Our loan book is collateralised and as at 30 June 2015, the value of collateral covered 81.8% of the gross banking business loan book.
The quality of our loan book and our future cost of risk is dependent on macroeconomic conditions and may deteriorate if conditions worsen. Devaluation of the Lari against the US Dollar may cause our customers to face difficulty in meeting their payment obligations. |
|
We have credit policies and procedures in place which incorporate prudent lending criteria aligned with our risk appetite to effectively manage risk. These policies and procedures are reviewed frequently and amended as necessary to account for changes in the economic environment or other factors.
Our Credit Committees set counterparty limits by the use of a credit risk classification and scoring system and approve individual transactions. The credit quality review process is continuous and provides early identification of possible changes in the creditworthiness of customers, potential losses and corrective actions needed to reduce risk.
We also stress test our loan book to estimate the size of the portfolio that may be impaired. In light of the Lari to US Dollar devaluation, we will continue to stress test using Lari/US Dollar exchange rates of 2.5/1 and 2.7/1. We allocate 75% more capital to the foreign currency loans of clients who earn income in Lari and discount real estate collateral values by 20%.
Given our strong liquidity position, we believe that we will be able to manage risk related to our US Dollar denominated loan book by re-profiling such loans. Potential re-profiling may include extending maturities and/or converting US Dollar denominated loans into Euro denominated loans.
We will also continue to expand our Lari and Euro denominated loan book in order to offset risk associated with our US Dollar denominated loan book. |
|
The local economy and our business
Since Georgia's independence from Russia in 1991, there have been ongoing disputes in the breakaway regions of Abkhazia and the Tskhinvali Region/South Ossetia and with Russia. In 2008, Georgian troops engaged with local militias and Russian forces that crossed the international border. Although a ceasefire was signed in 2008, Russia continues to recognise the independence of the breakaway regions and its troops occupy these regions and relations between Russia and Georgia remain tense.
The annexation of Crimea by Russia in 2014 has resulted in sanctions levied against Russia as well as social, political and military unrest between Russia and Ukraine, and has adversely affected the financial markets and economic stability of Russia and the neighbouring region.
In addition, relations between Azerbaijan and Armenia, remain tense, particularly in relation to the Nagorno-Karabakh region, and there are sporadic instances of violence between these two countries. |
|
Despite tensions in the breakaway territories, Russia has opened its market to Georgian exports.
Over the past year, Russia and Ukraine's relationship has continued to deteriorate. Although Russia and Ukraine signed a ceasefire agreement in February, fighting continues between pro-Russian rebels and the Ukrainian Army.
As a result, there is significant uncertainty as to if, how and when the conflict between Russia and Ukraine will be resolved. |
|
Georgia has taken significant steps to reduce its dependence on Russia
Georgia's exports to Russia have decreased from 18.0% of total exports in 2006 to 9.9% of total exports in 2014.
With the recent signing of the Deep and Comprehensive Free Trade Area (DCFTA) with the EU, we expect that Georgia's dependence on its regional neighbours will continue to decrease. |
|
We face regulatory risk.
Our businesses are highly regulated.
Our banking operations must comply with capital adequacy and other regulatory ratios set by our regulator, the NBG, including reserve requirements and mandatory financial ratios.
Our ability to comply with these regulations may be affected by a number of factors, including but not limited to increases in minimum capital adequacy ratios imposed by the NBG, our ability to raise capital, losses resulting from a deterioration in our asset quality, an increase in expenses and a decline in the values of our securities portfolio.
We also provide other regulated financial services and offer financing products, including brokerage and pension fund operations, insurance and services such as asset management, all of which are subject to governmental supervision and regulation.
With respect to our healthcare operations, there have been a number of reforms in the Georgian healthcare services market, including but not limited to the introduction of a Universal Healthcare Programme (UHC). It is possible that the Government may amend the UHC to enhance coverage and it may introduce new licensing or accreditation requirements, which may adversely affect our healthcare services and medical insurance businesses. |
|
Our businesses are currently in compliance with all applicable laws and regulations.
Compliance with changes in capital adequacy requirements and other regulatory ratios may be affected by factors outside of our control, including but not limited to a weakening of the global and Georgian economies.
In October 2014, an anti-monopoly agency was established and anti-monopoly legislation was implemented in respect of certain non-banking operations. We expect that such legislation may have an impact on our non-banking operations acquisitions as we will be required to seek permission to proceed with certain future acquisitions.
As healthcare legislation is continuously evolving, we expect that additional regulations will be adopted. We, however, cannot predict what additional regulatory changes will be introduced in the future or their effect. |
|
Continued investment in our people and processes is enabling us to meet our regulatory requirements and places us well to respond to changes in regulation.
In line with our integrated control framework, we carefully evaluate the impact of legislative and regulatory changes as part of our formal risk identification and assessment processes and, to the extent possible, proactively participate in the drafting of relevant legislation. As part of this process, we engage in constructive dialogue with regulatory bodies, where possible, and seek external advice on potential changes to legislation. We then develop appropriate policies, procedures and controls as required to fulfil our compliance obligations.
Our compliance framework, at all levels, is subject to regular review by internal audit and external assurance providers. |
|
We face operational risks.
We are subject to the risk of incurring losses or undue costs due to inadequacies or failure of internal control processes or systems or human error, business disruptions, criminal activities (including fraud and electronic crimes), unauthorised transactions, robbery and damage to assets. We are highly dependent on our information technology systems. The proper functioning of our systems, controls, risk management, accounting, customer service and other information technology systems, are critical to our operations. |
|
Over the past few years, we have seen an increase in external fraud, although losses from such frauds have not increased significantly.
In the future we expect that data security, particularly an increasing number of cyber-threats, will be the greatest concern in respect of operational risk. |
|
We have an integrated control framework encompassing operational risk management and control, AML compliance, corporate and information security and physical security, each of which is managed by a separate department. We identify and assess operational risk categories within our processes and operations, detecting critical risk areas or groups of operations with an increased risk level and seek to implement appropriate preventative tools.
Our internal audit function provides assurance on the adequacy and effectiveness of our internal controls. The work of the Audit Committee in reviewing our internal control system is set out in our 2014 Annual Report. |
|
We face risks related to our healthcare business, GHG, and other non-banking investment businesses.
Over the past several years, we have significantly expanded our healthcare operations through GHG and intend to continue with this expansion. There is a risk that GHG may be unable to efficiently integrate the acquired hospitals and/or may not be able to realise the anticipated cost savings, benefits, synergies and revenue enhancements from the acquisitions.
We have recently acquired a minority interest in Georgia Global Utilities, a water utility company. As this is a new business area for the Group, we face risks associated with water utility companies.
We have stated that as part of our strategy we intend to divest our investment businesses (in full or partially) within six years. We have announced our intention to IPO our healthcare business through a planned stock market listing in 2015. It may not be possible, or desirable, to IPO our healthcare business due to a number of factors, including supportive equity issuance markets, the ability to achieve favourable terms for the IPO and/or the political and economic environment. With respect to future divestments by way of a stock market listing or trade sale, similar risks may be present. |
|
From 2011 to 2013, we added over 600 beds through acquisitions and successfully integrated the acquired businesses, achieving significant cost savings, synergies and revenue enhancements from these acquisitions. Since 1 January 2014, we added an additional 1,341beds through acquisitions.
Businesses within the Group have successfully accessed the international capital markets since 2006. With respect to current capital markets conditions, although there is a strong level of preparatory activity by companies across Europe who are planning an IPO, the success of an IPO is very much linked to global and regional macroeconomic and political events, among other factors. |
|
GHG has a solid track record of acquisitions. Led by a highly experienced management team, GHG has successfully acquired and integrated more than 20 companies in the hospital and insurance sectors over the past decade. We have a dedicated integration team comprising of highly experienced professionals with extensive integration project experience. The integration team meets at least weekly to discuss all aspects of the integration process, including but not limited to financial, commercial, clinical, human resources and legal matters.
With respect to our minority interest in GGU, Mr Gilauri has recently joined the Supervisory Board and we have been able to select strong Group executives to join the GGU management team. We are also seeking advice from experienced global professionals in the industry.
With respect to the GHG IPO, we are targeting an IPO in 2H 2015. However, if GHG decides to postpone the IPO due to market related or other reasons, we are confident that the Group's current funding levels are sufficient to meet our business plan and the financial position would not be adversely affected. |
Responsibility Statements
We confirm that to the best of our knowledge:
· The interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting", as adopted by the European Union;
· This Results Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
· This Results Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the board
Neil Janin Irakli Gilauri
Chairman Chief Executive
20 August 2015
Consolidated Financial Statements
CONTENTS
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SELECTED EXPLANATORY NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Summary of Selected Significant Accounting Policies
7. Amounts Due from Credit Institutions
8. Investment Securities Available-for-sale
9. Loans to Customers and Finance Lease Receivables
12. Amounts Due to Credit Institutions
15. Commitments and Contingencies
16. Interest Income and Interest Expense
17. Net Fee and Commission Income
19. Maturity Analysis of Financial Assets and Liabilities
22. Event after the Reporting Period
INDEPENDENT REVIEW REPORT TO BANK OF GEORGIA HOLDINGS PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015, which comprises the consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows and related notes 1 to 22. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
Date: 20 August 2015
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
|||||||||||
|
|
|
As at |
|||||||||
|
|
Notes |
|
30 June 2015 |
|
31 December 2014 |
||||||
|
|
|
|
Unaudited |
|
Reclassified |
|
|||||
|
|
|
|
Banking |
Investment |
Elimi- |
Total |
|
Banking |
Investment |
Elimi- |
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
6 |
|
1,252,758 |
107,511 |
(98,464) |
1,261,805 |
|
706,780 |
92,722 |
(89,358) |
710,144 |
|
Amounts due from credit institutions |
7 |
|
575,534 |
18,844 |
(10,490) |
583,888 |
|
399,430 |
72,181 |
(53,330) |
418,281 |
|
Investment securities |
8 |
|
898,457 |
1,153 |
(3,770) |
895,840 |
|
768,559 |
1,153 |
- |
769,712 |
|
Loans to customers and finance lease receivables |
9 |
|
5,142,221 |
- |
(89,469) |
5,052,752 |
|
4,440,984 |
- |
(90,181) |
4,350,803 |
|
Accounts receivable and other loans |
|
|
15,474 |
70,343 |
(7,951) |
77,866 |
|
9,701 |
61,836 |
(4,282) |
67,255 |
|
Insurance premiums receivable |
|
|
26,519 |
32,023 |
(400) |
58,142 |
|
14,573 |
18,020 |
(753) |
31,840 |
|
Prepayments |
|
|
30,779 |
21,366 |
- |
52,145 |
|
15,644 |
18,130 |
- |
33,774 |
|
Inventories |
|
|
10,379 |
121,155 |
- |
131,534 |
|
6,857 |
94,585 |
- |
101,442 |
|
Investment property |
10 |
|
143,873 |
77,633 |
- |
221,506 |
|
128,552 |
62,308 |
- |
190,860 |
|
Property and equipment |
|
|
338,858 |
330,295 |
- |
669,153 |
|
314,369 |
274,144 |
- |
588,513 |
|
Goodwill |
|
|
48,092 |
11,964 |
- |
60,056 |
|
38,537 |
11,096 |
- |
49,633 |
|
Intangible assets |
|
|
33,260 |
3,634 |
- |
36,894 |
|
31,768 |
2,664 |
- |
34,432 |
|
Income tax assets |
|
|
21,686 |
7,394 |
- |
29,080 |
|
14,484 |
8,261 |
- |
22,745 |
|
Other assets |
|
|
174,820 |
80,058 |
(10,480) |
244,398 |
|
153,764 |
58,407 |
(2,460) |
209,711 |
|
Total assets |
|
|
8,712,710 |
883,373 |
(221,024) |
9,375,059 |
|
7,044,002 |
775,507 |
(240,364) |
7,579,145 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Client deposits and notes |
11 |
|
4,212,822 |
- |
(108,405) |
4,104,417 |
|
3,482,001 |
- |
(143,276) |
3,338,725 |
|
Amounts owed to credit institutions |
12 |
|
2,045,093 |
189,124 |
(94,700) |
2,139,517 |
|
1,324,609 |
177,313 |
(92,708) |
1,409,214 |
|
Debt securities issued |
13 |
|
990,257 |
79,894 |
(7,028) |
1,063,123 |
|
827,721 |
29,374 |
(400) |
856,695 |
|
Accruals and defered income |
|
|
14,369 |
118,463 |
- |
132,832 |
|
19,897 |
88,726 |
- |
108,623 |
|
Insurance contracts liabilities |
|
|
42,910 |
30,091 |
- |
73,001 |
|
27,979 |
18,607 |
- |
46,586 |
|
Income tax liabilities |
|
|
87,392 |
23,995 |
- |
111,387 |
|
79,987 |
17,577 |
- |
97,564 |
|
Other liabilities |
|
|
71,126 |
34,604 |
(10,891) |
94,839 |
|
51,031 |
40,594 |
(3,980) |
87,645 |
|
Total liabilities |
|
|
7,463,969 |
476,171 |
(221,024) |
7,719,116 |
|
5,813,225 |
372,191 |
(240,364) |
5,945,052 |
|
Equity |
14 |
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
1,154 |
- |
- |
1,154 |
|
1,143 |
- |
- |
1,143 |
|
Additional paid-in capital |
|
|
32,277 |
211,205 |
- |
243,482 |
|
87,950 |
157,355 |
- |
245,305 |
|
Treasury shares |
|
|
(36) |
- |
- |
(36) |
|
(46) |
- |
- |
(46) |
|
Other reserves |
|
|
(51,917) |
(9,592) |
- |
(61,509) |
|
(11,073) |
(11,501) |
- |
(22,574) |
|
Retained earnings |
|
|
1,247,508 |
166,362 |
- |
1,413,870 |
|
1,134,159 |
216,099 |
- |
1,350,258 |
|
Total equity attributable to shareholders of the Group |
|
|
1,228,986 |
367,975 |
- |
1,596,961 |
|
1,212,133 |
361,953 |
- |
1,574,086 |
|
Non-controlling interests |
|
|
19,755 |
39,227 |
- |
58,982 |
|
18,644 |
41,363 |
- |
60,007 |
|
Total equity |
|
|
1,248,741 |
407,202 |
- |
1,655,943 |
|
1,230,777 |
403,316 |
- |
1,634,093 |
|
Total liabilities and equity |
|
|
8,712,710 |
883,373 |
(221,024) |
9,375,059 |
|
7,044,002 |
775,507 |
(240,364) |
7,579,145 |
Signed and authorised for release on behalf of the Board of Directors of the Group:
Irakli Gilauri Chief Executive Officer
20 August 2015
The accompanying selected explanatory notes on pages 52 to 78 are an integral part of these interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT |
|||||||||||
|
|
|
|
For the six months ended |
||||||||
|
|
Notes |
|
2015 |
|
2014 |
||||||
|
|
|
|
Unaudited |
|
Unaudited, Reclassified |
||||||
|
|
|
|
Banking |
Investment |
Elimi- |
Total |
|
Banking |
Investment |
Elimi- |
Total |
|
Banking interest income |
|
|
417,666 |
- |
(6,099) |
411,567 |
|
287,011 |
- |
(3,098) |
283,913 |
|
Banking interest expense |
|
|
(168,205) |
- |
416 |
(167,789) |
|
(120,780) |
- |
315 |
(120,465) |
|
Net banking interest income |
16 |
|
249,461 |
- |
(5,683) |
243,778 |
|
166,231 |
- |
(2,783) |
163,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee and commission income |
|
|
77,503 |
- |
(2,568) |
74,935 |
|
64,045 |
- |
(1,230) |
62,815 |
|
Fee and commission expense |
|
|
(19,241) |
- |
281 |
(18,960) |
|
(16,753) |
- |
- |
(16,753) |
|
Net fee and commission income |
17 |
|
58,262 |
- |
(2,287) |
55,975 |
|
47,292 |
- |
(1,230) |
46,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net banking foreign currency gain |
|
|
38,727 |
- |
- |
38,727 |
|
22,700 |
- |
- |
22,700 |
|
Net other banking income |
|
|
4,906 |
- |
(634) |
4,272 |
|
3,420 |
- |
(313) |
3,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net insurance premiums earned |
|
|
19,019 |
26,134 |
(878) |
44,275 |
|
13,034 |
42,443 |
(859) |
54,618 |
|
Net insurance claims incurred |
|
|
(10,242) |
(20,642) |
- |
(30,884) |
|
(4,844) |
(33,716) |
- |
(38,560) |
|
Gross insurance profit |
|
|
8,777 |
5,492 |
(878) |
13,391 |
|
8,190 |
8,727 |
(859) |
16,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare revenue |
|
|
- |
81,234 |
- |
81,234 |
|
- |
52,591 |
- |
52,591 |
|
Cost of healthcare services |
|
|
- |
(46,259) |
- |
(46,259) |
|
- |
(29,653) |
- |
(29,653) |
|
Gross healthcare profit |
|
|
- |
34,975 |
- |
34,975 |
|
- |
22,938 |
- |
22,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate revenue |
|
|
- |
5,790 |
- |
5,790 |
|
- |
33,124 |
(80) |
33,044 |
|
Cost of real estate |
|
|
- |
(4,622) |
- |
(4,622) |
|
- |
(23,465) |
- |
(23,465) |
|
Gross real estate profit |
|
|
- |
1,168 |
- |
1,168 |
|
- |
9,659 |
(80) |
9,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross other investment profit |
|
|
- |
6,253 |
(120) |
6,133 |
|
- |
5,741 |
120 |
5,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
360,133 |
47,888 |
(9,602) |
398,419 |
|
247,833 |
47,065 |
(5,145) |
289,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and other employee benefits |
|
|
(76,672) |
(14,991) |
877 |
(90,786) |
|
(61,681) |
(12,084) |
619 |
(73,146) |
|
Administrative expenses |
|
|
(35,404) |
(8,527) |
773 |
(43,158) |
|
(27,947) |
(7,514) |
688 |
(34,773) |
|
Banking depreciation and amortisation |
|
|
(16,711) |
- |
- |
(16,711) |
|
(12,523) |
- |
- |
(12,523) |
|
Other operating expenses |
|
|
(1,733) |
(520) |
- |
(2,253) |
|
(1,624) |
(137) |
- |
(1,761) |
|
Operating expenses |
|
|
(130,520) |
(24,038) |
1,650 |
(152,908) |
|
(103,775) |
(19,735) |
1,307 |
(122,203) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before cost of credit risk / EBITDA |
|
|
229,613 |
23,850 |
(7,952) |
245,511 |
|
144,058 |
27,330 |
(3,838) |
167,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from associates |
|
|
- |
668 |
- |
668 |
|
- |
- |
- |
- |
|
Depreciation and amortization of investment business |
|
|
- |
(5,266) |
- |
(5,266) |
|
- |
(4,485) |
- |
(4,485) |
|
Net foreign currency gain (loss) from investment business |
|
|
- |
6,379 |
- |
6,379 |
|
- |
(1,849) |
- |
(1,849) |
|
Interest income from investment business |
16 |
|
- |
1,662 |
(423) |
1,239 |
|
- |
980 |
(248) |
732 |
|
Interest expense from investment business |
16 |
|
- |
(13,469) |
8,375 |
(5,094) |
|
- |
(7,835) |
4,086 |
(3,749) |
|
Operating income before cost of credit risk |
|
|
229,613 |
13,824 |
- |
243,437 |
|
144,058 |
14,141 |
- |
158,199 |
The accompanying selected explanatory notes on pages 52 to 78 are an integral part of these interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)
|
|
|
|
|
|
||||||
|
|
|
|
For the six months ended |
||||||||
|
|
Notes |
|
2015 |
|
2014 |
||||||
|
|
|
|
Unaudited |
|
Unaudited, Reclassified |
||||||
|
|
|
|
Banking |
Investment |
Elimi- |
Total |
|
Banking |
Investment |
Elimi- |
Total |
|
Operating income before cost of credit risk |
|
|
229,613 |
13,824 |
- |
243,437 |
|
144,058 |
14,141 |
- |
158,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charge on loans to customers |
9 |
|
(74,033) |
- |
- |
(74,033) |
|
(16,927) |
- |
- |
(16,927) |
|
Impairment charge on finance lease receivables |
|
|
(1,899) |
- |
- |
(1,899) |
|
(358) |
- |
- |
(358) |
|
Impairment charge on other assets and provisions |
|
|
(5,604) |
(2,172) |
- |
(7,776) |
|
(8,795) |
(1,083) |
- |
(9,878) |
|
Cost of credit risk |
|
|
(81,536) |
(2,172) |
- |
(83,708) |
|
(26,080) |
(1,083) |
- |
(27,163) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income before non-recurring items |
|
|
148,077 |
11,652 |
- |
159,729 |
|
117,978 |
13,058 |
- |
131,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net non-recurring items |
|
|
(5,575) |
2,715 |
- |
(2,860) |
|
(9,601) |
1,404 |
- |
(8,197) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
142,502 |
14,367 |
- |
156,869 |
|
108,377 |
14,462 |
- |
122,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
(22,238) |
(262) |
- |
(22,500) |
|
(8,484) |
(2,373) |
- |
(10,857) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
120,264 |
14,105 |
- |
134,369 |
|
99,893 |
12,089 |
- |
111,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
- shareholders of the Group |
|
|
119,211 |
14,030 |
- |
133,241 |
|
98,102 |
10,245 |
- |
108,347 |
|
- non-controlling interests |
|
|
1,053 |
75 |
- |
1,128 |
|
1,791 |
1,844 |
- |
3,635 |
|
|
|
|
120,264 |
14,105 |
- |
134,369 |
|
99,893 |
12,089 |
- |
111,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
14 |
|
|
|
|
|
|
|
|
|
|
|
- basic and diluted earnings per share |
|
|
|
|
|
3.4679 |
|
|
|
|
3.1458 |
The accompanying selected explanatory notes on pages 52 to 78 are an integral part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
|||||
|
|
|
|
For the six months ended |
||
|
|
|
|
2015 |
|
2014 |
|
|
|
|
Unaudited |
|
Unaudited |
|
|
|
|
|
|
|
|
Profit for the period |
|
|
134,369 |
|
111,982 |
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
|
|
|
|
Other comprehensive loss to be reclassified to profit or loss in subsequent periods: |
|
|
|
|
|
|
- Unrealized revaluation of available-for-sale securities |
|
|
(33,200) |
|
(13,603) |
|
- Realised loss on available-for-sale securities reclassified to the consolidated income statement |
|
|
81 |
|
22 |
|
- Gain from currency translation differences |
|
|
5,633 |
|
3,720 |
|
Income tax effect |
|
|
(1,487) |
|
(543) |
|
Net other comprehensive loss to be reclassified to profit or loss in subsequent periods |
|
|
(28,973) |
|
(10,404) |
|
|
|
|
|
|
|
|
Other comprehensive loss for the period, net of tax |
|
|
(28,973) |
|
(10,404) |
|
Total comprehensive income for the period |
|
|
105,396 |
|
101,578 |
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
- shareholders of the Group |
|
|
105,190 |
|
98,811 |
|
- non-controlling interests |
|
|
206 |
|
2,767 |
|
|
|
|
105,396 |
|
101,578 |
The accompanying selected explanatory notes on pages 52 to 78 are an integral part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|||||||||||||||
|
|
Attributable to shareholders of the Group |
|
Non-controlling interests |
|
Total equity |
||||||||||
|
|
Share capital |
|
Additional paid-in capital |
|
Treasury shares |
|
Other reserves |
|
Retained earnings |
|
Total |
|
|
||
|
31 December 2013 |
1,028 |
|
23,843 |
|
(56) |
|
(16,399) |
|
1,174,124 |
|
1,182,540 |
|
58,514 |
|
1,241,054 |
|
Profit for the six months ended 30 June 2014 |
- |
|
- |
|
- |
|
- |
|
108,347 |
|
108,347 |
|
3,635 |
|
111,982 |
|
Other comprehensive loss for the six |
- |
|
- |
|
- |
|
(49,004) |
|
39,468 |
|
(9,536) |
|
(868) |
|
(10,404) |
|
Total comprehensive income for the six |
- |
|
- |
|
- |
|
(49,004) |
|
147,815 |
|
98,811 |
|
2,767 |
|
101,578 |
|
Depreciation of property and equipment |
- |
|
- |
|
- |
|
(213) |
|
213 |
|
- |
|
- |
|
- |
|
Increase in equity arising from share-based |
- |
|
14,027 |
|
70 |
|
- |
|
- |
|
14,097 |
|
- |
|
14,097 |
|
GBP-GEL translation effect |
53 |
|
- |
|
(2) |
|
888 |
|
(939) |
|
- |
|
- |
|
- |
|
Dividends to shareholders |
- |
|
- |
|
- |
|
- |
|
(71,633) |
|
(71,633) |
|
- |
|
(71,633) |
|
Acquisition of non-controlling interests in |
- |
|
- |
|
- |
|
(17,590) |
|
- |
|
(17,590) |
|
(15,516) |
|
(33,106) |
|
Non-controlling interests arising on acquisition |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
9,405 |
|
9,405 |
|
Purchase of treasury shares |
- |
|
(4,461) |
|
(58) |
|
- |
|
- |
|
(4,519) |
|
- |
|
(4,519) |
|
30 June 2014 |
1,081 |
|
33,409 |
|
(46) |
|
(82,318) |
|
1,249,580 |
|
1,201,706 |
|
55,170 |
|
1,256,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2014 |
1,143 |
|
245,305 |
|
(46) |
|
(22,574) |
|
1,350,258 |
|
1,574,086 |
|
60,007 |
|
1,634,093 |
|
Profit for the six months ended 30 June 2015 |
- |
|
- |
|
- |
|
- |
|
133,241 |
|
133,241 |
|
1,128 |
|
134,369 |
|
Other comprehensive loss for the six |
- |
|
- |
|
- |
|
(29,601) |
|
1,550 |
|
(28,051) |
|
(922) |
|
(28,973) |
|
Total comprehensive income for the six |
- |
|
- |
|
- |
|
(29,601) |
|
134,791 |
|
105,190 |
|
206 |
|
105,396 |
|
Depreciation of property and equipment |
- |
|
- |
|
- |
|
(512) |
|
512 |
|
- |
|
- |
|
- |
|
Increase in equity arising from share-based |
- |
|
5,748 |
|
15 |
|
- |
|
- |
|
5,763 |
|
112 |
|
5,875 |
|
GBP-GEL translation effect * |
11 |
|
1,736 |
|
- |
|
(10,467) |
|
8,720 |
|
- |
|
- |
|
- |
|
Dividends to shareholders |
- |
|
- |
|
- |
|
- |
|
(80,411) |
|
(80,411) |
|
- |
|
(80,411) |
|
Dilution of interests in existing subsidiaries |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
434 |
|
434 |
|
Acquisition of non-controlling interests in |
- |
|
- |
|
- |
|
1,645 |
|
- |
|
1,645 |
|
(3,265) |
|
(1,620) |
|
Non-controlling interests arising on acquisition |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,488 |
|
1,488 |
|
Purchase of treasury shares |
- |
|
(9,307) |
|
(5) |
|
- |
|
- |
|
(9,312) |
|
- |
|
(9,312) |
|
30 June 2015 |
1,154 |
|
243,482 |
|
(36) |
|
(61,509) |
|
1,413,870 |
|
1,596,961 |
|
58,982 |
|
1,655,943 |
* Effect of GBP-GEL exchange rate changes from 2.8932 as at 31 December 2014 to 2.9220 as at 1 January 2015, when changes in functional currency became effective (note 3).
The accompanying selected explanatory notes on pages 52 to 78 are an integral part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|||||
|
|
|
|
For the six months ended |
||
|
|
Notes |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
Unaudited |
|
Cash flows from operating activities |
|
|
|
|
|
|
Interest received |
|
|
416,521 |
|
281,327 |
|
Interest paid |
|
|
(160,439) |
|
(146,966) |
|
Fees and commissions received |
|
|
76,084 |
|
62,762 |
|
Fees and commissions paid |
|
|
(19,134) |
|
(16,368) |
|
Insurance premiums received |
|
|
36,760 |
|
51,264 |
|
Insurance claims paid |
|
|
(23,039) |
|
(38,521) |
|
Healthcare revenue received |
|
|
72,982 |
|
33,812 |
|
Cost of healthcare services paid |
|
|
(38,020) |
|
(31,839) |
|
Net cash inflow from real estate |
|
|
5,104 |
|
24,727 |
|
Net realised gains from trading securities |
|
|
887 |
|
314 |
|
Net realised gains from investment securities |
|
|
(81) |
|
(22) |
|
Net realised gains from foreign currencies |
|
|
30,605 |
|
18,661 |
|
Recoveries of loans to customers previously written off |
9 |
|
14,722 |
|
13,465 |
|
Other expenses paid |
|
|
(8,692) |
|
(3,215) |
|
Salaries and other employee benefits paid |
|
|
(73,773) |
|
(62,766) |
|
General and administrative and operating expenses paid |
|
|
(43,405) |
|
(34,756) |
|
Cash flows from operating activities before changes in |
|
|
287,082 |
|
151,879 |
|
|
|
|
|
|
|
|
Net (increase) decrease in operating assets |
|
|
|
|
|
|
Amounts due from credit institutions |
|
|
(139,356) |
|
(16,173) |
|
Loans to customers |
|
|
(527,825) |
|
(170,142) |
|
Finance lease receivables |
|
|
242 |
|
1,089 |
|
Prepayments and other assets |
|
|
(37,905) |
|
126 |
|
|
|
|
|
|
|
|
Net increase (decrease) in operating liabilities |
|
|
|
|
|
|
Amounts due to credit institutions |
|
|
688,510 |
|
75,938 |
|
Debt securities issued |
|
|
201,052 |
|
59,384 |
|
Amounts due to customers |
|
|
421,460 |
|
(23,346) |
|
Other liabilities |
|
|
(27,890) |
|
(10,011) |
|
Net cash flows from operating activities before |
|
|
865,370 |
|
68,744 |
|
Income tax paid |
|
|
(15,196) |
|
(5,029) |
|
Net cash flows from operating activities |
|
|
850,174 |
|
63,715 |
|
|
|
|
|
|
|
|
Cash flows (used in) from investing activities |
|
|
|
|
|
|
Acquisition of subsidiaries, net of cash acquired |
|
|
7,861 |
|
(20,987) |
|
Purchase of investment securities available-for-sale |
|
|
(158,505) |
|
(65,795) |
|
Proceeds from sale of investment properties |
10 |
|
5,785 |
|
4,763 |
|
Purchase of investment property |
|
|
(10,160) |
|
- |
|
Proceeds from sale of property and equipment and |
|
|
4,137 |
|
1,494 |
|
Purchase of property and equipment and intangible assets |
|
|
(69,018) |
|
(29,602) |
|
Net cash flows used in investing activities |
|
|
(219,900) |
|
(110,127) |
The accompanying selected explanatory notes on pages 52 to 78 are an integral part of these interim condensed consolidated
financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
|
|||||
|
|
|
|
For the six months ended |
||
|
|
Notes |
|
2015 |
|
2014 |
|
|
|
|
Unaudited |
|
Unaudited |
|
Cash flows (used in) from financing activities |
|
|
|
|
|
|
Dividends paid |
|
|
(82,182) |
|
(69,696) |
|
Purchase of treasury shares |
|
|
(9,312) |
|
(4,519) |
|
Purchase of additional interests in existing subsidiaries |
|
|
(1,620) |
|
(29,603) |
|
Net cash used in financing activities |
|
|
(93,114) |
|
(103,818) |
|
|
|
|
|
|
|
|
Effect of exchange rates changes on cash and cash equivalents |
|
|
14,501 |
|
293 |
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
551,661 |
|
(149,937) |
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning |
6 |
|
710,144 |
|
1,053,671 |
|
Cash and cash equivalents, ending |
6 |
|
1,261,805 |
|
903,734 |
The accompanying selected explanatory notes on pages 52 to 78 are an integral part of these interim condensed consolidated
financial statements.
1. Principal Activities
JSC Bank of Georgia (the "Bank") was established on 21 October 1994 as a joint stock company ("JSC") under the laws of Georgia. The Bank operates under a general banking license issued by the National Bank of Georgia ("NBG"; the Central Bank of Georgia) on 15 December 1994.
The Bank accepts deposits from the public and extends credit, transfers payments in Georgia and internationally and exchanges currencies. Its main office is in Tbilisi, Georgia. At 30 June 2015 the Bank has 246 operating outlets in all major cities of Georgia (31 December 2014: 219). The Bank's registered legal address is 29a Gagarini Street, Tbilisi 0160, Georgia.
The Bank is the parent of a group of companies incorporated in Georgia and Belarus. Primary business activities include providing banking, leasing, insurance, real estate, healthcare, brokerage and investment management services, to corporate and individual customers.
Bank of Georgia Holdings PLC ("BGH") is a public limited liability company incorporated in England and Wales and holds 99.63% of the share capital of the Bank as at 30 June 2015, representing the Bank's ultimate parent company. Together with the Bank's subsidiaries, BGH makes up a group of companies (the "Group"). The shares of BGH ("BGH Shares") are admitted to the premium listing segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange PLC's Main Market for listed securities. The Bank is the Group's main operating unit and accounts for most of the Group's activities.
Bank of Georgia Holdings PLC's registered legal address is 84 Brook Street, London, United Kingdom W1IK 5EH.
As at 30 June 2015 and 31 December 2014 the following shareholders owned more than 5% of the outstanding shares of the Group. Other shareholders individually owned less than 5% of the outstanding shares.
|
Shareholder |
|
30 June |
|
31 December |
|
|
2015 |
|
2014 |
|
|
Schroder Investment Management |
|
11.99% |
|
12.46% |
|
Royal Bank of Canada |
|
5.48% |
|
3.42% |
|
Others |
|
82.53% |
|
84.12% |
|
Total* |
|
100.00% |
|
100.00% |
* For the purposes of calculating percentage of shareholding, the denominator includes total number of issued shares, which includes shares held in the trust for the share-based compensation purposes of the Bank.
As at 30 June 2015, the members of the Board of Directors of BGH and members of the Supervisory Board and Management Board of the Bank owned 764,887 shares or 1.9% (31 December 2014: 508,541 shares or 1.3%) of the Group.
|
Shareholder |
|
30 June 2015, shares held |
|
31 December 2014, shares held |
|
Irakli Gilauri |
|
271,131 |
|
161,131 |
|
Giorgi Chiladze |
|
116,596 |
|
101,800 |
|
Avto Namicheishvili |
|
102,264 |
|
61,664 |
|
Sulkhan Gvalia |
|
57,022 |
|
42,022 |
|
Mikheil Gomarteli |
|
52,851 |
|
30,851 |
|
Archil Gachechiladze |
|
50,750 |
|
- |
|
Neil Janin |
|
35,729 |
|
35,729 |
|
David Morrison |
|
26,357 |
|
26,357 |
|
Kaha Kiknavelidze |
|
26,337 |
|
26,337 |
|
Al Breach |
|
16,400 |
|
16,400 |
|
Kim Bradley |
|
1,250 |
|
1,250 |
|
Murtaz Kikoria |
|
200 |
|
5,000 |
|
Total |
|
756,887 |
|
508,541 |
2. Basis of Preparation
General
The financial information set out in these interim condensed consolidated financial statements does not constitute the Group's statutory financial statements within the meaning of section 435 of the Companies Act 2006. Those financial statements were prepared for the year ended 31 December 2014 under IFRS, as adopted by the European Union and have been reported on by BGH's auditors and delivered to the Registrar of Companies. The auditor's report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The interim condensed consolidated financial statements for the six months ended 30 June 2015 have been prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting", as adopted by the European Union. The Group's annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group's annual consolidated financial statements as at and for the year ended 31 December 2014, signed and authorized for release on 7 April 2015.
These interim condensed consolidated financial statements are presented in thousands of Georgian Lari ("GEL"), except per share amounts and unless otherwise indicated.
In these interim condensed consolidated financial statements income tax expense is based on management's best estimates of the effective annual income tax rate expected for the full financial year. Costs that occur unevenly during the financial year are anticipated or deferred in the interim condensed consolidated financial statements only if it is also appropriate to anticipate or defer such costs at the end of the financial year.
Going concern
The BGH's Board of Directors has made an assessment of the Group's ability to continue as a going concern and has a reasonable expectation that it has the resources to continue in business for the foreseeable future, being a period of at least 12 months from the date of this report. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.
3. Summary of Selected Significant Accounting Policies
Accounting policies
The accounting policies and methods of computation applied in the preparation of these condensed interim condensed consolidated financial statements are consistent with those disclosed in the annual consolidated financial statements of the Group as at and for the year ended 31 December 2014.
Functional and reporting currencies and foreign currency translation
The interim condensed consolidated financial statements are presented in GEL, which is the Group's presentation currency. Each entity in the Group determines its own functional currency and items included in the interim condensed financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency, converted at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into functional currency at functional currency rate of exchange ruling at the reporting date. Gains and losses resulting from the translation of foreign currency transactions are recognised in the consolidated income statement as gains less losses from foreign currencies - translation differences. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. BGH's and the Bank's functional currency is GEL effective 1 January 2015.
3. Summary of Selected Significant Accounting Policies (continued)
Functional and reporting currencies and foreign currency translation (continued)
Differences between the contractual exchange rate of a certain transaction and the NBG exchange rate on the date of the transaction are included in gains less losses from foreign currencies (dealing). The official NBG exchange rates at 30 June 2015 and 31 December 2014 were:
|
|
Lari to GBP |
Lari to USD |
Lari to EUR |
Lari to BYR |
|
30 June 2015 |
3.5289 |
2.2483 |
2.4992 |
1.4733 |
|
31 December 2014 |
2.8932 |
1.8636 |
2.2656 |
1.5727 |
As at the reporting date, the assets and liabilities of the entities whose functional currency is different from the presentation currency of the Group are translated into GEL at the rate of exchange ruling at the reporting date and, their income statements are translated at the weighted average exchange rates for the reporting period. The exchange differences arising on the translation are taken to other comprehensive income. On disposal of a subsidiary or an associate whose functional currency is different from the presentation currency of the Group, the deferred cumulative amount recognised in other comprehensive income relating to that particular entity is recognised in the consolidated income statement.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at the rate at the reporting date.
Change in Functional Currency
Prior to 1 January 2007, the Bank determined that GEL was its functional currency, as it was the currency of the primary economic environment in which the Bank operated. However, in 2007 the Bank determined that US Dollar ("USD") was its functional currency, due to the following:
• The USD share of the Bank's assets and liabilities was constantly increasing;
• Pricing of the loans was primarily based on the cost of funds which were sourced primarily from USD denominated offshore banking borrowings and deposits, at the same time Global Depositary Receipts ("GDR") of the Bank floated on the London Stock Exchange, and were priced and traded in USD;
• After the Bank had listed its shares in the form of GDRs on the London Stock Exchange in November 2006, communication, planning and execution of business activities of the Bank with shareholders were generally in USD.
In 2015 the Bank performed a re-assessment of its functional currency in accordance with International Accounting Standard 21 - "Effects of Changes in Foreign Exchange Rates" (IAS 21) and determined that GEL was its functional currency, due to the following:
• USD share of the Bank's assets is stable and no longer increasing, while USD share of liabilities is constantly decreasing;
• Due to their decreasing share in debt financing, pricing of the loans is constantly becoming less dependent on USD denominated offshore banking borrowings and deposits, while following the listing of BGH on the premium listing segment of the London Stock Exchange in February 2012, the Bank's equity financing source also changed from USD to British Pound Sterling ("GBP");
• Communication, planning and execution of business activities of the Bank with shareholders has become less relevant, concentrating more on GEL and GBP;
• Following listing on the premium segment of the London Stock Exchange, share-based compensation of the management has changed from being USD denominated to being GBP denominated;
3. Summary of Selected Significant Accounting Policies (continued)
Change in Functional Currency (continued)
In 2015 BGH also performed a re-assessment of its functional currency in accordance with IAS 21 and determined that GEL was its functional currency as well, due to the fact that BGH is a holding company that has no sufficiently substantive operations to enable it to have a different functional currency from its subsidiary.
As the result, the Bank and BGH changed their functional currencies, from USD and GBP respectively, to GEL starting 1 January 2015 and this has been accounted for prospectively from that date.
Share capital, additional paid-in capital and retained earnings of BGH were retranslated to GEL from 31 December 2014 GBP-GEL exchange rate of 2.8932 to 1 January 2015 exchange rate of 2.9220. This movement is shown as GBP-GEL translation effect in the consolidated statement of changes in equity for the six months ended 30 June 2015.
Change in Presentation of Statement of Financial Position and Income Statement
The Group changed the reporting format to reflect its recently updated strategy to operate as a Georgia-focused banking group with an investment arm. As the result, consolidated statements of financial position and income statement are presented as a combination of the Group's Banking and Investment businesses with corresponding inter-business eliminations. Certain line items of the statement of financial position and the income statement were reorganised to provide a more relevant presentation of these two distinct parts of the Group.
Reclassifications
Due to the change in the presentation of statement of financial position, the following reclassifications were made to the 31 December 2014 statement of financial position to conform to the six months ended 30 June 2015 presentation requirements:
|
As at |
Caption Consolidated Statement of Financial Position: |
As previously reported |
Reclassification |
As reclassified |
|
31 December 2014 |
Loans to customers |
4,322,186 |
(4,322,186) |
- |
|
31 December 2014 |
Finance lease receivables |
38,519 |
(38,519) |
- |
|
31 December 2014 |
Investments in associates |
48,659 |
(48,659) |
- |
|
31 December 2014 |
Other assets |
351,687 |
(141,976) |
209,711 |
|
31 December 2014 |
Loans to customers and finance lease receivables |
- |
4,350,803 |
4,350,803 |
|
31 December 2014 |
Accounts receivable and other loans |
- |
67,255 |
67,255 |
|
31 December 2014 |
Insurance premiums receivable |
- |
31,840 |
31,840 |
|
31 December 2014 |
Inventories |
- |
101,442 |
101,442 |
|
|
|
|
|
|
|
31 December 2014 |
Current income tax assets |
4,215 |
(4,215) |
- |
|
31 December 2014 |
Deferred income tax assets |
18,530 |
(18,530) |
- |
|
31 December 2014 |
Income tax assets |
- |
22,745 |
22,745 |
|
|
|
|
|
|
|
31 December 2014 |
Current income tax liabilities |
11,093 |
(11,093) |
- |
|
31 December 2014 |
Deferred income tax liabilities |
86,471 |
(86,471) |
- |
|
31 December 2014 |
Income tax liabilities |
- |
97,564 |
97,564 |
|
|
|
|
|
|
|
31 December 2014 |
Provisions |
4,732 |
(4,732) |
- |
|
31 December 2014 |
Other liabilities |
238,122 |
(150,477) |
87,645 |
|
31 December 2014 |
Accruals and deferred income |
- |
108,623 |
108,623 |
|
31 December 2014 |
Insurance contracts liabilities |
- |
46,586 |
46,586 |
3. Summary of Selected Significant Accounting Policies (continued)
Reclassifications (continued)
Due to the change in the presentation of income statement, the following line items were divided into Banking Business and Investment Business parts and placed above and below revenue respectively. The following main reclassifications were made to the six months ended 30 June 2014 income statement to conform to the six months ended 30 June 2015 presentation requirements:
|
Six months ended |
Caption Consolidated Statement of Financial Position: |
As previously reported |
Reclassification |
As reclassified |
|
30 June 2014 |
Interest income |
284,645 |
(284,645) |
- |
|
30 June 2014 |
Banking interest income |
- |
283,913 |
283,913 |
|
30 June 2014 |
Interest income from investment business |
- |
732 |
732 |
|
|
|
|
|
|
|
30 June 2014 |
Interest expense |
(124,387) |
124,387 |
- |
|
30 June 2014 |
Salaries and other employee benefits |
(73,058) |
(88) |
(73,146) |
|
30 June 2014 |
General and administrative expenses |
(34,688) |
(85) |
(34,773) |
|
30 June 2014 |
Banking interest expense |
- |
(120,465) |
(120,465) |
|
30 June 2014 |
Interest expense from investment business |
- |
(3,749) |
(3,749) |
|
30 June 2014 |
Depreciation and amortization |
(13,806) |
13,806 |
- |
|
30 June 2014 |
Cost of healthcare services |
(32,855) |
3,202 |
(29,653) |
|
30 June 2014 |
Banking depreciation and amortization |
- |
(12,523) |
(12,523) |
|
30 June 2014 |
Depreciation and amortization of investment business |
- |
(4,485) |
(4,485) |
|
|
|
|
|
|
|
30 June 2014 |
Net gain from foreign currencies: dealing |
20,559 |
(20,559) |
- |
|
30 June 2014 |
Net gain from foreign currencies: translation differences |
292 |
(292) |
- |
|
30 June 2014 |
Net banking foreign currency gain |
- |
22,700 |
22,700 |
|
30 June 2014 |
Net foreign currency loss from investment business |
- |
(1,849) |
(1,849) |
4. Business Combination
Acquisition of JSC PrivatBank
On 9 January 2015 the Bank acquired 100% of shares in JSC PrivatBank ("Acquiree"), a commercial Bank operating in Georgia, from PJSC CB PrivatBank (Ukraine) and its subsidiary for a total consideration of GEL 92.7 million.
The provisionally estimated fair values of identifiable assets and liabilities of the acquiree as at the date of acquisition was:
|
|
Provisional Fair value recognized on acquisition |
|
Cash and cash equivalents |
107,553 |
|
Amounts due from credit institutions |
26,226 |
|
Loans to customers and finance lease receivables |
297,387 |
|
Insurance premiums receivable |
2,069 |
|
Investment property (note 10) |
705 |
|
Property and equipment |
20,301 |
|
Intangible assets |
148 |
|
Income tax assets |
1,785 |
|
Other assets |
14,515 |
|
|
470,689 |
|
|
|
|
Client deposits and notes |
340,284 |
|
Amounts due to credit institutions |
38,620 |
|
Accruals and deferred income |
1,991 |
|
Other liabilities |
6,668 |
|
|
387,563 |
|
Total identifiable net assets |
83,126 |
|
|
|
|
Goodwill arising on business combination |
9,555 |
|
|
|
|
Consideration given1 |
92,681 |
The net cash inflow on acquisition was as follows:
|
Cash paid |
(83,433) |
|
Cash acquired with the subsidiary |
107,553 |
|
Net cash inflow |
24,120 |
The Group decided to increase their presence in retail segment of Georgia's banking sector, by acquiring JSC PrivatBank, thus consolidating a leading position in the growing retail segment of the Georgian commercial banking sector. Management considers that the deal will have a positive impact on the value of the Group.
GEL 32,130 and GEL 3,546 of revenue and profit, respectively comes from the Acquiree during five months ended 31 May 2015. In May 2015, the Bank completed the integration of the Acquiree. The goodwill of GEL 9,555 was added to the Retail Banking cash generating unit, as JSC PrivatBank operations became an indistinguishable part of our Retail Banking business.
The primary factor that contributed to the cost of business combination that resulted in the recognition of goodwill on acquisition is the positive synergy which is expected to be brought into the Group's operations. The whole amount of goodwill recognized is expected to be tax deductible.
The net assets as well as the amount of goodwill presented above are estimated provisionally, while customer-related intangible assets have not been identified and measured yet as at 30 June 2015. The Group continues thorough full examination and if identified, adjustments will be made to the net assets and amount of the goodwill during the twelve month period from the acquisition date, as allowed by IFRS 3 "Business Combinations".
1 Consideration comprised of GEL 92,681, which consists of GEL 83,433 cash payment and GEL 9,248 fair value of a holdback amount.
5. Segment Information
Following the updated strategy of the Group to operate as a Georgia-focused banking group with an investment arm, the management also reorganised its segment information accordingly. The previously presented Corporate Banking, Retail Banking, Investment Management and Corporate Centre of the Strategic group, P&C of the Synergistic group and BNB of the Non-core group was reorganised into the Banking Business, while GHG and Affordable Housing of the Synergistic group and Liberty Consumer and Other of the Non-core group were reorganised into the Investment Business.
For management purposes, the Group is organised into the following operating segments based on products and services as follows:
Banking Business - The Group's Banking Business segments, dedicated to delivery and enhancement of banking and related financial services:
RB - Retail Banking (excluding Retail Banking of BNB) - principally providing consumer loans, mortgage loans, overdrafts, credit card facilities and other credit facilities as well as funds transfer and settlement services, and handling customers' deposits for both, individuals as well as legal entities, encompassing mass affluent segment, retail mass markets, small & medium enterprises and micro businesses;
CB - Corporate Banking (excluding Corporate Banking of BNB) - principally providing loans and other credit facilities to large VIP as well as other legal entities, larger than SME and Micro, finance lease facilities provided by Georgian Leasing Company LLC, as well as providing funds transfers and settlement services, trade finance services and documentary operations support, handling saving and term deposits for corporate and institutional customers;
IM - Investment Management - principally providing private banking services to resident and non-resident wealthy individuals as well as their direct family members by ensuring individually distinguished approach and exclusivity in rendering common banking services such as fund transfers, currency exchange or settlement operations, or holding their savings and term deposits; Investment Management involves providing wealth and asset management services to same individuals through different investment opportunities and specifically designed investment products. It also encompasses corporate advisory, private equity and brokerage services;
P&C - Property and Casualty Insurance - principally providing wide-scale property and casualty insurance services to corporate clients and insured individuals;
BNB - Comprising JSC Belarusky Narodny Bank, principally providing retail and corporate banking services in Belarus.
Investment Business - the Group's investment arm segments, with disciplined development paths and exit strategies:
GHG - Georgia Healthcare Group - principally providing wide-scale healthcare and medical insurance services to clients and insured individuals;
m2 - Comprising the Group's real estate subsidiaries, principally developing and selling affordable residential apartments and also, holding investment properties repossessed by the Bank from defaulted borrowers and managing those properties.
Management monitors the operating results of its segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance, as explained in the table below, is measured in the same manner as profit or loss in the consolidated financial statements.
Transactions between operating segments are on an arm's length basis in a manner similar to transactions with third parties.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group's total revenue during the six months ended 30 June 2015 and 30 June 2014.
5. Segment Information (continued)
The following tables present income and profit and certain asset and liability information regarding the Group's operating segments as at and for the six months ended 30 June 2015 (unaudited):
|
|
Banking Business |
|
Investment Business |
|
|
Group |
|||||||||||
|
|
Retail banking |
Corporate banking |
Investment |
BNB |
P&C |
Other |
Banking Business Eliminations |
Banking Business |
|
GHG |
M2 |
Other Investment Business |
Investment Business Eliminations |
Investment |
|
Inter- |
|
|
Net banking interest income |
154,419 |
69,368 |
9,334 |
14,067 |
1,113 |
1,004 |
156 |
249,461 |
|
- |
- |
- |
- |
- |
|
(5,683) |
243,778 |
|
Net fee and commission income |
36,971 |
14,317 |
2,175 |
4,916 |
143 |
(293) |
33 |
58,262 |
|
- |
- |
- |
- |
- |
|
(2,287) |
55,975 |
|
Net banking foreign currency gain (loss) |
8,209 |
17,604 |
2,002 |
8,685 |
2,215 |
12 |
- |
38,727 |
|
- |
- |
- |
- |
- |
|
- |
38,727 |
|
Net other banking income |
2,348 |
2,888 |
604 |
234 |
388 |
10 |
(1,566) |
4,906 |
|
- |
- |
- |
- |
- |
|
(634) |
4,272 |
|
Gross insurance profit |
- |
- |
- |
- |
9,459 |
- |
(682) |
8,777 |
|
5,492 |
- |
- |
- |
5,492 |
|
(878) |
13,391 |
|
Gross healthcare profit |
- |
- |
- |
- |
- |
- |
- |
- |
|
34,975 |
- |
- |
- |
34,975 |
|
- |
34,975 |
|
Gross real estate profit |
- |
- |
- |
- |
- |
- |
- |
- |
|
257 |
911 |
- |
- |
1,168 |
|
- |
1,168 |
|
Gross other investment profit |
- |
- |
- |
- |
- |
- |
- |
- |
|
1,917 |
162 |
4,188 |
(14) |
6,253 |
|
(120) |
6,133 |
|
Revenue |
201,947 |
104,177 |
14,115 |
27,902 |
13,318 |
733 |
(2,059) |
360,133 |
|
42,641 |
1,073 |
4,188 |
(14) |
47,888 |
|
(9,602) |
398,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
(84,489) |
(25,968) |
(5,135) |
(8,941) |
(5,494) |
(2,552) |
2,059 |
(130,520) |
|
(18,102) |
(2,906) |
(3,044) |
14 |
(24,038) |
|
1,650 |
(152,908) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (expense) before cost of credit risk/EBITDA |
117,458 |
78,209 |
8,980 |
18,961 |
7,824 |
(1,819) |
- |
229,613 |
|
24,539 |
(1,833) |
1,144 |
- |
23,850 |
|
(7,952) |
245,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Business related income statement items |
- |
- |
- |
- |
- |
- |
- |
- |
|
(9,609) |
(399) |
(18) |
- |
(10,026) |
|
7,952 |
(2,074) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before cost of credit risk |
117,458 |
78,209 |
8,980 |
18,961 |
7,824 |
(1,819) |
- |
229,613 |
|
14,930 |
(2,232) |
1,126 |
- |
13,824 |
|
- |
243,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of credit risk |
(37,323) |
(33,527) |
(91) |
(10,328) |
(267) |
- |
- |
(81,536) |
|
(1,940) |
- |
(232) |
- |
(2,172) |
|
- |
(83,708) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (loss) before |
80,135 |
44,682 |
8,889 |
8,633 |
7,557 |
(1,819) |
- |
148,077 |
|
12,990 |
(2,232) |
894 |
- |
11,652 |
|
- |
159,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net non-recurring (expense/loss) income/gain |
(3,323) |
(797) |
(39) |
(1,416) |
- |
- |
- |
(5,575) |
|
(403) |
(140) |
3,258 |
- |
2,715 |
|
- |
(2,860) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax |
76,812 |
43,885 |
8,850 |
7,217 |
7,557 |
(1,819) |
- |
142,502 |
|
12,587 |
(2,372) |
4,152 |
- |
14,367 |
|
- |
156,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit |
(11,639) |
(7,465) |
(1,214) |
(2,212) |
238 |
54 |
- |
(22,238) |
|
(252) |
356 |
(366) |
- |
(262) |
|
- |
(22,500) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit |
65,173 |
36,420 |
7,636 |
5,005 |
7,795 |
(1,765) |
- |
120,264 |
|
12,335 |
(2,016) |
3,786 |
- |
14,105 |
|
- |
134,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
4,457,921 |
3,742,410 |
47,429 |
444,377 |
111,303 |
18,000 |
(108,730) |
8,712,710 |
|
500,779 |
234,066 |
148,844 |
(316) |
883,373 |
|
(221,024) |
9,375,059 |
|
Total liabilities |
3,282,904 |
2,897,171 |
947,309 |
363,782 |
80,189 |
1,344 |
(108,730) |
7,463,969 |
|
289,514 |
155,343 |
31,630 |
(316) |
476,171 |
|
(221,024) |
7,719,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
19,835 |
2,221 |
619 |
475 |
296 |
150 |
- |
23,596 |
|
26,889 |
422 |
1,291 |
- |
28,602 |
|
- |
52,198 |
|
Intangible assets |
2,999 |
420 |
32 |
166 |
621 |
11 |
- |
4,249 |
|
1,237 |
- |
12 |
- |
1,249 |
|
- |
5,498 |
|
Capital expenditure |
22,834 |
2,641 |
651 |
641 |
917 |
161 |
- |
27,845 |
|
28,126 |
422 |
1,303 |
- |
29,851 |
|
- |
57,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & Amortization |
(13,649) |
(1,947) |
(229) |
(532) |
(352) |
(2) |
- |
(16,711) |
|
(4,528) |
(85) |
(653) |
- |
(5,266) |
|
- |
(21,977) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Segment Information (continued)
The following tables present income and profit and certain asset and liability information regarding the Group's operating segments for the six months ended 30 June 2014 (unaudited and reclassified) and as at 31 December 2014 (reclassified):
|
|
Banking Business |
|
Investment Business |
|
|
Group |
|||||||||||
|
|
Retail banking |
Corporate banking |
Investment |
BNB |
P&C |
Other |
Banking Business Elimination |
Banking Business |
|
GHG |
M2 |
Other Investment Business |
Investment Business Elimination |
Investment |
|
Inter- |
|
|
Net banking interest income |
100,945 |
47,487 |
6,052 |
11,175 |
136 |
526 |
(90) |
166,231 |
|
- |
- |
- |
- |
- |
|
(2,783) |
163,448 |
|
Net fee and commission income |
26,009 |
12,014 |
4,663 |
4,342 |
155 |
(183) |
292 |
47,292 |
|
- |
- |
- |
- |
- |
|
(1,230) |
46,062 |
|
Net banking foreign currency gain (loss) |
8,240 |
11,011 |
467 |
2,928 |
54 |
- |
- |
22,700 |
|
- |
- |
- |
- |
- |
|
- |
22,700 |
|
Net other banking income |
1,828 |
1,693 |
222 |
272 |
288 |
12 |
(895) |
3,420 |
|
- |
- |
- |
- |
- |
|
(313) |
3,107 |
|
Gross insurance profit |
- |
- |
- |
- |
8,764 |
- |
(574) |
8,190 |
|
8,727 |
- |
- |
- |
8,727 |
|
(859) |
16,058 |
|
Gross healthcare profit |
- |
- |
- |
- |
- |
- |
- |
- |
|
22,938 |
- |
- |
- |
22,938 |
|
- |
22,938 |
|
Gross real estate profit |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
9,658 |
1 |
- |
9,659 |
|
(80) |
9,579 |
|
Gross other investment profit |
- |
- |
- |
- |
- |
- |
- |
- |
|
130 |
54 |
5,571 |
(14) |
5,741 |
|
120 |
5,861 |
|
Revenue |
137,022 |
72,205 |
11,404 |
18,717 |
9,397 |
355 |
(1,267) |
247,833 |
|
31,795 |
9,712 |
5,572 |
(14) |
47,065 |
|
(5,145) |
289,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
(60,758) |
(23,918) |
(4,959) |
(8,639) |
(4,167) |
(2,601) |
1,267 |
(103,775) |
|
(13,812) |
(2,548) |
(3,389) |
14 |
(19,735) |
|
1,307 |
(122,203) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (expense) |
76,264 |
48,287 |
6,445 |
10,078 |
5,230 |
(2,246) |
- |
144,058 |
|
17,983 |
7,164 |
2,183 |
- |
27,330 |
|
(3,838) |
167,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Business related income statement items |
- |
- |
- |
- |
- |
- |
- |
- |
|
(11,406) |
(692) |
(1,091) |
- |
(13,189) |
|
3,838 |
(9,351) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before cost of credit risk |
76,264 |
48,287 |
6,445 |
10,078 |
5,230 |
(2,246) |
- |
144,058 |
|
6,577 |
6,472 |
1,092 |
- |
14,141 |
|
- |
158,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of credit risk |
(372) |
(23,874) |
94 |
(1,601) |
(327) |
- |
- |
(26,080) |
|
(1,083) |
- |
- |
- |
(1,083) |
|
- |
(27,163) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (loss) before |
75,892 |
24,413 |
6,539 |
8,477 |
4,903 |
(2,246) |
- |
117,978 |
|
5,494 |
6,472 |
1,092 |
- |
13,058 |
|
- |
131,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net non-recurring (expense/loss) income/gain |
(4,766) |
(2,453) |
(267) |
(2,115) |
- |
- |
- |
(9,601) |
|
1,375 |
18 |
11 |
- |
1,404 |
|
- |
(8,197) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax |
71,126 |
21,960 |
6,272 |
6,362 |
4,903 |
(2,246) |
- |
108,377 |
|
6,869 |
6,490 |
1,103 |
- |
14,462 |
|
- |
122,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit |
(6,258) |
(2,353) |
(856) |
1,577 |
(823) |
229 |
- |
(8,484) |
|
(669) |
(974) |
(730) |
- |
(2,373) |
|
- |
(10,857) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit |
64,868 |
19,607 |
5,416 |
7,939 |
4,080 |
(2,017) |
- |
99,893 |
|
6,200 |
5,516 |
373 |
- |
12,089 |
|
- |
111,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
3,269,069 |
3,315,377 |
40,888 |
403,764 |
86,750 |
73,120 |
(144,966) |
7,044,002 |
|
409,834 |
193,119 |
172,785 |
(231) |
775,507 |
|
(240,364) |
7,579,145 |
|
Total liabilities |
2,316,688 |
2,412,671 |
842,874 |
326,515 |
58,695 |
748 |
(144,966) |
5,813,225 |
|
237,565 |
112,407 |
22,449 |
(230) |
372,191 |
|
(240,364) |
5,945,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
11,993 |
1,557 |
308 |
1,050 |
474 |
42 |
- |
15,424 |
|
9,209 |
135 |
1,011 |
- |
10,355 |
|
- |
25,779 |
|
Intangible assets |
2,434 |
495 |
36 |
158 |
28 |
3 |
- |
3,154 |
|
624 |
24 |
21 |
- |
669 |
|
- |
3,823 |
|
Capital expenditure |
14,427 |
2,052 |
344 |
1,208 |
502 |
45 |
- |
18,578 |
|
9,833 |
159 |
1,032 |
- |
11,024 |
|
- |
29,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & Amortization |
(9,425) |
(1,889) |
(177) |
(766) |
(264) |
(2) |
- |
(12,523) |
|
(3,730) |
(226) |
(529) |
- |
(4,485) |
|
- |
(17,008) |
6. Cash and Cash Equivalents
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Cash on hand |
389,046 |
|
393,315 |
|
Current accounts with central banks, excluding obligatory reserves |
215,736 |
|
152,647 |
|
Current accounts with other credit institutions |
323,495 |
|
138,243 |
|
Time deposits with credit institutions with maturity of up to 90 days |
333,528 |
|
25,939 |
|
Cash and cash equivalents |
1,261,805 |
|
710,144 |
As at 30 June 2015 GEL 547,776 (31 December 2014: GEL 136,559) was placed on current and time deposit accounts with internationally recognised OECD banks and central banks that are the counterparties of the Group in performing international settlements. The Group earned up to 1.2% interest per annum on these deposits (31 December 2014: 1.3%).
7. Amounts Due from Credit Institutions
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Obligatory reserves with central banks |
486,763 |
|
382,963 |
|
Time deposits with maturity of more than 90 days |
18,501 |
|
33,832 |
|
Inter-bank loan receivables |
78,624 |
|
1,486 |
|
Amounts due from credit institutions |
583,888 |
|
418,281 |
Obligatory reserves with central banks represent amounts deposited with the NBG and the NBRB (National Bank of the Republic of Belarus). Credit institutions are required to maintain cash deposit (obligatory reserve) with the NBG and with the NBRB, the amount of which depends on the level of funds attracted by the credit institution. The Group's ability to withdraw these deposits is restricted by the statutory legislature. The Group did not earn any interest on obligatory reserves with NBG or NBRB during the six months ended 30 June 2015 and 30 June 2014.
As at 30 June 2015 inter-bank loans and receivables include GEL 1,845 (31 December 2014: GEL 1,486) placed with non-OECD banks.
8. Investment Securities Available-for-sale
Available-for-sale securities comprise:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Georgian ministry of Finance treasury bonds* |
564,949 |
|
459,400 |
|
Georgian ministry of Finance treasury bills** |
176,913 |
|
169,796 |
|
Certificates of deposit of central banks*** |
69,477 |
|
92,547 |
|
Other debt instruments**** |
83,049 |
|
46,557 |
|
Corporate shares |
1,452 |
|
1,412 |
|
Investment securities available-for-sale |
895,840 |
|
769,712 |
* GEL 509,668 was pledged for short-term loans from the National Bank of Georgia (31 December 2014: GEL 341,681).
** GEL 142,574 was pledged for short-term loans from the National Bank of Georgia (31 December 2014: GEL 60,889).
*** GEL 8,819 was pledged for short-term loans from the National Bank of Georgia (31 December 2014: nil).
**** GEL 78,842 was pledged for short-term loans from the National Bank of Georgia (31 December 2014: GEL 25,069).
Other debt instruments as at 30 June 2015 comprises GEL denominated bonds issued by European Bank for Reconstruction and Development of GEL 50,383, GEL denominated bonds issued by International Finance Corporation of GEL 28,458, and USD denominated corporate bonds of GEL 4,208.
9. Loans to Customers and Finance Lease Receivables
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Commercial loans |
2,363,295 |
|
2,184,379 |
|
Consumer loans |
1,087,140 |
|
801,474 |
|
Micro and SME loans |
946,163 |
|
772,283 |
|
Residential mortgage loans |
736,249 |
|
604,143 |
|
Gold - pawn loans |
60,820 |
|
53,785 |
|
Loans to customers, gross |
5,193,667 |
|
4,416,064 |
|
Less - Allowance for loan impairment |
(177,717) |
|
(103,780) |
|
Loans to customers, net |
5,015,950 |
|
4,312,284 |
|
|
|
|
|
|
Finance Lease Receivables, gross |
39,253 |
|
39,248 |
|
Less - Allowance for Finance Lease Receivables impairment |
(2,451) |
|
(729) |
|
Finance Lease Receivables , net |
36,802 |
|
38,519 |
|
|
|
|
|
|
Loans to customers and finance lease receivables, net |
5,052,752 |
|
4,350,803 |
Allowance for loan impairment
Movements of the allowance for impairment of loans to customers by class are as follows:
|
|
Commercial loans |
|
Consumer loans |
|
Residential mortgage loans |
|
Micro and SME loans |
|
Total |
|
2015 |
|
2015 |
|
2015 |
|
2015 |
|
2015 |
|
|
At 1 January |
72,885 |
|
23,648 |
|
2,993 |
|
4,254 |
|
103,780 |
|
Charge * |
33,261 |
|
32,564 |
|
1,405 |
|
6,803 |
|
74,033 |
|
Recoveries |
1,818 |
|
9,448 |
|
1,425 |
|
2,031 |
|
14,722 |
|
Write-offs |
(1,217) |
|
(7,636) |
|
(485) |
|
(2,339) |
|
(11,677) |
|
Accrued interest on written-off loans |
(401) |
|
(1,476) |
|
(346) |
|
(446) |
|
(2,669) |
|
Currency translation differences |
(162) |
|
(58) |
|
- |
|
(252) |
|
(472) |
|
At 30 June |
106,184 |
|
56,490 |
|
4,992 |
|
10,051 |
|
177,717 |
|
|
Commercial loans |
|
Consumer loans |
|
Residential mortgage loans |
|
Micro and SME loans |
|
Total |
|
2014 |
|
2014 |
|
2014 |
|
2014 |
|
2014 |
|
|
At 1 January |
90,949 |
|
20,772 |
|
3,093 |
|
5,971 |
|
120,785 |
|
Charge (reversal) |
15,767 |
|
5,146 |
|
(1,373) |
|
(2,613) |
|
16,927 |
|
Recoveries |
1,798 |
|
7,194 |
|
2,459 |
|
2,014 |
|
13,465 |
|
Write-offs |
(23,326) |
|
(9,169) |
|
(2,104) |
|
(2,402) |
|
(37,001) |
|
Accrued interest on written-off loans |
(3,992) |
|
(1,350) |
|
(606) |
|
(176) |
|
(6,124) |
|
Currency translation differences |
(69) |
|
(17) |
|
- |
|
(86) |
|
(172) |
|
At 30 June |
81,127 |
|
22,576 |
|
1,469 |
|
2,708 |
|
107,880 |
* Increased impairment charges for six months ended 30 June 2015 are attributable to acquisition of JSC PrivatBank in January 2015 (note 4), which added higher cost of risk carrying loans in credit cards and consumer loan product lines, as well as increased cost of risk on existing loan portfolio - mostly due to GEL devaluation against USD during six months ended 2015.
9. Loans to Customers and Finance Lease Receivables (continued)
Concentration of loans to customers
As at 30 June 2015 concentration of loans granted by the Group to the ten largest third party borrowers comprised GEL 588,746 accounting for 11% of the gross loan portfolio of the Group (31 December 2014: GEL 711,647 and 16% respectively). An allowance of GEL 5,077 (31 December 2014: GEL 4,034) was established against these loans.
As at 30 June 2015, the concentration of loans granted by the Group to the ten largest third party group of borrowers comprised GEL 877,278 accounting for 24% of the gross loan portfolio of the Group (31 December 2014: GEL 1,094,084 and 25% respectively). An allowance of GEL 7,903 (31 December 2014: GEL 18,324) was established against these loans.
As at 30 June 2015 and 31 December 2014 loans are principally issued within Georgia, and their distribution by industry sector is as follows:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Individuals |
2,288,862 |
|
1,831,479 |
|
Manufacturing |
702,116 |
|
719,003 |
|
Trade |
754,744 |
|
647,858 |
|
Real estate |
533,649 |
|
400,533 |
|
Hospitality |
155,528 |
|
166,214 |
|
Transport & Communication |
160,563 |
|
151,715 |
|
Electricity, gas and water supply |
82,371 |
|
124,772 |
|
Construction |
141,490 |
|
114,891 |
|
Mining and quarrying |
124,290 |
|
15,310 |
|
Other |
250,054 |
|
244,289 |
|
Loans to customers, gross |
5,193,667 |
|
4,416,064 |
|
Less - allowance for loan impairment |
(177,717) |
|
(103,780) |
|
Loans to customers, net |
5,015,950 |
|
4,312,284 |
Loans have been extended to the following types of customers:
|
|
2015 |
|
2014 |
|
Private companies |
2,857,394 |
|
2,534,641 |
|
Individuals |
2,288,862 |
|
1,831,479 |
|
State-owned entities |
47,411 |
|
49,944 |
|
Loans to customers, gross |
5,193,667 |
|
4,416,064 |
|
Less - allowance for loan impairment |
(177,717) |
|
(103,780) |
|
Loans to customers, net |
5,015,950 |
|
4,312,284 |
10. Investment Properties
|
|
2015 |
|
2014 |
|
At 1 January |
190,860 |
|
157,707 |
|
Additions |
30,459 |
|
4,325 |
|
Business Combination (note 4) |
705 |
|
- |
|
Disposals |
(5,785) |
|
(4,763) |
|
Hyperinflation effect |
240 |
|
264 |
|
Transfers from (to) property and equipment and other assets |
5,266 |
|
(11,369) |
|
Currency translation differences |
(239) |
|
6,128 |
|
At 30 June |
221,506 |
|
152,292 |
Investment properties are stated at fair value. The fair value represents the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The date of latest revaluation is 31 December 2013. As at 30 June 2015 the Group concluded that the market price of investment properties was not materially different from their carrying value.
The Group has no restrictions on the realisability of its investment properties and has a commitment to invest GEL 25,200 until the end of 2018, for the development of an investment property.
11. Client Deposits and Notes
Client deposits and notes include the following:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Time deposits |
2,377,926 |
|
1,867,925 |
|
Current accounts |
1,724,946 |
|
1,445,790 |
|
Promissory notes issued |
1,545 |
|
25,010 |
|
Client deposits and notes |
4,104,417 |
|
3,338,725 |
|
|
|
|
|
|
Held as security against letters of credit and guarantees (Note 15) |
32,725 |
|
53,393 |
As at 30 June 2015 and 31 December 2014, promissory notes issued by the Group comprise the notes privately held by financial institutions being effectively equivalents of certificates of deposits with fixed maturity and fixed interest rate. The average remaining maturity of the notes is 10 months (31 December 2014: 1 month).
At 30 June 2015, GEL 588,785 (14%) was due to the 10 largest customers (31 December 2014: GEL 424,103 (13%)).
Client deposits and notes include accounts with the following types of customers:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Individuals |
2,346,627 |
|
1,868,762 |
|
Private enterprises |
1,529,425 |
|
1,284,955 |
|
State and state-owned entities |
228,365 |
|
185,008 |
|
Client deposits and notes |
4,104,417 |
|
3,338,725 |
The breakdown of client deposits by industry sector is as follows:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Individuals |
2,346,627 |
|
1,868,762 |
|
Real estate |
361,407 |
|
329,246 |
|
Transport & Communication |
322,621 |
|
173,591 |
|
Trade |
255,246 |
|
277,792 |
|
Construction |
214,607 |
|
220,234 |
|
Government services |
158,368 |
|
128,046 |
|
Financial intermediation |
150,007 |
|
110,759 |
|
Manufacturing |
126,983 |
|
107,813 |
|
Electricity, gas and water supply |
34,070 |
|
21,275 |
|
Hospitality |
20,660 |
|
33,503 |
|
Other |
113,821 |
|
67,704 |
|
Client deposits and notes |
4,104,417 |
|
3,338,725 |
12. Amounts Due to Credit Institutions
Amounts due to credit institutions comprise:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Borrowings from international credit institutions |
661,655 |
|
574,240 |
|
Short-term loans from the National Bank of Georgia |
674,701 |
|
400,772 |
|
Time deposits and inter-bank loans |
367,182 |
|
261,551 |
|
Correspondent accounts |
64,364 |
|
32,606 |
|
|
1,767,902 |
|
1,269,169 |
|
|
|
|
|
|
Non-convertible subordinated debt |
371,615 |
|
140,045 |
|
|
|
|
|
|
Amounts due to credit institutions |
2,139,517 |
|
1,409,214 |
During the six months ended 30 June 2015 the Group received short-term funds from Georgian banks in different currencies.
During the six months ended 30 June 2015 the Group paid up to 4.00% on USD borrowings from international credit institutions (30 June 2014: up to 5.19%). During the six months ended 30 June 2015 the Group paid up to 7.75% on USD subordinated debt (30 June 2014: up to 7.75%).
In June 2015, the Group signed a USD 90 million subordinated loan agreement with the International Finance Corporation. The loan facility, which includes USD 20 million from the European Fund for Southeast Europe bears a maturity of ten years and qualifies as Tier II capital under the Basel 2 framework.
Some long-term borrowings from international credit institutions are subject to certain conditions (the "Lender Covenants"). These covenants require the Group to maintain different limits for capital adequacy, liquidity, currency positions, credit exposures, leverage and others. At 30 June 2015 and 31 December 2014 the Group complied with all the Lender Covenants of the borrowings from international credit institutions.
13. Debt Securities Issued
Debt securities issued comprise:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Eurobonds |
938,739 |
|
779,445 |
|
Georgian local bonds |
92,572 |
|
46,217 |
|
Certificates of deposit |
31,812 |
|
31,033 |
|
Debt securities issued |
1,063,123 |
|
856,695 |
In May 2015, the Group's healthcare subsidiary JSC Medical Corporation EVEX completed the issuance of 2-year local bonds of USD 15 million (GEL 34 million). The bonds were issued at par with an annual coupon rate of 9.50% payable semi-annually with 5% withholding tax applying to individuals.
In May 2015, the Group's real estate subsidiary JSC m2 Real Estate completed the issuance of 2-year local bonds of USD 20 million (GEL 45 million). The bonds were issued at par with an annual coupon rate of 9.50% payable semi-annually with 5% withholding tax applying to individuals.
14. Equity
Share capital
As at 30 June 2015 and 31 December 2014, issued share capital of BGH comprised 39,500,320 common shares, all of which were fully paid. Each share has a nominal value of one (1) British Penny (31 December 2014: one (1) British Penny). Shares issued and outstanding as at 30 June 2015 are described below:
|
|
Number |
|
Amount |
|
31 December 2013 |
35,909,383 |
|
1,028 |
|
Effect of translation of equity components to presentation currency |
- |
|
53 |
|
30 June 2014 |
35,909,383 |
|
1,081 |
|
|
|
|
|
|
31 December 2014 |
39,500,320 |
|
1,143 |
|
Effect of translation of equity components to presentation currency (note 3) |
- |
|
11 |
|
30 June 2015 |
39,500,320 |
|
1,154 |
Treasury shares
Treasury shares of GEL 36 as at 30 June 2015 comprise 1,242,527 of the Group's shares owned by the Bank (31 December 2014: GEL 46, or 1,522,185 shares). Purchase of treasury shares were conducted by the Bank in the open market.
Dividends
Shareholders are entitled to dividends in British Pounds.
On 21 May 2015, the Directors of Bank of Georgia Holdings PLC declared 2015 interim dividends comprising Georgian Lari 2.1 per share. The currency conversion date was set at 8 June 2015, with the official GEL - GBP exchange rate of 3.5110, resulting in a GBP denominated interim dividend of 0.5981 per share. Payment of the total GEL 80,411 interim dividends was received by shareholders on 16 June 2015.
Nature and purpose of other reserves
Revaluation reserve for property and equipment
The revaluation reserve for property and equipment is used to record increases in the fair value of office buildings and service centers and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity.
Unrealised gains (losses) on investment securities available-for-sale
This reserve records fair value changes on investment securities available-for-sale.
Unrealised gains (losses) from dilution or sale / acquisition of shares in existing subsidiaries
This reserve records unrealised gains (losses) from dilution or sale / acquisition of shares in existing subsidiaries.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the interim condensed financial statements of foreign subsidiaries.
Movements in other reserves during six months ended 30 June 2015 and 30 June 2014 are presented in the statements of other comprehensive income.
14. Equity (continued)
Earnings per share
|
|
For the six months ended |
||
|
|
30 June 2015 |
|
30 June 2014 |
|
Basic and diluted earnings per share |
|
|
|
|
Profit for the year attributable to ordinary shareholders of the Group |
133,241 |
|
108,347 |
|
Weighted average number of ordinary shares outstanding during the year |
38,419,705 |
|
34,442,314 |
|
Basic and diluted earnings per share |
3.4679 |
|
3.1458 |
15. Commitments and Contingencies
Legal
In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition or the results of future operations of the Group.
Financial commitments and contingencies
As at 30 June 2015 and 31 December 2014 the Group's financial commitments and contingencies comprised the following:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Credit-related commitments |
|
|
|
|
Guarantees issued |
488,432 |
|
465,527 |
|
Undrawn loan facilities |
259,079 |
|
144,634 |
|
Letters of credit |
54,564 |
|
95,669 |
|
|
802,075 |
|
705,830 |
|
Operating lease commitments |
|
|
|
|
Not later than 1 year |
14,855 |
|
12,382 |
|
Later than 1 year but not later than 5 years |
29,122 |
|
21,943 |
|
Later than 5 years |
4,095 |
|
3,178 |
|
|
48,072 |
|
37,503 |
|
|
|
|
|
|
Capital expenditure commitments |
26,005 |
|
10,035 |
|
|
|
|
|
|
Less - Cash held as security against letters of credit and |
(32,725) |
|
(53,393) |
|
Less - Provisions |
(3,249) |
|
(4,732) |
|
Financial commitments and contingencies, net |
840,178 |
|
695,243 |
As at 30 June 2015 the capital expenditure represented the commitment for purchase of property and capital repairs of GEL 25,859 and software and other intangible assets of GEL 146. As at 31 December 2014 the capital expenditure represented the commitment for purchase of property and capital repairs of GEL 9,810 and software and other intangible assets of GEL 225.
16. Interest Income and Interest Expense
|
|
For the six months ended |
||||||||
|
|
2015 |
|
2014 |
||||||
|
|
Unaudited |
|
Unaudited, Reclassified |
||||||
|
|
Banking |
Investment |
Elimi- |
Total |
|
Banking |
Investment |
Elimi- |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
From loans to customers |
376,974 |
585 |
(6,033) |
371,526 |
|
261,084 |
585 |
(3,098) |
258,571 |
|
From investment securities: available-for-sale |
30,561 |
14 |
(72) |
30,503 |
|
18,071 |
- |
- |
18,071 |
|
From finance lease receivable |
4,827 |
- |
- |
4,827 |
|
4,498 |
- |
- |
4,498 |
|
From amounts due from credit institutions |
5,303 |
1,063 |
(416) |
5,950 |
|
3,358 |
395 |
(248) |
3,505 |
|
Interest Income |
417,666 |
1,662 |
(6,522) |
412,806 |
|
287,011 |
980 |
(3,346) |
284,645 |
|
|
|
|
|
|
|
|
|
|
|
|
On client deposits and notes |
(91,185) |
- |
932 |
(90,253) |
|
(67,129) |
- |
315 |
(66,814) |
|
On amounts owed to credit institutions |
(43,341) |
(11,557) |
6,138 |
(48,760) |
|
(27,228) |
(7,386) |
3,644 |
(30,970) |
|
On debt securities issued |
(33,679) |
(1,912) |
1,721 |
(33,870) |
|
(26,423) |
(449) |
442 |
(26,430) |
|
Interest Expense |
(168,205) |
(13,469) |
8,791 |
(172,883) |
|
(120,780) |
(7,835) |
4,401 |
(124,214) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
249,461 |
(11,807) |
2,269 |
239,923 |
|
166,231 |
(6,855) |
1,055 |
160,431 |
17. Net Fee and Commission Income
|
|
For the six months ended |
||
|
|
30 June 2015 |
|
30 June 2014 |
|
|
|
|
|
|
Settlements operations |
52,566 |
|
41,114 |
|
Guarantees and letters of credit |
12,293 |
|
10,604 |
|
Cash operations |
6,806 |
|
4,161 |
|
Currency conversion operations |
1,325 |
|
1,535 |
|
Brokerage service fees |
412 |
|
4,051 |
|
Advisory |
15 |
|
- |
|
Other |
1,518 |
|
1,350 |
|
Fee and commission income |
74,935 |
|
62,815 |
|
|
|
|
|
|
Settlements operations |
(13,902) |
|
(11,824) |
|
Cash operations |
(2,247) |
|
(1,767) |
|
Guarantees and letters of credit |
(1,890) |
|
(1,835) |
|
Insurance brokerage service fees |
(359) |
|
(364) |
|
Currency conversion operations |
(41) |
|
(50) |
|
Other |
(521) |
|
(913) |
|
Fee and commission expense |
(18,960) |
|
(16,753) |
|
Net fee and commission income |
55,975 |
|
46,062 |
18. Fair Value Measurements
Fair value hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 − Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
• Level 2 − Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
• Level 3 − Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
18. Fair Value Measurements (continued)
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability. The following tables show analysis of assets and liabilities measured at fair value or for which fair values are disclosed by level of the fair value hierarchy:
|
30 June 2015 (unaudited) |
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
|
|||||
|
Assets measured at fair value |
|
|
|
|
|
|
|
|
Investment securities |
- |
|
894,614 |
|
1,226 |
|
895,840 |
|
Other assets - derivative financial assets |
- |
|
64,127 |
|
- |
|
64,127 |
|
Other assets - trading securities owned |
280 |
|
- |
|
- |
|
280 |
|
|
|
|
|
|
|
|
|
|
Assets for which fair values are disclosed |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
- |
|
- |
|
1,261,805 |
|
1,261,805 |
|
Amounts due from credit institutions |
- |
|
- |
|
583,888 |
|
583,888 |
|
Loans to customers and finance lease receivables |
- |
|
24,116 |
|
4,886,582 |
|
4,910,698 |
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value: |
|
|
|
|
|
|
|
|
Other liabilities - derivative financial liabilities |
- |
|
1,873 |
|
- |
|
1,873 |
|
|
|
|
|
|
|
|
|
|
Liabilities for which fair values are disclosed |
|
|
|
|
|
|
|
|
Client deposits and notes |
- |
|
- |
|
4,138,931 |
|
4,138,931 |
|
Amounts owed to credit institutions |
- |
|
- |
|
2,139,517 |
|
2,139,517 |
|
Debt securities issued |
- |
|
- |
|
1,063,123 |
|
1,063,123 |
|
31 December 2014 (reclassified) |
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
|
|||||
|
Assets measured at fair value |
|
|
|
|
|
|
|
|
Investment securities |
- |
|
768,300 |
|
1,412 |
|
769,712 |
|
Other assets - derivative financial assets |
- |
|
45,733 |
|
- |
|
45,733 |
|
Other assets - trading securities owned |
1,034 |
|
- |
|
- |
|
1,034 |
|
|
|
|
|
|
|
|
|
|
Assets for which fair values are disclosed |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
- |
|
- |
|
710,144 |
|
710,144 |
|
Amounts due from credit institutions |
- |
|
- |
|
418,281 |
|
418,281 |
|
Loans to customers and finance lease receivables |
- |
|
- |
|
4,450,930 |
|
4,450,930 |
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value: |
|
|
|
|
|
|
|
|
Other liabilities - derivative financial liabilities |
- |
|
7,505 |
|
- |
|
7,505 |
|
|
|
|
|
|
|
|
|
|
Liabilities for which fair values are disclosed |
|
|
|
|
|
|
|
|
Client deposits and notes |
- |
|
- |
|
3,366,108 |
|
3,366,108 |
|
Amounts owed to credit institutions |
- |
|
- |
|
1,409,214 |
|
1,409,214 |
|
Debt securities issued |
- |
|
- |
|
856,695 |
|
856,695 |
The following is a description of the determination of fair value for financial instruments which are recorded at fair value using valuation techniques. These incorporate the Group's estimate of assumptions that a market participant would make when valuing the instruments.
18. Fair Value Measurements (continued)
Derivative financial instruments
Derivative financial instruments valued using a valuation technique with market observable inputs are mainly interest rate swaps, currency swaps and options, and forward foreign exchange contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves.
Trading securities and investment securities available-for-sale
Trading securities and a portion of investment securities available-for-sale are quoted equity and debt securities. Investment securities available-for-sale valued using a valuation technique or pricing models consist of unquoted equity and debt securities. These securities are valued using models which sometimes only incorporate data observable in the market and at other times use both observable and non-observable data. The non-observable inputs to the models include assumptions regarding the future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the investee operates.
Movements in level 3 financial instruments measured at fair value
The following tables show a reconciliation of the opening and closing amounts of level 3 financial assets which are recorded at fair value:
|
|
31 December 2013 |
Impairment of Investment in BG Bank |
Transfers from level 2 |
At 31 December |
Impairment of Investment in BG Bank |
At 30 June |
|
2014 |
2015 |
|||||
|
Level 3 financial assets |
|
|
|
|
|
|
|
Equity investment securities available-for-sale |
5,222 |
(3,837) |
27 |
1,412 |
(186) |
1,226 |
Movements in level 3 non-financial assets measured at fair value
All investment properties and revalued properties included in property and equipment are of level 3.
Fair value of financial assets and liabilities not carried at fair value
Set out below is a comparison by class of the carrying amounts and fair values of the Group's financial instruments that are carried in the financial statements. The table does not include the fair values of non-financial assets and non-financial liabilities.
|
|
Carrying |
Fair value |
Unrecognised |
|
Carrying |
Fair value |
Unrecognised |
|
|
Unaudited |
|
|
Reclassified |
|
||
|
Financial assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
1,261,805 |
1,261,805 |
- |
|
710,144 |
710,144 |
- |
|
Amounts due from credit institutions |
583,888 |
583,888 |
- |
|
418,281 |
418,281 |
- |
|
Loans to customers and finance lease receivables |
5,052,752 |
4,910,698 |
(142,054) |
|
4,350,803 |
4,450,930 |
100,127 |
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
Client deposits and notes |
4,104,417 |
4,138,931 |
(34,514) |
|
3,338,725 |
3,366,109 |
(27,384) |
|
Amounts owed to credit institutions |
2,139,517 |
2,139,517 |
- |
|
1,409,214 |
1,409,214 |
- |
|
Debt securities issued |
1,063,123 |
1,063,123 |
- |
|
856,695 |
856,695 |
- |
|
Total unrecognised change in unrealised fair value |
(176,568) |
|
|
|
72,743 |
||
The following describes the methodologies and assumptions used to determine fair values for those financial instruments which are not already recorded at fair value in the consolidated financial statements.
18. Fair Value Measurements (continued)
Fair value of financial assets and liabilities not carried at fair value (continued)
Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid or have a short term maturity (less than three months) it is assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable rate financial instruments.
Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were first recognised with current market rates offered for similar financial instruments. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and maturity.
19. Maturity Analysis of Financial Assets and Liabilities
The table below shows an analysis of financial assets and liabilities according to when they are expected to be recovered or settled.
|
|
30 June 2015 (unaudited) |
||||||||
|
|
On |
Up to |
Up to |
Up to |
Up to |
Up to |
Over |
Total |
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
928,622 |
333,183 |
- |
- |
- |
- |
- |
1,261,805 |
|
|
Amounts due from credit institutions |
485,954 |
5,462 |
17,171 |
71,665 |
1,845 |
- |
1,791 |
583,888 |
|
|
Investment securities |
165,387 |
644,394 |
2,325 |
26,638 |
57,064 |
32 |
- |
895,840 |
|
|
Loans to customers and finance lease receivables |
- |
812,549 |
493,480 |
991,616 |
1,438,266 |
692,298 |
624,543 |
5,052,752 |
|
|
Total |
1,579,963 |
1,795,588 |
512,976 |
1,089,919 |
1,497,175 |
692,330 |
626,334 |
7,794,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
Client deposits and notes |
475,072 |
862,017 |
435,265 |
1,879,248 |
371,229 |
63,625 |
17,961 |
4,104,417 |
|
|
Amounts owed to credit institutions |
65,183 |
953,051 |
138,419 |
142,281 |
412,893 |
181,174 |
246,516 |
2,139,517 |
|
|
Debt securities issued |
- |
55,224 |
877 |
48,152 |
942,608 |
16,262 |
- |
1,063,123 |
|
|
Total |
540,255 |
1,870,292 |
574,561 |
2,069,681 |
1,726,730 |
261,061 |
264,477 |
7,307,057 |
|
|
Net |
1,039,708 |
(74,704) |
(61,585) |
(979,762) |
(229,555) |
431,269 |
361,857 |
487,228 |
|
|
Accumulated gap |
1,039,708 |
965,004 |
903,419 |
(76,343) |
(305,898) |
125,371 |
487,228 |
|
|
|
|
2014 (reclassified) |
||||||||
|
|
On |
Up to |
Up to |
Up to |
Up to |
Up to |
Over |
Total |
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
691,573 |
18,571 |
- |
- |
- |
- |
- |
710,144 |
|
|
Amounts due from credit institutions |
382,714 |
808 |
3,974 |
26,324 |
2,486 |
- |
1,975 |
418,281 |
|
|
Investment securities |
327,846 |
383,657 |
7,361 |
9,698 |
34,008 |
1,966 |
5,176 |
769,712 |
|
|
Loans to customers and finance lease receivables |
- |
698,671 |
510,881 |
734,149 |
1,282,395 |
624,387 |
500,320 |
4,350,803 |
|
|
Total |
1,402,133 |
1,101,707 |
522,216 |
770,171 |
1,318,889 |
626,353 |
507,471 |
6,248,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
Client deposits and notes |
272,235 |
603,510 |
366,000 |
1,686,080 |
355,892 |
39,995 |
15,013 |
3,338,725 |
|
|
Amounts owed to credit institutions |
32,951 |
582,882 |
63,704 |
153,848 |
314,313 |
152,742 |
108,774 |
1,409,214 |
|
|
Debt securities issued |
- |
45,864 |
28,930 |
43,425 |
738,476 |
- |
- |
856,695 |
|
|
Total |
305,186 |
1,232,256 |
458,634 |
1,883,353 |
1,408,681 |
192,737 |
123,787 |
5,604,634 |
|
|
Net |
1,096,947 |
(130,549) |
63,582 |
(1,113,182) |
(89,792) |
433,616 |
383,684 |
644,306 |
|
|
Accumulated gap |
1,096,947 |
966,398 |
1,029,980 |
(83,202) |
(172,994) |
260,622 |
644,306 |
|
|
19. Maturity Analysis of Financial Assets and Liabilities (continued)
The Group's capability to discharge its liabilities relies on its ability to realise equivalent assets within the same period of time. In the Georgian marketplace, where most of the Group's business is concentrated, many short-term credits are granted with the expectation of renewing the loans at maturity. As such, the ultimate maturity of assets may be different from the analysis presented above. To reflect the historical stability of current accounts, the Group calculates the minimal daily balance of current accounts over the past two years and includes the amount in the less than 1 year category in the table above. The remaining current accounts are included in the on demand category.
The Group's principal sources of liquidity are as follows:
· deposits;
· borrowings from international credit institutions;
· inter-bank deposit agreement;
· debt issues;
· proceeds from sale of securities;
· principal repayments on loans;
· interest income; and
· fees and commissions income.
As at 30 June 2015 client deposits and notes amounted to GEL 4,104,417 (31 December 2014: GEL 3,338,725) and represented 53% (31 December 2014: 56%) of Group's total liabilities. These funds continue to provide a majority of the Group's funding and represent a diversified and stable source of funds. As at 30 June 2015 amounts owed to credit institutions amounted to GEL 2,139,517 (31 December 2014: GEL 1,409,214) and represented 28% (31 December 2014: 24%) of total liabilities. As at 30 June 2015 debt securities issued amounted to GEL 1,063,123 (31 December 2014: GEL 856,695) and represented 14% (31 December 2014: 14%) of total liabilities.
The Bank was in compliance with regulatory liquidity requirements as at 30 June 2015 and 31 December 2014. In management's opinion, liquidity is sufficient to meet the Group's present requirements.
The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled:
|
|
30 June 2015 (unaudited) |
|
31 December 2014 (reclassified) |
||||
|
|
Less than |
More than |
Total |
|
Less than |
More than |
Total |
|
|
|||||||
|
Cash and cash equivalents |
1,261,805 |
- |
1,261,805 |
|
710,144 |
- |
710,144 |
|
Amounts due from credit institutions |
580,252 |
3,636 |
583,888 |
|
413,820 |
4,461 |
418,281 |
|
Investment securities |
838,744 |
57,096 |
895,840 |
|
728,562 |
41,150 |
769,712 |
|
Loans to customers and finance lease receivables |
2,297,645 |
2,755,107 |
5,052,752 |
|
1,943,701 |
2,407,102 |
4,350,803 |
|
Accounts receivable and other loans |
67,124 |
10,742 |
77,866 |
|
67,255 |
- |
67,255 |
|
Insurance premiums receivable |
57,336 |
806 |
58,142 |
|
31,764 |
76 |
31,840 |
|
Prepayments |
33,667 |
18,478 |
52,145 |
|
17,848 |
15,926 |
33,774 |
|
Inventories |
53,761 |
77,773 |
131,534 |
|
61,654 |
39,788 |
101,442 |
|
Investment property |
- |
221,506 |
221,506 |
|
- |
190,860 |
190,860 |
|
Property and equipment |
- |
669,153 |
669,153 |
|
- |
588,513 |
588,513 |
|
Goodwill |
- |
60,056 |
60,056 |
|
- |
49,633 |
49,633 |
|
Intangible assets |
- |
36,894 |
36,894 |
|
- |
34,432 |
34,432 |
|
Income tax assets |
8,840 |
20,240 |
29,080 |
|
4,215 |
18,530 |
22,745 |
|
Other assets |
176,704 |
67,694 |
244,398 |
|
109,577 |
100,134 |
209,711 |
|
Total assets |
5,375,878 |
3,999,181 |
9,375,059 |
|
4,088,540 |
3,490,605 |
7,579,145 |
|
|
|
|
|
|
|
|
|
|
Client deposits and notes |
3,651,602 |
452,815 |
4,104,417 |
|
2,927,825 |
410,900 |
3,338,725 |
|
Amounts owed to credit institutions |
1,298,934 |
840,583 |
2,139,517 |
|
833,385 |
575,829 |
1,409,214 |
|
Debt securities issued |
104,253 |
958,870 |
1,063,123 |
|
118,219 |
738,476 |
856,695 |
|
Accruals and deferred income |
58,924 |
73,908 |
132,832 |
|
36,241 |
72,382 |
108,623 |
|
Insurance contracts liabilities |
69,141 |
3,860 |
73,001 |
|
43,166 |
3,420 |
46,586 |
|
Income tax liabilities |
3,035 |
108,352 |
111,387 |
|
11,093 |
86,471 |
97,564 |
|
Other liabilities |
76,971 |
17,868 |
94,839 |
|
49,482 |
38,163 |
87,645 |
|
Total liabilities |
5,262,860 |
2,456,256 |
7,719,116 |
|
4,019,411 |
1,925,641 |
5,945,052 |
|
|
|
|
|
|
|
|
|
|
Net |
113,018 |
1,542,925 |
1,655,943 |
|
69,129 |
1,564,964 |
1,634,093 |
20. Related Party Disclosures
In accordance with IAS 24 "Related Party Disclosures", parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.
Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties. All transactions with related parties disclosed below have been conducted on an arm's length basis.
The volumes of related party transactions, outstanding balances at the period end and related expenses and income for the period are as follows:
|
|
2015 (Unaudited) |
|
2014 (Unaudited) |
||||||||
|
|
Share-holders* |
|
Asso-ciates** |
|
Key |
|
Share-holders |
|
Asso-ciates |
|
Key |
|
Loans outstanding at 1 January, gross |
- |
|
78,592 |
|
2,048 |
|
- |
|
- |
|
1,484 |
|
Loans issued during the period |
- |
|
4,000 |
|
2,519 |
|
- |
|
- |
|
1,149 |
|
Loan repayments during the period |
- |
|
(44,260) |
|
(4,058) |
|
- |
|
- |
|
(1,785) |
|
Other movements |
- |
|
12,963 |
|
371 |
|
- |
|
- |
|
39 |
|
Loans outstanding at 30 June, gross |
- |
|
51,295 |
|
880 |
|
- |
|
- |
|
887 |
|
Less: allowance for impairment at 31 December |
- |
|
(649) |
|
(1) |
|
- |
|
- |
|
(1) |
|
Loans outstanding at 30 June, net |
- |
|
50,646 |
|
879 |
|
- |
|
- |
|
886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income on loans |
- |
|
2,546 |
|
70 |
|
- |
|
- |
|
33 |
|
Loan impairment charge |
- |
|
(92) |
|
(1) |
|
- |
|
- |
|
(15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits at 1 January |
- |
|
4,975 |
|
17,500 |
|
- |
|
50 |
|
11,455 |
|
Deposits received during the period |
- |
|
102,712 |
|
24,126 |
|
- |
|
54 |
|
17,447 |
|
Deposits repaid during the period |
- |
|
(103,204) |
|
(21,191) |
|
- |
|
(75) |
|
(14,568) |
|
Other movements |
- |
|
(70) |
|
3,729 |
|
- |
|
6 |
|
3,176 |
|
Deposits at 30 June |
- |
|
4,413 |
|
24,164 |
|
- |
|
35 |
|
17,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on deposits |
- |
|
- |
|
(272) |
|
- |
|
- |
|
(296) |
|
Other income |
- |
|
- |
|
41 |
|
- |
|
- |
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings at 1 January |
- |
|
- |
|
- |
|
233,209 |
|
- |
|
- |
|
Borrowings received during the period |
- |
|
- |
|
- |
|
16,522 |
|
- |
|
- |
|
Borrowings repaid during the period |
- |
|
- |
|
- |
|
(73,429) |
|
- |
|
- |
|
Other movements**** |
- |
|
- |
|
- |
|
(96,837) |
|
- |
|
- |
|
Borrowings at 30 June |
- |
|
- |
|
- |
|
79,465 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on borrowings |
- |
|
- |
|
- |
|
(3,693) |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps***** at 1 January |
- |
|
- |
|
- |
|
1,453 |
|
- |
|
- |
|
Payments during the period |
- |
|
- |
|
- |
|
(1,453) |
|
- |
|
- |
|
Interest rate swaps at 30 June |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
* On 24 February 2012 the EBRD and IFC utilized the equity conversion feature of subordinated convertible loans, becoming shareholders of the Group and sold their shares in 2014.
** On 23 December 2014 the Group acquired 25% interest in Georgian Global Utilities LLC (the "GGU"), a holding company with wholly owned subsidiaries that supply water and provide wastewater services, which also owns and operates three hydropower generation facilities in Georgia.
*** Key management personnel include members of BGH's Board of Directors and Chief Executive Officer and Deputies of the Bank.
**** Movements caused by the change in the list of respective related parties during the period. GEL 96,837 reduction of borrowings from related parties is attributable to the sale of BGH shares by the International Finance Corporation during the six months ended 30 June 2014.
***** Interest rate swap agreements with IFC.
20. Related Party Disclosures (continued)
Compensation of key management personnel comprised the following:
|
|
For the six months ended |
||
|
|
30 June 2015 |
|
30 June 2014 |
|
Salaries and other benefits |
2,599 |
|
2,160 |
|
Share-based payments compensation |
7,546 |
|
14,763 |
|
Social security costs |
24 |
|
20 |
|
Total key management compensation |
10,169 |
|
16,943 |
Key management personnel do not receive cash settled compensation, except for fixed salaries. The major part of the total compensation is share-based. The number of key management personnel at 30 June 2015 was 16 (31 December 2014:16).
21. Capital Adequacy
The Group maintains an actively managed capital base to cover risks inherent in the business. The adequacy of the Group's capital is monitored using, among other measures, the ratios established by the NBG in supervising the Bank and the ratios established by the Basel Capital Accord 1988.
Approved and published on 28 October 2013 by NBG, a new capital adequacy regulation became effective in 2014, based on Basel II/III requirements, adjusted for NBG's discretionary items. Pillar 1 requirements became effective on 30 June 2014. A transition period is to continue through 1 January 2017, during which the Bank will be required to comply with both, the new, as well as the current, capital regulations of the NBG.
During six months ended 30 June 2015, the Bank and the Group complied in full with all its externally imposed capital requirements.
The primary objectives of the Group's capital management are to ensure that the Bank complies with externally imposed capital requirements and that the Group maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholders' value.
The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous years.
NBG (Basel II/III) capital adequacy ratio
Effective 30 June 2014, the NBG requires banks to maintain a minimum total capital adequacy ratio of 12.5% of risk-weighted assets, computed based on the bank's stand-alone special purpose financial statements prepared in accordance with NBG regulations and pronouncements, based on Basel II/III requirements. As at 30 June 2015 and 31 December 2014 the Bank's capital adequacy ratio on this basis was as follows:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Tier 1 capital |
1,204,760 |
|
1,128,004 |
|
Less: Deductions from capital |
(335,380) |
|
(327,539) |
|
Tier 2 capital |
458,686 |
|
217,100 |
|
Total capital |
1,328,066 |
|
1,017,565 |
|
|
|
|
|
|
Risk-weighted assets |
8,350,545 |
|
7,204,080 |
|
|
|
|
|
|
Total capital ratio |
15.9% |
|
14.1% |
|
Tier 1 capital ratio |
10.4% |
|
11.1% |
21. Capital Adequacy (continued)
NBG (Basel II/III) capital adequacy ratio (continued)
Tier 1 capital comprises share capital, additional paid-in capital and retained earnings, less investments in subsidiaries, intangible assets and goodwill. Tier 2 capital includes subordinated long-term debt and general loss provisions. Certain adjustments are made to IFRS-based results and reserves, as prescribed by the NBG.
NBG capital adequacy ratio
The NBG requires banks to maintain a minimum capital adequacy ratio of 12% of risk-weighted assets, computed based on the Bank's standalone special purpose financial statements prepared in accordance with NBG regulations and pronouncements. As at 30 June 2015 and 31 December 2014, the Bank's capital adequacy ratio on this basis was as follows:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Core capital |
1,074,049 |
|
895,318 |
|
Supplementary capital |
530,376 |
|
398,598 |
|
Less: Deductions from capital |
(380,473) |
|
(365,487) |
|
Total regulatory capital |
1,223,952 |
|
928,429 |
|
|
|
|
|
|
Risk-weighted assets |
7,741,720 |
|
6,719,169 |
|
|
|
|
|
|
Total capital ratio |
15.8% |
|
13.8% |
|
Tier 1 capital ratio |
13.9% |
|
13.3% |
Core capital comprises share capital, additional paid-in capital and retained earnings (without current period profits), less intangible assets and goodwill. Supplementary capital includes subordinated long-term debt, current period profits and general loss provisions. Deductions from the capital include investments in subsidiaries. Certain adjustments are made to IFRS-based results and reserves, as prescribed by the NBG.
Capital adequacy ratio under Basel Capital Accord 1988
The Bank's capital adequacy ratio based on the consolidated statement of financial position and computed in accordance with the Basel Capital Accord 1988, with subsequent amendments including the amendment to incorporate market risks, as at 30 June 2015 and 31 December 2014, was as follows:
|
|
As at |
||
|
|
30 June 2015 |
|
31 December |
|
Tier 1 capital |
1,537,213 |
|
1,431,398 |
|
Less: Deductions Goodwill |
(60,056) |
|
(49,633) |
|
Tier 2 capital |
461,128 |
|
249,419 |
|
Less: Deductions from capital |
(1,162) |
|
(1,521) |
|
Total capital |
1,937,123 |
|
1,629,663 |
|
|
|
|
|
|
Risk-weighted assets |
7,253,159 |
|
6,252,992 |
|
|
|
|
|
|
Total capital ratio |
26.7% |
|
26.1% |
|
Tier 1 capital ratio |
20.4% |
|
22.9% |
22. Event after the Reporting Period
In July 2015 the Group acquired 50% equity interest in GNCo. GNCo is a holding company that owns 100% of High Technology Medical University Center ("HTMC"), a 450 bed referral hospital in Tbilisi, which provides a wide range of in-patient and out-patient services. The Group preliminary assessed that it obtained control over GNC Co as a result of that acquisition. Initial purchase accounting is currently in progress and not all of the asset valuations and accounting estimates are formally finalised. Therefore, management considers a more detailed disclosure impracticable. A full and complete IFRS 3 disclosure will be presented in the Group's 2015 annual financial statements.
In August, the Bank completed the corporate legal restructuring as announced in December 2014. The need for restructuring was created by the recently updated strategy as well as NBG's intention to regulate banks in Georgia on a standalone basis.
ANNEX 1: Glossary of financial items
|
Cash and cash equivalents |
Consists of cash on hand, current accounts with central banks, current accounts with credit institutions and time deposits with credit institutions with contractual maturities of less than 90 days. |
|
Amounts due from credit institutions |
Consists of obligatory reserves with central banks, time deposits with credit institutions with original maturities of over 90 days and interbank loans receivable. |
|
Investment securities |
Consists of government T-bills and T-bonds, NBG Certificate of Deposit and other interest-earning corporate bonds, as well as some corporate shares. |
|
Loans to customers and finance lease receivables |
Consists of loans to clients and finance lease receivables. |
|
Client deposits and notes |
Consists of client deposits, client certificates of deposit and promissory notes. |
|
Insurance contracts liabilities |
Consists of insurance contracts' Unearned Premiums Reserves (UPR), Reported But Not Settled (RBNS) and Incurred But Not Reported (IBNR) reserves. |
|
Other reserves |
Consists mainly of property revaluation, currency translation and available-for-sale investment security revaluation reserves. |
|
Banking interest income |
Consists of interest income from loans to clients, finance lease receivables, amounts due from credit institutions and available-for-sale investment securities. |
|
Banking interest expense |
Consists of interest expense on client deposits and notes, amounts due to credit institutions and debt securities issued. |
|
Fee and commission income |
Consists of fee and commission income from settlement, documentary, cash, brokerage and currency conversion operations. |
|
Fee and commission expense |
Consists of fee and commission expense on settlement, documentary, cash, brokerage and currency conversion operations. |
|
Net banking foreign currency gain |
Consists of income from foreign currency dealing, and gains & losses from currency translation differences of the Banking Business. |
|
Net other banking income |
Consists of banking business operating lease income, and gains & losses from sale of investment securities, trading securities and real estate properties. |
|
Net insurance premiums earned |
Consists of premium income from insurance contracts, net of reinsurance. |
|
Net insurance claims incurred |
Consists of claim expenses on insurance contracts, net of reinsurance. |
|
Real estate revenue |
Consists of income from sale of affordable housing apartments of m2, and investment business operating lease income and gains & losses from sale of real estate properties. |
|
Gross other investment profit |
Consists of income from sale of wine & spirits of Teliani Valley and other investment business income. |
|
Banking depreciation and amortisation |
Consists of depreciation and amortization expenses of the Banking Business. |
|
Profit (loss) from associates |
Consists of share in profit or loss of investments in associates. |
|
Depreciation and amortization of investment business |
Consists of depreciation and amortization expenses of the Investment Business. |
|
Net foreign currency gain from investment business |
Consists of gains & losses from currency translation differences of the Investment Business. |
|
Impairment charge on other assets and provisions |
Consists of impairment charges on other credit risk carrying financial assets and expenses for provisions. |
|
Non-recurring income and expenses |
as an income or expense triggered by or originated from an extraordinary economic, business or financial event that is not inherent to the regular and ordinary business course of the Group and is caused by uncertain or unpredictable external factors |
ANNEX 2: NOTES TO KEY RATIOS
|
1 Return on average total assets (ROAA) equals Profit for the period divided by monthly average total assets for the same period; |
|
2 Return on average total equity (ROAE) equals Profit for the period attributable to shareholders of the Group divided by monthly average equity attributable to shareholders of the Group for the same period; |
|
3 Net Interest Margin equals Net Banking Interest Income of the period divided by monthly Average Interest Earning Assets Excluding Cash for the same period; Interest Earning Assets Excluding Cash comprise: Amounts Due From Credit Institutions, Investment Securities (but excluding corporate shares) and net Loans To Customers And Finance Lease Receivables; |
|
4 Loan Yield equals Banking Interest Income From Loans To Customers And Finance Lease Receivables divided by monthly Average Gross Loans To Customers And Finance Lease Receivables; |
|
5 Cost of Funds equals banking interest expense of the period divided by monthly average interest bearing liabilities; interest bearing liabilities include: amounts due to credit institutions, client deposits and notes and debt securities issued; |
|
6 Operating Leverage equals percentage change in revenue less percentage change in operating expenses; |
|
7 Cost / Income Ratio equals operating expenses divided by revenue; |
|
8 Daily average liquid assets (as defined by NBG) during the month divided by daily average liabilities (as defined by NBG) during the month; |
|
9 Liquid assets include: cash and cash equivalents, amounts due from credit institutions and investment securities; |
|
10 Leverage (Times) equals total liabilities divided by total equity; |
|
11 NPL Coverage Ratio equals allowance for impairment of loans and finance lease receivables divided by NPLs; |
|
12 NPL Coverage Ratio adjusted for discounted value of collateral equals allowance for impairment of loans and finance lease receivables divided by NPLs (discounted value of collateral is added back to allowance for impairment) |
|
13 Cost of Risk equals impairment charge for loans to customers and finance lease receivables for the period divided by monthly average gross loans to customers and finance lease receivables over the same period; |
|
14 BIS Tier I Capital Adequacy ratio equals Tier I Capital divided by total risk weighted assets, both calculated in accordance with the requirements of Basel Accord I; |
|
15 BIS Total Capital Adequacy ratio equals total capital divided by total risk weighted assets, both calculated in accordance with the requirements of Basel Accord I; |
|
16 New NBG (Basel 2/3) Tier I Capital Adequacy ratio equals Tier I Capital divided by total risk weighted assets, both calculated in accordance with the requirements the National Bank of Georgia instructions; |
|
17 New NBG (Basel 2/3) Total Capital Adequacy ratio equals total capital divided by total risk weighted assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions; |
|
18 Old NBG Tier I Capital Adequacy ratio equals Tier I Capital divided by total risk weighted assets, both calculated in accordance with the requirements the National Bank of Georgia instructions; |
|
19 Old NBG Total Capital Adequacy ratio equals total capital divided by total risk weighted Assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions; |
ANNEX 3: REPORTING FORMAT CHANGE
Effective 1Q15, we have changed our reporting format to reflect our recently updated strategy. As a result, we now present our consolidated Group financial statements as a combination of our Banking Business and Investment Business, with corresponding interbusiness eliminations.
§ Banking Business comprises: Retail Banking, Corporate Banking, Investment Management, P&C insurance, and Belarusky Narodny Bank ("BNB")
§ Investment Business comprises: Healthcare Business (GHG), which includes healthcare services business ("Evex") and the medical insurance business ("Imedi L"), Real Estate Business (m2 Real Estate), Water & Utility Business (GGU) and other legacy investments (including the wine subsidiary Teliani Valley)
- Banking Business discussion is presented separately, following the Group's financial summary
- Retail Banking, Corporate Banking, Investment Management, GHG and m2 Real Estate are reported separately in the segment results discussion
§ BGH consolidated financials comprise Banking Business and Investment Business, as well as respective interbusiness eliminations on the face of the income statement and balance sheet.
§ Interbusiness eliminations represent transactions and/or balances that exist as of and for each reporting period between the Banking Business and Investment Business. They are eliminated for final consolidation purposes.
§ Privatbank results were fully consolidated in 1Q15
§ GGU, of which we own a 25% stake, was accounted for on an equity basis reflected in profit and loss from associates in the income statement and other assets in the balance sheet
COMPANY INFORMATION
BANK OF GEORGIA HOLDINGS PLC
Registered Address
84 Brook Street
London W1K 5EH
United Kingdom
www.bogh.co.uk
Registered under number 7811410 in England and Wales
Incorporation date: 14 October 2011
Stock Listing
London Stock Exchange PLC's Main Market for listed securities
Ticker: "BGEO.LN"
Contact Information
Bank of Georgia Holdings PLC Investor Relations
Telephone: +44 (0) 20 3178 4052; +995 322 444 205
E-mail: ir@bog.ge
www.bogh.co.uk
Auditors
Ernst & Young LLP
1 More London Place
London SE1 2AF
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol BS13 8AE
United Kingdom
Share price information
BGH shareholders can access both the latest and historical prices via our website, www.bogh.co.uk
This information is provided by RNS
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