3rd Quarter Results

RNS Number : 4488H

TBC Bank Group PLC

15 November 2018

TBC BANK GROUP PLC ("TBC Bank")

3Q AND 9M 2018 UNAUDITED CONSOLIDATED FINANCIAL RESULTS

Forward-Looking Statements

This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause the actual results, performance or achievements of TBC Bank Group PLC ("the Bank" or the "Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.

None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.

Certain financial information contained in this presentation, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management's accounts and financial statements. The areas in which the management's accounts might differ from the International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant; you should consult your own professional advisors and/or conduct your own due diligence for a complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subjected to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.

Third Quarter and Nine Months of 2018 Unaudited Financial Results Conference Call

TBC Bank Group PLC ("TBC PLC") will release its unaudited consolidated financial results for the third quarter and nine-month of 2018 on Thursday, 15 November 2018 at 7.00 am GMT (11.00 am GET).

On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.

Date & time: Thursday, 15 November 2018 at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST)

Please dial-in approximately five minutes before the start of the call quoting the password TBC:

Password:	TBC
UK Toll Free:	0808 109 0700
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USA Toll Free:	1 866 966 5335
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Moscow:	+7 (8) 495 249 9843

Replay Numbers
Replay Passcode:	5808754
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Standard International Access:	+44 (0) 20 8196 1998
USA Toll Free:	1 866 583 1035
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Moscow:	+7 (8) 495 249 9840

Contacts

Zoltan Szalai

Director of International Media and Investor Relations

E-mail: ZSzalai@Tbcbank.com.ge

Tel: +44 (0) 7908 242128

Web: www.tbcbankgroup.com

Address: 68 Lombard St, London EC3V 9LJ, United Kingdom

Anna Romelashvili

Head of Investor Relations

E-mail: IR@tbcbank.com.ge

Tel: +(995 32) 227 27 27

Web: www.tbcbankgroup.com

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Investor Relations Department

E-mail: IR@tbcbank.com.ge

Tel: +(995 32) 227 27 27

Web: www.tbcbankgroup.com

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Table of Contents

3Q and 9M 2018 Results Announcement

TBC Bank - Background

Financial Highlights

Recent Developments

Letter from the Chief Executive Officer

Economic Overview

Unaudited Consolidated Financial Results Overview for 3Q 2018

Unaudited Consolidated Financial Results Overview for 9M 2018

Additional Disclosures

TBC BANK Group PLC ("TBC Bank")

TBC Bank Announces Unaudited 3Q and 9M 2018 and Consolidated Financial Results:

Net Profit for 3Q 2018 up by 23.8% YoY to GEL 107.4 million

Net Profit for 9M 2018 up by 16.8% YoY to GEL 307.3 million

European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation.

TBC Bank - Background

TBC Bank is the largest banking group in Georgia, where 99.7% of its business is concentrated, and where it has 37.2% market share by total assets. TBC Bank offers retail, corporate, and MSME banking nationwide.

These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26 February 2016 as the ultimate holding company for JSC TBC Bank Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia on 10 August 2016, following the Group's restructuring. As this was a common ownership transaction, the results have been presented as if the Group existed at the earliest comparative date as allowed under the International Financial Reporting Standards ("IFRS"), as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing segment on 10 August 2016.

In 4Q 2016, TBC Bank acquired Bank Republic which has been consolidated into the Group's results.

Financial Highlights

3Q 2018 P&L Highlights

§ Net profit amounted to GEL 107.4 million (3Q 2017: GEL 86.8 million; 2Q 2018: GEL 102.4 million)

§ Return on equity (ROE) amounted to 21.2% (3Q 2017: 19.8%; 2Q 2018: 21.3%)

§ Return on assets (ROA) amounted to 3.1 % (3Q 2017: 2.9%; 2Q 2018: 3.2%)

§ Total operating income amounted to GEL 278.1 million, up by 34.3% YoY and up by 7.6% QoQ

§ Cost to income was 37.4% (3Q 2017: 40.5%; 2Q 2018: 35.6%)

§ Cost of risk stood at 1.9% (3Q 2017: 1.3%; 2Q 2018: 1.8%)

§ FX adjusted cost of risk stood at 1.5% (3Q 2017 1.2%; 2Q 2018: 1.7%)

§ Net interest margin (NIM) stood at 6.9% (3Q 2017: 6.2%; 2Q 2018: 7.1%)

§ Risk adjusted net interest margin (NIM) stood at 5.4% (3Q 2017: 5.0%; 2Q 2018: 5.5%)

9M 2018 P&L Highlights

§ Net profit amounted to GEL 307.3 million (9M 2017: GEL 263.2 million)

§ Return on equity (ROE) amounted to of 21.2% (9M 2017: 20.9%)

§ Return on assets (ROA) was 3.1% (9M 2017: 3.2%)

§ Total operating income for the period was up by 25.5% YoY to GEL 775.2 million

§ Cost to income stood at 37.0% (9M 2017: 42.1%)

§ Cost of risk on loans stood at 1.7% (9M 2017: 1.2%)

§ Net interest margin (NIM) stood at 7.0% (9M 2017: 6.5%)

§ Risk adjusted net interest margin (NIM) stood at 5.3% (9M 2017: 5.1%)

Balance Sheet Highlights as of 30 September 2018

§ Total assets amounted to GEL 14,424.0 million as of 30 September 2018, up by 18.8% YoY and up by 6.2% QoQ

§ Gross loans and advances to customers stood at GEL 9,622.6 million as of 30 September 2018, up by 23.9% YoY and up by 8.2% QoQ

§ Net loans to deposits + IFI funding stood at 88.0% and Net Stable Funding Ratio (NSFR) stood at 118.0%

§ NPLs were 3.1%, down by 0.4pp YoY and unchanged QoQ

§ NPLs coverage ratios stood at 113.2%, or 209.0% with collateral, on 30 September 2018 compared, to 80.5% or 206.8% with collateral, as of 30 September 2017[1] and 116.1%, or 216.1% with collateral on 30 June 2018

§ Total customer deposits amounted to GEL 8,740 million as of 30 September 2018, up by 23.2% YoY and up by 10.2% QoQ

§ As of 30 September 2018, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios per NBG methodology stood at 12.8% and 16.4% respectively, while minimum requirements amounted to 10.3% and 15.8%

Market Shares[2]

§ Market share in total assets reached 37.2% as of 30 September 2018, up by 0.7pp YoY and up by 0.1pp QoQ

§ Market share in total loans was 38.4% as of 30 September 2018, up by 0.2pp YoY and up by 0.1pp QoQ

§ In terms of individual loans, TBC Bank had a market share of 39.9% as of 30 September 2018, down by 0.6pp YoY and up by 0.1pp QoQ. The market share for legal entity loans was 36.6%, up by 1.0pp YoY and up by 0.1pp QoQ

§ Market share of total deposits reached 40.3% as of 30 September 2018, up by 1.7pp YoY and up by 0.8pp QoQ

§ Market share of individual deposits attained to 41.1%, up by 0.2pp YoY and down by 0.1pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 39.4%, up by 3.5pp YoY and up by 1.9pp QoQ.

Recent Developments

Recent and Upcoming Regulations

· On 1 September 2018, a 50% effective interest cap on loans was introduced, although we do not expect it to have any material impact on TBC Bank's performance;

· Other regulatory initiatives are also expected to come into force by the end of 2018, including the following: 1) an increase in the limit, below which loans cannot be issued to individuals in foreign currency, from GEL 100,000 to GEL 200,000, 2) an introduction of new caps on PTI and LTV ratios and 3) a regulation on loans to customers without verified income.

· While final details are not known yet, these regulations are expected to support further de-dollarization and it might decrease the retail loan growth rate in the short to medium term. Therefore, we are revising our medium term annual loan growth rate guidance to 10-15%. However, our other targets remain unchanged with return on equity above 20%, cost to income ratio below 35% and a dividend pay-out ratio of 25-35%.

Georgia ranks 6th in 2019 "Doing Business" report

· Georgia continues its remarkable progress on the World Bank's Doing Business rankings. According to the 2019 Ease of Doing Business report, Georgia ranks 6^th among 190 countries surveyed globally; up from the 9^th in the previous year. Georgia stands just after Korea and before Norway and it outscores all CEE countries.

TBC Bank Group PLC announces Board changes

· TBC Bank has appointed two female board members, Maria Luisa Cicognani and Tsira Kemularia, as Independent Non-Executive Directors. They will also serve as Supervisory Board members of TBC PLC's main subsidiary - JSC TBC Bank. Following the appointment of Ms Cicognani and Ms Kemularia, Stefano Marsaglia and Stephan Wilcke have stepped down from the TBC PLC Board and the Supervisory Board of JSC TBC Bank.

TBC Bank and FMO Sign a GEL 103 Million Loan Agreement

· TBC Bank has signed a loan agreement in the amount of GEL 103 million with FMO, the Netherlands Development Finance Company. The five-year loan facility will be used primarily to finance young entrepreneurs running micro, small and medium size enterprises in Georgia, as well as young retail customers requiring mortgage loans. The local currency funding will be obtained by FMO through a public bond placement on the Georgian Stock Exchange.

TBC Bank and EIB Sign EUR 30 Million Loan Agreement

· TBC Bank has signed a loan agreement in the amount of EUR 30 million with the European Investment Bank (EIB). The five-year loan facility will primarily be used to finance small and medium size enterprises in Georgia.

TBC Bank wins the Best Private Bank in Georgia 2018 award from PWM and The Banker Magazines

· TBC Bank has been named the Best Private Bank in Georgia 2018 by Professional Wealth Management (PWM) and The Banker magazines. This prestigious award is acknowledgement of TBC Bank's continuous efforts to deliver exceptional private banking services in Georgia. Participants were evaluated against a set of growth and performance measures, as well as on their particular private banking services.

TBC Bank wins Two Global Digital Awards from Global Finance Magazine

§ TBC Bank has been named the world's Best in Social Media Marketing and Services 2018 and the world's Best Integrated Consumer Banking Site 2018 by Global Finance Magazine. In the list of winners TBC Bank stands among some of the world's leading banks.

TBC Bank wins the Best Foreign Exchange Provider 2019 in Georgia from Global Finance Magazine

§ TBC Bank has been named the Best Foreign Exchange Provider 2019 in Georgia by Global Finance Magazine. The winners were chosen based on extensive criteria including transaction volume, market share, scope of global coverage, customer service, competitive pricing and innovative technologies.

Additional Information Disclosure

Additional historical information for certain P&L, balance sheet and capital items, and on asset quality is disclosed on our Investor Relations website on http://tbcbankgroup.com/ under the Financial Highlights section.

Letter from the Chief Executive Officer

I am delighted to present our strong financial results for the third quarter in 2018 and a brief overview of the recent economic developments, as well as give you an update on our international plans.

In the third quarter, we recorded a consolidated net profit of GEL 107.4 million, up by 23.8% year-on-year. Our return on equity amounted to 21.2%, up by 1.4 percentage points year-on-year, while our return on assets was 3.1%, up by 0.2 percentage points year-on-year.

We continued to deliver on our promises and achieved a net interest margin at 6.9% during the quarter, within the range of our short-term guidance. Over the same period, our net fee and commission income grew by 23.9% year-on-year, consistent with our annual growth guidance and mainly driven by the increasing number of card and settlement transactions. Our cost to income ratio decreased by 3.1 percentage points year-on-year to 37.4%.

During the quarter, our loan book grew by 23.9% year-on-year, bringing our market share to 38.4%, up by 0.2 percentage points year-on-year. Our asset quality remained sound, with FX adjusted cost of risk at 1.5% and non-performing loans at 3.1%. Over the same period, our customer accounts grew by 23.2% year-on-year, increasing our market share to 40.3%, up by 1.7 percentage points year-on-year.

Our capital and liquidity ratios continued to remain solid. As of 30 September 2018, our tier 1 and total capital adequacy ratios (CAR) per Basel III guidelines stood at 12.8% and 16.4% respectively, compared to the corresponding minimum requirement of 10.3% and 15.8%. At the same time, our net loans to deposits + IFI funding ratio stood at 88.0% and the net stable funding ratio (NSFR) was 118.0%.

I am particularly pleased with the achievements of our digital strategy as the number of transactions and sales volume through digital channels continue to grow. As a result, in the third quarter of 2018 our offloading ratio was 90%[3], while 47%[4] of all sales were completed via digital channels in September 2018. In addition, our recently launched, fully-digital bank, Space, continued to rapidly attract new customers and had approximately 186,000 users as of 30 September 2018.

The growth of the Georgian economy remains solid despite increased uncertainties in the region, contractionary fiscal policy and one-offs related to some large infrastructure projects. In the third quarter, real GDP^{^[5]} grew by 4.0%, while growth in September reached 5.6%. Investment demand has been the major contributor to growth, supported by healthy business lending as well as the strong pace of reforms aimed at improving the business environment in the country. Georgia ranked 6^th out of 190 countries in the recently released "Doing Business 2019 report", up from 9^th position in the previous year. While the growth of total external inflows slowed during the quarter, mostly due the situation in Turkey and Iran, it still remained in double digits thanks to the geographically diversified sources of inflows. During the quarter exports of goods increased by 21.1% year-on-year, mainly supported by exports to CIS countries. Over the same period, remittances grew by 12.0% year-on-year and tourism inflows expanded by 11.7% year-on-year, mainly driven by EU countries. Despite the temporary negative spill-overs from some neighbouring countries, the Georgian economy is expected to continue its solid growth, with the IMF projecting an average of 5.0% annual GDP growth over the next five years.

Finally, I would like to welcome our two new board members: Maria Luisa Cicognani and Tsira Kemularia, who joined our Board as independent Non-Executive Directors. Ms. Cicognani and Ms. Kemularia have extensive international experience at some of the world's leading institutions and will bring valuable perspectives and expertise to our Board.

Following the increase in diversity of our Board and our continued efforts to improve corporate governance, including implementation of the new executive compensation system, we expect substantial improvement in our governance scores, and we are very pleased to see ISS upgrading our score to 4 as of 1 November 2018.

Outlook

On 1 September 2018, a 50% effective interest rate cap on loans was introduced, although we do not expect it to have any material impact on TBC Bank's performance. Other regulatory initiatives are also expected to come into force by the end of 2018, including the following:

· An increase in the limit below which loans cannot be issued to individuals in a foreign currency, from GEL 100,000 to GEL 200,000;

· The introduction of new caps on PTI and LTV ratios; and

· Regulation of loans to customers without verified income.

While the final details are not known yet, these regulations are expected to support further de-dollarisation and they may also decrease the retail loan growth rate in the short-to-medium term. Therefore, we are revising our medium term annual loan growth rate guidance to 10-15%. However, our other targets remain unchanged: a return on equity above 20%, a cost to income ratio below 35% and a dividend pay-out ratio of 25-35%.

Regarding our insurance business, I am very pleased with its results. Starting from this year, we have become the second largest player on the P&C insurance market and the largest player in the retail segment, holding 18.3% and 30.0% market shares[6] respectively, based on internal estimates. In the third quarter, the number of customers grew steadily and totaled around 300,000, up by 113% year-on-year.

While Georgia will remain our main focus, the vast expertise we have built in the last three decades, including our advanced digital banking technology, should provide us with a strong competitive advantage to carefully enter selected new markets and start growing our banking business beyond Georgia.

In this context, I would like to provide you with an update on the progress made in our international strategy:

Azerbaijan

Following the completion of due diligence of Nikoil Bank, our Board of Directors is expected to approve the transaction on 16^th November, after which we will sign the definitive agreements. The next step is obtaining the regulatory approval, which could take up to a few months. After the merger is completed, TBC Bank will hold up to 10% of the merged entity and will have an option to acquire the number of shares needed to achieve 50%+1 share of the merged entity within 3 years, based on a fixed price formula.

In parallel, we have started to develop and implement the new strategy of the merged entity. The bank will be serving retail and MSME customers and will have a strong focus on digital offerings including our fully-digital bank, Space. The main shareholder of Nikoil has already recapitalised the bank by investing USD 45 million by September 2018. A further capital increase has also been agreed upon, whereby TBC Bank will be investing, consistent with its 10% shareholding, between three and five million US dollars each year subject to reaching appropriate KPIs by the merged entity. Within three years, we expect the bank to have USD 1,400 million in its loan book, USD 200 million in total equity and a return on equity of above 20%.

I am very pleased that we are establishing an outstanding team for the merged entity. In addition to the CEO, Nikoloz Shurgaia, who has extensive international banking experience and education, the following new members have joined the team:

• Chief Operating Officer - Nukri Tetrashvili, former CEO of TBC Kredit

• Chief Digital Officer -Senior Digital Manager with a solid track record at large Georgian bank

• Chief Risk Officer - David Tediashvili, former Head of Retail Credit Risk Department at TBC Bank

• Chief Financial Officer - Emil Dushdurov, former Associate Director, Deal Advisory at KPMG Azerbaijan

Uzbekistan

I would like to present our progress in our quest to expand our digital banking offerings not only in the Caucasus region, but also in Central Asia, namely in Uzbekistan. This is still at the concept phase and subject to approvals, including from the local authorities. Therefore, the project could change as we progress.

Uzbekistan is a very attractive market with a large and growing population of 32 million and with retail and MSME loans to GDP ratio^{^[7]}of below 5% as of the end 2017. Georgia and Uzbekistan have good cultural links, share a similar past dating back to the Soviet Union times and are both part of China's One Belt One Road initiative.

We believe that now is the right time to enter this market as the country has embarked on a path of reforms, many of which have been designed based on advice given by former Georgian government officials, and is creating a business friendly environment.

We aspire to build a greenfield, next generation bank for retail and MSME customers with a primary focus on digital channels including our fully-digital bank, Space. We also plan to operate hi-tech, asset-light branches with digital offerings.

We would like to establish the bank in partnership with international financial institutions and a local partner. Our plans foresee a minimum 51% shareholding and an initial investment of USD 20-30 million. We have already secured preliminary interest from certain international financial institutions and we are in the process of finding a local partner.

Our medium to long-term financial aspirations for the Uzbek subsidiary is to contribute above 20% to TBC Bank Group PLC's assets and income and to achieve sustainable ROE up to 25%.

On the one hand, our planned expansion in Azerbaijan and Uzbekistan should allow us to reach out to a population of around 40 million compared to just 4 million in Georgia, offering us tremendous new growth opportunities given the competitive advantages of our products and services. On the other hand, we plan to follow an asset-light, limited capital investment approach with a strong focus on digital channels and to invest in stages to make sure that we are comfortable with the results and the operating environment before committing additional investment.

We will aim to transfer our international aspirations into specific financial targets within the period of one year.

Economic Overview[8]

Economic growth

Economic growth remained at solid 5.5% in 2Q 2018. In nominal terms, the GDP increased by 10.6% YoY over the same period. Amid increased uncertainties in the countries across the region, a contractionary fiscal policy and one-offs related to large infrastructure projects, growth slowed to 4.0% in 3Q 2018, with latest September growth at 5.6%, in line with initial estimates of the national statistics' office Geostat. Reflecting the increased uncertainties in the external sector IMF revised GDP growth projections to 5.0% for 2018, down from 5.5% projected previously.

Structural reforms continue to support the domestic as well as foreign investment growth. According to the World Bank's "Doing Business 2019" report, Georgia further strengthened its position and ranked 6^th among the 190 countries surveyed - up by 3 steps from the 9^th position in previous year. With this position, Georgia stands among the countries such as Hong Kong, Korea, Norway, while outperforming all of the CEE countries. Continued tax reform contributes significantly to the strengthening of Georgia's position in "Doing Business 2019" rankings. Total tax and contribution rate as a percentage of corporate taxes currently stand at 9.9%, among the lowest globally, down from 16.4% in 2018^{^[9]}.

The investment demand has fuelled growth in 2Q 2018. Investment increased by 26.4% YoY in nominal terms and amounted to 34% of GDP over the last four quarters ending 2Q 2018, the highest level since 2006. The increase was driven by solid growth in capital investments (+21.2% YoY) as well as investments in inventory (+81.8% YoY). Consumption rose by 6.9% YoY in nominal terms as of 2Q 2018.

In 2Q 2018 trade and repairs (+10.5% YoY), manufacturing (+7.6% YoY), real estate (+13.8% YoY), and financial intermediation (+22.0% YoY) were the fastest growing sectors, contributing the most to real GDP growth, while agriculture (-3.3% YoY) and construction (-7.1% YoY) sectors contracted. The drop in the construction sector was primarily due to the one-off factors related to fiscal underspending on several large scale infrastructure projects as well as finalization of the South Caucasus pipeline expansion project.

Consolidated budget posted the surplus of an estimated 0.7% of GDP both in 3Q 2018 and in the first nine months of 2018. These figures imply sizeable contractionary impact of fiscal policy as budget deficit stood at 3.3% in 3Q 2017 and 2.0% in first nine months of 2017. In 3Q 2018 tax revenues increased by 8.7% YoY, over the same period total spending declined modestly by 0.5% YoY.

The contractionary impact of the fiscal spending was balanced by the economy's accelerated bank lending. As of September 2018 the total bank loan portfolio increased by 19.1%[10] YoY. Loans to SME and corporate segment increased by a solid 20.3% and 19.8% YoY respectively. Retail loan growth also remained strong at 18.1%, primarily driven by the increase of mortgage loans. The NBG's regulation related to the non-mortgage lending introduced back in May 2018 have resulted in slowdown of this segment.

The growth of total external inflows from exports, tourism and remittances slowed in 3Q 2018 amid increased uncertainties in some of Georgia's economic partners. Despite the negative impact mostly from Turkey and Iran, the growth of inflows remains in double digits thanks to their geographically diversified sources.

Exports of goods increased by a solid 21.1%^{^[11]} YoY in 3Q 2018. The growth was driven by growing exports to CIS countries (+41.9% YoY). Over the same period exports to EU decreased modestly by 1.7% YoY, while the exports to other countries increased by 9.5% YoY. The sharp drop of the Turkish lira and sanctions on Iranian oil exports negatively affected the growth of exports to these countries and dropped by 15% YoY and 28.8% YoY respectively. The share of Turkey and Iran in Georgia's total exports fell to 6.8% in 3Q 2018, thus the negative spillovers from these countries should be limited going forward.

After a 23.2% increase in the first half of 2018, the growth in imports retreated to 11.8% YoY in 3Q 2018, reflecting the expected slower economic growth in 3Q as well as restrictions on non-mortgage loans having negative impact on the imports of durable consumer goods. The trade deficit widened by only 6.4% in 3Q 2018 compared to the 20.5% growth 1H 2018. Declining growth rate of the trade deficit was evident since March 2018 with even improvement in September.

In 3Q 2018 tourism inflows grew by 11.7% YoY. The increase of visitors from the EU was steepest at 39.0% YoY. Visitors from the CIS countries increased by 9.6% YoY while the visitors from other countries went up by 4.0% YoY. The latter was negatively affected primarily by declining visitors from Iran (-26.3% YoY).

Remittances grew by 12.0% YoY in 3Q 2018 with EU countries remaining the major driver of growth. Private money transfers slowed from the CIS (+3.6% YoY) and other countries (7.5% YoY). In the same period sizeable decline in remittances from Turkey in 3Q 2018 (-13.8%) was the main drag on growth. Inflows also declined from Russia (-1.6% YoY) albeit more moderately.

The current account (CA) deficit was traditionally fully financed by FDIs and remained broadly unchanged from previous year, standing at 9.2% of GDP as of last four quarters ending 2Q 2018.

Important to mention that in the 3rd quarter 2018 NBG bought 62.5 mln USD, indicating that FX inflows are sufficient for higher growth and without negative impact of fiscal spending on domestic demand exchange rate would not have been necessarily depreciated.

In September, the USD/GEL exchange rate depreciated by 0.9% YTD and by 5.6% YoY. In the same period, the EUR/GEL exchange rate appreciated by 2.4% YTD and weakened by 3.6% YoY. Real effective exchange rate of GEL could be undervalued following the appreciation of Turkish lira and some USD/GEL weakness in Sept-October 2018. As of October 31 GEL real effective exchange rate was around same levels as in Jan-Feb 2018, close to its peak depreciation by the end of November 2017.

Inflation and monetary policy

CPI inflation stood at 2.7% in September, slightly below the NBG's 3% target. The core inflation remained around 1pp below the headline inflation, the difference being mostly driven by rising oil prices. The NBG started to gradually ease the monetary policy by cutting its refinancing rate by 0.25pp to 7% in July 2018. NBG left the policy rate unchanged at 7% during their September and October meetings. NBG expects to decrease interest rates going forward, however depending on external as well as domestic developments.

Going forward

Despite the temporary negative spillovers from the neighboring countries, the Georgian economy is expected to continue its solid performance. According to the IMF projections, growth is expected to average at 5% over the next five years. Solid growth projections are backed by the continuous reforms to further strengthen the economy as an attractive business destination. Furthermore, tax-free access to almost all major markets in the region enables Georgia to continue to diversify its export markets and increase the economy's resilience against headwinds.

More information on the Georgian economy and financial sector can be found at www.tbcresearch.ge

Unaudited Consolidated Financial Results Overview for 3Q 2018

This statement provides a summary of the unaudited business and financial trends for 3Q 2018 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.

Starting from 1 January 2018, TBC Bank adopted IFRS 9 and IFRS 15. Therefore, the comparative information for 2017 is not comparable to the information presented for 2018.

Please note, that there might be slight differences in previous periods' figures due to rounding.

Income Statement Highlights
in thousands of GEL	3Q'18	2Q'18	3Q'17	Change YoY	Change QoQ
Net Interest Income	199,612	188,204	146,546	36.2%	6.1%
Net Fee and Commission Income	39,384	39,162	31,790	23.9%	0.6%
Other Operating Non-Interest Income	39,093	31,052	28,758	35.9%	25.9%
Credit Loss Allowance	(47,650)	(35,091)	(27,097)	75.8%	35.8%
Operating Income after Credit Loss Allowance	230,439	223,327	179,997	28.0%	3.2%
Operating Expenses	(104,103)	(92,090)	(83,910)	24.1%	13.0%
Profit Before Tax	126,336	131,237	96,087	31.5%	-3.7%
Income Tax Expense	(18,952)	(28,799)	(9,327)	NMF	-34.2%
Profit for the Period	107,384	102,438	86,760	23.8%	4.8%

NMF - no meaningful figures

Balance Sheet and Capital Highlights

	Sep-18		Jun-18			Change QoQ
in thousands of GEL	GEL	USD		GEL	USD
Total Assets	14,423,997	5,515,658		13,583,510	5,540,671		6.2%
Gross Loans	9,622,563	3,679,616		8,895,947	3,628,629		8.2%
Customer Deposits	8,740,449	3,342,300		7,932,585	3,235,677		10.2%
Total Equity	2,055,951	786,184		1,943,684	792,823		5.8%
Regulatory Tier I Capital (Basel III)*	1,580,547	604,393		1,498,857	611,379		5.5%
Regulatory Total Capital (Basel III)*	2,020,501	772,629		1,908,398	778,430		5.9%
Regulatory Risk Weighted Assets (Basel III)*	12,305,756	4,705,654		11,200,354	4,568,590		9.9%

*As per new NBG regulation which came into force in December 2017

Key Ratios	3Q'18	2Q'18	3Q'17	Change YoY	Change QoQ
ROE	21.2%	21.3%	19.8%	1.4%	-0.1%
ROA	3.1%	3.2%	2.9%	0.2%	-0.1%
Cost to Income	37.4%	35.6%	40.5%	-3.1%	1.8%
Cost of Risk	1.9%	1.8%	1.3%	0.6%	0.1%
FX adjusted Cost of Risk	1.5%	1.7%	1.2%	0.3%	-0.2%
NPL to Gross Loans	3.1%	3.1%	3.5%	-0.4%	0.0%
Regulatory Tier 1 CAR (Basel III)*	12.8%	13.4%	10.8%	2.0%	-0.6%
Regulatory Total CAR (Basel III)*	16.4%	17.0%	14.5%	1.9%	-0.6%
Leverage (Times)	7.0x	7.0x	6.8x	0.2x	0.0x

*The 2018 figures are given as per new NBG regulation, which came into force in December 2017, while the 3Q 2017 figures are given based on previous regulation in accordance with Basel II/III guidelines.

Income Statement Discussion

Net interest Income

In thousands of GEL	3Q'18	2Q'18	3Q'17	Change YoY	Change QoQ
Loans and Advances to Customers	288,435	270,378	225,467	27.9%	6.7%
Investment Securities Measured at Fair Value through Other Comprehensive Income	15,310	11,968	12,657	21.0%	27.9%
Due from Other Banks	5,537	7,027	4,524	22.4%	-21.2%
Bonds Carried at Amortised Cost	10,994	9,842	9,785	12.4%	11.7%
Investment in Leases	10,415	8,937	5,819	79.0%	16.5%
Interest Income	330,691	308,152	258,252	28.0%	7.3%
Customer Accounts	68,727	64,804	59,329	15.8%	6.1%
Due to Credit Institutions	51,989	44,785	42,407	22.6%	16.1%
Subordinated Debt	10,033	9,959	9,494	5.7%	0.7%
Debt Securities in Issue	330	400	476	-30.7%	-17.5%
Interest Expense	131,079	119,948	111,706	17.3%	9.3%
Net Interest Income	199,612	188,204	146,546	36.2%	6.1%

Net Interest Margin	6.9%	7.1%	6.2%	0.7%	-0.2%

NMF - no meaningful figures

3Q 2018 to 3Q 2017 Comparison

Net interest income increased by GEL 53.1 million, or 36.2%, to GEL 199.6 million, compared to 3Q 2017, driven by a GEL 72.4 million, or 28.0%, higher interest income and a GEL 19.4 million, or 17.3%, higher interest expense.

Interest income grew by GEL 72.4 million, or 28.0%, YoY to GEL 330.7 million, mainly due to an increase in interest income from loans and advances to customers of GEL 63.0 million or 27.9%, which is primarily related to an increase in gross loan portfolio of GEL 1,854.9 million, or 23.9%, YoY. This effect was further magnified by a 0.5pp rise in loan yields, which was mainly driven by an increase in rates on GEL denominated loans by 1.4pp to 17.9% which offset the decrease in yields on FC denominated loans by 0.3pp to 8.5%. The growth in interest income also resulted from a higher interest income from investment in leases (through our subsidiary), due to an increase in the size of the respective portfolio, as well as increase in yields. Yields on interest earning assets expanded by 0.5pp to 11.4%, compared to 3Q 2017.

The GEL 19.4 million, or 17.3%, YoY growth in interest expense to GEL 131.1 million in 3Q 2018 was mainly due to GEL 9.4 million, or 15.8%, increase in interest expense on customer accounts and GEL 9.6 million, or 22.6%, increase in interest expense on amounts due to credit institutions. The increase in interest expense on customer accounts was attributable to a GEL 1,643.9 million, or 23.2%, growth in the respective portfolio. This effect was slightly offset by a 0.1pp drop in the cost of deposits to 3.3%, which resulted from a 0.4pp decrease in the cost of FC denominated deposits to 2.1% and a 0.1pp decrease in the cost of LC denominated deposits to 5.6%. The increase in interest expense on amounts due to credit institutions was attributable to a GEL 305.3 million, or 11.4% increase in the respective portfolio and a 0.5pp increase in effective rates on the amounts due to credit institutions, up to 7.1%, mainly related to higher libor rate. The cost of funding decreased by 0.1p p and stood at 4.4%.

Consequently, NIM stood at 6.9% in 3Q 2018, compared to 6.2% in 3Q 2017, while the risk adjusted NIM stood at 5.4%, compared to 5.0% in 3Q 2017.

3Q 2018 to 2Q 2018 Comparison

On a QoQ basis, net interest income grew by 6.1% as a result of a 7.3% higher interest income and a 9.3% higher interest expense.

The GEL 22.5 million, or 7.3%, QoQ increase in interest income mainly resulted from the growth in interest income on loans by GEL 18.1 million, or 6.7%. This in turn was due to an increase in loan portfolio by GEL 726.6 million, or 8.2%. The increase in interest income was also magnified by a rise in interest income from investment securities by GEL 3.3 million, or 27.9%, due to both growth in the respective portfolio and an increase in the respective yield by 0.1pp to 7.2%. The increase was slightly offset by the drop in interest income from due from credit institutions by GEL 1.5 million, or 21.2%, mainly driven by the decrease in respective yield by 1.1pp to 2.0%. The yield on interest earning assets decreased by 0.3pp to 11.4%, compared to 2Q 2018.

The GEL 11.1 million, or 9.3%, QoQ increase in interest expense was primarily due to the GEL 7.2 million, or 16.1%, increase in interest expense on amounts due to credit institutions. The main driver was a rise in the respective effective rate by 0.2pp to 7.1%, related to rise in libor rate. Another contributor to the rise in interest expense was the GEL 3.9 million, or 6.1% higher interest expense on customer accounts. This, resulted from the GEL 807.9 million, or 10.2%, increase in the respective portfolio, while the cost of deposits remained flat and stood at 3.3%. The cost of funding remained stable at 4.4%.

Consequently, on a QoQ basis, NIM decreased by 0.2pp and stood at 6.9%. Meanwhile risk adjusted NIM decreased by 0.1pp compared to the previous quarter and stood at 5.4%.

Fee and Commission Income

In thousands of GEL	3Q'18	2Q'18	3Q'17	Change YoY	Change QoQ
Card Operations	28,227	25,274	20,662	36.6%	11.7%
Settlement Transactions	17,709	17,454	15,170	16.7%	1.5%
Guarantees Issued	4,652	4,859	4,295	8.3%	-4.3%
Issuance of Letters of Credit	2,021	1,289	990	NMF	56.8%
Cash Transactions	3,950	4,543	4,576	-13.7%	-13.1%
Foreign Currency Exchange Transactions	482	406	420	14.8%	18.7%
Other	2,512	4,440	2,439	3.0%	-43.4%
Fee and Commission Income	59,553	58,265	48,552	22.7%	2.2%
Card Operations	14,730	12,975	11,409	29.1%	13.5%
Settlement Transactions	2,037	2,143	1,897	7.4%	-4.9%
Guarantees Issued	426	313	758	-43.8%	36.1%
Letters of Credit	433	327	239	81.2%	32.4%
Cash Transactions	1,524	1,242	1,177	29.5%	22.7%
Foreign Currency Exchange Transactions	(4)	3	3	NMF	NMF
Other	1,023	2,100	1,279	-20.0%	-51.3%
Fee and Commission Expense	20,169	19,103	16,762	20.3%	5.6%
Card Operations	13,497	12,299	9,253	45.9%	9.7%
Settlement Transactions	15,672	15,311	13,273	18.1%	2.4%
Guarantees	4,226	4,546	3,537	19.5%	-7.0%
Letters of Credit	1,588	962	751	NMF	65.1%
Cash Transactions	2,426	3,301	3,399	-28.6%	-26.5%
Foreign Currency Exchange Transactions	486	403	417	16.5%	20.6%
Other	1,489	2,340	1,160	28.4%	-36.4%
Net Fee And Commission Income	39,384	39,162	31,790	23.9%	0.6%

3Q 2018 to 3Q 2017 Comparison

In 3Q 2018, net fee and commission income totalled GEL 39.4 million, up by GEL 7.6 million, or 23.9%, compared to 3Q 2017. This mainly resulted from an increase in net fee and commission income from card operations of GEL 4.2 million, or 45.9% and an increase in net fee and commission income from settlement transactions of GEL 2.4 million, or 18.1%.

The rise in net fee and commission income from card operations is related to the increased number of active cards and POS terminals by 17.4% and 13.9% respectively. The increase in net fee and commission income from settlement transactions was mainly related to our subsidiary, TBC Pay, driven by increased number of transactions and the growth in net fee and commission income from our affluent retail sub-segment, TBC Status.

3Q 2018 to 2Q 2018 Comparison

On a QoQ basis, net fee and commission income increased by GEL 0.2 million, or 0.6%, compared to 2Q 2018. This was primarily driven by an increase in net fee and commission income from card transactions of GEL 1.2 million, or 9.7%. The rise was partially offset by the decline in other net fee and commission income by GEL 0.9 million, mainly due to the arrangement fee received in 2Q 2018 related to one corporate client in the amount of GEL 1.3 million. The decrease in cash transactions of GEL 0.9 million was due to reclassification of fees received from remittances to settlement transactions in 3Q 2018.

Other Operating Non-Interest Income and Gross Insurance Profit
In thousands of GEL	3Q'18	2Q'18	3Q'17	Change YoY	Change QoQ
Net Income from Foreign Currency Operations	31,040	23,251	20,330	52.7%	33.5%
Share of Profit of Associates	294	340	84	NMF	-13.5%
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments	(56)	396	(1)	NMF	NMF
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income	2	-	-	NMF	NMF
Revenues from Cash-In Terminal Services	237	226	241	-1.7%	4.9%
Revenues from Operational Leasing	1,671	1,567	1,623	3.0%	6.6%
Gain from Sale of Investment Properties	492	855	404	21.8%	-42.5%
Gain from Sale of Inventories of Repossessed Collateral	868	100	756	14.8%	NMF
Revenues from Non-Credit Related Fines	62	111	29	NMF	-44.1%
Gain on Disposal of Premises and Equipment	36	154	66	-45.5%	-76.6%
Other	1,324	799	3,453	-61.7%	65.7%
Other Operating Income	4,690	3,812	6,572	-28.6%	23.0%
Gross Insurance Profit[12]	3,123	3,253	1,773	76.1%	-4.0%
Other Operating Non-Interest Income and Gross Insurance Profit	39,093	31,052	28,758	35.9%	25.9%
NMF - no meaningful figures

3Q 2018 to 3Q 2017 Comparison

Total other operating non-interest income and gross insurance profit grew by GEL 10.3 million, or 35.9%, to GEL 39.1 million in 3Q 2018. This primarily resulted from the growth in net income from foreign currency operations by GEL 10.7 million, or 52.7% and the increase in gross insurance profit of GEL 1.4 million, or 76.1%. Higher net income from foreign currency operations resulted from an increased number and volume of FX transactions, as well as larger margins, driven by higher exchange rate volatility. The increase was partially offset by the drop in other operating income by GEL 1.9 million, or by 28.6%, due to higher one-off incomes in 3Q 2017.

Higher gross insurance profit resulted from a sharp increase in the number of customers by around 60,000, which in turn led to a high increase in gross written premium by 84.4% YoY to GEL 15,833 thousand on a stand-alone basis. More information about TBC insurance can be found in annex 23 on page 47.

3Q 2018 to 2Q 2018 Comparison

On a QoQ basis, total other operating non-interest income and gross insurance profit increased by GEL 8.0 million, or by 25.9%. This mainly resulted from the growth in net income from foreign currency operations by GEL 7.8 million, or by 33.5%, related to a higher turnover of FX operations and higher foreign exchange margins, that were mainly caused by increased quarter-on-quarter volatility of exchange rate. Another contributor was other operating income, which grew by GEL 0.9 million or 23.0%. This was partially offset by the decline in losses less gains from derivative financial instruments by GEL 0.5 million.

Credit Loss Allowance
In thousands of GEL	3Q'18	2Q'18	3Q'17	Change YoY	Change QoQ
Credit Loss Allowance for Loan to Customers	(43,345)	(37,982)	(25,036)	73.1%	14.1%
Credit Loss Allowance for Investments in Finance Lease	(493)	(252)	(285)	73.0%	95.6%
Credit Loss Allowance for Performance Guarantees and Credit Related Commitments	(24)	1,375	(680)	-96.5%	NMF
Credit Loss Allowance for Other Financial Assets	(3,706)	1,950	(1,096)	NMF	NMF
Credit Loss Allowance for Financial Assets Measured at Fair Value through Other Comprehensive Income	(29)	(12)	-	NMF	NMF
Credit Loss Allowance for Financial Assets Measured at Amortised Cost	(53)	(170)	-	NMF	-68.8%
Total Credit Loss Allowance	(47,650)	(35,091)	(27,097)	75.8%	35.8%
Operating Income after Credit Loss Allowance	230,439	223,327	179,997	28.0%	3.2%

Cost of Risk	1.9%	1.8%	1.3%	0.6%	0.1%
NMF - no meaningful figures

3Q 2018 to 3Q 2017 Comparison

In 3Q 2018, total credit loss allowance grew by GEL 20.6 million to GEL 47.7 million compared to 3Q 2017.

This was primarily attributable to an increase in credit loss allowance for loans to customers of GEL 18.3 million, mainly driven by local currency depreciation and recoveries of credit loss allowance in corporate segment in 3Q 2017. Another contributor to the increase was credit loss allowance on other financial assets by GEL 2.6 million.

In 3Q 2018, the cost of risk stood at 1.9% (1.5% without the FX effect), compared to 1.3% (1.2% without the FX effect) in 3Q 2017.

3Q 2018 to 2Q 2018 Comparison

On a QoQ basis, total credit loss allowance grew by GEL 12.6 million to GEL 47.7 million.

This was mainly driven by an increase in credit loss allowance for loans to customers by GEL 5.3 million and an increase in credit loss allowance for other financial assets by GEL 5.7 million. The increase was fully attributable to local currency depreciation.

In 3Q 2018, the cost of risk stood at 1.9% (1.5% without the FX effect), compared to 1.8% (1.7% without the FX effect) in 2Q 2018.

Operating Expenses

In thousands of GEL	3Q'18	2Q'18	3Q'17	Change YoY	Change QoQ
Staff Costs	54,294	50,732	46,620	16.5%	7.0%
Provisions for Liabilities and Charges	4,000	-	-	NMF	NMF
Depreciation and Amortization	11,944	10,992	9,317	28.2%	8.7%
Professional services	4,107	1,498	3,834	7.1%	NMF
Advertising and marketing services	7,193	7,117	3,492	NMF	1.1%
Rent	6,016	5,843	5,635	6.8%	3.0%
Utility services	1,702	1,453	1,533	11.0%	17.1%
Intangible asset enhancement	2,628	2,572	2,177	20.7%	2.2%
Taxes other than on income	1,799	1,946	1,763	2.0%	-7.6%
Communications and supply	1,558	1,160	1,067	46.0%	34.3%
Stationary and other office expenses	1,021	1,324	1,157	-11.8%	-22.9%
Insurance	1,063	483	(271)	NMF	NMF
Security services	517	506	477	8.4%	2.2%
Premises and equipment maintenance	2,167	1,128	1,142	89.8%	92.1%
Business trip expenses	578	669	468	23.5%	-13.6%
Transportation and vehicles maintenance	703	413	386	82.1%	70.2%
Charity	181	281	346	-47.7%	-35.6%
Personnel training and recruitment	465	233	191	NMF	99.6%
Write-down of current assets to fair value less costs to sell	(436)	(567)	(189)	NMF	-23.1%
Loss on disposal of inventory	36	80	2	NMF	-55.0%
Loss on disposal of investment properties	-	30	-	NMF	-100.0%
Loss on disposal of premises and equipment	99	58	135	-26.7%	70.7%
Impairment of intangible assets	-	-	66	-100.0%	NMF
Acquisition costs	-	-	1,063	-100.0%	NMF
Gross change in IBNR[13]	-	-	(391)	-100.0%	NMF
Other	2,468	4,139	3,890	-36.6%	-40.4%
Administrative and Other Operating Expenses	33,865	30,366	27,973	21.1%	11.5%
Operating Expenses	104,103	92,090	83,910	24.1%	13.0%
Profit before Tax	126,336	131,237	96,087	31.5%	-3.7%
Income Tax Expense	(18,952)	(28,799)	(9,327)	NMF	-34.2%
Profit for the Period	107,384	102,438	86,760	23.8%	4.8%

Cost to Income	37.4%	35.6%	40.5%	-3.1%	1.8%
ROE	21.2%	21.3%	19.8%	1.4%	-0.1%
ROA	3.1%	3.2%	2.9%	0.2%	-0.1%

3Q 2018 to 3Q 2017 Comparison

In 3Q 2018, total operating expenses expanded by GEL 20.2 million, or by 24.1% YoY to GEL 104.1 million, primarily due to an increase in staff costs of GEL 7.7 million, or 16.5% YoY driven by increased scale of business and higher performance bonuses. Another contributor to the increase was administrative expenses, which grew by GEL 5.9 million, or 21.1%, mainly related to uneven spending of advertising and marketing services during the year.

As a result, cost to income ratio decreased to 37.4% in 3Q 2018, compared to 40.5% in 3Q 2017.

3Q 2018 to 2Q 2018 Comparison

On a QoQ basis, total operating expenses grew by GEL 12.0 million, or 13.0%. This was primarily attributable to a GEL 3.6 million, or 7.0% rise in staff cost, related to increased scale of business and higher performance bonuses and a GEL 3.5 million, or 11.5% increase in administrative expenses, mainly related to professional services that are not equally spent during the year. The increase in provision to liabilities and charges by GEL 4.0 million, also contributed to the growth of total operating expense.

As a result, the cost to income ratio expanded by 1.8pp from 35.6%, compared to 2Q 2018.

Net Income

Net income for the third quarter increased by GEL 5.0 million, or 4.8%, QoQ and by GEL 20.6 million, or 23.8%, YoY and amounted to GEL 107.4 million.

As a result, ROE stood at 21.2%, up by 1.4pp YoY and down by 0.1pp QoQ, while ROA stood at 3.1%, up by 0.2pp YoY but down by 0.1 pp QoQ.

Balance Sheet Discussion
In thousands of GEL	Sep-18	Jun-18	Change QoQ
Cash, Due from Banks and Mandatory Cash Balances with NBG	2,693,455	2,681,809	0.4%
Loans and Advances to Customers (Net)	9,279,982	8,574,580	8.2%
Financial Securities	1,386,239	1,295,570	7.0%
Fixed and Intangible Assets & Investment Property	549,938	540,455	1.8%
Other Assets	514,383	491,096	4.7%
Total Assets	14,423,997	13,583,510	6.2%
Due to Credit Institutions	2,981,269	3,097,602	-3.8%
Customer Accounts	8,740,449	7,932,585	10.2%
Debt Securities in Issue	13,027	19,641	-33.7%
Subordinated Debt	412,803	397,576	3.8%
Other Liabilities	220,499	192,422	14.6%
Total Liabilities	12,368,047	11,639,826	6.3%
Total Equity	2,055,950	1,943,684	5.8%

Assets

On a QoQ basis, total assets increased by GEL 840.5 million, or 6.2%, mainly due to a GEL 705.4 million, or 8.2%, increase in net loans to customers. The QoQ increase in total assets also resulted from a GEL 11.7 million or 0.4% rise in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG) and a GEL 90.7 million or 7.0% increase in financial securities.

As of 30 September 2018, the gross loan portfolio reached GEL 9,622.6 million, up by 8.2% QoQ. At the same time, gross loans denominated in foreign currency accounted for 59.2% of total loans, compared to 58.5% as of 30 June 2018.

Asset Quality

Borrowers with FX income

	30-Sep-18		30-June-18
Segments	% of FX loans	of which borrowers with FX income**	% of FX loans	of which borrowers with FX income**
Retail	53.7%	28.1%	50.6%	26.9%
Consumer	18.9%	26.1%	18.2%	25.6%
Mortgage	81.9%	28.5%	80.4%	27.2%
Corporate	73.3%	52.5%*	76.7%	53.5%
MSME	52.1%	14.9%	51.8%	14.3%
Total Loan Portfolio	59.2%	34.4%	58.5%	34.4%

(Based on internal estimates)

* Pure exports account for 7.3% of total Corporate FX denominated loans

** FX income implies both direct and indirect income

PAR 30 by Segments and Currencies	Sep-18			Jun-18
	GEL	FC	Total	GEL	FC	Total
Corporate	0.0%	1.1%	0.8%	0.0%	0.4%	0.3%
Retail	4.5%	1.7%	3.0%	3.7%	1.8%	2.7%
MSME	1.8%	3.6%	2.7%	1.6%	3.7%	2.7%
Total	2.9%	1.9%	2.3%	2.5%	1.7%	2.0%
Loans overdue by more than 30 days to gross loans

Total

Total PAR 30 increased by 0.3pp QoQ and stood at 2.3%. The increase was attributable to retail and corporate loan book.

Retail Segment

The retail segment's PAR 30 amounted to 3.0%, up by 0.3pp QoQ. The increase was mainly attributable to credit cards, fast consumer and other higher yield products.

Corporate

The corporate segment's PAR 30 amounted to 0.8%, up by 0.5pp QoQ. Increase in corporate segment was mainly attributable to unusually low overdue amounts in 2Q 2018.

MSME

The MSME segment's PAR 30 remained stable QoQ and stood at 2.7% as of 30 September 2018.


NPLs	Sep-18			Jun-18
	GEL	FC	Total	GEL	FC	Total
Corporate	1.2%	3.2%	2.6%	1.5%	3.2%	2.8%
Retail	3.7%	2.4%	3.0%	2.8%	2.9%	2.9%
MSME	2.3%	5.7%	4.1%	2.2%	5.7%	4.0%
Total	2.8%	3.4%	3.1%	2.4%	3.6%	3.1%

Total

Total NPLs was stable on QoQ basis and stood at 3.1%.

Retail Segment

The retail segment's NPLs remained broadly stable QoQ and stood at 3.0%.

Corporate

The corporate segment's NPLs stood at 2.6%, down by 0.2pp on a QoQ due to significant increase in corporate loan book.

MSME

The MSME segment's NPLs remained broadly stable on QoQ basis and stood at 4.1%.


NPLs Coverage	Sep-18		Jun-18
	Exc. Collateral	Incl. Collateral	Exc. Collateral	Incl. Collateral
Corporate	104.3%	242.5%	99.2%	232.1%
Retail	140.8%	206.4%	153.9%	226.8%
MSME	80.8%	184.8%	76.9%	187.6%
Total	113.2%	209.0%	116.1%	216.1%

Liabilities

As of 30 September 2018, TBC Bank's total liabilities amounted to GEL 12,368.0 million, up by GEL 728.2 million, or 6.3%, QoQ. The rise was primarily due to a GEL 807.9 million, or 10.2%, increase in customer accounts and was partially offset by the decline in amounts due to credit institutions by GEL 116.3 million, or 3.8%.

Liquidity

As of 30 September 2018 the Bank's liquidity ratio, as defined by the NBG, stood at 31.9%, compared to 33.3% as of 30 June 2018. As of 30 September 2018, the total liquidity coverage ratio (LCR), as defined by the NBG, was 111.6%, above the 100.0% limit, while the LCR in GEL and FC stood at 86.5% and 128.1% respectively, above the respective limits of 75% and 100%.

Total Equity

As of 30 September 2018, TBC's total equity totalled GEL 2,056.0 million, up by GEL 112.3 million from GEL 1,943.7 million as of 30 June 2018. The QoQ change in equity was mainly due to increase in net income GEL 102.4 million.

Regulatory Capital

According to the new methodology introduced at the end of 2017, as of 30 September 2018 the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 12.8% and 16.4%, respectively, compared to the minimum required levels of 10.3% and 15.8%. In comparison, as of 30 June 2018, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 13.4% and 17.0%, respectively, compared to the minimum required levels of 10.2% and 15.6%.

In 30 September 2018, the Bank's Basel III Tier 1 Capital amounted to GEL 1,580.5 million, up by GEL 81.6 million, or 5.5%, compared to June 2018, due to increase in net income. The Bank's Basel III Total Capital amounted to GEL 2,020.5 million, up by GEL 112.1 million, or 5.9%, QoQ. Risk weighted assets stood at GEL 12,305.8 million as of 30 September 2018, compared to GEL 11,200.4 million as of 30 June 2018, mainly related to the increased loan book.

Results by Segments and Subsidiaries

The segment definitions are as follows (updated in 2018):

· Corporate - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million, or which have been granted facilities of more than GEL 5 million. Some other business customers may also be assigned to the corporate segment or transferred to MSME on a discretionary basis;

· MSME (Micro, Small and Medium) - business customers who are not included in either the corporate or the retail segments; or legal entities who have been granted a pawn shop loan; or individual customers of the newly launched, fully digital bank - Space;

· Retail - non-business individual customers or individual business customers who have been granted mortgage loans; all individual customers are included in retail deposits;

· Corporate Centre - comprises the Treasury, other support and back office functions, and the non-banking subsidiaries of the Group;

Business customers are all legal entities or individuals who have been granted a loan for business purpose.

Income Statement by Segments

3Q'18	Retail	MSME	Corporate	Corp.Centre	Total
Interest Income	153,360	69,807	66,930	40,594	330,691
Interest Expense	(31,545)	(2,409)	(34,773)	(62,352)	(131,079)
Net Transfer Pricing	(19,335)	(22,160)	10,577	30,918	-
Net Interest Income	102,480	45,238	42,734	9,160	199,612
Fee and Commission Income	43,967	5,537	9,765	284	59,553
Fee and Commission Expense	(16,655)	(1,757)	(1,671)	(86)	(20,169)
Net fee and Commission Income	27,312	3,780	8,094	198	39,384
Gross Insurance Profit	-	-	-	3,123	3,123
Net income from foreign currency operations	8,539	5,445	11,767	(1,113)	24,638
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)	-	-	-	6,402	6,402
Net Losses from Derivative Financial Instruments	(44)	-	-	(12)	(56)
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income	-	-	-	2	2
Other Operating Income	1,688	140	2,367	495	4,690
Share of profit of associates	-	-	-	294	294
Other Operating Non-Interest Income and Insurance Profit	10,183	5,585	14,134	9,191	39,093
Credit Loss Allowance for Loan to Customers	(29,063)	(6,543)	(7,739)	-	(43,345)
Credit Loss Allowance for Performance Guarantees and Credit Related Commitments	(41)	(663)	763	(83)	(24)
Credit Loss Allowance for Investments in Finance Lease	-	-	-	(493)	(493)
Credit Loss Allowance for Other Financial Assets	(90)	-	(2,580)	(1,036)	(3,706)
Credit Loss Allowance for Financial Assets Measured at Fair Value through Other Comprehensive Income	-	-	(85)	56	(29)
Credit Loss Allowance for Financial Assets Measured at Amortised Cost	-	-	-	(53)	(53)
Profit before G&A Expenses and Income Taxes	110,781	47,397	55,321	16,940	230,439
Staff Costs	(29,098)	(10,293)	(8,298)	(6,605)	(54,294)
Depreciation and Amortization	(9,557)	(1,301)	(584)	(502)	(11,944)
Provision for liabilities and charges	-	-	-	(4,000)	(4,000)
Administrative and Other Operating Expenses	(20,726)	(4,989)	(2,451)	(5,699)	(33,865)
Operating Expenses	(59,381)	(16,583)	(11,333)	(16,806)	(104,103)
Profit before Tax	51,400	30,814	43,988	134	126,336
Income Tax Expense	(6,794)	(4,408)	(6,570)	(1,180)	(18,952)
Profit for the Year	44,606	26,406	37,418	(1,046)	107,384

Portfolios by Segments
In thousands of GEL	Sep-18	Jun-18
Loans and Advances to Customers

Consumer	1,958,883	1,975,426
Mortgage	2,452,157	2,185,630
Pawn	35,357	35,393
Retail	4,446,397	4,196,449
Corporate	2,891,628	2,581,612
MSME	2,284,538	2,117,886
Total Loans and Advances to Customers (Gross)	9,622,563	8,895,947
Less: Credit loss allowance for Loans to Customers	(342,581)	(321,367)
Total Loans and Advances to Customers (Net)	9,279,982	8,574,580

Customer Accounts

Retail	4,850,586	4,467,638
Corporate	2,920,526	2,559,449
MSME	969,337	905,498
Total Customer Accounts	8,740,449	7,932,585

Retail Banking

As of 30 September 2018, retail loans stood at GEL 4,446.4 million, up by GEL 249.9 million, or 6.0%, QoQ and they accounted for 39.9% market share of total individual loans. As of the same date foreign currency loans represented 53.7% of the total retail loan portfolio.

In the reporting period, retail deposits stood at GEL 4,850.6 million, up by GEL 382.9 million, or 8.6%, QoQ and accounted for 41.1% market share of total individual deposits. As of 30 September 2018 term deposits accounted for 53.4% of the total retail deposit portfolio, while foreign currency deposits represented 83.0% of the total.

In 3Q 2018, retail loan yields and deposit rates stood at 14.1% and 2.7%, respectively. The segment's cost of risk on loans was 2.7% .The retail segment contributed 41.5%, or GEL 44.6 million, to the total net income in 3Q 2018.

Corporate Banking

As of 30 September 2018, corporate loans amounted to GEL 2,891.6 million, up by GEL 310.0 million, or 12.0%, QoQ. Foreign currency loans accounted for 73.3% of the total corporate loan portfolio. The market share of total legal entities loans stood at 36.6%.

As of the same date, corporate deposits totalled GEL 2,920.5 million, up by GEL 361.1 million, or 14.1%, QoQ. Foreign currency corporate deposits represented 45.7% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 39.4%.

In 3Q 2018, corporate loan yields and deposit rates stood at 9.6% and 4.9%, respectively. In the same period, the cost of risk on loans was 1.1%. In terms of profitability, the corporate segment's net profit reached GEL 37.4 million, or 34.8%, of the total net income.

MSME Banking

As of 30 September 2018, MSME loans amounted to GEL 2,284.5, up by GEL 166.7 million, or 7.9%, QoQ. Foreign currency loans accounted for 52.1% of the total MSME portfolio.

As of the same date, MSME deposits stood at GEL 969.3 million, up by GEL 63.8 million, or 7.0%, QoQ. Foreign currency MSME deposits represented 47.5% of the total MSME deposit portfolio.

In 3Q 2018, MSME loan yields and deposit rates stood at 12.6% and 1.0% respectively, while the cost of risk on loans was 1.2%. In terms of profitability, net profit for the MSME segment amounted to GEL 26.4 million, or 24.6%, of the total net income.

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet
In thousands of GEL	Sep-18	Jun-18
Cash and cash equivalents	1,114,672	1,605,163
Due from other banks	152,010	42,469
Mandatory cash balances with National Bank of Georgia	1,426,773	1,034,177
Loans and advances to customers	9,279,982	8,574,580
Investment securities measured at fair value through other comprehensive income	868,060	817,876
Bonds carried at amortised cost	518,179	477,694
Investments in associates	2,220	1,925
Investments in finance leases	183,715	172,027
Investment properties	78,274	78,094
Current income tax prepayment	7,650	7,369
Deferred income tax asset	2,499	2,331
Other financial assets	103,520	107,741
Other assets	186,061	171,046
Premises and equipment	375,002	374,414
Intangible assets	96,662	87,947
Goodwill	28,718	28,657
TOTAL ASSETS	14,423,997	13,583,510
LIABILITIES
Due to Credit Institutions	2,981,269	3,097,602
Customer accounts	8,740,449	7,932,585
Other financial liabilities	90,966	88,320
Current income tax liability	30	26
Debt Securities in issue	13,027	19,641
Deferred income tax liability	27,202	22,980
Provisions for liabilities and charges	16,329	11,732
Other liabilities	85,972	69,364
Subordinated debt	412,803	397,576
TOTAL LIABILITIES	12,368,047	11,639,826
EQUITY
Share capital	1,650	1,650
Share premium	796,854	796,808
Retained earnings	1,372,798	1,261,578
Group reorganisation reserve	(162,166)	(162,166)
Share based payment reserve	(18,689)	(21,085)
Revaluation reserve for premises	64,962	64,962
Revaluation reserve for available-for-sale securities	4,875	2,541
Cumulative currency translation reserve	(7,277)	(7,345)
Net assets attributable to owners	2,053,007	1,936,943
Non-controlling interest	2,943	6,741
TOTAL EQUITY	2,055,950	1,943,684
TOTAL LIABILITIES AND EQUITY	14,423,997	13,583,510

Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL	3Q'18	2Q'18	3Q'17
Interest income	330,691	308,152	258,252
Interest expense	(131,079)	(119,948)	(111,706)
Net interest income	199,612	188,204	146,546
Fee and commission income	59,553	58,265	48,552
Fee and commission expense	(20,169)	(19,103)	(16,762)
Net Fee and Commission Income	39,384	39,162	31,790
Net insurance premiums earned	5,976	6,168	2,590
Net insurance claims incurred and agents' commissions	(2,853)	(2,915)	(817)
Insurance Profit	3,123	3,253	1,773
Net income from foreign currency operations	24,638	21,701	18,085
Net gain/(losses) from foreign exchange translation	6,402	1,550	2,245
Net gains/(losses) from derivative financial instruments	(56)	396	(1)
Gains less Losses from disposal of Investment Securities measured at fair value through other comprehensive income	2	-	-
Other operating income	4,690	3,812	6,572
Share of profit of associates	294	340	84
Other operating non-interest income	35,970	27,799	26,985
Credit loss allowance for loan to customers	(43,345)	(37,982)	(25,036)
Credit loss allowance for investments in finance lease	(493)	(252)	(285)
Credit loss allowance for performance guarantees and credit related commitments	(24)	1,375	(680)
Credit loss allowance for other financial assets	(3,706)	1,950	(1,096)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	(29)	(12)	-
Credit loss allowance for financial assets measured at amortised cost	(53)	(170)	-
Operating income after credit loss allowance for impairment	230,439	223,327	179,997
Staff costs	(54,294)	(50,732)	(46,620)
Depreciation and amortization	(11,944)	(10,992)	(9,317)
(Provision for)/ recovery of liabilities and charges	(4,000)	-	-
Administrative and other operating expenses	(33,865)	(30,366)	(27,973)
Operating expenses	(104,103)	(92,090)	(83,910)
Profit before tax	126,336	131,237	96,087
Income tax expense	(18,952)	(28,799)	(9,327)
Profit for the period	107,384	102,438	86,760
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Revaluation of available for-sale-investments	2,365	(1,547)	1,929
Exchange differences on translation to presentation currency	71	81	399
Items that will not be reclassified to profit or loss:
Income tax recorded directly in other comprehensive income	-	(5,151)	-
Other comprehensive income for the Period	2,436	(6,617)	2,328
Total comprehensive income for the Period	109,820	95,821	89,088
Profit attributable to:
- Shareholders of TBCG	106,779	102,589	85,523
- Non-controlling interest	605	(151)	1,237
Profit for the period	107,384	102,438	86,760
Total comprehensive income is attributable to:
- Shareholders of TBCG	109,183	96,060	87,883
- Non-controlling interest	637	(239)	1,205
Total comprehensive income for the Period	109,820	95,821	89,088

Key Ratios

Average Balances

The average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records. These were used by the Management for monitoring and control purposes.

Key Ratios

Ratios (based on monthly averages, where applicable)	3Q'18	2Q'18	3Q'17
ROE¹	21.2%	21.3%	19.8%
ROA²	3.1%	3.2%	2.9%
ROE before credit loss allowance³	30.7%	28.6%	26.1%
Cost to Income⁴	37.4%	35.6%	40.5%
Cost of Risk⁵	1.9%	1.8%	1.3%
FX adjusted Cost of Risk⁶	1.5%	1.7%	1.2%
NIM⁷	6.9%	7.1%	6.2%
Risk Adjusted NIM⁸	5.4%	5.5%	5.0%
Loan Yields⁹	12.4%	12.5%	11.9%
Risk Adjusted Loan Yields¹⁰	10.9%	10.8%	10.7%
Deposit rates¹¹	3.3%	3.3%	3.4%
Yields on interest Earning Assets¹²	11.4%	11.7%	10.9%
Cost of Funding¹³	4.4%	4.4%	4.5%
Spread¹⁴	7.0%	7.3%	6.4%
PAR 90 to Gross Loans¹⁵	1.3%	1.1%	1.6%
NPLs to Gross Loans¹⁶	3.1%	3.1%	3.5%
NPLs coverage¹⁷	113.2%	116.1%	80.5%*
NPLs coverage with collateral¹⁸	209.0%	216.1%	206.8%*
Credit Loss Level to Gross Loans¹⁹	3.6%	3.6%	2.8%*
Related Party Loans to Gross Loans²⁰	0.1%	0.1%	0.1%
Top 10 Borrowers to Total Portfolio²¹	10.3%	9.2%	8.3%
Top 20 Borrowers to Total Portfolio²²	14.1%	13.2%	12.5%
Net Loans to Deposits plus IFI Funding²³	88.0%	89.5%	91.5%
Net Stable Funding Ratio²⁴	118.0%	127.8%	134.5%
Liquidity Coverage Ratio²⁵	111.6%	119.2%	115.0%
Leverage²⁶	7.0x	7.0x	6.8x
Regulatory Tier 1 CAR (Basel III)²⁷	12.8%	13.4%	10.8%**
Regulatory Total 1 CAR (Basel III)²⁸	16.4%	17.0%	14.5%**

* Figures per IAS39

** 3Q 2017 figures are given based on previous regulation in accordance with Basel II/III guidelines

Ratio definitions

1. Return on average total equity (ROE) equals net income attributable to owners divided by monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; Annualised where applicable.

2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. Annualised where applicable.

3. Return on average total equity (ROE) before credit loss allowance equals net income attributable to owners excluding all credit loss allowance divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period.

4. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).

5. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; Annualised where applicable.

6. FX adjusted cost of risk equal cost of risk at constant currency.

7. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; Annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG which currently has negative interest, and includes other earning items from due from banks.

8. Risk Adjusted Net interest margin is NIM minus cost of risk without one-offs and currency effect.

9. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; Annualised where applicable.

10. Risk Adjusted Loan yield is loan yield minus cost of risk without one-offs and currency effect.

11. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; Annualised where applicable.

12. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; Annualised where applicable.

13. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; Annualised where applicable.

14. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).

15. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided by the gross loan portfolio for the same period.

16. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.

17. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.

18. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.

19. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.

20. Related party loans to total loans equals related party loans divided by the gross loan portfolio.

21. Top 10 borrowers to total portfolio equals total loan amount of top 10 borrowers divided by the gross loan portfolio.

22. Top 20 borrowers to total portfolio equals total loan amount of top 20 borrowers divided by the gross loan portfolio.

23. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.

24. Net stable funding ratio equals available amount of stable funding divided by required amount of stable funding as defined in Basel III.

25. Liquidity coverage ratio equals high-quality liquid assets divided by total net cash outflow amount as defined by the NBG.

26. Leverage equals total assets to total equity.

27. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

28. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

Exchange Rates

To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.4516 as of 30 June 2018. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.4767 as of 30 September 2017. As of 30 September 2018 the USD/GEL exchange rate equalled 2.6151. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 3Q 2018 of 2.5295, 2Q 2018 of 2.4460, 3Q 2017 of 2.4232.

Unaudited Consolidated Financial Results Overview for 9M 2018

This statement provides a summary of the unaudited business and financial trends for 9M 2018 for TBC Bank Group plc and its subsidiaries. Quarterly financial information and trends are unaudited.

Starting from 1 January 2018, TBC Bank adopted IFRS 9 and IFRS 15. Therefore, the comparative information for 2017 is not comparable to the information presented for 2018.

Please note, that there might be slight differences in previous periods' figures due to rounding.

Income Statement Highlights
in thousands of GEL	9M'18	9M'17	Change YoY
Net Interest Income	563,219	438,620	28.4%
Net Fee and Commission Income	113,466	87,007	30.4%
Other Operating Non-Interest Income	98,521	92,041	7.0%
Credit Loss Allowance	(122,203)	(70,472)	73.4%
Operating Income after Credit Loss Allowance	653,003	547,196	19.3%
Operating Expenses	(287,125)	(259,760)	10.5%
Profit Before Tax	365,878	287,436	27.3%
Income Tax Expense	(58,530)	(24,263)	141.2%
Profit for the Period	307,348	263,173	16.8%

Balance Sheet and Capital Highlights
	Sep-18		Sep-17			Change YoY
in thousands of GEL	GEL	USD		GEL	USD
Total Assets	14,423,997	5,515,658		12,136,922	4,900,441		18.8%
Gross Loans	9,622,563	3,679,616		7,767,634	3,136,284		23.9%
Customer Deposits	8,740,449	3,342,300		7,096,523	2,865,314		23.2%
Total Equity	2,055,950	786,184		1,790,307	722,860		14.8%
Regulatory Tier I Capital (Basel III)*	1,580,547	604,393		1,354,679	546,969		16.7%
Regulatory Total Capital (Basel III)*	2,020,501	772,629		1,821,822	735,584		10.9%
Regulatory Risk Weighted Assets (Basel III)*	12,305,756	4,705,654		12,560,644	5,071,524		-2.0%

*September 2018 figures are given per new NBG regulation, which came into force in December 2017, while September 2017 figures are given based on previous regulation in accordance with Basel II/III guidelines

Key Ratios	9M'18	9M'17	Change YoY
ROE	21.2%	20.9%	0.3%
ROA	3.1%	3.2%	-0.1%
Cost to Income	37.0%	42.1%	-5.1%
Cost of Risk	1.7%	1.2%	0.5%
FX adjusted Cost of Risk	1.7%	1.4%	0.3%
NPL to Gross Loans	3.1%	3.5%	-0.4%
Regulatory Tier 1 CAR (Basel III)*	12.8%	10.8%	2.0%
Regulatory Total CAR (Basel III)*	16.4%	14.5%	1.9%
Leverage (Times)	7.0x	6.8x	0.2x

Income Statement Discussion

Net Interest Income
In thousands of GEL	9M'18	9M'17	Change YoY
Loans and Advances to Customers	814,866	664,220	22.7%
Investment Securities Measured at Fair Value through Other Comprehensive Income	40,445	31,744	27.4%
Due from Other Banks	17,482	9,433	85.3%
Bonds Carried at Amortised Cost	28,873	25,035	15.3%
Investment in Leases	27,026	15,486	74.5%
Interest Income	928,692	745,918	24.5%
Customer Accounts	196,453	167,740	17.1%
Due to Credit Institutions	138,251	111,360	24.1%
Subordinated Debt	29,632	26,681	11.1%
Debt Securities in Issue	1,137	1,517	-25.0%
Interest Expense	365,473	307,298	18.9%
Net Interest Income	563,219	438,620	28.4%

Net Interest Margin	7.0%	6.5%	0.5%

9M 2018 to 9M 2017 Comparison

In 9M 2018, net interest income grew by GEL 124.6 million, or 28.4%, YoY to GEL 563.2 million, resulting from a GEL 182.8 million, or 24.5%, higher interest income and a GEL 58.2 million or 18.9% higher interest expense.

Interest income grew by GEL 182.8 million, or 24.5%, YoY to GEL 928.7 million. This was mainly driven by an increase in interest income from loans and advances to customers of GEL 150.7 million, or 22.7%, which is primarily related to a rise in the gross loan portfolio by GEL 1,854.9 million, or 23.9%, YoY. This effect was further magnified by a 0.4pp increase in loan yields to 12.4%, which was driven by a rise in rates on GEL denominated loans of 1.2pp that was partially offset by the decrease in yields on FC denominated loans by 0.6pp. Another contributor to the increase in interest income was investment in leases, which was up by GEL 11.5 million, or 74.5%. This resulted from a significant increase in the size of such receivables by GEL 72.5 million, or 65.2%, and magnified by an increase in the respective yield of 1.1pp, up to 22.3%. Yields on interest earning assets expanded by 0.4pp to 11.5%, compared to 9M 2017.

The YoY growth in interest expense by GEL 58.2 million or 18.9% to a GEL 365.5 million in 9M 2018 was mainly due to 17.1% increase in interest expense on customer accounts by GEL 28.7 million and a rise in interest expense on amounts due to credit institutions by GEL 26.9 million or 24.1%. The higherinterest expense on customer accounts was attributable to a GEL 1,643.9 million, or 23.2%, growth in the respective portfolio, partially offset by a 0.1pp decline in the cost of deposit down to 3.3%, which resulted from by a 0.4pp decrease in cost of deposits of FC denominated deposits. Another contributor to the increase in interest expense was the portfolio of amounts due to credit institutions, up by GEL 305.4 million, or 11.4%, and a 0.6pp higher effective rate on the respective portfolio, which stood at 7.0%, mainly related to the rise in libor rate. As a result, the cost of funding remained stable on a YoY basis at 4.4%.

Consequently, NIM was 7.0% in 9M 2018, compared to 6.5% in 9M 2017.

Fee and Commission Income
In thousands of GEL	9M'18	9M'17	Change in %
Card Operations	75,237	60,907	23.5%
Settlement Transactions	51,402	43,328	18.6%
Guarantees Issued	13,731	10,367	32.4%
Issuance of Letters of Credit	4,382	4,449	-1.5%
Cash Transactions	12,938	12,046	7.4%
Foreign Currency Exchange Transactions	1,378	1,003	37.4%
Other	9,584	6,171	55.3%
Fee and Commission Income	168,652	138,271	22.0%
Card Operations	38,173	35,414	7.8%
Settlement Transactions	6,322	5,282	19.7%
Guarantees Issued	1,045	1,319	-20.8%
Letters of Credit	1,020	705	44.7%
Cash Transactions	3,883	3,282	18.3%
Foreign Currency Exchange Transactions	1	92	-98.9%
Other	4,742	5,170	-8.3%
Fee and Commission Expense	55,186	51,264	7.7%
Card Operations	37,064	25,493	45.4%
Settlement Transactions	45,080	38,046	18.5%
Guarantees	12,686	9,048	40.2%
Letters of Credit	3,362	3,744	-10.2%
Cash Transactions	9,055	8,764	3.3%
Foreign Currency Exchange Transactions	1,377	911	51.2%
Other	4,842	1,001	NMF
Net Fee and Commission Income	113,466	87,007	30.4%

NMF - no meaningful figures

9M 2018 to 9M 2017 Comparison

In 9M 2018, net fee and commission income totalled GEL 113.5 million, up by GEL 26.5 million, or 30.4%, compared to 9M 2017. This mainly resulted from an increase in net fee and commission income from card operations of GEL 11.6 million, or 45.4% and an increase in net fee and commission income from settlement transactions of GEL 7.0 million, or 18.5%.

The rise in net fee and commission income from card operations is related to the increased number of active cards and POS terminals by 17.4% and 13.9% respectively. The increase in net fee and commission income from settlement transactions was mainly related to our subsidiary, TBC Pay, driven by a higher number of transactions and the growth in net fee and commission income from our affluent retail sub-segment, TBC Status.

Other Operating Non-Interest Income and Gross Insurance Profit
In thousands of GEL	9M'18	9M'17	Change in %
Net Income from Foreign Currency Operations	73,845	65,759	12.3%
Share of Profit of Associates	942	661	42.5%
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments	357	(39)	NMF
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income	2	-	NMF
Revenues from Cash-In Terminal Services	1,490	838	77.8%
Revenues from Operational Leasing	4,813	5,134	-6.3%
Gain from Sale of Investment Properties	2,389	1,578	51.4%
Gain from Sale of Inventories of Repossessed Collateral	1,073	1,701	-36.9%
Revenues from Non-Credit Related Fines	316	125	NMF
Gain on Disposal of Premises and Equipment	235	257	-8.6%
Other	4,637	11,173	-58.5%
Other Operating Income	14,953	20,806	-28.1%
Gross Insurance Profit[14]	8,422	4,854	73.5%
Other Operating Non-Interest Income and Gross Insurance Profit	98,521	92,041	7.0%
NMF - no meaningful figures

9M 2018 to 9M 2017 Comparison

Total other operating non-interest income and gross insurance profit increased by GEL 6.5 million, or 7.0%, to GEL 98.5 million in 9M 2018. This mainly resulted from the rise in net income from foreign currency operations by GEL 8.1 million, or 12.3%, mainly due to increased clients' FX transactions, broadly consistent with the business scale growth. Another contributor was gross insurance profit up by GEL 3.6 million, or 73.5%. The increase was partially offset by the drop in other operating income by GEL 5.9 million or 28.1%, related to the higher one-off incomes in 9M 2017.

The increase in gross insurance profit was related to the hike in the number of customers by around 60,000, which in turn led to a high increase in gross written premium by 124.4% YoY on a stand-alone basis. More information about TBC insurance can be found in annex 23 on page 47.

Credit Loss Allowance
In thousands of GEL	9M'18	9M'17	Change in %
Credit Loss Allowance for Loan to Customers	(109,325)	(65,403)	67.2%
Credit Loss Allowance for Investments in Finance Lease	(986)	(414)	NMF
Credit Loss Allowance for Performance Guarantees and Credit Related Commitments	(2,524)	866	NMF
Credit Loss Allowance for Other Financial Assets	(9,175)	(5,521)	66.2%
Credit Loss Allowance for Financial Assets Measured at Fair Value through Other Comprehensive Income	(64)	-	NMF
Credit Loss Allowance for Financial Assets Measured at Amortised Cost	(129)	-	NMF
Total Credit Loss Allowance	(122,203)	(70,472)	73.4%
Operating Income after Credit Loss Allowance	653,003	547,196	19.3%

Cost of Risk	1.7%	1.2%	0.5%
NMF - no meaningful figures

9M 2018 to 9M 2017 Comparison

In 9M 2018, total credit loss allowance increased by GEL 51.7 million to GEL 122.2 million, compared to 9M 2017. The main contributor to the growth was credit loss allowance for loans to customers up by GEL 43.9 million. The increase was attributable to the corporate segment following a high recovery of credit loss in 9M 2017.

Operating Expenses
In thousands of GEL	9M'18	9M'17	Change in %
Staff Costs	157,141	148,995	5.5%
Provisions for Liabilities and Charges	4,000	(2,495)	NMF
Depreciation and Amortization	33,407	26,840	24.5%
Professional services	8,566	9,659	-11.3%
Advertising and marketing services	18,837	10,289	83.1%
Rent	17,723	17,224	2.9%
Utility services	4,889	4,552	7.4%
Intangible asset enhancement	7,694	6,958	10.6%
Taxes other than on income	5,401	4,576	18.0%
Communications and supply	3,751	2,868	30.8%
Stationary and other office expenses	3,528	3,397	3.9%
Insurance	2,031	1,705	19.1%
Security services	1,518	1,476	2.8%
Premises and equipment maintenance	4,331	3,839	12.8%
Business trip expenses	1,567	1,376	13.9%
Transportation and vehicles maintenance	1,494	1,184	26.2%
Charity	742	763	-2.8%
Personnel training and recruitment	874	918	-4.8%
Write-down of current assets to fair value less costs to sell	(1,006)	(373)	NMF
Loss on disposal of inventory	136	1,188	-88.6%
Loss on disposal of investment properties	60	385	-84.4%
Loss on disposal of premises and equipment	435	306	42.2%
Impairment of intangible assets	-	1,916	-100.0%
Acquisition costs	-	1,887	-100.0%
Other	10,006	10,327	-3.1%
Administrative and Other Operating Expenses	92,577	86,420	7.1%
Operating Expenses	287,125	259,760	10.5%
Profit before Tax	365,878	287,436	27.3%
Income Tax Expense	(58,530)	(24,263)	141.2%
Profit for the Period	307,348	263,173	16.8%

Cost to Income	37.0%	42.1%	-5.1%
ROE	21.2%	20.9%	0.3%
ROA	3.1%	3.2%	-0.1%
NMF - no meaningful figures

9M 2018 to 9M 2017 Comparison

In 9M 2018, total operating expenses expanded by GEL 27.4 million, or 10.5%, YoY. This mainly resulted from an increase in staff costs of GEL 8.1 million, or 5.5%, an increase in depreciation and amortisation of GEL 6.6 million, or 24.5% and an increase in administrative expenses by GEL 6.2 million, or 7.1%, mainly related to the growth of advertising and marketing services. The growth across the board was related to the overall growth of the business scale and higher performance.

As a result, cost to income ratio was 37.0% in 9M 2018, 5.1pp lower than the 42.1% in 9M 2017.

Income Tax

In 9M 2018, TBC Bank reversed the one-off deferred tax gain, which was recognised in 2016 due to the recent amendment to the Georgian Tax Code in relation to corporate income tax. The amendment, which came into force on 12 June 2018, postponed the tax relief for re-invested profit from 1 January 2019 to 1 January 2023 for financial institutions. This reversal has resulted in a GEL 17.4 million expense on the profit and loss statement and a GEL 5.1 million reduction in equity in 9M 2018.

Net Income

Net income for 9M increased by GEL 44.1 million, or 16.8%, YoY and stood at GEL 307.3 million.

As a result, ROE stood at 21.2%, up by 0.3pp YoY, and ROA stood at 3.1%, down by 0.1pp YoY.

Balance Sheet Discussion
In thousands of GEL	Sep-18	Sep-17	Change YoY
Cash, Due from Banks and Mandatory Cash Balances with NBG	2,693,455	2,507,912	7.4%
Loans and Advances to Customers (Net)	9,279,982	7,549,061	22.9%
Financial Securities	1,386,239	1,113,373	24.5%
Fixed and Intangible Assets & Investment Property	549,938	480,045	14.6%
Other Assets	514,383	486,531	5.7%
Total Assets	14,423,997	12,136,922	18.8%
Due to Credit Institutions	2,981,269	2,675,930	11.4%
Customer Accounts	8,740,449	7,096,523	23.2%
Debt Securities in Issue	13,027	19,818	-34.3%
Subordinated Debt	412,803	411,193	0.4%
Other Liabilities	220,499	143,151	54.0%
Total Liabilities	12,368,047	10,346,615	19.5%
Total Equity	2,055,950	1,790,307	14.8%

Assets

As of 30 September 2018, the Group's total assets amounted to GEL 14,424.0 million, up by GEL 2,287.1 million, or 18.8%, YoY. The increase was mainly due to a rise in net loans to customers of GEL 1,730.9 million, or by 22.9%, YoY. It also resulted from a GEL 185.5 million, or 7.4%, rise in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG) and a GEL 272.9 million, or 24.5%, increase in financial securities, compared to 30 September 2017.

As of 30 September 2018, the gross loan portfolio reached GEL 9,622.6 million, up by 23.9% YoY while proportion of gross loans denominated in foreign currency remained unchanged on a YoY basis and accounted for 59.2% of total loans.

Asset Quality


PAR 30 by Segments and Currencies	Sep-18			Sep-17
	GEL	FC	Total	GEL	FC	Total
Corporate	0.0%	1.1%	0.8%	0.3%	2.8%	2.1%
Retail	4.5%	1.7%	3.0%	3.2%	2.2%	2.7%
MSME	1.8%	3.6%	2.7%	1.7%	4.1%	3.2%
Total	2.9%	1.9%	2.3%	2.3%	2.9%	2.7%
Loans overdue by more than 30 days to gross loans

Total

The total PAR 30 has declined by 0.4pp YoY. The YoY decrease is related to the improvements across the corporate and MSME segments by 1.3pp and 0.5pp respectively.

Retail Segment

The retail segment's PAR 30 increased by 0.3pp and amounted to 3.0% on a YoY basis, mainly driven by credit cards and other higher yield products, aligned with the respective yield increases.

Corporate

The corporate segment's PAR 30 decreased by 1.3pp YoY. The decrease was driven by improved performance of the corporate loan book.

MSME

The MSME segment's PAR 30 decreased by 0.5pp YoY. YoY decrease was driven by the improved performance of both micro and SME portfolios.



NPLs	Sep-18				Sep-17
	GEL	FC	Total	GEL		FC	Total
Corporate	1.2%	3.2%	2.6%	0.3%		4.7%	3.4%
Retail	3.7%	2.4%	3.0%	2.8%		3.1%	2.9%
MSME	2.3%	5.7%	4.1%	2.7%		6.0%	4.8%
Total	2.8%	3.4%	3.1%	2.3%		4.3%	3.5%

Total

Total NPLs stood at 3.1%, down by 0.4pp on YoY basis, mainly driven by the improved performance of the corporate and MSME loan books.

Retail Segment

The retail segment's NPLs remained broadly stable and stood at 3.0%.

Corporate

The corporate NPLs stood at 2.6%, down by 0.8pp on YoY basis, due to overall improved performance of the corporate loan book.

MSME

The MSME NPLs declined by 0.7pp on a YoY basis, and stood at 4.1%, driven by improved performance in NPLs in both the micro and SME portfolios.


NPLs Coverage	Sep-18		Sep-17
	Exc. Collateral	Incl. Collateral	Exc. Collateral	Incl. Collateral
Corporate	104.3%	242.5%	52.5%	256.8%
Retail	140.8%	206.4%	120.6%	201.6%
MSME	80.8%	184.8%	49.7%	172.5%
Total	113.2%	209.0%	80.5%	206.8%

NPLs Coverage

YoY total credit loss allowance coverage grew from 80.5% to 113.2%. The key driver of the increase was the transition to the IFRS 9 methodology.

Liabilities

As of 30 September 2018, TBC Bank's total liabilities amounted to GEL 12,368.0 million, up by GEL 2,021.4 million, or 19.5% YoY. This was primarily due to a GEL 305.4 million, or 11.4%, increase in amounts due to credit institutions and a hike in customer accounts of GEL 1,643.9 million, or 23.2%. Total liabilities also expanded, due to an increase in deferred income tax liability of GEL 26.4 million, which was mainly related to the reversal of the deferred tax gain, as mentioned above.

Liquidity

As of 30 September 2018, the Bank's liquidity ratio, as defined by the NBG, stood at 31.9%, compared to 35.3% as of 30 September 2017. As of 30 September 2018, the total liquidity coverage ratio (LCR), as defined by the NBG, was 111.6%, above the 100.0% limit, while the LCR in GEL and FC stood at 86.5% and 128.1% respectively, above the respective limits of 75% and 100%.

Total Equity

As of 30 September 2018, TBC's total equity amounted to GEL 2,056.0 million, up by GEL 265.6 million or by 14.8% from GEL 1,790.3 million as of 30 September 2017. This YoY change in equity was mainly due to net profit contribution of GEL 404.1 million during the last 12 months, which was mostly offset by dividend distribution of GEL 88.9 million in May 2018 and by IFRS 9 transition effect in the amount of GEL 63.7 million as of 1 January 2018.

Regulatory Capital

According to the newly introduced methodology, as of 30 September 2018 the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 12.8% and 16.4%, respectively, compared to the minimum required levels of 10.3% and 15.8%.

In 30 September 2018, The Bank's Basel III Tier 1 Capital amounted to GEL 1,580.5 million. The Bank's Basel III Total Capital totalled GEL 2,020.5 million. Risk weighted assets amounted to GEL 12,305.8 million as of 30 September 2018.

Results by Segments and Subsidiaries

The segment definitions are as follows (updated in 2018):

· Retail - non-business individual customers or individual business customers who have been granted mortgage loans; all individual customers are included in retail deposits;

· Corporate Centre - comprises the Treasury, other support and back office functions, and the non-banking subsidiaries of the Group;

Business customers are all legal entities or individuals who have been granted a loan for business purpose.

Income Statement by Segments

9M'18	Retail	MSME	Corporate	Corp.Centre	Total
Interest Income	452,367	182,341	184,768	109,216	928,692
Interest Expense	(90,496)	(7,326)	(98,632)	(169,019)	(365,473)
Net Transfer Pricing	(62,039)	(60,158)	26,745	95,452	-
Net Interest Income	299,832	114,857	112,881	35,649	563,219
Fee and Commission Income	122,297	16,158	28,164	2,033	168,652
Fee and Commission Expense	(45,062)	(4,966)	(4,931)	(227)	(55,186)
Net fee and Commission Income	77,235	11,192	23,233	1,806	113,466
Gross Insurance Profit	-	-	-	8,422	8,422
Net income from foreign currency operations	20,418	15,475	31,583	(4,056)	63,420
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)	-	-	-	10,425	10,425
Net Losses from Derivative Financial Instruments	(44)	-	-	401	357
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income	-	-	-	2	2
Other Operating Income	6,367	505	6,943	1,138	14,953
Share of profit of associates	-	-	-	942	942
Other Operating Non-Interest Income	26,741	15,980	38,526	17,274	98,521
Credit Loss Allowance for Loan to Customers	(83,935)	(16,315)	(9,075)	-	(109,325)
Credit Loss Allowance for Performance Guarantees and Credit Related Commitments	(136)	(703)	(1,116)	(569)	(2,524)
Credit Loss Allowance for Investments in Finance Lease	-	-	-	(986)	(986)
Credit Loss Allowance for Other Financial Assets	(3,933)	(2)	(3,277)	(1,963)	(9,175)
Credit Loss Allowance for Financial Assets Measured at Fair Value through Other Comprehensive Income	-	-	(116)	52	(64)
Credit Loss Allowance for Financial Assets Measured at Amortised Cost	-	-	-	(129)	(129)
Profit before G&A Expenses and Income Taxes	315,804	125,009	161,056	51,134	653,003
Staff Costs	(91,893)	(29,823)	(21,668)	(13,757)	(157,141)
Depreciation and Amortization	(26,930)	(3,643)	(1,622)	(1,212)	(33,407)
Provision for liabilities and charges	-	-	-	(4,000)	(4,000)
Administrative and Other Operating Expenses	(60,157)	(13,260)	(6,047)	(13,113)	(92,577)
Operating Expenses	(178,980)	(46,726)	(29,337)	(32,082)	(287,125)
Profit before Tax	136,824	78,283	131,719	19,052	365,878
Income Tax Expense	(18,254)	(11,716)	(19,874)	(8,686)	(58,530)
Profit for the Year	118,570	66,567	111,845	10,366	307,348

Portfolios by Segments
In thousands of GEL	30-Sep-2018	30-Sep-2017
Loans and Advances to Customers

Consumer	1,958,883	1,972,012
Mortgage	2,452,157	1,900,186
Pawn	35,357	34,862
Retail	4,446,397	3,907,060
Corporate	2,891,628	2,128,478
MSME	2,284,538	1,732,096
Total Loans and Advances to Customers (Gross)	9,622,563	7,767,634
Less: Credit loss allowance for Loans to Customers	(342,581)	(218,573)
Total Loans and Advances to Customers (Net)	9,279,982	7,549,061

Customer Accounts

Retail	4,850,586	4,015,754
Corporate	2,920,526	2,130,763
MSME	969,337	950,006
Total Customer Accounts	8,740,449	7,096,523

Retail Banking

As of 30 September 2018, retail loans stood at GEL 4,446.4 million, up by GEL 539.3 million, or 13.8%, YoY and accounted for 39.9% market share of total individual loans. As of 30 June 2018, foreign currency loans represented 53.7% of the total retail loan portfolio.

In the reporting period, retail deposits stood at GEL 4,850.6 million, up by GEL 834.8 million, or 20.8%, YoY accounting for 41.1% market share of total individual deposits. As of 30 September 2018, term deposits accounted for 53.4% of the total retail deposit portfolio, while foreign currency deposits represented 83.0% of the total retail deposit portfolio.

In 9M 2018, retail loan yields and deposit rates stood at 14.4% and 2.7%, respectively. The segment's cost of risk on loans was 2.7%.The retail segment contributed 38.6%, or GEL 118.6 million, to the total net income in 9M 2018.

Corporate Banking

As of 30 September 2018, corporate loans amounted to GEL 2,891.6 million, up by GEL 763.1 million, or 35.9%, YoY. Foreign currency loans accounted for 73.3% of the total corporate loan portfolio. The market share of total legal entities loans stood at 36.6%.

As of the same date, corporate deposits totalled GEL 2,920.5 million, up by GEL 789.7 million, or 37.1%, YoY. Foreign currency corporate deposits represented 45.7% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 39.4%.

In 9M 2018, corporate loan yields and deposit rates stood at 9.4% and 5.1%, respectively. In the same period, the cost of risk on loans was 0.5%. In terms of profitability, the corporate segment's net profit reached GEL 111.8 million, or 36.4% of the total net income.

MSME Banking

As of 30 September 2018, MSME loans amounted to GEL 2,284.5, up by GEL 552.4 million, or 31.9%, YoY. Foreign currency loans accounted for 52.1% of the total MSME portfolio.

As of the same date, MSME deposits stood at GEL 969.3 million, up by GEL 19.3 million, or 2.0%, YoY. Foreign currency MSME deposits represented 47.5% of the total MSME deposit portfolio.

In 9M 2018, MSME loan yields and deposit rates stood at 12.1% and 1.0% respectively, while the cost of risk on loans was 1.1%. In terms of profitability, net profit for the MSME segment amounted to GEL 66.6 million, or 21.7%, of the total net income.

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet
In thousands of GEL	Sep-18	Sep-17
Cash and cash equivalents	1,114,672	1,445,521
Due from other banks	152,010	41,696
Mandatory cash balances with National Bank of Georgia	1,426,773	1,020,695
Loans and advances to customers	9,279,982	7,549,061
Investment securities Measured at Fair Value through Other Comprehensive Income	868,060	685,210
Bonds carried at amortised cost	518,179	428,163
Investments in associates	2,220	1,309
Investments in finance leases	183,715	111,223
Investment properties	78,274	88,750
Current income tax prepayment	7,650	18,380
Deferred income tax asset	2,499	3,592
Other financial assets	103,520	113,942
Other assets	186,061	209,428
Premises and equipment	375,002	321,431
Intangible assets	96,662	69,864
Goodwill	28,718	28,657
TOTAL ASSETS	14,423,997	12,136,922
LIABILITIES
Due to Credit Institutions	2,981,269	2,675,930
Customer accounts	8,740,449	7,096,523
Other financial liabilities	90,966	59,616
Current income tax liability	30	362
Debt Securities in issue	13,027	19,818
Deferred income tax liability	27,202	851
Provisions for liabilities and charges	16,329	11,072
Other liabilities	85,972	71,250
Subordinated debt	412,803	411,193
TOTAL LIABILITIES	12,368,047	10,346,615
EQUITY
Share capital	1,650	1,605
Share premium	796,854	714,651
Retained earnings	1,372,798	1,137,497
Group reorganisation reserve	(162,166)	(162,166)
Share based payment reserve	(18,689)	7,291
Revaluation reserve for premises	64,962	70,045
Revaluation reserve for available-for-sale securities	4,875	863
Cumulative currency translation reserve	(7,277)	(7,301)
Net assets attributable to owners	2,053,007	1,762,485
Non-controlling interest	2,943	27,822
TOTAL EQUITY	2,055,950	1,790,307
TOTAL LIABILITIES AND EQUITY	14,423,997	12,136,922

Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL	9M'18	9M'17
Interest income	928,692	745,918
Interest expense	(365,473)	(307,298)
Net interest income	563,219	438,620
Fee and commission income	168,652	138,271
Fee and commission expense	(55,186)	(51,264)
Net Fee and Commission Income	113,466	87,007
Net insurance premiums earned	16,578	8,972
Net insurance claims incurred and agents' commissions	(8,156)	(4,118)
Insurance Profit	8,422	4,854
Net income from foreign currency operations	63,420	61,477
Net gain/(losses) from foreign exchange translation	10,425	4,282
Net gains/(losses) from derivative financial instruments	357	(39)
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income	2	-
Other operating income	14,953	20,806
Share of profit of associates	942	661
Other operating non-interest income	90,099	87,187
Credit loss allowance for loan to customers	(109,325)	(65,403)
Credit loss allowance for investments in finance lease	(986)	(414)
Credit loss allowance for performance guarantees and credit related commitments	(2,524)	866
Credit loss allowance for other financial assets	(9,175)	(5,521)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	(64)	-
Credit loss allowance for financial assets measured at amortised cost	(129)	-
Operating income after credit loss allowance	653,003	547,196
Staff costs	(157,141)	(148,995)
Depreciation and amortization	(33,407)	(26,840)
(Provision for)/ recovery of liabilities and charges	(4,000)	2,495
Administrative and other operating expenses	(92,577)	(86,420)
Operating expenses	(287,125)	(259,760)
Profit before tax	365,878	287,436
Income tax expense	(58,530)	(24,263)
Profit for the period	307,348	263,173
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Revaluation of available for-sale-investments	3,192	4,544
Exchange differences on translation to presentation currency	85	241
Items that will not be reclassified to profit or loss:
Income tax recorded directly in other comprehensive income	(5,151)	(422)
Other comprehensive income for the Period	(1,874)	4,363
Total comprehensive income for the Period	305,474	267,536
Profit attributable to:
- Shareholders of TBCG	305,126	259,043
- Non-controlling interest	2,222	4,130
Profit for the period	307,348	263,173
Total comprehensive income is attributable to:
- Shareholders of TBCG	303,273	263,406
- Non-controlling interest	2,201	4,130
Total comprehensive income for the Period	305,474	267,536

Consolidated Statements of Cash Flows
In thousands of GEL	30-Sep-18	30-Sep-17
Cash flows from/(used in) operating activities
Interest received	898,534	726,012
Interest paid	(357,224)	(304,258)
Fees and commissions received	180,489	139,408
Fees and commissions paid	(55,190)	(51,358)
Insurance premium received	18,045	13,908
Insurance claims paid	(7,803)	(5,946)
Income received from trading in foreign currencies	63,420	61,478
Other operating income received	4,379	9,638
Staff costs paid	(153,876)	(143,370)
Administrative and other operating expenses paid	(97,685)	(78,995)
Income tax paid	(24,758)	(42,785)
Cash flows from operating activities before changes in operating assets and liabilities	468,331	323,732
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia	(479,208)	(73,036)
Loans and advances to customers	(1,064,695)	(777,837)
Investment in finance lease	(37,065)	(20,647)
Other financial assets	38,446	(11,776)
Other assets	(9,900)	1,119
Net change in operating liabilities
Due to other banks	116,376	(219,247)
Customer accounts	887,193	914,052
Other financial liabilities	(9,738)	(4,403)
Other liabilities and provision for liabilities and charges	6,484	1,241
Net cash from operating activities	(83,776)	133,198
Cash flows from/(used in) investing activities
Acquisition of investment securities measured at fair value through other comprehensive income	(479,092)	(514,803)
Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income	272,477	269,640
Acquisition of bonds carried at amortised cost	(235,480)	(247,035)
Proceeds from redemption of bonds carried at amortised cost	167,258	198,380
Acquisition of premises, equipment and intangible assets	(55,321)	(47,410)
Disposal of premises, equipment and intangible assets	1,140	1,436
Proceeds from disposal of investment property	8,448	7,831
Acquisition of subsidiaries, net of cash acquired	-	(350)
Net cash used in investing activities	(320,570)	(332,311)
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds	1,456,759	1,464,205
Redemption of other borrowed funds	(1,250,372)	(771,829)
Proceeds from subordinated debt	-	60,188
Redemption of subordinated debt	(32,166)	-
Proceeds from debt securities in issue	(7,446)	-
Redemption of debt securities in issue	-	(2,075)
Dividends paid	(85,483)	(67,927)
Issue of ordinary shares	-	29
Net cash flows from financing activities	81,292	682,591
Effect of exchange rate changes on cash and cash equivalents	6,249	16,863
Net increase in cash and cash equivalents	(316,805)	500,341
Cash and cash equivalents at the beginning of the year	1,431,477	945,180
Cash and cash equivalents at the end of the year	1,114,672	1,445,521

Key Ratios

Average Balances

The average balances in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records. These were used by the Management for monitoring and control purposes.

Key Ratios

Ratios (based on monthly averages, where applicable)	9M'18	9M'17
ROE¹	21.2%	20.9%
ROA²	3.1%	3.2%
ROE before credit loss allowance³	29.6%	26.6%
Cost to Income⁴	37.0%	42.1%
Cost of Risk⁵	1.7%	1.2%
FX adjusted Cost of Risk⁶	1.7%	1.4%
NIM⁷	7.0%	6.5%
Risk Adjusted NIM⁸	5.3%	5.1%
Loan Yields⁹	12.4%	12.0%
Risk Adjusted Loan Yields¹⁰	10.7%	10.6%
Deposit rates¹¹	3.3%	3.4%
Yields on interest Earning Assets¹²	11.5%	11.1%
Cost of Funding¹³	4.4%	4.4%
Spread¹⁴	7.1%	6.6%
PAR 90 to Gross Loans¹⁵	1.3%	1.6%
NPLs to Gross Loans¹⁶	3.1%	3.5%
NPLs coverage¹⁷	113.2%	80.5%*
NPLs coverage with collateral¹⁸	209.0%	206.8%*
Credit Loss Level to Gross Loans¹⁹	3.6%	2.8%*
Related Party Loans to Gross Loans²⁰	0.1%	0.1%
Top 10 Borrowers to Total Portfolio²¹	10.3%	8.3%
Top 20 Borrowers to Total Portfolio²²	14.1%	12.5%
Net Loans to Deposits plus IFI Funding²³	88.0%	91.5%
Net Stable Funding Ratio²⁴	118.0%	134.5%
Liquidity Coverage Ratio²⁵	111.6%	115.0%
Leverage²⁶	7.0x	6.8x
Regulatory Tier 1 CAR (Basel III)²⁷	12.8%	10.8%**
Regulatory Total 1 CAR (Basel III)²⁸	16.4%	14.5%**

* Figures per IAS39

**9M 2017 figures are based on previous regulation in accordance with Basel II/III guidelines