Final Results

RNS Number : 6184F

TBC Bank Group PLC

22 February 2018

TBC BANK GROUP PLC ("TBC Bank")

4Q 2017 UNAUDITED consolIdated FinanciAl Results and FY 2017 PRELIMINARY 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 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, 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 accounts and financial statements. The areas in which management accounts might differ from International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant and you should consult your own professional advisors and/or conduct your own due diligence for 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 subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.

Fourth Quarter 2017 Unaudited Consolidated Financial Results and Full Year 2017 Preliminary Unaudited Consolidated Financial Results Conference Call

TBC Bank Group PLC ("TBC PLC") will release its unaudited consolidated financial results for the fourth quarter and the preliminary unaudited consolidated financial results full year 2017 on Thursday, 22 February 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, 22 February 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 Bank:

Password:	TBC Bank
UK Toll Free:	0808 109 0700
Standard International Access:	+44 (0) 20 3003 2666
USA Toll Free:	1 866 966 5335
New York New York:	+1 212 999 6659
Russia Toll Free:	8 10 8002 4902044
Moscow:	+7 (8) 495 249 9843

Replay Numbers
Replay Passcode:	8536901
UK Toll Free:	0800 633 8453
Standard International Access:	+44 (0) 20 8196 1998
USA Toll Free:	1 866 583 1035
Russia Toll Free:	8 10 8002 4832044
Moscow:	+7 (8) 495 249 9840

Contacts

Sean Wade

Director of International Media and IR

E-mail: SWade@Tbcbank.com.ge

Web: www.tbcgroupbank.com

Tel: +44 (0) 7464 609025

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

Anna Romelashvili

Head of Investor Relations

E-mail: ARomelashvili@Tbcbank.com.ge

Web: www.tbcgroupbank.com

Tel: +(995 32) 227 27 27

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Investor Relations Department

E-mail: ir@tbcbank.com.ge

Web: www.tbcgroupbank.com

Tel: +(995 32) 227 27 27

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Table of Contents

4Q and FY 2017 Results Announcement

TBC Bank - Background

Financial Highlights

Recent Developments

Letter from the Chief Executive Officer

Economic Overview

Unaudited Consolidated Financial Results Overview for 4Q 2017

Preliminary Unaudited Consolidated Financial Results Overview FY 2017

Additional Disclosures

TBC BANK Group PLC ("TBC Bank")

TBC Bank Announces Unaudited Preliminary FY 2017 and 4Q 2017 Consolidated Financial Results

Underlying¹ Net Profit for FY 2017 up by 35.1% YoY to GEL 369.2 million

Underlying¹ Net Profit for 4Q 2017 up by 14.3% YoY to GEL 96.8 million

The 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 accounting for 36.4% market share by total assets, where 99.7% of its business is concentrated. 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.

Results reported below prior to 30 September 2016 relate to the group previously headed by JSC TBC Bank Georgia.

TBC Bank Group PLC financial results are prepared in accordance with IFRS standards and are adjusted for certain one-off items to enable better analysis of the Group's performance. The reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given under annex 21 section on pages 56-57. To further enhance the analysis, the Group separately discloses Bank Republic (BR) effects in 2016 and 2017. Detailed information is given in annex 22 section on pages 58-61.

Financial Highlights

4Q 2017 P&L Highlights

§ Underlying[1] net profit amounted to GEL 96.8 million (4Q 2016: GEL 84.6 million; 3Q 2017: GEL 88.0 million)

§ Reported net profit amounted to GEL 96.8 million (4Q 2016: GEL 88.0 million; 3Q 2017: GEL 86.8 million)

§ Underlying¹ return on equity (ROE) amounted to 21.0% (4Q 2016: 23.5%; 3Q 2017: 20.0%)

§ Reported return on equity (ROE) amounted to 21.0% (4Q 2016: 24.2%; 3Q 2017: 19.8%)

§ Underlying¹ return on asset (ROA) amounted to 3.0% (4Q 2016: 3.5%; 3Q 2017: 3.0%)

§ Reported return on asset (ROA) amounted to 3.0% (4Q 2016: 3.7%; 3Q 2017: 2.9%)

§ Total operating income amounted to 243.3 million up by 11.5% YoY and up by 17.5% relative to 3Q 2017

§ Underlying¹ cost to income ratio stood at 41.0% (4Q 2016: 47.0%; 3Q 2017: 39.8%)

§ Reported cost to income was 41.0% (4Q 2016: 51.2%; 3Q 2017: 40.5%)

§ Cost of risk stood at 1.4% (4Q 2016: 0.6%; 3Q 2017: 1.3%)

§ Net interest Margin (NIM) stood at 6.4% (4Q 2016: 7.9%; 3Q 2017: 6.2%)

§ Risk adjusted net interest margin (NIM) stood at 5.2% (4Q 2016: 6.3%; 3Q 2017: 5.0%)

FY 2017 P&L Highlights

§ Underlying¹ net profit amounted to GEL 369.2 million, up by 35.1% YoY, hence delivering an underlying ROE of 21.4% (FY 2016: 20.6%)

§ Reported net profit was up by 20.7% YoY to GEL 359.9 million, delivering a reported ROE of 20.9% (FY 2016: 22.4%)

§ Underlying¹ ROA was 3.2% (FY 2016: 3.6%)

§ Reported ROA was 3.1% (FY 2016: 3.9%)

§ Total operating income for the period was up by 26.4% YoY to GEL 861.0 million

§ Underlying¹ cost to income ratio stood at 40.5% (FY 2016: 42.9%)

§ Reported cost to income stood at 41.7% (FY 2016: 45.8%)

§ Cost of risk stood at 1.2% (FY 2016: 1.0%)

§ Net interest margin (NIM) stood at 6.5% (FY 2016: 7.8%)

§ Risk adjusted net interest margin (NIM) stood at 5.1% (FY 2016: 6.4%)

Balance Sheet Highlights as at 31 December 2017

§ Total assets amounted to GEL 12,965.9 million as of 31 December 2017, up by 20.4% YoY and 6.8% QoQ

§ Gross loans and advances to customers stood at GEL 8,553.2 million as of 31 December 2017, up by 16.2% YoY and up by 10.1% QoQ

§ Net loans to deposits + IFI funding stood at 92.5% and Net Stable Funding Ratio (NSFR) stood at 124.4%

§ NPLs stood at 3.3%, down by 0.2 pp YoY and QoQ

§ NPLs coverage ratios per IFRS 9 will be 104.7% and 209.4% with collateral (NPL coverage ratios per IAS 39 stood at 81.8% or 186.5% with collateral) on 31 December 2017 compared to 88.4% or 222.5% with collateral on 31 December 2016

§ Total customer deposits stood at GEL 7,816.8 million as of 31 December 2017, up by 21.1% YoY and up by 10.1% QoQ

§ As of 31 December 2017, the Bank's Tier 1 and Total Capital Adequacy Ratios (CAR) per new NBG methodology stood at 13.4% and 17.5% respectively, while minimum requirements amounted to 10.3% and 15.2%

Market Shares[2]

§ Market share in total assets stood at 36.4% up by 1.2 pp YoY and down by 0.1 pp QoQ

§ Market share in total loans was 38.2% as of 31 December 2017, down by 0.6 pp YoY and unchanged QoQ

§ In terms of individual loans, the Bank had a market share of 40.2% (or 42% without Credo Bank effect, which is a former microfinance organization registered as a bank in 1Q 2017 and is mainly focused on retail clients) as of 31 December 2017, down by 4.0 pp YoY and down by 0.3 pp QoQ. The market share for legal entity loans was 36.0% up by 2.5 pp YoY and up by 0.4 pp QoQ

§ Market share of total deposits stood at 39.8% as of 31 December 2017, up by 2.0 pp YoY and up by 1.2 pp QoQ

§ The Bank maintains its longstanding leadership in individual deposits with a market share of 41.3% up by 0.5 pp YoY and up by 0.4 pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 37.9%, up by 3.7 pp YoY and up by 2.1 pp QoQ.

Recent Developments

The Banker Magazine Names TBC Bank "Bank of the Year 2017 in Georgia"

§ TBC Bank has been named by The Banker magazine as "Bank of the Year 2017 in Georgia". This is the ninth time that TBC Bank has won this prominent award since 2002.

TBC Bank Signs USD 30 Million Loan Agreement with OeEB

§ TBC Bank signed a loan agreement for USD 30 million with the Oesterreichische Entwicklungsbank AG (OeEB), the Development Bank of Austria

§ The loan will be primarily used to finance rural areas outside of Tbilisi, MSMEs active in tourism and women-owned MSMEs

TBC Bank Receives GEL 54 Million Debt Financing from EFSE

§ TBC Bank signed a loan agreement in local currency, equivalent to USD 20 million, with the European Fund for Southeast Europe (EFSE) to provide financing to MSEs

TBC Bank signs EUR 94 million in loan guarantee agreements with EIB Group

· TBC Bank signed two guarantee agreements in the amount of EUR 94 million with the European Investment Bank Group (EIB and EIF):

v an InnovFin agreement in the amount of EUR 80 million will finance innovative Georgian small and medium-sized enterprises (SMEs) and small mid-caps;

v a EUR 14 million guarantee agreement under the EU4Business initiative will target small loans to SMEs.

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 Financial Highlights section.

Letter from the Chief Executive Officer

I am delighted to present another set of strong financial results for the full year 2017 and give an update on our achievements throughout the year, as well as provide a brief overview of the recent favourable developments in the Georgian economy. I would also like to note that our 2017 financial results include a full year contribution from Bank Republic for the first time, which has been fully integrated since second quarter.

Our underlying consolidated net profit for the full year 2017 reached GEL 369.2 million (reported net profit amounted to GEL 359.9 million), up by 35.1% compared to last year, while our underlying return on equity was 21.4% and underlying return on assets stood at 3.2%. Our robust profitability was supported by an increased fee and commission income, which helped to offset the effect of an anticipated drop in net interest margin, good performance in operating expenses, and prudent management of cost of risk.

In 2017, the net fee and commission income grew by 39.5% year-on-year, mainly related to an increase in settlement and card operations. Over the same period, total non-interest income, excluding net fee and commission income, rose by 30.6% year-on-year primarily due to an increase in gross insurance profit and FX gain. Net interest margin dropped by 1.1pp year-on-year on underlying basis, mainly due to the decrease of loan yields and stricter liquidity requirement. However, as expected, it has stabilized quarter-on-quarter basis and increased to 6.4% in the fourth quarter, up by 0.2pp compared to the third quarter. We have also achieved strong results in terms of cost efficiency, as a result, our underlying cost-to-income ratio decreased by 2.4pp year-on-year and stood at 40.5% in 2017.

In 2017, our loan book expanded by 16.2% year-on-year, supported by the growth across all business segments, and leading to the market share of 38.2%. Over the same period, deposits increased by 21.1% year-on-year, outpacing the market growth and expanding the deposit market share to 39.8%, up by 2pp year-on-year.

We continued to improve our asset quality; our non-performing loans stood at 3.3% at the year-end, down by 0.2pp year-on-year.

In January 2018, we have completed the IFRS 9 implementation, which is expected to increase the provision level by GEL 64 million and our non-performing loans coverage ratios with IFRS impact will stand at 104.7% or 209.4% including collateral. As anticipated, IFRS 9 will have no impact on our local regulatory capital requirements as established by NBG and profit and loss statement.

Our total capital adequacy ratio (CAR) per new NBG regulation stood at 17.5%, higher than the minimum requirement of 15.2%, while our regulatory tier I ratio was 13.4%, above the minimum requirement of 10.3%. In terms of our liquidity positon, the newly introduced regulatory liquidity coverage ratio stood at 113% at the end of the year, compared to the minimum requirement of 100%, while net loans to deposits + IFI funding stood at 92% and the net stable funding ratio (NSFR) was 124%.

The Georgian economy confirmed a steady growth in 2017. Initial estimates by Geostat[3] set the real annual GDP growth at 4.8%, compared to the 2.7% of 2016. The accelerated growth was mainly underpinned by the increased external inflows contributing positively to the recovery of private consumption. In 2017, the number of tourists increased by 27.9% year-on-year, while tourism revenue advanced by 26.9% year-on-year. Over the same period, exports increased by 29.1% year-on-year and remittances were up by 19.8% year-on-year. Another positive factor was the increase in domestic and foreign investments in infrastructure, construction, hotels and restaurants, and real estate. Most market commentators expect the GDP to continue its strong performance in 2018, supported by further improvements in the regional economic environment and continued implementation of the economic reforms.

With regards to our operating performance, we continue successfully to increase the use of our remote channels. As a result, our off-loading ratio[4] in the retail segment reached 88.3% in 2017, mainly driven by an increase in the number of transaction conducted through the mobile banking and self-service terminals. At the same time, the mobile banking penetration increased by 7.2pp year-on-year and stood at 31.4% at year-end, while the number of mobile bank users reached around 360,000, up by 74% year-on-year.

The past year was also rich in innovations. In March 2017, we launched the first Georgian speaking chatbot, Ti-Bot, which is available through Facebook messenger. Ti-Bot can perform simple bank transactions, such as P2P payments, and provide information about the Bank's products, as well as other useful information including the weather forecast and entertainment. Ti-Bot gained popularity very quickly and it has already attracted around 124,000 customers and received about 6.5 million messages. Just recently, we have added a new voice recognition function which allows our customers to send voice messages to the Ti-Bot instead of typing messages. In addition, we have introduced the fully digital on-boarding for legal entities, which enables them to become our clients by filling in the online application and opening a current account without visiting one of the Bank's branches. In December, around 20% of new legal entities have registered online. By the end of this year, we also launched a voice biometrics recognition system in our call centre, which enable us to identify callers based on their voice. This simplifies the identification of our customers, improving the safety of their personal and account data. We are the first bank it the region[5] to have implemented such a system.

Our insurance subsidiary continues to grow in line with our strategy. The gross written premium continues to increase steadily leading to a market share[6] of around 13%, making us the third largest player on the market and the second largest player in the retail segment with market share⁶ of around 26%. Over the same period, the number of customers has increased to around 277,000 in December 2017 from just 3,000 at the time of acquisition.

Outlook

2017 has been another successful year. We have recorded strong financial results; we successfully completed the merger with Bank Republic well ahead of schedule; we entered the FTSE 250 index; and we made good progress towards achieving our strategy of becoming the best digital financial services company in the region⁵.

Looking ahead, we are confident that we are well-positioned to achieve sustainable growth and deliver superior results to our shareholders. Therefore, we would like to reiterate our medium-term targets: ROE of above 20%, cost to income ratio below 40%, dividend pay-out ratio of 25-35% and loan book growth at around 15%.

Economic Overview

GDP growth

Georgian GDP growth accelerated significantly in 2017. Geostat's initial estimates set at 4.8% the annual GDP growth in 2017, up from 2.8% in 2016. Growth pickup in regional economies along with the higher consumer and investment activity in the country were the primary drivers for Georgia's stronger economic performance.

The Georgian economy also benefitted from the considerable positive spillovers of an accelerated growth in the EU, which is the country's largest trading partner. In addition, most of the CIS countries started to recover from the 2014-16 slowdown and this translated into a sharp increase in exports of goods as well as higher tourism and remittance inflows from these countries.

Growth was synchronized across a wide range of sectors of the economy with services accounting for the most significant improvement in the first nine months of 2017[7]. In the same period the transport and communications sector expanded by 6.2% YoY, compared to the 3.6% YoY decline in the first nine months of 2016. Trade and repairs grew by 6.4% YoY in the first nine months of 2017⁹, up from the 2.2% annual increase in the same period of 2016. Double digit growth in the first nine months of 2017⁹ was recorded in construction (+11.7% YoY) and hotels and restaurants (+12.0% YoY), supported by higher public investments in the former and a sharp increase of tourism inflows in the latter.

External inflows and exchange rate

Exports of goods went up by 29.1% YoY in 2017, with differences depending on the region. Exports towards the CIS countries grew by 60.0% YoY, reflecting the recovery in these economies. The sharp growth is mainly explained by the low base of the previous year, as exports to CIS in 2016 halved compared to 2013. Exports continued to grow to EU (+13.0% YoY) as well as towards other countries (+12.2% YoY). In 2017, notable growth continued towards China (+23.4% YoY), making it the 5^th largest export destination for Georgian goods. The Free Trade Agreement with China entered into force at the beginning of 2018 and it should further drive up Georgian exports to one of the world's largest market.

In 2017 the increase of imports by 9.4% YoY reflected the recovery of the domestic demand as well as the increase in oil prices. Imports of petroleum products went up by 18.4% in 2017, followed by the 10.5% increase of consumer goods. Imports of capital and intermediate goods grew by 5.0%. The trade balance slightly worsened by 1.4%, by c. USD 70 million in absolute terms.

Tourism inflows went up by an estimated 26.9% YoY with the total number of visitors exceeding 7.5 million. Georgia's immediate neighbors account for the majority of incoming visitors, but the country's popularity is growing among a larger spectrum of countries and tourism inflows from the EU and the Middle East have an upward trend.

There was a positive trend for remittances which grew by 19.8% YoY in 2017. Private money transfers from the EU and the CIS countries were up by 15.1% YoY and 15.6% YoY respectively, while remittances from other countries increased by 31.3% YoY. In the latter group Israel and Turkey recorded a significant growth, by 96.1% YoY and 25.6% YoY respectively.

The positive trend in external inflows improved markedly the current account balance. In the first nine months of 2017⁹ the CA deficit as a % of GDP stood at 7.1%, compared to the 11.2% over the same period the previous year.

The real effective exchange rate (REER) depreciated by 4.4% QoQ and 9.1% YoY in 4Q 2017. As it remains somewhat below its long-term trend, it supported the competitiveness of Georgian exports of goods and services.

As of the end of 2017 USD/GEL exchange rate appreciated by 2.1% YoY. Over the same period EUR/GEL exchange rate depreciated by 11.1%, reflecting the strengthening of EUR against USD. As expected, stronger EUR coincided with improved growth in EU as well as higher commodity prices having overall positive impact on the Georgian Economy.

Inflation and monetary policy

The annual CPI inflation was relatively high throughout the year, reaching 6.7% by the end of 2017, above the target at 4.0% set by the NBG. This mostly resulted from the one-off increase of excise taxes on petroleum, tobacco, and customs' tax on cars while in the second half of the year higher oil prices and weaker nominal effective exchange rate added pressure. The central bank raised the policy rate by 0.25pp to 7.25% in December 2017, and left it unchanged until the end of the year, as pressure on prices from exchange rate eased along with the appreciation of nominal effective exchange rate of GEL. As per the latest guidance by the central bank, inflation should align closer to the 3% target in 2018 as one-off effects of the increased import taxes on petroleum, cars, and tobacco will drop out of the CPI inflation starting from 2018. This is confirmed with the deceleration of annual inflation to 4.3% registered in January 2018.

The NBG continues to follow an inflation targeting framework with a flexible exchange rate, supporting the economic growth and the long-term stability of the exchange rate. Furthermore, the lowered inflation target for 2018 to 3% can be seen as a support for stronger nominal exchange rate of GEL going forward.

Fiscal policy

The Ministry of Finance delivered on its commitments to keep the budget deficit within sustainable levels in 2017, while at the same time accelerating investments in public infrastructure investment. Budget deficit amounted to 3.8% of GDP^{^[8]}, down from 3.9% in 2016. Capital spending was edged up to 4.8% of GDP from 4.1% in 2016, while social expenditures declined from 10.0% of GDP in 2016 to 9.3% in 2017. At the same time, government consumption^{^[9]} fell to 8.4% of GDP in 2017, down from 9.2% in 2016. The ratio of government consumption to GDP stood at the lowest level of the last 10 years, reflecting the successful attempts to optimize government spending on salaries and purchase of goods and services. Further steps were taken to enhance the cost-efficiency of the public institutions. A welcomed development in terms of reducing the bureaucratic burden was the reduction of the number of ministries, from 18 to 14, which entered into effect from 2018.

Public debt level remains comfortable at around 44.1%^{^[10]} of GDP as of the end of 2017, well below the upper-ceiling of 60%.

In addition, the Government continues its efforts to increase the transparency of the public finances. The 2017 assessment conducted by the International Budget Partnership ranked Georgia 5^th among the 102 countries surveyed, indicating the high levels of transparency, oversight, and public participation in the budgeting process. In the "Open Budget Index" Georgia outscores all of the EU countries with the exception of Sweden and Norway.

Going forward

The stabilization of external inflows and a more prudent fiscal policy, coupled with the continuation of structural reforms, will further improve the investment environment in the country. The stronger macroeconomic performance was reflected in the country's sovereign credit rating. Improved trade and investment relationships and strengthened banking supervision framework resulted in the higher sovereign credit rating. In September, 2017 Moody's upgraded Georgia's credit rating to Ba2 from Ba3, with the stable outlook.

Better country risk outlook, continuous reform efforts and higher trade openness are expected to remain key drivers of the economic growth in the country. For 2018 the International Monetary Fund (IMF) expects a 4.2% GDP growth while projections by the EBRD, the Government and the NBG are slightly higher, at 4.5%. Growth at these levels will enable Georgia to keep its place as one of the fastest growing economy among CEE and CIS region countries.

Unaudited Consolidated Financial Results Overview for 4Q 2017

This statement provides a summary of the unaudited business and financial trends for 4Q 2017 for TBC Bank Group plc and its subsidiaries. Quarterly financial information and trends are unaudited.

TBC Bank Group PLC financial results are adjusted for certain one-off items, to enable better analysis of the Group's performance. The reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given under the annex 21 section on pages 56-57. To further enhance the analysis, the Group separately discloses Bank Republic (BR) effects in 2016 and 2017. Detailed information is given in the annex 22 section on pages 58-61.

Income Statement Highlights

in thousands of GEL		4Q'17	3Q'17		4Q'16	Change YoY		Change QoQ
Net Interest Income		165,395	146,546		153,689	7.6%		12.9%
Net Fee and Commission Income		38,954	31,790		28,392	37.2%		22.5%
Other Operating Non-Interest Income		38,968	28,758		36,172	7.7%		35.5%
Provisioning Charges		(36,435)	(27,097)		(9,668)	NMF		34.5%
Operating Income after Provisions for Impairment		206,882	179,997		208,586	-0.8%		14.9%
Operating Expenses		(99,640)	(83,910)		(111,785)	-10.9%		18.7%
Profit Before Tax		107,241	96,086		96,801	10.8%		11.6%
Income Tax Expense		(10,487)	(9,327)		(8,767)	19.6%		12.4%
Reported Profit for the Period		96,754	86,759		88,034	9.9%		11.5%
Underlying profit for the period		96,754	87,978		84,639	14.3%		10.0%
NMF -no meaningful figures Balance Sheet and Capital Highlights

	Dec-17				Sep-17			Change QoQ
In Millions	GEL			USD	GEL		USD
Total Assets	12,965.9			5,001.9	12,136.9		4,900.4	6.8%
Gross Loans	8,553.2			3,299.6	7,767.6		3,136.3	10.1%
Customer Deposits	7,816.8			3,015.5	7,096.5		2,865.3	10.1%
Total Equity	1,890.5			729.3	1,790.3		722.9	5.6%
Regulatory Tier I Capital (Basel III)*	1,437.2			554.4	1,354.7**		547.0**	6.1%
Regulatory Total Capital (Basel III)*	1,885.3			727.3	1,784.8**		720.6**	5.6%
Regulatory Tier I Capital (Basel II/III)	1,437.2**			554.4**	1,354.7		547.0	6.1%
Regulatory Total Capital (Basel II/III)	1,883.8**			726.7**	1,821.8		735.6	3.4%
Regulatory Risk Weighted Assets (Basel III)*	10,753.2			4,148.3	9,601.4**		3,876.7**	12.0%
Regulatory Risk Weighted Assets (Basel II/III)	13,908.9**			5,365.7**	12,560.6		5,071.5	10.7%

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

**Figures are based on internal estimates and are presented for comparison purpose

Key Ratios[11]	4Q'17	3Q'17	4Q'16	Change YoY	Change QoQ
Underlying ROE	21.0%	20.0%	23.5%	-2.7%	0.8%
Reported ROE	21.0%	19.8%	24.2%	-3.2%	1.1%
Underlying ROA	3.0%	3.0%	3.5%	-0.5%	0.0%
Reported ROA	3.0%	2.9%	3.7%	-0.7%	0.1%
Underlying Cost to Income	41.0%	39.8%	47.0%	-6.0%	1.2%
Reported Cost to Income	41.0%	40.5%	51.2%	-10.2%	0.5%
Cost of Risk	1.4%	1.3%	0.6%	0.8%	0.1%
NPL to Gross Loans	3.3%	3.5%	3.5%	-0.2%	-0.2%
Regulatory Tier 1 CAR (Basel III)*	13.4%	14.1%**	N/A	N/A	-0.7%
Regulatory Total CAR (Basel III)*	17.5%	18.6%**	N/A	N/A	-1.1%
Regulatory Tier 1 CAR (Basel II/III)	10.3%**	10.8%	10.4%	-0.1%	-0.5%
Regulatory Total CAR (Basel II/III)	13.5%**	14.5%	14.2%	-0.7%	-1.0%
Leverage (Times)	6.9x	6.8x	6.8x	0.1x	0.1

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

**Figures are based on internal estimates and are presented for comparison purpose

Income Statement Discussion

Net Interest Income

In thousands of GEL	4Q'17	3Q'17	4Q'16	Change YoY	Change QoQ
Loans and Advances to Customers	255,576	225,467	222,116	15.1%	13.4%
Investment Securities Available for Sale	11,991	12,657	7,847	52.8%	-5.3%
Due from Other Banks	5,374	4,524	959	NMF	18.8%
Bonds Carried at Amortized Cost	7,293	9,785	7,460	-2.2%	-25.5%
Investment in Leases	7,787	5,819	4,895	59.1%	33.8%
Other	-	-	67	-100.0%	NMF
Interest Income	288,020	258,252	243,344	18.4%	11.5%
Customer Accounts	66,144	59,329	47,886	38.1%	11.5%
Due to Credit Institutions	45,762	42,407	29,526	55.0%	7.9%
Subordinated Debt	10,294	9,494	11,762	-12.5%	8.4%
Debt Securities in Issue	426	476	482	-11.6%	-10.5%
Interest Expense	122,626	111,705	89,655	36.8%	9.8%
Net Interest Income	165,395	146,546	153,689	7.6%	12.9%

Net Interest Margin	6.4%	6.2%	7.9%	-1.5%	0.2%

NMF -no meaningful figures

4Q 2017 to 4Q 2016 Comparison

In 4Q 2017, the net interest income increased by GEL 11.7 million, or 7.6%, to GEL 165.4 million (GEL 139.6 million without the Bank Republic estimated contribution effect), as a result of a GEL 44.7 million, or 18.4%, increase in interest income and a GEL 33.0 million, or 36.8%, rise in interest expense, compared to 4Q 2016.

Without the Bank Republic estimated contribution effect, the GEL 47.4 million, or 23.1%, increase in interest income was mainly due to a GEL 36.1 million, or 19.3%, increase in interest income from loans. This in turn was due to the 26.2% rise in the loan portfolio which more than offset the declining yield effect as discussed below. The gain in interest income was also driven by the growth in interest income from investment securities (comprising both investment securities available for sale and bonds carried at amortized cost) by GEL 4.9 million, or 38.6%, which resulted from the significant increase in the respective portfolio.

The Bank Republic estimated contribution effect added a GEL 32.6 million, or 12.7%, to the interest income from loans and GEL 1.7 million, or 8.7%, interest income from investment securities. As a result, the total interest income for 4Q stood at GEL 288.0 million and the Bank Republic contribution effect was GEL 35.0 million, or 12.2%.

In the reporting period, loan yields declined from 13.8% to 12.3% as a result of the decrease in foreign currency rates from 11.1% to 9.1% and decrease in GEL rates from 18.8% to 17.1% in line with the overall market trend. The yields on investment securities decreased from 8.1% to 6.9% (or 7.6% without an accounting adjustment effect between 3Q and 4Q). Consequently, these changes led to a decline in yields on average interest earning assets from 12.5% in 4Q 2016 to 11.2% in 4Q 2017.

Without the Bank Republic estimated contribution effect, interest expense amounted to GEL 113.4 million, making an increase of GEL 37.6 million, or 49.7% YoY. The growth was primarily attributable to the increased interest expense on due to credit institutions by GEL 19.0 million, or 81.7% as a result of respective portfolio growth, and increased interest expense on customer accounts by 21.0 million, or 52.2%, related to the portfolio growth.

The Bank Republic estimated contribution added GEL 4.8 million, or 7.3%, to the interest expense on customer accounts, which amounted to GEL 66.1 million in 4Q 2017. It also added GEL 3.6 million, or 7.9%, to the interest expense on due to credit institutions, which totalled GEL 45.8 million in 4Q 2017. Consequently, the Bank Republic contribution effect was GEL 9.2 million or 7.5%.

The rate on due to credit institutions decreased by 0.4 pp to 6.9%, while the cost of deposits increased by 0.1 pp to 3.5%. As a result, the cost of funds grew to 4.6%, up by 0.1pp in 4Q 2017.

Consequently, NIM dropped to 6.4% in 4Q 2017, compared to 7.9% in 4Q 2016, while underlying NIM decreased by 1.1pp from 7.5%.

4Q 2017 to 3Q 2017 Comparison

On a QoQ basis, net interest income grew by GEL 18.8 million, or 12.9% QoQ, to GEL 165.4 million due to GEL 29.8 million, or 11.5%, higher interest income and GEL 10.9 million, or 9.8%, higher interest expense.

The increase in interest income largely resulted from the rise in interest income on loans by GEL 30.1 million, or 13.4%, which was the result of a 10.1% increase in the respective portfolio. This effect was further extended by a 0.4pp rise in yields on loans to 12.3%. The increase in loan yields stemmed from 0.6pp rise in GEL rates to 17.1% and 0.3 pp increase in FC rates to 9.1%. The growth in interest income was also driven by the increase in interest income from investment in lease by GEL 2.0 million, or 33.8%, which was mainly driven by a 29.3% increase in respective portfolio. The rise was slightly offset by a GEL 3.2 million, or 14.1% drop in interest income from investment securities mainly due to accounting adjustment effect between 3Q and 4Q without which interest income from securities would have increased by GEL 0.8 million, or 4.1%. As a result, yields on average interest earning assets rose to 11.2%, compared to 10.9% in 3Q 2017.

The increase in interest expense was primarily due to the rise in the interest expense on customer accounts by GEL 6.8 million, or 11.5%. This resulted from the 10.1% increase in the respective portfolio and the 0.1pp increase in respective rate to 3.5%. The GEL 3.4 million, or 7.9% QoQ rise in interest expense on amounts due to credit institutions was driven by 0.3% increase in cost of borrowed fund, which was slightly offset by a 2.1% drop in respective portfolio. As a result, the cost of funds rose by 0.1pp to 4.6%. A GEL 0.8 million, or 8.4% increase in the interest expense on subordinated debt, was another contributor to interest expense and it was attributable to a 0.2pp rise in cost of subordinated debt and a 3.8% increase in respective portfolio. As a result, cost of funds increased by 0.1pp to 4.6%.

Consequently, on a QoQ basis, the NIM increased by 0.2 pp to 6.4%.

Fee and Commission Income


In thousands of GEL	4Q'17	3Q'17	4Q'16	Change YoY	Change QoQ
Card Operations	21,618	20,662	18,832	14.8%	4.6%
Settlement Transactions	16,410	15,170	14,590	12.5%	8.2%
Guarantees Issued	4,754	4,295	3,308	43.7%	10.7%
Letters of Credit	1,286	990	2,310	-44.3%	29.8%
Cash Transactions	5,378	4,576	3,930	36.8%	17.5%
Foreign Exchange Operations	337	420	484	-30.4%	-19.9%
Other	5,889	2,440	2,006	193.6%	141.4%
Fee and Commission Income	55,673	48,552	45,460	22.5%	14.7%
Card Operations	10,946	11,409	11,140	-1.7%	-4.1%
Settlement Transactions	2,139	1,897	1,722	24.2%	12.7%
Guarantees Issued	483	758	320	51.0%	-36.3%
Letters of Credit	368	239	297	23.9%	53.5%
Cash Transactions	1,111	1,177	751	48.0%	-5.7%
Foreign Exchange Operations	2	3	123	-98.1%	-18.9%
Other	1,671	1,279	2,717	-38.5%	30.7%
Fee and Commission Expense	16,719	16,763	17,068	-2.0%	-0.3%
Card Operations	10,672	9,253	7,692	38.7%	15.3%
Settlement Transactions	14,272	13,272	12,868	10.9%	7.5%
Guarantees	4,272	3,537	2,988	42.9%	20.8%
Letters of Credit	918	751	2,013	-54.4%	22.3%
Cash Transactions	4,268	3,398	3,180	34.2%	25.6%
Foreign Exchange Operations	334	417	361	-7.3%	-19.9%
Other	4,218	1,161	(710)	-693.8%	263.4%
Net Fee and Commission Income	38,954	31,790	28,392	37.2%	22.5%

NMF -no meaningful figures

4Q 2017 to 4Q 2016 Comparison

In 4Q 2017, net fee and commission income totalled GEL 39.0 million, up by GEL 10.6 million, or 37.2% compared to 4Q 2016. This growth resulted mainly from a GEL 1.4 million, or 10.9%, gain in net fee and commission income from settlement transactions, a GEL 3.0 million, or 38.7%, increase in net card operations; a GEL 1.3 million, or 42.9% in guarantees and GEL 1.1 million, or 34.2% increase in cash transactions. The Bank Republic estimated contribution effect was a GEL 1.6 million, or 4.0%, in net fee and commission income.

4Q 2017 to 3Q 2017 Comparison

On a QoQ basis, net fee and commission income rose by GEL 7.2 million, or 22.5%, compared to 3Q 2017. This was primarily driven by a GEL 1.4 million, or 15.3%, increase in net fee and commission income from net card operations, by a GEL 1.0 million, or 7.5%, increase in net settlement transactions, and by a GEL 3.1 million increases in other net fee and commission income, mainly driven by CIB segment performance.

Other Operating Non-Interest Income and Gross Insurance Profit

In thousands of GEL	4Q'17	3Q'17	4Q'16	Change YoY	Change QoQ
Gains Less Losses from Trading in Foreign Currencies and Foreign Exchange Translations	25,714	20,330	22,952	12.0%	26.5%
Share of Profit of Associates	249	84	0	NMF	NMF
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments	3	(1)	94	-97.1%	NMF
Gains less Losses from Disposal of Investment Securities Available for Sale	93	0	498	-81.4%	NMF
Revenues from Cash-In Terminal Services	255	241	300	-14.9%	5.8%
Revenues from Operational Leasing	1,411	1,623	1,158	21.8%	-13.1%
Gain from Sale of Investment Properties	2,775	404	2,393	16.0%	NMF
Gain from Sale of Inventories of Repossessed Collateral	682	756	991	-31.2%	-9.8%
Administrative Fee Income from International Financial Institutions	0	0	139	-100.0%	NMF
Revenues from Non-Credit Related Fines	1,284	29	211	NMF	NMF
Gain on Disposal of Premises and Equipment	760	66	110	NMF	NMF
Other	3,824	3,452	7,070	-47.8%	10.8%
Other Operating Income	10,991	6,572	12,372	-11.2%	67.3%
Other Operating Non-Interest Income	37,049	26,985	35,916	3.2%	37.3%
Gross Insurance Profit	1,919	1,773	256	NMF	8.2%
Other Operating Non-Interest Income and Gross Insurance Profit	38,968	28,758	36,172	7.7%	35.5%

NMF -no meaningful figures

4Q 2017 to 4Q 2016 Comparison

Total other operating non-interest income and gross insurance profit grew by GEL 2.8 million to GEL 39.0 million in 4Q 2017. While gains less losses from trading in foreign currencies and foreign exchange translations increased by GEL 2.8 million and revenues from non-credit related fines increased by GEL1.1 million, the growth was largely offset by a GEL 3.5 million decrease in "Other" income. Over the same time, gross insurance profit increased by GEL1.7 million.

The increase in gross insurance profit was related to the sharp increase in number of customers by c.277,000 which in turn led to high increase in gross written premium by 445.7% YoY on standalone basis. As a result, market share[12] increased to 13.0% from 3.5% establishing us as the third largest player on market. More information about TBC insurance can be found in annex 20 on page 55.

The Bank Republic's estimated contribution was GEL 4.8 million, or 12.4%, out of which GEL 3.3 million was related to gains less losses from trading in foreign currencies and foreign exchange translations.

4Q 2017 to 3Q 2017 Comparison

On a QoQ basis, total other operating non-interest income grew by GEL 10.2 million, or by 35.5%, primarily driven by increase in gains less losses from trading in foreign currencies and foreign exchange transactions by GEL 5.4 million, or 26.5%, by GEL 2.4 million increase in gains from sale of investment properties and by GEL 1.3 million rise in revenues from non-credit related fines. The increase in gains less losses from trading in foreign currencies and foreign exchange transactions was attributable to seasonally high trade volumes, as well as increased volatility of the GEL exchange rate.

Provision for Impairment

In thousands of GEL	4Q'17	3Q'17	4Q'16	Change YoY	Change QoQ
Provision for Loan Impairment	(28,421)	(25,036)	(10,405)	173.1%	13.5%
Provision for Impairment of Investments in Finance Lease	(79)	(285)	(322)	-75.6%	-72.4%
Provision for/(Recovery of Provision) Performance Guarantees and Credit Related Commitments	(1,019)	(680)	2,787	-136.6%	49.9%
Provision for Impairment of Other Financial Assets	(6,917)	(1,097)	(1,727)	NMF	NMF
Total Provision Charges for Impairment	(36,435)	(27,097)	(9,668)	NMF	34.5%
Operating Income after Provisions for Impairment	206,882	179,997	208,586	-0.8%	14.9%

Cost of Risk	1.4%	1.3%	0.6%	0.8%	0.1%

NMF -no meaningful figures

4Q 2017 to 4Q 2016 Comparison

In 4Q 2017, total provision charges grew by GEL 26.8 million to GEL 36.4 million compared to 4Q 2016. The rise is mainly determined by GEL 18.0 million in higher charges on loans related to low provision expense in 4Q 2016 driven by one-offs. (Detailed information regarding 2016-2017 one-offs and the respective underlying ratios is given in the annex 21 on pages 56-57.) Total provision charges growth was also driven by a GEL 5.2 million increase in provision for impairment of other financial assets and by a GEL 3.8 million in higher charges on provision for performance guarantees and credit related commitments.

In 4Q 2017, the cost of risk on loans stood at 1.4%, compared to 0.6% in 4Q 2016. The CoR in 4Q 2016 was very low due to one-off provision expenses.

4Q 2017 to 3Q 2017 Comparison

On a QoQ basis, total provision charges increased by a GEL 9.4 million, or 34.5%, amounting to GEL 36.4 million. A GEL 5.8 million increase in provisions for other financial assets was the main contributor to the rise in total provision charges. Provision charges on loans grew by GEL 3.4 million.

The cost of risk on loans remained broadly stable and amounted to 1.4% in 4Q 2017.

Further details on asset quality are available in the Balance Sheet Discussion section.

Operating Expenses

In thousands of GEL	4Q'17	3Q'17	4Q'16	Change YoY	Change QoQ
Staff Costs	54,105	46,620	62,544	-13.5%	16.1%
Provisions for Liabilities and Charges	0	0	2,210	-100.0%	NMF
Depreciation and Amortization	10,425	9,317	7,435	40.2%	11.9%
Professional services	4,672	3,834	10,976	-57.4%	21.9%
Advertising and marketing services	8,141	3,492	6,268	29.9%	133.2%
Rent	5,908	5,635	5,639	4.8%	4.8%
Utility services	1,515	1,533	1,474	2.8%	-1.2%
Intangible asset enhancement	3,346	2,177	1,840	81.9%	53.7%
Taxes other than on income	1,095	1,763	1,022	7.1%	-37.9%
Communications and supply	1,195	1,067	1,937	-38.3%	12.0%
Stationary and other office expenses	1,539	1,157	1,041	47.8%	33.0%
Insurance	756	(271)	733	3.2%	NMF
Security services	488	477	560	-12.7%	2.4%
Premises and equipment maintenance	1,574	1,142	1,949	-19.3%	37.8%
Business trip expenses	645	468	654	-1.4%	37.7%
Transportation and vehicles maintenance	453	386	425	6.7%	17.2%
Charity	282	346	185	52.6%	-18.5%
Personnel training and recruitment	526	191	504	4.3%	175.1%
Write-down of current assets to fair value less costs to sell	(165)	(189)	(2,779)	-94.1%	-13.0%
Loss on disposal of Inventory	51	2	1,038	-95.1%	NMF
Loss on disposal of investment properties	57	0	61	-5.5%	NMF
Loss on disposal of premises and equipment	186	135	90	105.5%	37.4%
Impairment of intangible assets	0	66	723	-100.0%	-100.0%
Acquisition costs	560	1,063	207	170.9%	-47.3%
Other	2,287	3,499	5,048	-54.7%	-34.7%
Administrative and Other Operating Expenses	35,111	27,974	39,595	-11.3%	25.5%
Operating Expenses	99,640	83,910	111,785	-10.9%	18.7%
Profit before Tax	107,241	96,086	96,801	10.8%	11.6%
Income Tax Expense	(10,487)	(9,327)	(8,767)	19.6%	12.4%
Profit for the Period	96,754	86,759	88,034	9.9%	11.5%

Cost to Income	41.0%	40.5%	51.2%	-10.2%	0.5%
ROE	21.0%	19.8%	24.2%	-3.2%	1.2%
ROA	3.0%	2.9%	3.7%	-0.7%	0.1%

NMF -no meaningful figures

4Q 2017 to 4Q 2016 Comparison

In 4Q 2017 the total operating expense, excluding one-offs and the Bank Republic estimated contribution effect, stood at GEL 84.2 million, down by GEL 1.8 million, or 2.1% YoY. This resulted from a GEL 9.8 million decrease in staff costs, which was partially offset by a GEL 6.1 million increase in administrative and other operating expenses, mainly related to the expanded business scale and performance, and a GEL 1.9 million rise in depreciation and amortisation.

In 4Q 2016 the one-off costs were related to Premium Listing, amounting to GEL 0.3 million, and to the Bank Republic integration costs, totalling GEL 12.2 million.

The Bank Republic estimated contribution to total operating expenses in 4Q 2017 amounted to GEL 15.4 million, comprising of GEL 9.0 million in staff costs, and GEL 5.4 million in administrative and other operating expenses. Total operating expense, including one-offs and the Bank Republic estimated contribution effect, amounted to GEL 99.6 million.

As a result, the cost to income ratio was 41.0% in 4Q 2017, compared to 51.2% in 4Q 2016, or 47.0% without one-offs.

4Q 2017 to 3Q 2017 Comparison

On a QoQ basis, the total operating expenses rose by a GEL 15.7 million, or 18.7%. The increase was primarily attributable to a GEL 7.5 million, or 16.1% increase in staff costs and a GEL 7.1 million or 25.5% increase in administrative and other operating expenses. The rise in administrative and other operating expenses was largely due to a GEL 4.6 million rise in advertising and marketing services, a GEL 1.2 million, or 53.7% increase in intangible asset enhancement, and a GEL 1.0 million increase in insurance expense. The overall rise in operating expenses is related to the seasonal high costs in 4Q, which more than offset the one-off effect in 3Q (related to the Bank Republic integration), as well as the achieved synergies deriving from the Bank Republic integration.

As a result, the cost to income ratio stood at 41.0% up by 0.5pp from 3Q 2017 (or up by 1.2pp on underlying basis)

Balance Sheet Discussion

In millions of GEL	Dec-17	Sep-17	Change QoQ
Cash, Due from Banks and Mandatory Cash Balances with NBG	2,504.9	2,507.9	-0.1%
Loans and Advances to Customers (Net)	8,325.4	7,549.1	10.3%
Financial Securities	1,107.5	1,113.4	-0.5%
Fixed and Intangible Assets & Investment Property	529.6	480.0	10.3%
Other Assets	498.5	486.5	2.5%
Total Assets	12,965.9	12,136.9	6.8%
Due to Credit Institutions	2,620.7	2,675.9	-2.1%
Customer Accounts	7,816.8	7,096.5	10.1%
Debt Securities in Issue	20.7	19.8	4.4%
Subordinated Debt	426.8	411.2	3.8%
Other Liabilities	190.4	143.2	33.0%
Total Liabilities	11,075.5	10,346.6	7.0%
Total Equity	1,890.5	1,790.3	5.6%

Assets

On a QoQ basis, total assets grew by GEL 829.0 million, or 6.8%, mainly due to a GEL 776.3 million, or 10.3% rise in net loans and advances to customers. A GEL 49.6 million, or 10.3%, increase in fixed and intangible assets and investment property, and a GEL 32.6 million, or 29.3%, increase in investments in finance leases, also contributed to the growth.

As of 31 December 2017, the gross loan portfolio amounted to GEL 8,553.2 million, up by GEL 786 million or 10.1% QoQ. Gross loans denominated in foreign currency accounted for 59.7% of the total, compared to 59.2% as of 30 September 2017. The slightly lower larisation level is attributable to the Georgian Lari depreciation against the USD in the respective period. As of 30 September 2017, NPLs stood at 3.3%, compared to 3.5% as of 30 September 2017. The NPLs provision coverage ratios including IFRS 9 effect will stand at 104.7% and 209.4% including the collateral (or stands at 81.8% and 186.5% respectively per IAS 39)

Asset Quality

Foreign Currency Income Linked Borrowers

	31-Dec-17		30-Sep-17
Segments	FC share	FC linked income borrowers share	FC share	FC linked income borrowers share
Retail	49.3%	24.9%	49.9%	25.5%
Consumer	18.5%	22.7%	19.8%	21.6%
Mortgage	81.4%	25.4%	81.7%	26.5%
Corporate	74.6%	56.3%*	72.0%	53.9%**
MSME	63.8%	16.6%	64.6%	16.7%
Total Loan Portfolio	59.7%	34.3%	59.2%	32.9%

(Based on internal estimates)

* Pure exports account for 8.0% of total Corporate FX denominated loans

** Pure exports account for 5.2% of total Corporate FX denominated loans

PAR 30¹ by Segments and Currencies

PAR 30	Dec-17			Sep-17
	GEL	FC	Total	GEL	FC	Total
Corporate	0.0%	2.0%	1.5%	0.3%	2.8%	2.1%
Retail	2.9%	2.0%	2.4%	3.2%	2.2%	2.7%
MSME	1.5%	3.1%	2.5%	1.7%	4.1%	3.2%
Total	2.1%	2.2%	2.2%	2.3%	2.9%	2.7%

¹loans overdue by more than 30 days to gross loans

Total

The total PAR 30 decreased by 0.5pp QoQ. The decrease in PAR 30 ratio in 4Q 2017 is related to improvement across all segment. PAR 30 in local currency decreased by 0.2pp to 2.1%, while PAR 30 in foreign currency dropped by 0.7pp to 2.2%.

Retail Segment

The retail segment PAR 30 amounted to 2.4%, down by 0.3% QoQ. The QoQ decrease was related to the stable performance of the book. The retail PAR 30 in local currency decreased by 0.3pp to 2.9%, while the PAR 30 in foreign currency decreased by 0.2pp to 2.0%.

Corporate

The corporate segment PAR 30 amounted to 1.5%, down by 0.6pp QoQ. The corporate PAR 30 in local currency dropped by 0.3%, while the PAR 30 in foreign currency decreased by 0.8pp to 2.0%.

MSME

The MSME segment PAR 30 amounted to 2.5%, down by 0.7pp QoQ. The decrease was driven by the improved performance of the book. The MSME PAR 30 in local currency decreased by 0.2pp to 1.5%, while PAR 30 in foreign currency was down by 1.0pp to 3.1%.

NPLs

NPLs	Dec-17			Sep-17
	GEL	FC	Total	GEL	FC	Total
Corporate	0.0%	4.2%	3.2%	0.3%	4.7%	3.4%
Retail	2.6%	2.8%	2.7%	2.8%	3.1%	2.9%
MSME	2.2%	6.0%	4.6%	2.7%	6.0%	4.8%
Total	2.1%	4.1%	3.3%	2.3%	4.3%	3.5%

Total

Total NPLs stood at 3.3%, down by 0.2 pp on a QoQ basis. The NPLs in local currency decreased by 0.2pp to 2.1%, while NPLs in foreign currency dropped by 0.2pp to 4.1%.

Retail Segment

Retail NPLs stood at 2.7%, down by 0.2pp QoQ. The Retail NPLs in local currency decreased by 0.2pp to 2.6%, while NPLs in foreign currency decreased by 0.3pp to 2.8%.

Corporate

Corporate NPLs stood at 3.2% down by 0.2pp on a QoQ basis. The corporate NPLs in local currency declined by 0.3pp to 0.0%, while NPLs in foreign currency decreased by 0.5pp to 4.2%.

MSME

MSME NPLs declined by 0.2pp on a QoQ basis, to 4.6%. The MSME NPLs in local currency decreased by 0.5pp to 2.2%, while NPLs in foreign currency remained stable at 6.0%.

NPLs Coverage

NPLs Coverage	Dec-17(including IFRS9 impact)		Sep-17
	Exc. Collateral	Incl. Collateral	Exc. Collateral	Incl. Collateral
Corporate	86.6%	211.0%	52.5%	256.8%
Retail	154.0%	237.3%	120.6%	201.6%
MSME	54.6%	170.6%	49.7%	172.5%
Total	104.7%	209.4%	80.5%	206.8%

Total

NPL coverage ratios per IAS 39 stood at 81.8% and 186.5%, including collateral.

Retail Segment

NPL coverage ratios per IAS 39 stood at 120.8% and 204.1%, including collateral.

Corporate

NPL coverage ratios per IAS 39 stood at 63.2% and 187.7%, including collateral.

MSME

NPL coverage ratios per IAS 39 stood at 46.1% and 162.2%, including collateral.

Liabilities

As of 31 December 2017, TBC Bank's total liabilities amounted to GEL 11,075.5 million, up by 7.0% QoQ. The growth of GEL 728.8 million was primarily due to a GEL 720.3 million, or 10.1%, increase in customer deposits. Total liabilities also grew due to the rise in other financial liabilities by a GEL 28.4 million as well as the increase in subordinated debt by GEL15.6 million. This effect was slightly offset by a GEL 55.2 million, or 2.1% decrease in amounts due to credit institutions.

Liquidity

The Bank's liquidity ratio, as defined by the NBG, stood at 32.5% as of 31 December 2017, compared to 35.3% as of 30 September 2017. As of 31 December 2017, the newly introduced short term liquidity ratio, the total LCR, as defined by NBG, was 112.7%, above the 100.0% limit, while the LCR for GEL and FC stood at 95.6% and 122.9% respectively, - both higher of their respective limits of 75% and 100%.

Total Equity

As of 31 December 2017, TBC's total equity amounted to GEL 1,890.5 million, up by GEL 100.1 million from GEL 1,790.3 million as of 30 September 2017. The QoQ change in equity was mainly due to the net profit contribution in respective period.

Regulatory Capital

In December 2017, the National Bank of Georgia introduced new capital adequacy requirements in order achieve better compliance with Basel III framework. More information can be found on page 56.

According to the newly introduced methodology, as of 31 December 2017, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 13.4% and 17.5%, respectively, compared to minimum required levels of 10.3% and 15.2%.

In December 2017, The Bank's Basel III Tier 1 Capital amounted to GEL 1,437.2 million. The Bank's Basel III Total Capital amounted to GEL 1,885.3 million. Risk Weighted Assets amounted to GEL 10,753.2 million as of 31 December 2017.

Results by Segments and Subsidiaries

The segment definitions are as per below:

· Corporate - Legal Entities with an annual revenue of GEL 8.0 million or more or who have been granted a loan in an amount equivalent to USD 1.5 million or more. Some other business customers may also be assigned to this segment or transferred to the MSME segment on a discretionary basis.

· MSME (Micro, Small and Medium) - all business customers who are not included in either Corporate and Retail segments; or Legal Entities who have been granted a Pawn shop loan;

· Retail - all non-business individual customers or individual business customers who have been granted a loan in an amount equivalent below USD 8.0 thousand. All individual customers are included in retail deposits.

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

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

Income Statement by Segments

4Q	Retail	MSME	Corporate	Corp.Centre	Total
Interest Income	147,324	49,741	60,468	30,488	288,020
Interest Expense	(31,444)	(3,468)	(31,233)	(56,482)	(122,626)
Net Transfer Pricing	(21,443)	(14,554)	8,995	27,002	0
Net Interest Income	94,437	31,720	38,230	1,008	165,395
Fee and Commission Income	37,573	5,760	11,020	1,320	55,673
Fee and Commission Expense	(11,801)	(2,622)	(1,630)	(665)	(16,719)
Net fee and Commission Income	25,772	3,138	9,390	655	38,954
Gross Insurance Profit	0	0	0	1,919	1,919
Gains Less Losses from Trading in Foreign Currencies	7,044	5,966	13,367	(754)	25,622
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)	0	0	0	92	92
Net Losses from Derivative Financial Instruments	0	0	0	3	3
(Losses Less Gains)/Gains Less Losses from Disposal of Investment Securities Available for Sale	0	0	0	93	93
Other Operating Income	3,282	718	7,123	(131)	10,991
Share of profit of associates	0	0	0	249	249
Other Operating Non-Interest Income	10,326	6,684	20,489	(450)	37,049
Other Operating Non-Interest Income and Gross Insurance Profit	10,326	6,684	20,489	1,469	38,968
Provision for Loan Impairment	(21,161)	(3,078)	(4,181)	0	(28,421)
(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments	41	(18)	(924)	(118)	(1,019)
Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease	0	0	0	(79)	(79)
(Provision)/Recovery of Provision for Impairment of other Financial Assets	(31)	43	(6,586)	(342)	(6,917)
Operating income after provisions for impairment	109,383	38,489	56,416	2,593	206,882
Staff Costs	(34,886)	(7,042)	(7,465)	(4,712)	(54,105)
Depreciation and Amortization	(8,332)	(1,377)	(379)	(337)	(10,425)
Administrative and Other Operating Expenses	(23,163)	(4,479)	(2,226)	(5,243)	(35,111)
Operating Expenses	(66,381)	(12,898)	(10,070)	(10,292)	(99,640)
Profit before Tax	43,002	25,591	46,347	(7,698)	107,241
Income Tax Expense	(5,612)	(3,746)	(7,235)	6,106	(10,487)
Profit for the Period	37,390	21,845	39,112	(1,592)	96,754

Portfolios by Segments

In thousands of GEL	Dec-17	Sep-17
Loans and Advances to Customers

Consumer	2,128,658	1,972,012
Mortgage	2,069,728	1,900,186
Pawn	34,767	34,861
Retail	4,233,153	3,907,059
Corporate	2,475,392	2,128,478
MSME	1,844,671	1,732,096
Total Loans and Advances to Customers (Gross)	8,553,217	7,767,634
Less: Provision for Loan Impairment	(227,864)	(218,573)
Total Loans and Advances to Customers (Net)	8,325,353	7,549,061

Customer Accounts

Retail	4,378,265	4,015,754
Corporate	2,410,862	2,130,763
MSME	1,027,690	950,005
Total Customer Accounts	7,816,817	7,096,523

Retail Banking

As of 31 December 2017, retail loans stood at GEL 4,233.2 million, up by GEL 326.1 million, or 8.3%, QoQ. This increase was attributable to a GEL 169.5 million, or 8.9% increase in mortgage loans and a GEL 156.6 million, or 7.9% increase in consumer loans. As of 31 December 2017, TBC Bank's retail loans accounted for 40.2% market share of total individual loans. As of 31 December 2017, foreign currency loans represented 49.3% of the total retail loan portfolio.

In the reporting period, retail deposits rose to GEL 4,378.3 million, up by GEL 362.5 million or 9.0% QoQ. Retail deposits accounted for 41.3% market share of total individual deposits. The increase in retail deposits was driven by a GEL 182.3 million, or 10.2% rise in current deposits and a GEL 180.2 million, or 8.1% rise in term deposits. As of 31 December 2017 term deposits accounted for 54.9% of the total retail deposit portfolio, while foreign currency deposits represented 83.8% of the total retail deposit portfolio.

In 4Q 2017, retail loan yields and deposit rates stood at 14.2% and 2.9% respectively. The segment's cost of risk on loans was 2.0%, down by 1.2pp QoQ, the decrease is related to improved performance of the overall retail book. The retail segment contributed 38.6%, or GEL 37.4 million, to the TBC's total net income in 4Q 2017.

Corporate Banking

As of 31 December 2017, corporate loans amounted to GEL 2,475.4, up by GEL 346.9 million or 16.3% QoQ. Foreign currency loans accounted for 74.6% of the total corporate loan portfolio. Market share in legal entities increased by 0.4pp QoQ to 36.0%.

As of the same date, corporate deposits totalled GEL 2,410.9 million, up by GEL 280.1 million or 13.1% QoQ. Foreign currency corporate deposits represented 49.8% of the total corporate deposit portfolio. Market share increased by 2.1pp and stood at 37.9%.

In 4Q 2017, corporate loan yields and deposit rates stood at 10.0% and 5.3%, respectively. In the same period, the cost of risk on loans was 0.7%. Negative CoR in 2017 is driven by good performance of the book. In terms of profitability, the corporate segment's net profit reached GEL 39.1 million, or 40.4% of the Bank's total net income.

MSME Banking

As of 31 December 2017, MSME loans amounted to GEL 1,844.7, up by GEL 112.6 million, or 6.5%, QoQ. Foreign currency loans accounted for 63.8% of the total MSME portfolio.

As of the same date, MSME deposits stood at GEL 1,027.7 million, up by GEL 77.7 million or 8.2% QoQ. Foreign currency MSME deposits represented 53.7% of the total MSME deposit portfolio.

In 4Q 2017, MSME loan yields and deposit rates stood at 10.9% and 1.4%, respectively while the cost of risk on loans was 0.7%, down by 0.2pp QoQ driven by improved of the loan book. In terms of profitability, net profit for the MSME segment amounted to GEL 21.8 million, or 22.6%, of TBC's total net income.

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet

In thousands of GEL	Dec-17	Sep-17
Cash and cash equivalents	1,431,477	1,445,521
Due from other banks	39,643	41,696
Mandatory cash balances with National Bank of Georgia	1,033,818	1,020,695
Loans and advances to customers (Net)	8,325,353	7,549,061
Investment securities available for sale	657,938	685,210
Investment in associates	1,277	1,309
Investment securities held to maturity	449,538	428,163
Investments in finance leases	143,837	111,223
Investment properties	79,232	88,750
Goodwill	28,657	28,657
Intangible assets	83,492	69,864
Premises and equipment	366,913	321,431
Other financial assets	146,144	113,942
Deferred tax asset	2,855	3,592
Current income tax prepayment	19,084	18,380
Other assets	156,651	209,427
TOTAL ASSETS	12,965,910	12,136,922
LIABILITIES
Due to Credit Institutions	2,620,714	2,675,930
Customer accounts	7,816,817	7,096,523
Current income tax liability	447	362
Debt Securities in issue	20,695	19,818
Deferred income tax liability	602	851
Provisions for liabilities and charges	13,200	11,072
Other financial liabilities	91,753	59,616
Subordinated debt	426,788	411,193
Other liabilities	84,440	71,251
TOTAL LIABILITIES	11,075,457	10,346,615
EQUITY
Share capital	1,605	1,605
Share premium	714,651	714,651
Retained earnings	1,246,327	1,137,497
Group reorganisation reserve	(162,167)	(162,167)
Share based payment reserve	(3,634)	7,291
Revaluation reserve for premises	70,045	70,045
Revaluation reserve for available-for-sale securities	1,731	863
Cumulative currency translation reserve	(7,360)	(7,301)
TOTAL EQUITY	1,861,198	1,762,485
Non-controlling interest	29,255	27,822
TOTAL EQUITY	1,890,453	1,790,307
TOTAL LIABILITIES AND EQUITY	12,965,910	12,136,922

Consolidated Statement of Profit or Loss and Other Comprehensive Income

In thousands of GEL	4Q'17	3Q'17	4Q'16
Interest income	288,020	258,252	243,344
Interest expense	(122,626)	(111,705)	(89,655)
Net interest income	165,395	146,546	153,689
Fee and commission income	55,673	48,552	45,460
Fee and commission expense	(16,719)	(16,763)	(17,068)
Net Fee and Commission Income	38,954	31,790	28,392
Gross insurance profit	1,919	1,773	256
Gains less losses from trading in foreign currencies	25,622	18,086	25,472
Foreign exchange translation gains less losses	92	2,245	(2,519)
Gains less losses/(losses less gains) from derivative financial instruments	3	(1)	94
(Losses less gains) / gains less losses from disposal of investment securities available for sale	93	0	498
Share of profit of associates	249	84	0
Other operating income	10,991	6,572	12,372
Other operating non-interest income	37,049	26,985	35,916
Provision for loan impairment	(28,421)	(25,036)	(10,405)
Provision for impairment of investments in finance lease	(79)	(285)	(322)
Provision for/ (recovery of provision) performance guarantees and credit related commitments	(1,019)	(680)	2,787
Provision for impairment of other financial assets	(6,917)	(1,097)	(1,727)
Operating income after provisions for impairment	206,882	179,997	208,586
Staff costs	(54,105)	(46,620)	(62,544)
Depreciation and amortisation	(10,425)	(9,317)	(7,435)
Provision for liabilities and charges	0	0	(2,210)
Administrative and other operating expenses	(35,111)	(27,974)	(39,595)
Operating expenses	(99,640)	(83,910)	(111,785)
Profit before tax	107,241	96,086	96,801
Income tax expense	(10,487)	(9,327)	(8,767)
Profit for the period	96,754	86,759	88,034
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Revaluation	946	1,929	(3,196)
Gains less losses reclassified to profit or loss upon disposal	0	0	(2,757)
Income tax recorded directly in other comprehensive income	0	0	248
Exchange differences on translation to presentation currency	(60)	399	147
Items that will not be reclassified to profit or loss:
Income tax recorded directly in other comprehensive income	0	0	422
Other comprehensive income for the period	886	2,328	(5,136)
Total comprehensive income for the period	97,640	89,086	82,898
Profit attributable to:
- Owners of the Bank	95,367	85,524	89,359
- Non-controlling interest	1,388	1,235	(1,326)
Profit for the period	96,754	86,759	88,034
Total comprehensive income is attributable to:
- Owners of the Bank	96,179	87,881	84,224
- Non-controlling interest	1,461	1,205	(1,326)
Total comprehensive income for the period	97,640	89,086	82,898

4Q 2017 Bank Republic Financial Results Based on Internal Estimates

Bank Republic Profit and Loss
In thousands of GEL	4Q 2017
Interest income	35,016
Interest expense	9,217
Net interest income	25,799
Card operations	-322
Settlement transactions	1,133
Guarantees and letters of credit	650
Other	90
Net fee and commission income	1,551
FX gain/losses	3,268
Other	1,579
Other non-interest income	4,847
Operating income	32,197
Staff costs	8,985
Depreciation and amortization	1,047
Administrative and other operating expenses	5,387
Operating expenses	15,418
Operating profit	16,778

Bank Republic Loan Portfolio
In thousands of GEL	as of 31 December 2017
Total gross loans	1,096,158
Retail	714,959
Corporate	245,235
MSME	135,964

Bank Republic Deposit Portfolio
In thousands of GEL	as of 31 December 2017
Total deposits	488,855
Retail	311,984
Corporate	113,406
MSME	63,464

Key Ratios

Average Balances

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)	4Q'17	3Q'17	4Q'16
Underlying ROE¹	21.0%	20.0%	23.5%
Reported ROE²	21.0%	19.8%	24.2%
Underlying ROA³	3.0%	3.0%	3.5%
Reported ROA⁴	3.0%	2.9%	3.7%
Underlying Cost to Income⁵	41.0%	39.8%	47.0%
Reported Cost to Income⁶	41.0%	40.5%	51.2%
Cost of Risk⁷	1.4%	1.3%	0.6%
NIM⁸	6.4%	6.2%	7.9%
Risk Adjusted NIM⁹	5.2%	5.0%	6.3%
Loan Yields¹⁰	12.3%	11.9%	13.8%
Risk Adjusted Loan Yields¹¹	11.1%	10.7%	12.6%
Deposit rates¹²	3.5%	3.4%	3.3%
Yields on interest Earning Assets¹³	11.2%	10.9%	12.5%
Cost of Funding¹⁴	4.6%	4.5%	4.5%
Spread¹⁵	6.6%	6.4%	8.0%
PAR 90 to Gross Loans¹⁶	1.4%	1.6%	1.3%
NPLs to Gross Loans¹⁷	3.3%	3.5%	3.5%
NPLs coverage per IAS 39¹⁸	81.8%	80.5%	88.4%
NPLs coverage with collateral per IAS 39¹⁹	186.5%	206.8%	222.5%
NPLs coverage per IFRS 9²⁰	104.7%	N/A	N/A
NPLs coverage with collateral per IFRS 9²¹	209.4%	N/A	N/A
Provision Level to Gross Loans²²	2.7%	2.8%	3.1%
Related Party Loans to Gross Loans²³	0.1%	0.1%	0.1%
Top 10 Borrowers to Total Portfolio²⁴	8.2%	8.6%	7.6%
Top 20 Borrowers to Total Portfolio²⁵	12.4%	12.3%	11.3%
Net Loans to Deposits plus IFI Funding²⁶	92.5%	91.5%	93.4%
Net Stable Funding Ratio²⁷	124.4%	134.5%	108.4%
Liquidity Coverage Ratio²⁸	113%	115.2%	N/A
Leverage²⁹	6.9x	6.8x	6.8x
Regulatory Tier 1 CAR (Basel III)³⁰	13.4%	14.1%**	N/A
Regulatory Total CAR (Basel III)³¹	17.5%	18.6%**	N/A
Regulatory Tier 1 CAR (Basel II/III)³²	10.3%*	10.8%	10.4%
Regulatory Total CAR (Basel II/III)³³	13.5%*	14.5%	14.2%
Estimated Basel II/III ratios as of 31 December 2017 * estimated Basel III ratios according to new NBG regulation which came into force from the end of 2017

Ratio definitions

1. Underlying return on average total equity (ROE) equals underlying net income attributable to owners divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period adjusted for the respective one-off items; Annualized where applicable.

2.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; Annualized where applicable.

3. Underlying return on average total assets (ROA) equals underlying net income of the period divided by monthly average total assets for the same period. Annualised where applicable.

4. 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.

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

6. 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).

7. Cost of risk equals provision for loan impairment divided by monthly average gross loans and advances to customers. Annualized where applicable.

8. 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, amount 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.

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

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

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

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

13. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets. Annualized where applicable.

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

15. 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).

16. 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.

17. 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.

18. NPLs coverage ratio equals total loan loss provision calculated per IAS 39 divided by the NPL loans.

19. NPLs coverage with collateral ratio equals loan loss provision calculated per IAS 39 plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.

20. NPLs coverage ratio equals total loan loss provision calculated per IFRS 9 divided by the NPL loans.

21. NPLs coverage with collateral ratio equals loan loss provision calculated 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.

22. Provision level to gross loans equals loan loss provision divided by the gross loan portfolio for the same period.

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

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

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

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

27. Net stable funding ratio equals available amount of stable funding divided by required amount of stable funding as defined in Basel III. NSFR ratio for before 2Q 2017 is calculated per updated internal methodology in line with Basel 2014 guidelines.

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

29. Leverage equals total assets to total equity.

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

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

32. Regulatory Tier 1 CAR equals Tier I Capital divided by total risk weighted assets, both calculated in accordance with the NBG Basel II/III requirements.

33. Regulatory Total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the NBG Basel II/III requirements

Exchange Rates

To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used USD/GEL exchange rate of 2.4767 as of 30 September 2017. For the calculations of the YoY growth without the currency exchange rate effect, we used USD/GEL exchange rate of 2.6468 as of 31 December 2016. The USD/GEL exchange rate as of 31 December 2017 equalled 2.5922. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 4Q 2017 of 2.5933, 3Q 2017 of 2.4207, 4Q 2016 of 2.4958.

Preliminary Unaudited Consolidated Financial Results Overview FY 2017

The information contained in this announcement and its appendices relating to full year FY17 preliminary results, which were approved by the Board on 21 February 2018, do not constitute statutory accounts under section 434 of the UK Companies Act 2006. The financial statements of TBC Bank will be included in the Annual Report and Accounts due to be published in March 2018, and filed with the Registrar of Companies in due course.

Income Statement Highlights

in thousands of GEL			Y'17		Y'16		Change
Net Interest Income			604,015		490,453		23.2%
Net Fee and Commission Income			125,961		90,268		39.5%
Other Operating Non-Interest Income			131,009		100,341		30.6%
Provisioning Charges			(106,907)		(53,396)		100.2%
Operating Income after Provisions for Impairment			754,078		627,667		20.1%
Operating Expenses			(359,400)		(311,988)		15.2%
Profit Before Tax			394,678		315,679		25.0%
Income Tax Expense			(34,750)		(17,420)		99.5%
Profit for the Year			359,928		298,258		20.7%
Underlying profit for the Year			369,214		273,318		35.1%
Balance Sheet and Capital Highlights

	Dec-17			Dec-16				Change
In Millions	GEL	USD		GEL		USD
Total Assets	12,965.9	5,001.9		10,769.0		4,068.7		20.4%
Gross Loans	8,553.2	3,299.6		7,358.7		2,780.2		16.2%
Customer Deposits	7,816.8	3,015.5		6,454.9		2,438.8		21.1%
Total Equity	1,890.5	729.3		1,582.6		597.9		19.5%
Regulatory Tier I Capital (Basel III)*	1,437.2	554.4		N/A		N/A		N/A
Regulatory Total Capital (Basel III)*	1,885.3	727.3		N/A		N/A		N/A
Regulatory Tier I Capital (Basel II/III)	1,437.2**	554.4**		1,041.2		422.5		38.0%
Regulatory Total Capital (Basel II/III)	1,883.8**	727.7**		1,422.0		576.9		32.5%
Regulatory Risk Weighted Assets (Basel III)*	10,753.2	4,148.3		N/A		N/A		N/A
Regulatory Risk Weighted Assets (Basel II/III)	13,908.9**	5,365.7**		10,021.5		4,065.8		38.8%

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

**Figures are based on internal estimates and are presented for comparison purpose

Key Ratios[13]	Y'17	Y'16	Change
Underlying ROE	21.4%	20.6%	0.8%
Reported ROE	20.9%	22.4%	-1.5%
Underlying ROA	3.2%	3.6%	-0.4%
Reported ROA	3.1%	3.9%	-0.8%
Underlying Cost to Income	40.5%	42.9%	-2.4%
Reported Cost to Income	41.7%	45.8%	-4.1%
Cost of Risk	1.2%	1.0%	0.2%
NPL to Gross Loans	3.3%	3.5%	-0.2%
Regulatory Tier 1 CAR (Basel III)*	13.4%	N/A	N/A
Regulatory Total CAR (Basel III)*	17.5%	N/A	N/A
Regulatory Tier 1 CAR (Basel II/III)	10.3%**	10.4%	-0.1%
Regulatory Total CAR (Basel II/III)	13.5%**	14.2%	-0.7%
Leverage (Times)	6.9x	6.8x	0.1x

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

**Figures are based on internal estimates and are presented for comparison purpose

Income Statement Discussion

Net Interest Income

In thousands of GEL	Y'17	Y'16	Change YoY
Loans and Advances to Customers	919,796	688,724	33.6%
Investment Securities Available for Sale	43,735	25,707	70.1%
Due from Other Banks	14,806	4,550	NMF
Bonds Carried at Amortized Cost	32,328	30,714	5.3%
Investment in Leases	23,273	16,566	40.5%
Other	0	165	-100.0%
Interest Income	1,033,939	766,426	34.9%
Customer Accounts	233,884	154,840	51.0%
Due to Credit Institutions	157,122	85,030	84.8%
Subordinated Debt	36,975	34,325	7.7%
Debt Securities in Issue	1,943	1,778	9.3%
Interest Expense	429,924	275,973	55.8%
Net Interest Income	604,015	490,453	23.2%

Net Interest Margin	6.5%	7.8%	-1.3%

NMF -no meaningful figures

FY 2017 to FY 2016 Comparison

In FY 2017, net interest income grew by 23.2% YoY to GEL 604.0 million (GEL 493.3 million without the Bank Republic estimated contribution effect), resulting from a 34.9% higher interest income and 55.8% higher interest expense.

Without the Bank Republic estimated contribution effect, the interest income increased by GEL 142.0 million, or 19.5% YoY, mainly driven by a higher interest income from loans to customers by GEL 114.3 million, or 17.5%. This is primarily related to the 26.2% gross loan portfolio increase. A rise in interest income from investment securities (comprising both investment securities available for sale and bonds carried at amortized cost) of GEL 13.5 million, or 25.1%, also contributed to the overall increase in loan portfolio. That in turn was driven by the significant rise in the respective portfolio. In addition, net interest income from due from other banks grew by GEL 7.7 million, which was also determined by the large increase in respective portfolio.

In FY 2017 the Bank Republic effect mainly contributed a GEL 152.0 million, or 16.5% to the interest income from loans and advances to customers, which totalled GEL 1,033.9 million, and GEL 8.7 million, or 11.5%, to interest income from investment securities, which amounted to GEL 76.1 million. As a result, the overall Bank Republic estimated contribution effect was GEL 163.3 million, or 15.8%, to the interest income.

Loan yields declined over the same period from 13.4% to 12.1%. The drop was driven by a decrease in rates on FC-denominated loans, from 10.4% to 9.1%, as well as by decline in GEL-denominated loans rates from 19.0% to 16.9% broadly in line with the overall market trend. The decline of yields on investment securities, from 8.6% to 7.8%, over the same period is related to a lower average refinance rate in the country in FY 2017 compared to FY 2016. As a result, the yields on average interest earning assets dropped from 12.2% in FY 2016 to 11.1% in FY 2017.

In the reporting period, without the Bank Republic estimated contribution effect, interest expense increased by GEL 115.3 million, or 44.0% YoY. The rise was mainly due to a higher interest expense on due to customer accounts by GEL 61.2 million, or 41.6%, and due to credit institutions by GEL 54.9 million or 69.8%. The growth in interest expense on both customer accounts and on due to credit institutions was driven by the large increase in respective portfolios related to the overall business growth.

The Bank Republic estimated contribution effect added GEL 25.4 million, or 10.9%, to the interest expense on customer accounts, which amounted to GEL 233.9 million in FY 2017, and GEL 23.5 million or 15.0% to interest expense on interest expense due to credit institutions, which amounted to GEL 157.1 million. As a result, the overall Bank Republic contribution effect was a GEL 52.5 million, or 12.2%, to the interest expense.

The cost of deposits increased slightly by 0.1pp to 3.4% in FY 2017 and in the same period the cost of borrowing dropped to 6.5%, from 7.0% in FY 2016. This was mainly due to the 1.2 pp decrease in rates on Lari-denominated borrowings and the 0.2 pp decrease in rates on FC-denominated borrowings. As a result, the cost of funding ratio remained flat at 4.5%.

Consequently, NIM was 6.5% in FY 2017, compared to underlying NIM of 7.6% in FY 2016 (or reported NIM of 7.8%)

Fee and Commission Income


In thousands of GEL	Y'17	Y'16	Change
Card Operations	82,525	61,115	35.0%
Settlement Transactions	59,739	43,434	37.5%
Guarantees Issued	15,121	11,699	29.2%
Letters of Credit	5,735	6,215	-7.7%
Cash Transactions	17,424	13,013	33.9%
Foreign Exchange Operations	1,339	1,277	4.9%
Other	12,060	6,046	99.5%
Fee and Commission Income	193,944	142,800	35.8%
Card Operations	46,360	34,906	32.8%
Settlement Transactions	7,421	5,795	28.1%
Guarantees Issued	1,801	796	126.3%
Letters of Credit	1,072	1,624	-34.0%
Cash Transactions	4,393	2,633	66.8%
Foreign Exchange Operations	94	190	-50.4%
Other	6,841	6,587	3.9%
Fee and Commission Expense	67,983	52,532	29.4%
Card Operations	36,165	26,209	38.0%
Settlement Transactions	52,317	37,639	39.0%
Guarantees	13,320	10,903	22.2%
Letters of Credit	4,663	4,592	1.6%
Cash Transactions	13,031	10,380	25.5%
Foreign Exchange Operations	1,245	1,086	14.6%
Other	5,219	(541)	NMF
Net Fee and Commission Income	125,961	90,268	39.5%

NMF -no meaningful figures

FY 2017 to FY 2016 Comparison

In FY 2017, net fee and commission income totalled GEL 126.0 million, marking an increase of GEL 35.7 million, or 39.5%, compared to FY 2016. The rise resulted mainly from a GEL 14.7 million, or 39.0%, gain in net fee and commission income from settlement transactions; a GEL 10.0 million, or 38.0%, increase in net card operations; a GEL 2.7 million, or 25.5%, rise in net cash transactions, and a GEL 2.4 million, or 22.2%, increase in net guarantees. The Bank Republic estimated contribution was GEL 6.9 million, or 5.5%, in the net fee and commission income.

Net fee and commission income from card operations expanded due to increase in number of active cards by 36% YoY, as well as a rise in number of POS terminals by 12% YoY. Net Fee and commission income from settlement transactions increased mainly due to increased commission income from money transfers by 40% and increased volume of settlement transactions by 44% for one of the subsidiaries, TBC Pay.

Other Operating Non-Interest Income and Gross Insurance Profit

In thousands of GEL	Y'17	Y'16	Change
Gains Less Losses from Trading in Foreign Currencies and Foreign Exchange Translations	91,473	67,762	35.0%
Share of Profit of Associates	909	0	NMF
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments	(36)	(206)	-82.3%
Gains less Losses from Disposal of Investment Securities Available for Sale	93	9,293	-99.0%
Revenues from Cash-In Terminal Services	1,093	1,100	-0.6%
Revenues from Operational Leasing	6,544	5,772	13.4%
Gain from Sale of Investment Properties	4,353	2,623	66.0%
Gain from Sale of Inventories of Repossessed Collateral	2,383	2,382	0.1%
Administrative Fee Income from International Financial Institutions	0	644	-100.0%
Revenues from Non-Credit Related Fines	1,408	658	114.1%
Gain on Disposal of Premises and Equipment	1,017	208	NMF
Other	14,998	9,848	52.3%
Other Operating Income	31,797	23,236	64.2%
Other Operating Non-Interest Income	124,236	100,085	24.1%
Gross Insurance Profit	6,773	256	NMF
Other Operating Non-Interest Income and Gross Insurance Profit	131,009	100,341	30.6%

NMF -no meaningful figures

FY 2017 to FY 2016 Comparison

In FY 2017 total other operating non-interest income and gross insurance profit increased by GEL 30.7 million, or by 30.6%, YoY to GEL 131.0 million in FY 2017. This increase was mainly driven by a GEL 23.7 million or 35.0% rise in net gains less losses from trading in foreign currencies and foreign exchange translations mainly driven by increased trade volume and Bank Republic contribution. Another large contributor to the increase in other operating non-interest income and gross insurance profit is a GEL 6.5 million increase in gross insurance profit from our subsidiary- TBC Insurance, which was acquired in October 2016. As a result, the group's consolidated figures include contribution from TBC Insurance only in the 4Q 2016, while it has been consolidated on a full year basis in 2017.

During 2017, we have significantly increased number of customers to around 277,000 from only 3,000, which in turn led to high increase in gross written premium which amounted to GEL12.2 million in 2017 on a standalone basis. As a result, market share[14] increased to 13% from 3.5% establishing TBC Insurance as the third largest player on market. More information about TBC insurance can be found in annex 20 on page 55.

The growth is also due to a GEL 1.7 million increase in gain from the sale of investment properties as well as GEL 5.2 gain in the "other" subsection of other operating income. The latter is mainly attributable to GEL 2.6 million reimbursed taxes; a GEL 2.9 million related to fair value adjustment of previously acquired portfolio due to a better than expected performance, and a GEL 2.1 million related to expense sharing programme by our partner payment technology companies. The rise across these items was largely offset by a GEL 8.8 million drop in net gains less losses from disposal of investment securities available for sale due to one-off gain from sale of investment security in 2Q 2016. The Bank Republic's estimated contribution in total other operating non-interest income was GEL 22.8 million or 17.4%, out of which GEL 14.1 million was related to gains less losses from trading in foreign currencies and foreign exchange translations.

Provision for Impairment

In thousands of GEL	Y'17	Y'16	Change
Provision for Loan Impairment	(93,823)	(49,201)	90.7%
Provision for Impairment of Investments in Finance Lease	(492)	(558)	-11.8%
Provision for/(Recovery of Provision) Performance Guarantees and Credit Related Commitments	(153)	(771)	-80.2%
Provision for Impairment of Other Financial Assets	(12,439)	(2,855)	NMF
Impairment of Investment Securities Available for Sale	0	(11)	-100.0%
Total Provision Charges for Impairment	(106,907)	(53,396)	100.2%
Operating Income after Provisions for Impairment	754,078	627,667	20.1%

Cost of Risk	1.2%	1.0%	0.2%

NMF -no meaningful figures

FY 2017 to FY 2016 Comparison

In 2017, total provision charges rose to GEL 106.9 million, up by GEL 53.5 million, compared to FY 2016, mainly driven by the increased charges on loans by GEL 44.6 million and a GEL 9.6 million rise in provision for impairment of other financial assets. The cost of risk on increased by 0.2pp to 1.2%.

Further details on asset quality are available under the Balance Sheet Discussion section.

Operating Expenses

In thousands of GEL	Y'17	Y'16	Change
Staff Costs	203,100	172,221	17.9%
Provisions for Liabilities and Charges	(2,495)	2,210	NMF
Depreciation and Amortization	37,265	28,082	32.7%
Professional services	14,332	29,926	-52.1%
Advertising and marketing services	18,430	13,796	33.6%
Rent	23,132	18,294	26.4%
Utility services	6,067	5,108	18.8%
Intangible asset enhancement	10,304	7,446	38.4%
Taxes other than on income	5,670	4,699	20.7%
Communications and supply	4,063	4,183	-2.9%
Stationary and other office expenses	4,936	3,448	43.2%
Insurance	2,461	2,687	-8.4%
Security services	1,965	1,883	4.3%
Premises and equipment maintenance	5,413	3,889	39.2%
Business trip expenses	2,021	1,880	7.5%
Transportation and vehicles maintenance	1,637	1,386	18.2%
Charity	1,045	884	18.2%
Personnel training and recruitment	1,444	1,272	13.5%
Write-down of current assets to fair value less costs to sell	(538)	(4,424)	-87.8%
Loss on disposal of Inventory	1,239	1,690	-26.7%
Loss on disposal of investment properties	442	61	NMF
Loss on disposal of premises and equipment	492	423	16.2%
Impairment of intangible assets	1,916	19	NMF
Acquisition costs	2,447	207	NMF
Other	12,612	10,718	17.7%
Administrative and Other Operating Expenses	121,530	109,474	11.0%
Operating Expenses	359,400	311,988	15.2%
Profit before Tax	394,678	315,679	25.0%
Income Tax Expense	(34,750)	(17,420)	99.5%
Profit for the Year	359,928	298,258	20.7%

Cost to Income	41.7%	45.8%	-4.1%
ROE	20.9%	22.4%	-1.5%
ROA	3.1%	3.9%	-0.8%

NMF -no meaningful figures

FY 2017 to FY 2016 Comparison

Total operating expenses, excluding one-offs and the Bank Republic estimated contribution effect, amounted to GEL 287.7 million, up by GEL 17.5 million, or 6.5% YoY. The growth was mainly driven by a GEL 15.3 million increase in administrative expenses and a GEL 4.4 million rise in depreciation and amortization.

In FY 2016, the one-off costs related to the Premium Listing and the Bank Republic integration amounted to GEL 16.2 million and GEL 12.2 million respectively. In FY 2017, one-off costs were related to the Bank Republic integration and totalled GEL 10.9 million.

Out of the total operating expenses the Bank Republic estimated contribution amounted to GEL 60.8 million, or 16.9%, of which staff costs amounted to GEL 35.2 million and administrative and other operating expenses to GEL 20.9 million. Total operating expense including one-offs and the Bank Republic estimated contribution effect amounted to GEL 359.4 million.

Annualized cost synergies are expected to be GEL 24 million. In 2017, the estimated realized synergies were around GEL 20.5 million. As a result, the cost to income ratio stood at 41.7% (40.5% with one-offs) in FY 2017, compared to 45.8% (42.9% with one-offs) in FY 2016.

Balance Sheet Discussion

In millions of GEL	Dec-17	Dec-16	Change
Cash, Due from Banks and Mandatory Cash Balances with NBG	2,504.9	1,960.5	27.8%
Loans and Advances to Customers (Net)	8,325.4	7,133.7	16.7%
Financial Securities	1,107.5	803.7	37.8%
Fixed and Intangible Assets & Investment Property	529.6	470.6	12.5%
Other Assets	498.5	400.5	24.5%
Total Assets	12,965.9	10,769.0	20.4%
Due to Credit Institutions	2,620.7	2,197.6	19.3%
Customer Accounts	7,816.8	6,454.9	21.1%
Debt Securities in Issue	20.7	23.5	-12.0%
Subordinated Debt	426.8	368.4	15.9%
Other Liabilities	190.4	142.0	34.1%
Total Liabilities	11,075.5	9,186.4	20.6%
Total Equity	1,890.5	1,582.6	19.5%

Assets

As of 31 December 2017, TBC Bank's total assets amounted to GEL 12,965.9 million, up by GEL 2,196.9 million, or 20.4%, YoY. This was mainly due to the increase in gross loans to customers by the GEL 1,194.5 million, or 16.2%. In addition, the YoY rise resulted from a GEL 303.8 million, or 37.8%, increase in financial securities, a GEL 486.3 million or 51.5% increase in cash and cash equivalents, a GEL 52.9 million, or 16.8% increase in premises and equipment and a GEL 22.5 million, or 37.0% increase in intangible assets, largely attributable to the Bank Republic estimated contribution effect.

Asset Quality

PAR 30¹ by Segments and Currencies
PAR 30	Dec-17			Dec-16
	GEL	FC	Total	GEL	FC	Total
Corporate	0.0%	2.0%	1.5%	0.0%	1.4%	1.0%
Retail	2.9%	2.0%	2.4%	2.5%	2.3%	2.4%
MSME	1.5%	3.1%	2.5%	1.8%	3.5%	3.0%
Total	2.1%	2.2%	2.2%	1.9%	2.3%	2.2%

¹loans overdue by more than 30 days to gross loans

Total

The total PAR 30 ratio remained stable YoY at 2.2%. PAR 30 in local currency increased by 0.2pp to 2.1%, while PAR 30 in foreign currency dropped by 0.1pp to 2.2%.

Retail Segment

The retail segment PAR 30 amounted to 2.4%, unchanged from December 2016. The Retail PAR 30 in local currency increased by 0.4pp to 2.9%, while PAR 30 in foreign currency declined by 0.3pp to 2.0%.

Corporate

The corporate segment PAR 30 amounted to 1.5%, an increase of 0.5pp YoY. The increase is driven by one large borrower falling in PAR 30; this exposure is guaranteed by the AAA rated Export Development Agency, according to international credit rating agencies.

The corporate PAR 30 in local currency remained stable at 0.0%, while PAR 30 in foreign currency rose by 0.6pp to 2.0%.

MSME

The MSME segment PAR 30 amounted to 2.5%, down by 0.5% YoY. The decrease is driven by overall improved performance of the book. The MSME PAR 30 in local currency decreased by 0.3pp to 1.5%, while PAR 30 in foreign currency decreased by 0.4pp to 3.1%.

NPLs
NPLs	Dec-17			Dec-16
	GEL	FC	Total	GEL	FC	Total
Corporate	0.0%	4.2%	3.2%	0.7%	6.1%	4.8%
Retail	2.6%	2.8%	2.7%	1.8%	3.0%	2.5%
MSME	2.2%	6.0%	4.6%	1.8%	4.9%	4.0%
Total	2.1%	4.1%	3.3%	1.6%	4.4%	3.5%

Total

Total NPLs stood at 3.3% down by 0.2 pp on YoY basis. The NPLs in local currency increased by 0.5pp to 2.1%, while NPLs in foreign currency decreased by 0.3pp to 4.1%.

Retail Segment

Retail NPLs stood at 2.7% up by 0.2pp on YoY. The Retail NPLs in local currency increased by 0.8pp to 2.6%, while NPLs in foreign currency declined by 0.2pp to 2.8%.

Corporate

Corporate NPLs stood at 3.2%, down by 1.6pp on a YoY basis. The decline was driven by write-off of one large corporate borrower in 1Q 2017, which was almost fully provisioned, as well as by improved financial conditions of several other borrowers.

The corporate NPLs in local currency decreased by 0.7pp to 0.0%, while NPLs in foreign currency dropped by 1.9pp to 4.2%.

MSME

MSME NPLs expanded by 0.6pp on a YoY basis to 4.6%. The YoY increase is driven by worsened financial standing of a few borrowers.

The MSME NPLs in local currency increased by 0.4pp to 2.2%, while NPLs in foreign currency increased by 1.1pp to 6.0%.

NPLs Coverage
NPLs Coverage	Dec-17(including IFRS9 impact)		Dec-16
	Exc. Collateral	Incl. Collateral	Exc. Collateral	Incl. Collateral
Corporate	86.6%	211.0%	91.8%	262.2%
Retail	154.0%	237.3%	106.6%	205.6%
MSME	54.6%	170.6%	57.7%	186.4%
Total	104.7%	209.4%	88.4%	222.5%

Total

NPL coverage ratios per IAS 39 stood at 81.8% and 186.5%, including collateral.

Retail Segment

NPL coverage ratios per IAS 39 stood at 120.8% and 204.1%, including collateral.

Corporate

NPL coverage ratios per IAS 39 stood at 63.2% and 187.7%, including collateral.

MSME

NPL coverage ratios per IAS 39 stood at 46.1% and 162.2%, including collateral

Liabilities

As of 31 December 2017, TBC Bank's total liabilities amounted to GEL 11,075.5 million, up by 20.6% YoY. The YoY growth of GEL 1,889.1 million was primarily due to a GEL 1,361.9 million, or 21.1%, increase in customer deposits. Total liabilities also grew following the increase in amounts due to credit institutions by GEL 423.1 million as well as a rise in subordinated debt by GEL 58.4 million.

Liquidity

The Bank's liquidity ratio, as defined by the NBG, stood at 32.5% as of 31 December 2017, compared to 30.8% as of 31 December 2016. The newly introduced short term liquidity ratio, total LCR, as defined by NBG, stood at 112.7% above the 100.0% limit. The LCR for GEL and FC stood at 95.6% and 122.9% respectively, both higher of their respective limits of 75% and 100%.

Total Equity

As of 31 December 2017, TBC's total equity amounted to GEL 1,890.5 million, up from GEL 1,582.6 million as of 31 December 2016. The YoY change in equity was mainly due to the net profit contribution of GEL 359.9 million, which was offset by a GEL 74.8 million dividend distribution (gross of tax and consisting of GEL 66.7 million cash-based and GEL 8.1 million share-based).

Regulatory Capital

In December 2017, the National Bank of Georgia introduced new capital adequacy requirements in order achieve better compliance with Basel III framework. More information can be found on pages 54-55.

The regulatory CAR is already based on the new regulation. As of 31 December 2017, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 13.4% and 17.5%, compared to the required levels of 10.3% and 15.2%, respectively. The Bank's Basel III Tier 1 Capital amounted to GEL 1,437.2million and Bank's Basel III Total Regulatory Capital amounted to GEL 1,885.3million. Risk Weighted Assets amounted to GEL 10,753.2million as of 31 December 2017.

Results by Segments and Subsidiaries

The segment definitions are as per below:

· MSME (Micro, Small and Medium) - all business customers who are not included in either Corporate and Retail segments; or Legal Entities who have been granted a Pawn shop loan;

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

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

Income Statement by Segments

Y'17	Retail	MSME	Corporate	Corp.Centre	Total
Interest Income	535,851	184,008	203,082	110,998	1,033,939
Interest Expense	(118,516)	(11,661)	(103,707)	(196,040)	(429,924)
Net Transfer Pricing	(73,141)	(51,488)	22,489	102,140	0
Net Interest Income	344,194	120,859	121,864	17,098	604,015
Fee and Commission Income	140,581	20,335	30,037	2,990	193,944
Fee and Commission Expense	(51,199)	(8,949)	(6,942)	(893)	(67,983)
Net fee and Commission Income	89,383	11,386	23,095	2,098	125,961
Gross Insurance Profit	0	0	0	6,773	6,773
Gains Less Losses from Trading in Foreign Currencies	22,597	26,885	38,885	(1,268)	87,099
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)	0	0	0	4,374	4,374
Net Losses from Derivative Financial Instruments	0	0	0	(36)	(36)
(Losses Less Gains)/Gains Less Losses from Disposal of Investment Securities Available for Sale	0	0	0	93	93
Other Operating Income	12,670	1,726	13,465	3,936	31,797
Share of profit of associates	0	0	0	909	909
Other Operating Non-Interest Income	35,267	28,612	52,350	8,007	124,236
Other Operating Non-Interest Income and Gross Insurance Profit	35,267	28,612	52,350	14,781	131,009
Provision for Loan Impairment	(106,579)	(14,275)	27,031	0	(93,823)
(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments	(261)	467	183	(542)	(153)
Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease	0	0	0	(492)	(492)
(Provision)/Recovery of Provision for Impairment of other Financial Assets	(17)	(64)	(7,666)	(4,692)	(12,439)
Operating income after provisions for impairment	361,986	146,985	216,858	28,250	754,078
Staff Costs	(128,331)	(31,225)	(25,989)	(17,555)	(203,100)
Depreciation and Amortization	(29,813)	(4,972)	(1,438)	(1,042)	(37,265)
Provision for Liabilities and Charges	0	0	0	2,495	2,495
Administrative and Other Operating Expenses	(81,356)	(15,118)	(7,457)	(17,599)	(121,530)
Operating Expenses	(239,501)	(51,316)	(34,884)	(33,700)	(359,400)
Profit before Tax	122,486	95,669	181,974	(5,450)	394,678
Income Tax Expense	(15,526)	(13,820)	(27,738)	22,335	(34,750)
Profit for the Year	106,959	95,655	154,235	16,884	359,928

Portfolios by Segments

In thousands of GEL	Dec-17	Dec-16
Loans and Advances to Customers

Consumer	2,128,658	1,838,895
Mortgage	2,069,728	1,808,433
Pawn	34,767	33,247
Retail	4,233,153	3,680,575
Corporate	2,475,392	2,062,229
MSME	1,844,671	1,615,919
Total Loans and Advances to Customers (Gross)	8,553,217	7,358,723
Less: Provision for Loan Impairment	(227,864)	(225,022)
Total Loans and Advances to Customers (Net)	8,325,353	7,133,702

Customer Accounts

Retail	4,378,265	3,748,151
Corporate	2,410,862	1,875,200
MSME	1,027,690	831,598
Total Customer Accounts	7,816,817	6,454,949

Retail Banking

As of 31 December 2017, retail loans stood at GEL 4,233.2 million (or GEL 3,518.2 million without Bank Republic estimated contribution effect), up by GEL 552.6 million, or 15.0%, YoY. The main drivers were GEL 289.8 million, or 15.8%, increase in consumer loans, and a GEL 261.3 million, or 14.4% rise in mortgage loans. As of 31 December 2017, TBC Bank's retail loans accounted for 40.2% market share of total individual loans. As of 31 December 2017, foreign currency loans represented 49.3% of the total retail loan portfolio.

In the reporting period, retail deposits increased to GEL 4,378.3 million (or to GEL 4,066.3 million without Bank Republic estimated contributed effect), up by GEL 630.1 million or 16.8% YoY. Retail deposits grew by GEL 362.5 million, or 9.0%, on a QoQ basis and accounted for 41.3% market share of total individual deposits. The increase in retail deposits was attributable to a GEL 355.2 million, or 21.9%, rise in current deposits, and a GEL 274.9 million, or 12.9% increase in term deposits YoY. Term deposits accounted for 54.9% of the total retail deposit portfolio as of 31 December 2017, while foreign currency deposits represented 83.8% of the total retail deposit portfolio, compared to 86.4% as of December 2016.

In FY 2017, retail loan yields and deposit rates stood at 14.0% and 3.1% respectively, and the segment's cost of risk on loans was 2.8%. The retail segment contributed 29.7%, or GEL 107.0 million, to the TBC's total net income in Respective period.

Corporate Banking

As of 31 December 2017, corporate loans amounted to GEL 2,475.4 million (or GEL 2,230.2 million excluding Bank Republic estimated effect), up by GEL 413.2 million or 20.0% YoY. Foreign currency loans accounted for 74.6% of the total corporate loan portfolio. The market share for legal entities increased by 2.3% YoY to 36.0% mainly due to newly acquired blue chip customers.

As of the same date, corporate deposits totalled GEL 2,410.9 million (or GEL 2,297.5 million without the Bank Republic effect), up by GEL 535.7 million or 28.6% YoY. Foreign currency corporate deposits represented 49.8% of the total corporate deposit portfolio. Market share stood at 37.9%.

In FY 2017, corporate loan yields and deposit rates stood at 9.5% and 5.2%, respectively. In the same period, the cost of risk on loans was -1.3%. Negative CoR in 2017 is driven by good performance of the book. In terms of profitability, the corporate segment's net profit reached GEL 154.2 million, or 42.9% of the Bank's total net income.

MSME Banking

As of 31 December 2017, MSME loans amounted to GEL 1,844.7 million (GEL 1,708.7 million excluding Bank Republic estimated loan portfolio), up by GEL 228.8 million, or 14.2% YoY. Foreign currency loans accounted for 63.8% of the total MSME portfolio.

As of the same date, MSME deposits stood at GEL 1,027.7 million (GEL 964.2 million excluding Bank Republic estimated deposit portfolio), up by GEL 196.1 million or 23.6% YoY. Foreign currency MSME deposits represented 53.7% of the total MSME deposit portfolio.

In FY 2017, MSME loan yields and deposit rates stood at 10.9% and 1.3% respectively, while the cost of risk on loans was 0.8%. In terms of profitability, net profit for the MSME segment amounted to GEL 95.7 million, or 26.6% of TBC's total net income.

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet

In thousands of GEL	Dec-17	Dec-16
Cash and cash equivalents	1,431,477	945,180
Due from other banks	39,643	24,725
Mandatory cash balances with the National Bank of Georgia	1,033,818	990,642
Loans and advances to customers	8,325,353	7,133,702
Investment securities available for sale	657,938	430,703
Bonds carried at amortized cost	449,538	372,956
Investments in finance leases	143,837	95,031
Investment properties	79,232	95,615
Current income tax prepayment	19,084	7,430
Deferred income tax asset	2,855	3,511
Other financial assets	146,144	94,627
Other assets	156,651	171,263
Premises and equipment	366,913	314,032
Intangible assets	83,492	60,957
Goodwill	28,657	28,658
Investments in associates	1,277	-
Total assets	12,965,910	10,769,032
Liabilities
Due to credit institutions	2,620,714	2,197,577
Customer accounts	7,816,817	6,454,949
Other financial liabilities	91,753	50,998
Current income tax liability	447	2,577
Debt securities in issue	20,695	23,508
Deferred income tax liability	602	5,646
Provisions for liabilities and charges	13,200	16,026
Other liabilities	84,440	66,739
Subordinated debt	426,788	368,381
Total liabilities	11,075,457	9,186,401
EQUITY
Share capital	1,605	1,581
Share premium	714,651	677,211
Retained earnings	1,246,327	955,173
Group reorganisation reserve	(162,167)	(162,166)
Share based payment reserve	(3,634)	23,327
Revaluation reserve for premises	70,045	70,460
Revaluation reserve for available-for-sale securities	1,730	(3,681)
Cumulative currency translation reserve	(7,360)	(7,538)
Net assets attributable to owners	1,861,198	1,554,367
Non-controlling interest	29,255	28,264
Total equity	1,890,453	1,582,631
Total liabilities and equity	12,965,910	10,769,032

Consolidated Statement of Profit or Loss and Other Comprehensive Income

In thousands of GEL	Y'17	Y'16
Interest income	1,033,939	766,426
Interest expense	(429,924)	(275,973)
Net interest income	604,015	490,453
Fee and commission income	193,944	142,800
Fee and commission expense	(67,983)	(52,532)
Net Fee and Commission Income	125,961	90,268
Gross Insurance profit	6,773	256
Gains less losses from trading in foreign currencies	87,099	70,269
Foreign exchange translation gains less losses	4,374	(2,507)
Gains less losses/(losses less gains) from derivative financial instruments	(36)	(206)
(Losses less gains) / gains less losses from disposal of investment securities available for sale	93	9,293
Share of profit of associates	909	0
Other operating income	31,797	23,236
Other operating non-interest income	124,236	100,085
Provision for loan impairment	(93,823)	(49,201)
Provision for impairment of investments in finance lease	(492)	(558)
Provision for/ (recovery of provision) performance guarantees and credit related commitments	(153)	(771)
Provision for impairment of other financial assets	(12,439)	(2,855)
Impairment of investment securities available for sale	0	(11)
Operating income after provisions for impairment	754,078	627,667
Staff costs	(203,100)	(172,221)
Depreciation and amortisation	(37,265)	(28,082)
Provision for liabilities and charges	2,495	(2,210)
Administrative and other operating expenses	(121,530)	(109,474)
Operating expenses	(359,400)	(311,988)
Profit before tax	394,678	315,679
Income tax expense	(34,750)	(17,420)
Profit for the year	359,928	298,258
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Revaluation	5,489	522
Gains less losses reclassified to profit or loss upon disposal	0	(11,611)
Income tax recorded directly in other comprehensive income	0	1,649
Exchange differences on translation to presentation currency	181	(948)
Items that will not be reclassified to profit or loss:
Income tax recorded directly in other comprehensive income	(422)	10,928
Other comprehensive income for the year	5,248	540
Total comprehensive income for the year	365,176	298,798
Profit attributable to:
- Owners of the Bank	354,410	299,146
- Non-controlling interest	5,518	(887)
Profit for the year	359,928	298,258
Total comprehensive income is attributable to:
- Owners of the Bank	359,585	299,686
- Non-controlling interest	5,591	(887)
Total comprehensive income for the year	365,176	298,798

Consolidated Statements of Cash Flows

In thousands of GEL	YE 2017	YE 2016

Cash flows from operating activities
Interest received	1,001,920	735,705
Interest paid	(425,454)	(273,795)
Fees and commissions received	195,285	144,247
Fees and commissions paid	(68,036)	(52,154)
Insurance premium received	23,518	1,591
Insurance claims paid	(9,127)	(703)
Income received from trading in foreign currencies	87,099	70,411
Other operating income received	9,080	8,411
Staff costs paid	(187,520)	(148,656)
Administrative and other operating expenses paid	(112,270)	(104,077)
Income tax (paid) / refunded	(53,916)	(34,279)
Cash flows from operating activities before changes in operating assets and liabilities	460,580	346,701
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia	(74,918)	(448,582)
Loans and advances to customers	(1,341,709)	(1,219,501)
Investment in finance lease	(46,605)	(11,687)
Other financial assets	(38,153)	(22,965)
Other assets	73,814	(843)
Due to other banks	(230,290)	265,679
Customer accounts	1,337,901	1,150,146
Other financial liabilities	18,263	5,724
Other liabilities and provision for liabilities and charges	3,487	332
Net cash from operating activities	162,370	65,004
Cash flows from investing activities
Acquisition of investment securities available for sale	(560,226)	(143,980)
Proceeds from disposal of investment securities available for sale	-	11,868
Proceeds from redemption at maturity of investment securities available for sale	345,748	166,871
Acquisition of subsidiaries	-	(242,195)
Acquisition of bonds carried at amortised cost	(307,248)	(304,109)
Proceeds from redemption of bonds carried at amortised cost	242,380	314,231
Acquisition of premises, equipment and intangible assets	(114,383)	(50,689)
Disposal of premises, equipment and intangible assets	1,933	1,273
Proceeds from disposal of investment property	19,082	7,822
Acquisition of subsidiaries, net of cash acquired	(273)	150,791
Net cash used in investing activities	(372,988)	(88,117)
Cash flows from financing activities
Proceeds from other borrowed funds	1,483,191	903,502
Redemption of other borrowed funds	(844,115)	(666,156)
Proceeds from subordinated debt	119,859	136,817
Redemption of subordinated debt	(59,671)	(90,416)
Proceeds from debt securities in issue	(0)	4,354
Redemption of debt securities in issue	(2,123)	(4,636)
Dividends paid	(67,927)	(54,560)
Issue of ordinary shares	29	(3,495)
Net cash from / (used in) financing activities	629,243	225,410
Effect of exchange rate changes on cash and cash equivalents	67,672	22,536
Net increase / (decrease) in cash and cash equivalents	486,297	224,833
Cash and cash equivalents at the beginning of the year	945,180	720,347
Cash and cash equivalents at the end of the year	1,431,477	945,180

FY 2017 Bank Republic Financial Results Based on Internal Estimates

Bank Republic Profit and Loss
In thousands of GEL	FY 2017
Interest income	163,250
Interest expense	52,519
Net interest income	110,731
Card operations	(1,430)
Settlement transactions	6,210
Guarantees and letters of credit	2,896
Other	(765)
Net fee and commission income	6,911
FX gain/losses	14,113
Other	8,654
Other non-interest income	22,767
Operating income	140,409
Operating expenses	60,775
Staff costs	35,175
Depreciation and amortization	4,702
Administrative and other operating expenses	20,898
Operating profit	80,269

Bank Republic Loan Portfolio
In thousands of GEL	as of 31 December 2017
Total gross loans	1,096,158
Retail	714,959
Corporate	245,235
MSME	135,964
Bank Republic Deposit Portfolio
In thousands of GEL	as of 31 December 2017
Total deposits	488,855
Retail	311,984
Corporate	113,406
MSME	63,4

Key Ratios

Average Balances

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, which were used by the Management for monitoring and control purposes.

Key Ratios

Ratios (based on monthly averages, where applicable)	Y'17	Y'16
Underlying ROE¹	21.4%	20.6%
Reported ROE²	20.9%	22.4%
Underlying ROA³	3.2%	3.6%
Reported ROA⁴	3.1%	3.9%
Underlying Cost to Income⁵	40.5%	42.9%
Reported Cost to Income⁶	41.7%	45.8%
Cost of Risk⁷	1.2%	1.0%
NIM⁸	6.5%	7.8%
Risk Adjusted NIM⁹	5.1%	6.4%
Loan Yields¹⁰	12.1%	13.4%
Risk Adjusted Loan Yields¹¹	10.7%	12.1%
Deposit rates¹²	3.4%	3.3%
Yields on interest Earning Assets¹³	11.1%	12.2%
Cost of Funding¹⁴	4.5%	4.5%
Spread¹⁵	6.6%	7.8%
PAR 90 to Gross Loans¹⁶	1.4%	1.3%
NPLs to Gross Loans¹⁷	3.3%	3.5%
NPLs coverage per IAS 39¹⁸	81.8%	88.4%
NPLs coverage with collateral per IAS 39¹⁹	186.5%	222.5%
NPLs coverage per IFRS 9²⁰	104.7%	N/A
NPLs coverage with collateral per IFRS 9²¹	209.4%	N/A
Provision Level to Gross Loans²²	2.7%	3.1%
Related Party Loans to Gross Loans²³	0.1%	0.1%
Top 10 Borrowers to Total Portfolio²⁴	8.2%	7.6%
Top 20 Borrowers to Total Portfolio²⁵	12.4%	11.3%
Net Loans to Deposits plus IFI Funding²⁶	92.5%	93.4%
Net Stable Funding Ratio²⁷	124.4%	108.4%
Liquidity Coverage Ratio²⁸	113%	N/A
Leverage²⁹	6.9x	6.8x
Regulatory Tier 1 CAR (Basel III)³⁰	13.4%	N/A
Regulatory Total CAR (Basel III)³¹	17.5%	N/A
Regulatory Tier 1 CAR (Basel II/III)³²	10.3%*	10.4%
Regulatory Total CAR (Basel II/III)³³	13.5%*	14.2%
Dividend Pay-out ratio³⁴	25.4%	25.2%

*Estimated Basel II/III ratios as of 31 December 2017