1st Quarter Results

RNS Number : 7352F

TBC Bank Group PLC

22 May 2017

 

TBC BANK GROUP PLC ("TBC Bank")

1Q 2017 Unaudited 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 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 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 Presentation 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.

First Quarter 2017 Unaudited Financial Results Conference Call

TBC Bank Group PLC ("TBC PLC") will release its first quarter 2017 unaudited financial results on Monday, 22 May 2017 at 7am BST (10am GET).

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

Date & time:       Monday, 22 May at 14.00 (BST) / 15.00 (CEST) / 9.00 (EDT)                                    

Please dial-in approximately 5 minutes before the start of the call quoting the password TBC Bank:

Password:	TBC Bank
UK Toll Free:	0808 109 0700
Standard International Access:	[phone]
USA Toll Free:	1 866 966 5335
New York New York:	[phone]
Russia Toll Free:	8 10 8002 4902044
Moscow:	[phone]

Replay Numbers
Replay Passcode:	7936347
UK Toll Free:	0800 633 8453
Standard International Access:	[phone]
USA Toll Free:	1 866 583 1035
Russia Toll Free:	8 10 8002 4832044
Moscow:	[phone]

Contacts

Sean Wade Director of International Media and IR E-mail:  [e-mail] Web: www.tbcgroupbank.com Tel:  [phone] Address: 68 Lombard St, London EC3V 9LJ, United Kingdom

Anna Romelashvili Head of Investor Relations E-mail:  [e-mail]   Web: www.tbcgroupbank.com Tel:  +(995 32) 227 27 27 Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Investor Relations Department E-mail:  [e-mail]   Web: www.tbcgroupbank.com Tel:  +(995 32) 227 27 27 Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Table of Contents

TBC Bank - Background

Financial Highlights

Recent Developments

Letter from the Chief Executive Officer

Economic Overview

Results Overview 1Q 2017

Income Statement Discussion

Balance Sheet Discussion

Results by Segments and Subsidiaries

Annexes

Subsidiaries of TBC Bank Group PLC

Consolidated Financial Statements of TBC Bank Group PLC

Key Ratios

Additional Disclosures

The Bank Republic Data

TBC BANK Group PLC ("TBC Bank")

TBC Bank Announces 1Q 2017 Consolidated Results:

Net Profit for 1Q 2017 up by 64.5% YoY to GEL 96.6 million (or up by 38.5% YoY to GEL 81.3 million without Bank Republic effect)

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

These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank"), 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 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 International Financial Reporting Standards ("IFRS") as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing on 10 August 2016.

In Q4 2016, TBC Bank acquired Bank Republic and started its consolidating into the results since then.

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

TBC Bank is the largest banking group in Georgia. Following the acquisition of Bank Republic in late 2016, TBC Bank became the country's leading universal bank, accounting for 36.4% market share by total assets, where 99.6% of its business is concentrated. TBC bank offers retail, corporate, and MSME banking nationwide.

Financial Highlights

1Q 2017 P&L Highlights                                                        

§ Net Profit for 1Q 2017 up by 64.5% YoY and 9.7% QoQ to GEL 96.6 million (up by 38.5% YoY to GEL 81.3 million without Bank Republic effect)

§ Return on Equity (ROE) amounted to 24.2% (24.6% without one-off) and Return on Asset (ROA) to 3.7%

§ Total operating income for the period up by 40.2% YoY and down by 6.8% QoQ to GEL 203.5 million

§ Cost to income ratio stood at 40.8% (39.8% without one-offs) compared to 44.3% in Q1 2016 and 51.2% in Q4 2016

§ Cost of risk on loans stood at 0.9%, down by 0.2pp YoY and up by 0.3pp QoQ

§ Net interest margin (NIM) stood at 6.6% (without change in accounting rules related to consumer loans NIM would have been 6.8%) in 1Q 2017, down by 1.1pp YoY and down by 1.2pp QoQ

§ Risk adjusted Net interest margin (NIM) stood at 5.1% in 1Q 2017 compared to 6.4% in 1Q 2016 and 6.3% in 4Q 2016

Balance Sheet Highlights 31 March 2017

§ Total assets reached GEL 10,362.6 million as of 31 March 2017, up by 55.7% YoY (up by 36.1% YoY to GEL 9,059.0 million without Bank Republic effect)

§ Gross loans and advances to customers stood at GEL 7,121.0 million as of 31 March 2017, up by 58.5% YoY (up by 27.1% YoY to GEL 5,710.6 million without Bank Republic effect)

§ Net loans to deposits + IFI funding stood at 97.2% and Net Stable Funding Ratio (NSFR) stood at 106.8%

§ NPLs stood at 3.4%, down by 1.4pp YoY and 0.1pp QoQ

§ NPLs coverage stood at 84.6%, (217.4% with collateral), compared to 88.4% as of 31 December 2016

§ Total customer deposits stood at GEL 6,070.8 million as of 31 March 2017, up by 54.4% YoY (up by 37.1% YoY to GEL 5,392.2 million without Bank Republic effect)

§ Regulatory Tier I and Total Capital Adequacy Ratios stood at 11.3% and 14.9% respectively

Market Shares[1]

§ TBC Bank's market share in total assets increased by 4.2pp YoY and decreased by 0.1pp QoQ, reaching 29.9% and 36.4% with Bank Republic's total assets (30.5%, and 37.1% with Bank Republic's total assets not considering Credo Bank's share) as of 31 March 2017.

§ TBC Bank's market share in total loans was 30.3% and 37.8% with Bank Republic's total loans (31.0% and 38.7% with Bank Republic's total loans not considering Credo Bank's share) as of 31 March 2017, up by 2.2pp YoY and down by 0.9pp QoQ.

§ In terms of individual loans, the Bank had a market share of 31.4% and 41.8% with Bank Republic's total individual loans (32.9% and 43.9% with Bank Republic's total individual loans not considering Credo Bank's share) as of 31 March 2017, up by 0.1pp YoY and down by 1.5% QoQ. The market share for legal entity loans was 29.1% and 33.4% with the Bank Republic's total legal loans, up by 4.0pp YoY and down by 0.3pp QoQ.

§ TBC Bank's market share of total deposits stood at 33.4% (37.6% with Bank Republic's total deposits) as of 31 March 2017, up by 6.1pp YoY and up by 0.4pp QoQ.

§ The Bank maintains its longstanding leadership in individual deposits with a market share of 37.0% (40.1% with Bank Republic's total individual deposits), up by 3.0pp YoY and down by 0.2pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 29.0% (34.5% with Bank Republic's legal entity deposits), up by 9.4pp YoY and 1.0pp QoQ.

Recent Developments

TBC Bank has completed merger with Bank Republic

§ TBC Bank has completed the merger with Bank Republic, well ahead of schedule. Bank Republic was acquired in October 2016 and was, at the time, the third largest Georgian bank in terms of gross loans with a strong footprint in the retail segment. The merger was originally anticipated to be completed in the third quarter of 2017.

§ Following the merger, the Bank's market share in total loans increased by 7.6% (or 7.8% not considering Credo Bank's share) and reached 37.8% (or 38.7% not considering Credo Bank's share) as of 31 March 2017. The client base expanded by approximately 380,000 customers and an additional 41 branches and around 160 ATMs added to our distribution network.

§ The one-off integration costs have amounted to GEL 22.9 million, less than the expected GEL 23.3 million. Moreover, the bank has upgraded annualized cost synergies guidance from GEL 20.5 million to GEL 24.0 million.  

TBC Bank Group PLC hosts a London Capital Markets Day

§ TBC Bank Group PLC will host a Capital Markets Day on Thursday 1 June 2017 in London

§ TBC Bank's management will present to the investors and analysts the latest developments: the Bank's strategy, goals, and plans from macro to specific banking areas

§ Mr. Koba Gvenetadze, Governor of the National Bank of Georgia, will join the TBC's top management. The Governor will give an overview of the Georgian macro environment and monetary policy

TBC Bank acts as underwriter of EBRD Eurobond issue

·      JSC TBC Bank has acted as lead manager and underwriter for European Bank for Reconstruction and Development ('EBRD') GEL 120 million (€46.7 million) Eurobond issue under EBRD's Medium Term Note Programme. The bonds are to be listed on the London Stock Exchange

·      The bonds are issued with a maturity of five years and its coupons are linked to a three-month Certificates of Deposit ('CDs') issued by the National Bank of Georgia ('NBG') and will be made eligible for the repurchase operations carried out by the NBG

TBC Bank wins The Best Bank of the Year

§ In recognition of its outstanding performance TBC Bank was named as "the Best Bank of the Year 2016" in Georgia by the EMEA Finance Magazine

§ TBC Bank won the "Best Bank of the Year 2017" award assigned by the Global Finance Magazine

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 report that since the start of 2017, we have again delivered a strong performance. First of all, we successfully completed the merger with Bank Republic on May 8th, well ahead of schedule. The merger process went smoothly for all stakeholders and we are looking forward to welcoming our new customers and offering them our best in class services. I would also like to highlight that the one-off integration costs have amounted to GEL 22.9 million, less than the expected GEL 23.3 million and we have upgraded the annualised cost synergies guidance from GEL 20.5 million to GEL 24.0 million.  

In terms of financial performance, in the first quarter of 2017, our consolidated net profit reached GEL 96.6 million with a return on equity of 24.2%, up by 4.9 pp year-on-year and a return on assets of 3.7%, up by 0.2 pp year-on-year. In November, anticipating falling loan yields on the market, we decided to accept lower interest rates and increase our loan book, especially to low yield, higher income customer segments. As a result our market share including Bank Republic, increased by 1.5 pp[2] over the last 6 months. In first quarter, the bank also changed accounting rules related to consumer loans, which resulted in 0.2pp decrease in NIM. As a result, NIM declined to 6.6%, or to 5.1% on risk-adjusted basis, however we have benefited from strong growth in fee and commission and other operation income. At the same time, our cost to income ratio decreased to 40.8%, or 39.8% without one offs, and even though it is expected to increase due to seasonal factors, it has decreased below our 40% guidance in the first quarter 2017.

We have also achieved strong balance sheet growth year-on-year with both loans and deposit growth outperforming the market. In the first quarter 2017, the loan book grew by 27.1% year-on-year without Bank Republic, or by 58.5% with Bank Republic. As a result, the aggregate market share in total loans reached 37.8% (or 38.7% excluding the market share of Credo Bank which registered as a bank in the first quarter of 2017), up by 9.8 pp. Over the same period, total deposits grew by 37.1% year-on-year without Bank Republic, or by 54.4% with Bank Republic. Consequently, the aggregate market share in total deposit reached 37.6%, up by 10.3 pp.

We continue to maintain robust asset quality with a non-performing loan ratio of 3.4% at the end of first quarter 2017, down by 1.4 pp on a year-on-year basis, while our non-performing coverage ratio stood at 85% or 217% with collateral. In addition, we continue to operate with strong capital and liquidity positions.  Our total capital adequacy ratio (CAR) per Basel II/III regulation stood at 14.9% compared to the minimum requirement of 10.5%, and our Regulatory Tier I Ratio stood at 11.3% compared to the minimum requirement of 8.5%. Net loans to deposits + IFI funding stood at 97% and the net stable funding ratio (NSFR) stood at 107%.

 I would also like to mention the standalone performance of Bank Republic. The loan portfolio grew by 15.3% since the acquisition and market share reached 7.6% (or 7.8% excluding the market share of Credo Bank which registered as a bank in the first quarter of 2017) as of 31 March 2017. During the same period the number of customers grew by 11.0% and reached around 380,000 clients, while the employee turnover remained low at 3% in the front office. Bank Republic delivered strong financial results with return on equity standing at 20.1% and return on assets at 3.1% in the first quarter 2017. At the same time, asset quality remained strong with the non-performing loan ratio standing at 2.6% and non-performing coverage ratio at 121% or 214% with collateral, respectively. The cost of risk stood at 1.0% in the first quarter 2017.

On a macro side, I am pleased to report positive economic developments in Georgia. Economic activity gained pace and, according to the initial estimates of Geostat, the GDP growth reached 5.0% in the first quarter of 2017. This was supported by a strong recovery of exports of goods which increased by 30.3% year-on-year. Tourist inflows also demonstrated robust growth with the number of tourists increasing by a solid 26.1% year-on-year. In addition, remittances improved by 22.3% year-on-year, supporting the recovery of private consumption in the country. The future outlook remains positive with most of the market commentators forecasting the growth around 4.0%, one of the highest growth rates among our peers from Central and Eastern Europe.

 In terms of operational performance, I am pleased to see the share of remote transactions rising and reaching 85.5%[3] in the first quarter 2017 in line with our strategy of becoming the best digital service company in the region[4]. At the same time the mobile banking penetration ratio increased to 25%. This year, we also launched the first Georgian language Chat Bot, Ti-Bot, which has been welcomed by our customers and is rapidly gaining popularity.

Finally, I am also pleased to announce that TBC Bank has been awarded "the Best Bank in Georgia award for 2016 " by the EMEA Finance Magazine and "The Best Bank in Georgia Award for 2017" by Global Finance Magazine, in recognition of our outstanding performance and continuous commitment to offer the best banking service to our customers.

Outlook

One of our main strategic objectives for 2017 is to deepen the relationship with our clients and offer our existing and newly acquired Bank Republic customers the best-in-class products and services, including bancassurance products through our newly acquired insurance company, TBC insurance. Our focus in this regard is to increase the product-per customer-ratio[5] and non-interest income. Our strong cross-selling opportunity combined with the efficient cost control is expected to translate into a robust profit performance. At the same time, we will continue to grow in line with the market and aim to maintain our market share. As a result we have decided to increase our medium term dividend pay-out ratio target to 25-35% and at the same time have updated our loan book growth guidance to c.15% and tier1 capital adequacy ratio to c.10.5%. Finally, we maintain our medium-term cost-to-income guidance at below 40% and ROE forecast of 20% plus.

Economic Overview

Information set out below relating to the broad economic overview in Q1 2017, sets the context for TBC Bank's operating activities and financial results. Around 99% of TBC Bank's operations take place in Georgia and, although developments in the immediate Caucasus region are an important factor in the regional business climate, the bank's performance is therefore largely affected by the developments in the Georgian economy. 

The domestic economic environment remains stable and the banking sector continues to grow, supported by broader macroeconomic stability and attractive business climate. 

Economic activity gained pace in Q1 2017, according to the initial estimates of Geostat GDP expanded by 5% y/y, highest since Q3 2014. Sharp recovery in exports of goods and tourism inflows was major factor behind the improvement in growth.

Growth of exports accelerated in Q1 2017 with exports of goods increasing by 30.3% YoY compared to the 7.5% y/y growth in Q4 2016. From the goods perspective the exports growth was mostly driven by traditional export goods such as Wines (+63% YoY), other alcoholic drinks (+34% YoY) and Mineral Waters (+17% YoY). Increased prices on Metals in Q1 2017 boosted exports of Ferro-alloys (+201% YoY) which was also among the major drivers of growth.

Exports of goods to EU increased by solid 44% YoY, at the same time, stable exchange rates and recovery in economic activity underpinned increase of Georgian exports to CIS countries (+59.4% YoY). Exports to other countries increased by relatively moderate 4.5% YoY.

In Q1 2017, higher oil prices and resulting increased imports of petroleum products (+39% y/y) was major driver behind 14.9% YoY growth of imports of goods. Growth of imports translated into 8.3% higher trade deficit in Q1 2017 compared to the same figure a year ago. However, the deterioration in the balance of trade was more than offset by increasing inflows from tourism and remittances.

Georgia's dynamic tourism industry continued to grow in 1Q 2017, with number of tourists increasing by a solid 26.1% YoY. More recent indicators of growth in tourism revenues are very encouraging; as of April 2017 the number of tourist in Georgia increased by c. 30% YoY.

Remittances, which represent a significant positive component in Georgia's current account balance, increased by 22.3% YoY, mainly supported by higher  money transfers from Russia (+27.0%), Israel (+94.7%), Turkey (+38.4%), The USA (+19.4%), Greece (+14.1%) and Italy (+9.1%), as of 1Q 2017. Continued growth of remittances is expected to positively influence private consumption in the country, which has been broadly flat over the last two years.

Improved external inflows and stable/appreciating currencies in the main trading partners of Georgia positively influenced USD/GEL exchange rate as well. From the beginning of 2017 till end of April, 2017 USD/GEL appreciated by c. 8% to 2.44.  Over the same period EUR/GEL exchange rate appreciated by 4.4%.

Higher oil price on global markets, increase in excise taxes on tobacco and petroleum pushed annual Inflation rate to  around 4.9% in 1Q 2017 as opposed to 0.6% Inflation in Q4 2016. Core inflation[6] edged up only moderately from 1.2% in Q4 2016 to 2.9% in Q1 2017. Lower core inflation indicates that inflation expectations remained well managed and higher CPI inflation was driven by one-off factor that will gradually dissipate by the end of 2017.

To ensure short-term inflation fluctuations will not translate in rise in inflation expectation, NBG raised refinancing rate from 6.5% by the end of 2016 to 6.75 in Feb. 2017 and to 7% in the beginning of May 2017. According to NBG, inflation will remain above the target in 2017. 0.5 PP increase in policy rate as well as diminishing effect of one-off factors mentioned above and should ensure that inflation goes to 3% target in 2018 and currently there is no need to further tighten monetary policy in 2017.

Supported by higher economic activity in Q1 2017 as well as increased excise tax budget revenues posted solid 19% YoY growth. Higher-than-projected budget revenues kept the budget in surplus of c. 1.8% of GDP^[7]. Public debt also fell to c. 41.6% of GDP in Q1 2017, as opposed to 44.5% of GDP by the end of 2017. It is to be noted, that government consumption[8] declined by 3.4% YoY in Q1 2017 reflecting the optimization of public spending. Government actively pursues the strategy to restrain current spending and redirect saved resources towards investment spending, which positively influences economic growth as well as sustainability of fiscal balances.  

In March 2017, EU ratified long awaited visa free regime for the citizens of Georgia, which is an important milestone in EU-Georgia relations. This important step improves opportunities for Georgian businesses to better capture the benefits of free trade deal and positively influences consumer sentiments in the country.

Going forward, it is expected that traditional competitive advantages of the economy will continue to support growth. Business friendly environment, transparent and corruption free institutions coupled with free trade agreements with all of the major economic players in the region will support economic growth in the coming years.

Results Overview 1Q 2017

Income Statement Highlights
in thousands of GEL	1Q'17 w/o BR	1Q'17	1Q'16	Change YoY %	Change YoY %	Q4'16	Change QoQ %
Net Interest Income	114,969	142,333	108,883	5.6%	30.7%	153,689	-7.4%
Net Fee and Commission Income	24,570	26,477	18,297	34.3%	44.7%	28,392	-6.7%
Other Operating Non-Interest Income	25,517	34,672	17,931	42.3%	93.4%	36,172	-4.2%
Provisioning Charges	-6,680	-17,658	-14,340	-53.4%	23.1%	-9,668	82.6%
Operating Income after Provisions for Impairment	158,375	185,823	130,772	21.1%	42.1%	208,586	-10.9%
Operating Expenses	-72,727	-82,920	-64,299	13.1%	29.0%	-111,785	-25.8%
Profit Before Tax	85,648	102,903	66,474	28.8%	54.8%	96,801	6.3%
Income Tax Expense	-4,336	-6,345	-7,777	-44.2%	-18.4%	-8,767	-27.6%
Profit for the Period	81,312	96,558	58,696	38.5%	64.5%	88,034	9.7%

Balance Sheet and Capital Highlights
	Mar-17				Dec-16		Change YoY %	Change YoY %	Mar-16		Change QoQ
In Millions	GEL w/o BR	USD w/o BR	GEL	USD	GEL	USD	%	%	GEL	USD
Total Assets	9,059.0	3,704.8	10,362.6	4,237.9	10,769.0	4,068.7	36.1%	55.7%	6,654.4	2,810.2	-3.8%
Gross Loans	5,710.6	2,335.4	7,121.0	2,912.3	7,358.7	2,780.2	27.1%	58.5%	4,493.7	1,897.8	-3.2%
Customer Deposits	5,392.2	2,205.2	6,070.8	2,482.8	6,454.9	2,438.8	37.1%	54.4%	3,931.6	1,660.4	-6.0%
Total Equity	1,676.2	685.5	1,680.5	687.3	1,582.6	597.9	30.9%	31.2%	1,280.6	540.8	6.2%
Regulatory Tier I Capital	1,115.2	456.1	1,115.2	456.1	1,041.3	393.4	12.2%	12.2%	994.1	419.8	7.1%
Regulatory Risk Weighted Assets	9,878.1	4,039.8	9,878.1	4,039.8	10,021.5	3,786.3	32.6%	32.6%	7,450.6	3,146.5	-1.4%

Key Ratios	1Q'17 w/o BR	1Q'17	1Q'16	Change YoY %	Change YoY %	Q4'16	Change QoQ %
ROAE	20.3%	24.2%	19.3%	1.0%	4.9%	24.2%	0.0%
ROAA	3.6%	3.7%	3.5%	0.1%	0.2%	3.7%	0.0%
Pre-Provision ROAE	22.0%	28.7%	23.9%	-1.9%	4.7%	26.8%	1.9%
Cost to Income	44.1%	40.8%	44.3%	-0.2%	-3.6%	51.2%	-10.5%
Cost of Risk	0.5%	0.9%	1.2%	-0.6%	-0.2%	0.6%	0.3%
NPL to Gross Loans	3.9%	3.4%	4.8%	-0.9%	-1.4%	3.5%	-0.1%
Regulatory Total CAR	14.9%	14.9%	16.8%	-1.9%	-1.9%	14.2%	0.7%
Leverage (Times)	5.4	6.2	5.2	0.2	1.0	6.8	-0.6

Income Statement Discussion

Net Interest Income
In thousands of GEL	1Q'17 w/o BR	1Q'17	1Q'16	Change YoY %	Change YoY %	Q4'16	Change QoQ %
Loans and Advances to Customers	172,657	215,089	154,465	11.8%	39.2%	222,116	-3.2%
Investment Securities Available for Sale	5,718	8,801	7,053	-18.9%	24.8%	7,847	12.2%
Due from Other Banks	2,828	1,752	1,255	125.2%	39.5%	959	82.6%
Bonds Carried at Amortized Cost	7,440	7,440	7,880	-5.6%	-5.6%	7,460	-0.3%
Investment in Leases	4,686	4,686	4,205	11.4%	11.4%	4,895	-4.3%
Other	-	-	-	NMF	NMF	67	-100%
Interest Income	193,330	237,769	174,859	10.6%	36.0%	243,344	-2.3%
Customer Accounts	46,001	53,852	35,778	28.6%	50.5%	47,886	12.5%
Due to Credit Institutions	23,139	32,363	22,199	4.2%	45.8%	29,526	9.6%
Subordinated Debt	8,685	8,685	7,510	15.6%	15.6%	11,762	-26.2%
Debt Securities in Issue	536	536	489	9.7%	9.7%	482	11.4%
Interest Expense	78,361	95,436	65,976	18.8%	44.7%	89,655	6.4%
Net Interest Income	114,969	142,333	108,883	5.6%	30.7%	153,689	-7.4%
Net Interest Margin	6.5%	6.6%	7.7%	-2.4%	-1.1%	7.9%	-1.2%

*Not Material Figures

1Q 2017 to 1Q 2016 Comparison

Without the Bank Republic acquisition effect, in 1Q 2017, net interest income grew by 5.6% YoY, resulting from the 10.6% higher interest income and 18.8% higher interest expense. A GEL 18.5 million or 10.6% YoY increase in interest income to GEL 193.3 million was mainly driven by GEL 18.2 million or 11.8% increase in interest income from loans to customers - this was primarily related to the gross loan portfolio increase by 27.1% YoY. Loans yield declined from 13.6% in 1Q 2016 to 11.9% in 1Q 2017, which was caused by the decline in loan yields for both GEL and foreign-currency denominated loans. The increase in interest income was also driven by the increase in interest income from due from other banks by GEL 1.6 million, which was driven by the sharp increase of the respective portfolio. The increase in interest income was partially offset by GEL 1.3 million or 18.9% decline in interest income from investment securities available for sale. The decline was largely explained by the decrease in yields on such securities from 9.4% to 8.0%, mainly due to the lower refinancing rate in 1Q 2017 compared to 1Q 2016.

Without the Bank Republic acquisition effect, a GEL12.4 million or 18.8% YoY increase in interest expense to GEL 78.4 million was mainly driven by GEL 10.2 million or 28.6% hike in interest expense on amounts due to customer accounts, primarily related to the gross customer account's portfolio increase by 37.1% YoY. The cost of deposit declined from 3.6% in 1Q 2016 to 3.3% in 1Q 2017, resulting to the decrease in FC-denominated deposits cost from 3.2% to 2.6%, which more than offset the increase in Lari-denominated deposit cost from 4.7% to 5.6% in the respective periods. The increase in interest expense was also driven by GEL 1.2 million or 15.6% increase in interest expense on subordinated debt, which was mainly driven by 13.7% increase in respective portfolio. The cost of subordinated debt declined from 10.3% to 9.7%.

The Bank Republic acquisition effect increased the net interest income by GEL 27.4 million, resulting from GEL 44.4 million or 18.7% contribution to interest income and a GEL 17.1 million or 17.9% to interest expense.

Consequently, without the Bank Republic acquisition effect NIM was 6.5% (5.3% Risk-adjusted NIM) in 1Q 2017, compared to 7.7% (6.4% Risk-adjusted NIM) in the same quarter of the previous year.

1Q 2017 to 4Q 2016 Comparison

With the Bank Republic acquisition effect in both of the quarters under consideration, net interest income declined by 7.4% QoQ, resulting from 2.3% lower interest income and 6.4% higher interest expense. A GEL 5.6 million or 2.3% QoQ decline in interest income to GEL 237.8 million was mainly driven by GEL 7.0 million drop from interest income from loans to customers, primarily related to the decrease in average portfolio caused by appreciation of domestic currency in March. This effect was further magnified by the decline in loan yield from 13.8% in 4Q 2016 to 11.9% in 1Q 2017 mostly aligned with the market trend. The decline was partially offset by GEL 1.0 million increase in interest income from investment securities available for sale, due to increase in average portfolio of such securities.

Considering the Bank Republic acquisition effect, a GEL 5.8 million or 6.4% QoQ increase in interest expense to GEL 95.4 million was mainly driven by GEL 6.0 million rise in interest expense on amounts due to customer accounts, primarily related the increase in respective average portfolio in real terms more than offsetting currency rate appreciation effect on the portfolio and the increase slight increase in cost of deposit from 3.3% in 4Q 2016 to 3.4% in 1Q 2017. At the same time, interest expense on amounts due to credit institutions grew by GEL 2.8 million related to the increase in the respective average portfolio which was partially offset by the positive effect of declining rates on the portfolio and interest expense on subordinated debt decreased by GEL 3.1 million, which was explained by the decrease in cost of subordinated debt from 13.2% in 4Q 2016 to 9.7% in 1Q 2017 and the decrease in respective portfolio.

In 1Q 2017, the bank changed the accounting rule related to consumer loans, which resulted in 0.2pp decrease in NIM. Consequently, with the Bank Republic acquisition effect NIM was 6.6%, or 6.8% without the above mentioned change, (5.1% Risk-adjusted NIM) in 1Q 2017, compared to 7.9% or 7.5% without one-offs (6.3% Risk-adjusted NIM) in the 4Q 2016. 

Fee and Commission Income
In thousands of GEL	1Q'17 w/o BR	1Q'17	1Q'16	Change YoY %	Change YoY %	Q4'16	Change QoQ %
Card Operations	19,734	20,829	13,282	48.6%	56.8%	18,832	10.6%
Settlement Transactions	12,401	14,095	8,499	45.9%	65.8%	14,590	-3.4%
Guarantees Issued	2,028	2,744	2,320	-12.6%	18.3%	3,308	-17.0%
Issuance of Letters of Credit	1,246	1,409	1,479	-15.8%	-4.7%	2,310	-39.0%
Cash Transactions	3,343	3,428	2,355	41.9%	45.6%	3,930	-12.8%
Foreign Exchange Operations	212	220	345	-38.4%	-36.1%	484	-54.4%
Other	1,565	1,774	1,267	23.5%	40.0%	2,006	-11.6%
Fee and Commission Income	40,529	44,500	29,547	37.2%	50.6%	45,460	-2.1%
Card Operations	11,290	12,777	7,588	48.8%	68.4%	11,140	14.7%
Settlement Transactions	1,493	1,520	1,240	20.4%	22.5%	1,722	-11.7%
Guarantees Received	186	267	140	32.3%	90.2%	320	-16.4%
Letters of Credit	213	213	480	-55.6%	-55.6%	297	-28.1%
Cash Transactions	643	1,007	559	15.0%	80.2%	751	34.2%
Foreign Exchange Operations	46	88	68	-32.1%	28.9%	123	-28.3%
Other	2,087	2,152	1,174	77.8%	83.3%	2,717	-20.8%
Fee and Commission Expense	15,959	18,023	11,250	41.9%	60.2%	17,068	5.6%
Net Card Operations	8,444	8,053	5,694	48.3%	41.4%	7,692	4.7%
Net Settlement Transactions	10,907	12,576	7,258	50.3%	73.3%	12,868	-2.3%
Net Guarantees	1,842	2,477	2,180	-15.5%	13.6%	2,988	-17.1%
Net Letters of Credit	1,032	1,195	998	3.4%	19.7%	2,013	-40.6%
Net Cash Transactions	2,700	2,421	1,797	50.3%	34.8%	3,180	-23.9%
Net Foreign Exchange Operations	166	132	276	-40.0%	-52.2%	361	-63.4%
Net Other	-522	-378	94	NMF	NMF	-710	-46.8%
Net Fee And Commission Income	24,570	26,477	18,297	34.3%	44.7%	28,392	-6.7%

1Q 2017 to 1Q 2016 Comparison

Without the Bank Republic acquisition effect, in 1Q 2017, net fee and commission income amounted to GEL 24.6 million, up by GEL 6.3 million, or 34.3%, compared to 1Q 2016. This increase resulted mainly from a GEL 3.6 million or 50.3% increase in net fee and commission income from settlement transactions, a GEL 2.8 million or 48.3% increase in net card operations and a GEL 0.9 million or 50.3%  increase in net cash transactions, resulting mainly from the increased scale of operations. The increase was slightly offset by GEL 0.6 million decline in net other fee and commission income.

The Bank Republic acquisition effect in net fee and commission income amounts to GEL 1.9 million or 7.2%, with GEL 4.0 million or 8.9% higher fee and commission income and GEL 2.1 million or 11.5% higher fee and commission expense.

1Q 2017 to 4Q 2016 Comparison

With the Bank Republic acquisition effect in both of the quarters under consideration, basis, net fee and commission income in 1Q 2017 decreased by a GEL 1.9 million, or by 6.7%, compared to 4Q 2016, primarily driven by the fact that 1Q is usually the lowest fee generating quarter versus 4Q, which is usually the highest fee generating quarter. The net fee and commission income from letters of credit issues, cash transactions, and guarantees received decreased by GEL 0.8 million, GEL 0.8 million and GEL 0.5 million, respectively. The net fee and commission income from card operations and other fee and commission income, however, increased by GEL 0.4 million and GEL 0.2 million respectively.

Other Operating Non-Interest Income
In thousands of GEL	1Q'17 w/o BR	1Q'17	1Q'16	Change YoY %	Change YoY %	Q4'16	Change QoQ %
Gains Less Losses from Trading in Foreign Currencies and Foreign Exchange Translations	18,045	22,192	14,627	23.4%	51.7%	22,952	-3.3%
Share of profit of associates	93	93	0	NMF	NMF	0	NMF
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments	-3	-3	-363	-99.1%	-99.1%	94	NMF
Losses from Disposal of Investment Securities Available for Sale	-	-	-	NMF	NMF	498	-100.0%
Revenues from Cash-In Terminal Services	262	262	232	12.9%	12.9%	300	-12.5%
Revenues from Operational Leasing	1,468	1,784	1,810	-18.9%	-1.4%	1,158	54.1%
Gain from Sale of Investment Properties	0	192	215	-100.0%	-11.0%	2,393	-92.0%
Gain from Sale of Inventories of Repossessed Collateral	354	354	222	59.1%	59.1%	991	-64.3%
Administrative Fee Income from International Financial Institutions	151	151	212	-28.8%	-28.8%	139	8.5%
Revenues from Non-Credit Related Fines	50	50	133	-62.4%	-62.4%	211	-76.2%
Gain on Disposal of Premises and Equipment	27	27	65	-58.5%	-58.5%	110	-75.2%
Gross Insurance Profit	1,225	1,225	-	NMF	NMF	256	NMF
Other	3,844	8,345	777	NMF	NMF	7,070	13.9%%
Other Operating Income	7,382	12,391	3,668	101.3%	NMF	12,628	-1.9%
Other Operating Non-Interest Income	25,517	34,672	17,931	42.3%	93.4%	36,172	-4.1%

1Q 2017 to 1Q 2016 Comparison

Without the Bank Republic acquisition effect, in 1Q 2017, total other operating non-interest income increased by GEL 7.6 million, or 42.3% YoY, to GEL 25.5 million. This increase was mainly driven by GEL 3.4 million, or 23.4% increase in gains from trading in foreign currencies and foreign exchange translations related to relatively higher volatility of the currency exchange rate in 1Q 2017 and higher trade volumes. The rise was resulted from the contribution of gross insurance profit, amounting to GEL 1.2 million and the increase in other income by GEL 3.1 million compared to 1Q 2016. The increase was slightly offset by a GEL 0.3 million decrease in revenues from operational leasing and by GEL 0.2 million decrease in gain from the sale of investment property.

The Bank republic accounted for GEL 9.2 million or 26.4% in other operating non-interest income, mainly due to GEL 4.1 million or 18.7% share in gains less losses from trading in foreign currencies and foreign exchange translations.

1Q 2017 to 4Q 2016 Comparison

With the Bank Republic acquisition effect in both of the quarters under consideration, on a QoQ basis, other operating non-interest income decreased by GEL 0.2 million, or by 1.9%. The decline was mainly explained by a GEL 2.2 million drop in gain from sale of investment properties, by a GEL 0.8 million decrease in gains from trading in foreign currencies and foreign exchange translations, which is due to higher activity in last quarter of the year. The decline was also due to a GEL 0.5 million decrease in gains less losses from disposal of investment securities available for sale. The decline was largely offset by the rise in gross insurance profit by a GEL 1.0 million and an increase in other income by a GEL 1.3 million.

Provision for Impairment
In thousands of GEL	1Q'17 w/o BR	1Q'17	1Q'16	Change YoY %	Change YoY %	Q4'16	Change QoQ %
Provision for Loan Impairment	-7,323	-16,922	-13,067	-44.0%	29.5%	-10,405	62.6%
Provision for Impairment of Investments in Finance Lease	-31	-31	-185	-83.0%	-83.0%	-322	-90.2%
Provision for/(Recovery of Provision) Performance Guarantees and Credit Related Commitments	1,039	92	-1,029	NMF	-109.0%	2,787	-96.7%
Provision for Impairment of Other Financial Assets	-364	-797	-49	NMF	NMF	-1,727	-53.9%
Impairment of Investment Securities Available for Sale	-	-	-11	-100.0%	-100.0%	-	NMF
Total Provision Charges for Impairment	-6,680	-17,658	-14,340	-53.4%	23.1%	-9,668	82.6%
Operating Income after Provisions for Impairment	158,375	185,823	130,772	21.1%	42.1%	208,586	-10.9%
Cost of Risk	0.5%	0.9%	1.2%	-0.6%	-0.2%	0.6%	0.3%

1Q 2017 to 1Q 2016 Comparison

Without the Bank Republic acquisition effect, in 1Q 2017 total provision charges declined to GEL6.7 million from GEL14.3 million 1Q 2016, mainly driven by the decreased charges on loans by GEL 5.7 million to GEL 7.3 million. This was mainly due to the GEL exchange rate appreciation and without currency effect provision charges on loans would have increased by GEL3.4 million to GEL 16.5 million.

Without Bank Republic provision charges for performance guarantees and credit related commitments decreased on YoY basis due to overall improvement in the corporate book performance.

Without the Bank Republic effect in 1Q 2017, the cost of risk on loans without the Bank Republic acquisition effect was 0.5% compared to 1.2% in the same period of the previous year. Excluding the FX effect the cost of risk would have been 1.2% and 1.4% in 1Q 2017 and 1Q 2016 respectively. The decrease is driven by improved performance of the book.

The Bank Republic accounted for GEL 11.0 million or 62.2% in total provision charges for impairment, mainly due to GEL 9.6 million share in provision for loan impairment.

1Q 2017 to 4Q 2016 Comparison

In 1Q 2017 total provision charges increased by GEL 8.0 million from GEL 9.7 million to GEL 17.7 million, mainly as a result of  increased charges on loans by GEL 6.5 million. The increase in charges was mainly due to lower provision expenses in 4Q 2016 resulting from recovery of previously written-off corporate borrower. 

Total provision charges for impairment also increased for performance guarantees and credit related commitments, after the recovery of GEL2.8 in 4Q 2016.

In 1Q 2017, the cost of risk on loans was 0.9%, compared to 0.6% in 4Q 2016. The low cost of risk in 4Q 2016 was due to a large recovery in the corporate segment. Without both the one-off and currency effect the cost of risk would be 1.2% and 1.5% in 4Q 2016 and 1Q 2017 respectively.

Further details on asset quality can be found under Balance Sheet Discussion section.

Operating Expenses
In thousands of GEL	1Q'17 w/o BR	1Q'17	1Q'16	Change YoY %	Change YoY %	Q4'16	Change QoQ %
Staff Costs	41,868	47,538	34,172	22.5%	39.1%	62,544	-24.0%
Provisions for liabilities and charges	(95)	(95)	-	NMF	NMF	2,210	NMF
Depreciation and Amortization	7,515	8,605	6,567	14.4%	31.0%	7,435	15.7%
Professional services	2,983	3,415	6,701	-55.5%	-49.0%	10,976	-68.9%
Advertising and marketing services	3,007	3,060	1,923	56.3%	59.1%	6,268	-51.2%
Rent	4,688	5,836	4,341	8.0%	34.4%	5,639	3.5%
Utility services	1,399	1,717	1,320	6.0%	30.1%	1,474	16.5%
Intangible asset enhancement	2,214	2,214	1,880	17.8%	17.8%	1,840	20.3%
Taxes other than on income	1,250	1,511	1,162	7.6%	30.0%	1,022	47.9%
Communications and supply	776	786	755	2.7%	4.1%	1,937	-59.4%
Stationary and other office expenses	933	1,100	843	10.7%	30.5%	1,041	5.6%
Insurance	487	530	605	-19.5%	-12.4%	733	-27.7%
Security services	458	517	399	14.6%	29.3%	560	-7.7%
Premises and equipment maintenance	799	1,644	587	36.3%	180.2%	1,949	-15.7%
Business trip expenses	342	365	352	-3.0%	3.5%	654	-44.2%
Transportation and vehicles maintenance	370	416	313	18.1%	33.0%	425	-2.0%
Charity	271	271	270	0.3%	0.3%	185	46.7%
Personnel training and recruitment	210	404	234	-10.0%	72.9%	504	-19.8%
Write-down of current assets to fair value less costs to sell	-57	-57	-70	-18.2%	-18.2%	-2,779	-97.9%
Loss on disposal of Inventory	955	955	285	235.3%	235.3%	1,038	-8.0%
Loss on disposal of investment properties	-	-	-	NMF	NMF	61	-100.0%
Loss on disposal of premises and equipment	123	123	41	204.1%	204.1%	90	36.6%
Impairment of intangible assets	-	-	19	-100.0%	-100.0%	2,025	-100.0%
Acquisition costs	319	307	-	NMF	NMF	207	48.4%
Gross Change in IBNR	221	221	-	NMF	NMF	-	NMF
Other	1,690	1,537	1,599	5.7%	-3.9%	3,746	-59.0%
Administrative and Other Operating Expenses	23,439	26,873	23,560	-0.5%	14.1%	39,595	-32.1%
Operating Expenses	72,727	82,920	64,299	13.1%	29.0%	111,785	-25.8%
Profit before Tax	85,648	102,903	66,474	28.8%	54.8%	96,801	6.3%
Income Tax Expense	-4,336	-6,345	-7,777	-44.2%	-18.4%	-8,767	-27.6%
Profit for the Period	81,312	96,558	58,696	38.5%	64.5%	88,034	9.7%
Cost to Income	44.1%	40.8%	44.3%	-0.2%	-3.6%	51.2%	-10.5%
ROAE	20.3%	24.2%	19.3%	1.0%	4.9%	24.2%	0.0%
ROAA	3.6%	3.7%	3.5%	0.1%	0.2%	3.7%	0.0%

1Q 2017 to 1Q 2016 Comparison

Without the Bank Republic acquisition effect, in 1Q 2017, total operating expenses amounted to GEL 72.7 million, up by GEL 8.4 million, or by 13.1% YoY. The increase was largely explained by GEL 7.7 million increase in staff cost expenses related to the extended scale, performance of the business and the changing environment and by GEL 1.1 million increase in advertising and marketing services. The gain was partially offset by a GEL 3.7 million drop in professional services, which was due to GEL 5.9 million one-off expense related to Premium Listing in 1Q 2016. In 1Q 2017, TBC Bank incurred GEL 1.9 million one-off expense related to Bank Republic integration costs.

The Bank Republic's share in the total operating expenses amounted to a GEL 10.2 million or 12.3%. This effect is largely explained by a GEL 5.7 million or 11.9% contribution to staff expenses and a GEL 1.1 million or 12.7% contribution to depreciation and amortization expenses.

As a result, without the Bank Republic acquisition effect the cost to income ratio was 44.1% (42.9% without one-off) in 1Q 2017, compared to 44.3% in 1Q 2016.

1Q 2017 to 4Q 2016 Comparison

With the Bank Republic acquisition effect in both of the quarters under consideration, on a QoQ basis, operating expenses amounted to GEL 83.0 million, down by GEL 28.9 million, or 25.8%. The decrease was largely explained by GEL 7.6 million decrease in professional services related to consulting and investment banks fees in connection with the Bank Republic acquisition in 4Q 2016, by GEL 15.0 million decrease in staff cost, by GEL 2.3 million drop in provision for liabilities and charges related to staff redundancy provision related to Bank Republic's acquisition and by GEL 3.2 million decrease in advertising and marketing services expenses. As mentioned above, TBC Bank incurred GEL 1.9 million one-off expense related to Bank Republic integration costs.

As a result, with the Bank Republic acquisition effect the cost to income ratio was 40.8% (39.8% without one-offs) in 1Q 2017, compared to 51.2% in 4Q 2016.

Balance Sheet Discussion

In millions of GEL	Mar-17 w/o BR	Mar-17	Mar-16	Change YoY %	Change YoY %	Dec-16	Change QoQ
Cash, Due from Banks and Mandatory Cash Balances with NBG	1,747	1,753	1,153	51.5%	52.1%	1,961	-10.6%
Loans and Advances to Customers (Net)	5,526	6,918	4,298	28.6%	61.0%	7,134	-3.0%
Financial Securities	682	813	592	15.2%	37.4%	804	1.1%
Fixed and Intangible Assets & Investment Property	390	481	364	6.9%	31.9%	471	2.1%
Other Assets	715	397	247	189.4%	60.9%	401	-0.8%
Total Assets	9,059	10,363	6,654	36.1%	55.7%	10,769	-3.8%
Due to Credit Institutions	1,503	2,112	1,002	49.9%	110.8%	2,198	-3.9%
Customer Accounts	5,392	6,071	3,932	37.1%	54.4%	6,455	-6.0%
Debt Securities in Issue	24	24	21	13.8%	13.8%	24	3.7%
Subordinated Debt	345	345	303	13.7%	13.7%	368	-6.4%
Other Liabilities	119	130	115	3.2%	12.7%	142	-8.7%
Total Liabilities	7,383	8,682	5,374	37.4%	61.6%	9,186	-5.5%
Total Equity	1,676	1,681	1,281	30.9%	31.2%	1,583	6.2%

Assets

As of March 2017, without the Bank Republic acquisition effect, TBC Bank's total assets amounted to GEL 9,059.0 million, up by GEL 2,404.6 million, or by 36.1% YoY. The increment was mainly due to the increase in net loans and advances to customers by GEL 1,227.6 million, or by 28.6% as well as the rise in cash, due from banks and mandatory cash balances with NBG by GEL 593.8 million, compared to 31 March 2016. The liquid assets to liability ratio stood at 32.9%, compared to 32.2% as of 31 March 2016.

With the Bank Republic acquisition effect, total assets amounted to GEL 10,362.6 million, down by GEL 406.4 million, or by 3.8% QoQ. The contraction resulted from the the decrease in net loans and advances to customers by GEL 215.5 million, or by 3.0% and due to the GEL 197.8 million, or by 7.2% decrease in liquid assets (comprising cash and cash equivalents, amounts due from other banks, mandatory cash balances and investment securities, less corporate shares). The liquid assets to liability ratio stood at 29.5%, compared to 30.1% as of 31 December 2016.

With the Bank Republic acquisition effect, as of 31 March 2017, gross loan portfolio amounted to GEL 7,121.0 million, down by GEL 237.7 million, or by 3.2% QoQ. Gross Loans denominated in foreign currency accounted for 61.4% of total gross loans, compared to 65.9% as of 31 December 2016. As of 31 March 2016, NPLs stood at 3.4% compared to 3.5% as of 31 December 2016. The NPLs coverage ratio stood at 84.6% (217.4% including collateral), compared to 88.4% (222.5% including collateral) compared to previous quarter result.

Asset Quality

Foreign Currency Income Linked Borrowers without Bank Republic effect[9]

	31-Mar-17		31-Dec-16
Segments	FC share	FC linked income borrowers share	FC share	FC linked income borrowers share
Retail	50.1%	24.1%	55.7%	24.1%
Consumer	20.9%	19.6%	25.2%	21.7%
Mortgage	85.1%	25.4%	89.8%	24.9%
Corporate	79.6%	57.9%[10]	78.1%	58.4%[11]
MSME	67.5%	16.6%[12]	71.5%	33.7%
Total Loan Portfolio	62.8%	34.4%	66.3%	38.9%

PAR 30 by Segments and Currencies Par 30 Mar-17 Dec-16 Mar-16 GEL w/o BR FC w/o BR Total w/o BR GEL FC Total GEL FC Total GEL FC Total Corporate 0.4% 1.5% 1.3% 0.3% 1.6% 1.2% 0.0% 1.4% 1.0% 0.4% 1.5% 1.3% Retail 3.0% 2.9% 3.0% 2.7% 2.4% 2.6% 2.5% 2.3% 2.4% 2.9% 3.5% 3.2% MSME 2.0% 3.9% 3.3% 1.9% 4.0% 3.3% 1.8% 3.5% 3.0% 3.0% 5.8% 5.0% Total 2.4% 2.7% 2.5% 2.1% 2.5% 2.4% 1.9% 2.3% 2.2% 2.5% 3.4% 3.1% Total Without the Bank Republic acquisition effect, PAR 30 decreased by 0.6pp YoY, from 3.1% to 2.5%. This was due to improved performance of the book. With the Bank Republic acquisition effect,PAR 30 remained broadly stable with 0.2pp increase on a QoQ basis. Retail Segment Without the Bank Republic acquisition effect, PAR 30 decreased by 0.3pp YoY, from 3.2% to 3.0%. With the Bank Republic acquisition effect, PAR 30 increased by 0.2pp QoQ, from 2.4% to 2.6%. Corporate Segment Without the Bank Republic acquisition effect, PAR 30 remained unchanged and stood at 1.3%. With the Bank Republic acquisition effect,PAR 30 increased by 0.2pp QoQ, from 1.0% to 1.2%, staying still at low level. MSME Segment Without the Bank Republic acquisition effect, PAR 30 decreased by 1.8pp YoY, from 5.0% to 3.3%. This was due to improved performance of the segment. With the Bank Republic acquisition effect, PAR 30 increased by 0.3pp QoQ, from 3.0% to 3.3%.   NPLs per new segmentation applied retrospectively NPLs Mar-17 Dec-16 Mar-16 GEL w/o BR FC w/o BR Total w/o BR GEL FC Total GEL FC Total GEL FC Total Corporate 1.1% 5.4% 4.6% 0.7% 5.2% 4.1% 0.7% 6.1% 4.8% 1.5% 8.7% 7.4% Retail 2.3% 3.7% 3.0% 2.1% 2.9% 2.5% 1.8% 3.0% 2.5% 2.1% 4.2% 3.2% MSME 2.7% 5.8% 4.8% 2.5% 5.4% 4.5% 1.8% 4.9% 4.0% 1.8% 5.7% 4.7% Total 2.2% 4.9% 3.9% 1.9% 4.3% 3.4% 1.6% 4.4% 3.5% 2.0% 6.3% 4.8% Total Without the Bank Republic acquisition effect, NPLs decreased by 0.9pp YoY, from 4.8% to 3.9%. This was due to the improved performance of the corporate book. With the Bank Republic acquisition effect, NPLs stayed broadly stable and decreased by  0.1pp on QoQ, from 3.5% to 3.4%.     Retail Segment Without the Bank Republic acquisition effect, NPLs decreased by 0.2pp YoY, from 3.2% to 3.0%. With the Bank Republic acquisition effect, NPLs remained stable QoQ and stood at 2.5%. Corporate Segment Without the Bank Republic acquisition effect, NPLs decreased by 2.8pp, from 7.4% to 4.6%. This was due to recovery of several NPL borrowers and write-off of one borrowers in 1Q 2017, which was almost fully provisioned. With the Bank Republic acquisition effect, NPLs decreased by 0.7pp QoQ, from 4.8% to 4.1%. This was caused by write-off mentioned above. MSME Segment Without the Bank Republic acquisition effect, segment NPLs increased by 0.1pp YoY, from 4.7% to 4.8%. With the BR acquisition effect, NPLs increased by 0.5pp QoQ, from 4.0% to 4.5%. This was caused by the seasonal factors, mainly related to micro loans repayment schedule. NPLs Coverage NPLs Coverage Mar-17 Dec-16 Mar-16 Exc. Col. w/o BR Incl. Col. w/o BR Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral Corporate 69.9% 256.7% 69.2% 271.0% 91.8% 262.2% 100.2% 241.5% Retail 119.6% 207.7% 121.4% 207.6% 106.6% 205.6% 108.7% 196.9% MSME 53.3% 163.8% 54.4% 170.9% 57.7% 186.4% 47.3% 178.8% Total 83.0% 210.8% 84.6% 217.4% 88.4% 222.5% 90.6% 213.3%

With Bank Republic acquisition effect, the NPLs coverage ratio stood at 84.6% (217.4% including collateral), compared to 88.4% (222.5%) as of 31 December 2016. Without the Bank Republic acquisition effect in 1Q 2017 NPLs coverage ratio stood at 83.0% (210.8% including collateral), compared to 90.6% (213.3% including collateral) as of 31 March 2016.

With Bank Republic acquisition effect, NPL coverage ratio for corporate segment decreased due to write-off of one corporate exposure, which was almost fully provisioned and overall improved performance of the book. As for the retail segment in 1Q 2017 - the NPL coverage ratio increased in 1Q 2017, while it remained stable for the MSME segment.

Liabilities

Without the Bank Republic acquisition effect, as of 31 March 2017 TBC Bank's total liabilities amounted to GEL 7,382.8 million, up by GEL 2,009.0 million, or by 37.4% YoY. This was driven by a GEL 1,460.5 million or 37.1% increase in customer accounts portfolio, by GEL 500.3 million, or 49.9% increase in amounts due to credit institutions and by GEL 41.6 million, or 13.7% increase in subordinated debt portfolio, compared to 31 March 2016.

With the Bank Republic acquisition effect, as of 31 March 2017 TBC Bank's total liabilities amounted to GEL 8,682.0 million, down by GEL 504.4 million, or by 5.5% QoQ. The decrease was driven by a GEL 384.1 million, or 6.0% decrease in customer accounts portfolio, by GEL 85.2 million, or 3.9% decrease in amounts due to credit institutions and by GEL 23.5 million, or 6.4% decrease in subordinated debt portfolio, compared to 31 December 2016.

Liquidity

The Bank's liquidity ratio, as defined by the central bank, stood at 29.4% as of 31 March 2017, compared to 33.1% and 30.8% as of 31 March 2016 and 31 December 2016, respectively.

Total Equity

Without the Bank Republic acquisition effect, as of 31 March 2017, TBC's total equity amounted to GEL 1,676.2 million, up from GEL 1,280.6 million as of 31 March 2016. With the acquisition, as of 31 March 2017, TBC's total equity amounted to GEL and from GEL 1,680.5 million, up from GEL 1582.6 million as of 31 December 2016. In both cases, the growth was primarily driven by the net income attributable to the Bank's owners.

Regulatory Capital

As of 31 March 2017, the Bank's Basel II/III^[13] Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 11.3% and 14.9%, respectively, compared to 13.3% and 16.8% as of 31 March 2016, and 10.4% and 14.2% as of 31 December 2016. The minimum capital requirements set by the NBG for Basel II/III Tier 1 and Total Capital Adequacy Ratios are 8.5% and 10.5%, respectively. The Bank's Basel II/III tier 1 capital amounted to GEL 1,115.2 million, compared to GEL 994.1 million as of 31 March 2016 and GEL 1,041.3 million as of 31 December 2016. Risk weighted assets were GEL 9,878.1 million as of 31 March 2017, up by GEL 2,427.6 million YoY and down by GEL 143.3 million QoQ.

GEL Million	Standalone 31- Dec-2016	Standalone 31-Mar-2017	Merger Impact	Merger Impact if Applied to March 2017*	QoQ Change Standalone
Tier 1 Capital	1,041	1,115	248	1,363	74
Total Capital	1,422	1,473		1,721	51
Risk Weighted Assets	10,021	9,878	2,060	11,938	-143
Tier 1 Capital Adequacy Ratio	10.4%	11.3%	0.1%	11.4%	0.9%
Total Capital Adequacy Ratio	14.2%	14.9%	-0.5%	14.4%	0.7%

* This is calculation of the theoretical impact on the CARs if the merger had happened in March 2017 to give the reader indication of CAR. In reality, the merger occurred in Q2 of 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 the corporate segment or transferred to 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 thousand. All individual customers are included in retail deposits.

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

Income Statement by Segments
1Q'17	Retail	MSME	Corporate	Corp.Centre	Total
Interest Income	126,422	43,619	45,048	22,680	237,769
Interest Expense	-29,871	-2,302	-21,678	-41,584	-95,436
Net Transfer Pricing	-15,641	-12,102	3,438	24,305	0
Net Interest Income	80,910	29,214	26,808	5,401	142,333
Fee and Commission Income	34,337	4,617	5,287	259	44,500
Fee and Commission Expense	-14,560	-1,697	-1,578	-188	-18,023
Net fee and Commission Income	19,776	2,920	3,709	70	26,477
Gross Insurance Profit	0	0	0	1,225	1,225
Gains Less Losses from Trading in Foreign Currencies	5,837	8,226	7,476	-150	21,388
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)	0	0	0	804	804
Net Losses from Derivative Financial Instruments	0	0	0	-3	-3
Other Operating Income	3,409	741	2,001	5,015	11,166
Share of profit of associates	0	0	0	93	93
Other Operating Non-Interest Income	9,245	8,966	9,477	5,758	33,447
Provision for Loan Impairment	-26,720	-4,540	14,338	0	-16,922
(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments	574	-4	-478	0	92
Recovey of Provision/(Provision) for Impairment of Investments in Finance Lease	0	0	0	-31	-31
(Provision)/Recovery of Provision for Impairment of other Financial Assets	-298	-126	-115	-258	-797
Recovery of Impairment/(Impairment) of Investment Securities Available for Sale	0	0	0	0	0
Profit before G&A Expenses and Income Taxes	83,488	36,431	53,739	12,166	185,823
Staff Costs	-29,252	-7,632	-6,485	-4,168	-47,538
Depreciation and Amortization	-6,860	-1,138	-365	-241	-8,605
Provisions for Liabilities and Charges	-	-	-	95	95
Administrative and Other Operating Expenses	-16,863	-3,758	-1,661	-4,591	-26,873
Operating Expenses	-52,974	-12,529	-8,512	-8,905	-82,920
Profit before Tax	30,513	23,902	45,227	3,260	102,903
Income Tax Expense	-4,905	-3,436	-6,314	8,310	-6,345
Profit for the Year	25,608	20,466	38,914	11,570	96,558

Income Statement by Segments without the Bank Republic acquisition effect
1Q'17	Retail	MSME	Corporate	Corp.Centre	Total
Interest Income	95,314	38,381	38,963	20,673	193,330
Interest Expense	-28,161	-2,119	-15,721	-32,360	-78,361
Net Transfer Pricing	-6,484	-11,044	20	17,507	-
Net Interest Income	60,669	25,218	23,262	5,820	114,969
Fee and Commission Income	32,208	4,061	4,001	259	40,529
Fee and Commission Expense	-13,111	-1,627	-1,111	-110	-15,959
Net fee and Commission Income	19,097	2,434	2,890	148	24,570
Gross Insurance Profit	-	-	-	1,225	1,225
Gains Less Losses from Trading in Foreign Currencies	4,286	7,218	5,197	363	17,064
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)	-	-	-	982	982
Net Losses from Derivative Financial Instruments	-	-	-	-3	-3
Other Operating Income	1,813	390	1,704	2,249	6,157
Share of profit of associates	-	-	-	93	93
Other Operating Non-Interest Income	6,099	7,607	6,901	3,684	24,292
Provision for Loan Impairment	-18,463	-3,158	14,298	-	-7,323
(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments	521	164	354	-	1,039
Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease	-	-	-	-31	-31
(Provision)/Recovery of Provision for Impairment of other Financial Assets	1	-	-108	-258	-364
Recovery of Impairment/(Impairment) of Investment Securities Available for Sale	-	-	-	93	93
Profit before G&A Expenses and Income Taxes	67,925	32,265	47,598	10,588	158,375
Staff Costs	-24,917	-6,757	-5,774	-4,421	-41,868
Depreciation and Amortization	-6,047	-977	-272	-219	-7,515
Provision for liabilities and charges	-	-	-	95	95
Administrative and Other Operating Expenses	-14,302	-3,301	-1,291	-4,545	-23,439
Operating Expenses	-45,266	-11,034	-7,336	-9,090	-72,727
Profit before Tax	22,659	21,230	40,261	1,497	85,648
Income Tax Expense	-2,885	-2,993	-6,129	7,672	-4,336
Profit for the Year	19,774	18,237	34,132	9,169	81,312

Portfolios by Segments
In thousands of GEL	Mar-17 wo BR	Mar-17	Dec-16	Mar-16
Loans and Advances to Customers
Consumer	1,433,646	1,859,865	1,838,895	1,149,980
Mortgage	1,218,690	1,736,302	1,808,433	894,240
Pawn	33,985	33,985	33,247	35,895
Retail	2,686,321	3,630,152	3,680,575	2,080,115
Corporate	1,628,207	1,922,615	2,062,229	1,347,213
MSME	1,396,068	1,568,270	1,615,919	1,066,391
Total Loans and Advances to Customers (Gross)	5,710,597	7,121,036	7,358,723	4,493,719
Less: Provision for Loan Impairment	-184,730	-202,791	-225,022	-195,428
Total Loans and Advances to Customers (Net)	5,525,867	6,918,246	7,133,702	4,298,291
Customer Accounts
Retail	3,267,452	3,543,911	3,748,151	2,593,415
Corporate	1,399,525	1,733,114	1,875,200	760,438
MSME	725,180	793,808	831,598	577,771
Total Customer Accounts	5,392,157	6,070,833	6,454,949	3,931,623

Retail Banking

Without the Bank Republic acquisition effect, retail loans stood at GEL 2,686.3 million, up by 29.1% YoY. The hike mainly resulted from a GEL 324.4 million increase in mortgage loans and a GEL 283.7 million increase in consumer loans. TBC Bank's retail loans accounted for 31.4% market share of total individual loans. As of 31 March 2017, foreign currency loans represented 50.1% of the total retail loan portfolio.

With the acquisition effect, as of 31 March 2016, retail loans stood at GEL 3,630.2 million, down by 1.4% QoQ. The QoQ decrease was mainly related to a GEL 72.1 million decrease in mortgage loans. TBC Bank's and Bank Republic's combined retail loans accounted for a 41.8% market share of total individual loans. As of 31 March 2017, foreign currency loans represented 51.9% of the total retail loan portfolio.

Without the acquisition effect, retail deposits stood at GEL 3,267.5 million, up by 26.0% YoY and accounted for a 37.0% market share of total individual deposits. The increment in retail deposits was mainly attributable to the increase in current deposits by 40.3% YoY. Term deposits accounted for 57.9% of the total retail deposit portfolio as of 31 March 2017. Foreign deposits accounted for 85.9% of the total retail deposit portfolio.

With the acquisition effect, retail deposits decreased to GEL 3,543.9 million down by 5.4% QoQ and accounted for a 40.1% market share of total individual deposits. The decrease in retail deposits was mainly attributable to the decrease in term deposits by 5.0% QoQ. Term deposits accounted for 57.1% of the total retail deposit portfolio as of 31 March 2017. Foreign currency deposits accounted for 85.0% of the total retail deposit portfolio.

Without the acquisition effect, retail loan yields and deposit rates stood at 14.2% and 3.4% respectively, and the segment's cost of risk on loans was 2.8%. The retail segment contributed 24.3%, or GEL 19.8 million, to TBC's total net income in 1Q 2017. With the acquisition effect, retail loan yields and deposit rates stood at 13.9% and 3.3% respectively, and the segment's cost of risk on loans was 2.9%. The retail segment contributed 26.5%, or GEL 25.6 million, to TBC's total net income in 1Q 2017.

 Corporate Banking

Without the Bank Republic acquisition effect, corporate loans amounted GEL 1,628.2 million, up by 20.9% YoY. Foreign currency loans accounted for 79.6% of the total corporate loan portfolio. With the acquisition effect, corporate loans amounted to GEL 1,922.6 million, down by 6.8% QoQ. Foreign currency loans accounted for 73.5% of the total corporate loan portfolio.

Without the acquisition effect, corporate deposits totaled GEL 1,399.5 million, up by 84.0% YoY. Foreign currency corporate deposits represented 53.9% of the total corporate deposit portfolio. With the acquisition effect, corporate deposits totaled GEL 1,733.1 million, down by 7.6% QoQ. Foreign currency corporate deposits represented 51.4% of the total corporate deposit portfolio.

Without the Bank Republic acquisition effect loan yield and deposit rates stood at 9.1% and 4.4%, respectively. In the same period, the cost of risk on loans was -3.3%. In terms of profitability, the corporate segment's net profit reached GEL 34.1 million, or 42.0% of the Bank's total net income. With the acquisition effect, corporate loan yields and deposit rates stood at 9.1% and 4.9%, respectively. In the same period, the cost of risk on loans was -2.9%. In terms of profitability, the corporate segment's net profit reached GEL 38.9 million, accounting for 40.3% of the Bank's total net income.

MSME Banking

Without Bank Republic's acquisition effect, MSME loans amounted to GEL 1,396.1 million, up by 30.9% YoY. Foreign currency loans accounted for 67.5% of the total MSME portfolio. With the acquisition effect, MSME loans amounted to GEL 1,568.3 million, down by 2.9% QoQ. Foreign currency loans accounted for 68.6% of the total MSME portfolio.

Without the acquisition effect, MSME deposits stood at GEL 725.2 million, up by 21.5% YoY QoQ. Foreign currency MSME deposits accounted for 60.6% of the total MSME deposit portfolio. Consequently, with the acquisition effect MSME deposits stood at GEL 793.8 million, down by 4.5% QoQ. Foreign currency MSME deposits accounted for 59.8% of the total MSME deposit portfolio.

Without the acquisition effect MSME loan yields and deposit rates stood at 11.0% and 1.1%, respectively, while the cost of risk on loans was 0.9%. In terms of profitability, net profit for the MSME segment amounted to GEL 18.2 million, or 22.4%, of TBC's total net income. Consequently, with the Bank Republic acquisition effect, MSME loan yields and deposit rates stood at 11.0% and 1.1%, respectively, while the cost of risk on loans was 1.1%. In terms of profitability, net profit for the MSME segment amounted to GEL 20.5million, or 21.2 % of TBC's total net income.

Annexes

Subsidiaries of TBC Bank Group PLC[14]

	Ownership / voting % as of 31 March 2017		Country	Year of incorporation or acquisition	Industry	Total Assets  (after elimination)
Subsidiary						Amount GEL'000	% in TBC Group
United Financial Corporation JSC	98.7%		Georgia	1997	Card processing	7,875	0.08%
TBC Capital LLC	100.0%		Georgia	1999	Brokerage	1,457	0.01%
TBC Leasing JSC	99.6%		Georgia	2003	Leasing	112,427	1.08%
TBC Kredit LLC	75.0%		Azerbaijan	2008	Non-banking credit institution	38,452	0.37%
Banking System Service Company LLC	100.0%		Georgia	2009	Information services	637	0.01%
TBC Pay LLC	100.0%		Georgia	2009	Processing	25,561	0.25%
Mali LLC	100.0%		Georgia	2011	Real estate management	202	0.00%
Real Estate Management Fund JSC	100.0%		Georgia	2010	Real estate management	23	0.00%
TBC Invest LLC	100.0%		Israel	2011	PR and marketing	173	0.00%
Bank republic	100.0%		Georgia	2016	Financial sector	1,844,445	17.8%
JSC TBC Bank	98.5%		Georgia	2016	Financial sector	8,322,315	80.31%
TBC Insurance	100.0%		Georgia	2016	Insurance	7,093	0.1%

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet
In thousands of GEL	Mar-17 w/o BR	Mar-17	Dec-16	Mar-16
Cash and cash equivalents	830,484	697,118	945,180	688,118
Due from other banks	119,707	151,780	24,725	12,591
Mandatory cash balances with National Bank of Georgia	796,751	904,487	990,642	452,398
Loans and advances to customers (Net)	5,525,867	6,918,246	7,133,702	4,298,291
Investment securities available for sale	297,055	428,138	430,703	224,614
Investments in Subsidiaries and Associates	351,578	537	0	0
Investment securities held to maturity	384,756	384,756	372,956	367,045
Investments in finance leases	88,627	88,627	95,031	78,950
Investment properties	67,019	96,064	95,615	69,461
Goodwill	4,491	28,658	28,658	2,726
Intangible assets	59,527	63,906	60,957	45,129
Premises and equipment	263,121	320,659	314,032	249,756
Other financial assets	78,660	82,254	92,377	55,380
Deferred tax asset	3,406	3,406	3,511	2,301
Current income tax prepayment	10,058	10,058	7,431	10,671
Insurance and Reinsurance Receivables	3,584	3,414	2,249	0
Other assets	174,270	180,479	171,263	96,921
TOTAL ASSETS	9,058,963	10,362,587	10,769,032	6,654,351
LIABILITIES
Due to Credit Institutions	1,502,649	2,112,360	2,197,577	1,002,300
Customer accounts	5,392,157	6,070,833	6,454,949	3,931,623
Current income tax liability	44	2,902	2,578	468
Debt Securities in issue	24,376	24,376	23,508	21,424
Deferred income tax liability	768	3,727	5,646	35,838
Provisions for liabilities and charges	13,448	15,528	16,026	10,491
Other financial liabilities	51,913	54,780	50,511	38,563
Subordinated debt	344,841	344,841	368,381	303,381
Insurance Contracts Liabilities	342	342	486	0
Other liabilities	52,236	52,354	66,739	29,686
TOTAL LIABILITIES	7,382,773	8,682,043	9,186,401	5,373,774
EQUITY
Share capital	1,581	1,581	1,581	19,612
Share premium	677,211	677,211	677,211	408,274
Retained earnings	1,046,100	1,055,011	955,174	772,225
Group reorganisation reserve	-162,167	-162,167	-162,167	0
Share based payment reserve	21,303	21,303	23,327	14,753
Revaluation reserve for premises	70,038	70,460	70,460	59,532
Revaluation reserve for available-for-sale securities	-108	-5,088	-3,680	6,391
Cumulative currency translation reserve	-7,636	-7,636	-7,539	-6,615
TOTAL EQUITY	1,646,323	1,650,677	1,554,366	1,274,174
Non-controlling interest	29,867	29,867	28,264	6,403
TOTAL EQUITY	1,676,190	1,680,544	1,582,631	1,280,577
TOTAL LIABILITIES AND EQUITY	9,058,963	10,362,587	10,769,032	6,654,351

Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL	1Q'17 w/o BR	1Q'17	1Q'16	Q4'16
Interest income	193,330	237,769	174,859	243,344
Interest expense	-78,361	-95,436	-65,976	-89,655
Net interest income	114,969	142,333	108,883	153,689
Fee and commission income	40,529	44,500	29,547	45,460
Fee and commission expense	-15,959	-18,023	-11,250	-17,068
Net Fee and Commission Income	24,570	26,477	18,297	28,392
Gains less losses from trading in foreign currencies	17,064	21,146	14,619	25,472
Foreign exchange translation gains less losses	982	1,046	8	-2,519
Gains less losses/(losses less gains) from derivative financial instruments	-3	-3	-363	94
(Losses less gains) / gains less losses from disposal of investment securities available for sale	0	0	0	498
Other operating income	6,250	11,259	3,668	12,372
Other operating non-interest income	24,292	33,447	17,931	35,419
Gross insurance profit	1,225	1,225	0	256
Provision for loan impairment	-7,323	-16,922	-13,067	-10,405
Provision for  impairment of investments in finance lease	-31	-31	-185	-322
Provision for/ (recovery of provision)  performance guarantees and credit related commitments	1,039	92	-1,029	2,787
Provision for  impairment of other financial assets	-364	-797	-49	-1,727
Impairment of investment securities available for sale	0	0	-11	0
Operating income after provisions for impairment	158,375	185,823	130,772	208,586
Staff costs	-41,868	-47,538	-34,172	-62,544
Depreciation and amortisation	-7,515	-8,605	-6,567	-7,435
Provision for liabilities and charges	95	95	0	-2,210
Administrative and other operating expenses	-23,439	-26,873	-23,560	-39,595
Operating expenses	-72,727	-82,920	-64,299	-111,785
Profit before tax	85,648	102,903	66,474	96,801
Income tax expense	-4,336	-6,345	-7,777	-8,767
Profit for the period	81,312	96,558	58,696	88,034
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Revaluation	-527	-1,407	-596	3,196
Gains less losses reclassified to profit or loss upon disposal	0	0	0	2,757
Income tax recorded directly in other comprehensive income	0	0	-35	-248
Exchange differences on translation to presentation currency	-96	-96	24	-147
Items that will not be reclassified to profit or loss:
Income tax recorded directly in other comprehensive income	0	0	0	-422
Other comprehensive income for the year	-623	-1,503	608	-5,136
Total comprehensive income for the year	80,689	95,055	59,304	82,898
Profit attributable to:
- Owners of the Bank	79,730	94,975	59,483	89,359
- Non-controlling interest	1,582	1,582	-786	-1,326
Profit for the period	81,312	96,558	58,696	88,034
Total comprehensive income is attributable to:
- Owners of the Bank	79,106	93,473	60,091	84,224
- Non-controlling interest	1,582	1,582	-786	-1,326
Total comprehensive income for the year	80,689	95,055	59,304	82,898

Consolidated Statements of Cash Flows

In thousands of GEL	As of 31-Mar-2017
Cash flows from operating activities
Interest received	236,723
Interest paid	(93,871)
Fees and commissions received	43,697
Fees and commissions paid	(18,193)
Insurance premium received	2,472
Insurance claims paid	(1,407)
Income received from trading in foreign currencies	21,303
Other operating income received	7,493
Staff costs paid	(51,305)
Administrative and other operating expenses paid	(32,771)
Income tax (paid) / refunded	(10,379)
Cash flows from operating activities before changes in operating assets and liabilities	103,764
Changes in operating assets and liabilities
Net (increase) / decrease in due from other banks	(214,398)
Net (increase) / decrease in loans and advances to customers	(190,209)
Net decrease in investment in finance lease	363
Net decrease / (increase) in other financial assets	24,090
Net decrease / (increase) in other assets	(17,175)
Net increase in due to other banks	(49,578)
Net increase in customer accounts	(53,309)
Net (decrease) / increase in other financial liabilities	6,351
Net (decrease) / increase in other liabilities & provisions for liabilities and charges	(1,669)
Net cash from operating activities	(391,770)
Cash flows from investing activities
Acquisition of investment securities available for sale	(37,753)
Proceeds from disposal of investment securities available for sale	(2,250)
Proceeds from redemption at maturity of investment securities available for sale	41,583
Acquisition of investment securities held to maturity	(129,956)
Proceeds from redemption of investment securities held to maturity	119,285
Acquisition of premises, equipment and intangible assets	(19,573)
Disposal of premises, equipment and intangible assets	1,458
Proceeds from disposal of investment property	872
Acquisition of subsidiaries, net of cash acquired	(350)
Net cash used in investing activities	(26,684)
Cash flows from financing activities
Proceeds from other borrowed funds	497,714
Redemption of other borrowed funds	(473,650)
Proceeds from debt securities in issue	2,805
Issue of ordinary shares	29
Net cash from / (used in) financing activities	26,899
Effect of exchange rate changes on cash and cash equivalents	(25,003)
Net increase / (decrease) in cash and cash equivalents	(416,558)
Cash and cash equivalents at the beginning of the year	1,113,676
Cash and cash equivalents at the end of the year	697,118

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 and used by the Management for monitoring and control purposes.

Key Ratios
Ratios (based on monthly averages, where applicable)	1Q'17 w/o BR	1Q'17	1Q'16	Q4'16
ROAE	20.3%	24.2%	19.3%	24.2%
ROAA	3.6%	3.7%	3.5%	3.7%
Pre-provision ROAE	22.0%	28.6%	23.9%	26.8%
Pre-provision ROAA	3.9%	4.4%	4.3%	4.1%
Cost to Income	44.1%	40.8%	44.3%	51.2%
Cost of Risk	0.5%	0.9%	1.2%	0.6%
NIM	6.5%	6.6%	7.7%	7.9%
Risk adjusted NIM	5.3%	5.1%	6.4%	6.3%
Loan yields	11.9%	11.9%	13.6%	13.8%
Risk adjusted loan yields	10.8%	10.5%	12.2%	12.0%
Deposit rates	3.3%	3.4%	3.6%	3.3%
Yields on interest earning assets	10.9%	11.1%	12.4%	12.5%
Cost of Funding	4.3%	4.4%	4.8%	4.5%
Spread	6.6%	6.7%	7.6%	8.0%
PAR 90 to gross loans	1.7%	1.5%	1.7%	1.3%
NPLs to gross loans	3.9%	3.4%	4.8%	3.5%
NPLs coverage	83.0%	84.6%	90.6%	88.4%
Provision Level to Gross Loans	3.2%	2.8%	4.3%	3.1%
Related party loans to gross loans	0.1%	0.1%	0.2%	0.1%
Top 10 borrowers to total portfolio	N/A	8.3%	9.2%	7.6%
Top 20 borrowers to total portfolio	N/A	12.2%	14.6%	11.3%
Net loans to deposits plus IFI funding	92.4%	97.2%	97.7%	93.4%
Net stable funding ratio	N/A	106.8%	117.3%	108.4%
Leverage	5.4	6.2	5.2	6.8
Hypothetical Tier 1 CAR	15.0%	15.0%	18.7%	14.2%
Hypothetical Total CAR	19.8%	19.8%	22.8%	19.3%
Regulatory Tier 1 CAR	11.3%	11.3%	13.3%	10.4%
Regulatory  Total CAR	14.9%	14.9%	16.8%	14.2%

Ratio definitions

1. Return on average total equity (ROAE) 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; Pre-provision ROAE excludes all provision charges. Annualized where applicable.

2. Return on average total assets (ROAA) equals net income of the period divided by monthly average total assets for the same period. Pre-provision ROAE excludes all provision charges. Annualised where applicable.

3. 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).

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

5. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets. Annualised where applicable.

6. Risk Adjusted Net interest margin is NIM minus Cost of Risk without one -offs and currency effect

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

8. Risk Adjusted Loan yield is Loan yield minus Cost of Risk without one-offs and currency effect

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

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

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

12. 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).

13. 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.

14. 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.

15. NPLs coverage ratio equals total loan loss provision divided by the NPL loans.

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

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

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

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

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

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

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

23. Liquidity coverage ratio equals high-quality liquid assets divided by total net cash outflow amount as defined in Basel III (calculated according to NBG standards).

24. Leverage equals total assets to total equity.

25. Hypothetical ratios - hypothetical ratio based on the Basel III guidelines except for calculation of credit equivalent amounts for interest rate and foreign exchange related contracts, which are calculated based on original exposure method being in line with NBG Pillar 1 requirements. Calculations are made for TBC Bank stand-alone, based on local standards.

26. 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 II/III standards. The reporting started from the end of 2012. Calculations are made for TBC Bank stand-alone, based on local standards.

27. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel II/III standards. The reporting started from the end of 2012. Calculations are made for TBC Bank stand-alone, based on local standards.

Exchange Rates

To calculate the Balance Sheet items' QoQ growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.6468 as of 31 December 2016. For calculations of YoY growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.3679 as of 31 March 2016. The USD/GEL exchange rate as of 31 March2017 equaled 2.4452. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 1Q 2016 of 2.4351, FY, 1Q 2017 of 2.6029, 4Q 2016 of 2.4958.

Additional Disclosures

Earnings per Share

In GEL	1Q 2017
Earnings per share for profit attributable to the owners of the Group:	1.80
- Basic earnings per share
- Diluted earnings per share	1.75

Source: IFRS Consolidated

Sensitivity Scenario

Sensitivity Scenario	31-Mar-17	10% Currency Devaluation Effect
NIM*		-0.1%
Technical Cost of Risk		+0.2%
Regulatory Total Capital	1,473	1,501
Regulatory Capital adequacy ratios tier 1 and total capital decrease by		0.73% - .79%

(*) Linear depreciation is assumed for NIM sensitivity analysis

Source: IFRS statements and Management Figures

FC details for Selected P/L Items

Selected P&L Items 1Q 2017	FC % of Respective Totals
Interest Income	48%
Interest Expense	59%
Fee and Commission Income	36%
Fee and Commission Expense	58%
Administrative Expenses	24%

Source: IFRS statements and Management figures

GEL Refinance Rate and Libor Linked B/S Items 31 March 2017

GEL Refinance Rate Gap	GEL     -310 m			Libor Gap	GEL 544 m
	GEL m	% share in totals			GEL m	% share in totals
Assets	1,292	13%		Assets	1,700	16%
Securities with fixed yield(≤1y)*	362	45%		Nostro**	234	56%
Securities with floating yield	150	19%		NBG Reserves**	904	92%
Loans with Floating yield	688	10%		Libor Loans	517	7%
Reserves in NBG	72	7%		Interest Rate Options	43
Interbank loans& Deposits & Repo	19	5%
Liabilities	1,602	18%		Liabilities	1,155	13%
Current accounts***	682	11%		Senior Loans	848	46%
Saving accounts***	150	3%		Subordinated Loans	307	89%
Refinancing Loan of NBG	540	29%
Interbank Loans &Deposits & Repo	79	26%
IFI Borrowings	152	8%

(*) 61% of the less than 1 year securities are maturing in 6 months

(**) Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby benchmarks are correlated with Libor. From March, 2016  according to NBG regulation is it possible  to apply negative interest rates on NBG reserves and correspondent accounts, therefore these two items close the gap in case of both upward and downward movement of Libor rate.

(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1 month prior notification)

 Source: IFRS Group Data

Yields and Rates
Yields and Rates	1Q'17 w/o BR	1Q'17	4Q'16 w/o BR	4Q'16	3Q'16	2Q'16	1Q'16
Loan yields	11.9%[15]	11.9%	13.8%	13.8%[16]	13.5%	13.3%	13.6%
Retail loan yields  GEL	20.4%	20.0%	22.9%	23.3%	22.8%	22.7%	22.5%
Retail loan yields FX	8.9%	9.1%	9.8%	10.0%	9.9%	10.3%	11.1%
Retail Loan Yields	14.2%	13.9%[17]	15.8%	15.8%	16.0%	16.3%	16.5%
Corporate loan yields  GEL	10.0%	10.0%	10.0%	9.6%	12.4%	13.7%	13.2%
Corporate loan yields FX	8.9%	8.8%	12.9%	12.5%	10.6%	8.8%	9.3%
Corporate Loan Yields	9.1%	9.1%	12.2%	11.8%[18]	11.0%	9.7%	10.1%
MSME loan yields  GEL	13.2%	13.3%	14.0%	14.3%	14.2%	14.8%	15.1%
MSME loan yields FX	10.1%	10.1%	10.8%	11.0%	10.6%	10.8%	11.6%
MSME Loan Yields	11.0%	11.0%	11.7%	11.9%	11.7%	11.9%	12.5%
Deposit rates	3.3%	3.4%	3.1%	3.3%	3.3%	3.4%	3.6%
Retail deposit rates GEL	4.1%	3.9%	3.7%	3.7%	4.0%	4.1%	3.8%
Retail deposit rates FX	3.3%	3.2%	3.4%	3.4%	3.5%	3.6%	3.9%
Retail Deposit Yields	3.4%	3.3%	3.4%	3.4%	3.6%	3.7%	3.9%
Corporate deposit rates GEL	8.5%	8.7%	6.7%	7.5%	7.3%	7.5%	6.7%
Corporate deposit rates FX	1.5%	1.7%	1.5%	2.0%	1.5%	1.3%	1.7%
Corporate Deposit Yields	4.4%	4.9%	3.7%	4.4%	4.2%	4.0%	4.1%
MSME deposit rates GEL	2.0%	2.0%	1.7%	1.7%	2.1%	2.5%	2.4%
MSME deposit rates FX	0.5%	0.5%	0.6%	0.6%	0.4%	0.4%	0.7%
MSME Deposit Yields	1.1%	1.1%	1.0%	1.1%	1.1%	1.2%	1.3%
Yields on Securities	8.0%	8.1%	8.0%	8.1%	8.3%	9.1%	9.4%

Source: IFRS Consolidated

Risk Adjusted Yields
Risk-adjusted Yields	1Q'17 w/o BR	1Q'17	4Q'16 w/o BR	4Q'16	3Q'16	2Q'16	1Q'16
Loan yields	10.8%	10.5%[19]	12.4%	12.6%[20]	12.2%	12.1%	12.2%
Retail Loan Yields	11.0%	10.6%[21]	13.3%	13.0%	13.3%	13.5%	13.4%
Corporate Loan Yields	11.5%	11.1%	13.3%	14.4%[22]	12.5%	11.1%	12.2%
MSME Loan Yields	9.5%	9.4%	9.6%	9.6%	9.9%	10.7%	10.2%

Source: IFRS Consolidated

Cost of Risk by Segments
Cost of Risk	1Q'17 w/o BR	1Q'17	4Q'16	3Q'16	2Q'16	1Q'16
Retail	2.8%	2.9%	3.5%	2.6%	2.8%	3.1%
Corporate	-3.3%	-2.9%	-6.4%	-1.6%	-1.7%	-2.3%
MSME	0.9%	1.1%	3.3%	1.6%	1.2%	2.0%
Total	0.5%	0.9%	0.6%	1.1%	1.1%	1.2%

Source: IFRS Consolidated

Loan Quality per NBG

Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG

	Mar-17	Dec-16	Sep-16	Jun-16	Mar-16
SDL Loans as % of Gross Loans	4.1%	4.3%	5.1%	6.9%	7.2%

  Source: NBG

Cross Sell Ratio[23] and Number Active Products

	Mar-17	Dec-16	Sep-16	Aug-16
Cross Sell Ratio	3.57	3.68	3.55	3.45
Number of Active Products (in millions)	3.16	3.14	2.83	2.74

Source: Management figures

Diversified Deposit Base

Status: monthly income >=2,000 GEL or loans/deposits >=20,000 GEL

VIP: deposit >=100,000 USD as well as on discretionary basis; WM: >=10,000 USD as well as on discretionary basis

Wealth Management includes UHNW and HNW non-resident clients

31 March 2017	Volume of Deposits	Number of Deposits
MASS	35%	94.7%
STATUS	25%	4.7%
VIP	25%	0.4%
Wealth Management	14%	0.2%

 Source: Management figures

Loan Concentration

	Mar-17	Dec-16	Sep-16	Jun-16	Mar-15
Top 20 Borrowers as % of total portfolio	12.2%	11.3%	13.4%	14.4%	14.6%
Top 10 Borrowers as % of total portfolio	8.3%	7.6%	8.6%	9.0%	9.2%
Related Party Loans as % of total portfolio	0.1%	0.1%	0.1%	0.1%	0.2%

 Source: IFRS consolidated

Sales Breakdown (for products offered through Multichannel)

	Mar-17	Dec-16	Sep-16	Jun-16	Mar-16	Dec-15	Sep-15
Digital Channels	24%	26%	24%	23%	27%	21%	25%
Call Center	28%	29%	33%	32%	23%	28%	15%
Branches	49%	45%	43%	46%	50%	51%	60%

Source: Management figures

Number of Transactions in Digital Channels ('000)

	1Q17	4Q-16	3Q-16	2Q-16	1Q-16
Internet Banking Number of Transactions	2,098	2,280	1,828	1,797	1,669
Mobile Banking Number of Transactions	2,622	2,532	1,814	1,485	1,151

Source: Management figures

Penetration Ratios of Digital Channels

	Mar-17	Dec-16	Sep-16	Jun-16	Mar-16	Dec-15	Sep-15
IB&MB Penetration Ratio	34%	37%	34%	34%	32%	32%	26%
Internet Banking Penetration Ratio	27%	32%	29%	30%	28%	30%	24%
Mobile Banking Penetration Ratio	25%	24%	20%	19%	17%	15%	12%

Source: Management figures

Mid-term targets for digital channels is to increase the penetration ratio of internet or mobile banking users to above 45% from the current level of 37% and to increase mobile banking penetration ratio to above 35% from the current level of 24%

Net outflow of borrowed funds

Subordinated and Senior Loans' Principal Amount Outflow by Year (GEL million)
2017	2018	2019	2020	2021	2022	2023	2024	2025	2026
269.5	416.1	210.4	213.3	209.6	77.1	50.6	15.1	63.3	145.6

Source: Management figures, Revolving non IFI loans from NBG are excluded

NPL Build Up
NPLs		NPLs in millions as of Dec-16	Real Growth	FX Effect	Write-Offs	Repossessed	NPLs in Millions as of Mar-17
Retail		91	24	-4	-19	-2	91
Corporate		98	9[24]	-6	-23	-1	78
MSME		65	17	-5	-5	-2	71
Total		255	50	-15	-46	-4	240

Source: IFRS Consolidated

Net Write-Offs, 1Q 2017
In GEL millions		Write-Offs	Recoveries		Net Write-Offs
Retail		19	5		14
Corporate		23	1		22
MSME		5	2		3
Total		46	8		39
Source: IFRS Consolidated Portfolio Breakdown by Collateral Types as of 31-Mar-17
Cash Cover				1%
Gold				4%
Inventory				5%
Real Estate				66%
Third Party Guarantees				7%
Other				1%
Unsecured				15%

Source: IFRS Consolidated

Loan to Value by Segments as of 31-Mar-17
Retail	Corporate		MSME		Total
37%	34%		33%		35%
Source: IFRS Consolidated TBC Gross Loan Portfolio Breakdown as of 31-Dec-16
Old Segmentation				New Segmentation
Corporate		28.0%		Corporate		28.0%
Retail		51.1%		Retail		50.0%
SME		11.7%		MSME		22.0%
Micro		9.2%

Source: IFRS Consolidated

TBC Deposit Portfolio Breakdown as of 31-Dec-16
Old Segmentation		New Segmentation
Corporate	27.8%	Corporate	29.1%
Retail	56.8%	Retail	58.1%
SME	13.8%	MSME	12.9%
Micro	1.6%

Source: IFRS Consolidated

Loan Movement from Old to New Segmentation as of 31-Dec-16

IN GEL thousands		Retail	Corporate	MSME
Corporate	2,060,171	2,058	-	-	2,062,229	Corporate
Retail	3,763,254	189,104	-	-271,784	3,680,575	Retail
Consumer	1,663,550	175,345	-	-	1,838,895	Consumer
Mortgage	1,811,695	-3,262	-	-	1,808,433	Mortgage
Pawn shop Retail	288,010	17,021	-	-271,784	33,247	Pawn shop Retail
SME	857,552	5,969	-	-	863,521	SME (MSME)
Pawn shop Micro	17,021	-17,021	-	271,784	271,784	Pawn shop MSME
Micro	660,725	-180,110	-	-	480,615	Micro (MSME)

Source: IFRS Consolidated

IFRS 9 update

The Bank is in the process of implementation IFRS 9 standard, which will come into effect starting from 1^st January 2018.

Relevant Change Areas for the Bank

§ Key areas of IFRS 9 are classification and measurement, impairment and hedge accounting

§ Based on the Bank's Business model no significant changes are expected from classification and measurement and hedge accounting

§ Key changes comes from impairment part, where the standard moved from incurred credit loss to expected credit loss model

IFRS 9 Project

§ The Bank started IFRS 9 implementation project in June 2016

§ The project is undertaken with support  from Deloitte

§ In parallel to methodology and model development, the Bank is in the process of respective software implementation

High Level Expected Impact

§ During the project gap analysis phase, high level impact assessment was performed, applying simplified approaches e.g. for macro factors incorporation

§ Based on the impact assessment results provision level for the portfolio is expected to increase in the range of 0.2-0.5% of the loan book (6-18% of provision level). However the final impact may be different, considering the finalized models and methodologies of the Bank and macro outlook

§ The expected impact is in the lower range of market expectations, due to the fact the under IAS 39 provisioning methodology the Bank already applies conservative approach

§ Based on EBA's report from Nov 2016, which covers sample of 50 financial institutions in Europe, estimated increase of provisions compared to the current levels of provisions under IAS 39 is on average 18% with upper limit being 30% for 86% (75th percentile) of respondents. The assessment is done on a high level applying simplified approaches, with one macro scenario being one of the simplifications

§ No impact is expected on capital adequacy ratios, which are calculated based on local standards, and Profit and loss statement as the amount will directly affect equity.

NBG Loan Larization Program

The NBG Larization program consist of two parts:

§ One-time conversion program: on 11 January 2017, in order to ease the increased debt service burden caused by the exchange rate fluctuation, the government of Georgia approved a subsidized, one-time program on the voluntary conversion of US dollar-denominated bank loans of individuals into lari loans. The program started on 17 January and lasted for two months. As a result Loans of up to 80 million USD were converted in GEL through the Larization Program

§ Issuing small loans in local currency only: based on an amendment to the civil code, starting from 15 January 2017, individuals will only be able to borrow amounts up to 100,000 GEL in the national currency

Loans of up to 80 million USD were converted in GEL through the Larization Program:

In millions of GEL	%	Absolute Amount
TBC + Bank Republic	55.1%	44.1
BOG	33.1%	26.5
VTB	6.1%	4.9
Other	5.7%	4.6

Around 5'600 loans were converted during this program:

In absolute amounts	%	Number of loans
TBC + Bank Republic	55.0%	3,080
BOG	29.6%	1,658
VTB	9.6%	5,38
Other	5.8%	325

Total amount of loans issued below GEL 100,000:

In GEL millions	1Q'2016	1Q'2017	% Change
TBC Bank	179	372	107.8%
Bank Republic	62	142	129.0%
Share in retail portfolio with Bank Republic	8.1%	14.2%	75.3%
Share in total Portfolio with Bank Republic	4.2%	7.2%	71.4%

Other Selected Data of TBC Bank and Bank Republic

NPLs: Total Portfolio as of 31-Mar-17

Bank Republic NPLs	Book Value	Total	Retail	Corporate	MSME
	Provision Coverage	121%	167%	97%	103%
	Collateral Coverage	92%	57%	93%	179%
	Total Coverage	214%	224%	190%	282%
	NPL	2.6%	1.3%	6.3%	2.8%
	Cost of Risk 1Q'17	1.0%	1.7%	-1.3%	1.2%
	Fair Value Adjusted	Total	Retail	Corporate	MSME
	Provision Coverage	105%	136%	54%	74%
	Collateral Coverage	197%	71%	518%	219%
	Total Coverage	302%	207%	572%	293%
	NPL	1.2%	1.0%	1.2%	2.3%
	Cost of Risk 1Q'17	2.7%	3.4%	-0.1%	3.0%
TBC Bank NPLs		Total	Retail	Corporate	MSME
	Provision Coverage	83%	120%	70%	53%
	Collateral Coverage	128%	88%	187%	111%
	Total Coverage	211%	208%	257%	164%
	NPL	3.9%	3.0%	4.6%	4.8%
	Cost of Risk 1Q'17	0.5%	2.8%	-3.3%	0.9%
TBC + BR NPLs		Total	Retail	Corporate	SME
	Provision Coverage	85%	121%	69%	54%
	Collateral Coverage	133%	86%	202%	117%
	Total Coverage	217%	208%	271%	171%
	NPL	3.4%	2.5%	4.1%	4.5%
	Cost of Risk 1Q'17	0.9%	2.9%	-2.9%	1.1%

Source: IFRS figures

Gross Loan Segmentation as of 31-Mar-17

	TBC Bank[25]	Bank Republic[26]	TBC + Republic
Corporate	29%	21%	27%
Mortgage	21%	37%	24%
Consumer Lending	26%	30%	27%
MSME	24%	12%	22%
Total	5,711million	1,410 million	7,121 million

Source: IFRS figures

Customer Deposits Segmentation as of 31-Mar-17

	TBC Bank[27]	Bank Republic[28]	TBC + Republic
Corporate	26%	49%	29%
Retail	61%	41%	58%
MSME	13%	10%	13%
Total	5,392 million	679 million	6,071 million

Source: IFRS figure

 

Balance Sheet
In thousands of GEL	31-Mar-17 (standalone)	31-Dec-16 (standalone) audited
Cash and cash equivalents	192,632	235,865
Mandatory cash balance with the National Bank of Georgia	107,736	131,133
Due from other banks	48,621	9,937
Investment securities available for sale	54	54
Loans and advances to customers (Net)	1,515,205	1,574,395
Premises and Equipment	56,415	57,275
Intangible assets	4,392	4,855
Investment properties	29,250	28,558
Prepayments and accrued interest	835	1,358
Repossessed Assets	1,535	2,585
Other assets	8,474	10,191
Total assets	1,965,149	2,056,208
Customer accounts	1,078,688	1,087,268
Provisions	2,442	1,489
Deferred income tax liabilities	3,137	3,812
Current income tax liabilities	2,858	2,099
Due to Credit Institutions	536,005	612,506
Other liabilities	4,550	26,093
Subordinated debt	16,236	17,029
Total liabilities	1,643,917	1,750,295
Share capital	76,031	76,031
Share premium	39,914	39,914
Other reserves	21,717	21,902
Retained earnings	183,570	168,066
Total Equity	321,232	305,913
Total equity and liabilities	1,965,149	2,056,208

The Bank Republic Data

 

Income Statement
In thousands of GEL	Q1 2017	Q4 2016
Interest income	45,108	48,254
Interest expense	-18,473	-16,435
Net interest income	26,635	31,819
Fee and commission income	4,033	4,039
Fee and commission expense	-2,113	-2,305
Net Fee and Commission Income	1,920	1,743
Gains less losses from trading in foreign currencies	4,082	5,543
Foreign exchange translation gains less losses	64	3,213
Losses less gains / (gains less losses) from disposal of investment securities available for sale	-	3,252
Other operating income	805	1,711
Other operating non-interest income	4,951	13,719
Provision for loan impairment	-3,836	-10,606
Provision for/ (recovery of provision)  performance guarantees and credit related commitments	-1,500	408
Provision for  impairment of other financial assets	-	-50
Operating income after provisions for impairment	28,170	37,024
Staff costs	-6,028	-9,956
Depreciation and amortization	-1,258	-319
Administrative and other operating expenses	-3,260	-8,678
Operating expenses	-10,546	-18,954
Profit before tax	17,624	18,070
Income tax expense	-2,120	2,547
Profit for the period	15,504	20,618
Profit attributable to owners of the bank	15,504	20,618

Key Ratios
Ratios (based on quarterly averages, where applicable)	1Q'17	4Q '16
ROAE	20.1%	27.1%
ROAA	3.1%	4.3%
Pre-provision ROAE	27.0%	40.5%
Pre-provision ROAA	4.2%	6.4%
Cost: Income	31.5%	40.1%
Cost of Risk	1.0%	3.2%
NIM	6.8%	8.4%
Loan yields	11.6%	13.1%
Deposit rates	4.3%	4.0%
Yields on interest earning assets	11.5%	12.7%
Cost of Funding	2.2%	4.1%
Leverage	6.1x	6.7x
Spread	9.3%	8.6%
PAR 90 to gross loans	2.3%	2.9%
NPLs to gross loans	2.6%	3.1%
NPLs coverage	121.3%	112.0%
NPL coverage with collateral	213.5%	207.4%
Provision Level to Gross Loans	3.1%	3.4%
Regulatory Tier 1 CAR	11.8%	10.4%
Regulatory Total CAR	13.7%	12.2%

Strong Financial Performance
Key Ratios	1Q'17	4Q'16	1Q'16[29]
ROE	20.1%	27.1%	22.9%
Net Profit	15.5 million	20.6 million	14.4 million

Accelerated growth and increased market shares
Portfolios	1Q'17	4Q'16	1Q'16[30]
Retail Segment	947	986	887
Business Segment	484	491	345
Total	1430	1477	1231
Market Share	7.6%[31]	7.8%	7.4%

Synergy Potential and one-off integration costs

The one-off integration costs have amounted to GEL 22.9 million, less than the expected GEL 23.3 million. The bank has upgraded annualised cost synergies guidance from GEL 20.5 million to GEL 24.0 million.

Stable employee turnover after the acquisition

Following the acquisition of the Bank Republic front office employee turnover was low at c.3%.

Bank Republic Loan portfolio increased by 15.3% since acquisition[32]

QoQ decline in loans is mainly attributable to seasonal factors and at constant currency rate gross loans portfolio remains broadly stable

Accelerated growth in customer acquisition

Following the acquisition, total number of customers increased by 11% across all segments and reached around 380,000.

 

---

[1] Market share figures are based on data from the National Bank of Georgia (NBG)

[2] Excluding market share of Credo Bank, which registered as a bank in 1Q 2017

[3] Number of transactions conducted in remote channels divided by total number of transactions, based on JSC TBC Bank standalone data

[4] Region in this context comprises Georgia, Azerbaijan and Armenia

[5] Number of active products divided by number of active customers

[6] Core inflation excludes energy, food and administered prices

[7] Estimated number for Nominal GDP

[8] Measured as sum of government spending on salaries and goods and services

[9] Based on internal estimates

[10] Pure exports account for 7.0% of total Corporate USD denominated loans

[11] Pure exports account for 10.1% of total Corporate USD denominated loans

 [12] Based on new legislation loans up to GEL100k should be disbursed in GEL, therefore wholesale pawn shop loans  are not considered FX  income linked

[13] The National Bank of Georgia enforced Basel II/III regulation in June 2014.

[14] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016

[15] 12.1% without change in the accounting rule

[16] 13.2% without one-offs

[17] 14.2% without change in the accounting rule

[18] 9.6% without one-offs

[19] 10.6% without change in accounting rule

[20] 12.0% without one-offs

[21] 10.9% without change in accounting rule

[22] 12.2% without one-offs

[23] Cross-sell ratio is defined as number of active products divided by the number of active customers

[24] Real growth comprises of new client additions in the amount of GEL 25 million less repayments of existing clients in the amount of GEL 16 million. 

 [25] TBC Bank Group PLC figures without Bank Republic effect

[26] Bank Republic after fair value adjustments

[27] TBC Bank Group P:C figures without Bank Republic effect

[28] Bank Republic after fair value adjustments

[29] Based on management accounts

[30] Per old segmentation

[31] 7.8% excluding market share of Credo Bank, which registered as a bank in 1Q 2017

[32] Bank Republic deposit portfolio is not relevant as new corporate deposits are transferred to TBC Bank branches

 

END

 

 

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