Final Results

RNS Number : 6717Q

TBC Bank Group PLC

21 February 2019

TBC BANK GROUP PLC ("TBC Bank")

4Q 2018 UNAUDITED CONSOLIDATED FINANCIAL RESULTS AND FY 2018 PRELIMINARY UNAUDITED CONSOLIDATED FINANCIAL RESULTS

Forward-Looking Statements

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

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

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

Fourth Quarter 2018 Unaudited Consolidated Financial Results and Full Year 2018 Preliminary Unaudited Consolidated Financial Results Conference Call

TBC Bank Group PLC ("TBC PLC") announces that its consolidated financial results for the fourth quarter 2018 and preliminary consolidated financial results for the full year 2018 will be published on Thursday, 21 February 2019 at 7.00 am GMT (11.00 am GET).

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

Date & time: Thursday, 21 February 2019 at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST)

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

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

Replay Numbers
Replay Passcode:	0420415
UK Toll Free:	0800 633 8453
Standard International Access:	+44 (0) 20 8196 1998
USA Toll Free:	1 866 583 1035
Russia Toll Free:	8 10 8002 4832044
Moscow:	+7 (8) 495 249 9840

Contacts

Zoltan Szalai

Director of International Media and Investor Relations

E-mail: ZSzalai@Tbcbank.com.ge

Tel: +44 (0) 7908 242128

Web: www.tbcbankgroup.com

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

Anna Romelashvili

Head of Investor Relations

E-mail: IR@tbcbank.com.ge

Tel: +(995 32) 227 27 27

Web: www.tbcbankgroup.com

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Investor Relations Department

E-mail: IR@tbcbank.com.ge

Tel: +(995 32) 227 27 27

Web: www.tbcbankgroup.com

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Table of Contents

4Q and FY 2018 Results Announcement

TBC Bank - Background

Financial Highlights

Recent Developments

Development of Customer Focused Ecosystems

Letter from the Chief Executive Officer

Economic Overview

Unaudited Consolidated Financial Results Overview for 4Q 2018

Preliminary Unaudited Consolidated Financial Results Overview FY 2018

Additional Disclosures

TBC BANK Group PLC ("TBC Bank")

TBC Bank Announces Unaudited Preliminary 4Q and FY 2018 and Consolidated Financial Results:

Net Profit for 4Q 2018 up by 34.5% YoY to GEL 130.1 million

Underlying[1] Net Profit for FY 2018 up by 23.2% YoY to GEL 454.9 million

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

TBC Bank - Background

TBC Bank is the largest banking group in Georgia, where 99.8% of its business is concentrated, with a 38.2% market share by total assets. It offers retail, corporate, and MSME banking nationwide.

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

TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. The results are adjusted for certain one-off items to enable better analysis of the Group's performance. The reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given under Annex 26 section on page 51.

Financial Highlights

4Q 2018 P&L Highlights

§ Net profit amounted to GEL 130.1 million (4Q 2017: GEL 96.8 million; 3Q 2018: GEL 107.4 million)

§ Return on equity (ROE) amounted to 24.3% (4Q 2017: 21.0%; 3Q 2018: 21.2%)

§ Return on assets (ROA) amounted to 3.5 % (4Q 2017: 3.0%; 3Q 2018: 3.1%)

§ Total operating income amounted to GEL 312.3 million, up by 28.3% YoY and up by 12.3% QoQ

§ Cost to income was 39.7% (4Q 2017: 41.0%; 3Q 2018: 37.4%)

§ Cost of risk stood at 1.4% (4Q 2017: 1.4%; 3Q 2018: 1.9%)

§ FX adjusted cost of risk stood at 1.3% (4Q 2017: 1.2%; 3Q 2018: 1.5%)

§ Net interest margin (NIM) stood at 6.7% (4Q 2017: 6.4%; 3Q 2018: 6.9%)

§ Risk adjusted net interest margin (NIM) stood at 5.4% (4Q 2017: 5.2%; 3Q 2018: 5.4%)

FY 2018 P&L Highlights

§ Underlying¹ net profit amounted to GEL 454.9 million (FY 2017: GEL 369.2 million)

§ Reported net profit amounted to GEL 437.4 million (FY 2017: GEL 359.9 million)

§ Underlying¹ return on equity (ROE) without one-offs of 22.8% (FY 2017: 21.4%)

§ Reported return on equity (ROE) amounted to of 22.0% (FY 2017: 20.9%)

§ Underlying¹ return on assets (ROA) was 3.3% (FY 2017: 3.2%)

§ Reported return on assets (ROA) was 3.2% (FY 2017: 3.1%)

§ Total operating income for the period was up by 26.3% YoY to GEL 1,087.5 million

§ Cost to income stood at 37.8% (FY 2017: 41.7%)

§ Cost of risk on loans stood at 1.6% (FY 2017: 1.2%)

§ FX adjusted cost of risk stood at 1.5% (FY 2017: 1.4%)

§ Net interest margin (NIM) stood at 6.9% (FY 2017: 6.5%)

§ Risk adjusted net interest margin (NIM) stood at 5.4% (FY 2017: 5.1%)

Balance Sheet Highlights as of 31 December 2018

§ Total assets amounted to GEL 15,526.3 million as of 31 December 2018, up by 19.7% YoY and up by 7.6% QoQ

§ Gross loans and advances to customers stood at GEL 10,372.6 million as of 31 December 2018, up by 21.3% YoY and up by 7.8% QoQ

§ Net loans to deposits + IFI funding stood at 89.9% and Net Stable Funding Ratio (NSFR) stood at 130.2%

§ NPLs were 3.1%, down by 0.2pp YoY and unchanged QoQ

§ NPLs coverage ratios stood at 102.7%, or 216.4% with collateral, on 31 December 2018 compared, to 104.7% or 209.4% with collateral, as of 31 December 2017 and 113.2%, or 209.0% with collateral on 30 September 2018

§ Total customer deposits amounted to GEL 9,352.1 million as of 31 December 2018, up by 19.6% YoY and up by 7.0% QoQ

§ As of 31 December 2018, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios per NBG methodology stood at 12.8% and 17.9% respectively, while minimum requirements amounted to 11.8% and 16.7%

Market Shares[2]

§ Market share by total assets reached 38.2% as of 31 December 2018, up by 1.8pp YoY and up by 1.0pp QoQ

§ Market share by total loans was 38.8% as of 31 December 2018, up by 0.6pp YoY and up by 0.4pp QoQ

§ In terms of individual loans, TBC Bank had a market share of 40.0% as of 31 December 2018, down by 0.2pp YoY and up by 0.1pp QoQ. The market share for legal entity loans was 37.4%, up by 1.4pp YoY and up by 0.8pp QoQ

§ Market share of total deposits reached 41.2% as of 31 December 2018, up by 1.4pp YoY and up by 0.9pp QoQ

§ Market share of individual deposits stood at to 41.2%, down by 0.1pp YoY and up by 0.1pp on QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 41.2%, up by 3.3pp YoY and up by 1.8pp QoQ.

Recent Developments

Inspection Report - Update

Further to its announcement of 9 January 2019, TBC Bank Group PLC ("TBC PLC") notes today's release of a joint statement by TBC PLC, TBC Bank JSC ("TBC Bank") and the National Bank of Georgia (the "NBG") in respect of NBG's inspection of certain transactions involving TBC Bank that took place in 2007 and 2008, an English translation of which follows:

"Over the last few days, we have had detailed discussions around events concerning TBC Bank. Regarding this, we would like to announce the following:

Announcement from TBC Bank

Since TBC Bank takes into account the possible damage to the country's investment image and respects the role of the National Bank, as a qualified regulator, and despite the fact that the decisions of the National Bank was appealed in the court, JSC TBC Bank would like to announce that it will implement a restructuring of its Supervisory Board whereby the founding shareholders will not be represented at the supervisory Board of JSC TBC Bank. The founding shareholders will maintain their positions as the Chairman and Deputy Chairman of the Board of Directors of TBC Bank Group PLC (a London-based, 100% shareholder of JSC TBC Bank). TBC Bank withdraws all court cases against the National Bank of Georgia and will pay approximately GEL 1 million, which was previously requested by the NBG and disclosed by TBC PLC on 9 January 2019.

In addition, TBC Bank continues to cooperate with the NBG to further improve the quality of the Bank's corporate governance. In order to prevent any questions from any third party regarding corporate governance, TBC PLC will engage with a reputable international firm to conduct a review of the group's related party transactions, practices and procedures.

Announcement from the National Bank

NBG welcomes this decision. This will have a positive effect on the transparency of the Bank and will increase investor confidence, which will ultimately have a positive effect on the development of the Bank and the country's financial sector.

NBG stresses that TBC Bank is one of the leading financial institutions in the country and in the region and is led by a highly qualified executive management team and independent members of the Supervisory board. TBC Bank is a strong and stable credit institution and fully complies with economic normative requirements and limits set by the National Bank.

Additionally, the NBG would like note that, in this case, its supervisory focus was on the risks associated with matters concerning conflicts of interest and instances of the breaches of the regulation on conflicts of interest related to the 2007-2008 transactions.

Within the scope of its mandate, the NBG continues to monitor the implementation of the abovementioned decisions.

With this, from both sides this matter has been closed."

The content of this announcement and the release of the same has been approved by the NBG.

Furthermore, TBC Bank has taken an opinion from Dentons (for the summary of Dentons's memorandum please see Annex 30 on page 54).

New Regulations

Responsible Lending Initiative by NBG - starting from 1 January 2019

· The NBG introduced additional requirements for income verification, which aim to support sound lending to individuals.

· The regulation sets new limits on PTI and LTV for loans to individuals.

· The thresholds differ for domestic and foreign currency loans (for detailed information please see Annex 34).

Limits on FX Loans - starting from 24 January 2019

· In order to further support de-dollarization process in the country, the NBG increased minimum limit for FX denominated individual loans from GEL 100,000 to GEL 200,000

In light of the new regulations, we re-iterate our medium term loan book growth rate of 10-15% and anticipate NIM to drop by 0.3-0.5 pp, while we expect CoR to be in the range of 1.3%-1.6%

Awards

§ TBC Bank's first Georgian-speaking financial chat-bot, Ti-Bot, has been named the Best Alternative Payments Project at the Payments Awards ceremony.

§ The competition was organised by FStech and Retail Systems in recognition of cards and payments excellence and innovation.

§ Our Ti-Bot is an innovative and safe system of transferring money via chat extension, Ti-Transfer, which was developed in partnership with industry-leading player Pulsar Al.

Development of Customer Focused Ecosystems

In order to integrate better with our customers, we started to develop customer focused ecosystems, which are closely linked with our financial products and services and enable us to create synergies with our core banking offerings.

E-commerce

§ In August 2018, we purchased Swoop, Georgia's well-known online discount and sales company for USD 70,000.

§ We started developing an e-commerce market place in Georgia through building an innovative digital trading platform, Vendoo.

§ The platform will allow customers to purchase various products online, to get installment loans and to benefit from prompt delivery and a flexible refund policy.

§ Our estimated investment for the next two years will be around USD 2-3 million.

Real Estate

§ In January 2019, we acquired 90% shares of real estate platform Allproprerty.ge for USD 225,000.

§ Started developing digital real estate ecosystem, that will offer our customers a wide range of products and services, including finding the suitable real estate, comparison of different properties, getting financing, buying furniture and many more.

§ Our estimated investment is set at around USD 2 million during the next 2 years.

In 2019, we plan to implement more ecosystems.

Additional Information Disclosure

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

Letter from the Chief Executive Officer

I am delighted to present another set of strong financial results for the full year 2018, to give a brief summary of our main achievements throughout the year and to provide an overview of the recent macroeconomic developments in Georgia.

Our underlying consolidated net profit[3] for the full year 2018 reached GEL 454.9 million (reported net profit amounted to GEL 437.4 million), up by 23.2% compared to 2017, while our underlying return on equity was 22.8% and our underlying return on assets stood at 3.3%. Our robust profitability was driven by strong income generation, improved cost efficiency and prudent risk management. In 2018, we maintained a solid net interest margin at 6.9%, up by 0.4 pp year-on-year, and we achieved a strong increase in net fee and commission income, up by 25.1% year-on-year. Over the same period, our cost to income ratio decreased by 3.9 pp and stood at 37.8%, while cost of risk stood at 1.6% or 1.5% without the currency effect.

In terms of balance sheet growth, our loan book expanded by 21.3% year-on-year, supported by growth across all business segments, which resulted in a market share of 38.8%, up by 0.6 pp year-on-year. Over the same period, deposits increased by 19.6% expanding our deposit market share to 41.2%, up by 1.4 pp year-on-year.

Our capital and liquidity ratios continued to remain solid. As of 31 December 2018, our tier 1 and total capital adequacy ratios (CAR) per Basel III guidelines were 12.8% and 17.9% respectively, compared to the corresponding minimum requirements of 11.8% and 16.7%. At the same time, our net loans to deposits + IFI funding ratio stood at 89.9% and the net stable funding ratio (NSFR) was 130.2%.

Our insurance subsidiary, TBC Insurance, continues to grow steadily and has established itself as one of the leading players on the market, holding the number two position in P&C and life insurance and the number one position in the retail segment. During 2018, TBC Insurance increased its P&C and life insurance market share[4] by 7.6 pp to 20.9%, while its market share in the retail segment went up by 6.3 pp and amounted to 35.0%.

Our digital strategy also continues to deliver superior results. In the fourth quarter of 2018, our offloading ratio reached 90.6%[5] up by 2.3 pp year-on-year, mainly driven by the increased number of transactions in mobile banking. Over the same period, our mobile banking penetration increased by 5.5 pp and amounted to 37.0%. Sales conducted through digital channels also demonstrated strong growth and amounted to 45.3%[6] of total sales in December 2018.

Regarding macro developments, the Georgian economy continued to perform strongly in 2018 following the sharp recovery of 2017. According to initial estimates, GDP growth amounted to 4.8%[7] in 2018, placing Georgia among the fastest-growing economies in the region. The core strengths of the economy - continuous reforms, diversified trade and investment inflows - as well as a prudent macroeconomic stance continued to pay off. Even with a number of unfavourable events in the region and considerably tighter fiscal policy domestically, the economy has stayed on the course of sustainable development. Banking sector loan growth continued to be solid in 2018, with the total loan portfolio expanding by 17.2% at a constant exchange rate. Lending was strong across both the business and retail segments, although a sharp slowdown in non-mortgage retail lending was notable following the introduction of a new regulation on retail lending in May 2018.

As our strategy evolves together with our customers' changing needs, we are constantly updating our strategic priorities to ensure that we create maximum value for our customers. In this regard, I would like to highlight several areas:

· Space: in May 2018, we launched the first fully-digital bank in Georgia, Space, which is a cutting edge mobile application for managing daily finances. This application challenges and redefines the traditional banking experience by offering a unique customer experience through simple procedures and products, intuitive design, price transparency and instant delivery. Space has proved to be very successful and has attracted up to 94,000 customers and 260,000 downloads since its launch.

· Ecosystems: in order to deepen our relationship with our customers, we started developing customer focused ecosystems, which are closely linked with our core financial products and services. In 2018, we launched two such projects as described below, and we plan to add other ecosystems during 2019.

o We began to develop an e-commerce market place through building an innovative digital trading platform, Vendoo, and by acquiring Swoop, a well-known online discount and sales company in Georgia.

o We also acquired a 90% stake in a real estate platform, Allproperty.ge, to develop a digital ecosystem for real estate in Georgia that will offer our customers a wide range of products and services that they typically need when buying a home and moving into it.

· Agile: we launched an enterprise wide agile transformation project, which aims to create a more flexible and effective organizational structure. We plan to roll it out across the entire banks in several waves during 2019.

We will elaborate more on our strategic priorities during our Capital Markets Day in June 2019.

I would also like to update you on the progress made during recent months in relation to our international initiatives:

· Azerbaijan: a shareholder agreement with Nikoil Bank was agreed in late December 2018 and signed in early January 2019. In parallel, based on strong mutual commitment, we have been actively engaged in developing the bank including the new strategy and streamlining the operations. The bank has launched several large scale initiatives which would lead to the fundamental improvements of business processes, business volume and brand perception throughout the next few quarters. In parallel, the governance and risk management systems have been improving continuously.

· Uzbekistan: Our international partners, EBRD and IFC have expressed their interest to participate in this project subject to completion of their internal procedures and approvals. We are also in the final stage of negotiations with the local partner. At the same time, we have started deploying the core banking system and renovating our pilot branch for a proof on concept, which is scheduled to open in March 2019.

Finally, since TBC Bank takes into account the possible damage to the country's investment image and respects the role of the National Bank, as a qualified regulator, and despite the fact that the decisions of the National Bank was appealed in the court, JSC TBC Bank would like to announce that it will implement a restructuring of its Supervisory Board whereby the founding shareholders will not be represented at the supervisory Board of JSC TBC Bank. The founding shareholders will maintain their positions as the Chairman and Deputy Chairman of the Board of Directors of TBC Bank Group PLC (a London-based, 100% shareholder of JSC TBC Bank). TBC Bank withdraws all court cases against the National Bank of Georgia and will pay approximately GEL 1 million, which was previously requested by the NBG and disclosed by TBC PLC on 9 January 2019.

With this, this matter with NBG has been closed.

Outlook

2018 turned out to be another successful year. We recorded strong financial and operating results and embarked on several new challenges, as described above.

Looking ahead, we are confident that we are well-positioned to capture new opportunities, to achieve sustainable growth and to deliver superior results to our shareholders. Therefore, we would like to reiterate our medium-term targets: ROE of above 20%, cost to income ratio below 35%, dividend pay-out ratio of 25-35% and loan book growth of around 10-15%.

Economic Overview[8]

Economic growth

The Georgian economy continued its solid performance and recorded a 4.8%[9] real GDP growth for the full year 2018. After a slower increase of 3.7% in 3Q, GDP growth rebounded to almost its trend rate and in the last quarter it reached a rate similar to the full year of 4.8%. Such a development is particularly remarkable given the unfavourable environment in the region and the considerably tighter fiscal policy domestically. This once more underlines the economy's core strengths - continuous reforms, diversified trade and investment inflows, as well as a prudent macroeconomic stance.

The growth was broad-based across different sectors of the economy. Data from 9M-show that the 4.8% growth was mostly driven by trade and repairs (+5.7% YoY), real estate (+12.7% YoY), transport and communications (+6.8% YoY), financial intermediation (+15.8% YoY) and hotels and restaurants (+7.3% YoY). The construction sector declined by 3.8% YoY over the same period, reflecting one-off factors related to several large-scale infrastructure projects as well as a slowdown in public spending.

On the demand side, in 9M 2018 final consumption expenditures nominal growth came in at 5.2% YoY while the expansion of investments (+20.0% YoY), including robust growth in inventories supported by business lending, was the growth's key driver. Net exports (-10.8% YoY) somewhat worsened despite the strong growth of exports of goods and services, primarily reflecting the strong aggregate demand in the first half of the year.

The increase in inflows of exports, tourism and remittances remained strong in 1H 2018 (+26.4% YoY in USD terms). Following the economic difficulties in Turkey, sanctions on Iran, and RUB weakness, the growth of inflows slowed in the second half of 2018 (+14.1% YoY), but it still remained solid. As for the full year, total inflows were 19.4% higher YoY. Growth of exports, tourism and remittances inflows was mostly driven by the EU, followed by Azerbaijan, Russia and other CIS economies. The Georgian economy continues to align closer to more stable markets like the EU's while reducing the overall concentration of inflows on any particular country. In that regard its worth mentioning that the EU became the prime source of remittance inflows to Georgia accounting for 35% of the total, while the traditional Russian market, which had always enjoyed the leading position, accounted for 29% of the total remittances inflows.

The Current Account balance continues to improve. Over the last four quarters ending 3Q 2018 the CA deficit to GDP ratio stood at 8.3%, compared to the 8.8% in 2017. The improvement is due to several factors, including continued positive trend in external inflows, normalisation of FDI-related imports as well as low fiscal spending. As a result of the progress and strong seasonal effect, in 3Q 2018 the CA turned even to surplus at 0.3% of GDP.

FDI inflows declined by 27.2% YoY in 9M 2018, mostly reflecting one-offs related to the finalisation of the BP's South Caucasus Pipeline Extension project[10]. From the sectors' perspective, the decline was most pronounced in transport and communications (-70.6% YoY) and construction sectors, both to be primarily explained by the finalization of BP's project mentioned above. FDI inflows also declined in the real estate (-47.8% YoY) and hotels and restaurants (-11.1% YoY) sectors. At the same time, FDI inflows went up in manufacturing (+61.2% YoY), mining (+38.1% YoY), financial (+31.1% YoY) and energy (+30.1% YoY). Despite the contraction in 9M 2018, FDI inflows remain the major source of financing for Georgia's CA deficit.

The fiscal policy remained contractionary throughout the year. Although the budget deficit amounted to an estimated 2.6% of the GDP in 2018, the spending was concentrated mostly at the end of the year and it primarily reflected the advance payments on infrastructure projects. The full impact of the spending on growth is to be apparent in the coming months, with the strongest effect likely in 2Q 2019. At the same time, tax refunds doubled from GEL 232.6 million in 2017 to GEL 466.8 million in 2018 creating more business friendly tax environment and supporting the growth. The increase resulted from the enhanced system of tax refunds at the beginning of the year,

Loan growth remained solid in 2018 with the total bank loan portfolio expanding by 17.2% YoY at a constant exchange rate. Lending was strong across the business as well as retail segments, albeit a sharp slowdown in non-mortgage retail lending was notable since the introduction of the regulation on retail unsecured lending in May 2018.

Inflation and exchange rate

Annual CPI inflation was around the targeted level of 3% in 2018 with 4.3% in January and gradually declining to 1.5% by the end of 2018. The NBG decreased the policy rate by 0.25 pp from 7.25% to 7.00% in July 2018. The central bank continued the normalisation of the monetary policy in 2019 as well, cutting the policy rate by another 0.25 pp to 6.75% in January.

On the back of higher inflows, lower oil prices and, likely, weaker domestic demand, the NBG continued to refill international reserves and purchased USD 65 million in December, equivalent to an estimated 4.0% of the GDP in the same month. Overall, in 2018 the NBG made 17 interventions and purchased USD 197.5 million - an estimated 1.2% of the GDP.

As for the exchange rates, as of the end of December 2018 GEL nominal exchange rate weakened against USD by 3.3% YoY and appreciated against EUR by 1.1% YoY. Over the same period, the GEL nominal effective exchange rate appreciated by 8.0% while the real effective exchange rate appreciation amounted to 4.6%. GEL real effective exchange rate remained below its long term trend as well as medium term average.

Going forward

Georgia continues to position itself as an attractive business environment with structural reforms and high GDP growth potential. In addition, 2018 was another demonstration of a resilience of the economy. According to IMF projections, the Georgian economy is expected to remain among the fastest growing economies in the region with the average GDP growth estimated at above 5.0% in medium term.

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

Unaudited Consolidated Financial Results Overview for 4Q 2018

This statement provides a summary of the unaudited business and financial trends for 4Q 2018 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.

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

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

Income Statement Highlights
in thousands of GEL	4Q'18	3Q'18	4Q'17	Change YoY	Change QoQ
Net interest income	214,803	199,612	165,395	29.9%	7.6%
Net fee and commission income	44,064	39,384	38,952	13.1%	11.9%
Other operating non-interest income	53,395	39,093	38,969	37.0%	36.6%
Credit loss allowance	(44,036)	(47,650)	(36,436)	20.9%	-7.6%
Operating income after credit loss allowance	268,226	230,439	206,880	29.7%	16.4%
Operating expenses	(123,904)	(104,103)	(99,641)	24.4%	19.0%
Profit before tax	144,322	126,336	107,239	34.6%	14.2%
Income tax expense	(14,235)	(18,952)	(10,487)	35.7%	-24.9%
Profit for the period	130,087	107,384	96,752	34.5%	21.1%

NMF - no meaningful figures

Balance Sheet and Capital Highlights

	Dec-18		Sep-18			Change QoQ
in thousands of GEL	GEL	USD		GEL	USD
Total assets	15,526,294	5,800,752		14,423,997	5,515,658		7.6%
Gross loans	10,372,582	3,875,283		9,622,563	3,679,616		7.8%
Customer deposits	9,352,142	3,494,038		8,740,449	3,342,300		7.0%
Total equity	2,205,968	824,168		2,055,950	786,184		7.3%
Regulatory tier I capital (Basel III)	1,678,716	627,182		1,580,547	604,393		6.2%
Regulatory total capital (Basel III)	2,351,269	878,454		2,020,501	772,629		16.4%
Regulatory risk weighted assets (Basel III)	13,154,872	4,914,769		12,305,756	4,705,654		6.9%

Key Ratios	4Q'18	3Q'18	4Q'17	Change YoY	Change QoQ
ROE	24.3%	21.2%	21.0%	3.3 pp	3.1 pp
ROA	3.5%	3.1%	3.0%	0.5 pp	0.4 pp
NIM	6.7%	6.9%	6.4%	0.3 pp	-0.2%
Cost to income	39.7%	37.4%	41.0%	-1.3 pp	2.3%
Cost of risk	1.4%	1.9%	1.4%	0.0 pp	-0.5 pp
FX adjusted Cost of Risk	1.3%	1.5%	1.2%	0.1 pp	-0.2 pp
NPL to gross loans	3.1%	3.1%	3.3%	-0.2 pp	0.0 pp
Regulatory tier 1 CAR (Basel III)	12.8%	12.8%	13.4%	-0.6 pp	0.0 pp
Regulatory total CAR (Basel III)	17.9%	16.4%	17.5%	0.4 pp	1.5 pp
Leverage (times)	7.0x	7.0x	6.9x	0.1x	0.0x

Income Statement Discussion

Net Interest Income

In thousands of GEL	4Q'18	3Q'18	4Q'17	Change YoY	Change QoQ
Loans and advances to customers	309,106	288,435	255,576	20.9%	7.2%
Investment securities measured at fair value through other comprehensive income	16,612	15,310	-	NMF	8.5%
Investment securities available for sale	-	-	11,991	NMF	NMF
Due from other banks	6,261	5,537	5,374	16.5%	13.1%
Bonds carried at amortised cost	11,752	10,994	7,293	61.1%	6.9%
Investment in leases	11,812	10,415	7,787	51.7%	13.4%
Interest income	355,543	330,691	288,021	23.4%	7.5%
Customer accounts	70,288	68,727	66,144	6.3%	2.3%
Due to credit institutions	58,247	51,989	45,762	27.3%	12.0%
Subordinated debt	11,939	10,033	10,294	16.0%	19.0%
Debt securities in issue	266	330	426	-37.6%	-19.4%
Interest expense	140,740	131,079	122,626	14.8%	7.4%
Net interest income	214,803	199,612	165,395	29.9%	7.6%

Net interest margin	6.7%	6.9%	6.4%	0.3 pp	-0.2 pp

NMF - no meaningful figures

4Q 2018 to 4Q 2017 Comparison

Net interest income increased by GEL 49.4 million, or 29.9%, to GEL 214.8 million, compared to 4Q 2017, driven by a GEL 67.5 million, or 23.4%, higher interest income and a GEL 18.1 million, or 14.8%, higher interest expense.

Interest income grew by GEL 67.5 million, or 23.4%, YoY to GEL 355.5 million, mainly due to an increase in interest income from loans and advances to customers of GEL 53.5 million, or 20.9%. This is primarily related to an increase in gross loan portfolio of GEL 1,819.4 million, or 21.3%, YoY. This effect was slightly offset by a 0.1 pp drop in loan yields, which was mainly driven by a decrease in rates on FC-denominated loans by 0.4 pp to 8.7%, despite the increase in yields on GEL denominated loans by 0.3 pp to 17.4%. The gain in interest income was also driven by the growth in interest income from investment securities (comprising of investment securities measured at fair value through other comprehensive income, investment securities available for sale and bonds carried at amortized cost) by GEL 9.1 million, or 47.1%, which resulted from the significant increase in the respective portfolios. The yield on interest earning assets decreased by 0.1 pp to 11.1%, compared to 4Q 2017.

The GEL 18.1 million, or 14.8%, YoY growth in interest expense to GEL 140.7 million in 4Q 2018 was mainly due to GEL 12.5 million, or 27. 3%, increase in interest expense on amounts due to credit institutions and a GEL 4.1 million, or 6.3%, increase in interest expense on customer accounts. The rise in interest expense on amounts due to credit institutions was attributable to a GEL 410.8 million, or 15.7% increase in the respective portfolio and a 0.7pp increase in respective effective rates, up to 7.6%, mainly related to higher Libor rate. The higher interest expense on customer accounts was attributable to a GEL 1,535.3 million, or 19.6%, growth in the respective portfolio. This effect was partially offset by a 0.4 pp drop in the cost of deposits to 3.1%, which resulted from a 0.4 pp drop in the cost of FC-denominated deposits to 2.0% and a 0.7 pp decrease in the cost of LC denominated deposits to 5.3%. The cost of funding decreased by 0.2 p p and stood at 4.4%.

Consequently, NIM stood at 6.7% in 4Q 2018, compared to 6.4% in 4Q 2017, while the risk adjusted NIM stood at 5.4%, compared to 5.2% in 4Q 2017.

4Q 2018 to 3Q 2018 Comparison

On a QoQ basis, net interest income grew by 7.6% as a result of a 7.5% higher interest income and a 7.4% higher interest expense.

The increase in interest income by GEL 24.9 million, or 7.5%, QoQ mainly resulted from the growth in interest income on loans by GEL 20.7 million, or 7.2%. This in turn was due to an increase in loan portfolio by GEL 750.0 million, or 7.8%. The rise in the portfolio was slightly offset by a 0.2 pp decline in loan yields, which was mainly driven by a decrease in rates on GEL denominated loans by 0.5 pp to 17.4%. This in turn offset the increase in yields on FC-denominated loans by 0.2 pp to 8.7%. The increase in interest income was also magnified by a rise in interest income from investment securities by GEL 2.1 million, or 7.8%, due to growth in the respective portfolios. This effect was partially offset by a decrease of 0.2 pp on yields on investment securities to 7.6%. The yield on interest earning assets decreased by 0.3 pp to 11.1%, compared to 3Q 2018.

The increase in interest expense by GEL 9.7 million, or 7.4%, QoQ was primarily due to the GEL 6.3 million, or 12.0%, rise in the interest expense on amounts due to credit institutions. The main driver was a rise in the respective effective rate by 0.5 pp, to 7.6%, related to change in the currency composition in the portfolio of amounts due to credit institutions, LC-denominated portfolio share increased. Another contributor to the rise in interest expense was the GEL 1.9 million, or 19.0% higher interest expense on subordinated loans. This resulted from the GEL 238.1 million, or 57.7%, increase in the respective portfolio, related to the capital planning. The cost of funding remained stable at 4.4%.

Consequently, on a QoQ basis, NIM decreased by 0.2 pp and stood at 6.7%. Meanwhile risk adjusted NIM was stable on QoQ basis and stood at 5.4%.

Fee and Commission Income
In thousands of GEL	4Q'18	3Q'18	4Q'17	Change YoY	Change QoQ
Card operations	30,830	28,227	21,618	42.6%	9.2%
Settlement transactions	19,319	17,709	16,410	17.7%	9.1%
Guarantees issued	6,084	4,652	4,754	28.0%	30.8%
Issuance of letters of credit	2,081	2,021	1,286	61.8%	3.0%
Cash transactions	4,209	3,950	5,378	-21.7%	6.6%
Foreign currency exchange transactions	805	482	337	NMF	67.0%
Other	3,721	2,512	5,889	-36.8%	48.1%
Fee and commission income	67,049	59,553	55,672	20.4%	12.6%
Card operations	17,720	14,730	10,946	61.9%	20.3%
Settlement transactions	2,347	2,037	2,139	9.7%	15.2%
Guarantees issued	415	426	483	-14.1%	-2.6%
Letters of credit	382	433	368	3.8%	-11.8%
Cash transactions	1,297	1,524	1,111	16.7%	-14.9%
Foreign currency exchange transactions	2	(4)	2	0.0%	NMF
Other	822	1,023	1,671	-50.8%	-19.6%
Fee and commission expense	22,985	20,169	16,720	37.5%	14.0%
Card operations	13,110	13,497	10,672	22.8%	-2.9%
Settlement transactions	16,972	15,672	14,271	18.9%	8.3%
Guarantees	5,669	4,226	4,271	32.7%	34.1%
Letters of credit	1,699	1,588	918	85.1%	7.0%
Cash transactions	2,912	2,426	4,267	-31.8%	20.0%
Foreign currency exchange transactions	803	486	335	NMF	65.2%
Other	2,899	1,489	4,218	-31.3%	94.7%
Net fee and commission income	44,064	39,384	38,952	13.1%	11.9%

NMF - no meaningful figures

4Q 2018 to 4Q 2017 Comparison

In 4Q 2018, net fee and commission income totalled GEL 44.1 million, up by GEL 5.1 million, or 13.1%, compared to 4Q 2017. This mainly resulted from an increase in net fee and commission income from settlement transactions of GEL 2.7 million, or 18.9% and an increase in net fee and commission income from card operations of GEL 2.4 million, or 22.8%.

The rise in net fee and commission income from card operations is related to the increased number of active cards and POS terminals by 17.8% and 15.0% respectively. The increase in net fee and commission income from settlement transactions was mainly related to the increased volume and number of money transfer transactions and the growth in net fee and commission income from our affluent retail sub-segment, TBC Status.

4Q 2018 to 3Q 2018 Comparison

On a QoQ basis, net fee and commission income increased by GEL 4.7 million, or 11.9%, compared to 3Q 2018. This was primarily driven by an increase in net fee and commission income from guarantees of GEL 1.4 million, or 34.1%, a GEL 1.4 million increase in other net fee and commission income and a GEL 1.3 million, or 8.3% increase in net fee and commission income from settlement transactions.

The rise in net fee and commission income from guarantees was mainly related to the growth of respective portfolio of GEL 328.8 million, or 37.9%. The rise in other net fee and commission income was mainly due to increased brokerage activities of our subsidiary, TBC Capital, while the increase in net interest income from settlement transactions was driven by increased number and volume of money transfer transactions as mentioned above, consistent with the seasonal patterns.

Other Operating Non-Interest Income and Gross Insurance Profit
In thousands of GEL	4Q'18	3Q'18	4Q'17	Change YoY	Change QoQ
Net income from foreign currency operations	33,029	31,040	25,714	28.4%	6.4%
Share of profit of associates	212	294	249	-14.9%	-27.9%
Gains less losses/(losses less gains) from derivative financial instruments	(184)	(56)	3	NMF	NMF
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income	-	2	-	NMF	NMF
Gains less losses from disposal of investment securities available for sale	-	-	93	NMF	NMF
Revenues from sale of cash-in terminals	225	237	255	-11.8%	-5.1%
Revenues from operational leasing	1,731	1,671	1,411	22.7%	3.6%
Gain from sale of investment properties	7,392	492	2,775	NMF	NMF
Gain from sale of inventories of repossessed collateral	1,504	868	682	NMF	73.3%
Revenues from non-credit related fines	367	62	1,284	-71.4%	NMF
Gain on disposal of premises and equipment	117	36	760	-84.6%	NMF
Other	5,149	1,324	3,824	34.6%	NMF
Other operating income	16,485	4,690	10,991	50.0%	NMF
Gross insurance profit[11]	3,853	3,123	1,919	NMF	23.4%
Other operating non-interest income and gross insurance profit	53,395	39,093	38,969	37.0%	36.6%
NMF - no meaningful figures

4Q 2018 to 4Q 2017 Comparison

Total other operating non-interest income and gross insurance profit grew by GEL 14.4 million, or 37.0%, to GEL 53.4 million in 4Q 2018. This primarily resulted from the growth in net income from foreign currency operations by GEL 7.3 million, or 28.4%, the increase in gains from sale of investment property by GEL 4.6 million and the increase in gross insurance profit of GEL 1.9 million. Higher net income from foreign currency operations resulted from an increased number and volume of FX transactions.

Higher gross insurance profit mainly resulted from increased cross-selling of various insurance products and improved efficiency levels. More information about TBC insurance can be found in Annex 23 on pages 49-50.

4Q 2018 to 3Q 2018 Comparison

On a QoQ basis, total other operating non-interest income and gross insurance profit increased by GEL 14.3 million, or by 36.6%. This mainly resulted from the growth in gains from sale of investment property by GEL 6.9 million and the increase in other operating income, which grew by GEL 3.8 million, mainly related to the recognition of an option to buy equity shares of one of our large corporate client.

Credit Loss Allowance
In thousands of GEL	4Q'18	3Q'18	4Q'17	Change YoY	Change QoQ
Credit loss allowance for loan to customers	(34,398)	(43,345)	(28,421)	21.0%	-20.6%
Credit loss allowance for investments in finance lease	(779)	(493)	(79)	NMF	58.0%
Credit loss allowance for performance guarantees and credit related commitments	(1,532)	(24)	(1,019)	50.3%	NMF
Credit loss allowance for other financial assets	(7,305)	(3,759)	(6,917)	5.6%	94.3%
Credit loss allowance for financial assets measured at fair value through other comprehensive income	(22)	(29)	-	NMF	-24.1%
Total credit loss allowance	(44,036)	(47,650)	(36,436)	20.9%	-7.6%
Operating income after credit loss allowance	268,226	230,439	206,880	29.7%	16.4%

Cost of risk	1.4%	1.9%	1.4%	0.0 pp	-0.5 pp
NMF - no meaningful figures

4Q 2018 to 4Q 2017 Comparison

In 4Q 2018, total credit loss allowance grew by GEL 7.6 million to GEL 44.0 million compared to 4Q 2017.

This was primarily attributable to an increase in credit loss allowance for loans to customers by GEL 6.0 million, or 21.0% mainly driven by retail segment.

In 4Q 2018, the cost of risk stood at 1.4% (1.3% without the FX effect), compared to 1.4% (1.2% without the FX effect) in 4Q 2017.

4Q 2018 to 3Q 2018 Comparison

On a QoQ basis, total credit loss allowance declined by GEL 3.6 million to GEL 44.0 million.

This was mainly driven by a drop in credit loss allowance for loans to customers by GEL 8.9 million, or 20.6%. The decline was mainly attributable to improvement in corporate and MSME segments' performance. The drop was partially offset by a rise in credit loss allowance for other financial assets by GEL 3.5 million.

In 4Q 2018, the cost of risk stood at 1.4% (1.3% without the FX effect), compared to 1.9% (1.5% without the FX effect) in 3Q 2018.

Operating Expenses

In thousands of GEL	4Q'18	3Q'18	4Q'17	Change YoY	Change QoQ
Staff costs	63,213	54,294	54,105	16.8%	16.4%
Provisions for liabilities and charges	-	4,000	-	NMF	-100.0%
Depreciation and amortization	12,333	11,944	10,425	18.3%	3.3%
Professional services	5,385	4,107	4,672	15.3%	31.1%
Advertising and marketing services	10,738	7,193	8,141	31.9%	49.3%
Rent	6,666	6,016	5,908	12.8%	10.8%
Utility services	1,602	1,702	1,515	5.7%	-5.9%
Intangible asset enhancement	3,672	2,628	3,346	9.7%	39.7%
Taxes other than on income	1,356	1,799	1,095	23.8%	-24.6%
Communications and supply	1,422	1,558	1,195	19.0%	-8.7%
Stationary and other office expenses	1,312	1,021	1,539	-14.7%	28.5%
Insurance	2,558	1,063	756	NMF	NMF
Security services	522	517	488	7.0%	1.0%
Premises and equipment maintenance	1,767	2,167	1,574	12.3%	-18.5%
Business trip expenses	706	578	645	9.5%	22.1%
Transportation and vehicles maintenance	549	703	453	21.2%	-21.9%
Charity	332	181	282	17.7%	83.4%
Personnel training and recruitment	1,006	465	526	91.3%	NMF
Write-down of current assets to fair value less costs to sell	(19)	(436)	(165)	-88.5%	-95.6%
Loss on disposal of Inventory	1	36	51	-98.0%	-97.2%
Loss on disposal of investment properties	36	-	57	-36.8%	NMF
Loss on disposal of premises and equipment	425	99	186	NMF	NMF
Impairment of intangible assets	1	-	-	NMF	NMF
Acquisition costs	-	-	560	-100.0%	NMF
Other	8,321	2,468	2,287	NMF	NMF
Administrative and other operating expenses	48,358	33,865	35,111	37.7%	42.8%
Operating expenses	123,904	104,103	99,641	24.4%	19.0%
Profit before tax	144,322	126,336	107,239	34.6%	14.2%
Income tax expense	(14,235)	(18,952)	(10,487)	35.7%	-24.9%
Profit for the period	130,087	107,384	96,752	34.5%	21.1%

Cost to income	39.7%	37.4%	41.0%	-1.3 pp	2.3 pp
ROE	24.3%	21.2%	21.0%	3.3 pp	3.1 pp
ROA	3.5%	3.1%	3.0%	0.5 pp	0.4 pp

NMF - no meaningful figures

4Q 2018 to 4Q 2017 Comparison

In 4Q 2018, total operating expenses expanded by GEL 24.3 million, or 24.4% YoY to GEL 123.9 million, primarily due to an increase in staff costs of GEL 9.1 million, or 16.8% YoY and a rise in other administrative expenses, of GEL 13.2 million, or 37.7%. The growth in staff cost was mainly driven by a higher scale and performance, while increase in administrative and other operating expenses was spread across different categories and was mainly related to the increased scale of business and the costs of the mandatory deposit insurance, which was introduced at the end of 2017. Without these costs, total operating expenses and administrative and other operating expenses would have increased by 22.9% and 33.7%, respectively. In addition, in FY 2018 staff cost grew only by 8.5% on YoY basis.

As a result, cost to income ratio dropped to 39.7% in 4Q 2018, compared to 41.0% in 4Q 2017.

4Q 2018 to 3Q 2018 Comparison

On a QoQ basis, total operating expenses grew by GEL 19.8 million, or 19.0%. This was primarily attributable to a GEL 8.9 million, or 16.4% rise in staff cost and a GEL 14.5 million, or 42.8% increase in administrative and other operating expenses. The increase in operating expenses was related to seasonally high costs across various categories of expenses in 4Q.

As a result, the cost to income ratio expanded by 2.3 pp from 37.4%, compared to 3Q 2018.

Net Income

Net income for the fourth quarter increased by GEL 22.7 million, or 21.1%, QoQ and by GEL 33.3 million, or 34.5%, YoY and amounted to GEL 130.1 million.

As a result, ROE stood at 24.3%, up by 3.3 pp YoY and by 3.1 pp QoQ, while ROA stood at 3.5%, up by 0.5 pp YoY but by 0.4 pp QoQ.

Balance Sheet Discussion
In thousands of GEL	Dec-18	Sep-18	Change QoQ
Cash, due from banks and mandatory cash balances with NBG	2,637,036	2,693,455	-2.1%
Loans and advances to customers (Net)	10,038,452	9,279,982	8.2%
Financial securities	1,659,442	1,386,239	19.7%
Fixed and intangible assets & investment property	561,020	549,938	2.0%
Other assets	630,344	514,383	22.5%
Total assets	15,526,294	14,423,997	7.6%
Due to credit institutions	3,031,503	2,981,269	1.7%
Customer accounts	9,352,142	8,740,449	7.0%
Debt securities in issue	13,343	13,027	2.4%
Subordinated debt	650,919	412,803	57.7%
Other liabilities	272,419	220,499	23.5%
Total liabilities	13,320,326	12,368,047	7.7%
Total equity	2,205,968	2,055,950	7.3%

Assets

On a QoQ basis, total assets rose by GEL 1,102.3 million, or 7.6%, mainly due to a GEL 758.5 million, or 8.2%, increase in net loans to customers. The increase also resulted from a GEL 273.2 million or 19.7% rise in financial securities and a GEL 116.0 million or 22.5% increase in other assets. The expansion was partially offset by a decline in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG) by GEL 56.4 million, or 2.1%.

As of 31 December 2018, the gross loan portfolio reached GEL 10,372.6 million, up by 7.8% QoQ. At the same time, gross loans denominated in foreign currency accounted for 60.1% of total loans, compared to 59.2% as of 30 September 2018.

Asset Quality

Borrowers with FX income

	31-Dec-18		30-Sep-18
Segments	% of FX loans	of which borrowers with FX income**	% of FX loans	of which borrowers with FX income**
Retail	56.1%	28.5%	53.7%	28.1%
Non-mortgage	19.9%	24.1%	18.9%	26.1%
Mortgage	82.7%	29.3%	81.9%	28.5%
Corporate	71.5%	51.4%*	73.3%	52.5%*
MSME	53.1%	15.2%	52.1%	14.9%
Total loan portfolio	60.1%	34.0%	59.2%	34.4%

(Based on internal estimates)

* Pure exports account for 7.0% and 7.3% of total corporate FX denominated loans as at 31 December 2018 and 30 September 2018, respectively

** FX income implies both direct and indirect income

PAR 30 by Segments and Currencies	Dec-18			Sep-18
	GEL	FC	Total	GEL	FC	Total
Corporate	0.7%	0.3%	0.4%	0.0%	1.1%	0.8%
Retail	4.0%	1.5%	2.6%	4.5%	1.7%	3.0%
MSME	2.4%	3.2%	2.8%	1.8%	3.6%	2.7%
Total	2.8%	1.4%	2.0%	2.9%	1.9%	2.3%
Loans overdue by more than 30 days to gross loans

Total

Total PAR 30 improved by 0.3 pp QoQ, standing at 2.0%. The improvement was attributable to both retail and corporate segments.

Retail Segment

The retail segment's PAR 30 amounted to 2.6%, down by 0.4 pp QoQ. The decrease was driven by an improvement across all retail products.

Corporate

The corporate segment's PAR 30 amounted to 0.4%, down by 0.4 pp QoQ and it was driven by overall improvement of the corporate loan book, as well as high portfolio growth.

MSME

The MSME segment's PAR 30 remained broadly stable QoQ and stood at 2.8% as of 31 December 2018.


NPLs	Dec-18			Sep-18

Corporate	1.6%	3.1%	2.7%	1.2%	3.2%	2.6%
Retail	3.7%	2.3%	2.9%	3.7%	2.4%	3.0%
MSME	2.6%	5.5%	4.2%	2.3%	5.7%	4.1%
Total	2.9%	3.3%	3.1%	2.8%	3.4%	3.1%

Total

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

Retail Segment

The retail segment's NPLs remained broadly stable QoQ and stood at 2.9%.

Corporate

The corporate segment's NPLs remained broadly stable QoQ and stood at 2.7%.

MSME

The MSME segment's NPLs remained broadly stable on QoQ basis and stood at 4.2%.

NPLs Coverage	Dec-18		Sep-18
	Exc. Collateral	Incl. Collateral	Exc. Collateral	Incl. Collateral
Corporate	96.4%	286.9%	104.3%	242.5%
Retail	132.4%	204.4%	140.8%	206.4%
MSME	68.4%	174.0%	80.8%	184.8%
Total	102.7%	216.4%	113.2%	209.0%

Liabilities

As of 31 December 2018, TBC Bank's total liabilities amounted to GEL 13,320.3 million, up by GEL 952.3 million, or 7.7%, QoQ. This primarily resulted from a GEL 611.7 million, or 7.0%, increase in customer accounts and GEL 238.1 million or 57.7% increase in subordinated debt.

Liquidity

As of 31 December 2018 the Bank's liquidity ratio, as defined by the NBG, stood at 33.3%, compared to 31.9% as of 30 September 2018 and above the NBG limit of 30%. As of 31 December 2018, the total liquidity coverage ratio (LCR), as defined by the NBG, was 113.9%, above the 100.0% limit. The LCR in GEL and FC stood at 102.5% and 121.1% respectively, above the respective limits of 75% and 100%.

Total Equity

As of 31 December 2018, TBC's total equity totalled GEL 2,206.0 million, up by GEL 150.0 million from GEL 2,056.0 million as of 30 September 2018. The QoQ change in equity was mainly due to an increase in net income of GEL 130.1 million.

Regulatory Capital

According to the new methodology introduced at the end of 2017, as of 31 December 2018 the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 12.8% and 17.9%, respectively, compared to the minimum required levels of 11.8% and 16.7%. In comparison, as of 30 September 2018, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 12.8% and 16.4%, respectively, higher than the minimum required levels of 10.3% and 15.8%.

In 31 December 2018, the Bank's Basel III Tier 1 Capital amounted to GEL 1,678.7 million, up by GEL 98.2 million, or 6.2%, compared to September 2018, due to an increase in net income. The Bank's Basel III Total Capital amounted to GEL 2,351.3 million, up by GEL 330.8 million, or 16.4%, QoQ. The increase in total capital was attributable to the increase in net income as mentioned above and the growth in subordinated loans. In 4Q, the bank attracted GEL 230.5 million subordinated loan, out of which GEL 160.6 million was converted from existing senior loans and the remaining GEL 69.9 million was additionally raised. Risk weighted assets stood at GEL 13,154.9 million as of 31 December 2018, up by GEL 849.1 million, or 6.9%, compared to September 2018, mainly related to the rise in loan book.

Results by Segments and Subsidiaries

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

· Corporate - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million, or which have been granted facilities of more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to MSME on a discretionary basis;

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

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

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

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

Income Statement by Segments

4Q'18	Retail	MSME	Corporate	Corp.Centre	Total
Interest income	157,622	73,492	79,791	44,638	355,543
Interest expense	(33,233)	(2,384)	(34,670)	(70,453)	(140,740)
Net transfer pricing	(16,414)	(23,317)	8,786	30,945	-
Net interest income	107,975	47,791	53,907	5,130	214,803
Fee and commission income	47,785	6,340	12,503	421	67,049
Fee and commission expense	(19,208)	(1,895)	(1,730)	(152)	(22,985)
Net fee and commission income	28,577	4,445	10,773	269	44,064
Gross insurance profit	-	-	-	3,853	3,853
Net income from foreign currency operations	8,393	6,527	13,046	292	28,258
Foreign exchange translation gains less losses/(losses less gains)	-	-	-	4,771	4,771
Net losses from derivative financial instruments	(179)	-	-	(5)	(184)
Other operating income	2,291	243	12,748	1,203	16,485
Share of profit of associates	-	-	-	212	212
Other operating non-interest income and insurance profit	10,505	6,770	25,794	10,326	53,395
Credit loss allowance for loan to customers	(34,108)	461	(751)	-	(34,398)
Credit loss allowance for performance guarantees and credit related commitments	(276)	456	(1,711)	(1)	(1,532)
Credit loss allowance for investments in finance lease	-	-	-	(779)	(779)
Credit loss allowance for other financial assets	(26)	-	(5,357)	(1,922)	(7,305)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	-	-	21	(43)	(22)
Profit before G&A expenses and income taxes	112,647	59,923	82,676	12,980	268,226
Staff costs	(37,064)	(13,562)	(8,598)	(3,989)	(63,213)
Depreciation and amortization	(9,815)	(1,337)	(604)	(577)	(12,333)
Administrative and other operating expenses	(30,172)	(7,924)	(6,569)	(3,693)	(48,358)
Operating expenses	(77,051)	(22,823)	(15,771)	(8,259)	(123,904)
Profit before tax	35,596	37,100	66,905	4,721	144,322
Income tax expense	(4,644)	(5,534)	(10,033)	5,976	(14,235)
Profit for the year	30,952	31,566	56,872	10,697	130,087

Portfolios by Segments
In thousands of GEL	Dec-18	Sep-18
Loans and advances to customers

Non-mortgage	1,989,516	1,994,240
Mortgage	2,709,183	2,452,157
Retail	4,698,699	4,446,397
Corporate	3,177,289	2,891,628
MSME	2,496,594	2,284,538
Total loans and advances to customers (Gross)	10,372,582	9,622,563
Less: credit loss allowance for loans to customers	(334,130)	(342,581)
Total loans and advances to customers (Net)	10,038,452	9,279,982

Customer accounts

Retail	5,103,971	4,850,586
Corporate	3,230,653	2,920,526
MSME	1,017,518	969,337
Total Customer accounts	9,352,142	8,740,449

Retail Banking

As of 31 December 2018, retail loans stood at GEL 4,698.7 million, up by GEL 252.3 million, or 5.7%, QoQ and they accounted for 40.0% market share of total individual loans. As of the same date foreign currency loans represented 56.1% of the total retail loan portfolio.

In the reporting period, retail deposits stood at GEL 5,104.0 million, up by GEL 253.4 million, or 5.2%, QoQ and accounted for 41.2% market share of total individual deposits. As of 31 December 2018 term deposits accounted for 52.5% of the total retail deposit portfolio, while foreign currency deposits represented 81.7% of the total.

In 4Q 2018, retail loan yields and deposit rates stood at 13.6% and 2.6%, respectively. The segment's cost of risk on loans was 2.9% . The retail segment contributed 23.8%, or GEL 31.0 million, to the total net income in 4Q 2018.

Corporate Banking

As of 31 December 2018, corporate loans amounted to GEL 3,177.3 million, up by GEL 285.7 million, or 9.9%, QoQ. Foreign currency loans accounted for 71.5% of the total corporate loan portfolio. The market share of total legal entities loans stood at 37.4%.

As of the same date, corporate deposits totalled GEL 3,230.7 million, up by GEL 310.1 million, or 10.6%, QoQ. Foreign currency corporate deposits represented 45.7% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 41.2%.

In 4Q 2018, corporate loan yields and deposit rates stood at 10.0% and 4.5%, respectively. In the same period, the cost of risk on loans was 0.1%. In terms of profitability, the corporate segment's net profit reached GEL 56.9 million, or 43.7%, of the total net income.

MSME Banking

As of 31 December 2018, MSME loans amounted to GEL 2,496.6, up by GEL 212.1 million, or 9.3%, QoQ. Foreign currency loans accounted for 53.1% of the total MSME portfolio.

As of the same date, MSME deposits stood at GEL 1,017.5 million, up by GEL 48.2 million, or 5.0%, QoQ. Foreign currency MSME deposits represented 49.3% of the total MSME deposit portfolio.

In 4Q 2018, MSME loan yields and deposit rates stood at 12.2% and 1.0% respectively, while the cost of risk on loans was -0.1%. In terms of profitability, net profit for the MSME segment amounted to GEL 31.6 million, or 24.3%, of the total net income.

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet
In thousands of GEL	Dec-18	Sep-18
Cash and cash equivalents	1,166,911	1,114,672
Due from other banks	47,316	152,010
Mandatory cash balances with National Bank of Georgia	1,422,809	1,426,773
Loans and advances to customers	10,038,452	9,279,982
Investment securities measured at fair value through other comprehensive income	1,005,239	868,060
Bonds carried at amortised cost	654,203	518,179
Investments in finance leases	203,802	183,715
Investment properties	84,296	78,274
Current income tax prepayment	2,116	7,650
Deferred income tax asset	2,097	2,499
Other financial assets	167,518	103,520
Other assets	221,093	186,061
Premises and equipment	367,504	375,002
Intangible assets	109,220	96,662
Goodwill	31,286	28,718
Investments in associates	2,432	2,220
TOTAL ASSETS	15,526,294	14,423,997
LIABILITIES
Due to Credit Institutions	3,031,503	2,981,269
Customer accounts	9,352,142	8,740,449
Other financial liabilities	98,714	90,966
Current income tax liability	63	30
Debt Securities in issue	13,343	13,027
Deferred income tax liability	22,237	27,202
Provisions for liabilities and charges	47,068	16,329
Other liabilities	104,337	85,972
Subordinated debt	650,919	412,803
TOTAL LIABILITIES	13,320,326	12,368,047
EQUITY
Share capital	1,650	1,650
Share premium	796,854	796,854
Retained earnings	1,523,879	1,372,798
Group reorganisation reserve	(162,166)	(162,166)
Share based payment reserve	(16,294)	(18,689)
Revaluation reserve for premises	57,240	64,962
Fair value reserve	8,680	4,875
Cumulative currency translation reserve	(6,937)	(7,277)
Net assets attributable to owners	2,202,906	2,053,007
Non-controlling interest	3,062	2,943
TOTAL EQUITY	2,205,968	2,055,950
TOTAL LIABILITIES AND EQUITY	15,526,294	14,423,997

Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL	4Q'18	3Q'18	4Q'17
Interest income	355,543	330,691	288,021
Interest expense	(140,740)	(131,079)	(122,626)
Net interest income	214,803	199,612	165,395
Fee and commission income	67,049	59,553	55,672
Fee and commission expense	(22,985)	(20,169)	(16,720)
Net fee and commission income	44,064	39,384	38,952
Net insurance premiums earned	7,023	5,976	3,660
Net insurance claims incurred and agents' commissions	(3,170)	(2,853)	(1,741)
Insurance profit	3,853	3,123	1,919
Net income from foreign currency operations	28,258	24,638	25,622
Net gain/(losses) from foreign exchange translation	4,771	6,402	92
Net gains/(losses) from derivative financial instruments	(184)	(56)	3
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income	-	2	-
Gains less losses from disposal of investment securities available for sale	-	-	93
Other operating income	16,485	4,690	10,991
Share of profit of associates	212	294	249
Other operating non-interest income	49,542	35,970	37,050
Credit loss allowance for loan to customers	(34,398)	(43,345)	(28,421)
Credit loss allowance for investments in finance lease	(779)	(493)	(79)
Credit loss allowance for performance guarantees and credit related commitments	(1,532)	(24)	(1,019)
Credit loss allowance for other financial assets	(7,305)	(3,759)	(6,917)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	(22)	(29)	-
Operating income after credit loss allowance for impairment	268,226	230,439	206,880
Staff costs	(63,213)	(54,294)	(54,105)
Depreciation and amortization	(12,333)	(11,944)	(10,425)
(Provision for)/ recovery of liabilities and charges	-	(4,000)	-
Administrative and other operating expenses	(48,358)	(33,865)	(35,111)
Operating expenses	(123,904)	(104,103)	(99,641)
Profit before tax	144,322	126,336	107,239
Income tax expense	(14,235)	(18,952)	(10,487)
Profit for the period	130,087	107,384	96,752
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve	3,757	2,365	-
Revaluation of available-for-sale investments	-	-	946
Exchange differences on translation to presentation currency	340	71	(60)
Items that will not be reclassified to profit or loss:
Revaluation of premises and equipment	10,749	-	-
Income tax recorded directly in other comprehensive income	2,788	-	-
Other comprehensive income for the period	17,634	2,436	886
Total comprehensive income for the period	147,721	109,820	97,638
Profit attributable to:
- Shareholders of TBCG	129,952	106,779	95,364
- Non-controlling interest	135	605	1,388
Profit for the period	130,087	107,384	96,752
Total comprehensive income is attributable to:
- Shareholders of TBCG	147,628	109,183	96,177
- Non-controlling interest	93	637	1,461
Total comprehensive income for the period	147,721	109,820	97,638

Key Ratios

Average Balances

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

Key Ratios

Ratios (based on monthly averages, where applicable)	4Q'18	3Q'18	4Q'17
ROE¹	24.3%	21.2%	21.0%
ROA²	3.5%	3.1%	3.0%
ROE before credit loss allowance³	32.5%	30.7%	29.0%
Cost to income⁴	39.7%	37.4%	41.0%
Cost of risk⁵	1.4%	1.9%	1.4%
FX adjusted cost of risk⁶	1.3%	1.5%	1.2%
NIM⁷	6.7%	6.9%	6.4%
Risk adjusted NIM⁸	5.4%	5.4%	5.2%
Loan yields⁹	12.2%	12.4%	12.3%
Risk adjusted loan yields¹⁰	10.9%	10.9%	11.1%
Deposit rates¹¹	3.1%	3.3%	3.5%
Yields on interest earning assets¹²	11.1%	11.4%	11.2%
Cost of funding¹³	4.4%	4.4%	4.6%
Spread¹⁴	6.6%	7.0%	6.6%
PAR 90 to gross loans¹⁵	1.2%	1.3%	1.4%
NPLs to gross loans¹⁶	3.1%	3.1%	3.3%
NPLs coverage¹⁷	102.7%	113.2%	104.7%
NPLs coverage with collateral¹⁸	216.4%	209.0%	209.4%
Credit loss level to gross loans¹⁹	3.2%	3.6%	3.4%
Related party loans to gross loans²⁰	0.1%	0.1%	0.1%
Top 10 borrowers to total portfolio²¹	10.1%	10.3%	8.2%
Top 20 borrowers to total portfolio²²	14.2%	14.1%	12.4%
Net loans to deposits plus IFI Funding²³	89.9%	88.0%	92.5%
Net stable funding ratio²⁴	130.2%	118.0%	124.4%
Liquidity coverage ratio²⁵	113.9%	111.6%	112.7%
Leverage²⁶	7.0x	7.0x	6.9x
Regulatory tier 1 CAR (Basel III)²⁷	12.8%	12.8%	13.4%
Regulatory total 1 CAR (Basel III)²⁸	17.9%	16.4%	17.5%

Ratio definitions

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

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

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

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

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

6. FX adjusted cost of risk is calculated based on currency rates of the respective prior periods.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

26. Leverage equals total assets to total equity.

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

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

Exchange Rates

To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6151 as of 30 September 2018. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.5922 as of 31 December 2017. As of 31 December 2018 the USD/GEL exchange rate equalled 2.6766. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 4Q 2018 of 2.6752, 3Q 2018 of 2.5295, 4Q 2017 of 2.5933.

Preliminary Unaudited Consolidated Financial Results Overview FY 2018

The information contained in this announcement and its appendices relating to full year FY18 preliminary results, which were approved by the Board on 20 February 2019, do not constitute statutory accounts under section 434 of the UK Companies Act 2006. The financial statements of TBC Bank will be included in the Annual Report and Accounts due to be published in April 2019, and filed with the Registrar of Companies in due course.

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

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

Income Statement Highlights
in thousands of GEL	FY'18	FY'17	Change YoY
Net interest income	778,022	604,015	28.8%
Net fee and commission income	157,530	125,961	25.1%
Other operating non-interest income	151,916	131,009	16.0%
Credit loss allowance	(166,239)	(106,907)	55.5%
Operating income after credit loss allowance	921,229	754,078	22.2%
Operating expenses	(411,029)	(359,400)	14.4%
Profit before tax	510,200	394,678	29.3%
Income tax expense	(72,765)	(34,750)	NMF
Profit for the period	437,435	359,928	21.5%
Underlying profit for the period	454,861	369,214	23.2%

Balance Sheet and Capital Highlights
	Dec-18		Dec-17			Change YoY
in thousands of GEL	GEL	USD		GEL	USD
Total assets	15,526,294	5,800,752		12,965,910	5,001,894		19.7%
Gross loans	10,372,582	3,875,283		8,553,217	3,299,598		21.3%
Customer deposits	9,352,142	3,494,038		7,816,817	3,015,515		19.6%
Total equity	2,205,968	824,168		1,890,454	729,286		16.7%
Regulatory tier I capital (Basel III)	1,678,716	627,182		1,437,218	554,439		16.8%
Regulatory total capital (Basel III)	2,351,269	878,454		1,885,287	727,292		24.7%
Regulatory risk weighted assets (Basel III)	13,154,872	4,914,769		10,753,189	4,148,287		22.3%

Key Ratios	FY'18	FY'17	Change YoY
Underlying ROE	22.8%	21.4%	1.4 pp
Reported ROE	22.0%	20.9%	1.1 pp
Underlying ROA	3.3%	3.2%	0.1 pp
Reported ROA	3.2%	3.1%	0.1 pp
NIM	6.9%	6.5%	0.4 pp
Cost to income	37.8%	41.7%	-3.9 pp
Cost of risk	1.6%	1.2%	0.4 pp
FX adjusted cost of risk	1.5%	1.4%	0.1 pp
NPL to gross loans	3.1%	3.3%	-0.2 pp
Regulatory tier 1 CAR (Basel III)	12.8%	13.4%	-0.6 pp
Regulatory total CAR (Basel III)	17.9%	17.5%	0.4 pp
Leverage (times)	7.0x	6.9x	0.1x

Income Statement Discussion

Net Interest Income
In thousands of GEL	FY'18	FY'17	Change YoY
Loans and advances to customers	1,123,972	919,796	22.2%
Investment securities measured at fair value through other comprehensive income	57,057	-	NMF
Investment securities available for sale	-	43,735	NMF
Due from other banks	23,744	14,807	60.4%
Bonds carried at amortised cost	40,625	32,328	25.7%
Investment in leases	38,837	23,273	66.9%
Interest income	1,284,235	1,033,939	24.2%
Customer accounts	266,741	233,884	14.0%
Due to credit institutions	196,498	157,122	25.1%
Subordinated debt	41,571	36,975	12.4%
Debt securities in issue	1,403	1,943	-27.8%
Interest expense	506,213	429,924	17.7%
Net interest income	778,022	604,015	28.8%

Net interest margin	6.9%	6.5%	0.4 pp

NMF - no meaningful figures

FY 2018 to FY 2017 Comparison

In FY 2018, net interest income grew by GEL 174.0 million, or 28.8%, YoY to GEL 778.0 million, resulting from a GEL 250.3 million, or 24.2%, higher interest income and a GEL 76.3 million or 17.7% higher interest expense.

Interest income grew by GEL 250.3 million, or 24.2%, YoY to GEL 1,284.2 million. This was mainly driven by an increase in interest income from loans and advances to customers of GEL 204.2 million, or 22.2%, which is primarily related to a rise in the gross loan portfolio by GEL 1,819.4 million, or 21.3%, YoY. This effect was further magnified by a 0.2 pp increase in loan yields to 12.3%, which was driven by a rise in rates on GEL denominated loans of 0.9 pp. This in turn was partially offset by the decrease in yields on FC denominated loans by 0.6 pp. Another contributor to the increase in interest income was the interest income from investment securities, which was up by GEL 21.6 million, or 28.4%. This resulted from an increase in respective portfolio by GEL 554.0 million, or by 50.1%. Yield on investment securities remained stable on YoY basis. Yields on interest earning assets expanded by 0.3 pp to 11.4%, compared to FY 2017.

The YoY growth in interest expense by GEL 76.3 million, or 17.7% to a GEL 506.2 million in FY 2018 was mainly due to 25.1% increase in interest expense on amounts due to credit institutions by GEL 39.4 million and a rise in interest expense on customer accounts by GEL 32.9 million, or 14.0%. The higher interest expense on amounts due to credit institutions was mainly due to an increase in the respective portfolio by GEL 410.8 million, or 15.7%, and a 0.7pp higher effective rate, which stood at 7.2%, mainly related to the rise in Libor rate. The higher interest expense on customer accounts was attributable to a GEL 1,535.3 million, or 19.6%, growth in the respective portfolio, partially offset by a 0.2 pp decline in the cost of deposit, down to 3.2%, which resulted from a 0.3 pp and a 0.4 pp decrease in cost of deposits of LC and FC denominated deposits, respectively. As a result, the cost of funding decreased by 0.1 pp on a YoY basis and stood at 4.4%.

Consequently, NIM was 6.9% in FY 2018, compared to 6.5% in FY 2017.

Fee and Commission Income
In thousands of GEL	FY'18	FY'17	Change YoY
Card operations	106,067	82,525	28.5%
Settlement transactions	70,720	59,739	18.4%
Guarantees issued	19,815	15,121	31.0%
Issuance of letters of credit	6,463	5,735	12.7%
Cash transactions	17,147	17,424	-1.6%
Foreign currency exchange transactions	2,183	1,339	63.0%
Other	13,306	12,061	10.3%
Fee and commission income	235,701	193,944	21.5%
Card operations	55,893	46,360	20.6%
Settlement transactions	8,669	7,421	16.8%
Guarantees issued	1,460	1,801	-18.9%
Letters of credit	1,403	1,072	30.9%
Cash transactions	5,180	4,393	17.9%
Foreign currency exchange transactions	3	94	-96.8%
Other	5,563	6,842	-18.7%
Fee and commission expense	78,171	67,983	15.0%
Card operations	50,174	36,165	38.7%
Settlement transactions	62,051	52,318	18.6%
Guarantees	18,355	13,320	37.8%
Letters of credit	5,060	4,663	8.5%
Cash transactions	11,967	13,031	-8.2%
Foreign currency exchange transactions	2,180	1,245	75.1%
Other	7,743	5,219	48.4%
Net fee and commission income	157,530	125,961	25.1%

NMF - no meaningful figures

FY 2018 to FY 2017 Comparison

In FY 2018, net fee and commission income totalled GEL 157.5 million, up by GEL 31.6 million, or 25.1%, compared to FY 2017. This mainly resulted from an increase in net fee and commission income from card operations of GEL 14.0 million, or 38.7% and an increase in net fee and commission income from settlement transactions of GEL 9.7 million, or 18.6%.

The rise in net fee and commission income from card operations is related to the increased number of active cards and POS terminals by 17.8% and 15.0% respectively. The increase in net fee and commission income from settlement transactions was mainly related to our subsidiary, TBC Pay, driven by a higher number of transactions, the growth in net fee and commission income from our affluent retail sub-segment, TBC Status and the increased number and volume of money transfer transactions.

Other Operating Non-Interest Income and Gross Insurance Profit
In thousands of GEL	FY'18	FY'17	Change YoY
Net income from foreign currency operations	106,874	91,473	16.8%
Share of profit of associates	1,154	909	27.0%
Gains less losses/(losses less gains) from derivative financial instruments	173	(36)	NMF
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income	2	-	NMF
Gains less losses from disposal of investment securities available for sale	-	93	NMF
Revenues from sale of cash-in terminals	1,715	1,093	56.9%
Revenues from operational leasing	6,544	6,544	0.0%
Gain from sale of investment properties	9,781	4,353	NMF
Gain from sale of inventories of repossessed collateral	2,577	2,383	8.1%
Revenues from non-credit related fines	683	1,408	-51.5%
Gain on disposal of premises and equipment	352	1,017	-65.4%
Other	9,786	14,999	-34.8%
Other operating income	31,438	31,797	-1.1%
Gross insurance profit[12]	12,275	6,773	81.2%
Other operating non-interest income and gross insurance profit	151,916	131,009	16.0%
NMF - no meaningful figures

FY 2018 to FY 2017 Comparison

Total other operating non-interest income and gross insurance profit increased by GEL 20.9 million, or 16.0%, to GEL 151.9 million in FY 2018. This mainly resulted from the rise in net income from foreign currency operations by GEL 15.4 million, or 16.8%, mainly due to an increased number and volume of FX transactions. Another contributor was gross insurance profit up by GEL 5.5 million, or 81.2%.

The increase in gross insurance profit was mainly related to increased cross selling of various insurance products and improved efficiency levels. More information about TBC insurance can be found in Annex 23 on pages 49-50.

Credit Loss Allowance
In thousands of GEL	FY'18	FY'17	Change in %
Credit loss allowance for loan to customers	(143,723)	(93,823)	53.2%
Credit loss allowance for investments in finance lease	(1,765)	(492)	NMF
Credit loss allowance for performance guarantees and credit related commitments	(4,056)	(153)	NMF
Credit loss allowance for other financial assets	(16,609)	(12,439)	33.5%
Credit loss allowance for financial assets measured at fair value through other comprehensive income	(86)	-	NMF
Total credit loss allowance	(166,239)	(106,907)	55.5%
Operating income after credit loss allowance	921,229	754,078	22.2%

Cost of risk	1.6%	1.2%	0.4 pp
NMF - no meaningful figures

FY 2018 to FY 2017 Comparison

In FY 2018, total credit loss allowance increased by GEL 59.3 million to GEL 166.2 million, compared to FY 2017. The main contributor to the growth was credit loss allowance for loans to customers up by GEL 49.9 million. The increase was mainly attributable to the corporate segment following a high recovery of credit loss in FY 2017.

Operating Expenses
In thousands of GEL	FY'18	FY'17	Change in %
Staff costs	220,354	203,100	8.5%
Provisions for liabilities and charges	4,000	(2,495)	NMF
Depreciation and amortization	45,740	37,265	22.7%
Professional services	13,951	14,332	-2.7%
Advertising and marketing services	29,575	18,430	60.5%
Rent	24,389	23,132	5.4%
Utility services	6,491	6,067	7.0%
Intangible asset enhancement	11,366	10,304	10.3%
Taxes other than on income	6,757	5,670	19.2%
Communications and supply	5,173	4,063	27.3%
Stationary and other office expenses	4,841	4,936	-1.9%
Insurance	4,589	2,461	86.5%
Security services	2,040	1,965	3.8%
Premises and equipment maintenance	6,098	5,413	12.7%
Business trip expenses	2,273	2,021	12.5%
Transportation and vehicles maintenance	2,043	1,637	24.8%
Charity	1,074	1,045	2.8%
Personnel training and recruitment	1,880	1,444	30.2%
Write-down of current assets to fair value less costs to sell	(1,026)	(538)	90.7%
Loss on disposal of Inventory	137	1,239	-88.9%
Loss on disposal of investment properties	96	442	-78.3%
Loss on disposal of premises and equipment	860	492	74.8%
Impairment of intangible assets	1	1,916	-99.9%
Acquisition costs	-	2,447	-100.0%
Other	18,327	12,612	45.3%
Administrative and other operating expenses	140,935	121,530	16.0%
Operating expenses	411,029	359,400	14.4%
Profit before tax	510,200	394,678	29.3%
Income tax expense	(72,765)	(34,750)	NMF
Profit for the period	437,435	359,928	21.5%

Cost to income	37.8%	41.7%	-3.9 pp
ROE	22.0%	20.9%	1.1 pp
ROA	3.2%	3.1%	0.1 pp
NMF - no meaningful figures

FY 2018 to FY 2017 Comparison

In FY 2018, total operating expenses expanded by GEL 51.6 million, or 14.4%, YoY. This mainly resulted from an increase in: staff costs by GEL 17.3 million, or 8.5%; depreciation and amortisation by GEL 8.5 million, or 22.7% and administrative expenses by GEL 19.4 million, or 16.0% (mainly related to the growth of advertising and marketing services). The growth across the board resulted from the overall expansion of the business scale, the higher performance and the costs of the mandatory deposit insurance, which was introduced at the end of 2017. Without these costs, total operating expenses and administrative and other operating expenses would have increased by 12.9% and 11.6% respectively.

As a result, cost to income ratio was 37.8% in FY 2018, 3.9 pp lower than the 41.7% in FY 2017.

Income Tax

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

Net Income

Net income for FY increased by GEL 77.5 million, or 21.5%, YoY and stood at GEL 437.4 million, while underlying net income (without reversal of one-off deferred tax gain mentioned above) increased by GEL 85.6 million or 23.2% YoY and amounted to GEL 454.9 million.

As a result, underlying ROE stood at 22.8%, up by 1.4pp YoY, while underlying ROA stood at 3.3%, up by 0.1pp YoY. Reported ROE stood at 22.0%, up by 1.1pp YoY, and reported ROA remained broadly stable on YoY basis and stood at 3.2%.

Balance Sheet Discussion
In thousands of GEL	Dec-18	Dec-17	Change YoY
Cash, due from banks and mandatory cash balances with NBG	2,637,036	2,504,938	5.3%
Loans and advances to customers (Net)	10,038,452	8,325,353	20.6%
Financial securities	1,659,442	1,107,476	49.8%
Fixed and intangible assets & investment property	561,020	529,637	5.9%
Other assets	630,344	498,506	26.4%
Total assets	15,526,294	12,965,910	19.7%
Due to credit institutions	3,031,503	2,620,714	15.7%
Customer accounts	9,352,142	7,816,817	19.6%
Debt securities in issue	13,343	20,695	-35.5%
Subordinated debt	650,919	426,788	52.5%
Other liabilities	272,419	190,442	43.0%
Total liabilities	13,320,326	11,075,456	20.3%
Total equity	2,205,968	1,890,454	16.7%

Assets

As of 31 December 2018, the Group's total assets amounted to GEL 15,526.3 million, up by GEL 2,560.4 million, or 19.7%, YoY. The increase was mainly due to a rise in net loans to customers by GEL 1,713.1 million, or 20.6%, YoY. Other contributors to the increase were a GEL 552.0 million, or 49.8%, rise in financial securities and a GEL 132.1 million, or 5.3%, increase in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG), compared to 31 December 2017.

As of 31 December 2018, the gross loan portfolio reached GEL 10,372.6 million, up by 21.3% YoY, while the proportion of gross loans denominated in foreign currency increased by 0.4 pp on a YoY basis and accounted for 60.1% of total loans.

Asset Quality


PAR 30 by Segments and Currencies	Dec-18			Dec-17
	GEL	FC	Total	GEL	FC	Total
Corporate	0.7%	0.3%	0.4%	0.0%	2.0%	1.5%
Retail	4.0%	1.5%	2.6%	2.9%	2.0%	2.4%
MSME	2.4%	3.2%	2.8%	1.5%	3.1%	2.5%
Total	2.8%	1.4%	2.0%	2.1%	2.2%	2.2%
Loans overdue by more than 30 days to gross loans

Total

The total PAR 30 has improved by 0.2 pp YoY driven by improved corporate segment performance.

Retail Segment

The retail segment's PAR 30 increased by 0.2 pp, amounting to 2.6% on a YoY basis, mainly driven by credit cards, fast consumer loans and other higher yield products.

Corporate

The corporate segment's PAR 30 decreased by 1.1 pp YoY, mainly driven by the repayment of one large corporate client as well as an overall improvement of the corporate loan book.

MSME

The MSME segment's PAR 30 increased by 0.3 pp YoY, mainly attributable to SME.


NPLs	Dec-18			Dec-17
	GEL	FC	Total	GEL	FC	Total
Corporate	1.6%	3.1%	2.7%	0.0%	4.2%	3.2%
Retail	3.7%	2.3%	2.9%	2.6%	2.8%	2.7%
MSME	2.6%	5.5%	4.2%	2.2%	6.0%	4.6%
Total	2.9%	3.3%	3.1%	2.1%	4.1%	3.3%

Total

Total NPLs stood at 3.1%, down by 0.2pp on YoY basis, mainly driven by the improved performance of the corporate and MSME loan books.

Retail Segment

The retail segment's NPLs increase by 0.2 pp to 2.9% on YoY basis, mainly driven by credit cards, fast consumer loans and other higher yield products.

Corporate

The corporate NPLs stood at 2.7%, down by 0.5 pp on YoY basis, due to the overall improved performance of the corporate loan book, as well as a high portfolio growth in 2018.

MSME

The MSME NPLs decreased by 0.4 pp on a YoY basis and stood at 4.2%. This was driven by the improved performance in NPLs in both the micro and SME portfolios.


NPLs Coverage	Dec-18		Dec-17
	Exc. Collateral	Incl. Collateral	Exc. Collateral	Incl. Collateral
Corporate	96.4%	286.9%	86.6%	211.0%
Retail	132.4%	204.4%	154.0%	237.3%
MSME	68.4%	174.0%	54.6%	170.6%
Total	102.7%	216.4%	104.7%	209.4%

Liabilities

As of 31 December 2018, TBC Bank's total liabilities amounted to GEL 13,320.3 million, up by GEL 2,244.9 million, or 20.3% YoY. This was primarily due to a GEL 410.8 million, or 15.7%, increase in amounts due to credit institutions and a hike in customer accounts of GEL 1,535.3 million, or 19.6%. Total liabilities also expanded, due to an increase in subordinated debt by GEL 224.1 million, or 52.5%.

Liquidity

As of 31 December 2018, the Bank's liquidity ratio, as defined by the NBG, stood at 33.3%, compared to 32.5% as of 31 December 2017 and above the NBG limit of 30%. As of 31 December 2018, the total liquidity coverage ratio (LCR), as defined by the NBG, was 113.9%, above the 100.0% limit, while the LCR in GEL and FC stood at 102.5% and 121.1% respectively, above the respective limits of 75% and 100%.

Total Equity

As of 31 December 2018, TBC's total equity amounted to GEL 2,206.0 million, up by GEL 315.5 million or by 16.7% from GEL 1,890.5 million as of 31 December 2017. This YoY change in equity was mainly due to net profit contribution of GEL 437.4 million during the last 12 months, which was mostly offset by dividend distribution of GEL 88.9 million in May 2018 and by IFRS 9 transition effect in the amount of GEL 63.7 million as of 1 January 2018.

Regulatory Capital

According to the newly introduced methodology, as of 31 December 2018 the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 12.8% and 17.9%, respectively, compared to the minimum required levels of 11.8% and 16.7%.

In 31 December 2018, The Bank's Basel III Tier 1 Capital amounted to GEL 1,678.7 million, up by GEL 241.5 million or 16.8%, compared to December 2017, due to increase in net income. The Bank's Basel III Total Capital totalled GEL 2,351.3 million, up by GEL 466.0 million, or by 24.7%. The increase in total capital was attributable to the increase in net income and the growth in subordinated loans, as mentioned above. Risk weighted assets amounted to GEL 13,154.9 million as of 31 December 2018, up by GEL 2,401.7 million, or by 22.3%, compared to December 2017, mainly related to the rise in loan book.

Results by Segments and Subsidiaries

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

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

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

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

Summary of key changes:

· The limits for corporate customers have been increased from GEL 8.0 million to GEL 12.0 million for annual revenue and from USD 1.5 million to GEL 5.0 million for granted facilities. Additionally as allowed by policy, some customers were moved to corporate segment on discretionary basis considering practical aspects of client account servicing and administration. As a result, the increase amounted to GEL 66 million and GEL 78 million for corporate loan portfolio and corporate deposit portfolio, respectively.

· Certain sub-categories for the individual business customers that are granted non mortgage loans have been moved from retail to MSME segment. Subsequently, GEL 236 million was transferred from retail to MSME loan portfolio.

Income Statement by Segments

FY'18	Retail	MSME	Corporate	Corp.Centre	Total
Interest income	609,989	255,833	264,559	153,854	1,284,235
Interest expense	(123,729)	(9,710)	(133,302)	(239,472)	(506,213)
Net transfer pricing	(78,453)	(83,475)	35,531	126,397	-
Net interest income	407,807	162,648	166,788	40,779	778,022
Fee and commission income	170,082	22,498	40,667	2,454	235,701
Fee and commission expense	(64,270)	(6,861)	(6,661)	(379)	(78,171)
Net fee and commission income	105,812	15,637	34,006	2,075	157,530
Gross insurance profit	-	-	-	12,275	12,275
Net income from foreign currency operations	28,811	22,002	44,629	(3,764)	91,678
Foreign exchange translation gains less losses/(losses less gains)	-	-	-	15,196	15,196
Net losses from derivative financial instruments	(223)	-	-	396	173
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income	-	-	-	2	2
Other operating income	8,658	748	19,691	2,341	31,438
Share of profit of associates	-	-	-	1,154	1,154
Other operating non-interest income	37,246	22,750	64,320	27,600	151,916
Credit loss allowance for loan to customers	(118,043)	(15,854)	(9,826)	-	(143,723)
Credit loss allowance for performance guarantees and credit related commitments	(412)	(247)	(2,827)	(570)	(4,056)
Credit loss allowance for investments in finance lease	-	-	-	(1,765)	(1,765)
Credit loss allowance for other financial assets	(3,959)	(2)	(8,634)	(4,014)	(16,609)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	-	-	(95)	9	(86)
Profit before G&A expenses and income taxes	428,451	184,932	243,732	64,114	921,229
Staff costs	(128,957)	(43,385)	(30,266)	(17,746)	(220,354)
Depreciation and amortization	(36,745)	(4,980)	(2,226)	(1,789)	(45,740)
Provision for liabilities and charges	-	-	-	(4,000)	(4,000)
Administrative and other operating expenses	(90,329)	(21,184)	(12,616)	(16,806)	(140,935)
Operating expenses	(256,031)	(69,549)	(45,108)	(40,341)	(411,029)
Profit before tax	172,420	115,383	198,624	23,773	510,200
Income tax expense	(22,898)	(17,250)	(29,907)	(2,710)	(72,765)
Profit for the year	149,522	98,133	168,717	21,063	437,435

Portfolios by Segments
In thousands of GEL	31-Dec-2018	31-Dec-2017
Loans and advances to customers

Non-mortgage	1,989,516	2,163,425
Mortgage	2,709,183	2,069,728
Retail	4,698,699	4,233,153
Corporate	3,177,289	2,475,392
MSME	2,496,594	1,844,672
Total loans and advances to customers (Gross)	10,372,582	8,553,217
Less: credit loss allowance for loans to customers	(334,130)	(227,864)
Total loans and advances to customers (Net)	10,038,452	8,325,353

Customer Accounts

Retail	5,103,971	4,378,265
Corporate	3,230,653	2,410,862
MSME	1,017,518	1,027,690
Total Customer Accounts	9,352,142	7,816,817

Retail Banking

As of 31 December 2018, retail loans stood at GEL 4,698.7 million, up by GEL 465.5 million, or 11.0%, YoY and accounted for 40.0% market share of total individual loans. Without the re-segmentation effect[13], the retail loan portfolio would have increased by 18.1% YoY. As of 31 December 2018, foreign currency loans represented 56.1% of the total retail loan portfolio.

In the reporting period, retail deposits stood at GEL 5,104.0 million, up by GEL 725.7 million, or 16.6%, YoY accounting for 41.2% market share of total individual deposits. As of 31 December 2018, term deposits accounted for 52.5% of the total retail deposit portfolio, while foreign currency deposits represented 81.7% of the total retail deposit portfolio.

In FY 2018, retail loan yields and deposit rates stood at 14.2% and 2.7%, respectively. The segment's cost of risk on loans was 2.7%. The segment contributed 34.2%, or GEL 149.5 million, to the total net income in FY 2018.

Corporate Banking

As of 31 December 2018, corporate loans amounted to GEL 3,177.3 million, up by GEL 701.9 million, or 28.4%, YoY. Without the re-segmentation effect¹³, the corporate loan portfolio would have increased by 24.6% YoY. Foreign currency loans accounted for 71.5% of the total corporate loan portfolio. The market share of total legal entities loans stood at 37.4%.

As of the same date, corporate deposits totalled GEL 3,230.7 million, up by GEL 819.8 million, or 34.0%, YoY. Without the re-segmentation effect[14], the corporate deposits would have increased by 29.0% YoY. Foreign currency corporate deposits represented 45.7% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 41.2%.

In FY 2018, corporate loan yields and deposit rates stood at 9.5% and 4.9%, respectively. In the same period, the cost of risk on loans was 0.4%. In terms of profitability, the corporate segment's net profit reached GEL 168.7 million, or 38.6% of the total net income.

MSME Banking

As of 31 December 2018, MSME loans amounted to GEL 2,496.6, up by GEL 651.9 million, or 35.3%, YoY. Without the re-segmentation effect¹³, the MSME loan portfolio would have increased by 23.4% YoY. Foreign currency loans accounted for 53.1% of the total MSME portfolio.

As of the same date, MSME deposits stood at GEL 1,017.5 million, down by GEL 10.2 million, or 1.0%, YoY. Without the re-segmentation effect¹⁴, the MSME deposits would have increased by 8.9% YoY. Foreign currency MSME deposits represented 49.3% of the total MSME deposit portfolio.

In FY 2018, MSME loan yields and deposit rates stood at 12.1% and 1.0% respectively, while the cost of risk on loans was 0.7%. In terms of profitability, net profit for the MSME segment amounted to GEL 98.1 million, or 22.4%, of the total net income.

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet
In thousands of GEL	Dec-18	Dec-17
Cash and cash equivalents	1,166,911	1,431,477
Due from other banks	47,316	39,643
Mandatory cash balances with National Bank of Georgia	1,422,809	1,033,818
Loans and advances to customers	10,038,452	8,325,353
Investment securities measured at fair value through other comprehensive income	1,005,239	-
Investments securities available for sale	-	657,938
Bonds carried at amortised cost	654,203	449,538
Investments in finance leases	203,802	143,836
Investment properties	84,296	79,232
Current income tax prepayment	2,116	19,084
Deferred income tax asset	2,097	2,855
Other financial assets	167,518	146,144
Other assets	221,093	156,651
Premises and equipment	367,504	366,913
Intangible assets	109,220	83,492
Goodwill	31,286	28,658
Investments in associates	2,432	1,278
TOTAL ASSETS	15,526,294	12,965,910
LIABILITIES
Due to Credit Institutions	3,031,503	2,620,714
Customer accounts	9,352,142	7,816,817
Other financial liabilities	98,714	91,753
Current income tax liability	63	447
Debt Securities in issue	13,343	20,695
Deferred income tax liability	22,237	602
Provisions for liabilities and charges	47,068	13,200
Other liabilities	104,337	84,440
Subordinated debt	650,919	426,788
TOTAL LIABILITIES	13,320,326	11,075,456
EQUITY
Share capital	1,650	1,605
Share premium	796,854	714,651
Retained earnings	1,523,879	1,232,865
Group reorganisation reserve	(162,166)	(162,166)
Share based payment reserve	(16,294)	9,828
Revaluation reserve for premises	57,240	70,045
Fair value reserve	8,680	-
Revaluation reserve for available-for-sale securities	-	1,730
Cumulative currency translation reserve	(6,937)	(7,359)
Net assets attributable to owners	2,202,906	1,861,199
Non-controlling interest	3,062	29,255
TOTAL EQUITY	2,205,968	1,890,454
TOTAL LIABILITIES AND EQUITY	15,526,294	12,965,910

Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL	FY'18		FY'17
Interest income	1,284,235		1,033,939
Interest expense	(506,213)		(429,924)
Net interest income	778,022		604,015
Fee and commission income	235,701		193,944
Fee and commission expense	(78,171)		(67,983)
Net fee and commission income	157,530		125,961
Net insurance premiums earned	23,601		12,633
Net insurance claims incurred and agents' commissions	(11,326)		(5,860)
Insurance profit	12,275		6,773
Net income from foreign currency operations	91,678		87,099
Net gain/(losses) from foreign exchange translation	15,196		4,374
Net gains/(losses) from derivative financial instruments	173		(36)
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income	2		-
Gains less losses from disposal of investment securities available for sale	-		93
Other operating income	31,438		31,797
Share of profit of associates	1,154		909
Other operating non-interest income	139,641		124,236
Credit loss allowance for loan to customers	(143,723)		(93,823)
Credit loss allowance for investments in finance lease	(1,765)		(492)
Credit loss allowance for performance guarantees and credit related commitments	(4,056)		(153)
Credit loss allowance for other financial assets	(16,609)		(12,439)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	(86)		-
Operating income after credit loss allowance	921,229		754,078
Staff costs	(220,354)		(203,100)
Depreciation and amortization	(45,740)		(37,265)
(Provision for)/ recovery of liabilities and charges	(4,000)		2,495
Administrative and other operating expenses	(140,935)		(121,530)
Operating expenses	(411,029)		(359,400)
Profit before tax	510,200		394,678
Income tax expense	(72,765)		(34,750)
Profit for the period	437,435		359,928
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve	6,949		-
Revaluation of available-for-sale investments	-		5,489
Exchange differences on translation to presentation currency	425		181
Items that will not be reclassified to profit or loss:
Revaluation of premises and equipment	10,749		-
Income tax recorded directly in other comprehensive income	(2,363)		(422)
Other comprehensive income for the period	15,760		5,248
Total comprehensive income for the period	453,195		365,176
Profit attributable to:
- Shareholders of TBCG	435,078		354,410
- Non-controlling interest	2,357		5,518
Profit for the period	437,435		359,928
Total comprehensive income is attributable to:
- Shareholders of TBCG	450,901		359,585
- Non-controlling interest	2,294		5,591
Total comprehensive income for the period	453,195		365,176
Consolidated Statements of Cash Flows
In thousands of GEL		31-Dec-18		31-Dec-17
Cash flows from/(used in) operating activities
Interest received		1,224,606		1,000,571
Interest paid		(501,984)		(424,105)
Fees and commissions received		235,508		195,285
Fees and commissions paid		(78,140)		(68,036)
Insurance premium received		54,682		23,518
Insurance claims paid		(15,174)		(9,127)
Income received from trading in foreign currencies		91,678		87,099
Other operating income received		11,407		8,992
Staff costs paid		(202,897)		(187,520)
Administrative and other operating expenses paid		(136,670)		(112,270)
Income tax paid		(34,918)		(53,916)
Cash flows from operating activities before changes in operating assets and liabilities		648,098		460,491
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia		(343,772)		(98,586)
Loans and advances to customers		(1,718,446)		(1,330,105)
Investment in finance lease		(54,784)		(49,297)
Other financial assets		(35,570)		(38,064)
Other assets		(4,486)		73,814
Net change in operating liabilities
Due to other banks		69,755		(228,486)
Customer accounts		1,371,675		1,329,071
Other financial liabilities		(12,136)		18,263
Other liabilities and provision for liabilities and charges		3,618		3,487
Net cash from operating activities		(76,048)		140,588
Cash flows from/(used in) investing activities
Acquisition of investment securities measured at fair value through other comprehensive income		(717,729)		-
Acquisition of investment securities available for sale		-		(560,226)
Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income		385,352		-
Proceeds from redemption at maturity of investment securities available for sale		-		345,748
Acquisition of bonds carried at amortised cost		(395,717)		(307,248)
Proceeds from redemption of bonds carried at amortised cost		200,658		242,380
Acquisition of premises, equipment and intangible assets		(89,263)		(114,383)
Disposal of premises, equipment and intangible assets		813		1,932
Proceeds from disposal of investment property		42,515		19,082
Acquisition of subsidiaries, net of cash acquired		809		(273)
Net cash used in investing activities		(572,562)		(372,988)
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds		1,776,489		1,461,191
Redemption of other borrowed funds		(1,515,562)		(800,333)
Proceeds from subordinated debt		255,900		119,859
Redemption of subordinated debt		(60,910)		(59,671)
Proceeds from debt securities in issue		(7,596)		-
Redemption of debt securities in issue		-		(2,123)
Dividends paid		(85,484)		(67,927)
Issue of ordinary shares		-		29
Net cash flows from financing activities		362,837		651,025
Effect of exchange rate changes on cash and cash equivalents		21,207		67,672
Net increase in cash and cash equivalents		(264,566)		486,297
Cash and cash equivalents at the beginning of the year		1,431,477		945,180
Cash and cash equivalents at the end of the year		1,166,911		1,431,477

Key Ratios

Average Balances

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

Key Ratios

Ratios (based on monthly averages, where applicable)	FY'18	FY'17
Underlying ROE¹	22.8%	21.4%
Reported ROE²	22.0%	20.9%
Underlying ROA³	3.3%	3.2%
Reported ROA⁴	3.2%	3.1%
ROE before credit loss allowance⁵	30.4%	27.2%
Cost to income⁶	37.8%	41.7%
Cost of risk⁷	1.6%	1.2%
FX adjusted cost of risk⁸	1.5%	1.4%
NIM⁹	6.9%	6.5%
Risk adjusted NIM¹⁰	5.4%	5.1%
Loan yields¹¹	12.3%	12.1%
Risk adjusted loan yields¹²	10.8%	10.7%
Deposit rates¹³	3.2%	3.4%
Yields on interest earning assets¹⁴	11.4%	11.1%
Cost of funding¹⁵	4.4%	4.5%
Spread¹⁶	7.0%	6.6%
PAR 90 to gross loans¹⁷	1.2%	1.4%
NPLs to gross loans¹⁸	3.1%	3.3%
NPLs coverage¹⁹	102.7%	104.7%
NPLs coverage with collateral²⁰	216.4%	209.4%
Credit loss level to gross loans²¹	3.2%	3.4%
Related party loans to gross loans²²	0.1%	0.1%
Top 10 borrowers to total portfolio²³	10.1%	8.2%
Top 20 borrowers to total portfolio²⁴	14.2%	12.4%
Net loans to deposits plus IFI Funding²⁵	89.9%	92.5%
Net stable funding ratio²⁶	130.2%	124.4%
Liquidity coverage ratio²⁷	113.9%	112.7%
Leverage²⁸	7.0x	6.9x
Regulatory tier 1 CAR (Basel III)²⁹	12.8%	13.4%
Regulatory total 1 CAR (Basel III)³⁰	17.9%	17.5%

Ratio definitions

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

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

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

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

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

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

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

8. FX adjusted cost of risk is calculated based on currency rates of the respective prior periods.

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

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

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

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

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

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

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

16. 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).

17. 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.

18. 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.

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

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

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

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

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

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

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

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

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

28. Leverage equals total assets to total equity.

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

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

Exchange Rates

To calculate the YoY growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.5922 as of 31 December 2017. As of 31 December 2018, the USD/GEL exchange rate equalled 2.6766. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: FY 2018 of 2.5345, FY 2018 of 2.5117.

Additional Disclosures

Subsidiaries of TBC Bank Group PLC[15]

	Ownership / voting % as of 31 December 2018	Country	Year of incorporation	Industry	Total Assets (after elimination)
Subsidiary	Ownership / voting % as of 31 December 2018	Country	Year of incorporation	Industry	Amount GEL'000	% in TBC Group
JSC TBC Bank	99.9%	Georgia	1992	Banking	15,081,646	97.14%
United Financial Corporation JSC	98.7%	Georgia	1997	Card processing	9,569	0.06%
TBC Capital LLC	100.0%	Georgia	1999	Brokerage	7,522	0.05%
TBC Leasing JSC	99.6%	Georgia	2003	Leasing	269,717	1.74%
TBC Kredit LLC	100.0%	Azerbaijan	1999	Non-banking credit institution	34,592	0.22%
Banking System Service Company LLC	100.0%	Georgia	2009	Information services	634	0.00%
TBC Pay LLC	100.0%	Georgia	2009	Processing	29,228	0.19%
Index LLC	100.0%	Georgia	2011	Real estate management	436	0.00%
Real Estate Management Fund JSC	100.0%	Georgia	2010	Real estate management	21	0.00%
TBC Invest LLC	100.0%	Israel	2011	PR and marketing	178	0.00%
BG LLC*	0.0%	Georgia	2018	Asset management	8,902	0.06%
JSC TBC Insurance	100.0%	Georgia	2014	Insurance	80,468	0.52%
Swoop JSC	100.0%	Georgia	2010	Retail Trade	989	0.01%
GE Commerce LTD	100.0%	Georgia	2018	Retail Trade	397	0.00%
(*) In July 2018 the Group obtained de facto control over BG LLC

1) Earnings per Share

In GEL	FY 2018	FY 2017
Earnings per share for profit attributable to the owners of the Group:
- Basic earnings per share	8.07	6.73
- Diluted earnings per share	8.00	6.63

Source: IFRS Consolidated

In GEL	4Q 2018	4Q 2017
Earnings per share for profit attributable to the owners of the Group:
- Basic earnings per share	2.40	1.80
- Diluted earnings per share	2.37	1.77

Source: IFRS Consolidated

2) Sensitivity Scenario

Sensitivity Scenario	31-Dec-18	10% Currency Devaluation Effect
NIM*		-0.17%
Technical Cost of Risk		+0.11%
Regulatory Total Capital	2,351	2,396
Regulatory Capital adequacy ratios tier 1 and total capital decrease by		0.58% - 0.76%

(*) Linear depreciation is assumed for NIM sensitivity analysis

Source: IFRS statements and Management Figures

3) The share of selected FC denominated P/L Items

Selected P&L Items 4Q 2018	FC % of Respective Totals
Interest Income	40%
Interest Expense	50%
Fee and Commission Income	33%
Fee and Commission Expense	64%
Administrative Expenses	15%

Source: IFRS statements and Management figures

4) Open Interest Rate Position as of 31 December 2018

Open interest rate position in GEL	GEL 861 m		Open interest rate position in FC	GEL 2,474 m
	GEL m	% share in totals		GEL m	% share in totals
Assets	3,147	20%	Assets	4,259	27%
Securities with fixed yield(≤1y)*	428	26%	Nostro**	95	16%
Securities with floating yield	541	33%	NBG Reserves**	1,423	92%
Loans with floating yield	2,038	20%	NBG Deposits	0	0%
Reserves in NBG	127	8%	Libor Loans	2,741	26%
Interbank loans& Deposits & Repo	13	2%	Interest Rate Swap	0	0%
Liabilities	2,286	17%
Current accounts***	466	5%	Liabilities	1,785	13%
Saving accounts***	615	7%	Senior Loans	1,295	45%
Refinancing Loan of NBG	620	22%	Subordinated Loans	490	75%
Interbank Loans &Deposits & Repo	70	44%
IFI Borrowings	515	18%

(*) 90% 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 June 2018, according to NBG regulation is it possible to apply negative interest rates on NBG reserves and correspondent accounts. However, negative rate is floored by 0% in case of USD and by (-0.6)% in case of EUR accounts.

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

5) Yields and Rates

Yields and Rates	4Q'18	3Q'18	2Q'18	1Q'18	4Q'17
Loan yields	12.2%	12.4%	12.5%	12.3%	12.3%
Retail loan yields GEL	20.7%	20.8%	21.3%	20.5%	19.7%
Retail loan yields FX	7.8%	7.9%	8.0%	8.4%	8.8%
Retail Loan Yields	13.6%	14.1%	14.7%	14.6%	14.2%
Corporate loan yields GEL	10.9%	11.0%	11.4%	11.2%	12.2%
Corporate loan yields FX	9.7%	9.1%	8.7%	8.6%	9.2%
Corporate Loan Yields	10.0%	9.6%	9.4%	9.2%	10.0%
MSME loan yields GEL	16.2%	16.6%	15.9%	15.0%	13.6%
MSME loan yields FX	8.6%	8.9%	8.5%	8.9%	9.4%
MSME Loan Yields	12.2%	12.6%	12.0%	11.3%	10.9%
Deposit rates	3.1%	3.3%	3.3%	3.3%	3.5%
Retail deposit rates GEL	4.6%	4.4%	4.3%	4.4%	4.4%
Retail deposit rates FX	2.2%	2.3%	2.4%	2.5%	2.7%
Retail Deposit Yields	2.6%	2.7%	2.7%	2.8%	2.9%
Corporate deposit rates GEL	6.8%	7.5%	7.9%	8.0%	8.5%
Corporate deposit rates FX	1.8%	2.0%	1.9%	2.0%	2.1%
Corporate Deposit Yields	4.5%	4.9%	5.2%	5.2%	5.3%
MSME deposit rates GEL	1.6%	1.7%	1.7%	1.8%	2.1%
MSME deposit rates FX	0.3%	0.4%	0.4%	0.5%	0.8%
MSME Deposit Yields	1.0%	1.0%	1.0%	1.1%	1.4%
Yields on Securities	7.6%	7.8%	7.7%	8.1%	6.9%

Source: IFRS Consolidated

6) Risk Adjusted Yields & Cost of Risk
Risk-adjusted Yields	4Q'18	3Q'18	2Q'18	1Q'18	4Q'17
Loan yields	10.9%	10.9%	10.8%	10.6%	11.1%
Retail Loan Yields	10.6%	11.6%	12.1%	11.6%	12.2%
Corporate Loan Yields	10.1%	9.1%	8.6%	9.3%	9.6%
MSME Loan Yields	12.4%	11.8%	11.1%	9.8%	10.5%

	4Q'18	3Q'18	2Q'18	1Q'18	4Q'17

Cost of Risk	1.4%	1.9%	1.8%	1.3%	1.4%
Retail	2.9%	2.7%	2.6%	2.7%	2.0%
Corporate	0.1%	1.1%	0.9%	-0.8%	0.7%
MSME	-0.1%	1.2%	1.0%	1.0%	0.7%

Source: IFRS Consolidated

7) Loan Quality per NBG

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

	Dec-18	Sep-18	Jun-18	Mar-18	Dec-17
SDL Loans as % of Gross Loans	3.6%	3.8%	3.3%	3.1%	3.2%

Source: NBG

8) Cross Sell Ratio[16] and Number Active Products

	Dec-18	Sep-18	Jun-18	Mar-18	Dec-17
Cross Sell Ratio	3.81	3.85	3.89	3.88	3.94
Number of Active Products (in million)	4.62	4.58	4.64	4.58	4.50

Source: Management's figures.

9) Diversified Deposit Base

Status: monthly income >=GEL 3,000 or loans/deposits >=GEL 30,000

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

Wealth Management includes UHNW and HNW non-resident clients

31 December 2018	Volume of Deposits	Number of Deposits
MASS	39%	91.8%
STATUS	30%	7.7%
VIP	23%	0.4%
Wealth Management for non-resident clients	8%	0.1%

Source: Management figures

10) Loan Concentration

	Dec-18	Sep-18	Jun-18	Mar-18	Dec-17
Top 20 Borrowers as % of total portfolio	14.2%	14.1%	13.2%	13.4%	12.4%
Top 10 Borrowers as % of total portfolio	10.1%	10.3%	9.2%	9.4%	8.2%
Related Party Loans as % of total portfolio	0.1%	0.1%	0.1%	0.1%	0.1%

Source: IFRS consolidated

11) Number of Transactions in Digital Channels (in thousands)

	4Q 18	4Q 17	4Q 16	4Q 15
Internet banking number of transactions	2,495	2,743	2,280	1,729
Mobile banking number of transactions	7,904	5,207	2,532	1,008

Source: Management figures

12) Penetration Ratios of Digital Channels

	Dec-18	Dec-17	Dec-16	Dec-15
Internet or Mobile Banking Penetration Ratio*	44%	40%	37%	32%
Mobile Banking Penetration Ratio**	37%	31%	24%	15%

Source: Management figures

* Internet or Mobile Banking penetration equals active clients of Interment or Mobile Banking divided by total active clients

** Mobile Banking penetration equals active clients of Mobile Banking divided by total active clients

13) Number of Active Clients (in thousands)

	Dec-18	Dec-17	Dec-16	Dec -15
Internet or mobile banking	529	461	313	229
Mobile banking	448	359	207	109

Source: Management figures

14) Distribution of Transactions in Digital Channels

	4Q 18
Mobile Banking	26%
Internet Banking	11%
Branches	10%
TBC Pay terminals	19%
ATMs	33%
Other	1%

91% of all transactions are conducted in digital channels

15) Distribution of Sales in Channels

	4Q 18	4Q 17	4Q 16
IB, MB, ATM, Web	45%	23%	26%
Branches & Call Center	55%	77%	74%

45% of sales are conducted in digital channels*

* For products being offered through remote channels: pre-approved loans, credit cards, limit increase and opening of accounts

16) Percentage of Selected Product Sales in Digital Channels

	4Q 18	4Q 17	4Q 16
Deposits	71%	60%	53%
Pre-approved loans	54%	17%	13%
Debit cards	24%	17%	-

17) POS Terminal Transactions

	Dec-18	Sep-18	Jun-18	Mar-18	Dec-17
POS number of transactions (in millions)	27.4	24.1	22.3	17.9	16.4
POS volume of transactions (in mln GEL)	1,117	986	850	661	631

* Data includes e-commerce and excludes transactions at POS terminals in TBC Bank's branches

18) Funding repayment ladder

Subordinated and Senior Loans' Principal Amount Outflow by Year (USD million)

	2019	2020	2021	2022	2023	2024	2025	2026	2027	2028
Senior loans	115	184	252	101	85	31	22	7	5	-
Subordinated loans	6	14	11	11	32	1	39	73	16	37

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

19) NPL Build Up (in GEL million)

NPLs	NPLs as of Sep-18	Real Growth	FX Effect	Write-Offs	Repossessed	NPLs as of Dec-18
Retail	134	54	1	(49)	(2)	138
Corporate	77	8	1	-	(1)	85
MSME	92	19	2	(8)	(2)	103
Total	303	81	4	(57)	(5)	326

20) Net Write-Offs, 4Q 2018
In GEL million	Write-Offs	Recoveries	Net Write-Offs
Retail	(49)	9	(40)
Corporate	-	1	1
MSME	(8)	5	(3)
Total	(57)	15	(42)

Source: IFRS Consolidated

21) Portfolio Breakdown by Collateral Types as of 31-Dec-18
Cash Cover	2%
Gold	3%
Inventory	10%
Real Estate	66%
Third Party Guarantees	6%
Other	2%
Unsecured	11%

Source: IFRS Consolidated

22) Loan to Value by Segments as of 31-Dec-18

Retail	Corporate	MSME	Total
48%	46%	43%	46%
Mortgage loan's LTV stood at 48%

23) TBC Insurance

TBC Insurance is a rapidly growing, wholly owned subsidiary of TBC Bank and it is the bank's main bancassurance partner. The company was acquired by the Group in October 2016 and it has since grown significantly, becoming the second largest player on the P&C and life insurance market and the largest player in the retail segment, holding 20.9% and 35.0% market shares[17] without border motor third party liability (MTPL) insurance, respectively in 2018 based on internal estimates.

TBC insurance serves both individual and legal entities and it provides a broad range of insurance products covering motor, travel, personal accident, credit life and property, business property, liability, cargo and agro insurance products. The company differentiates itself for its advanced digital channels, which include TBC bank's award winning Internet and mobile banking applications, a wide network of self-service terminals, a web channel, as well as a Georgian-speaking chat-bot B-Bot, which is available through Facebook messenger.

In 2018, TBC Insurance achieved strong growth results and improved its efficiency. The gross written premium grew by 91.8% and amounted to GEL 60.1 million driven by strong focus on cross-selling. Over the same period, the net combined ratio^{^[18]} decreased by 17.9 pp to 79.3%. As a result, the net profit for the year stood at GEL 7.3 million. At the same time TBC insurance maintains strong capital levels, with solvency ratio above regulatory minimum of 100%, standing at 164.4%.

In thousands of GEL	FY'18	FY'17	4Q'18	3Q'18	4Q'17
Gross written premium	60,079	31,318	17,075	15,833	12,153
Net earned premium[19]	35,657	16,851	10,554	9,841	5,881
Net profit	7,263	934	2,264	2,243	601
	FY'18	FY'17	4Q'18	3Q'18	4Q'17
Net combined ratio	79.3%	97.2%	80.7%	78.8%	93.0%
Market share	20.9%	13.3%	25.5%	20.7%	20.6%

24) Regulatory Capital

Total Capital and Tier 1 Capital Limits

	31-Dec-2018 Actual		31-Dec-2019 F		31-Dec-2020 F		31-Dec-2021 F
	Tier 1	Total	Tier 1	Total	Tier 1	Total	Tier 1	Total
Minimum Requirement	6.0%	8.0%	6.0%	8.0%	6.0%	8.0%	6.0%	8.0%
Conservation Buffer	2.5%	2.5%	2.5%	2.5%	2.5%	2.5%	2.5%	2.5%
Counter-Cyclical Buffer	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Systemic Buffer	1.0%	1.0%	1.5%	1.5%	2.0%	2.0%	2.5%	2.5%
Pillar 1 buffers	9.5%	11.5%	10.0%	12.0%	10.5%	12.5%	11.0%	13.0%
Pillar 2	2.3%	5.15%	2.5-4.0%	4.0%-5.5%	2.5%-4.0%	4.0%-5.5%	2.5%-4.0%	4.0%-5.5%
Total	11.8%	16.65%	12.5-14.0%	16.0-17.5%	13.0-14.5%	16.5-18.0%	13.5-15.0%	17.0-18.5%

25) NBG Initiatives

The new regulation on responsible lending to individuals:

Starting from January 2019, the National Bank of Georgia has adopted the regulation on responsible lending to individuals, which replaces the former regulation introduced in May 2018. The regulation requires financial institutions to conduct solvency analysis of a borrower before issuing a loan and it also sets new limits on Payment to Income (PTI) and Loan to Value (LTV) for individual loans. The thresholds are different for domestic and foreign currency loans in order to protect a borrower and the financial system against the risks stemming from exchange rate fluctuations.

Maximum Payment to Income Ratios:

Monthly income, net (in GEL)	For non-hedged borrower in case of maximum/contractual maturity	For hedged borrowers in case of maximum/contractual maturity
<1,000	20% / 25%	25% / 35%
>=1,000-2,000<	20% / 25%	35% / 45%
>=2,000-4,000<	25% / 30%	45% / 55%
>=4,000	30% / 35%	50% / 60%

Maximum Loan to Value Ratios:

Maximum loan to value ratio (LTV) for GEL loans	85%
Maximum loan to value ratio (LTV) for foreign currency loans	70%

Maximum tenures:

Mortgage	15 years
Consumer mortgages collateralized by real estate	10 years
Auto Loans	6 years
Other consumer loans	4 years

26) Reconciliation of reported IFRS consolidated figures with underlying numbers

in thousands of GEL	2018	2017
Reported net interest income	778,022	604,015
Reported net fee and commission income	157,530	125,961
Reported gross Insurance Profit	12,275	6,773
Reported Other operating income	139,641	124,236
Reported operating income	1,087,468	860,985
Reported total provision expenses	(166,239)	(106,907)
Reported operating income after provisions	921,229	754,078
Reported Operating expenses	(411,029)	(359,400)
One-off costs related to Bank Republic integration (consulting costs)	-	(10,925)
Underlying operating expenses	(411,029)	(348,475)

Reported profit before tax	510,200	394,678
Underlying profit before tax	510,200	405,603

Reported income tax	(72,765)	(34,750)
Reversal of the one-off deferred tax gain	(17,426)	-
Effect on tax of one-off items	-	1,639
Underlying income tax	(55,339)	(36,389)

Reported net profit	437,435	359,928
Underlying net profit	454,861	369,214

Reported non-controlling interest (NCI)	2,357	5,518
Effect on NCI of one-off items	-	120
Underlying NCI	2,357	5,638
Reported net profit less NCI	435,078	354,410
Underlying net profit less NCI	452,504	363,576

	2018	2017
Underlying ROE	22.8%	21.4%
Underlying ROA	3.3%	3.2%

27) Space - fully digital bank

Date	# of app. downloads	# of registered customers	loans in thousands GEL
31-May-2018	69,510	38,598	157
30-Jun-2018	99,646	47,657	1,112
31-Jul-2018	128,205	55,699	2,196
31-Aug-2018	155,267	63,435	3,230
30-Sep-2018	186,044	72,447	5,814
31-Oct-2018	216,107	80,993	8,766
30-Nov-2018	241,480	87,576	11,837
31-Dec-2018	258,846	93,994	14,693

28) International strategy: expansion into Azerbaijan market[20]

Main highlights

• TBC Bank and Nikoil Bank agreed on shareholders agreement in late December 2018 and signed in early January 2019;

• Our shareholding in the joint entity will be 8.34%;

• We will have the right to exercise a call option during the next four years to obtain 50%+1 shareholding in the joint entity;

• The call option is based on a fixed price formula and in most scenarios it is between 1-1.15x of the merged entity's book value (it is closer to the book value when exercised in later years);

• Our additional estimated investment during the next four years will be consistent with our 8.34% shareholding and is estimated to be around USD 3-5 mln per year.

Timeline

Before December -

Capital injection by Nikoil's Shareholder:

• USD 45 mln before September

• USD 30 mln in December

Current Developments -

• Developing new branch concept and new products

• Started rebranding

• Improving governance and risk management

• Obtain regulatory approval for the merger

Strengthening Management Team

Existing management team of the joint entity
CEO -	Nikoloz Shurghaia
First Deputy CEO, Head of MSME -	Farhad Hajinski
Deputy CEO, Head of Retail -	Fuad Tagiyev

New management team of the joint entity
COO -	Nukri Tetrashvili, former CEO at TBC Kredit
CDM -	Senior Digital Manager with a solid track record at large Georgian bank
CRO -	David Tediashvili, former Head of Retail Credit Risk Department at TBC Bank
CFO -	Emil Dushdurov, former Associate Director, Deal Advisory at KPMG Azerbaijan
Three-year vision
In USD millions	4Q results of Nikoil Bank*	Mid-term targets of joint entity
Loan Portfolio	c. 221	c. 1,400
Equity	c. 33	c. 200
ROE	NMF	20%+
*Based on management accounts

• Core segments: Retail and MSME (not large SMEs and Corporates)

• Product offerings: A mix of Nikoil Bank and TBC Bank products adapted to the local needs and offered primarily through digital channels, including Space Bank

29) International strategy: digital greenfield bank in Uzbekistan[21]

This is still in the concept stage and subject to approval (including approval from the authorities), therefore it could change as we progress. The license is expected in 2019.

Why Uzbekistan?

• Large underpenetrated market:

• with more than 32 million population

• below 5% retail and MSME loan to GDP^{^[22]}

• Similar past during the USSR and good cultural links

• Right time given the implementation of reforms, many of which were designed by former Georgian government officials

• Both Uzbekistan and Georgia are included into China's One Belt One Road initiative

Strategic Positioning

• Build a next generation bank for retail and MSME

• Focus on digital channels and SPACE

• Operate asset light, smart branches

• Establishing the highest standards of corporate governance

• Simple and intuitive products and processes

• Transparent and straightforward commissions structure

• Best customer experience

• Automated decision making system

Main highlights

• Initial investments from TBC Bank around USD 20-30 million, resulting in 51% shareholding

• Medium to long-term financial targets after license is granted:

• Achieve sustainable ROE up to 25%

• Cost to income ratio below 35%

Our Uzbek and Azerbaijan subsidiaries together will contribute c. 30% to the Group's loan book.

Upcoming Events

· Opening pilot branch in March 2019 for a proof of concept

· Core banking implementation with local IT company

· Multichannel development including Space

· Our international partners, EBRD and IFC have expressed their interest to participate in this project subject to completion of their internal procedures and approvals

· We are also in the final stage of negotiations with the local partner

30) Summary of the Dentons's Memorandum

A global law firm Dentons conducted the thorough analysis of the potential breaches of the conflict of interest rules under the Regulations of the National Bank of Georgia and provisions of the Criminal Code of Georgia on the Legislation of the illegal income in relation to loan transactions that took place with Samgori M LLC and Samgori Trade LLC in 2008. Based on the facts, circumstance and available documents, Dentons concluded that:

• The loan transactions conducted with Samgori M LLC and Samgori Trade LLC should not qualify as related party transactions under the regulation of National Bank of Georgia effective at the time of the transaction took place

• Taking into consideration factual circumstances, the transactions do not amount to a money laundering under Criminal Code of Georgia.

31) Nikoil Bank Financials

Profit & Loss Statement

In thousands of USD	FY'2018	FY'2017	4Q'18	3Q'18	4Q'17
Interest income	14,541	16,989	4,280	3,706	4,209
Interest expense	(9,123)	(11,581)	(2,068)	(2,150)	(2,656)
Net interest income	5,418	5,408	2,212	1,556	1,553
Fee and commission income	2,952	2,468	958	738	764
Fee and commission expense	(1,200)	(982)	(425)	(285)	(477)
Net Fee and Commission Income	1,751	1,486	532	453	287
Net income from foreign currency operations	1,224	1,126	313	235	259
Net gain/(losses) from foreign exchange translation	440	652	119	133	91
Gains less losses/(losses less gains) from derivative financial instruments	(93)	(2,456)	(28)	(30)	(14)
Other operating non-interest income	1,572	(678)	404	338	336
Credit loss allowance of loans	(71,532)	4,669	(23,670)	(20,447)	11
Credit loss allowance of other financial assets	(8,256)	(786)	(8,447)	(121)	(116)
Operating income after credit loss allowance	(71,047)	10,100	(28,968)	(18,221)	2,072
Staff costs	(6,619)	(5,171)	(2,276)	(1,425)	(1,409)
Depreciation and amortisation	(1,313)	(1,573)	(312)	(316)	(522)
Administrative and other operating expenses	(4,610)	(4,949)	(1,519)	(1,161)	(1,652)
Operating expenses	(12,542)	(11,693)	(4,107)	(2,902)	(3,583)
Profit before tax	(83,589)	(1,593)	(33,075)	(21,123)	(1,511)
Income tax expense	-	-	-	-	-
Profit for the period	(83,589)	(1,593)	(33,075)	(21,123)	(1,511)

Balance Sheet

In thousands of USD	31-Dec-18	30-Sep-18	31-Dec-17
Cash and cash equivalents	29,591	35,099	44,818
Due from other banks	26,833	21,190	22,093
Net Loans	120,704	129,544	162,356
Investment securities measured at fair value through other comprehensive income	46,794	26,371	-
Investment securities available for sale	-	-	4,668
Current income tax prepayment	2	2	100
Deferred income tax asset	768	768	768
Other financial assets	545	396	1,431
Other assets	7,195	13,533	10,326
Premises and equipment (Net)	5,571	5,576	6,036
Intangible assets (Net)	1,924	1,991	2,095
TOTAL ASSETS	239,927	234,470	254,691
Due to other banks	20,152	23,152	23,709
Customer Accounts	137,244	127,591	135,654
Other borrowed funds	41,237	38,876	36,077
Other financial liabilities	3,054	4,125	2,715
Subordinated debt	5,000	5,000	15,001
TOTAL LIABILITIES	206,687	198,744	213,156
Share capital	204,705	174,118	129,411
Additional paid-in-capital	500	500	500
Retained earnings	(171,965)	(138,891)	(88,376)
TOTAL EQUITY	33,240	35,727	41,535
TOTAL LIABILITIES AND EQUITY	239,927	234,470	254,691

[1] Excluding one-off items. Detailed information and effects are given in Annex 26 on page 51.

[2] Market share figures are based on data from the National Bank of Georgia (NBG). The NBG includes interbank loans for calculating market share in loans

^{^[3]}In 2018, one-off costs included the reversal of deferred tax gains due to change in legislation, while in 2017 one-off costs included operating expenses related to the integration of Bank Republic

[4]Market share without border MTPL, which was introduced starting from March 2018 and GWP was divided evenly between 17 insurance companies. The data is based on internal estimates

[5] The number of transactions conducted through remote channels divided by the total number of transactions.

[6] For products being offered through remote channels:pre-approved loans, credit cards, limit increase and opening of accounts

^{^[7]}Source: Geostat

^{^[8]}Latest available information.

[9] Initial estimates of Geostat.

[10] For details see https://www.bp.com/en_ge/bp-georgia/about-bp/bp-in-georgia/south-caucasus-pipeline--scp-.html

[11] Gross insurance profit can be reconciled to the standalone net insurance profit (as shown in Annex 23 on pages 49-50) as follows: gross insurance profit less credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income

[12] Gross insurance profit can be reconciled to the standalone net insurance profit as follows (as shown in Annex 23 on pages 49-50): gross insurance profit less credit loss allowance, administrative expenses and taxes, plus fee and commission income net interest income

[13] In 1Q 2018, GEL 236 million was transferred from retail to MSME portfolio and GEL 66 million was transferred from MSME to corporate loans

[14] In 1Q 2018, GEL 78 mln was transferred from MSME to corporate deposits portfolio

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

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

[17] Or 19.3% and 31.0% respectively, with MTPL insurance. Starting from March 1, 2018 border MTPL was introduced and GWP was divided evenly between 17 insurance companies, therefore it has decreased our market share.

^{^[18]} Net insurance claims plus acquisition costs and administrative expenses divided net earned premium

^{^[19]} Net earned premium equals earned premium minus reinsurer's share of earned premium

[20] No investment has been made in relation to this project during 2018 and no material costs were incurred.

[21] No investment has been made in relation to this project during 2018 and around GEL 2.5 million were incurred as operating expenses

[22] Source: CBU and commercial bankss

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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