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JSC Bank of Georgia (BGEO)

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Friday 27 February, 2009

JSC Bank of Georgia

Final Results

Final Results

Bank of Georgia

1.67 GEL/US$ December 2008 period end

1.49 GEL/US$ 2008 average

1.56 GEL/US$ Q4 2008 average

1.59 GEL/US$ December 2007 period end

1.67 GEL/US$ 2007 average

1.62 GEL/US$ Q4 2007 average

JSC BANK OF GEORGIA REPORTS FULL YEAR 2008 NET INCOME OF GEL 0.7 MILLION;

ANNOUNCES CONSOLIDATED Q4 2008 & FULL YEAR 2008 RESULTS

Millions, unless otherwise noted   Q4 2008     Growth y-o-y 1
 
Bank of Georgia (Consolidated, Unaudited, IFRS-based) US$    

GEL

Total Operating Income (Revenue)2 52.6 87.7 29%
Recurring Operating Costs 27.0 45.1 34%
Normalised Net Operating Income3 25.6 42.7 24%
Net Non-Recurring Operating Costs 18.0 30.0 NMF
Net Provision Expenses 9.0 15.0 83%
Net Income/(Loss) (0.3) (0.5) NMF
 
 
Millions, unless otherwise noted   2008 (YTD)     Growth y-o-y 1
 
Bank of Georgia (Consolidated, Unaudited, IFRS-based) US$     GEL
Total Operating Income (Revenue)2 204.4 340.7 55%
Recurring Operating Costs 112.8 188.0 60%
Normalised Net Operating Income3 91.6 152.6 50%
Net Non-Recurring Operating Costs 12.4 20.7 NMF
Net Provision Expenses 79.7 132.8 679%
Net Income/(Loss) 0.4 0.7 -99%
 
Total Assets 1,976.4 3,294.6 12%
Net Loans 1,249.9 2,083.7 21%
Total Deposits 790.8 1,318.3 -5%
Tier I Capital Adequacy Ratio (BIS)4 22.5%
Total Capital Adequacy Ratio (BIS)5 27.3%
Tier I Capital Adequacy Ratio (NBG) 16.6%
Total Capital Adequacy Ratio (NBG) 13.5%
 
Tier 1 Capital Adequacy Ratio (NBG), as of 31 January 2009 15.8%
Total Capital Adequacy Ratio (NBG), as of 31 January 2009 16.0%
 
 

1 Compared to the same period in 2007; growth calculations based on GEL values.

2 Revenue includes Net Interest Income and Net Non-Interest Income.

3 Normalised for Net Non-Recurring Costs.

4 BIS Tier I Capital Adequacy Ratio equals Tier I Capital as of the period end divided by Total Risk Weighted Assets as of the same date, both calculated in accordance with the requirements of Basel Accord I.

5 BIS Total Capital Adequacy Ratio equals Total Capital as of the period end divided by Total Risk Weighted Assets as of the same date, both calculated in accordance with the requirements of Basel Accord I

Bank of Georgia (LSE: BGEO, GSE: GEB) (the “Bank”), Georgia’s leading bank, announced today its Q4 2008 and full year 2008 consolidated results (IFRS-based, derived from management accounts), reporting a Q4 2008 Net Loss of GEL 0.5 million and full year 2008 Net Income of GEL 0.7 million.

For the full-year 2008 the Bank reported Normalized Net Operating Income (“NNOI”) of GEL 152.6 million, net provision expense of GEL 132.8 million, which increased 679.1% compared to 2007 mainly due to the conflict between Georgia and Russia in August 2008 (the “Conflict”) and deterioration of the market environment caused by global economic downturn, and Net Income of GEL 0.7 million.

Q4 2008 Highlights

In Q4 2008 the GEL 41.1 NNOI generated by the Bank’s Georgian banking operation (JSC Bank of Georgia on a standalone basis) was offset by:

  • Net Non-Recurring Operating Costs of GEL 30.0 million, which mainly includes revaluation of investment property by the Bank and its selected subsidiaries, costs associated with the restructuring and the headcount reduction at the Bank’s retail banking and insurance divisions, foreign exchange losses of the Bank’s subsidiaries following the 17% devaluation of Georgian Lari on 10 November 2008, as well as increased charity and PR costs following the conflict; and
  • Net Provision Expense of GEL 15.0 million, which includes provision charge of GEL 23.3 million of BG Bank, which increased sharply due to the developing economic crisis and deteriorating market environment in Ukraine, and driven by the partial reversal of provisions taken by the Bank on its leasing subsidiary and its Georgian loan portfolio in Q3 2008 in the aftermath of the Conflict.

In Q4 2008 the Bank’s key operational priorities were determined by the changes in the operating environment shaped by the deepening global financial crisis and the economic downturn in the Bank’s target markets.

Wholesale funding

In December 2008 the Bank secured US$239 million long-term financing from European Bank for Reconstruction and Development (“EBRD”) and International Finance Corporation (“IFC”) and Overseas Private Investment Corporation (“OPIC”). As of 27 February 2009, US$189 million of this amount has been already drawn down.

Cost optimization

In December 2008 the Bank announced the reorganization of its banking business in Georgia, which mainly involved the Bank’s retail businesses most impacted by the decline in lending volumes due to the economic slowdown. As the result of the reorganization the Bank’s headcount reduced by 832 FTEs, resulting in an expected annual cost saving of approximately GEL 12.6 million.

Cost optimization measures were also implemented at the Bank’s subsidiaries. From 30 September 2008 to 31 January 2009 BG Bank reduced headcount by 103 to 583, closing nine branches, GTS reduced staff from 58 to 32 and Aldagi BCI reduced staff by 55 to 255. Additional cost savings are being achieved by renegotiating rental agreements, implementing strict travel policy and other cost saving initiatives.

Bonuses for the Bank’s senior executives for 2008 were significantly reduced due to the challenging market environment, despite strong performance and commitment demonstrated by the Bank’s management team, in particular during the Conflict and in its aftermath. Executive bonuses for the Bank’s top management were GEL1.2 million in 2008 as compared to GEL4.1 million of 2007. The Remuneration Committee agreed with the proposal of the Chairman of the Supervisory Board and Chief Executive Officer that due to the difficult market conditions they receive no cash bonus for 2008.

Q4 2008 Summary of the Bank’s Consolidated Results

In Q4 2008 the Bank’s total Operating Income increased by 28.9% y-o-y, up 2.1% q-o-q1) to GEL 87.7 million. Net Interest Income grew by 26.7% y-o-y to GEL 54.2 million, a 7.8% decrease q-o-q, largely due to the increased borrowing costs. Net Interest Margin (NIM) for the quarter stood at 9.3%, a decrease of 50 basis points from Q3 2008 NIM and an increase of 70 basis points from Q4 2007.

Net Non-Interest Income amounted to GEL 33.5 million up 23.8% q-o-q (up 32.7% y-o-y). Net Foreign Currency Related Income for the quarter grew 81.2% y-o-y to GEL 18.4 million, up 94.5% q-o-q. The growth of Net Foreign Currency Related Income was largely attributed to the increased profitability of BG Bank’ FX business due to the increased volatility of Ukrainian Hryvna. Net Income from Documentary Operations (GEL 1.4 million decreased 15.9% q-o-q (down by 26.0% y-o-y) and Net Fee and Commission Income decreased by 6.3% q-o-q during the quarter (up 35.5% y-o-y) and amounted to GEL 10.3 million. The decrease was mainly caused by the reduced lending activity during the quarter. Net Other Non-Interest Income stood at GEL 3.5 million during Q4 2008, down 30.3% q-o-q and down 38.2% y-o-y. NNOI reached GEL 42.7 million, up 17.6% q-o-q and up 23.6% y-o-y.

Personnel Costs amounted to GEL 21.5 million in Q4 2008, a decrease of 24.1% q-o-q, which was due to significant reduction in bonus accruals in Q4 2008 and the reversal of GEL 7.5 million in bonuses accrued earlier in 2008.

The cost saving measure implemented in Q4 2008 resulted in a 9.2% q-o-q decrease in Consolidated Recurring Operating Costs (up 34.3% y-o-y) to GEL 45.1 million. As the result, normalized operating leverage in Q4 2008 was positive and stood at 11.2% q-o-q. Normalized Cost/Income ratio was 51.4% (Costs exclude Net Non-Recurring Costs) as compared to 57.8% in Q3 2008 and 49.3% in Q4 2007. NNOI of GEL 42.7 million for the Q4 2008 was a 17.6% q-o-q increase (up 23.6% y-o-y).

The Bank’s Net Non-Recurring Cost amounted GEL 30.0 million in Q4 2008. The table below provides breakdown of the Bank’s Net Non-Recurring Costs for the quarter.

Net Non-Recurring Cost Breakdown

Net Non-Reccuring Costs     Bank of Georgia Standalone       SBRE       Insurance       Other       Total    
GEL mln
 
Devaluation of Investment Property 5.1 13.1 18.2
Severance Payment 1.5 0.7 2.2
FX losses 2.1 1.8 3.9
Charity related to Conflict 1.6 1.6
Post Conflict PR and Ad. Campaign 2.2 2.2
Other 1.9 1.9
Total 12.3 13.1 2.8 1.8 30.0
 
 

In Q4 2008 the Bank continued its conservative approach to loan provisioning policy. The deterioration of economic environment in Ukraine and weakening of the Ukrainian Hryvna in Q4 2008, prompted extraordinary sharp increase in net loan loss provisions of BG Bank, which amounted to GEL 23.3 million in Q4 2008 as compared to GEL 0.5 million in Q3 2008 and GEL 0.1mln in Q4 2007. Total net loan loss provisions booked by the Bank on a consolidated basis amounted to GEL 15.0 million, reflecting the partial recovery of provisions booked by the Bank on its Georgia loan portfolio in Q3 2008 and its leasing subsidiary. The effect of the Conflict and the slowdown of the economies in the Bank’s target markets resulted in the increase of consolidated NPLs to GEL 64.3 million or 2.9% of the consolidated gross loans at the year-end 2008. At year-end 2008 NPL coverage ratio stood at 179.6%.

In Q4 2008, the Bank further tightened its conservative lending policy. The 7.9% q-o-q increase in Net Loans to GEL 2.1 billion as of 31 December 2008, was mostly the result of the 17% devaluation of Georgian Lari, in November 2008. The Bank’s Total Assets stood at GEL 3.3 billion, up 4.5% from 30 September 2008 and up 11.5% from Q4 2007.

Against the background of intensified competition for deposits and the effects of economic slowdown, the Bank’s Client Deposits grew by 3.0% q-o-q to GEL 1.2 billion as of 31 December 2008. Bank of Georgia’s standalone deposits grew by 9.8% q-o-q. In the Bank’s view, growth in deposits was largely driven by spending of the Georgian government in December 2008, which resulted in a system-wide deposit inflow at Georgian banks and the resumed flow of funds of the Bank’s international private banking clients.

In December 2008 Bank of Georgia secured US$239 million in wholesale debt funding through two transactions. On 29 December, the Bank received a US$39 million financing package from OPIC, comprising of a US$29 million 10-year senior mortgage facility and a US$10 million 10-year subordinated loan facility. On 31 December 2008 the Bank announced the signing of the agreements with IFC and EBRD providing long-term loan facilities to the Bank in an aggregate amount of US$200 million (the “IFC/EBRD Package”), comprised of senior loan (final maturity in 2014), 10-year subordinated loan and 10-year convertible subordinated loan. As of 27 February 2008 the Bank has drawn down US$ 150 from the IFC/EBRD Package. In January and February 2009 the Bank has repaid US$ 108.5 million of wholesale debt financing. This included US$65 million loan facility arranged by Merrill Lynch and the second tranche of the syndicated loan received by the Bank in August 2007 in the amount of US$43.5 million. In addition, the Bank repurchased Loan Passthrough Notes issued in June 2008 and maturing in June 2010 with the face value of US$27 million for US$24.9 million. The remaining outstanding amount of Loan Passthrough Notes is US$113 million. The Loan Passthrough Notes, which may be put back by noteholders to the Bank in June 2009, represent the Bank’s only remaining international wholesale funding obligation that could become payable by the Bank in 2009.

Full Year 2008 Summary of the Bank’s Consolidated Results

During 2008 the Bank’s Total Operating Income (Revenue) increased by 55.2 % y-o-y to GEL 340.7 million, driven by a 67.9 % y-o-y increase in Net Interest Income and a 36.7 % y-o-y increase in Net Non-Interest Income.

Total Recurring Operating Costs increased by 60.1 % y-o-y to GEL 188.0 million. NNOI grew 49.6 % y-o-y to GEL 152.6 million. The Bank reported Net Income of GEL 0.7 million for 2008, reflecting the negative impact of the extraordinary increase in the full-year Net Provision Expense of GEL 132.8 million (mostly caused by the Conflict-related Net Provision Expense) and extraordinary increase in Net Non-Recurring Cost of GEL 20.7 million.

On 31 December 2008 the Bank’s consolidated Total Assets amounted to GEL 3.3 billion, up 11.5 % y-o-y. Gross Loans stood at GEL 2.2 billion, 25.0 % increase y-o-y. The increase was mainly attributed to the loan book growth in the 1H 2008 and the Lari devaluation against US$ in November 2008. Corporate Gross Loans to Clients in Georgia stood at GEL 918.8 million (up 5.1 % y-o-y). Retail Gross Loans to Clients in Georgia reached GEL 995.0 million (up 51.6 % y-o-y). Wealth Management Gross Loans to Clients in Georgia amounted to GEL 55.5 million (up 25.6 % y-o-y). In Ukraine BG Bank’s Gross Loans to Clients stood at GEL 201.3 million, 12.4 % y-o-y decrease, and accounted for 9.2 % of the Bank’s Total Gross Loans. BNB’s Gross Loans to Clients amounted to GEL 36.6 million, accounting for 1.7 % of the Bank’s Total Gross Loans.

As of 31 December 2008 the Bank’s consolidated Total Liabilities stood at GEL 2.6 billion (up 7.8 % y-o-y and up 6.9 % q-o-q). The Bank’s Consolidated Client Deposits stood at GEL 1.2 billion, a decrease of 8.7% y-o-y. Despite the increase in Client Deposits in Q4 2008, the y-o-y decrease was mostly related to the effect of the Conflict and its immediate aftermath and the appreciation of Georgian Lari (31.4% in 2008) against Ukrainian Hryvna.

As of 31 December 2008 Bank of Georgia on standalone basis held market share of 32.9 %, 32.9 % and 28.8 % by total assets, gross loans, and deposits, respectively in Georgia2 .

As of 31 December 2008 the Bank’s Shareholders’ Equity amounted to GEL 712.9 million, (up GEL 154.9 million y-o-y). The YTD growth of the Bank’s Shareholders’ Equity was mostly attributed to the capital increase through the placement of the new ordinary shares in the form of GDRs on 13 February 2008, raising US$100 million. The Bank’s equity book value per share stood at GEL 22.81 (US$ 13.68 ) as at 31 December 2008, up 11.0 % y-o-y.

Capital Adequacy, Liquidity and Leverage

As of 31 December according to the requirement of the NBG, the Bank’s Tier I Capital Adequacy Ratio was 16.6 % and Total Capital Adequacy Ratio was 13.5 % at the same time by BIS standards, the Bank’s Tier I Capital Adequacy Ratio was 22.5 % and Total Capital Adequacy Ratio was 27.3 %. Following the drawdown of subordinated and convertible subordinated facilities from the IFC/EBRD package on 27 February the Bank’s Total Capital Adequacy Ratio according to NBG reached 16.02%.

The Bank’s NBG Average Liquidity Ratio of 27.3 % as of December 2008 increased modestly from 27.2 % as of 30 September 2008, still well above the NBG requirement of 20%.

The Bank’s leverage ratio (Total Liabilities to Shareholders Equity) stood at solid 3.62 x as of 31 December 2008, up from 3.27x as of 30 September 2008.

JSC Bank of Georgia (Standalone)

Bank of Georgia’s banking operations in Georgia, which are provided through JSC Bank of Georgia, reported Q4 2008 standalone Net Income of GEL 26.4 million, as compared to Net Loss of GEL 58.0 in Q3 2008 (up 81.5 % y-o-y). Increased profitability was due to significant reduction in bonus accruals in Q4 2008 and the reversal of (GEL 7.5 million) bonus accrual charge earlier in 2008, partial recovery of provisions taken by the Bank on its Georgian loan portfolio in Q3 2008 in the aftermath of the Conflict which more than offset the negative effect of Net Non-Recurring Costs of GEL 12.0 million.

Total Operating Income reached GEL 68.6 million down 3.9 % q-o-q and up 26.7 % y-o-y. Reflecting higher borrowing costs due to a challenging market environment, Net Interest Income reached GEL 49.7 million down 4.6% q-o-q and up 43.4 % y-o-y. Net Non-Interest Income amounted to GEL 18.9 million, down 1.8 % q-o-q and down 3.0 % y-o-y. Despite the challenging operating environment during the fourth quarter 2008, Bank of Georgia’s operating leverage on normalized basis was positive and stood at 14.4 % q-o-q. NNOI for the quarter grew to GEL 41.1 million, up by 9.1 % and up 28.6 % y-o-y.

For the full-year basis 2008, Bank of Georgia reported Standalone Net Income of GEL 22.2 million, down 64.1 % y-o-y due to the Conflict related Net Non-Recurring Costs and provisions booked by the Bank on a standalone basis in Q3 2008.

In 2008 Bank of Georgia’s Net Interest Income grew 56.4 % to GEL 197.3 million and Net Non-Interest Income increased by 37.9 % to GEL 80.4 million resulting in Total Operating Income for the period of GEL 277.7 million, up 50.6 % y-o-y. In 2008 Recurring Operating Costs on a standalone basis increased by 41.6 % to GEL 121.4 million, driving a 58.3 % growth of NNOI to GEL 156.2 million for the full year. Normalized operating leverage was positive and stood at 9.0% on a full-year basis.

As of 31 December 2008 Bank of Georgia’s Total Assets on a standalone basis stood at GEL 3.0 billion, up 16.1 % y-o-y. The growth rate reflects the effects of the Conflict and slowdown of the economy in the second half of the year. Net Loans increased by 25.0 % y-o-y to GEL 1,9 billion.

Breakdown of the Total Gross Loans, currency, loan loss reserves and NPLs by Business Units

Bank of Georgia, Standalone                      
GEL million GEL FC

Gross

Loan
Book

LL Reserves NPLs

Net Loan
Book

RB + WM 309.7 740.9 1,050.6 (49.8) 33.9 1,000.8
CB 219.6 703.5 923.2 (45.2) 6.9 878.0
Corporate Centre, (mainly CB loans) 3.4 10.9 14.4 (5.2) 15.8 9.2
Total 532.8 1,455.4 1,988.2 (100.2) 56.6 1,888.0
as percent of Total Gross Loan Book 26.8% 73.2%
 
 

In Q4 2008, the Bank’s deposits in Georgia increased by GEL 95.7 million to GEL 1.1 billion, up 9.8 % q-o-q. The growth in deposits was largely driven by increased spending of the Georgian government in December 2008, which resulted in a strong system-wide inflow in Georgian banks and the resumed flow of funds of the Bank’s international private banking clients.

Breakdown of Total Deposits by currency

Bank of Georgia, Stand-alone   30-Sep-08     31-Dec-08
GEL million GEL     FC     Total GEL     FC     Total
RB + WM 113.6 282.8 396.4 89.1 329.4 418.5
CB 376.3 199.9 0.6 269.0 380.8 649.8
Total 489.9 482.6 397.0 358.1 710.2 1,068.3
 
 

Business Unit Overview

Corporate Banking (CB)

In Q4 2008 CB Allocated Revenues reached GEL 26.1 million, up 5.8 % q-o-q and up 16.8 % y-o-y, while Allocated Recurring Costs decreased to GEL 2.5 million, down 45.1 % q-o-q, down by 68.8 % y-o-y . NNOI grew to GEL 23.6 million, up 17.5 % q-o-q and up 65.7 % y-o-y, contributing 55.3 % to the consolidated NNOI. Q4 2008 Net Income equaled GEL 38.2 million, compared to the CB Net Loss of GEL 45.6 million in Q3 2008 and up 355.9 % y-o-y.

On an annual basis for 2008, Allocated Revenues in Q4 2008 grew 36.8 % y-o-y to GEL 97.7 million, while Allocated Recurring Costs decreased by 5.1 % y-o-y to GEL 21.3 million. NNOI grew by 56.1 % y-o-y to GEL 76.4 million, contributing 50.0 % to the consolidated NNOI. CB reported Net Income equaled GEL 15.5 million, down 49.2 y-o-y, which was primarily due to Conflict related provisions booked by the Bank in Q3 2008.

CB Gross Loans stood at GEL 918.8 million, up 15.5% q-o-q and up 5.1 % y-o-y. The increase in the Gross Loans in Q4 2008 was mainly due to the devaluation of Lari against the US$ in November 2008. CB Client Deposits increased by 12.6 % q-o-q since the outflow during and in the aftermath of the Conflict to GEL 649.0 million (down 5.6 % y-o-y).

In a move to increase revenue per client and clients’ account balances through better understanding of the client needs, a Senior Client Coverage model has been introduced. The key element of the Senior Client Coverage model is the coverage of the Bank’s top existing and targeted 50 corporate clients by the Bank’s top six senior executives.

In order to help improve the debt servicing ability of its corporate client base, whose ability was impaired by the Conflict and the economic slowdown, the Bank created a Corporate Restructuring Team (“CRT”) which will focus on developing a customer-focused loan restructuring solutions CRT will also advise the Bank’s credit committee on restructuring (if applicable) of corporate loans in excess of GEL 1 million.

In February 2009, the Bank announced the restructuring package of loans to 15 residential real estate projects owned by ten Georgian residential real estate companies. These residential real estate projects are near completion and are commercially viable under recently reduced real estate prices, according to the Bank’s analysis. Bank of Georgia can exercise forced sales clause, which enables the Bank to sell real estate at much lower than already reduced price and recover the exposure to the real estate developer. The Bank’s total exposure to the afore-mentioned 15 projects amounts to approximately GEL 39 million (US$23 million) out of GEL 79 million of the total exposure to the real estate companies.

Retail Banking (RB)

In Q4 2008 RB Allocated Revenues reached GEL 48.5 million down 4.2 % q-o-q and up 73.1 % y-o-y, while Allocated Recurring Costs grew to GEL 18.7 million, up 0.9 % q-o-q and up 99.9 % y-o-y. In Q4 2008 NNOI stood at GEL 29.8 million down 7.1 % q-o-q and up 59.7 % y-o-y, contributing 69.9 % to the consolidated NNOI. RB’s provision charge in Q4 2008 was GEL 24.2 million as compared to GEL 17.9 million provision charge in Q3 2008. Quarterly Net Income in Q4 2008 equaled GEL 1.4 million.

On annual basis for 2008 Allocated Revenues grew 93.5 % y-o-y to GEL 180.6 million, while Allocated Recurring Costs increased by 75.5 % y-o-y to GEL 75.9 million. NNOI grew 109.1 % y-o-y to GEL 104.7 million, contributing 68.6 % to the consolidated NNOI. Net Income increased 33.5 % y-o-y to GEL 38.7 million.

RB Gross Loans grew to GEL 995.0 million up by 6.9 % q-o-q and up 51.6 % y-o-y driven by increased lending activity due to high demand for mortgages, car loans, consumer loans, credit cards and other retail banking products predominantly in 1H 2008. RB Client Deposits (including WM client deposits) decreased 0.9% y-o-y to GEL 419.3 million (up 5.8% q-o-q).

In light of the recent developments on the Georgian market, the Bank’s retail banking strategy in Georgia has been modified. The new strategic priority entails an aggressive targeting of the mass affluent client base, with an aim to enhance retail deposit base and maximize revenue per client by means of improved client service, cost control and increased efficiency. RB time deposits grew 10.6 % q-o-q to GEL 241.1 million by 31 December 2008. In line with its strategy for retail banking, the Bank launched new investment deposit product, which guarantees principal and interest and additionally allows 15 % participation in oil price movement.

In December 2008 the Bank completed the reorganization mainly involving its retail business lines, which were most impacted by the decline in lending volumes due to the economic slowdown in Georgia. The reorganization involved the closure of POS lending and mobile sales units. General consumer and mortgage lending units were merged and downsized. Going forward, the Bank’s main priorities for retail business will be improving efficiency of the IT systems, customer service and cost control.

The reorganization of the RB also entails the optimization of the Bank’s branch network. In January and February 2009, the Bank closed down 13 branches (mostly limited-service service centers in Populi supermarket chain) translating into an expected annual cost saving of up to GEL 0.5 million. Going forward, the Bank will continue the re-evaluation of the existing branches, with profitability and size of deposit portfolio being the main criteria. By the end of February 2009 the Bank renegotiated 32 out of 97 branch rental contracts, resulting in an expected annual cost savings of approximately GEL 1 million, or approximately 14 % decrease.

Management Change

Reflecting expected slowdown in the development in the retail business in Georgia and decision to put on hold the development of the retail business in Ukraine, the management structure of Retail Business Unit has been simplified and streamlined. Mikheil Gomarteli, formerly a Co-Head of Retail Banking in charge of Sales was appointed as Deputy Chief Executive Officer overseeing Retail Banking operations in Georgia. Shahram Sharifi, formerly Global Head of Retail Banking, was appointed as Head of Strategic Projects. In this new role he will focus on Technological improvements and increasing efficiency through the implementation of new strategic IT projects. Final decision on IT investments will be made in May 2009.

Wealth Management (WM)

In 2008 Allocated Revenues for WM was GEL 5.8 million, an increase of 22.9 % y-o-y. Net Income equaled GEL 788 thousand as compared to Net Income of GEL 1.9 million for 2007. On a quarterly basis, Allocated Revenues was GEL 1.4 million, up 14.8 % y-o-y and down 4.3 % q-o-q. Net Income amounted to GEL 209 thousand in Q4 2008.

WM Gross Loans stood at GEL 55.5 million an increase of 25.6 % y-o-y and up 22.9 % q-o-q. WM Client Deposits increased by 38.0 % y-o-y to GEL 96.7 million, up 37.3 % q-o-q.

Growth in WM deposits in Q4 is mainly attributable to WM’s non-resident clients, in particular Israeli citizens, who account for about 30% of total WM deposits.

Further developing WM client base in Israel is a strategic priority for the Bank. In 2008 the Bank established a subsidiary in Israel: Georgian Financial Investments (GFI) with the view to attract high-yield short term deposits from Israeli high net worth individual clients, corporates and institutional investors. Michael Abramovitch, who joined the Bank in Tel Aviv in 2008 from Excellence Provident Fund, has been appointed as Head of GFI.

The Bank views WM as a strategically important funding tool for the Bank. Recently WM launched several new attractive products, including Investment deposits the return on which is linked to the movement of oil and gold price, as well as deposits linked to currency hedging.

Management Change

Structured Products Department was merged with Wealth Management Business Unit and Vasil Revishvili, formerly Head of the Structure Products Department, was appointed as the Head of the merged entity. Before joining Bank of Georgia in August 2008, Mr. Revishvili worked for four years at Pictet Asset Management in London and Geneva as Senior Investment Manager.

BG Bank (Ukraine)

In Ukraine Q4 2008 was marked by rapid deterioration of the banking market environment due to significant devaluation of Hryvna, sharp economic slowdown and liquidity problems. The deterioration of the market environment has prompted the Bank’s management to put on hold its strategic development plans for BG Bank and focus on BG Bank’s liquidity, deposit retention, loan portfolio quality, and scaling down of its operations.

Although BG Banks liquidity and capital position remained strong throughout Q4 2008, the likely deterioration of the loan portfolio due to the economic downturn and Hryvna devaluation became apparent. Despite its solid operating performance, in Q4 2008 BG Bank recorded a Net Loss of GEL 10.7 million mainly driven by sharply increased loan loss provision charge for the quarter (GEL 23.3 million).

BG Bank’s Revenue increased to GEL 13.6 million up 56.1 % q-o-q, while Allocated Recurring Costs stood at GEL 5.3 million down 20.9 % q-o-q as the result of aggressive cost-cutting measures initiated in Q3 2008. NNOI reached GEL 8.3 million up 317.3 % q-o-q. Net Loss for the quarter stood at GEL 10.7 million as compared to Net Income of GEL 0.7 million in Q3 2008.

On annual basis, BG Bank’s Total Operating Income amounted to GEL 35.6 million, while Recurring Costs stood at GEL 26.3 million. NNOI reached GEL 9.3 million contributing 6.1 % to consolidated NNOI. Net Loss for 2008 stood at GEL 10.0 million.

BG Bank’s Total Assets decreased by 30.2 % y-o-y to GEL 249.0 million (down 26.1 % q-o-q), largely due to the 31.4 % the depreciation of Hryvna against Lari in 2008. Gross Loans to Clients stood at GEL 201.3 million by 31 December 2008, down by 12.4 % y-o-y and down 21.6 % q-o-q. 57.0 % of BG Bank’s gross loans is issued in Hryvna and the remaining loans are issued in foreign currency.

Client Deposits dropped 52.8 % y-o-y and 25.3 % q-o-q to GEL 127.4 million. As expressed in Hryvna, BG Bank’s Client Deposits in Q4 2008 remained unchanged. BG Bank’s Total Liabilities stood at GEL 183.9 million at year-end 2008 as compared to GEL 286.8 million at year end 2007.

Economic downturn resulted in expected deterioration of the quality of BG Bank’s loan portfolio. In Q4 2008 BG Bank booked a GEL 23.3 million loan loss provision charge as compared to loan loss provision charge of GEL 0.5 million in Q3 2008. At year-end 2008, BG Bank’s NPLs stood at GEL 6.6 million, or 3.3 % of BG Bank’s Gross Loan book. The NPL coverage ratio stood at 319.7 % as of 31 December 2008. Loan Loss Reserves to Gross Loans amounted to 21.1%.

BG Bank’s leverage is at a healthy 2.9x. Unlike most of the banks in Ukraine, BG Bank has no international wholesale funding to be refinanced in 2009. The bank’s exposure to the real estate development sector is limited to GEL 21.3 million.

As of 31 December 2008, Capital Adequacy Ratio of the BG Bank stood at 21.0% by the requirements of the National Bank of Ukraine. According to the requirement of the National Bank of Ukraine this ratio should be no less than 8%. Excess Tier I Capital as of 31 December 2008 amounted to UAH 183 million (US$23.8 million)

Market environment in Ukraine continued to deteriorate in January and February 2009. US$/UAH exchange rate depreciated further and as of 27 February stood at 7.7 , the deposit outflow continued despite certain restrictions on deposit withdrawals introduced by NBU, and loan portfolio continued to deteriorate.

In this new increasingly challenging market environment BG Bank’s priorities are:

  • Increasing bank’s deposit base, in particular retail deposits, by reducing outflow of existing deposits and acquiring new depositors;
  • Working with the banks borrowers focusing on restructuring/recovery of problem loans;
  • Finding additional sources of liquidity in Ukraine and internationally:
  • Cost optimization through downscaling of the operations.

Belarus

In Q4 2008 BNB’s Total Operating Income increased to GEL 2.1 million, up 0.8 % q-o-q, while Recurring Costs stood at GEL 1.5 million up 16.3 % q-o-q, resulting in a Net Income of GEL 243 thousand, down 76.2 % q-o-q. On 31 December 2008, BNB’s Total Assets stood at GEL 73.7 million, up 10.5 % q-o-q and Gross Loans to Clients equaled GEL 36.6 million, up 5.4 % q-o-q. Client Deposits amounted to GEL 30.7 million, up 15.7 % q-o-q, while Total Liabilities stood at GEL 32.1 million up 7.8 % q-o-q.

Total Capital Adequacy after devaluation of Belarusian Ruble by 20% stood at solid 54.5% , while Tier I Capital Adequacy Ratio amounted to 30.1% . National Bank of Belarus requires Total Capital Adequacy ratio of 8 % and Tier I Capital Adequacy Ratio of 6 %.

Management Change

Constantin Tsereteli, formerly a Co-Head of Retail Banking in Georgia, has been seconded for a year as a Deputy Chief Executive Officer of BNB, with a mandate to increase efficiency of BNB’s operations and to further develop BNB’s business, in particular SME and Micro businesses, as well as retail business focusing mostly on mass affluent client base for the deposit gathering purposes.

Galt & Taggart Securities (GTS)

Against the background of rapidly developing global financial crisis and falling equity markets in Georgia and Ukraine (in Q4 2008 GTS Index decreased by 40.6 % and the PFTS Index decreased by 18.4 %) GTS continued scaling down, restructuring and reducing risk profile of its business, adjusting its operation to the new market realities.

In Q4 2008 GTS staff was further downsized from 58 to 37. Headcount was further reduced in January and February 2009. Savings were also achieved through the reduction of rent expense and a stricter travel policy for GTS employees.

In Q4 2008 GTS reported a Net Loss of GEL 0.8 million, an improvement compared to Net Loss of GEL 2.3 million in Q3 2008. For the full year 2008 GTS recorded net loss of GEL 7.5 million.

Asset Management (AM)

The following key entities are included in the AM segment: Galt & Taggart Asset Management (“GTAM”), the Bank’s asset management arm, majority owned by the Bank; JSC Liberty Consumer ('LC'), a GSE-listed consumer-and retail- oriented investment company managed by GTAM in which the Bank owns 65.24% equity stake and JSC SB Real Estate (“SBRE”), a real estate investment company managed by GTAM in which LC owns 52.08% equity stake.

As part of its strategy in 2008, the Bank declared its intention to review its positions in GTAM, LC and SBRE. The Bank has held discussions with potential buyers/investors for each of these assets, however due to challenging market conditions none of these transactions were completed. Going forward the Bank plans to continue exploring its options in respect of GTAM, LC and SBRE.

In Q4 2008 AM reported Net Loss of GEL 12.1 million, as compared to Net Loss of GEL 0.41 million in Q3 2008 and Net Income of GEL 13.8 million in Q4 2007. The quarterly net loss was mainly driven by the revaluation of investment real estate properties owned by SBRE following a drop in real estate price in Georgia in 2H 2008.

On annual basis in 2008 AM reported Net Loss of GEL 0.9 million as compared to Net Income of GEL 12.7 million in 2007.

On 31 December 2008 LC had total assets of GEL 100.6 million and net book value of GEL 70.6 million and SBRE had total assets of GEL 53.2 million and net book value of GEL 38.0 million.

Insurance

Gross Premiums Written of Aldagi BCI, the bank’s fully-owned Georgian insurance subsidiary, increased by 45.9 % y-o-y to GEL 61.1 million in 2008. Net Premiums Earned grew 122.6 % y-o-y to GEL 37.1 million. Revenues increased by 10.2 % y-o-y to GEL 7.5 million in 2008. Net Loss in 2008 equaled GEL 5.0 million. On a quarterly basis, Revenues increased by 30.2 % y-o-y to GEL 1.0 million, while Net Loss amounted to GEL 4.6 million for Q4 2008.

Insurance business showed poor results due to non-recurring FX loss of GEL 2.1 million, a result of Lari devaluation in November 2008, severance package of (GEL 0.7 million) and the negative effect of the outstanding number of health insurance contracts in 2008. A GEL 6.7 million loss was attributed to 10 health insurance contracts during the year. Seven loss making contracts that accounted for a GEL 4.2 million loss have been cancelled in the beginning of 2009. Gross written premium has been increased significantly on two contracts, which contributed GEL 1.8 million to the 2008 losses. One of these contracts expires in Q1 2009.

In Q4 2008 the Government of Georgia announced that in 2009 it intends to increase premium on health insurance for socially vulnerable population from GEL 11.0 per person per month to GEL 15.0 and no additional health services will be included. This increase makes participation in the program for socially vulnerable economically attractive and Aldagi BCI intends to participate in tender process in 2009.

In June 2008 insurance companies in Georgia (including Aldagi BCI) increased health insurance premium on average by 250%. Aldagi BCI’s loss ratio on newly acquired clients or renewed health insurance contracts (41,000 clients) under new tariffs amounted to 45%. Clean-up of old health insurance portfolio and introduction of new tariffs are expected to positively affect P&L of Aldagi BCI in 2009.

Currently, Aldagi BCI insures 205,000 people, of which 58,000 are socially vulnerable, 42,000 are insured through municipality of Tbilisi and the rest are insured through insurance programs offered by their employers.

Aldagi BCI’s restructuring of its Bancassurance business resulted in a headcount reduction by 55 employees (on 31 January 2009 Aldagi BCI’s total staff was 255), representing annual cost saving of GEL 600,000.

In 2009 Aldagi BCI’s objective is to improve its profitability through better claims management, cost control and efficiency. In line with its strategy of focusing on its core businesses, the Bank continues considering its strategic options in respect of Aldagi BCI.

Comments

“We are very pleased that despite the global financial crisis and economic slowdown our Georgian banking business, which accounts for a large majority of our assets and net income, is holding up well. Being the largest bank in Georgia, we are, of course, highly dependent on the macroeconomic environment in the country. Fortunately, despite a slowdown, Georgian economy has performed well compared to other countries in our region. National currency has devalued by 17% in November without causing too much excitement amongst general population, public finances remain sound and banking system remains stable.

In Q4 the Bank successfully completed several projects which strengthened its position vis-à-vis difficult market environment. In December we secured US$239 mln in wholesale funding from IFC, EBRD and OPIC, which allows the Bank to comfortably meet all our obligations on repayment of international debt through 2011.

Also in December we completed a large-scale reorganization of our retail business in Georgia, which helped to adjust our business to declining retail lending volumes and re-focus front office employees on closer work with existing client base and deposit-gathering. Anticipating deterioration in our loan book we have allocated significant resources to working on restructuring and collection of problematic corporate and retail loans.

Regrettably, some of our subsidiaries were unable to avoid losses related to the economic slowdown and currency devaluation. SBRE booked a GEL 13.1 million loss on its investment real estate portfolio for the quarter and Aldagi BCI and Georgian Leasing Company booked a GEL 3.3 million loss due to devaluation of Lari.

In Ukraine we have put on hold our development plans for BG Bank due to increasingly difficult market environment and now are focused on managing BG Bank’s liquidity, deposit retention and quality of the loan portfolio. The Bank’s senior management intends to be directly and actively involved in day-to-day management of BG Bank until Ukraine’s macro environment and banking system show signs of a durable stability.

Due to the challenging market environment in Q4 we have been unable to move forward our strategy of reducing the Bank’s involvement in Aldagi BCI, LC and SBRE. Although we held preliminary discussions with several potential investors, we were unable to progress further due the global financial crisis. However, re-focusing on our core businesses remains our strategic priority and we intend to renew discussions with potential investors as soon as the market environment permits”, commented Nicholas Enukidze, Chairman of the Supervisory Board.

SEGMENT RESULTS

Total Operating Income (Revenue)     Growth y-o-y     2008       Share       2007       Share    
Corporate Banking 36.83% 97,723 28.69% 71,418 32.54%
Retail Banking 93.51% 180,644 53.03% 93,349 42.54%
Wealth Management 22.91% 5,793 1.70% 4,713 2.15%
Ukraine 412.06% 35,568 10.44% 6,946 3.17%
Belarus NMF 4,192 1.23% - 0.00%
Galt & Taggart Securities -97.85% 485 0.14% 22,556 10.28%
Asset Management -84.26% 3,539 1.04% 22,481 10.24%
Insurance 10.22% 7,457 2.19% 6,766 3.08%
Corporate Center/Eliminations -160.08% 5,273 1.55% (8,777) -4.00%
Total Operating Income (Revenue) 55.24% 340,674 100.00% 219,452 100.00%
 
Total Recurring Operating Costs          
Corporate Banking -5.07% 21,340 11.35% 22,481 19.14%
Retail Banking 75.45% 75,933 40.38% 43,278 36.85%
Wealth Management 67.29% 3,139 1.67% 1,876 1.60%
Ukraine 457.11% 26,317 14.00% 4,724 4.02%
Belarus NMF 2,844 1.51% - 0.00%
Galt & Taggart Securities 53.26% 9,989 5.31% 6,517 5.55%
Asset Management -0.12% 6,801 3.62% 6,809 5.80%
Insurance 28.20% 9,574 5.09% 7,468 6.36%
Corporate Center/Eliminations 32.18% 32,105 17.07% 24,289 20.68%
Total Recurring Operating Costs 60.11% 188,041 100.00% 117,443 100.00%
 
Net Income/Loss          
Corporate Banking -49.18% 15,470 2068.18% 30,441 40.24%
Retail Banking 33.50% 38,682 5171.39% 28,976 38.31%
Wealth Management -59.33% 788 105.35% 1,938 2.56%
Ukraine -715.39% (10,015) -1338.90% 1,627 2.15%
Belarus NMF 1,263 168.85% - 0.00%
Galt & Taggart Securities -162.49% (7,520) -1005.35% 12,034 15.91%
Asset Management -107.24% (918) -122.73% 12,686 16.77%
Insurance 589.36% (4,986) -666.58% (723) -0.96%
Corporate Center/Eliminations 182.37% (32,016) -4280.21% (11,338) -14.99%
Net Income -99.01% 748 100.00% 75,642 100.00%
 
Basic EPS Contribution Growth y-o-y Contribution Share Contribution Share
Corporate Banking -57.19% 0.50 2500.00% 1.17 40.34%
Retail Banking 12.46% 1.25 6250.00% 1.11 38.28%
Wealth Management -65.74% 0.03 150.00% 0.07 2.41%
Ukraine -618.41% (0.32) -1600.00% 0.06 2.07%
Belarus NMF 0.04 200.00% - 0.00%
Galt & Taggart Securities -152.64% (0.24) -1200.00% 0.46 15.86%
Asset Management -106.10% (0.03) -150.00% 0.49 16.90%
Insurance 480.72% (0.16) -800.00% (0.03) -1.03%
Corporate Center/Eliminations 137.88% (1.05) -5250.00% (0.44) -14.83%
Total -99.17% 0.02 100.00% 2.90 100.00%
 
 

SEGMENT RESULTS CONT’D

Total Operating Income (Revenue)     Growth y-o-y       Q4 2008       Share       Q3 2008       Share       Q4 2007       Share       Growth q-o-q
Corporate Banking 16.80% 26,118 29.77% 24,680 28.73% 22,361 32.85% 5.83%
Retail Banking 73.13% 48,514 55.29% 50,621 58.92% 28,023 41.17% -4.16%
Wealth Management 14.84% 1,421 1.62% 1,485 1.73% 1,237 1.82% -4.31%
Ukraine 95.87% 13,605 15.51% 8,714 10.14% 6,946 10.20% 56.12%
Belarus NMF 2,105 2.40% 2,087 2.43% - 0.00% NMF
Galt & Taggart Securities -53.09% 1,807 2.06% (1,934) -2.25% 3,852 5.66% -193.44%
Asset Management -154.88% (11,019) -12.56% 477 0.55% 20,078 29.49% -2412.13%
Insurance 30.21% 956 1.09% 2,101 2.45% 734 1.08% -54.48%
Corporate Center/Eliminations -127.95% 4,237 4.83% (2,316) -2.70% (15,158) -22.27% -282.92%
Total Operating Income (Revenue) 28.90% 87,744 100.00% 85,914 100.00% 68,073 100.00% 2.13%
 
Total Recurring Operating Costs                
Corporate Banking -68.83% 2,532 5.62% 4,609 9.30% 8,124 24.21% -45.06%
Retail Banking 99.91% 18,702 41.49% 18,531 37.30% 9,355 27.88% 0.92%
Wealth Management -109.34% (38) -0.08% 1,844 3.70% 403 1.20% -102.04%
Ukraine 12.66% 5,322 11.81% 6,730 13.60% 4,724 14.08% -20.92%
Belarus NMF 1,529 3.39% 1,315 2.60% - 0.00% 16.30%
Galt & Taggart Securities 84.19% 3,166 7.02% 894 1.80% 1,719 5.12% 254.14%
Asset Management -44.52% 1,634 3.62% 984 2.00% 2,945 8.78% 66.05%
Insurance 14.41% 2,909 6.45% 2,236 4.50% 2,543 7.58% 30.14%
Corporate Center/Eliminations 149.27% 9,318 20.67% 12,484 25.20% 3,738 11.14% -25.36%
Total Recurring Operating Costs 34.35% 45,075 100.00% 49,627 100.00% 33,551 100.00% -9.17%
 
Net Income/Loss                
Corporate Banking 355.90% 38,218 -6991.11% (45,630) 77.39% 8,383 32.53% -183.76%
Retail Banking -82.19% 1,440 -263.34% 11,488 -19.49% 8,085 31.37% -87.47%
Wealth Management -63.73% 209 -38.32% (406) 0.69% 577 2.24% -151.59%
Ukraine -757.27% (10,696) 1956.65% 721 -1.22% 1,627 6.31% -1583.20%
Belarus NMF 243 -44.40% 1,020 -1.73% - 0.00% NMF
Galt & Taggart Securities -174.11% (821) 150.20% (2,292) 3.89% 1,108 4.30% -64.18%
Asset Management -187.25% (12,073) 2208.38% (410) 0.70% 13,837 53.69% 2845.04%
Insurance 237.93% (4,625) 846.02% (26) 0.04% (1,369) -5.31% 17660.31%
Corporate Center/Eliminations 92.14% (12,442) 2275.91% (23,423) 39.73% (6,475) -25.12% -46.88%
Net Income/Loss -102.12% (547) 100.00% (58,958) 100.00% 25,774 100.00% -99.07%
 
Basic EPS Contribution Growth y-o-y Contribution Share Contribution Share Contribution Share Growth q-o-q
Corporate Banking 323.46% 1.25 -6250.00% (1.51) 77.04% 0.29 30.53% -182.75%
Retail Banking -90.32% 0.03 -150.00% 0.37 -18.88% 0.28 29.47% -92.51%
Wealth Management -68.38% 0.01 -50.00% (0.01) 0.51% 0.02 2.11% -147.26%
Ukraine -654.25% (0.35) 1750.00% 0.02 -1.02% 0.06 6.32% -1560.69%
Belarus NMF 0.01 -50.00% 0.03 -1.53% - 0.00% -78.12%
Galt & Taggart Securities -179.62% (0.02) 100.00% (0.07) 3.57% 0.03 3.16% -68.58%
Asset Management -174.37% (0.40) 2000.00% (0.02) 1.02% 0.53 55.79% 2122.52%
Insurance 180.08% (0.15) 800.00% (0.00) 0.00% (0.05) -5.26% NMF
Corporate Center/Eliminations 78.56% (0.39) 1950.00% (0.77) 39.29% (0.22) -22.11% -49.10%
Total -101.93% (0.02) 100.00% (1.96) 100.00% 0.95 100.00% -99.06%
 
 

SEGMENT RESULTS CONT’D

Total Assets     Growth y-o-y       December-08       Share       December-07       Share    
Corporate Banking -5.59% 1,396,447 42.39% 1,479,181 50.08%
Retail Banking 35.26% 1,503,318 45.63% 1,111,388 37.63%
Wealth Management 11.75% 84,348 2.56% 75,481 2.56%
Ukraine -30.21% 248,964 7.56% 356,756 12.08%
Belarus NMF 73,707 2.24% - 0.00%
Galt & Taggart Securities -52.39% 23,873 0.72% 50,141 1.70%
Asset Management 46.30% 109,935 3.34% 75,146 2.54%
Insurance 39.16% 86,226 2.62% 61,963 2.10%
Corporate Center/Eliminations -9.46% (232,193) -7.05% (256,445) -8.68%
Total Assets 11.55% 3,294,625 100.00% 2,953,611 100.00%
 
Loans to Clients, Gross          
Corporate Banking 5.12% 918,790 41.78% 874,030 49.68%
Retail Banking 51.57% 995,040 45.25% 656,482 37.32%
Wealth Management 25.61% 55,527 2.52% 44,204 2.51%
Ukraine NMF 201,314 9.15% 229,756 13.06%
Belarus NMF 36,566 1.66% - 0.00%
Galt & Taggart Securities 0.00% - 0.00% - 0.00%
Asset Management 0.00% - 0.00% - 0.00%
Insurance 0.00% - 0.00% - 0.00%
Corporate Center/Eliminations -82.04% (8,113) -0.37% (45,174) -2.57%
Total Loans to Clients 25.00% 2,199,124 100.00% 1,759,297 100.00%
 
Total Liabilities          
Corporate Banking -0.87% 1,205,304 46.69% 1,215,841 50.75%
Retail Banking 23.12% 921,254 35.68% 748,236 31.23%
Wealth Management 34.79% 129,995 5.04% 96,446 4.03%
Ukraine -35.86% 183,942 7.12% 286,766 11.97%
Belarus NMF 32,050 1.24% - 0.00%
Galt & Taggart Securities -9.09% 16,906 0.65% 18,596 0.78%
Asset Management 16.16% 36,928 1.43% 31,791 1.33%
Insurance 58.83% 70,495 2.73% 44,385 1.85%
Corporate Center/Eliminations -67.36% (15,158) -0.59% (46,441) -1.94%
Total Liabilities 7.77% 2,581,716 100.00% 2,395,620 100.00%
 
Client Deposits          
Corporate Banking -14.10% 649,037 52.43% 687,338 50.71%
Retail Banking 1.00% 322,579 26.06% 353,212 26.06%
Wealth Management 10.10% 96,702 7.81% 70,074 5.17%
Ukraine NMF 127,359 10.29% 269,944 19.92%
Belarus NMF 30,721 2.48% - 0.00%
Galt & Taggart Securities 326.70% 11,451 0.93% 8,630 0.64%
Asset Management 0.00% - 0.00% - 0.00%
Insurance 0.00% - 0.00% - 0.00%
Corporate Center/Eliminations 0.00% - 0.00% (33,722) -2.49%
Total Client Deposits 12.90% 1,237,849 100.00% 1,355,476 100.00%
 
Book Value Per Share Growth y-o-y Contribution Share Contribution Share
Corporate Banking -36.93% 6.12 26.81% 9.70 47.19%
Retail Banking 39.27% 18.62 81.65% 13.37 65.08%
Wealth Management 89.18% (1.46) -6.40% (0.77) -3.76%
Ukraine -19.28% 2.08 9.12% 2.58 12.54%
Belarus NMF 1.33 5.84% - 0.00%
Galt & Taggart Securities -80.81% 0.22 0.98% 1.16 5.65%
Asset Management 46.31% 2.34 10.24% 1.60 7.77%
Insurance -22.24% 0.50 2.21% 0.65 3.15%
Corporate Center/Eliminations -10.20% (6.94) -30.44% (7.73) -37.64%
Book Value Per Share 11.01% 22.81 100.00% 20.55 100.00%
 
 

STANDALONE 2008 INCOME STATEMENT DATA

Period Ended     2008       2007       Growth3
Standalone, IFRS Based US$1       GEL US$2       Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited)
Interest Income 215,813 359,761 146,392 232,997 54.4%
Interest Expense 97,462 162,469 67,139 106,858 52.0%
Net Interest Income 118,352 197,292 79,253 126,138 56.4%
Fee & Commission Income 26,672 44,462 20,192 32,138 38.3%
Fee & Commission Expense 4,440 7,402 3,070 4,887 51.5%
Net Fee & Commission Income 22,231 37,060 17,122 27,251 36.0%
Income From Documentary Operations 5,206 8,679 4,894 7,789 11.4%
Expense On Documentary Operations 1,349 2,249 1,282 2,040 10.2%
Net Income From Documentary Operations 3,858 6,431 3,612 5,749 11.8%
Net Foreign Currency Related Income 21,725 36,215 15,628 24,874 45.6%
Net Other Non-Interest Income 402 669 252 401 67.0%
Net Non-Interest Income 48,215 80,375 36,614 58,275 37.9%
Total Operating Income (Revenue) 166,567 277,667 115,867 184,413 50.6%
Personnel Costs 39,908 66,527 32,606 51,895 28.2%
Selling, General & Administrative Costs 14,044 23,412 9,106 14,492 61.5%
Procurement & Operations Support Expenses 7,973 13,291 5,815 9,255 43.6%
Depreciation & Amortization 9,303 15,507 5,199 8,274 87.4%
Other Operating Expenses 1,623 2,706 1,152 1,833 47.6%
Total Recurring Operating Costs 72,851 121,442 53,877 85,750 41.6%
Normalized Net Operating Income 93,716 156,225 61,990 98,663 58.3%
Net Non-Recurring Income (Costs) (7,815) (13,028) (6,607) (10,515) 23.9%
Profit Before Provisions 85,901 143,198 55,383 88,148 62.5%
Net Provision Expense/(Benefit) 70,202 117,026 10,046 15,990 631.9%
Pre-Tax Income 15,700 26,171 45,337 72,158 -63.7%
Income Tax Expense (Benefit) 2,355 3,926 6,451 10,268 -61.8%
Net Income 13,345 22,245 38,885 61,890 -64.1%

1 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6670 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 31 December 2008

2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.5916 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 31 December 2007

3Growth calculations based on GEL values

STANDALONE Q4 2008 INCOME STATEMENT DATA

Period Ended     Q4 2008       Q3 2008       Growth3       Q4 2007       Growth
Standalone, IFRS Based US$1       GEL US$2       GEL Q-O-Q US$4       GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited) (Unaudited)
Interest Income 56,238 93,748 66,867 93,948 -0.2% 44,442 70,735 32.5%
Interest Expense 26,404 44,015 29,746 41,793 5.3% 22,646 36,043 22.1%
Net Interest Income 29,834 49,733 37,121 52,155 -4.6% 21,797 34,691 43.4%
Fee & Commission Income 6,883 11,474 7,377 10,364 10.7% 6,629 10,551 8.7%
Fee & Commission Expense 1,368 2,281 1,275 1,791 27.3% 1,118 1,780 28.2%
Net Fee & Commission Income 5,515 9,193 6,102 8,573 7.2% 5,511 8,771 4.8%
Income From Documentary Operations 1,323 2,205 1,592 2,237 -1.5% 1,545 2,459 -10.3%
Expense On Documentary Operations 470 783 390 548 43.0% 337 537 46.0%
Net Income From Documentary Operations 853 1,421 1,202 1,689 -15.9% 1,208 1,923 -26.1%
Net Foreign Currency Related Income 4,552 7,588 5,903 8,293 -8.5% 5,360 8,532 -11.1%
Net Other Non-Interest Income 402 669 466 655 2.2% 145 230 190.8%
Net Non-Interest Income 11,321 18,872 13,673 19,211 -1.8% 12,224 19,456 -3.0%
Total Operating Income (Revenue) 41,155 68,605 50,794 71,366 -3.9% 34,020 54,147 26.7%
Personnel Costs 7,641 12,737 13,688 19,232 -33.8% 7,439 11,840 7.6%
Selling, General & Administrative Costs 4,206 7,011 3,950 5,550 26.3% 2,826 4,497 55.9%
Procurement & Operations Support Expenses 2,158 3,598 2,382 3,347 7.5% 1,580 2,514 43.1%
Depreciation & Amortization 2,549 4,249 3,054 4,291 -1.0% 1,614 2,570 65.4%
Other Operating Expenses (27) (46) 926 1,301 -103.5% 502 799 -105.7%
Total Recurring Operating Costs 16,527 27,550 24,001 33,721 -18.3% 13,961 22,220 24.0%
Normalized Net Operating Income 24,628 41,055 26,794 37,645 9.1% 20,059 31,927 28.6%
Net Non-Recurring Income (Costs) (7,213) (12,024) (1,403) (1,971) 510.2% (6,608) (10,517) 14.3%
Profit Before Provisions 17,416 29,032 25,391 35,675 -18.6% 13,451 21,409 35.6%
Net Provision Expense (1,244) (2,074) 73,916 103,852 -102.0% 5,280 8,403 -124.7%
Pre-Tax Income 18,659 31,105 (48,525) (68,177) NMF 8,172 13,006 139.2%
Income Tax Expenses/(Benefit) 2,799 4,666 (7,279) (10,227) NMF (982) (1,562) -398.7%
Net Income 15,861 26,440 (41,246) (57,951) NMF 9,153 14,568 81.5%
 
 

1 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6670 per US$1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 31 December 2008

2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.4050 per US$1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 30 September 2008

3 Growth calculations based on GEL values

4Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.5916 per US$1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 31 December 2007

STANDALONE YE 2008 BALANCE SHEET DATA

    31-Dec-08       30-Sep-08       31-Dec-07       Growth4       Growth4
Standalone, IFRS Based US$1       GEL US$2       GEL US$3       GEL Y-O-Y Q-O-Q
000s, unless otherwise noted (Unaudited) (Unaudited) (Unaudited)
Cash & Cash Equivalents 93,298 155,528 85,013 119,444 58,856 93,675 66.0% 30.2%
Loans & Advances To Credit Institutions 197,804 329,739 198,939 279,510 201,338 378,532 2.9% 18.0%
Mandatory Reserve With NBG 18,539 30,904 11,043 15,515 51,569 82,077 -62.3% 99.2%
Other Accounts With NBG 25,791 42,993 107,474 151,002 49,100 78,148 -45.0% -71.5%
Balances With & Loans To Other Banks 153,474 255,842 80,422 112,994 100,669 160,225 59.7% 126.4%
Available-For-Sale & Trading Securities - - - - - - NMF NMF
Treasuries & Equivalents 4,963 8,274 12,852 18,057 23,729 37,768 -78.1% -54.2%
Other Fixed Income Instruments 8,893 14,825 11,713 16,457 95,756 152,405 -90.3% -9.9%
Gross Loans To Clients 1,192,652 1,988,151 1,270,888 1,785,598 967,180 1,539,364 29.2% 11.3%
Less: Reserve For Loan Losses (60,100) (100,187) (86,801) (121,956) (18,473) (29,402) 240.8% -17.8%
Net Loans To Clients 1,132,552 1,887,963 1,184,087 1,663,642 948,707 1,509,962 25.0% 13.5%
Investments In Other Business Entities, Net 177,138 295,290 224,347 315,207 120,261 191,408 54.3% -6.3%
Property & Equipment Owned, Net 147,884 246,523 161,339 226,681 96,836 154,124 60.0% 8.8%
Intangible Assets Owned, Net 2,577 4,295 2,821 3,964 1,208 1,922 123.4% 8.4%
Goodwill 13,604 22,678 16,116 22,643 13,850 22,044 2.9% 0.2%
Tax Assets - Current & Deferred - - - - - - NMF NMF
Prepayments & Other Assets 10,351 17,255 36,128 50,760 17,377 27,657 -37.6% -66.0%
Total Assets 1,789,065 2,982,372 1,933,355 2,716,364 1,577,918 2,569,495 18.8% 9.8%
 
Client Deposits 640,862 1,068,318 692,225 972,576 697,804 1,110,624 -3.8% 9.8%
Deposits & Loans From Banks 35,854 59,768 64,350 90,411 15,975 25,426 135.1% -33.9%
Borrowed Funds 674,906 1,125,069 674,592 947,801 543,066 864,344 30.2% 18.7%
Issued Fixed Income Securities - - - - - - NMF NMF
Insurance Related Liabilities - - - - - - NMF NMF
Tax Liabilities - Current & Deferred 10,350 17,254 11,274 15,840 14,215 22,624 -23.7% 8.9%
Accruals & Other Liabilities 14,015 23,363 18,375 25,817 18,322 29,161 -19.9% -9.5%
Total Liabilities 1,375,987 2,293,771 1,460,815 2,052,445 1,289,382 2,052,180 11.8% 11.8%
 
Ordinary Shares 18,748 31,253 22,242 31,250 17,061 27,155 15.1% 0.0%
Share Premium 280,098 466,924 330,844 464,836 197,455 314,269 48.6% 0.4%
Treasury Shares (700) (1,167) (834) (1,171) (958) (1,525) -23.5% -0.4%
Retained Earnings 79,121 131,894 83,872 117,841 39,536 62,926 109.6% 11.9%
Revaluation & Other Reserves 22,467 37,452 39,400 55,357 33,049 52,600 -28.8% -32.3%
Net Income (Loss) For The Period 13,345 22,245 (2,985) (4,194) 38,885 61,890 -64.1% -630.4%
Shareholders' Equity Excluding Minority Interest 413,078 688,601 472,540 663,919 325,028 517,315 33.1% 3.7%
Minority Interest - - - - - - NMF NMF
Total Shareholders' Equity 413,078 688,601 472,540 663,919 325,028 517,315 33.1% 3.7%
Total Liabilities & Shareholders' Equity 1,789,065 2,982,372 1,933,355 2,716,364 1,614,410 2,569,495 16.1% 9.8%
 
 

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.6770 per US$1.00, such exchange rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 31 December 2008

2 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.4050 per US$1.00, such exchange rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 September 2008

3 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.5916 per US$1.00, such exchange rate being the official Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 31 December 2007

4 Growth calculations based on GEL values

CONSOLIDATED 2008 INCOME STATEMENT DATA

Period Ended     2008       2007       Growth3
Consolidated, IFRS Based US$1       GEL US$2       Y-O-Y
000s, unless otherwise noted (Unaudited) (Audited)
Interest Income 246,965 411,690 152,239 242,304 69.91%
Interest Expense 115,780 193,006 70,423 112,085 72.20%
Net Interest Income 131,184 218,684 81,816 130,219 67.94%
Fee & Commission Income 30,125 50,218 25,489 40,569 23.78%
Fee & Commission Expense 5,207 8,679 2,871 4,570 89.92%
Net Fee & Commission Income 24,918 41,538 22,618 35,999 15.39%
Income From Documentary Operations 5,206 8,679 4,894 7,789 11.43%
Expense On Documentary Operations 1,349 2,249 1,282 2,040 10.23%
Net Income From Documentary Operations 3,858 6,431 3,612 5,749 11.86%
Net Foreign Currency Related Income 30,847 51,422 16,782 26,710 92.52%
Net Insurance Income 4,200 7,001 3,432 5,462 28.18%
Brokerage Income 2,027 3,379 2,423 3,857 -12.38%
Asset Management Income 666 1,111 1,422 2,263 -50.92%
Realized Net Investment Gains (Losses) (2,052) (3,421) 3,400 5,412 -163.21%
Other 8,715 14,528 2,377 3,782 284.10%
Net Other Non-Interest Income 13,557 22,599 13,053 20,776 8.77%
Net Non-Interest Income 73,179 121,989 56,065 89,234 36.71%
Total Operating Income (Revenue) 204,363 340,674 137,881 219,452 55.24%
Personnel Costs 61,725 102,895 47,524 75,639 36.03%
Selling, General & Administrative Costs 28,402 47,346 9,933 15,809 199.50%
Procurement & Operations Support Expenses 8,215 13,694 5,815 9,255 47.95%
Depreciation & Amortization 11,776 19,631 6,197 9,863 99.04%
Other Operating Expenses 2,684 4,475 4,320 6,876 -34.92%
Total Recurring Operating Costs 112,802 188,041 73,789 117,443 60.11%
Normalized Net Operating Income 91,561 152,633 64,093 102,010 49.63%
Net Non-Recurring Income (Costs) (12,447) (20,749) 2,982 4,746 -537.21%
Profit Before Provisions 79,115 131,884 67,074 106,755 23.54%
Net Provision Expense/(Benefit) 79,653 132,782 10,708 17,043 679.08%
Pre-Tax Income (538) (898) 56,366 89,712 -101.00%
Income Tax Expense (Benefit) (987) (1,646) 8,840 14,070 -111.70%
Net Income 449 748 47,526 75,642 -99.01%
 
 
Weighted Average Number of Shares Outstanding (000s) 30,932 26,057 18.71%
Fully Diluted Number of Shares Period End (000s) 31,253 27,250 14.69%
EPS (Basic) 0.01 0.02 1.82 2.90 -99.17%
EPS (Fully Diluted) 0.01 0.02 1.74 2.78 -99.14%
 
 

1 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6670 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 31 December 2008

2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.5916 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 31 December 2007

3Growth calculations based on GEL values

CONSOLIDATED Q4 2008 INCOME STATEMENT DATA

Period Ended     Q4 2008       Q3 2008       Growth3       Q4 2007       Growth    
Consolidated, IFRS Based US$1       GEL US$2       GEL Q-O-Q US$4       GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited) (Unaudited)
Interest Income 63,908 106,535 77,138 108,379 -1.70% 52,844 84,106 26.67%
Interest Expense 31,375 52,302 35,250 49,527 5.60% 25,939 41,285 26.68%
Net Interest Income 32,533 54,233 41,888 58,852 -7.85% 26,904 42,821 26.65%
Fee & Commission Income 7,693 12,824 9,369 13,164 -2.58% 7,525 11,977 7.07%
Fee & Commission Expense 1,541 2,569 1,580 2,220 15.72% 2,769 4,407 -41.71%
Net Fee & Commission Income 6,152 10,255 7,789 10,944 -6.30% 4,756 7,570 35.47%
Income From Documentary Operations 1,323 2,205 1,592 2,237 -1.45% 1,545 2,459 -10.33%
Expense On Documentary Operations 470 783 390 548 42.96% 337 537 45.97%
Net Income From Documentary Operations 853 1,421 1,202 1,689 -15.86% 1,208 1,922 -26.05%
Net Foreign Currency Related Income 11,010 18,354 6,716 9,437 94.50% 6,365 10,131 81.17%
Net Insurance Income 701 1,168 1,750 2,459 -52.49% (90) (143) -918.56%
Brokerage Income 254 424 82 115 268.92% 616 980 -56.77%
Asset Management Income 42 71 105 148 -52.31% 1,413 2,249 -96.86%
Realized Net Investment Gains (Losses) (917) (1,529) (814) (1,144) 33.68% (59) (95) 1517.15%
Other 2,008 3,347 2,430 3,414 -1.95% 1,658 2,638 26.87%
Net Other Non-Interest Income 2,088 3,481 3,553 4,992 -30.27% 3,537 5,630 -38.17%
Net Non-Interest Income 20,103 33,511 19,261 27,062 23.83% 15,866 25,253 32.70%
Total Operating Income (Revenue) 52,636 87,744 61,149 85,914 2.13% 42,770 68,073 28.90%
Personnel Costs 12,917 21,533 20,194 28,372 -24.10% 11,160 17,763 21.23%
Selling, General & Administrative Costs 7,981 13,304 7,642 10,738 23.90% 5,288 8,417 58.06%
Procurement & Operations Support Expenses 2,281 3,803 2,523 3,545 7.29% 1,580 2,515 51.23%
Depreciation & Amortization 3,287 5,479 3,885 5,458 0.39% 1,981 3,153 73.81%
Other Operating Expenses 573 955 1,077 1,514 -36.91% 1,071 1,705 -43.97%
Total Recurring Operating Costs 27,040 45,075 35,321 49,627 -9.17% 21,080 33,551 34.35%
Normalized Net Operating Income 25,597 42,669 25,827 36,287 17.59% 21,690 34,522 23.60%
Net Non-Recurring Income (Costs) (18,000) (30,006) (1,854) (2,605) 1051.71% 3,131 4,984 -702.09%
Profit Before Provisions 7,597 12,664 23,973 33,682 -62.40% 24,821 39,506 -67.94%
Net Provision Expense 8,977 14,965 73,432 103,171 -80.67% 5,133 8,169 83.20%
Pre-Tax Income (1,381) (2,301) (49,459) (69,489) -89.53% 19,689 31,337 -107.34%
Income Tax Expenses/(Benefit) (1,053) (1,755) (7,496) (10,531) -73.40% 3,495 5,562 -131.55%
Net Income (328) (547) (41,963) (58,958) -92.41% 16,194 25,774 -102.12%
 
 
Weighted Average Number of Shares Outstanding (000s) 31,253 31,250 0.01% 27,154 15.09%
Fully Diluted Number of Shares Period End (000s) 31,253 31,250 0.01% 27,250 14.69%
EPS (Basic) (0.01) (0.02) (1.34) (1.89) -92.41% 0.60 0.95 -101.84%
EPS (Fully Diluted) (0.01) (0.02) (1.34) (1.89) -92.41% 0.59 0.95 -101.85%
 
 

1 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6670 per US$1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 31 December 2008

2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.4050 per US$1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 30 September 2008

3 Growth calculations based on GEL values

4Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.5916 per US$1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 31 December 2007

CONSOLIDATED YE 2008 BALANCE SHEET DATA

    31-Dec-08       31-Dec-07       Growth3    
Consolidated, IFRS Based US$1       GEL US$2       GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Audited)
 
Cash & Cash Equivalents 129,786 216,354 254,945 405,770 -46.68%
Loans & Advances To Credit Institutions 187,888 313,209 97,109 154,559 102.65%
Mandatory Reserve With NBG/NBU/NBRB 23,787 39,653 51,569 82,077 -51.69%
Other Accounts With NBG/NBU/NBRB 25,791 42,993 - - NMF4
Balances With & Loans To Other Banks 138,310 230,563 45,541 72,483 218.09%
Available-For-Sale & Trading Securities 23,874 39,798 30,617 48,729 -18.33%
Treasuries & Equivalents 4,963 8,274 25,169 40,060 -79.35%
Other Fixed Income Instruments 8,893 14,825 95,756 152,405 -90.27%
Gross Loans To Clients 1,319,211 2,199,124 1,105,364 1,759,297 25.00%
Less: Reserve For Loan Losses (69,266) (115,467) (23,211) (36,943) 212.56%
Net Loans To Clients 1,249,945 2,083,658 1,082,153 1,722,355 20.98%
Investments In Other Business Entities, Net 41,847 69,759 25,304 40,273 73.21%
Property & Equipment Owned, Net 187,549 312,643 128,586 204,657 52.76%
Intangible Assets Owned, Net 5,580 9,302 3,717 5,915 57.25%
Goodwill 80,843 134,765 69,158 110,072 22.43%
Tax Assets - Current & Deferred 4,130 6,884 979 1,557 342.01%
Prepayments & Other Assets 51,080 85,151 42,258 67,258 26.60%
Total Assets 1,976,379 3,294,623 1,855,750 2,953,611 11.55%
 
Client Deposits 742,561 1,237,849 851,644 1,355,476 -8.68%
Deposits & Loans From Banks 48,240 80,416 23,530 37,451 114.73%
Borrowed Funds 674,906 1,125,069 543,066 864,344 30.16%
Issued Fixed Income Securities 3 5 3,137 4,993 -99.91%
Insurance Related Liabilities 36,448 60,759 24,646 39,226 54.89%
Tax Liabilities - Current & Deferred 15,065 25,113 23,379 37,209 -32.51%
Accruals & Other Liabilities 31,497 52,506 35,764 56,921 -7.76%
Total Liabilities 1,548,720 2,581,716 1,505,165 2,395,620 7.77%
 
Ordinary Shares 18,748 31,253 17,061 27,155 15.09%
Share Premium 271,078 451,888 198,175 315,415 43.27%
Treasury Shares (1,218) (2,030) (1,091) (1,737) 16.90%
Retained Earnings 86,731 144,580 40,122 63,858 126.41%
Revaluation & Other Reserves 19,932 33,227 42,318 67,354 -50.67%
Net Income (Loss) For The Period 449 748 47,526 75,642 -99.01%
Shareholders' Equity Excluding Minority Interest 395,720 659,665 344,111 547,687 20.45%
Minority Interest 31,939 53,242 6,474 10,304 416.73%
Total Shareholders' Equity 427,659 712,907 350,585 557,990 27.76%
Total Liabilities & Shareholders' Equity 1,976,378 3,294,622 1,855,750 2,953,611 11.55%
 
Shares Outstanding 31,253 27,155 15.09%
Book Value Per Share 13.68 22.81 12.91 20.55 10.40%
 
 

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.6770 per US$1.00, such exchange rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 31 December 2008

2 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.5916 per US$1.00, such exchange rate being the official Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 31 December 2007

3 Growth calculations based on GEL values

4 Not meaningful

KEY RATIOS

    Full Year 2008       Full Year 2007
Profitability Ratios
ROAA 1, Annualised 0.02% 2.39%
ROA 0.02% 2.56%
ROAE2, Annualised 0.11% 17.74%
ROE 0.10% 13.56%
Interest Income To Average Interest Earning Assets 3, Annualised 17.68% 15.16%
Cost Of Funds 4, Annualised 8.33% 7.63%
Net Spread 5 9.35% 7.54%
Net Interest Margin 6, Annualised 9.39% 8.15%
Net Interest Margin Normalized 35, Annualised 9.39% 8.15%
Loan Yield 7, Annualised 13.97% 20.50%
Interest Expense To Interest Income 46.88% 46.26%
Net Non-Interest Income To Average Total Assets, Annualised 3.82% 4.45%
Net Non-Interest Income To Revenue 8 35.81% 40.66%
Net Fee And Commission Income To Average Interest Earning Assets 9, Annualised 1.78% 2.25%
Net Fee And Commission Income To Revenue 12.19% 16.40%
Operating Leverage 10 -30.03% 63.76%
Total Operating Income (Revenue) To Total Assets, Annualised 10.34% 7.43%
Recurring Earning Power 11, Annualised 4.13% 5.32%
Net Income To Revenue 0.22% 34.47%
 
Efficiency Ratios
Operating Cost To Average Total Assets 12, Annualised 5.89% 5.85%
Cost To Average Total Assets 13, Annualised 6.54% 5.62%
Cost / Income 14 61.29% 51.35%
Cost / Income, Normalized 37 55.20% 53.52%
Cost / Income, Bank of Georgia, Standalone 15 48.43% 52.20%
Cost/Income, Normalized, Bank of Georgia, Standalone 43.74% 46.50%
Cash Cost / Income 55.52% 46.86%
Total Employee Compensation Expense To Revenue 16 30.20% 34.47%
Total Employee Compensation Expense To Cost 49.28% 67.12%
Total Employee Compensation Expense To Average Total Assets, Annualised 3.23% 3.77%
 
Liquidity Ratios
Net Loans To Total Assets 17 63.24% 58.31%
Average Net Loans To Average Total Assets 60.28% 53.53%
Interest Earning Assets To Total Assets 73.45% 70.06%
Average Interest Earning Assets To Average Total Assets 73.00% 79.63%
Liquid Assets To Total Assets 18 16.78% 24.36%
Liquid Assets To Total Liabilities, NBG Stand-Alone 27.26% 44.96%
Liquid Assets To Total Liabilities, IFRS Consolidated 22.95% 33.46%
Net Loans To Client Deposits 168.33% 127.07%
Average Net Loans To Average Client Deposits 147.54% 125.73%
Net Loans To Total Deposits 19 158.06% 123.65%
Net Loans To (Total Deposits + Equity) 102.58% 88.28%
Net Loans To Total Liabilities 80.71% 71.90%
Total Deposits To Total Liabilities 51.06% 58.14%
Client Deposits To Total Deposits 93.90% 97.31%
Client Deposits To Total Liabilities 47.95% 56.58%
Current Account Balances To Client Deposits 38.08% 42.35%
Demand Deposits To Client Deposits 8.74% 6.76%
Time Deposits To Client Deposits 53.18% 50.89%
Total Deposits To Total Assets 40.01% 47.16%
Client Deposits To Total Assets 37.57% 45.89%
Client Deposits To Total Equity (Times) 20 1.74 2.43
Due From Banks / Due To Banks 21 389.49% 412.70%
Total Equity To Net Loans 34.21% 32.40%
Leverage (Times) 22 3.62 4.29
 
 

KEY RATIOS CONT’D

    Full Year 2008       Full Year 2007
Asset Quality
NPLs (in GEL) 23 64,306 25,325
NPLs To Gross Loans To Clients 24 2.92% 1.44%
Cost of Risk 25, Annualized 6.65% 1.55%
Cost of Risk Normalized 36, Annualized 6.65% 1.55%
Reserve For Loan Losses To Gross Loans To Clients 26 5.25% 2.10%
NPL Coverage Ratio 27 179.56% 145.87%
Equity To Average Net Loans To Clients 37.07% 51.95%
 
Capital Adequacy
Equity To Total Assets 21.64% 18.89%
BIS Tier I Capital Adequacy Ratio, consolidated 28 22.47% 21.35%
BIS Total Capital Adequacy Ratio, consolidated 29 27.31% 24.97%
NBG Tier I Capital Adequacy Ratio 30 16.57% 13.19%
NBG Total Capital Adequacy Ratio 31 13.49% 13.07%
 
Per Share Values
Basic EPS (GEL) 32 0.02 2.90
Basic EPS (US$) 0.01 1.82
Fully Diluted EPS (GEL) 33 0.02 2.78
Fully Diluted EPS (US$) 0.01 1.74
Book Value Per Share (GEL) 34 22.81 20.55
Book Value Per Share (US$) 13.68 12.91
Ordinary Shares Outstanding - Weighted Average, Basic 30,931,549 26,057,022
Ordinary Shares Outstanding - Period End 31,252,553 27,154,918
Ordinary Shares Outstanding - Fully Diluted 31,252,553 27,249,918
 
Selected Operating Data
Full Time Employees (FTEs) 4,979 4,459
FTEs, Bank of Georgia Standalone 2,741 2,692
Total assets per FTE 23 (GEL Thousands) 662 669
Total Assets per FTE, Bank of Georgia Standalone (GEL Thousands) 1,202 1,107
Number Of Active Branches 151 117
Number Of ATMs 416 250
Number Of Cards (Thousands) 667 647
Number Of POS Terminals 2,693 1,594
 
 

NOTES TO KEY RATIOS

1     Return On Average Total Assets (ROAA) equals Net Income of the period divided by quarterly Average Total Assets for the same period;
2 Return On Average Total Equity (ROAE) equals Net Income of the period divided by quarterly Average Total Equity for the same period;
3 Average Interest Earning Assets are calculated on a quarterly basis; Interest Earning Assets include: Loans And Advances To Credit Institutions, Treasuries And Equivalents, Other Fixed Income Instruments and Net Loans to Clients;
4 Cost Of Funds equals Interest Expense of the period divided by quarterly Average Interest Bearing Liabilities; Interest Bearing Liabilities Include: Client Deposits, Deposits And Loans From Banks, Borrowed Funds and Issued Fixed Income Securities;
5 Net Spread equals Interest Income To Average Interest Earning Assets less Cost Of Funds;
6 Net Interest Margin equals Net Interest Income of the period divided by quarterly Average Interest Earning Assets of the same period;
7 Loan Yield equals Interest Income, less Net Provision Expense, divided by quarterly Average Gross Loans To Clients;
8 Revenue equals Total Operating Income;
9 Net Fee And Commission Income includes Net Income From Documentary Operations of the period ;
10 Operating Leverage equals percentage change in Revenue less percentage change in Total Costs;
11 Recurring Earning Power equals Profit Before Provisions of the period divided by average Total Assets of the same period;
12 Operating Cost equals Total Recurring Operating Costs;
13 Cost includes Total Recurring Operating Costs and Net Non-Recurring Costs (Income);
14 Cost/Income Ratio equals Costs of the period divided by Total Operating Income (Revenue);
15 Cost/ Income, Bank of Georgia, standalone, equals non-consolidated Total Costs of the bank of the period divided by non-consolidated Revenue of the bank of the same period;
16 Total Employee Compensation Expense includes Personnel Costs;
17 Net Loans equal Net Loans To Clients;
18 Liquid Assets include: Cash And Cash Equivalents, Other Accounts With NBG, Balances With And Loans To Other Banks, Treasuries And Equivalents and Other Fixed Income Securities as of the period end and are divided by Total Assets as of the same date;
19 Total Deposits include Client Deposits and Deposits And Loans from Banks;
20 Total Equity equals Total Shareholders’ Equity;
21 Due From Banks/ Due To Banks equals Loans And Advances To Credit Institutions divided by Deposits And Loans From Banks;
22 Leverage (Times) equals Total Liabilities as of the period end divided by Total Equity as of the same date;
23 NPLs (in GEL) equals consolidated total gross non-performing loans as of the period end; non-performing loans are loans that have debts in arrears for more than 90 calendar days;
24 Gross Loans equals Gross Loans To Clients;
25 Cost Of Risk equals Net Provision For Loan Losses of the period, plus provisions for (less recovery of) other assets, divided by quarterly average Gross Loans To

Clients over the same period;

26 Reserve For Loan Losses To Gross Loans To Clients equals reserve for loan losses as of the period end divided by gross loans to clients as of the same date;
27 NPL Coverage Ratio equals Reserve For Loan losses as of the period end divided by NPLs as of the same date;
28 BIS Tier I Capital Adequacy Ratio equals Tier I Capital as of the period end divided by Total Risk Weighted Assets as of the same date, both calculated in accordance with the requirements of Basel Accord I;
29 BIS Total Capital Adequacy Ratio equals Total Capital as of the period end divided by Total Risk Weighted Assets as of the same date, both calculated in accordance with the requirements of Basel Accord I;
30 NBG Tier I Capital Adequacy Ratio equals Tier I Capital as of the period end divided by Total Risk Weighted Assets as of the same date, both calculated in accordance with the requirements the National Bank of Georgia;
31 NBG Total Capital Adequacy Ratio equals Total Capital as of the period end divided by Total Risk Weighted Assets as of the same date, both calculated in accordance with the requirements of the National Bank of Georgia;
32 Basic EPS equals Net Income of the period divided by the weighted average number of outstanding ordinary shares over the same period;
33 Fully Diluted EPS equals net income of the period divided by the number of outstanding ordinary shares as of the period end plus number of ordinary shares in contingent liabilities;
34 Book Value Per Share equals Equity as of the period end, plus Treasury Shares, divided by the total number of Outstanding Ordinary shares as of the same date.
35 Net Interest Margin Normalized equals Net Interest Income of the period, less interest income generated by non-performing loans through the date of their write-off, divided by quarterly Average Interest Earning Assets of the same period;
36 Cost Of Risk Normalized equals Net Provision For Loan Losses of the period, less provisions for the interest income generated by non-performing loans through the date of their write-off, plus provisions for (less recovery of) other assets, divided by quarterly average Gross Loans To Clients over the same period;
37 Cost / Income Normalized equals Recurring Operating Costs divided by Total Operating Income (Revenue) for the same period

About Bank of Georgia

Bank of Georgia, the leading universal Georgian bank with operations in Georgia, Ukraine and Belarus, is the largest bank by assets, loans, deposits and equity in Georgia, with 32.9% market share by total assets (all data according to the NBG as of 31 December 2008). The bank has 141 branches and over 856,000 retail and more than 139,000 corporate current accounts. The bank offers a full range of retail banking and corporate and investment banking services to its customers across Georgia. The bank also provides corporate and retail insurance products through its wholly-owned subsidiary, Aldagi BCI, as well as asset & wealth management services.

Bank of Georgia has, as of the date hereof, the following credit ratings:

Standard & Poor’s     ‘B/B’
FitchRatings ‘B/B’
Moody’s ‘B3/NP’ (FC) & ‘Ba1/NP’ (LC)

For further information, please visit www.bog.ge/ir or contact:

Nicholas Enukidze     Irakli Gilauri     Macca Ekizashvili
Chairman of the Supervisory Board Chief Executive Officer Head of Investor Relations
+995 32 444 800 +995 32 444 109 +995 32 444 256
nenukidze@bog.ge igilauri@bog.ge ir@bog.ge

This news report is presented for general informational purposes only and should not be construed as an offer to sell or the solicitation of an offer to buy any securities. Certain statements in this news report are forward-looking statements and, as such, are based on the management’s current expectations and are subject to uncertainty and changes in circumstances.

The financial information as of Q3 2008, Q4 2008, full year 2008 and Q4 2007 contained in this news report is unaudited and reflects the best estimates of management. The bank’s actual results may differ significantly from the amounts reflected herein as a result of various factors.