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JSC Bank of Georgia (BGEO)

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Wednesday 02 September, 2009

JSC Bank of Georgia

Half-yearly Report

Half-yearly Report

Bank of Georgia

1.66 GEL/US$ 30 June 2009 period end
1.66 GEL/US$ 1H 2009 average1.66 GEL/US$ 1H 2009 average
1.66 GEL/US$ Q2 2009 average1.66 GEL/US$ Q2 2009 average
1.67 GEL/US$ 31 March 2009 period end1.67 GEL/US$ 31 March 2009 period end
1.67 GEL/US$ Q1 2009 average1.67 GEL/US$ Q1 2009 average
1.66 GEL/US$ 30 June 2008 period end1.66 GEL/US$ 30 June 2008 period end
1.50 GEL/US$ 1H 2008 average1.50 GEL/US$ 1H 2008 average
1.44 GEL/US$ Q2 2008 average1.44 GEL/US$ Q2 2008 average

JSC BANK OF GEORGIA REPORTS Q2 2009 AND 1H 2009 RESULTS

Millions, unless otherwise noted   Q2 2009   Growth y-o-y 1
 
Bank of Georgia (Consolidated, Unaudited, IFRS-based) US$   GEL
Total Operating Income (Revenue)2 48.6 80.6 -6%
Recurring Operating Costs 27.9 46.3 -5%
Normalised Net Operating Income3 (NNOI) 20.7 34.2 -8%
Net Provision Expenses 24.5 40.7 466%
Net Income/(Loss) (2.6) (4.3) NMF
 
 
1H 2009 Growth y-o-y 1
Bank of Georgia (Consolidated, Unaudited, IFRS-based) US$ GEL
Total Operating Income (Revenue)2 97.9 162.3 -3%
Recurring Operating Costs 54.9 91.0 -3%
Normalised Net Operating Income3 43.0 71.3 -3%
Net Provision Expenses 43.9 72.8 397%
Net Income/(Loss) 0.5 0.8 -99%
 
 
Total Assets 1,753.9 2,907.8 -14%
Net Loans 1,055.3 1,749.6 -15%
Total Deposits 643.2 1,066.4 -30%
Tier I Capital Adequacy Ratio (BIS)4 23.9%
Total Capital Adequacy Ratio (BIS)5 34.2%
Tier I Capital Adequacy Ratio (NBG) 17.8%
Total Capital Adequacy Ratio (NBG) 18.4%

1 Compared to the same period in 2008; 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

About Bank of Georgia

Bank of Georgia is the leading Georgian bank offering a broad range of corporate and investment banking, retail banking, wealth management and insurance services to its customers in Georgia, Ukraine and Belarus. Bank of Georgia is the largest bank in Georgia by assets, loans, deposits and equity, with 33.6% market share by total assets (all data according to the NBG as of 30 June 2009). The bank has 140 branches and over 880,000 retail and more than 146,000 corporate current accounts.

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) & ‘Ba3/NP’ (LC)

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

Nicholas Enukidze   Irakli Gilauri   Macca Ekizashvili
Chairman of the Supervisory Board CEO, Supervisory Board Member Head of Investor Relations
+995 32 444 858 +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 Q2 2008, 1H 2008, Q1 2009, Q2 2009 and 1H 2009 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.

Bank of Georgia (LSE: BGEO, GSE: GEB) (the “Bank”), Georgia’s leading bank, announced today its Q2 2009 and 1H 2009 consolidated results (IFRS-based, derived from management accounts), reporting a Q2 2009 Net Loss of GEL 4.3 million and 1H 2009 Net Income of GEL 0.8 million.

Q2 2009 Summary of the Bank’s Consolidated Results

In Q2 2009 the Bank’s performance continued to reflect challenging market conditions in the Bank’s principal markets and globally. Throughout Q2 the Bank maintained a conservative liquidity management policy reducing its loan book and increasing amount of liquid funds on its balance sheet. At the end of Q2 2009 the Bank’s liquidity ratio reached 38% (as compared to 20% required by the FSA) despite retiring all of US$140 million Loan Passthrough Notes, which were callable in June 2009.

Reduction of the Bank’s loan portfolio in Q2 2009 was the principal reason for the decrease of the Bank’s total Operating Income (Revenue) by 6.4% y-o-y to GEL 80.6 million, (down 1.4% q-o-q6). Net Interest Income declined 11.4% y-o-y to GEL 49.5 million (down 5.7% q-o-q), and Net Non-Interest Income increased 2.8% y-o-y to GEL 31.1 million (up 6.3% q-o-q). The decline of Net Interest Income during the quarter was a result of a 7.2% q-o-q decrease of Interest Income, which reflects the contraction of the consolidated gross loan book of the Bank by GEL 142.2 million, or a decrease of 6.9% q-o-q. Net Interest Margin (NIM) for the quarter stood at 8.1%, a decrease of 0.66 % from Q1 2009 and a decrease of 0.98% y-o-y from Q2 2008. The decline of NIM was mainly due to the sharp increase in liquidity during the quarter. Net Fees and Commission Income decreased 7.2% y-o-y to GEL 9.4 million (up 5.8% q-o-q) and Net Income from Documentary Operations decreased 5.2% y-o-y to GEL 1.8 million, (down 20.7% q-o-q). Net Foreign Currency Related Income of GEL 7.1 million, decreased by 32.1%y-o-y and by 19.5% q-o-q. The q-o-q decline was a result of the decreased FX income in Belarus and Ukraine due to lower FX volatility and regulatory restrictions on foreign currency transactions in Ukraine. Net Other Non-Interest Income increased 64.0% y-o-y to GEL 12.9 million, up 37.4% q-o-q due to the increased profitability during the quarter of the Bank’s insurance and brokerage subsidiaries. The Bank’s Insurance Income grew 191.1% y-o-y to GEL 5.1 million, up 66.1% q-o-q and Brokerage Income increased by 300.0% q-o-q to GEL 1.3 million (decreased by 14.0% y-o-y).

6 q-o-q compares Q2 2009 results with Q1 2009 results.

NNOI decreased 8.1% y-o-y to GEL 34.3 million, down 7.6% q-o-q, reflecting a 3.8% q-o-q increase of Total Consolidated Recurring Operating Costs for the quarter to GEL 46.3 million (down 5.2% y-o-y) in Q2 2009. Personnel Costs, the largest Recurring Cost item, declined 14.9% y-o-y due to headcount reduction in Q4 2008, but has increased 5.5% q-o-q to GEL 23.2 million. The Personnel Cost increase in Q2 2009 was mostly due to increased performance driven bonus accruals in insurance and brokerage subsidiaries. Recurring Operating Costs excluding Personnel Costs reached a total of GEL 23.1 million in Q2 2009, a 2.1% increase q-o-q. Normalized Cost/Income ratio (Costs exclude Net Non-Recurring Costs) increased to 57.5 % in Q2 2009 from 54.6% in Q1 2009 and 56.9% in Q2 2008.

Challenging economic environment in Georgia and Ukraine was the key reason for the increase in the Bank’s Net Provision Expense, which amounted to GEL 40.7 million for the quarter, up 26.9% q-o-q and 465.6% y-o-y. Net Provision Expense in Georgia amounted to GEL 29.6 million (up 23.2% q-o-q) and in Ukraine GEL 11.0 million, (up 17.5% q-o-q).

1H 2009 Summary of the Bank’s Consolidated Results

In 1H 2009 the Bank’s Total Operating Income (Revenue) decreased 2.8% y-o-y to GEL 162.3 million, due to 3.5% y-o-y decrease in Net Interest Income to GEL 101.9 million and 1.6% y-o-y decrease in Net Non-Interest Income to GEL 60.4 million. The decline of Net Interest Income reflects the decrease of the consolidated gross loan book from GEL 2,107 million at the end of Q2 2008 to GEL 1,905 million in Q2 2009, a result of the conservative approach to liquidity management adopted by the Bank following the armed conflict between Georgia and Russia in August 2008 (the “Conflict”), the global financial crisis that negatively affected the economies of Georgia and Ukraine and political tensions in April and May in 2009 in Georgia. In 1H 2009, Net Foreign Currency Related Income declined by 33.0% y-o-y to GEL 15.8 million. The Bank’s Net Fees and Commission Income decreased 9.8% y-o-y to GEL 18.3 million, while Net Income from Documentary Operations grew by 20.9% y-o-y to GEL 4.0 million. Net Other Non-Interest Income reached GEL 22.2 million, up 57.4% y-o-y, mostly driven by the 139.9% growth of Net Insurance Income to GEL 8.1 million. Total Recurring Operating Costs decreased by 2.5% y-o-y to GEL 91.0 million, mostly due to a 14.7% y-o-y decline of Personnel Cost, a result of the cost optimization measures, including headcount reduction across the board, implemented by the Bank at the end of 2008.

The effect of the Conflict and the challenging economic environment in the Bank’s target markets prompted Net Provision Expense of GEL 72.8 million booked by the Bank in 1H 2009, as compared to the Net Provision Expense of GEL 14.6 million for 1H 2008. The Bank had Net Provision Expense of GEL 20.4 million in Ukraine and GEL 53.6 million in Georgia.

The Bank reported the Net Income of GEL 0.8 million for 1H 2009. On 30 June 2009, the Bank’s Consolidated Total Assets stood at GEL 2.9 billion, down 8.8% from 31 March 2009, 10.8% from 31 December 2008 and 14.5% from Q2 2008. The Bank’s Net Loans decreased by 8.5% q-o-q (down 15.2% y-o-y) to GEL 1,750 million, reflecting the tightening of the Bank’s lending policy in light of challenging economic environment in its target markets and the Bank’s conservative approach to liquidity.

In Q2 2009 loan loss reserves amounted to GEL 155.1 million or 8.1% of consolidated gross loan book, up from 6.6% in Q1 2009. NPLs increased to GEL 148.8 million (up from GEL 104.6 million in Q1 2009), representing 7.8% of the consolidated gross loans as at 30 June 2009, up from 5.1% in Q1 2009.

During 2009 both Georgia and Ukraine witnessed a system-wide decline in banking deposits. The Bank’s Client Deposits decreased from GEL 1,193 million on 31 December 2008 to GEL 1,025 million on of 30 June 2009. Since year-end 2008 client deposits in Georgia decreased from GEL 1,045 million to GEL 909.3 million and in Ukraine from GEL127.4 million to GEL114.8 million. As of 31 August 2009, Client Deposits reached GEL 1,030 million in Georgia and GEL 113.3 million in Ukraine.

In the first half of 2009, the Bank redeemed a total of US$260.1 million of wholesale debt financing. This included the repayment of the US$65 million loan facility and US$43.5 million syndicated loan granted in December 2007 and August 2007, respectively, as well as the settlement of an aggregate amount of US$140 million of loan passthrough notes issued in June and July of 2008.

The Bank’s consolidated Book Value per Share on 30 June 2009 stood at GEL 22.7, compared to GEL 22.8 as at 31 March 2009 and GEL 23.0 as of 31 December 2008.

In Q2 2009 the Bank’s Tier I Capital Adequacy Ratio was 23.9% and Total Capital Adequacy Ratio was 34.2% by BIS standards.

JSC Bank of Georgia (Standalone)

Bank of Georgia’s banking operations in Georgia, which are provided through JSC Bank of Georgia, reported Q2 2009 standalone Net Income of GEL 0.9 million, as compared to Net Income of GEL 11.3 in Q1 2009. The decline in profitability compared to the previous quarter was mostly caused by increased provisions and lower Interest Income following the decrease of the Bank’s loan book in Georgia in 1H 2009.

In Q2 2009 Total Operating Income amounted to GEL 62.3 million, down 6.5 % q-o-q and 12.4% y-o-y. Net Interest Income stood at GEL 45.5 million, down 9.7% q-o-q and down 9.2% y-o-y. Net Non-Interest Income amounted to GEL 16.8 million, up 3.3% q-o-q and down 20.0% y-o-y. The q-o-q increase of Net Non-Interest Income was mainly attributed to the 2.9% q-o-q growth of Net Fees and Commission Income to GEL 8.2 million. Net Income from Documentary Operations decreased 20.6% q-o-q to GEL 1.8 million. On a standalone basis, Bank of Georgia’s standalone Total Recurring Operating Costs increased 3.1% q-o-q to GEL 29.7 million, down 6.5% y-o-y. The y-o-y decline of Total Recurring Costs was driven predominantly by 13.3% decline of Personnel Costs, which amounted to GEL 14.8 million in Q2 2009. The Bank’s Net Provision Expense on a standalone basis during the quarter reached GEL 29.6 million, attributed predominantly to the Bank’s retail banking and wealth management loans.

Bank of Georgia’s 1H 2009 Total Operating Income on a standalone basis stood at GEL 128.9 million down 6.4% y-o-y, following a 0.5% y-o-y growth of Net Interest Income to GEL 95.9 million, and 21.8% y-o-y decline of Net Non-Interest Income to GEL 33.1 million. The decline of Net Non-Interest Income was mostly due to 41.1% y-o-y decline of Foreign Currency Related Income to GEL 12.0 million. The Total Recurring Cost of the Bank’s Georgian operations declined by 2.8% y-o-y, driven by a 14.5% reduction of personnel costs on a y-o-y basis. Net Provision Expense in 1H 2009 reached GEL 53.6 million, resulting in 1H 2009 standalone Net Income of GEL 12.2 million.

As of 30 June 2009 Bank of Georgia’s Total Assets on a standalone basis stood at GEL 2.7 billion, down 7.9% q-o-q and 9.5% y-o-y. Net Loans declined 8.4% q-o-q to GEL 1.6 billion, down by 11.7% y-o-y, as a result of the Bank’s conservative lending policy. Reserve for loan losses at the end of Q2 2009 was up 11.9% q-o-q reaching GEL 114.8 million, with reserve on RB and WM loan losses representing 59.1% of total Reserve for Loan Losses on a standalone basis, up from 56.3% in Q1 2009 and 50.8% in Q4 2008. NPLs for the quarter stood at GEL 118.7 million, and represented 6.9% of the total gross loan book, an increase from the same ratio of 4.7% in Q1 2009. The growth of the Bank of Georgia’s standalone NPLs was driven by the growth of non-performing RB and WM loan from GEL 46.3 million in Q1 2009 to GEL 67.4 million in Q2 2009 and growth of non-performing CB loans from GEL 41.1 million in Q1 2009 to GEL 51.3 million in Q2 2009.

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

GEL million   GEL   Foreign Currency   Gross Loans   LL Reserves   Net Loan Book   NPLs
RB + WM   219.3   675.5   894.9   (67.9)   827.0   67.4
CB 178.2 617.4 795.6 (36.4) 759.3 51.3
Corporate Centre, (mainly CB loans)   4.7   21.7   26.3   (10.5)   15.8   -
Total 402.2 1,314.6 1,716.8 (114.8) 1,602.0 118.7

In Q2 2009, the Bank’s client deposits in Georgia stood at GEL 909.3 million as compared to GEL 979.0 million in Q1 2009 and GEL 1,045 million on 31 December 2008. The deposit growth trend, which started mid-May 2009 continued through the end of August 2009, when Client Deposits reached GEL 1,030 million.

Breakdown of Standalone Total Deposits by currency

  30-Jun-09   31-Mar-09   31-Dec-08
GEL million   GEL   Foreign Currency   Total   GEL   Foreign Currency   Total   GEL   Foreign Currency   Total
RB + WM 67.0   323.3   390.2 66.2   307.6   373.7 89.1   329.4   418.5
CB   271.8   247.2   519.0   266.3   339.0   605.2   245.8   380.8   626.7
Total 338.8 570.5 909.3 332.5 646.6 979.0 335.0 710.2 1,045.2

As of 31 July 2009 Bank of Georgia on a standalone basis held market share of 33.7 %, 31.5%, 29.2 %, 39.6% and 34.7% by total assets, gross loans, client deposits, shareholders’ equity and regulatory capital, respectively in Georgia7.

7Market share data are derived from the information published by the National Bank of Georgia (www.nbg.gov.ge) and represent an aggregation of standalone financial information (non-IFRS, based on National Bank of Georgia requirements) filed by Georgian banks.

Capital Adequacy, Liquidity and Leverage

As of 30 June 2009, the Bank’s Tier I Capital Adequacy Ratio was 17.8% and Total Capital Adequacy Ratio was 18.4% according to the Georgian FSA standards. According to the requirement of the Georgian FSA Tier I Capital Adequacy Ratio should be no less than 8% and Total Capital Adequacy Ratio no less than 12%.

The Bank’s NBG Liquidity Ratio (standalone) remained flat at 37.6% on 30 June 2009, well above the NBG requirement of 20%.

The Bank’s standalone leverage ratio (Total Liabilities to Shareholders Equity) stood at 2.8x as of 30 June 2009, down from 3.1x on 31 March 2009.

BG Bank (Ukraine)

In Q2 2009 BG Bank’s Revenue increased to GEL 5.6 million, up 2.0% q-o-q and down 17.3% y-o-y. Recurring Costs declined 19.0% q-o-q to GEL 4.6 million, down 35.4% y-o-y. BG Bank’s Net Provision Expense for the quarter amounted to GEL 11.0 million as compared to GEL 9.4 million in Q1 2009 and GEL 23.3 million booked in Q4 2008. In Q2 2009 BG Bank recorded Net Loss of GEL 10.8 million as compared to Net Loss of GEL 7.3 million in Q1 2009 and Net Loss of GEL 10.7 million in Q4 2008.

In 1H 2009 BG Bank’s Revenue decreased to GEL 11.1 million, down 16.6% y-o-y. Recurring Costs stood at GEL 10.2 million, down 28.2% y-o-y. BG Bank’s Net Provision Charge for 1H 2009 reached GEL 20.4 million as compared to GEL 0.9 million recovery of provision charge in 1H 2008. In 1H 2009 BG Bank recorded Net Loss of GEL 18.1 million as compared to Net Loss of GEL 40 thousand in 1H 2008.

BG Bank’s Total Assets decreased by 43.0% y-o-y to GEL 205.5 million (down 16.1% q-o-q), due to the decline in BG Bank’s loan book as a result of conservative lending policy and increased provisioning. In Q2 2009 gross Loans to Clients decreased 28.3% y-o-y to GEL 190.4 million (down 4.2% q-o-q) and loan loss reserves increased 23.4% q-o-q to GEL 39.0 million or 20.5% of BG Bank’s Gross Loan Book. 57.3% of BG Bank’s gross loans is issued in Hryvna and the remaining loans are issued in foreign currency. As at 30 June 2009, BG Bank’s NPLs stood at GEL 27.7 million, or 14.6% of BG Bank’s Gross Loan book. The NPL coverage ratio stood at 140.9% as of 30 June 2009.

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

GEL millions   UAH   Foreign Currency   Gross Loan Book   LL Reserves   Net Loan Book   NPLs
RB   7.3   29.8   37.1   (12.8)   24.2   5.6
CB   101.8   51.5   153.3   (26.2)   127.1   22.1
Total 109.1 81.3 190.3 (39.0) 151.3 27.7

BG Bank’s Client Deposits dropped 5.1% q-o-q to GEL 114.8 million following the expiry of the NBU restriction on early withdrawal of time deposits. BG Bank’s Total Liabilities stood at GEL 156.9 million in Q2 2009, down 46.3% y-o-y and 14.6% q-o-q. BG Bank has no international wholesale funding obligations and its leverage stood at a healthy 3.2x as of 30 June 2009.

Breakdown of BG Bank’s Total Deposits by currency

  30-Jun-09   31-Mar-09   31-Dec-08
GEL million   UAH   Foreign Currency   Total   UAH   Foreign Currency   Total   UAH   Foreign Currency   Total
RB 27.3   49.8   77.1 27.1   47.0   74.1 26.7   52.0   81.7
CB   34.0   3.7   37.7   42.2   4.8   47.0   36.2   9.5   45.7
Total 61.3 53.5 114.8 69.3 51.8 121.1 65.9 61.5 127.4

As of 30 June 2009, BG Bank’s regulatory position remained strong. National Bank of Ukraine (NBU) Capital Adequacy Ratio of BG Bank stood at 24.5% well above 8% required by NBU. In Q2 2009 Current and Short-Term Liquidity Ratios of BG Bank stood at 53% and 41%, respectively, higher than the NBU requirement of 40% and 20% respectively

Belaruskiy Narodniy Bank, Belarus (BNB)

In Q2 2009 BNB’s Total Operating Income decreased to GEL 1.7 million, down 29.6% q-o-q, mostly due to decreased FX related income in Belarus during the quarter. In Q1 2009, BNB reported extraordinary FX related income due to one-off 20% devaluation of BYR. BNB’s Recurring Costs stood at GEL 1.5 million, down 3.2% q-o-q, resulting in a Net Income of GEL 197 thousand as compared to Net Income of GEL 0.7 million in Q1 2009 and Net Loss of GEL 0.2 million in Q4 2008.

In 1H 2009 BNB’s Total Operating Income reached GEL 4.1 million, while Total Recurring Operating Costs stood at GEL 3.0 million. NNOI equaled GEL 1.2 million for 1H 2009. BNB reported Net Income of GEL 0.9 million for 1H 2009.

On 30 June 2009 BNB’s Total Assets stood at GEL 51.9 million, down 13.6% q-o-q and Gross Loans to Clients equaled GEL 27.4 million, down 7.5% q-o-q. Client Deposits amounted to GEL 16.2 million, down 36.1% q-o-q, primarily caused by the withdrawal of one deposit in the amount of US$3.75 million, which was part of the holdback at the time of the acquisition of BNB by the Bank. The second part of the holdback, subject to the holdback provision, in the amount of US$3.75 million may be withdrawn in Q2 2010. Total Liabilities stood at GEL 19.1 million, down 27.9% q-o-q.

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

GEL million   BYR   Foreign Currency   Gross Loan Book   LL Reserves   Net Loan Book   NPLs
RB   0.5   2.3   2.8   (0.2)   2.6   0.1
CB   11.5   13.1   24.6   (1.0)   23.6   2.2
Total 12.0 15.4 27.3 (1.2) 26.2 2.3

Breakdown of BNB’s Total Deposits by currency

30-Jun-09 31-Mar-09 31-Dec-08
GEL million BYR Foreign Currency Total BYR Foreign Currency Total BYR Foreign Currency Total
RB 0.2 3.7 4.0 0.2 4.2 4.4 0.3 4.0 4.3
CB 3.7 8.6 12.3 4.2 16.8 21.0 9.1 17.3 26.4
Total 3.9 12.3 16.2 4.4 21.0 25.4 9.4 21.3 30.7

Total Capital Adequacy stood at solid 55.4%, while Tier I Capital Adequacy Ratio amounted to 28.7%. National Bank of Belarus requires Total Capital Adequacy ratio of 8% and Tier I Capital Adequacy Ratio of 4%. As of 1 January 2010, capital requirement by the National Bank of Belarus will increase from the current EUR 10 million to EUR 25 million.

Galt & Taggart Securities (GTS)

In Q2 2009 GTS completed rationalizing of its operations achieving closer integration of its teams in Georgia, Ukraine and Belarus. GTS’s Revenue for the quarter amounted to GEL 1.5 million and Net Income to GEL 0.8 million. GTS’s Revenue for 1H 2009 was GEL 2.8 million and Net Income was GEL 0.9 million.

Asset Management (AM)

As part of the effort to restructure the Bank’s position in the Asset Management segment, the Bank is in the process of sale of its equity interest in GTAM to minority shareholder of GTAM. The sale is expected to be completed in the middle of September 2009.

Insurance

Aldagi BCI, the Bank’s wholly-owned insurance subsidiary, reported Q2 2009 Net Income of GEL 1.6 million (as compared to Net Income of GEL 656 thousand in Q1 2009 and Net Income of GEL 36 thousand in Q2 2008). The successful clean-up of Aldagi BCI’s health insurance portfolio and introduction of new tariffs translated into 34.6% y-o-y growth of Q2 2009 Net Premiums Earned to GEL 12.8 million (up 109.8% q-o-q). Revenue grew by 34.0% y-o-y to GEL 3.9 million in Q2 2009. The notable improvement of Aldagi BCI’s cost control and efficiency and better claims management resulted in the 23.5% y-o-y decrease of Operating Costs to GEL 2.3 million. In 1H 2009 Aldagi BCI’s Gross Premiums Written grew 26.6% y-o-y to GEL 37.7 million. Net Premiums Earned increased 40.2% y-o-y, reaching GEL 24.5 million. Revenue for 1H 2009 equaled GEL 7.8 million, up 45.3% y-o-y.

In light of Aldagi BCI’s increased operating efficiency and improved financial performance, the Bank has temporarily suspended its search for a strategic partner for Aldagi BCI announced previously. The Bank’s objective now is to complete the rationalization of Aldagi BCI’s business and further improve company’s financial performance. The Bank will again review its position in respect of Aldagi BCI in 2010.

STANDALONE Q2 2009 INCOME STATEMENT DATA

Period Ended   Q2 2009     Q1 20091   Growth4   Q2 2008   Growth
Standalone, IFRS Based US$2 GEL US$3   GEL Q-O-Q US$5   GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited) (Unaudited)
Interest Income 51,621 85,582 56,235 90,982 -5.94% 64,331 91,222 -6.18%
Interest Expense 24,179 40,087 24,323 40,620 -1.31% 29,007 41,131 -2.54%
Net Interest Income 27,441 45,495 31,912 50,363 -9.66% 35,325 50,090 -9.17%
Fee & Commission Income 6,298 10,442 6,126 10,231 2.06% 8,576 12,161 -14.14%
Fee & Commission Expense 1,334 2,212 1,336 2,231 -0.87% 1,411 2,001 10.54%
Net Fee & Commission Income 4,964 8,230 4,790 8,000 2.88% 7,165 10,160 -19.00%
Income From Documentary Operations 1,433 2,376 1,612 2,692 -11.74% 1,615 2,290 3.76%
Expense On Documentary Operations 363 601 273 456 31.93% 294 417 44.12%
Net Income From Documentary Operations 1,071 1,775 1,339 2,237 -20.63% 1,321 1,873 -5.22%
Net Foreign Currency Related Income 3,856 6,392 3,343 5,583 14.50% 6,460 9,161 -30.22%
Net Other Non-Interest Income 244 404 270 450 -10.36% (135) (191) NMF
Net Non-Interest Income 10,134 16,801 9,742 16,270 3.27% 14,812 21,003 -20.01%
Total Operating Income (Revenue) 37,576 62,297 41,654 66,632 -6.51% 50,136 71,093 -12.37%
Personnel Costs 8,949 14,836 8,800 14,695 0.96% 12,064 17,106 -13.27%
Selling, General & Administrative Costs 3,603 5,974 3,788 6,325 -5.56% 4,355 6,175 -3.26%
Procurement & Operations Support Expenses 1,551 2,571 1,631 2,725 -5.62% 2,286 3,242 -20.68%
Depreciation & Amortization 3,154 5,229 2,454 4,097 27.62% 2,741 3,886 34.55%
Other Operating Expenses 652 1,082 566 945 14.50% 951 1,348 -19.76%
Total Recurring Operating Costs 17,909 29,692 17,238 28,787 3.14% 22,396 31,758 -6.50%
Normalized Net Operating Income 19,666 32,605 24,417 37,845 -13.85% 27,740 39,336 -17.11%
Net Non-Recurring Income (Costs) (1,169) (1,938) 322 538 NMF 1,840 2,609 -215.52%
Profit Before Provisions 18,497 30,666 24,095 37,307 -17.80% 29,580 41,945 -26.89%
Net Provision Expense 17,852 29,598 16,146 24,032 23.16% 6,032 8,553 246.05%
Pre-Tax Income 645 1,069 7,949 13,275 -91.95% 23,548 33,392 -96.80%
Income Tax Expenses/(Benefit) 97 160 1,192 1,991 -91.95% 3,532 5,009 -96.80%
Net Income 548 908 6,757 11,284 -91.95% 20,016 28,383 -96.80%

1 Q1 2009 results reflect the downward restatement of both Interest Income and Net Provision Expense by GEL 2.9 million; Net Income for the period hasn’t been revised.
2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6579 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 30 June 2009
3 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6700 per U$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 March 2009
4Growth calculations based on GEL values
5 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.4180 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 30 June 2008

STANDALONE 1H 2009 INCOME STATEMENT DATA

Period Ended   1H 2009   1H 2008   Growth3
Standalone, IFRS Based US$1   GEL US$2   GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited)
Interest Income 106,499 176,564 121,343 172,065 2.61%
Interest Expense 48,680 80,706 54,062 76,661 5.28%
Net Interest Income 57,819 95,858 67,281 95,404 0.48%
Fee & Commission Income 12,469 20,673 15,954 22,623 -8.62%
Fee & Commission Expense 2,680 4,443 2,349 3,330 33.41%
Net Fee & Commission Income 9,790 16,230 13,606 19,293 -15.88%
Income From Documentary Operations 3,057 5,068 2,988 4,237 19.62%
Expense On Documentary Operations 637 1,057 647 917 15.21%
Net Income From Documentary Operations 2,420 4,012 2,341 3,320 20.84%
Net Foreign Currency Related Income 7,223 11,975 14,340 20,334 -41.11%
Net Other Non-Interest Income 515 854 -462 (655) NMF
Net Non-Interest Income 19,948 33,071 29,825 42,292 -21.80%
Total Operating Income (Revenue) 77,766 128,929 97,106 137,696 -6.37%
Personnel Costs 17,812 29,531 24,371 34,558 -14.54%
Selling, General & Administrative Costs 7,418 12,299 7,652 10,850 13.35%
Procurement & Operations Support Expenses 3,194 5,296 4,475 6,346 -16.54%
Depreciation & Amortization 5,625 9,326 4,914 6,967 33.86%
Other Operating Expenses 1,222 2,026 1,023 1,450 39.74%
Total Recurring Operating Costs 35,273 58,479 42,434 60,171 -2.81%
Normalized Net Operating Income 42,493 70,450 54,672 77,525 -9.13%
Net Non-Recurring Income (Costs) (1,493) (2,476) 682 966 NMF
Profit Before Provisions 41,000 67,974 55,354 78,491 -13.40%
Net Provision Expense 32,348 53,630 10,753 15,248 251.71%
Pre-Tax Income 8,652 14,344 44,600 63,243 -77.32%
Income Tax Expenses/(Benefit) 1,298 2,152 6,690 9,486 -77.32%
Net Income 7,354 12,192 37,910 53,757 -77.32%

1 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6579 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 30 June 2009
2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.4180 per U$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 30 June 2008
3Growth calculations based on GEL values

STANDALONE Q2 2009 BALANCE SHEET DATA

  30-Jun-09   31-Mar-09   30-Jun-08   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 66,203 109,758 67,042 111,960 73,777 104,615 4.92% -1.97%
Loans & Advances To Credit Institutions 193,733 321,190 254,884 425,656 255,299 362,014 -11.28% -24.54%
Mandatory Reserve With NBG 16,708 27,701 17,634 29,449 58,663 83,184 -66.70% -5.94%
Other Accounts With NBG 78,692 130,464 43,249 72,226 65,179 92,424 41.16% 80.63%
Balances With & Loans To Other Banks 98,333 163,026 194,001 323,981 131,457 186,406 -12.54% -49.68%
Available-For-Sale & Trading Securities - - - - - - NMF NMF
Treasuries & Equivalents - - - - 12,689 17,993 NMF NMF
Other Fixed Income Instruments 34,537 57,259 22,954 38,333 61,860 87,717 -34.72% 49.37%
Gross Loans To Clients 1,035,549 1,716,837 1,109,171 1,852,315 1,306,475 1,852,581 -7.33% -7.31%
Less: Reserve For Loan Losses (69,257) (114,821) (61,464) (102,645) (26,620) (37,747) 204.19% 11.86%
Net Loans To Clients 966,292 1,602,016 1,047,707 1,749,670 1,279,855 1,814,834 -11.73% -8.44%
Insurance Related Assets - - - - - - NMF NMF
Investments In Other Business Entities, Net 189,709 314,518 188,328 314,507 221,599 314,228 0.09% 0.00%
Property & Equipment Owned, Net 135,255 224,240 138,605 231,471 152,171 215,779 3.92% -3.12%
Intangible Assets Owned, Net 4,379 7,260 4,076 6,807 2,638 3,741 94.10% 6.65%
Goodwill 13,742 22,783 13,642 22,783 15,968 22,643 0.62% 0.00%
Tax Assets - Current & Deferred - - - - - - NMF NMF
Prepayments & Other Assets 16,379 27,155 9,140 15,263 16,844 23,885 13.69% 77.91%
Total Assets 1,620,230 2,686,180 1,746,378 2,916,451 2,092,699 2,967,447 -9.48% -7.90%
-
Client Deposits 548,436 909,252 586,214 978,977 822,684 1,166,566 -22.06% -7.12%
Deposits & Loans From Banks 9,811 16,265 17,573 29,348 58,267 82,623 -80.31% -44.58%
Borrowed Funds 609,036 1,009,720 696,288 1,162,801 637,266 903,644 11.74% -13.16%
Issued Fixed Income Securities - - - - - - NMF NMF
Insurance Related Liabilities - - - - - - NMF NMF
Tax Liabilities - Current & Deferred 10,274 17,033 9,682 16,169 19,743 27,995 -39.16% 5.34%
Accruals & Other Liabilities 14,246 23,620 13,644 22,786 48,392 68,620 -65.58% 3.65%
Total Liabilities 1,191,802 1,975,888 1,323,402 2,210,081 1,586,352 2,249,447 -12.16% -10.60%
Ordinary Shares 18,862 31,272 18,719 31,261 22,036 31,248 0.08% 0.03%
Share Premium 283,702 470,349 279,874 467,390 325,295 461,268 1.97% 0.63%
Treasury Shares (677) (1,123) (699) (1,167) (1,036) (1,469) -23.58% -3.75%
Retained Earnings 83,438 138,332 82,834 138,332 82,927 117,590 17.64% 0.00%
Revaluation & Other Reserves 35,750 59,269 35,491 59,269 39,215 55,607 6.59% 0.00%
Net Income (Loss) For The Period 7,354 12,192 6,757 11,284 37,910 53,757 -77.32% 8.05%
Shareholders' Equity Excluding Minority Interest 428,428 710,291 422,976 706,370 506,347 718,000 -1.07% 0.56%
Minority Interest - - - - - - NMF NMF
Total Shareholders' Equity 428,428 710,291 422,976 706,370 506,347 718,000 -1.07% 0.56%
Total Liabilities & Shareholders' Equity 1,620,230 2,686,180 1,746,378 2,916,451 2,092,699 2,967,447 -9.48% -7.90%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.6579 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 June 2009
2 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.6700 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 March 2009
3 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.4180 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 30 June 2008
4 Growth calculations based on GEL values

BG BANK (UKRAINE) 1H 2009 INCOME STATEMENT DATA

Period Ended   1H 2009   1H 2008   Growth3
Standalone, IFRS Based US$1   GEL US$1   GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited)
Interest Income 12,215 20,251 17,585 24,936 -18.79%
Interest Expense 7,873 13,053 10,027 14,218 -8.19%
Net Interest Income 4,342 7,198 7,559 10,718 -32.84%
Fee & Commission Income 1,145 1,899 1,133 1,607 18.17%
Fee & Commission Expense 257 426 395 560 -23.86%
Net Fee & Commission Income 888 1,473 738 1,047 40.66%
Income From Documentary Operations - - - - NMF
Expense On Documentary Operations - - - - NMF
Net Income From Documentary Operations - - - - NMF
Net Foreign Currency Related Income 1,436 2,381 1,046 1,484 60.49%
Net Other Non-Interest Income - - - - NMF
Net Non-Interest Income 2,324 3,854 1,785 2,530 52.29%
Total Operating Income (Revenue) 6,666 11,052 9,343 13,248 -16.58%
Personnel Costs 3,904 6,472 6,262 8,879 -27.11%
Selling, General & Administrative Costs 1,079 1,788 3,476 4,929 -63.72%
Procurement & Operations Support Expenses 653 1,082 - - NMF
Depreciation & Amortization 294 487 299 424 14.89%
Other Operating Expenses 249 412 24 34 1108.04%
Total Recurring Operating Costs 6,177 10,241 10,061 14,266 -28.21%
Normalized Net Operating Income 489 811 (718) (1,017) NMF
Net Non-Recurring Income (Costs) (206) (342) 74 104 NMF
Profit Before Provisions 283 469 (644) (913) NMF
Net Provision Expense 12,309 20,407 (606) (859) NMF
Pre-Tax Income (12,026) (19,938) (38) (54)
Income Tax Expenses/(Benefit) (1,099) (1,823) (10) (15)
Net Income (10,927) (18,116) (28) (40)

1 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6579 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 30 June 2009
2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.4180 per U$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 30 June 2008
3Growth calculations based on GEL values

BNB (BELARUS) 1H 2009 INCOME STATEMENT DATA

  1H 2009
Period Ended US$1       GEL
Standalone, IFRS Based (Unaudited)
000s, unless otherwise noted
Interest Income 1,839 3,049
Interest Expense 666 1,104
Net Interest Income 1,174 1,946
Fee & Commission Income 447 741
Fee & Commission Expense 65 107
Net Fee & Commission Income 383 634
Income From Documentary Operations 2 3
Expense On Documentary Operations 1 1
Net Income From Documentary Operations 1 2
Net Foreign Currency Related Income 880 1,459
Net Other Non-Interest Income 62 102
Net Non-Interest Income 1,326 2,198
Total Operating Income (Revenue) 2,499 4,143
Personnel Costs 922 1,528
Selling, General & Administrative Costs 190 314
Procurement & Operations Support Expenses 282 467
Depreciation & Amortization 183 304
Other Operating Expenses 211 349
Total Recurring Operating Costs 1,787 2,963
Normalized Net Operating Income 712 1,180
Net Non-Recurring Income (Costs) 12 19
Profit Before Provisions 723 1,199
Net Provision Expense 1 1
Pre-Tax Income 723 1,198
Income Tax Expenses/(Benefit) 205 340
Net Income 517 858

1 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6579 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 30 June 2009

CONSOLIDATED Q2 2009 INCOME STATEMENT DATA

Period Ended   Q2 2009   Q1 20091   Q2 2008   Growth5   Growth5
Consolidated, IFRS Based US$2   GEL US$3   GEL US$4   GEL Y-O-Y Q-O-Q
000s, unless otherwise noted (Unaudited) (Unaudited) (Unaudited)
Interest Income 57,028 94,547 60,978 101,833 73,481 104,196 -9.26% -7.15%
Interest Expense 27,201 45,097 29,586 49,409 34,106 48,362 -6.75% -8.73%
Net Interest Income 29,827 49,451 31,391 52,423 39,375 55,834 -11.43% -5.67%
Fee & Commission Income 7,189 11,918 6,823 11,395 8,787 12,460 -4.34% 4.59%
Fee & Commission Expense 1,502 2,490 1,489 2,486 1,619 2,296 8.43% 0.17%
Net Fee & Commission Income 5,687 9,428 5,335 8,909 7,167 10,163 -7.23% 5.83%
Income From Documentary Operations 1,434 2,377 1,614 2,695 1,615 2,290 3.80% -11.80%
Expense On Documentary Operations 363 601 274 457 294 417 44.16% 31.64%
Net Income From Documentary Operations 1,071 1,776 1,340 2,238 1,321 1,873 -5.19% -20.66%
Net Foreign Currency Related Income 4,261 7,064 5,256 8,778 7,338 10,405 -32.11% -19.53%
Net Insurance Income 3,047 5,052 1,821 3,042 1,224 1,736 191.05% 66.09%
Brokerage Income 813 1,348 202 337 1,104 1,566 -77.80% 3.05%
Asset Management Income 155 256 97 162 174 246 4.04% 58.41%
Realized Net Investment Gains (Losses) 185 306 (2) (3) (265) (375) NMF NMF
Other 3,560 5,902 3,489 5,826 3,295 4,672 26.31% 1.30%
Net Other Non-Interest Income 7,759 12,864 5,607 9,364 5,533 7,845 63.97% 37.38%
Net Non-Interest Income 18,778 31,132 17,539 29,289 21,359 30,287 2.79% 6.29%
Total Operating Income (Revenue) 48,605 80,582 48,930 81,713 60,734 86,121 -6.43% -1.38%
Personnel Costs 13,990 23,193 13,164 21,985 19,224 27,260 -14.92% 5.50%
Selling, General & Administrative Costs 6,017 9,976 6,999 11,688 8,463 12,001 -16.87% -14.65%
Procurement & Operations Support Expenses 2,345 3,888 1,771 2,957 2,286 3,242 19.92% 31.47%
Depreciation & Amortization 3,967 6,576 3,105 5,185 3,289 4,664 40.99% 26.83%
Other Operating Expenses 1,623 2,691 1,694 2,830 1,195 1,695 58.82% -4.89%
Total Recurring Operating Costs 27,941 46,324 26,733 44,645 34,458 48,861 -5.19% 3.76%
Normalized Net Operating Income 20,664 34,258 22,196 37,068 26,276 37,260 -8.06% -7.58%
Net Non-Recurring Income (Costs) (175) (290) (137) (228) 2,252 3,194 -109.07% 26.77%
Profit Before Provisions 20,489 33,969 22,060 36,839 28,529 40,454 -0.29% -7.79%
Net Provision Expense 24,543 40,690 19,198 32,061 5,073 7,194 465.62% 26.91%
Pre-Tax Income (4,054) (6,721) 2,861 4,778 23,455 33,260 NMF NMF
Income Tax Expenses/(Benefit) (1,445) (2,395) (181) (302) 3,473 4,924 NMF 692.93%
Net Income (2,610) (4,326) 3,042 5,080 19,983 28,335 NMF NMF

1 Q1 2009 results reflect the downward restatement of both Interest Income and Net Provision Expense by GEL 2.9 million; Net Income for the period hasn’t been revised
2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6579 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 30 June 2009
3 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6700 per U$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 March 2009
4Growth calculations based on GEL values
5 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.4180 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 30 June 2008

CONSOLIDATED 1H 2009 INCOME STATEMENT DATA

Period Ended   1H 2009   1H 2008   Growth
Consolidated, IFRS Based US$1   GEL US$2   GEL Y-O-Y
000s, unless otherwise noted (Unaudited) (Unaudited)
Interest Income 118,451 196,380 138,770 196,777 -0.20%
Interest Expense 57,003 94,506 64,300 91,177 3.65%
Net Interest Income 61,448 101,874 74,471 105,599 -3.53%
Fee & Commission Income 14,062 23,313 17,088 24,230 -3.79%
Fee & Commission Expense 3,001 4,976 2,744 3,890 27.91%
Net Fee & Commission Income 11,060 18,337 14,344 20,340 -9.85%
Income From Documentary Operations 3,059 5,072 2,988 4,237 19.71%
Expense On Documentary Operations 638 1,058 647 917 15.35%
Net Income From Documentary Operations 2,421 4,014 2,341 3,320 20.91%
Net Foreign Currency Related Income 9,555 15,842 16,665 23,631 -32.96%
Net Insurance Income 4,882 8,094 2,379 3,373 139.94%
Brokerage Income 1,016 1,685 2,003 2,841 -75.89%
Asset Management Income 252 418 629 892 -53.16%
Realized Net Investment Gains (Losses) 185 303 (528) (748) NMF
Other 7,074 11,728 5,477 7,767 51.00%
Net Other Non-Interest Income 13,407 22,228 9,961 14,125 57.36%
Net Non-Interest Income 36,444 60,421 43,312 61,416 -1.62%
Total Operating Income (Revenue) 97,892 162,295 117,782 167,016 -2.83%
Personnel Costs 27,250 45,178 37,369 52,989 -14.74%
Selling, General & Administrative Costs 13,067 21,664 16,435 23,305 -7.04%
Procurement & Operations Support Expenses 4,129 6,845 4,475 6,346 7.87%
Depreciation & Amortization 7,094 11,761 6,131 8,694 35.28%
Other Operating Expenses 3,330 5,521 1,415 2,006 175.21%
Total Recurring Operating Costs 54,870 90,969 65,825 93,339 -2.54%
Normalized Net Operating Income 43,022 71,326 51,958 73,676 -3.19%
Net Non-Recurring Income (Costs) (312) (518) 8,365 11,862 -104.37%
Profit Before Provisions 42,709 70,808 60,323 85,538 -17.22%
Net Provision Expense 43,881 72,751 10,328 14,645 396.77%
Pre-Tax Income (1,172) (1,943) 49,995 70,893 NMF
Income Tax Expenses/(Benefit) (1,627) (2,697) 7,504 10,640 NMF
Net Income 455 754 42,491 60,253 -98.75%

1 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6579 per U$S1.00, such rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia as at 30 June 2009
2 Converted to U.S. dollars for convenience using a period-end exchange rate of GEL 1.6700 per U$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 March 2009

CONSOLIDATED Q2 2009 BALANCE SHEET DATA

  30-Jun-09   31-Mar-09   30-Jun-08   Growth5   Growth5
Consolidated, 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 85,886 142,390 102,477 171,136 73,777 104,615 36.11% -16.80%
Loans & Advances To Credit Institutions 187,879 311,484 248,418 414,857 255,299 362,014 -13.96% -24.92%
Mandatory Reserve With NBG 20,473 33,943 29,350 49,014 58,663 83,184 -59.20% -30.75%
Other Accounts With NBG 78,692 130,464 43,249 72,226 65,179 92,424 41.16% 80.63%
Balances With & Loans To Other Banks 88,713 147,077 175,818 293,617 131,457 186,406 -21.10% -49.91%
Available-For-Sale & Trading Securities 17,128 28,396 24,252 40,501 - - NMF NMF
Treasuries & Equivalents - - - - 12,689 17,993 NMF NMF
Other Fixed Income Instruments 35,651 59,105 22,967 38,355 61,860 87,717 -32.62% 54.10%
Gross Loans To Clients 1,148,849 1,904,676 1,225,658 2,046,850 1,306,475 1,852,581 2.81% -6.95%
Less: Reserve For Loan Losses (93,535) (155,072) (80,985) (135,245) (26,620) (37,747) 310.82% 14.66%
Net Loans To Clients 1,055,313 1,749,604 1,144,673 1,911,604 1,279,855 1,814,834 -3.59% -8.47%
Insurance Related Assets 28,569 47,365 31,506 52,615 - - NMF NMF
Investments In Other Business Entities, Net 48,787 80,884 21,875 36,531 221,599 314,228 -74.26% 121.41%
Property & Equipment Owned, Net 171,397 284,159 203,532 339,898 152,171 215,779 31.69% -16.40%
Intangible Assets Owned, Net 7,195 11,928 6,839 11,421 2,638 3,741 218.88% 4.44%
Goodwill 81,604 135,291 80,992 135,257 15,968 22,643 497.50% 0.03%
Tax Assets - Current & Deferred 4,996 8,283 4,003 6,685 - - NMF NMF
Prepayments & Other Assets 29,515 48,933 16,705 27,898 16,844 23,885 104.87% 75.40%
Total Assets 1,753,919 2,907,822

1,908,239

3,186,759

2,092,699 2,967,447 -2.01% -8.75%
 
Client Deposits 618,424 1,025,285 678,402 1,132,931 822,684 1,166,566 -12.11% -9.50%
Deposits & Loans From Banks 24,805 41,124 31,702 52,942 58,267 82,623 -50.23% -22.32%
Borrowed Funds 610,037 1,011,380 696,288 1,162,801 637,266 903,644 11.92% -13.02%
Issued Fixed Income Securities 119 198 81 136 - - NMF NMF
Insurance Related Liabilities 35,987 59,663 38,207 63,806 - - NMF NMF
Tax Liabilities - Current & Deferred 11,679 19,362 11,348 18,951 19,743 27,995 -30.84% 2.17%
Accruals & Other Liabilities 24,676 40,910 25,955 43,345 48,392 68,620 -40.38% -5.62%
Total Liabilities 1,325,727 2,197,922 1,481,983 2,474,911 1,586,352 2,249,447 -2.29% -11.19%
-
Ordinary Shares 18,862 31,272 18,719 31,261 22,036 31,248 0.08% 0.04%
Share Premium 277,125 459,446 274,512 458,435 325,295 461,268 -0.39% 0.22%
Treasury Shares (1,081) (1,793) (1,199) (2,002) (1,036) (1,469) 22.03% -10.43%
Retained Earnings 73,081 121,161 72,529 121,123 82,927 117,590 3.04% 0.03%
Revaluation & Other Reserves 28,653 47,504 27,890 46,577 39,215 55,607 -14.57% 1.99%
Net Income (Loss) For The Period 454 753 3,042 5,080 37,910 53,757 -98.60% -85.18%
Shareholders' Equity Excluding Minority Interest 397,095 658,343 395,494 660,474 506,347 718,000 -8.31% -0.32%
Minority Interest 31,098 51,557 30,762 51,373 - - NMF NMF
Total Shareholders' Equity 428,192 709,900 426,256 711,847 506,347 718,000 -1.13% -0.27%
Total Liabilities & Shareholders' Equity 1,753,919 2,907,822 1,908,239 3,186,759 2,092,699 2,967,447 -2.01% -8.75%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.6579 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 June 2009
2 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.67 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 March 2009
3 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.4180 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 30 June 2008
4 Growth calculations based on GEL values

KEY RATIOS

  1H 2009   1H 2008
Profitability Ratios
ROAA 1, Annualised   0.1%   3.8%
ROA   0.1%   3.5%
ROAE2, Annualised   0.8%   17.3%
ROE   0.9%   15.4%
Interest Income To Average Interest Earning Assets 3, Annualised   17.6%   16.3%
Cost Of Funds 4, Annualised   8.5%   8.0%
Net Spread 5   9.1%   8.3%
Net Interest Margin 6, Annualised   9.1%   8.8%
Loan Yield 7, Annualised   12.3%   19.2%
Interest Expense To Interest Income   48.1%   46.3%
Net Non-Interest Income To Average Total Assets, Annualised   3.9%   3.9%
Net Non-Interest Income To Revenue 8   37.2%   36.8%
Net Fee And Commission Income To Average Interest Earning Assets 9, Annualised   1.6%   1.7%
Net Fee And Commission Income To Revenue   11.3%   12.2%
Operating Leverage 10   -15.1%   9.3%
Total Operating Income (Revenue) To Total Assets, Annualised   11.2%   9.8%
Recurring Earning Power 11, Annualised   4.6%   6.4%
Net Income To Revenue   0.5%   36.1%
 
Efficiency Ratios
Operating Cost To Average Total Assets 12, Annualised   5.9%   4.9%
Cost To Average Total Assets 13, Annualised   6.0%   5.1%
Cost / Income 14   56.4%   48.8%
Cost / Income, Normalized 37   56.1%   55.9%
Cost / Income, Bank of Georgia, Standalone 15   43.4%   43.0%
Cost/Income, Normalized, Bank of Georgia, Standalone   45.4%   43.7%
Cash Cost / Income   49.1%   43.6%
Total Employee Compensation Expense To Revenue 16   27.8%   31.7%
Total Employee Compensation Expense To Cost   49.4%   65.0%
Total Employee Compensation Expense To Average Total Assets, Annualised   3.0%   3.3%
 
Liquidity Ratios
Net Loans To Total Assets 17   60.2%   60.7%
Average Net Loans To Average Total Assets   60.9%   58.4%
Interest Earning Assets To Total Assets   72.9%   75.1%
Average Interest Earning Assets To Average Total Assets   73.1%   75.9%
Liquid Assets To Total Assets 18   17.5%   18.7%
Liquid Assets To Total Liabilities, NBG Stand-Alone   37.6%   33.8%
Liquid Assets To Total Liabilities, IFRS Consolidated   24.6%   27.9%
Net Loans To Client Deposits   170.6%   147.8%
Average Net Loans To Average Client Deposits   173.3%   136.2%
Net Loans To Total Deposits 19   164.1%   135.7%
Net Loans To (Total Deposits + Equity)   98.5%   89.5%
Net Loans To Total Liabilities   79.6%   78.8%
Total Deposits To Total Liabilities   48.5%   58.1%
Client Deposits To Total Deposits   96.1%   91.8%
Client Deposits To Total Liabilities   46.6%   53.3%
Current Account Balances To Client Deposits   40.6%   39.3%
Demand Deposits To Client Deposits   9.7%   5.5%
Time Deposits To Client Deposits   49.6%   55.2%
Total Deposits To Total Assets   36.7%   44.7%
Client Deposits To Total Assets   35.3%   41.0%
Client Deposits To Total Equity (Times) 20   1.44   1.8
Due From Banks / Due To Banks 21   757.4%   308.5%
Total Equity To Net Loans   40.6%   38.0%
Leverage (Times) 22   3.1   3.3

KEY RATIOS CONT’D

  1H 2009   1H 2008
Asset Quality
NPLs (in GEL) 23   148,767   32,086
NPLs To Gross Loans To Clients 24   7.8%   1.5%
Cost of Risk 25, Annualized   7.3%   1.6%
Cost of Risk Normalized 36, Annualized   7.3%   1.6%
Reserve For Loan Losses To Gross Loans To Clients 26   8.1%   2.1%
NPL Coverage Ratio 27   104.2%   138.3%
Equity To Average Net Loans To Clients   38.1%   42.2%
 
Capital Adequacy
Equity To Total Assets   24.4%   23.0%
BIS Tier I Capital Adequacy Ratio, consolidated 28   23.9%   25.1%
BIS Total Capital Adequacy Ratio, consolidated 29   34.2%   25.8%
NBG Tier I Capital Adequacy Ratio 30   17.8%   15.8%
NBG Total Capital Adequacy Ratio 31   18.4%   15.1%
 
Per Share Values
Basic EPS (GEL) 32   0.02   2.00
Basic EPS (US$)   0.01   1.41
Fully Diluted EPS (GEL) 33   0.02   1.93
Fully Diluted EPS (US$)   0.01   1.36
Book Value Per Share (GEL) 34   22.70   25.06
Book Value Per Share (US$)   13.69   17.67
Ordinary Shares Outstanding - Weighted Average, Basic   31,263,045   30,105,610
Ordinary Shares Outstanding - Period End   31,271,525   31,247,511
Ordinary Shares Outstanding - Fully Diluted   34,746,139   31,247,511
 
Selected Operating Data
Full Time Employees (FTEs)   4,914   5,909
FTEs, Bank of Georgia Standalone   2,660   3,619
Total assets per FTE 23 (GEL Thousands)   595   576
Total Assets per FTE, Bank of Georgia Standalone (GEL Thousands)   1,093   940
Number Of Active Branches   140   134
Number Of ATMs   394   363
Number Of Cards (Thousands)   593   847
Number Of POS Terminals   1,861   2,452

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.