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JSC Bank of Georgia (BGEO)

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Monday 23 August, 2010

JSC Bank of Georgia

Half-yearly Report

Half-yearly Report

Bank of Georgia

1.84 GEL/US$ 30 June 2010
1.76 GEL/US$ 1 H 2010 average1.76 GEL/US$ 1 H 2010 average
1.80 GEL/US$ Q2 2010 average1.80 GEL/US$ Q2 2010 average
1.75 GEL/US$ 31 March 20101.75 GEL/US$ 31 March 2010
1.72 GEL/US$ Q1 2010 average1.72 GEL/US$ Q1 2010 average
1.66 GEL/US$ 30 June 20091.66 GEL/US$ 30 June 2009
1.66 GEL/US$ 1 H 2009 average1.66 GEL/US$ 1 H 2009 average
1.66 GEL/US$ Q2 2009 average1.66 GEL/US$ Q2 2009 average

JSC BANK OF GEORGIA REPORTS Q2 2010 AND 1H RESULTS

Millions, unless otherwise noted   Q2 2010   Growth q-o-q1
Bank of Georgia (Consolidated, Unaudited, IFRS-based) US$   GEL
Total Operating Income (Revenue)3 44.9 82.8 9.1%
Recurring Operating Costs 25.9 47.8 3.3%
Normalised Net Operating Income4 19.0 35.0 18.1%
Net Non-Recurring Income / (Costs) 1.0 1.9 NMF
Profit/(Loss) Before Provisions 20.0 36.8 39.8%
Net Provision Expenses 7.1 13.1 77.6%
Net Income/(Loss) 10.6 19.5 16.3%
 
1H 2010 Growth y-o-y2
US$ GEL
Total Operating Income (Revenue)3 86.0 158.6 -2.2%
Recurring Operating Costs 51.0 94.1 3.4%
Normalised Net Operating Income(NNOI) 4 35.0 64.6 -9.4%
Net Non-Recurring Income / (Costs) (0.8) (1.4) NMF
Profit/(Loss) Before Provisions 34.3 63.2 -10.7%
Net Provision Expenses 11.1 20.4 -71.9%
Net Income/(Loss) 19.7 36.2 NMF
 
Total Assets 1,882.6 3,471.9 19.4%
Loans To Clients, Net 1,070.1 1,973.5 12.8%
Client Deposits 812.6 1,498.5 46.2%
Tier I Capital Adequacy Ratio (BIS)5 19.6%
Total Capital Adequacy Ratio (BIS)6 32.5%
Tier I Capital Adequacy Ratio (NBG) 15.8%
Total Capital Adequacy Ratio (NBG) 14.5%

Bank of Georgia (LSE:BGEO)(GSE:GEB) (the “Bank”), Georgia’s leading bank, announced today its Q2 2010 and 1H 2010 consolidated results (IFRS based, derived from management accounts), reporting a Q2 2010 Net Income of GEL 19.5 million and 1H 2010 Net Income of GEL 36.2 million.

Q2 2010 highlights

  • Consolidated Net Normalized Operating Income (NNOI) increased 18.1% q-o-q to GEL 35.0 million, up 2.1% y-o-y and Consolidated Profit Before Provisions increased 39.8% q-o-q to GEL 36.8 million, up 8.5% y-o-y
  • Net Interest Margin (NIM) improved from 8.0% in Q1 2010 to 8.3% in Q2 2010 as Cost of Funds declined from 8.6% in Q1 2010 to 8.3% in Q2 2010, as a result of decline in the Interest expense growth rate due to interest rate cuts on deposits
  • Positive consolidated operating leverage achieved as Revenue grew 9.1% q-o-q and Total Recurring Operating Cost lagged at 3.3% q-o-q growth. As a result, consolidated Cost/Income ratio declined to 55.5% in Q2 2010 from 65.3% in Q1 2010
  • Positive standalone operating leverage in Q2 2010 reached 8.4% q-o-q and Standalone Cost/Income ratio declined to 49.9% in Q2 2010 from 53.9% in Q1 2010
  • Consolidated gross loan portfolio grew 10.9% q-o-q to GEL 2,163.3 million, up 17.2% YTD and up 14.0% y-o-y
  • Consolidated Client Deposits grew 7.5% q-o-q to GEL 1,498.5 million, up 17.8% YTD and up 46.2% y-o-y
  • Extended approximately GEL 501.1 million, (up 149.4% y-o-y and up 40.5% q-o-q), in new loans to an estimated 21,500 clients (through credit cards, mortgages, consumer and other loans) and to small-and-medium sized companies and corporate clients
  • Bank of Georgia standalone NPLs declined 5.6% q-o-q to GEL 129.2 million, while BG Bank’ (Ukraine) NPLs grew 45.6% q-o-q to GEL 41.9 million. Consolidated NPL coverage ratio stood at 109.3% in Q2 2010 compared to 102.6% in Q1 2010
  • The Balance Sheet growth since the beginning of the year in 1H 2010 resulted in 2.1% market share gain by assets, 1.1% market share gain by gross loans and 2.5% market share gain by client deposits7.

“Bank’s Q2 2010 results reflect the solid balance sheet growth during the quarter. Bank’s loan portfolio grew by 10.9%, while Client Deposits grew by 7.5% on quarterly basis. Consequently, the Interest Income grew by 9.6% during the quarter. At the same time Interest Expense growth rate was significantly lower at 5.4% q-o-q. The q-o-q growth rate of Interest Expense slowed down because of interest rate cuts on deposits during the past nine months, which led to the decrease of Cost of Funds from 8.6% in Q1 2010 to 8.3% in Q2 2010. This also contributed to the improvement of NIM from 8.0% in Q1 2010 to 8.3% in Q2 2010 and a 9.1% quarterly growth of consolidated Revenue to GEL 82.8 million. The Recurring Operating Cost grew by only 3.3% q-o-q, despite the headcount increase and 9.7% growth in personnel costs, resulting in the positive operating leverage for the quarter. This translated into 18.1% q-o-q growth on NNOI to GEL 35.0 million, and to 16.3% q-o-q growth of consolidated Net Income to GEL 19.5 million. Last but not least, the Bank’s consolidated ROAE increased to 12.5% in Q2 from 11.1% in Q1 2010”, commented Giorgi Chiladze, Deputy Chief Executive Officer, Finance.

Q2 2010 summary of the Bank’s consolidated results

In Q2 2010 the Bank’s Total Operating Income (Revenue) increased 9.1% q-o-q to GEL 82.8 million, (up 2.7% y-o-y), due to 14.2% q-o-q growth of Net Interest Income to GEL 51.7 million (up 4.5% y-o-y), and 1.6% q-o-q growth of Net Non-Interest Income to GEL 31.1 million (down 0.1% y-o-y). The Net Interest Income growth rate was driven by the 9.6% q-o-q growth of Interest Income (GEL 104.1 million), which more than offset the 5.4% q-o-q increase in Interest Expense (GEL 52.4 million) that was affected by several rounds of deposit rate cuts in Georgia during previous quarters. NIM of 8.3% for the quarter strengthened compared to the NIM of 8.0% in Q1 2010. On a year-on-year basis, Interest Income grew by 10.1%, while Interest Expense increased by 16.3% y-o-y in Q2 2010 compared to Q2 2009, when the Bank’s Client Deposits were down by 46.2% from the current level. In Q2 2010 The Bank’s Net Non-Interest Income remained essentially flat compared to the same period last year and grew 1.6% to GEL 31.1 million compared to Q1 2010. The quarterly growth of Net Non-Interest Income in Q2 2010 was largely driven by the 20.5% q-o-q growth of Net Foreign Currency Related Income to GEL 8.8 million, a result of high FX volumes during the quarter and the 5.2% q-o-q growth of Net Fee and Commission Income to GEL 10.9 million, in line with the increased lending activity. Net Other Non-Interest Income decreased by 14.3% q-o-q, a result of the decline in Net Investment Gains by GEL 1.8 million in Q2 2010. The Bank’s insurance operations grew during the quarter, posting Net Insurance Income of GEL 4.2 million, up 1.0% q-o-q.

Total Consolidated Recurring Operating Costs for the quarter increased by 3.3% q-o-q to GEL 47.8 million, (up 3.2% y-o-y), a result of 9.7% q-o-q increase in Personnel Costs due to the increase in headcount and 3.2% q-o-q decline in non-personnel expenses. NNOI for the quarter increased 18.1% q-o-q to GEL 35.0 million, while Cost/Income ratio decreased to 55.5% in Q2 2010 from 65.3% in Q1 2010.

The Bank’s Consolidated Net Provision Expense for the quarter was GEL 13.1 million, up from Net Provision Expense of GEL 7.4 million in Q1 2010, with the increase largely attributed to the devaluation effect of Lari against US$ of GEL 5.0 million and the Georgian loan book growth effect of GEL 3.9 million. The increase of Net Provision Expense of BG Bank by GEL 3.5 million q-o-q to GEL 2.0 million also contributed to the increase of Consolidated Net Provision Expense during the quarter. Bank of Georgia’s Q2 2010 standalone Net Provision Expense of GEL 6.2 million declined 49.8% q-o-q due to the loan repayments by subsidiaries. Cost of Risk for the quarter grew to 2.5% from 1.6% in Q1 2010, respectively.

Net Provision Expense   Consolidated   Standalone
GEL thousands Q2 2010   Q1 2010   Q-O-Q Q2 2010   Q1 2010   Q-O-Q
Effect of Lari devaluation against US$ 5,002 3,778 1,224 5,002 3,778 1,224
Effect of loan book growth in Georgia 3,944 4,237 (294) 3,944 4,237 (294)
Effect of subsidiary loan repayments - - - (3,988) - (3,988)
Ukraine (BG Bank) expense / (reversal) 1,956 (1,563) 3,519 - - -
Belarus (BNB) expense / (reversal) 234 421 (187) - - -
Remaining expense / (reversal) 1,933 486 1,447 1,224 4,293 (3,069)
Net Provision Expense 13,069 7,360 5,709 6,181 12,309 (6,127)

On 30 June 2010 the Bank’s Consolidated Total Assets stood at GEL 3,471.9 million, up 11.1% from 31 March 2010 and up 19.2% from 31 December 2009. As a result of the increase in lending activity in Q2 2010, the gross loan book increased by 10.9% q-o-q to GEL 2,163.3 million as of the end of the second quarter, up 14% y-o-y and up 17.2% YTD.

In Q2 2010 Loan Loss Reserves amounted to GEL 189.8 million or 8.8% of consolidated gross loan book, largely flat compared to 8.9% in Q1 2010. Consolidated Net Loans increased by 11.0% q-o-q (up 12.8% y-o-y and up 17.6% YTD) to GEL 1,973.5 million. Consolidated NPLs of GEL 173.7 million grew by 2.9% q-o-q, representing 8.0% of the consolidated gross loans as of 30 June 2010, down from the same ratio of 8.7% in Q1 2010. In Q2 2010, Bank of Georgia NPLs on a standalone basis amounted to GEL 129.2 million, down 5.6% q-o-q, NPLs of BG Bank stood at GEL 41.9 million, up 45.6% q-o-q and NPLs of BNB amounted to GEL 2.6 million, down 19.3% q-o-q.

Client deposits continued to grow during the quarter, resulting in the 7.5% q-o-q growth of the Bank’s Total Client Deposits to GEL 1,498.5 million as of 30 June 2010, a 17.8% increase from 31 December 2009 and a 46.2% increase since 30 June 2009. As of 30 June 2010, the Bank’s consolidated Net Loans/Client Deposits ratio stood at 131.7%, down from 170.6% same period last year.

The Bank’s Borrowed funds stood at GEL 945.6 million. As of 31 July 2010, the outstanding Eurobonds maturing in February 2012 amounted to US$149 million, out of original US$ 200 million, following the gradual buy-backs by the Bank. The Bank is aiming to raise up to US$ 150 million of long-term wholesale funding from IFIs. In the context of wholesale funding strategy the Bank already signed agreements for US$ 50 million 5-year credit facilities with EBRD, as announced in August 2010.

1H 2010 Summary of the Bank’s Consolidated Results

The Bank reported the Net Income of GEL 36.2 million for 1H 2010. In the 1H 2010, the Bank’s Total Operating Income (Revenue) decreased 2.2% y-o-y to GEL 158.6 million, largely attributable to 4.9% y-o-y decrease in Net Interest Income to GEL 96.9 million. The decline is a result of lower average loan book in 1H 2010 compared to the average loan book in 1H 2009, higher average client deposits in 1H 2010 compared to the average client deposits in 1H 2009 and higher liquidity level in 1H 2010. Net Non-Interest Income of GEL 61.7 million increased by 2.2% y-o-y, mainly as a result of 12.3% growth of Net Other Non-Interest Income to GEL 20.0 million. In 1H 2010, Net Foreign Currency Related Income increased by 2.2% y-o-y to GEL 16.2 million, predominantly due to the high FX volumes in Georgia. The Bank’s Net Fees and Commission Income decreased 6.8% y-o-y to GEL 21.2 million, while Net Income from Documentary Operations grew by 7.8% y-o-y to GEL 4.3 million.

The Bank’s Net Provision Expense declined from GEL 72.8 million in 1H 2009 to GEL 20.4 million in 1H 2010. The Bank had Net Provision Expense of GEL 18.5 million in Georgia and GEL 0.4 million in Ukraine. The Bank reported the Net Income of GEL 36.2 million for 1H 2010 compared to the Net Income of GEL 0.8 million in 1H 2009.

The Bank’s consolidated Book Value per Share on 30 June 2010 stood at GEL 20.73 (US$ 11.24), compared to GEL 19.53 (US$ 11.17) as at 31 March 2010 and GEL 19.12 (US$ 11.34) as of 31 December 2009.

JSC Bank of Georgia (Standalone) results

Bank of Georgia on a standalone basis reported Q2 2010 Net Income of GEL 24.0 million, which compares to the Standalone Net Income of GEL 12.8 million in Q1 2010 and GEL 0.9 million in Q2 2009. The increase in Net Income for the quarter reflects the healthy growth of the Bank’s standalone Revenue and the decline in standalone Net Provision Expenses both on a quarter-on-quarter and year-on-year basis.

In Q2 2010, Total Operating Income amounted to GEL 68.7 million, up 15.7 % q-o-q (up 10.3% y-o-y). Net Interest Income grew 12.5% q-o-q to GEL 47.9 million, driven by 9.3 % q-o-q increase of Interest Income to GEL 95.6 million, outpacing the 6.2 % q-o-q growth of Interest Expense to GEL 47.6 million. Interest Income growth during the quarter was driven by the healthy loan book growth of the past two quarters, while interest expense growth rate slowed down compared to the previous quarters, benefiting from the interest rate cuts on deposits in Georgia. On a year-on-year basis, the 5.4% increase of Net Interest Income was predominantly related to the increase in loan book since the beginning of 2010. In Q2 2010 Net Non-Interest Income amounted to GEL 20.8 million, up 23.9% q-o-q and up 23.6 % y-o-y, with the growth mainly attributed to the 39.3 % q-o-q increase of the Net Foreign Currency Related Income to GEL 7.8 million and the 18.2% q-o-q growth of Net Fees and Commission Income to GEL 10.0 million, a result of increased FX income due to increase in volumes and increase in lending activity, respectively. On a standalone basis, Bank of Georgia’s Total Recurring Operating Costs increased 5.6 % q-o-q to GEL 32.5 million (up 9.4 % y-o-y), mostly due to the increase of the Personnel Costs driven by the headcount increase to GEL 17.2 million up 11.3% q-o-q (up 16.1% y-o-y), which more than offset a 0.2% q-o-q decrease of non-personnel costs on a standalone basis to GEL 15.3 million. On a standalone basis, Bank of Georgia achieved positive operating leverage of 8.4% on a consecutive q-o-q basis and 1.8% on a y-o-y basis.

The Bank’s Net Provision Expense on a standalone basis declined from GEL 12.3 million in Q1 2010 to GEL 6.2 million in Q1 2010. Net Provision Expense was attributed mostly to the Bank’s Retail Banking loans.

Bank of Georgia’s 1H 2010 standalone Total Operating Income on a standalone basis stood at GEL 128.1 million, almost flat compared to the Total Operating Income of GEL 128.9 million in 1H 2009. In 1H 2010 Interest Income (GEL 183.0 million) grew 3.7% y-o-y, compared to the 14.6% y-o-y growth rate of Interest Expense (GEL 92.5 million), as the Bank’s average loan book was lower in 1H 2010 compared to 1H 2009, and the Bank maintained higher average client deposits and higher liquidity in 1H 2010 compared the same period last year. As a result, Net Interest Income in the 1H 2010 declined by 5.5% y-o-y to GEL 90.5 million. Net Non-Interest Income increased by 13.5% y-o-y to GEL 37.5 million, with the increase driven by 12.4% y-o-y increase of Net Foreign Currency Related Income to GEL 13.5 million and 14.2% y-o-y increase in Net Fees and Commission Income to GEL 18.5 million. Net Income from Documentary Operations reached GEL 4.2 million, up 4.7% y-o-y. The Total Recurring Cost of Bank of Georgia on a standalone basis increased by 8.1% y-o-y, driven by a 10.7% increase of Personnel Costs on a y-o-y basis, a result of increased headcount in line with the increase in lending activity during the period. Net Provision Expense in 1H 2010 reached GEL 18.5 million, compared to GEL 53.6 million Net Provision Expense in the 1H 2009, resulting in 1H 2010 Standalone Net Income of GEL 36.8 million, up 201.9% y-o-y.

As of 30 June 2010, Bank of Georgia’s Total Assets on a standalone basis stood at GEL 3.4 billion, up 11.5 % q-o-q, up 25.9% y-o-y and up 19.0% YTD. Gross loans increased 7.9 % q-o-q (up 15.5 % y-o-y and up 14.3% YTD) to GEL 2.0 billion driven by 7.0 % q-o-q increase of the corporate gross loan book to GEL 1,017.4 million and 9.8% q-o-q growth of retail gross book to GEL 929.6 million. NPLs stood at GEL 129.2 million and represented 6.5 % of the total gross loan book, a decrease from the same ratio of 7.4 % in Q1 2010, when the NPLs amounted to GEL 136.8 million on a standalone basis.

In Q2 2010, the Bank’s Client Deposits in Georgia stood at GEL 1,346.6 million as compared to GEL 1,251.5 million in Q1 2010, GEL 1,126.8 million as of 31 December 2009 and GEL 909.3 million as of 30 June 2009. The growth of Client Deposits during the period was mostly driven by the increase of Wealth Management client deposits that reached GEL 212.3 million as of 30 June 2010, up 96.9 % y-o-y, up 17.5 % q-o-q and up 30.2% YTD. Retail Banking client deposits amounted to GEL 450.8 million, up 59.3 % y-o-y, up 8.7% q-o-q and up 15.2% YTD. Corporate Banking client deposits stood at GEL 683.5 million, up 31.8% y-o-y, up 4.2 % q-o-q and up 16.3% YTD.

As of 30 June 2010 Bank of Georgia on a standalone basis held market share of 35%, 33%, and 30% by total assets, gross loans, and client deposits, respectively in Georgia. Since the year-end 2009, the Bank gained market shares of 2.1% by assets, 1.1% by gross loans and 2.5% by client deposits7.

IT Projects Implementation Report

The Bank has made the following progress in implementing the IT projects launched in line with its goal to further improve efficiency through technological enhancements.

  • Completed the first phase of implementation of CRIF loan origination and credit scoring system, launched in Q2 2010. The first phase entailed the migration of retail overdraft product underwriting into the system that results in improvements in operational efficiency and speed of service.
  • Started to deploy Softscape, fully automated talent management system acquired in October 2009. Renewed 360° Employee Evaluation System has been launched in 1H 2010, with approximately 1,500 employees participating in this process as raters 130 key employees were assessed. Employee Administration module, which centralizes, consolidates and integrates all HR information is scheduled go-live in October 2010.
  • Deployed SafeWatch, AML (Anti-Money Laundering) screening software, in line with AML regulations. SafeWatch further improves the Bank’s capability to filter banking transactions and customer database against the official watch lists.
  • Temenos T-24, core-banking system to replace existing system, launched in Q4 2009. Completed the following key stages:
    • The initial build of the system was completed by Temenos team in Chennai in Q1 2010;
    • The analysis of key business processes against T24 model bank functionality has been completed and key gaps have been identified;
    • Initial analysis of the main interfaces undertaken to scope the integration efforts for implementation of T24 core system

However, due unsatisfactory and slow progress on subsequent phases of the project, Bank of Georgia has suspended its relationship with Temenos interation partner Foranx and is now in direct commercial and legal negotiation with Temenos with respect to the next steps. The project is currently on hold pending the completion of these discussions.

The business segment discussion set forth below is derived from IFRS-based management reports. Business segment results of RB, CB and WM represent Bank of Georgia’s standalone performance and do not include intercompany eliminations.

In 2010 the Bank introduced new model for standalone segment reporting. The comparative numbers for Q2 2009 business segment reporting have been adjusted respectively.

Retail Banking (RB)

GEL millions, unless otherwise noted   Q2 2010   Q1 2010   Q2 2009   Change Q-O-Q   Change Y-O-Y
Total operating income (Revenue) 37.2 32.8 39.8 13.3% -6.6%
Total recurring operating costs 21.0 20.2 20.2 3.9% 3.9%
Net income / (Loss) 1.9 2.1 (8.6) -7.4% NMF
Loans to clients, gross 929.6 846.6 860.7 9.8% 8.0%
Loans to clients, net 849.0 772.5 788.0 9.9% 7.7%
Client deposits 450.8 414.7 283.1 8.7% 59.3%

Discussion of results

RB Revenues increased 13.3 % q-o-q (down 6.6% y-o-y) to GEL 37.2 million, a result of the growth of all RB revenue items in Q2 2010. RB Net Interest Income increased by 11.6% q-o-q (down 11.3% y-o-y) to GEL 26.3 million, as RB Interest Income growth of 8.3% q-o-q outpaced the 4.7% q-o-q growth rate of RB Interest Expense. RB Net Non-Interest Income during the quarter increased by 17.6 % q-o-q (up 7.3% y-o-y) to GEL 10.8 million, mostly driven by 16.3% q-o-q increase of RB Net Fee and Commission Income to GEL 8.4 million (up 17.6%- y-o-y). RB Recurring Operating Costs increased by 3.9% q-o-q to GEL 21.0 million (up 3.9 % y-o-y), translating into a positive operating leverage for the quarter. RB Net Provision Expense amounted to GEL 12.6 million in Q2 2010 an increase from GEL 9.4 million, or 33.4%, compared to Q1 2010, the growth mostly attributable to the mortgage and credit card portfolios and the effect of 5.4% devaluation of Lari against US$ during the quarter. On a year-on-year basis, the Q2 2010 RB Net Provision Expense improved by 55.9%, reflecting the upturn of the operating environment. Net Income for Q2 2010 amounted to GEL 1.9 million, contributing 8.1 % to the standalone Net Income and 9.9% to the consolidated Net Income.

On a YTD basis, RB Revenues decreased 16.5 % y-o-y to GEL 69.9 million, driven predominantly by the 22.0% y-o-y decrease in RB Net Interest Income to GEL 49.9 million and 11.6% y-o-y growth of Net Fee and Commission income to GEL 15.7 million. 1H 2010 RB Recurring Operating Costs grew by 2.9% y-o-y to GEL 41.2 million, leading to the 36.9% y-o-y decrease of RB Profit Before Provisions. The Net Provision Expense for RB in 1H 2010 reached GEL 22.0 million, down 60.4% from 1H 2009.

RB gross loans increased 9.8% q-o-q to GEL 929.6 million (up 8.0 % y-o-y and up 15.2% YTD), as a result of a pick-up in the retail lending activity during 1H 2010. RB Client Deposits grew 19.9% YTD and 59.3 % y-o-y to GEL 450.8 million, driven primarily by the growth of time deposits.

Highlights

  • Launched new pilot branch concept with reduced back-office operations with a view to increase sales, branch effectiveness and speed of service.
  • Launched the American Express Blue Credit Card on the Georgian market on an exclusive basis in July 2010. AmEx Blue Credit Card is the third AmEx card launched by the Bank.
  • Issued 68,462 debit cards in Q2 2010 bringing the total debit cards outstanding to 459,408.
  • Issued 14,312 credit cards of which 7,046 American Express cards in Q2 2010. A total of 19,600 American Express cards were issued since the launch in November 2009. The total number of credit cards outstanding amounted to 74,510 as of 30 June 2010.
  • Outstanding number of RB clients reached 714,484 up 2.8 y-o-y%.
  • Acquired 643 new clients in Solo business line, Bank of Georgia’s mass affluent sub-brand. As of 30 June, the number of Solo clients reached 1,043.
  • Stepped up mortgage loan originations to GEL 45.9 million in Q2 2010 (up 77.9 % q-o-q) resulting in mortgage loans outstanding by 30 June 2010 of GEL 378.3 million, up 1.2% y-o-y and up 10.8% YTD.
  • Consumer loan originations of GEL 64.3 million (up 33.9% q-o-q and up 69.4% y-o-y) resulted in consumer loans outstanding in the amount of GEL 130.9 million as of 30 June 2010, down 9.3% y-o-y and up 14.8% YTD.
  • Micro loan originations of GEL 71.7 million (up 38.9 % q-o-q and up 327.2% y-o-y) resulted in micro loans outstanding in the amount of GEL 156.8 million as of 30 June 2010, up 54.8% y-o-y and up 58.6% YTD.
  • Car loan originations of GEL 5.0 million (up 80.7% q-o-q and up 49.0% y-o-y) resulted in car loans outstanding in the amount of GEL 52.5 million as of 30 June 2010, down 28.1% y-o-y and down 7.2% YTD.

Corporate Banking (CB)

GEL millions, unless otherwise noted   Q2 2010   Q1 2010   Q2 2009   Change Q-O-Q   Change Y-O-Y
Total operating income (Revenue) 30.8 25.3 21.4 21.8% 44.2%
Total recurring operating costs 10.6 9.5 8.4 11.2% 26.4%
Net income 22.2 8.4 9.8 164.9% 126.0%
Loans to clients, gross 1,017.4 951.0 806.4 7.0% 26.2%
Loans to clients, net 963.0 890.0 767.0 8.2% 25.6%
Client deposits 683.5 656.1 518.4 4.2% 31.8%

Discussion of results

CB Revenues increased 21.8 % q-o-q to GEL 30.8 million (up 44.2% y-o-y). CB Net Interest Income increased by 18.0% q-o-q (up 41.6% y-o-y) to GEL 21.3 million, as CB Interest Expense (GEL 23.3 million) growth of 8.1% q-o-q lagged behind the 12.6% q-o-q growth of CB Interest Income (GEL 44.6 million) in Q2 1010. Net Non-Interest Income during the quarter increased by 31.2 % q-o-q (up 50.5% y-o-y) to GEL 9.5 million, mostly driven by 27.0% q-o-q increase of CB Net Fee and Commission Income to GEL 1.5 million (up 52.4%- y-o-y), reflecting the growth of CB loan book. CB Recurring Operating Costs increased by 11.2% q-o-q to GEL 10.6 million (up 26.4 % y-o-y), resulting in a positive operating leverage for the quarter. Reflecting the improved CB loan portfolio quality, CB Net Provision Reversal for the quarter amounted to GEL 6.4 as compared to the CB Net Provision Expense in Q1 2010 which amounted to GEL 5.4 million. Net Income for Q2 2010 amounted to GEL 22.2 million, contributing 92.6% to the standalone Net Income for the quarter.

On a YTD basis, CB Revenues increased 29.9% y-o-y to GEL 56.1 million, driven predominantly by the 28.7% y-o-y increase in CB Net Interest Income to GEL 39.3 million and 47.6% y-o-y growth of Net Foreign Currency Related Income to GEL 9.3 million. 1H 2010 CB Recurring Operating Costs grew by 23.2% y-o-y to GEL 20.1 million, resulting in a 35.3% y-o-y increase of CB Profit Before Provisions. The Net Provision Recovery for CB in 1H 2010 reached GEL 1.0 million as compared to GEL 3.4 million in 1H 2009.

CB Gross Loans increased 7.0% q-o-q to GEL 1,017.4 million (up 26.2 % y-o-y and 15.6% YTD), while CB Client Deposits grew 16.3% YTD and 31.8 % y-o-y to GEL 683.5 million.

Highlights

  • Major new corporate client acquisitions include Saqkabeli, electric cable producer and Karvasla, largest shopping mall, among others.
  • Increased the number of corporate clients using the bank’s payroll services from 1,475as of Q1 2010 to 1,567 in Q2 2010. By 30 June 2010, the number of individual clients serviced through the corporate payroll programs administered by the bank increased from approximately 164,931 as of 30 June 2009 to over 167,499 as of 30 June 2010.
  • More than 5,000 new corporate accounts opened at the Bank in Q2 2010, bringing the total to over 164,800.
  • The recently restructured SME Unit grew its portfolio from GEL59.7 million in Q1 2010 to GEL 82.0 million in Q2 2010.
  • Intensified lending in the regions with a view of capturing growing potential in Adjara, Poti and other larger cities of Georgia. In 1H 2010, the regional portfolio increased by 60% since the beginning of the year.

Wealth Management (WM)

GEL millions, unless otherwise noted   Q2 2010   Q1 2010   Q2 2009   Change Q-O-Q   Change Y-O-Y
Total operating income (Revenue) 0.8 1.3 1.2 -41.6% -35.8%
Total recurring operating costs 0.9 1.0 1.1 -14.3% -18.8%
Net income / (Loss) (0.2) 2.3 (0.4) NMF NMF
Loans to clients, gross 36.3 40.6 49.7 -10.5% -27.0%
Loans to clients, net 33.7 37.9 47.0 -11.0% -28.3%
Client deposits 212.3 180.7 107.8 17.5% 96.9%

Discussion of results

In line with the Bank’s WM strategy of deposit attraction, WM Client deposits grew to GEL 212.3 million, up 17.5% q-o-q, while WM Loan book decreased 10.5% q-o-q to GEL 36.3 million. As a result of the surge of the Client Deposit during the quarter, Interest Expense growth of 15.7% q-o-q to GEL 5.6 million outpaced the 1.9% q-o-q growth of Interest income to GEL 6.0 million, driving down the WM Revenues by 41.6% q-o-q (down 35.8% y-o-y) to GEL 755 thousand. The WM Net Non-Interest Income during the quarter increased by 41.4% q-o-q (up 8.9% y-o-y) to GEL 0.4 million, mostly driven by 61.3% q-o-q increase of Net WM Fee and Commission Income to GEL 122 thousand (up 47.3%- y-o-y) and 64.3% q-o-q increase in Net Foreign Currency Related Income to GEL 275 thousand (up 41.5% y-o-y). WM Total Recurring Operating Costs decreased by 14.3% q-o-q to GEL 898 thousand (down 18.8 % y-o-y). WM Net Provision Expense amounted to GEL 30 thousand in Q2 2010 compared to Q1 2010 Net Provision Reversal of GEL 2.5 million. Net Loss for Q2 2010 amounted to GEL 157 thousand compared to the Net Income of GEL 2.3 million in Q1 2010.

On a YTD basis, WM Revenues increased by 1.6 % y-o-y to GEL 2.0 million, driven predominantly by the 7.3% y-o-y increase in WM Net Non Interest Income to GEL 676 thousand that more than offset the 1.0% y-o-y decline of Net Interest Income. 1H 2010 WM Recurring Operating Costs declined by 7.6% y-o-y to GEL 1.9 million, leading to the WM Profit Before Provisions of GEL 99 thousand compared to the WM Pre-Provison Loss of GEL 148 thousand in 1H 2009. The Net Provision Reversal for WM in 1H 2010 reached GEL 2.5 million compared to the Net Provision Expense of GEL 1.4 million in 1H 2009.

Highlights

  • WM Assets under management reached GEL 235.7 million as of 30 June 2010, up from GEL 205.6 million as of 31 March 2010, or 14.6% q-o-q.
  • The number of WM clients amounted to 1,423 clients, of which 460 were non-resident WM clients, up from 341 non-resident WM clients as of 30 June 2009.

BG Bank (Ukraine)

GEL millions, unless otherwise noted   Q2 2010   Q1 2010   Q2 2009   Change Q-O-Q   Change Y-O-Y
Total operating income (Revenue) 4.1 3.1 5.6 33.5% -26.7%
Total recurring operating costs 4.2 4.0 4.6 7.1% -7.5%
Net income / (Loss) (1.7) 0.3 (10.8) NMF NMF
Loans to clients, gross 201.0 190.8 190.3 5.4% 5.6%
Loans to clients, net 143.4 131.9 151.3 8.7% -5.2%
Client deposits 142.0 122.3 114.8 16.1% 23.6%

Discussion of results

In Q2 2010 BG Bank’s Revenue amounted to GEL 4.1 million, up by 33.5% q-o-q (down 26.7% y-o-y). Recurring Costs stood at GEL 4.2 million, compared to GEL 4.0 million in Q1 2010 and down 7.5% y-o-y, a result of the cost-control measures that have been implemented by BG Bank in 2009. BG Bank’s Net Provision Expense for the quarter amounted to GEL 2.0 million as compared to Net Provision Reversal of GEL 1.6 million in Q1 2010. In Q2 2010 BG Bank recorded Net Loss of GEL 1.7 million that compares to the Net Loss of GEL 10.8 million for the same period last year.

On a YTD basis, BG Bank reported a Net Loss of GEL 1.4 million, compared to the Net Loss of GEL 18.1 million in 1H 2009.

BG Bank’s Total Assets increased by 12.8% q-o-q to GEL 215.2 million (up 4.7% y-o-y. In Q2 2010 gross loans to clients increased 5.4% q-o-q to GEL 201.0 million (up 5.6% y-o-y) and Loan Loss Reserves declined 2.1% q-o-q to GEL 57.6 million or 28.7% of BG Bank’s gross loan book. As at 30 June 2010, BG Bank’s NPLs stood at GEL 41.9 million, or 20.2% of BG Bank’s gross loan book. The NPL coverage ratio stood at 137.3% as of 30 June 2010.

BG Bank’s Client Deposits increased by 16.1% q-o-q to GEL 141.9 million, up 23.6% y-o-y. BG Bank’s Total Liabilities stood at GEL 182.1 million in Q2 2010, up 16.0% y-o-y and up by 15.0% q-o-q.

Highlights

  • Continued the restructuring of BG Bank, reducing the headcount by further 115 full-time employees (FTEs) employees bringing the total number of FTEs to 278 as of 31 July 2010
  • Closed down one outlet bringing the total to 9 outlets

Belaruskiy Narodniy Bank, Belarus (BNB)

GEL millions, unless otherwise noted   Q2 2010   Q1 2010   Q2 2009   Change Q-O-Q   Change Y-O-Y
Total operating income (Revenue) 3.0 2.9 1.7 1.6% 73.3%
Total recurring operating costs 2.0 1.8 1.5 12.1% 36.7%
Net income 0.6 0.5 0.2 5.9% 190.1%
Loans to clients gross 41.8 33.1 27.3 24.3% 50.2%
Loans to clients, net 39.7 31.1 26.2 28.0% 51.9%
Client deposits 15.7 11.6 16.2 35.9% -3.2%

Discussion of results

In Q2 2010 BNB’s Total Operating Income increased to GEL 3.0 million, up 1.6% q-o-q, mostly driven by the 1.8% q-o-q growth of Net Interest Income to GEL 2.3 million (up 146.5% y-o-y), a result of the growth of the BNB’s loan book to GEL 41.8 million (up 24.3% q-o-q) in Q2 2010. BNB’s Net Non-Interest Income increased by 1.0% q-o-q to GEL 624 thousand, as the 70.6% q-o-q growth of Net Fee and Commission Income to GEL 394 thousand more than offset the 50.0% decline in Net Foreign Currency Related Income for the quarter. In Q2 2010, BNB’s Recurring Costs increased 12.1% q-o-q to GEL 2.0 million. BNB’s Net Provision Expense for the quarter amounted to GEL 234.0 thousand as compared to GEL 421.0 thousand in Q1 2010. BNB posted Net Income of GEL 571.0 thousand as compared to Net Income of GEL 539.0 thousand in Q1 2010 and Net Income of GEL 196.8 thousand in Q2 2009.

On 30 June 2010 BNB’s Total Assets stood at GEL 90.4 million, up 74.3% y-o-y. Client Deposits amounted to GEL 15.7 million, up 35.9% q-o-q. Total Liabilities of BNB stood at GEL 28.3 million, up 36.6% q-o-q.

Highlights

  • Increased the number of corporate clients by 6% to 1,256 as of 30 June 2010.
  • Increased the number of corporate clients using the BNB’s payroll services by 40.5% to 177 as of 30 June 2010.
  • In July 2010, IFC became a minority shareholder by purchasing 19.99% equity interest in BNB. In addition, IFC extended a US$ 5 million loan to BNB that will support the loan book growth in 2H 2010.

Insurance

GEL millions, unless otherwise noted   Q2 2010   Q1 2010   Q2 2009   Change Q-O-Q   Change Y-O-Y
Total operating income (Revenue) 4.8 4.6 6.3 4.4% -23.9%
Total recurring operating costs 3.6 3.1 4.0 13.9% -9.9%
Net income 0.9 1.1 1.7 -16.6% -47.9%
Gross premiums written 16.8 19.0 15.6 -11.7% 7.4%

Discussion of results

Standalone Revenue of Aldagi BCI (ABCI), the Bank’s wholly-owned insurance subsidiary, increased by 4.4% q-o-q to GEL 4.8 million, impacted by the growth in both corporate and consumer lines of business, with standalone Gross Premiums Written up 7.4% y-o-y to GEL 16.8 million. Standalone Operating Costs were GEL 3.6 million, down 9.9% y-o-y. Total Insurance Assets amounted to GEL 84.7 million, while Total Insurance Liabilities reached GEL 65.4 million as at 30 June 2010.

Highlights

  • Number of retail clients exceeded 211,800 as of the end of the quarter.
  • Launched Agency Network, for the first time in Georgia, responsible for selling ABCI retail insurance products.
  • Completed business process description project, conducted by Ernst & Young and launched a tender to acquire fully-integrated insurance software.
  • In line with the health insurance strategy to vertically integrate the business, ABCI launched a tender to build six healthcare facilities in the Western Georgia, where ABCI has the largest concentration of the insured under its healthcare plan. As of 30 June 2010, ABCI operates four outpatient clinics and one mid-sized hospital.

BG Capital

In Q2 2009 BG Capital posted Revenue of GEL 1.1 million, that compares to GEL 0.9 million in Q2 2009. Recurring Operating Costs of BG Capital were up 16.1% q-o-q to GEL 2.3 million, up 216.3 % y-o-y. Net Loss for the quarter reached GEL 1.0 million, compared to the Net Income of GEL 0.7 million in Q1 2010 and Net Income of GEL 0.2 million in Q2 2009

BG Capital enjoyed another solid quarter, successfully navigating a volatile period in CIS markets. In line with market trends, the company reduced its exposure to equity markets during the quarter. It also continued the development of its frontier brokerage franchise – Euromoney named BG Capital the Best Frontier Markets Investment Bank in Central and Eastern Europe, and its analysts took two of the top three spots in Thomson Extel’s survey of the best analysts in Ukraine. BG Capital’s corporate finance team continued its growth, signing two new financing mandates during the period.

On 23-24 September 2010, BG Capital will hold its first international investor conference “Catching the B.U.G” Ukraine and Beyond in Kyiv. The conference will offer one-on-one meetings with companies from Belarus, Ukraine and Georgia and will include site visits in Ukraine and Georgia.

Comment:

“I am pleased that the second quarter continued the growth trend set from the beginning of the year and the bank and most of its subsidiaries show improved performance. The growth was achieved on the back of the Georgian economy growth and market share gains, as Bank of Georgia reached 35% market share by assets, the record high point in the Bank’s history.

2010 is the year of turnaround. In the first half we have achieved strong growth and profitability but much remains to be done in terms of further improvement of efficiency and the reduction of cost of risk of retail business in Georgia. I am looking forward to the continuation of the profitable growth in the second half of the year,” commented Irakli Gilauri, Chief Executive Officer.

1 Compared to Q1 2010; growth calculations based on GEL values.

2 Compared to the respective period in 2009

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

4 Normalised for Net Non-Recurring Costs.

5 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.

6 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

7 Market 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.

About Bank of Georgia

Bank of Georgia is the leading Georgian bank offering a broad range of corporate banking, retail banking, wealth management, brokerage and insurance services to its clients in Georgia, Ukraine and Belarus. Bank of Georgia is the largest bank in Georgia by assets, loans, deposits and equity, with 35.1% market share by total assets (all data according to the NBG as of 30 June 2010). The bank has 137 branches and more than one million retail and 164,818 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:

Irakli Gilauri   Giorgi Chiladze   Macca Ekizashvili
Chief Executive Officer Deputy CEO, Finance Head of Investor Relations
+995 32 444 109 +995 32 444 249 +995 32 444 256

igilauri@bog.ge

gchiladze@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 2009, Q1 2010 and Q2 2010 contained in this news report is unaudited, unreviewed, derived from IFRS-based management reports and reflects the best estimates of management. The Bank’s actual results may differ from the amounts reflected herein as a result of various factors

STANDALONE Q2 2010 SEGMENT INCOME STATEMENT DATA

  CB   RB   WM   CC/ Eliminations   Total
GEL millions, unless otherwise noted Q2 '10   Q2 '09 Q2 '10   Q2 '09 Q2 '10   Q2 '09 Q2 '10   Q2 '09 Q2 '10   Q2 '09
Interest Income 44.6 34.2 49.5 49.4 6.0 3.3 (4.5) (1.3) 95.6 85.6
Interest Expense 23.3 19.2 23.2 19.7 5.6 2.5 (4.5) (1.3) 47.6 40.1
Net Interest Income 21.3 15.0 26.3 29.7 0.4 0.8 0.0 0.0 47.9 45.5
Net Non-Interest Income 9.5 6.3 10.8 10.1 0.4 0.4 0.0 0.0 20.8 16.8
Total Operating Income (Revenue) 30.8 21.4 37.2 39.8 0.8 1.2 0.0 0.0 68.7 62.3
Total Recurring Operating Costs 10.6 8.4 21.0 20.2 0.9 1.1 0.0 0.0 32.5 29.7
Normalized Net Operating Income / (Loss) 20.2 13.0 16.1 19.5 (0.1) 0.1 0.0 0.0 36.2 32.6
Net Non-Recurring Income / (Costs) (0.5) (0.8) (1.4) (1.0) 0.0 (0.1) 0.0 0.0 (1.8) (1.9)
Net Provision Expense / (Reversal) (6.4) 0.6 12.6 28.6 0.0 0.4 0.0 0.0 6.2 29.6
Net Income / (Loss) 22.2 9.8 1.9 (8.6) (0.2) (0.4) 0.0 0.0 24.0 0.9

STANDALONE Q2 2010 SEGMENT BALANCE SHEET DATA

  CB   RB   WM   CC/ Eliminations   Total
GEL millions, unless otherwise noted Q2 '10   Q2 '09 Q2 '10   Q2 '09 Q2 '10   Q2 '09 Q2 '10   Q2 '09 Q2 '10   Q2 '09
Loans To Clients, Gross 1,017.4 806.4 929.6 860.7 36.3 49.7 0.0 0.0 1,983.4 1,716.8
Loans To Clients, Net 963.0 767.0 849.0 788.0 33.7 47.0 0.0 0.0 1,845.8 1,602.0
Total Assets 1,468.7 1,033.8 1,537.8 1,284.4 42.0 53.5 332.6 314.5 3,381.1 2,686.2
Client Deposits 683.5 518.4 450.8 283.1 212.3 107.8 0.0 0.0 1,346.6 909.3
Total Liabilities 1,271.9 930.1 1,100.7 938.0 212.3 107.8 0.0 0.0 2,584.9 1,975.9
Total Shareholders Equity 243.2 202.0 210.7 183.7 9.7 10.1 332.6 314.5 796.1 710.3
Total Liabilities And Shareholders’ Equity 1,515.1 1,132.1 1,311.4 1,121.7 221.9 117.9 332.6 314.5 3,381.1 2,686.2

CONSOLIDATED Q2 2010 INCOME STATEMENT

Period ended   Q2 2010  

Q1 2010

  Q2 2009   Change4   Change4
Consolidated, IFRS-based US$1   GEL US$2   GEL US$3   GEL Q-O-Q Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited) (Unaudited)
 
Interest Income 56,454 104,113 54,320 95,027 57,028 94,547 9.6% 10.1%
Interest Expense 28,439 52,448 28,454 49,777 27,201 45,097 5.4% 16.3%
Net Interest Income 28,015 51,665 25,866 45,250 29,827 49,451 14.2% 4.5%
Fees & Commission Income 7,473 13,782 7,554 13,215 8,494 14,082 4.3% -2.1%
Fees & Commission Expense 1,585 2,923 1,656 2,897 1,502 2,490 0.9% 17.4%
Net Fees & Commission Income 5,888 10,859 5,898 10,318 6,992 11,592 5.2% -6.3%
Income From Documentary Operations 1,427 2,632 1,519 2,657 1,434 2,377 -0.9% 10.7%
Expense On Documentary Operations 260 480 274 480 363 601 0.0% -20.2%
Net Income From Documentary Operations 1,167 2,152 1,244 2,177 1,071 1,776 -1.1% 21.2%
Net Foreign Currency Related Income 4,796 8,844 4,196 7,340 4,261 7,064 20.5% 25.2%
Net Insurance Income / (Loss) 2,278 4,202 2,377 4,159 3,047 5,052 1.0% -16.8%
Brokerage And Investments Banking Income 134 247 124 217 813 1,348 13.8% -81.7%
Asset Management Income 29 53 24 42 155 256 26.2% -79.3%
Net Investment Gains / (Losses) 93 172 1,126 1,969 185 306 -91.3% -43.8%
Other 2,482 4,577 2,517 4,404 2,255 3,739 3.9% 22.4%
Net Other Non-Interest Income 5,016 9,251 6,168 10,791 6,455 10,701 -14.3% -13.6%
Net Non-Interest Income 16,867 31,106 17,507 30,626 18,778 31,133 1.6% -0.1%
Total Operating Income (Revenue) 44,882 82,771 43,373 75,876 48,606 80,583 9.1% 2.7%
Personnel Costs 13,905 25,643 13,365 23,381 13,989 23,193 9.7% 10.6%
Selling, General & Administrative Expenses 5,010 9,240 5,604 9,803 6,017 9,976 -5.7% -7.4%
Procurement & Operations Support Expenses 1,793 3,306 2,005 3,507 2,345 3,888 -5.7% -15.0%
Depreciation And Amortization 3,550 6,547 3,802 6,651 3,967 6,576 -1.6% -0.4%
Other Operating Expenses 1,659 3,060 1,667 2,917 1,623 2,691 4.9% 13.7%
Total Recurring Operating Costs 25,917 47,796 26,443 46,259 27,941 46,324 3.3% 3.2%
Normalized Net Operating Income / (Loss) 18,965 34,975 16,930 29,617 20,664 34,260 18.1% 2.1%
Net Non-Recurring Income / (Costs) 1,016 1,873 (1,867) (3,266) (175) (290) -157.3% NMF
Profit / (Loss) Before Provisions 19,980 36,848 15,063 26,351 20,490 33,970 39.8% 8.5%
Net Provision Expense 7,087 13,069 4,207 7,360 24,543 40,690 77.6% -67.9%
Pre-Tax Income / (Loss) 12,894 23,779 10,856 18,991 (4,053) (6,720) 25.2% NMF
Income Tax Expense / (Benefit) 2,325 4,287 1,278 2,236 (1,445) (2,395) 91.7% NMF
Net Income / (Loss) 10,569 19,492 9,578 16,755 (2,609) (4,325) 16.3% NMF

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.7494 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 2010

3 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

4 Change calculations based on GEL values

CONSOLIDATED 1H INCOME STATEMENT

Period ended   1H 2010   1H 2009   Change3
Consolidated, IFRS-based US$1   GEL US$2   GEL Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited)
 
Interest Income 107,982 199,140 118,451 196,380 1.4%
Interest Expense 55,431 102,225 57,003 94,506 8.2%
Net Interest Income 52,551 96,915 61,448 101,874 -4.9%
Fees & Commission Income 14,639 26,997 16,709 27,702 -2.5%
Fees & Commission Expense 3,156 5,820 3,001 4,976 17.0%
Net Fees & Commission Income 11,483 21,177 13,708 22,726 -6.8%
Income From Documentary Operations 2,868 5,289 3,059 5,072 4.3%
Expense On Documentary Operations 521 960 638 1,058 -9.3%
Net Income From Documentary Operations 2,347 4,329 2,421 4,014 7.8%
Net Foreign Currency Related Income 8,776 16,184 9,555 15,842 2.2%
Net Insurance Income / (Loss) 4,534 8,361 4,882 8,094 3.3%
Brokerage And Investments Banking Income 252 464 1,016 1,685 -72.5%
Asset Management Income 52 95 252 418 -77.3%
Net Investment Gains / (Losses) 1,161 2,141 183 303 606.6%
Other 4,870 8,981 4,427 7,340 22.4%
Net Other Non-Interest Income 10,868 20,042 10,761 17,840 12.3%
Net Non-Interest Income 33,474 61,732 36,445 60,422 2.2%
Total Operating Income (Revenue) 86,025 158,647 97,893 162,296 -2.2%
Personnel Costs 26,583 49,024 27,250 45,178 8.5%
Selling, General & Administrative Expenses 10,326 19,043 13,067 21,664 -12.1%
Procurement & Operations Support Expenses 3,694 6,813 4,129 6,845 -0.5%
Depreciation And Amortization 7,156 13,198 7,094 11,761 12.2%
Other Operating Expenses 3,241 5,977 3,330 5,521 8.3%
Total Recurring Operating Costs 51,000 94,055 54,870 90,969 3.4%
Normalized Net Operating Income / (Loss) 35,024 64,592 43,022 71,327 -9.4%
Net Non-Recurring Income / (Costs) (755) (1,393) (312) (518) NMF
Profit / (Loss) Before Provisions 34,269 63,199 42,710 70,809 -10.7%
Net Provision Expense 11,077 20,429 43,881 72,751 -71.9%
Pre-Tax Income / (Loss) 23,192 42,770 (1,171) (1,942) NMF
Income Tax Expense / (Benefit) 3,537 6,523 (1,627) (2,697) NMF
Net Income / (Loss) 19,655 36,247 455 755 NMF

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

3 Change calculations based on GEL values

CONSOLIDATED Q2 2010 BALANCE SHEET

Period ended   Q2 2010   Q1 2010   Q2 2009   Change4   Change4
Consolidated, IFRS-based US$1   GEL US$2   GEL US$3   GEL Q-O-Q Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited)
Cash And Cash Equivalents 84,152 155,194 101,688 177,893 85,886 142,390 -12.8% 9.0%
Loans And Advances To Credit Institutions 231,660 427,227 184,193 322,227 187,879 311,484 32.6% 37.2%
Investment Securities: AFS & Trading Securities 9,106 16,794 10,146 17,750 17,128 28,396 -5.4% -40.9%
Investment Securities: HTM, Treasuries 156,042 287,773 142,451 249,203 - - 15.5% -
Investment Securities: HTM, Other - - - - 35,651 59,105 - -100.0%
Loans To Clients, Gross 1,173,026 2,163,295 1,115,014 1,950,605 1,144,392 1,897,287 10.9% 14.0%
Less: Reserve For Loan Losses (102,937) (189,837) (99,071) (173,314) (89,078) (147,683) 9.5% 28.5%
Loans To Clients, Net 1,070,089 1,973,458 1,015,943 1,777,291 1,055,313 1,749,604 11.0% 12.8%
Insurance Related Assets 19,577 36,104 18,641 32,610 28,569 47,365 10.7% -23.8%
Investment Property 53,904 99,409 54,522 95,381 31,152 51,647 4.2% 92.5%
Investments In Other Business Entities, Net 2,829 5,217 4,484 7,844 17,635 29,237 -33.5% -82.2%
Property And Equipment Owned, Net 159,069 293,355 158,054 276,499 171,397 284,159 6.1% 3.2%
Intangible Assets Owned, Net 12,665 23,357 12,662 22,151 7,195 11,928 5.4% 95.8%
Goodwill 37,525 69,204 39,344 68,828 81,604 135,291 0.5% -48.8%
Tax Assets, Current And Deferred 13,289 24,507 13,616 23,820 4,996 8,283 2.9% 195.9%
Prepayments And Other Assets 32,702 60,309 30,063 52,592 29,515 48,933 14.7% 23.2%
Total Assets 1,882,609 3,471,908 1,785,806 3,124,089 1,753,919 2,907,822 11.1% 19.4%
Client Deposits 812,553 1,498,510 797,096 1,394,439 618,424 1,025,285 7.5% 46.2%
Deposits And Loans From Banks 135,205 249,345 44,725 78,242 24,805 41,124 NMF NMF
Borrowed Funds 512,737 945,589 521,304 911,970 610,037 1,011,380 3.7% -6.5%
Issued Fixed Income Securities 1,980 3,651 0 - 119 198 - NMF
Insurance Related Liabilities 24,352 44,910 24,415 42,712 35,987 59,663 5.1% -24.7%
Tax Liabilities, Current And Deferred 17,029 31,404 15,602 27,295 11,679 19,362 15.1% 62.2%
Accruals And Other Liabilities 26,703 49,247 33,015 57,757 24,675 40,908 -14.7% 20.4%
Total Liabilities 1,530,558 2,822,656 1,436,158 2,512,415 1,325,725 2,197,920 12.3% 28.4%
Share Capital - Ordinary Shares 16,985 31,324 17,901 31,316 18,862 31,272 0.0% 0.2%
Share Premium 260,387 480,206 274,190 479,668 277,125 459,446 0.1% 4.5%
Treasury Shares (754) (1,390) (913) (1,597) (1,081) (1,793) -13.0% -22.5%
Revaluation And Other Reserves 26,905 49,619 11,874 20,773 28,653 47,504 138.9% 4.5%
Retained Earnings 19,595 36,138 27,095 47,400 73,081 121,161 -23.8% -70.2%
Net Income / (Loss) For The Period 19,655 36,247 9,578 16,755 455 755 116.3% NMF
Shareholders' Equity Excluding Minority 342,774 632,144 339,725 594,315 397,096 658,345 6.4% -4.0%
Minority Interest 9,277 17,108 9,923 17,359 31,098 51,557 -1.4% -66.8%
Total Shareholders' Equity 352,051 649,252 349,648 611,674 428,194 709,902 6.1% -8.5%
Total Liabilities And Shareholders Equity 1,882,609 3,471,908 1,785,806 3,124,089 1,753,919 2,907,822 11.1% 19.4%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.7494 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 2010

3 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

4 Change calculations based on GEL values

STANDALONE Q2 2010 INCOME STATEMENT

Period ended   Q2 2010   Q1 2010   Q2 2009   Change4   Change4
Standalone, IFRS-based US$1   GEL US$2   GEL US$3   GEL Q-O-Q Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited) (Unaudited)
 
Interest Income 51,816 95,560 49,997 87,465 51,621 85,582 9.3% 11.7%
Interest Expense 25,820 47,618 25,642 44,859 24,179 40,087 6.2% 18.8%
Net Interest Income 25,996 47,942 24,355 42,607 27,441 45,495 12.5% 5.4%
Fees & Commission Income 7,078 13,052 6,349 11,106 6,298 10,442 17.5% 25.0%
Fees & Commission Expense 1,633 3,012 1,491 2,608 1,334 2,212 15.5% 36.2%
Net Fees & Commission Income 5,444 10,040 4,858 8,498 4,964 8,230 18.2% 22.0%
Income From Documentary Operations 1,401 2,584 1,472 2,576 1,433 2,376 0.3% 8.7%
Expense On Documentary Operations 260 480 274 480 363 601 0.0% -20.1%
Net Income From Documentary Operations 1,141 2,104 1,198 2,096 1,071 1,775 0.4% 18.5%
Net Foreign Currency Related Income 4,248 7,835 3,215 5,624 3,856 6,392 39.3% 22.6%
Net Other Non-Interest Income 431 795 314 549 244 404 44.9% 96.9%
Net Non-Interest Income 11,265 20,774 9,584 16,766 10,134 16,801 23.9% 23.6%
Total Operating Income (Revenue) 37,261 68,716 33,939 59,373 37,576 62,297 15.7% 10.3%
Personnel Costs 9,337 17,219 8,847 15,476 8,949 14,836 11.3% 16.1%
Selling, General & Administrative Expenses 3,059 5,642 3,459 6,051 3,603 5,974 -6.8% -5.6%
Procurement & Operations Support Expenses 1,417 2,614 1,629 2,849 1,551 2,571 -8.3% 1.7%
Depreciation And Amortization 3,004 5,540 3,141 5,495 3,154 5,229 0.8% 6.0%
Other Operating Expenses 793 1,462 510 892 652 1,082 63.9% 35.1%
Total Recurring Operating Costs 17,610 32,477 17,586 30,764 17,909 29,692 5.6% 9.4%
Normalized Net Operating Income / (Loss) 19,650 36,239 16,354 28,609 19,666 32,605 26.7% 11.1%
Net Non-Recurring Income / (Costs) (998) (1,840) (697) (1,220) (1,169) (1,938) 50.8% -5.1%
Profit / (Loss) Before Provisions 18,653 34,400 15,656 27,389 18,497 30,666 25.6% 12.2%
Net Provision Expense 3,352 6,181 7,036 12,309 17,852 29,598 -49.8% -79.1%
Pre-Tax Income / (Loss) 15,301 28,218 8,620 15,080 645 1,069 87.1% NMF
Income Tax Expense / (Benefit) 2,295 4,233 1,293 2,262 97 160 87.1% NMF
Net Income / (Loss) 13,006 23,985 7,327 12,818 548 908 87.1% NMF

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.7494 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 2010

3 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

4 Change calculations based on GEL values

STANDALONE 1H INCOME STATEMENT

Period ended   1H 2010   1H 2009   Change3
Standalone, IFRS-based US$1   GEL US$2   GEL Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited)
 
Interest Income 99,244 183,025 106,499 176,564 3.7%
Interest Expense 50,144 92,476 48,680 80,706 14.6%
Net Interest Income 49,099 90,549 57,819 95,858 -5.5%
Fees & Commission Income 13,100 24,159 12,469 20,673 16.9%
Fees & Commission Expense 3,048 5,620 2,680 4,443 26.5%
Net Fees & Commission Income 10,052 18,538 9,790 16,230 14.2%
Income From Documentary Operations 2,798 5,160 3,057 5,068 1.8%
Expense On Documentary Operations 521 960 637 1,057 -9.2%
Net Income From Documentary Operations 2,277 4,200 2,420 4,012 4.7%
Net Foreign Currency Related Income 7,298 13,459 7,223 11,975 12.4%
Net Other Non-Interest Income 728 1,343 515 854 57.3%
Net Non-Interest Income 20,356 37,541 19,948 33,071 13.5%
Total Operating Income (Revenue) 69,455 128,090 77,766 128,929 -0.7%
Personnel Costs 17,729 32,695 17,812 29,531 10.7%
Selling, General & Administrative Expenses 6,340 11,693 7,418 12,299 -4.9%
Procurement & Operations Support Expenses 2,962 5,463 3,194 5,296 3.2%
Depreciation And Amortization 5,984 11,036 5,625 9,326 18.3%
Other Operating Expenses 1,276 2,354 1,222 2,026 16.1%
Total Recurring Operating Costs 34,292 63,241 35,273 58,479 8.1%
Normalized Net Operating Income / (Loss) 35,164 64,849 42,493 70,450 -8.0%
Net Non-Recurring Income / (Costs) (1,659) (3,060) (1,493) (2,476) 23.6%
Profit / (Loss) Before Provisions 33,504 61,789 41,000 67,974 -9.1%
Net Provision Expense 10,026 18,490 32,348 53,630 -65.5%
Pre-Tax Income / (Loss) 23,478 43,299 8,652 14,344 201.9%
Income Tax Expense / (Benefit) 3,522 6,495 1,298 2,152 201.9%
Net Income / (Loss) 19,957 36,804 7,354 12,192 201.9%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

3 Change calculations based on GEL values

STANDALONE Q2 2010 BALANCE SHEET

Period ended   Q2 2010   Q1 2010   Q2 2009   Change4   Change4
Standalone, IFRS-based US$1   GEL US$2   GEL US$3   GEL Q-O-Q Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited) (Unaudited)
 
Cash And Cash Equivalents 62,198 114,706 72,796 127,350 66,203 109,758 -9.9% 4.5%
Loans And Advances To Credit Institutions 241,278 444,965 179,742 314,441 193,733 321,190 41.5% 38.5%
Investment Securities: HTM, Treasuries 145,449 268,238 142,451 249,203 - - 7.6% -
Investment Securities: HTM, Other - - - - 34,537 57,259 - -100.0%
Loans To Clients, Gross 1,075,465 1,983,373 1,050,756 1,838,192 1,035,549 1,716,837 7.9% 15.5%
Less: Reserve For Loan Losses (74,604) (137,585) (78,727) (137,725) (69,257) (114,821) -0.1% 19.8%
Loans To Clients, Net 1,000,861 1,845,788 972,029 1,700,468 966,292 1,602,016 8.5% 15.2%
Investment Property 34,125 62,932 21,633 37,844 - - 66.3% -
Investments In Other Business Entities, Net 180,333 332,570 181,931 318,270 189,709 314,518 4.5% 5.7%
Property And Equipment Owned, Net 125,472 231,396 123,457 215,976 135,255 224,240 7.1% 3.2%
Intangible Assets Owned, Net 9,873 18,208 9,653 16,887 4,379 7,260 7.8% 150.8%
Goodwill 12,335 22,748 13,003 22,748 13,742 22,783 0.0% -0.2%
Tax Assets, Current And Deferred 3,306 6,097 3,485 6,097 - - 0.0% -
Prepayments And Other Assets 18,114 33,406 13,636 23,856 16,379 27,155 40.0% 23.0%
Total Assets 1,833,345 3,381,054 1,733,817 3,033,139 1,620,230 2,686,180 11.5% 25.9%
Client Deposits 730,169 1,346,579 715,416 1,251,549 548,436 909,252 7.6% 48.1%
Deposits And Loans From Banks 127,461 235,063 33,702 58,958 9,811 16,265 298.7% NMF
Borrowed Funds 512,737 945,589 521,304 911,970 609,036 1,009,720 3.7% -6.4%
Issued Fixed Income Securities 1,980 3,651 - - - - - -
Insurance Related Liabilities - - - - - - - -
Tax Liabilities, Current And Deferred 16,184 29,846 14,651 25,631 10,274 17,033 16.4% 75.2%
Accruals And Other Liabilities 13,119 24,195 18,949 33,150 14,245 23,620 -27.0% 2.4%
Total Liabilities 1,401,650 2,584,923 1,304,023 2,281,258 1,191,802 1,975,889 13.3% 30.8%
Share Capital - Ordinary Shares 16,985 31,324 17,901 31,316 18,862 31,272 0.0% 0.2%
Share Premium 260,537 480,482 273,609 478,651 283,702 470,349 0.4% 2.2%
Treasury Shares (642) (1,184) (817) (1,430) (677) (1,123) -17.2% 5.4%
Revaluation And Other Reserves 35,831 66,079 21,890 38,294 35,750 59,269 72.6% 11.5%
Retained Earnings 99,028 182,627 109,885 192,232 83,438 138,332 -5.0% 32.0%
Net Income / (Loss) For The Period 19,957 36,804 7,327 12,818 7,354 12,192 187.1% 201.9%
Total Shareholders' Equity 431,695 796,131 429,794 751,881 428,428 710,291 5.9% 12.1%
Total Liabilities And Shareholders Equity 1,833,345 3,381,054 1,733,817 3,033,139 1,620,230 2,686,180 11.5% 25.9%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.7494 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 2010

3 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

4 Change calculations based on GEL values

BG BANK (UKRAINE) Q2 2010 INCOME STATEMENT

Period ended   Q2 2010   Q2 2009   Change3
Standalone, IFRS-based US$1   GEL US$2   GEL Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited)
 
Interest Income 4,415 8,143 5,518 9,148 -11.0%
Interest Expense 2,481 4,576 2,902 4,812 -4.9%
Net Interest Income 1,934 3,567 2,615 4,336 -17.7%
Fees & Commission Income 248 458 649 1,077 -57.5%
Fees & Commission Expense 37 68 134 221 -69.5%
Net Fees & Commission Income 212 390 516 855 -54.4%
Income From Documentary Operations 12 22 - - -
Expense On Documentary Operations - - - - -
Net Income From Documentary Operations 12 22 - - -
Net Foreign Currency Related Income 53 98 235 390 -74.9%
Net Other Non-Interest Income 8 14 - - -
Net Non-Interest Income 284 524 751 1,245 -57.9%
Total Operating Income (Revenue) 2,219 4,092 3,366 5,581 -26.7%
Personnel Costs 1,386 2,556 1,952 3,236 -21.0%
Selling, General & Administrative Expenses 379 699 277 459 52.4%
Procurement & Operations Support Expenses 233 430 653 1,082 -60.3%
Depreciation And Amortization 82 151 167 278 -45.4%
Other Operating Expenses 219 404 (284) (470) -185.9%
Total Recurring Operating Costs 2,300 4,241 2,765 4,584 -7.5%
Normalized Net Operating Income / (Loss) (81) (150) 601 997 -115.0%
Net Non-Recurring Income / (Costs) (64) (118) (314) (521) -77.3%
Profit / (Loss) Before Provisions (145) (268) 287 476 NMF
Net Provision Expense 1,061 1,956 6,649 11,023 -82.3%
Pre-Tax Income / (Loss) (1,206) (2,224) (6,362) (10,547) -78.9%
Income Tax Expense / (Benefit) (296) (546) 147 243 NMF
Net Income / (Loss) (910) (1,678) (6,508) (10,790) -84.4%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

3 Change calculations based on GEL values

BG BANK (UKRAINE) 1H INCOME STATEMENT

Period ended   1H 2010   1H 2009   Change3
Standalone, IFRS-based US$1   GEL US$2   GEL Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited)
 
Interest Income 8,281 15,271 12,215 20,251 -24.6%
Interest Expense 4,865 8,972 7,873 13,053 -31.3%
Net Interest Income 3,415 6,299 4,342 7,198 -12.5%
Fees & Commission Income 485 894 1,145 1,899 -52.9%
Fees & Commission Expense 151 278 257 426 -34.7%
Net Fees & Commission Income 334 615 888 1,473 -58.2%
Income From Documentary Operations 55 102 - - -
Expense On Documentary Operations - - - - -
Net Income From Documentary Operations 55 102 - - -
Net Foreign Currency Related Income 66 121 1,436 2,381 -94.9%
Net Other Non-Interest Income 10 18 - - -
Net Non-Interest Income 465 857 2,324 3,854 -77.8%
Total Operating Income (Revenue) 3,880 7,155 6,666 11,052 -35.3%
Personnel Costs 2,766 5,101 3,904 6,472 -21.2%
Selling, General & Administrative Expenses 704 1,298 1,079 1,788 -27.4%
Procurement & Operations Support Expenses 451 832 653 1,082 -23.1%
Depreciation And Amortization 194 358 294 487 -26.3%
Other Operating Expenses 332 611 249 412 48.3%
Total Recurring Operating Costs 4,447 8,201 6,177 10,241 -19.9%
Normalized Net Operating Income / (Loss) (567) (1,046) 489 811 NMF
Net Non-Recurring Income / (Costs) (251) (462) (206) (342) 35.1%
Profit / (Loss) Before Provisions (818) (1,508) 283 469 NMF
Net Provision Expense 214 394 12,309 20,407 -98.1%
Pre-Tax Income / (Loss) (1,031) (1,902) (12,026) (19,938) -90.5%
Income Tax Expense / (Benefit) (258) (475) (1,099) (1,823) -73.9%
Net Income / (Loss) (773) (1,426) (10,927) (18,116) NMF

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

3 Change calculations based on GEL values

BNB (BELARUS) Q2 2010 INCOME STATEMENT

Period ended   Q2 2010   Q2 2009   Change3
Standalone, IFRS-based US$1   GEL US$2   GEL Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited)
 
Interest Income 1,379 2,543 862 1,428 78.0%
Interest Expense 109 201 288 478 -58.0%
Net Interest Income 1,270 2,342 573 950 146.5%
Fees & Commission Income 260 480 241 400 20.0%
Fees & Commission Expense 47 86 35 57 50.2%
Net Fees & Commission Income 214 394 207 343 14.9%
Income From Documentary Operations 14 26 0 1 NMF
Expense On Documentary Operations - - (0) (0) NMF
Net Income From Documentary Operations 14 26 0 1 NMF
Net Foreign Currency Related Income 99 183 172 284 -35.6%
Net Other Non-Interest Income 11 21 81 134 -84.3%
Net Non-Interest Income 338 624 459 762 -18.1%
Total Operating Income (Revenue) 1,608 2,966 1,033 1,712 73.3%
Personnel Costs 614 1,133 463 768 47.5%
Selling, General & Administrative Expenses 140 259 94 156 66.4%
Procurement & Operations Support Expenses 142 262 142 235 11.7%
Depreciation And Amortization 75 138 83 138 -0.1%
Other Operating Expenses 108 200 97 161 24.4%
Total Recurring Operating Costs 1,080 1,992 879 1,457 36.7%
Normalized Net Operating Income / (Loss) 528 974 153 254 282.8%
Net Non-Recurring Income / (Costs) (11) (21) 6 9 NMF
Profit / (Loss) Before Provisions 517 953 159 264 261.5%
Net Provision Expense 127 234 (17) (28) NMF
Pre-Tax Income / (Loss) 390 719 176 292 146.4%
Income Tax Expense / (Benefit) 80 148 57 95 55.8%
Net Income / (Loss) 310 571 119 197 190.1%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

3 Change calculations based on GEL values

BNB (BELARUS) 1H INCOME STATEMENT

Period ended   1H 2010   1H 2009   Change3
Standalone, IFRS-based US$1   GEL US$2   GEL Y-O-Y
000s Unless otherwise noted (Unaudited) (Unaudited)
 
Interest Income 2,790 5,145 1,839 3,049 68.7%
Interest Expense 273 503 666 1,104 -54.4%
Net Interest Income 2,517 4,642 1,174 1,946 138.6%
Fees & Commission Income 416 767 447 741 3.5%
Fees & Commission Expense 77 142 65 107 32.6%
Net Fees & Commission Income 339 625 383 634 -1.5%
Income From Documentary Operations 15 27 2 3 NMF
Expense On Documentary Operations - - 1 1 -100.0%
Net Income From Documentary Operations 15 27 1 2 NMF
Net Foreign Currency Related Income 298 549 880 1,459 -62.4%
Net Other Non-Interest Income 22 41 62 102 -59.8%
Net Non-Interest Income 673 1,242 1,326 2,198 -43.5%
Total Operating Income (Revenue) 3,191 5,884 2,499 4,143 42.0%
Personnel Costs 1,165 2,149 922 1,528 40.6%
Selling, General & Administrative Expenses 244 450 190 314 43.1%
Procurement & Operations Support Expenses 280 517 282 467 10.6%
Depreciation And Amortization 144 265 183 304 -12.9%
Other Operating Expenses 210 388 211 349 11.1%
Total Recurring Operating Costs 2,044 3,769 1,787 2,963 27.2%
Normalized Net Operating Income / (Loss) 1,147 2,115 712 1,180 79.3%
Net Non-Recurring Income / (Costs) (7) (13) 12 19 -168.1%
Profit / (Loss) Before Provisions 1,140 2,102 723 1,199 75.3%
Net Provision Expense 355 655 1 1 NMF
Pre-Tax Income / (Loss) 785 1,447 723 1,198 20.8%
Income Tax Expense / (Benefit) 183 337 205 340 -1.0%
Net Income / (Loss) 602 1,110 517 858 29.4%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.8442 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 2010

2 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 Georgia Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 June 2009

3 Change calculations based on GEL values

KEY RATIOS

Profitability Ratios   Q2 2010   Q1 2010   Q2 2009
       
ROAA 1, Annualised 2.4% 2.2% -0.6%
ROAE2, Annualised 12.5% 11.1% -2.4%
Interest Income / Average Interest Earning Assets, Annualised3 16.6% 16.8% 17.3%

Cost Of Funds 4, Annualised

8.3% 8.6% 8.3%
Net Spread, Annualised 5 8.3% 8.1% 8.9%
Net Interest Margin 6, Annualised 8.3% 8.0% 9.0%
Loan Yield Excluding Provisions7, Annualised 20.2% 20.2% 19.4%
Loan Yield Including Provisions7, Annualised 17.7% 18.6% 11.1%
Interest Expense To Interest Income 50.4% 52.4% 47.7%
Net Non-Interest Income To Average Total Assets, Annualised 3.8% 4.0% 4.1%
Net Non-Interest Income To Revenue 8 37.6% 40.4% 38.6%
Net Fee And Commission Income To Average Interest Earning Assets 9, Annualised 1.7% 1.8% 2.1%
Net Fee And Commission Income To Revenue 13.1% 13.6% 14.4%
Operating Leverage, Y-O-Y 10 4.2% -17.5% -8.5%
Operating Leverage, Consecutive Q-O-Q 10 16.4% 65.8% -5.3%
Total Operating Income (Revenue) To Total Assets, Annualised 9.5% 9.7% 11.1%
Recurring Earning Power 11, Annualised 4.5% 3.5% 4.5%
Net Income To Revenue 23.5% 22.1% -5.4%
 
Efficiency Ratios      
Operating Cost To Average Total Assets 12, Annualised 5.8% 6.1% 6.2%
Cost To Average Total Assets 13, Annualised 5.6% 6.5% 6.2%
Cost / Income 14 55.5% 65.3% 57.8%
Cost / Income, Normalized 15 57.7% 61.0% 57.5%
Cash Cost / Income 43.8% 45.9% 38.3%
Total Employee Compensation Expense To Revenue 16 31.0% 30.8% 28.8%
Total Employee Compensation Expense To Cost 55.8% 47.2% 49.8%
Total Employee Compensation Expense To Average Total Assets, Annualised 3.1% 3.1% 3.1%
 
Liquidity Ratios
Net Loans To Total Assets 17 56.8% 56.9% 60.2%
Average Net Loans To Average Total Assets 57.3% 56.6% 60.3%
Interest Earning Assets To Total Assets 77.4% 75.2% 72.9%
Average Interest Earning Assets To Average Total Assets 76.5% 74.9% 73.0%
Liquid Assets To Total Assets 18 25.5% 24.6% 18.6%
Liquid Assets To Total Short-Term Liabilities, NBG Stand-Alone 34.8% 38.8% 38.0%
Liquid Assets To Total Liabilities, IFRS Consolidated 31.4% 30.5% 24.6%
Net Loans To Client Deposits 131.7% 127.5% 170.6%
Average Net Loans To Average Client Deposits 130.7% 128.4% 174.8%
Net Loans To Total Deposits 19 112.9% 120.7% 164.1%
Net Loans To (Total Deposits + Equity) 82.3% 85.3% 98.5%
Net Loans To Total Liabilities 69.9% 70.7% 79.6%
Total Deposits To Total Liabilities 61.9% 58.6% 48.5%
Client Deposits To Total Deposits 85.7% 94.7% 96.1%
Client Deposits To Total Liabilities 53.1% 55.5% 46.6%
Current Account Balances To Client Deposits 44.4% 44.1% 42.4%
Demand Deposits To Client Deposits 9.0% 9.0% 9.8%
Time Deposits To Client Deposits 46.6% 46.9% 47.8%
Total Deposits To Total Assets 50.3% 47.1% 36.7%
Client Deposits To Total Assets 43.2% 44.6% 35.3%
KEY RATIOS CONT’D      
Liquidity Ratios cont’d      
Client Deposits To Total Equity (Times) 20 2.31 2.28 1.44
Due From Banks / Due To Banks 21 171.3% 411.8% 757.4%
Total Equity To Net Loans 32.9% 34.4% 40.6%
Leverage (Times) 22 4.3 4.1 3.1
 
Asset Quality
NPLs (in GEL) 23 173,743 168,892 148,767
NPLs To Gross Loans To Clients 24 8.0% 8.7% 7.8%
NPL Coverage Ratio 25 109.3% 102.6% 99.3%
Cost of Risk 26, Annualised 2.5% 1.6% 8.4%
Reserve For Loan Losses To Gross Loans To Clients 27 8.8% 8.9% 7.8%
% Of Loans To Clients Collateralized 92.1% 93.8% 89.7%
Equity To Average Net Loans To Clients 36.1% 35.7% 53.3%
 
Capital Adequacy:
Equity To Total Assets 18.7% 19.6% 24.4%
BIS Tier I Capital Adequacy Ratio, Consolidated 28 19.6% 21.4% 23.4%
BIS Total Capital Adequacy Ratio, Consolidated 29 32.5% 33.8% 35.6%
BIS Tier I Capital Adequacy Ratio, Stand-alone 28 24.6% 26.7% 25.5%
BIS Total Capital Adequacy Ratio, Stand-alone 29 31.5% 32.6% 32.0%
NBG Tier I Capital Adequacy Ratio 30 15.8% 17.7% 17.8%
NBG Total Capital Adequacy Ratio 31 14.5% 15.9% 18.4%
 
Per Share Values:
Basic EPS (GEL) 32 0.62 0.54 (0.14)
Basic EPS (US$) $0.22 $0.13 $0.14
Fully Diluted EPS (GEL) 33 0.56 0.48 (0.12)
Fully Diluted EPS (US$) $0.19 $0.12 $0.13
Book Value Per Share (GEL) 34 20.73 19.53 22.70
Book Value Per Share (US$) $11.24 $11.17 $13.69
Ordinary Shares Outstanding - Weighted Average, Basic 31,321,662 31,315,960 31,271,525
Ordinary Shares Outstanding - Period End 31,324,466 31,315,960 31,271,525
Ordinary Shares Outstanding - Fully Diluted 34,796,276 34,790,574 34,746,139
 
Selected Operating Data:
Full Time Employees, Group 5,118 5,048 4,914
Full Time Employees, BOG Stand-Alone 2,963 2,825 2,660
Total Assets Per FTE 35 (thousands) 678 619 592
Total Assets Per FTE, BOG Stand-Alone (thousands) 1,141 1,074 1,010
Number Of Active Branches 137 140 140
Number Of ATMs 387 379 394
Number Of Cards Outstanding 551,741 570,637 594,617
Number Of POS Terminals 2,225 2,067 1,861

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 Normalized equals Total Recurring Operating cost (excludes net non-recurring costs) divided by total operating income.
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 Operating Cost equals Total Recurring Operating Costs;
24 Cost includes Total Recurring Operating Costs and Net Non-Recurring Costs (Income);
25 Cost/Income Ratio equals Costs of the period divided by Total Operating Income (Revenue);
26 Cost/Income Normalized equals Total Recurring Operating cost (excludes net non-recurring costs) divided by total operating income.
27 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;
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 Equals total consolidated assets divided by total number of full-time employees