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JSC Bank of Georgia (BGEO)

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Thursday 29 December, 2011

JSC Bank of Georgia

3rd Quarter Results

3rd Quarter Results

Bank of Georgia

JSC BANK OF GEORGIA ANNOUNCES Q3 2011 AND NINE MONTHS YTD 2011 RESULTS

Nine month Profits almost double, Fitch and S&P raise credit rating

Bank of Georgia (LSE: BGEO, GSE: GEB) (the “Bank”), Georgia’s leading bank, announced today its Q3 2011 and nine months 2011 (year-to-date, YTD) consolidated results (IFRS based, derived from management accounts), reporting a Q3 2011 Profit of GEL 37.6 million, or GEL 1.25 per share and nine months 2011 Profit From Continuing Operations of GEL 113.6 million, or GEL 3.83 per share.

Financial Highlights

  • Q3 2011 Profit From Continuing Operations of GEL 37.6 million, up by 80.4% y-o-y; Nine months 2011 Profit From Continuing Operations of GEL 113.6 million, up 98.6% y-o-y
  • Strong operational leverage has continued as a result of broadly stable net interest margins and good levels of balance sheet growth
    • Revenue increased by GEL 17.2 million, or 19.1% y-o-y, to GEL 107.4 million in Q3 2011
    • Other Operating Non-Interest Expenses decreased by 2.9% y-o-y to GEL 55.3 million in Q3 2011
  • Efficiency improvements continue as the Bank maintains rigorous financial management and continues to implement cost control measures
    • Cost to Income ratio declined to 51.5% in Q3 2011 from 63.1% in Q3 2010
    • Return on Average Assets (ROAA1) in Q3 2011 amounted to 3.52% compared to 2.39% in Q3 2010
  • Improving asset quality resulting from the strengthened operating environment:
    • Cost of credit risk decreased by GEL 5.2 million, or 50.1% y-o-y to GEL 5.2 million in Q3 2011
  • Strong capital and liquidity position has been maintained
    • Net loans to amounts due to customers ratio improved significantly to 107.5%, reflecting continued strong deposit growth
    • BIS tier 1 capital adequacy ratio remained strong at 17.9%
    • Book Value per Share increased by 16.1% to GEL 25.94 (US$15.62)

“In the third quarter we continued to deliver strong ROAE of approximately 20% and strong loan book and deposit growth rates of circa 5% and 4%, respectively. At the same time, we have benefitted from robust economic growth in Georgia with 7.5% preliminary real GDP growth in the third quarter, bringing nine months preliminary GDP growth rate to 6.2%. Due to the strong macro factors, Georgia's sovereign credit rating was upgraded by both Fitch and S&P to BB- in December 2011. I am also pleased to report to our shareholders that both of these rating agencies raised their respective long-term ratings on Bank of Georgia to ‘BB-‘,” commented Irakli Gilauri, Chief Executive Officer.

1 ROAA is calculated by dividing Net Profit From Continuing Operations for the period by average total assets (average of beginning and end of the period)

1.661 GEL/US$ 30 September 2011

1.806 GEL/US$ 30 September 2010

Financial Summary

Millions, unless otherwise noted   Q3 2011   Growth y-o-y1
Bank of Georgia (Consolidated, Unaudited, IFRS-based) US$   GEL
Revenue2 64.6 107.4 19.1%
Operating Income Before Cost of Credit Risk 31.4 52.1 56.8%
Cost of Credit Risk3 (3.1) (5.2) -50.1%
Net Operating Income 28.3 47.0 105.0%
Profit For the Period From Continuing Operations 22.6 37.6 80.4%
EPS (Basic)4 0.76 1.25 80.1%
EPS (Diluted)5 0.72 1.19 73.0%

Millions, unless otherwise noted

Nine Months 2011 Growth y-o-y1
Bank of Georgia (Consolidated, Unaudited IFRS-based) US$ GEL
Revenue 194.6 323.2 28.8%
Operating income before cost of credit risk 97.5 162.0 67.6%
Cost of Credit Risk 8.1 13.4 -55.7%
Net Operating Income 89.4 148.6 124.0%
Profit For the Period From Continuing Operations 68.4 113.6 98.6%
EPS (Basic) 2.31 3.83 100.2%
EPS (Diluted) 2.17 3.61 89.9%

Total Assets

2,624.6 4,359.4 24.2%

Net Loans and finance lease receivables

1,541.7 2,560.7 25.8%
Amounts due to customers 1,398.5 2,322.9 41.8%

Tier I Capital Adequacy Ratio (BIS)6

17.9%

Total Capital Adequacy Ratio (BIS)7

26.1%
NBG Tier I Capital Adequacy Ratio 10.8%
NBG Total Capital Adequacy Ratio 15.0%
               

Book Value per Share (Basic)

US$15.62

GEL 25.94

16.1%

Book Value per Share (Diluted)

 

US$15.46

 

GEL 25.66

 

14.4%

 

Interim Condensed Consolidated Financial Statements of JSC Bank of Georgia and its subsidiaries for three months and nine months ended 30 September 2011 are available on www.bankofgeorgia.ge./ir

1 Compared to the respective period in 2010; growth calculations based on GEL values

2 Revenue includes Net Interest Income, Net Fee and Commission Income, Net Insurance Revenue and Other Operating Non-Interest Income

3 Cost of Credit Risk includes impairment charge (reversal of impairment) on: loans to customers, finance lease receivables and other assets

4 EPS (Basic) equals profit for the period divided by weighted average number of outstanding shares for the period

5 EPS (Diluted) Diluted shares equals weighted average number of outstanding shares for the period plus approximately 3.5 million shares allocated for the conversion of the convertible loans of EBRD and IFC

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

7 BIS Total Capital Adequacy Ratio equals Total Consolidated Capital as of the period end divided by Total Consolidated 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, based on total assets (with a 36% market share), total loans (with a 36% market share) and client deposits (with a 34% market share) as of 30 June 2011, all data based on standalone financial information filed by banks in Georgia with the National Bank of Georgia. The Bank offers a broad range of corporate banking, retail banking, wealth management, brokerage and insurance services to its clients.

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

Standard & Poor’s   ‘BB-/B’
FitchRatings ‘BB-/B’
Moody’s ‘B1/NP’ (FC) & ‘Ba3/NP’ (LC)

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

Irakli Gilauri   Giorgi Chiladze   Macca Ekizashvili   David Westover/Justin Griffiths
Chief Executive Officer Deputy CEO, Finance Head of Investor Relations Citigate Dewe Rogerson

+995 32 444 109

+995 32 444 249 +44 (0) 203 178 4052 +44 (0) 207 638 9571

igilauri@bog.ge

gchiladze@bog.ge

ir@bog.ge

bog@citigatgdr.co.uk

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

The financial information as of Q3 2011, nine months ended 30 September 2011, Q3 2010 and nine months ended 30 September 2010 contained in this news report is unaudited, 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.

Discussion of Results

Revenue

GEL millions, unless otherwise noted   Q3 2011   Q3 2010   Change y-o-y
Interest income 128.7 106.6 20.7%
Interest expense 68.0 46.1 47.4%
Net interest income 60.8 60.5 0.4%
Fee and commission income 23.7 20.4 16.4%
Fee and commission expense 4.5 3.2 37.7%
Net fee and commission income 19.3 17.1 12.4%
Net insurance premiums earned 11.8 11.8 -0.3%
Net insurance claims incurred 6.7 7.7 -13.2%
Net insurance revenue 5.1 4.1 24.0%
Other operating non-interest income 22.3 8.4 165.0%
Revenue 107.4 90.1 19.1%

In Q3 2011, the Bank’s Revenue increased to GEL 107.4 million, or 19.1% growth year-on-year, a result of an increase in all revenue items.

The Bank’s interest income growth of 20.7% y-o-y to GEL 128.7 million was primarily attributable to the increase in interest income from loans to customers by GEL 12.9 million, or 13.1% y-o-y a result of the increase in the Bank’s loan book. The currency-blended loan yields of the Bank were 17.9% and 17.3%, for the three months ended 30 September 2010 and 2011, respectively. The growth of the average outstanding amounts of interest earning investment securities resulted in the 65.7% y-o-y, or GEL 3.8 million increase in interest income from investment securities to GEL 9.6 million, while the increases in average volumes of inter-bank deposits prompted the increase in interest income from amounts due from credit institutions from GEL 1.0 million in Q3 2010 to GEL 5.7 million in Q3 2011.

GEL millions, unless otherwise noted   Q3 2011   Q3 2010   Change y-o-y
Loans to customers 111.7 98.8 13.1%
Investment securities - available-for-sale 9.6 0.3 NMF
Amounts due from credit institutions 5.7 1.0 NMF
Finance lease receivables 1.7 1.1 61.3%
Investment securities - held-to-maturity - 5.4 NMF
Interest income 128.7 106.6 20.7%

In Q3 2011, interest expense increased by 47.4% to GEL 68.0 million, with growth largely attributed to the 51.7% increase in interest expense on amounts due to customers (client deposits and promissory notes issued) to GEL 41.9 million. Foreign currency amounts due to customers accounted for 68.9% of amounts due to customers as at 30 September 2011 compared to 73.6% as of 30 September 2010. Currency-blended customer deposit yields comprised 7.3% and 7.0% in Q3 2011 and Q3 2010, respectively.

GEL millions, unless otherwise noted   Q3 2011   Q3 2010   Change y-o-y
Amounts due to customers 41.9 27.6 51.7%
Amounts due to credit institutions 26.0 18.4 41.0%
Interest expense 68.0 46.1 47.4%
Net gains / (losses) from derivative financial instruments 2.6 (4.2) NMF
Interest expense adjusted for Net gains from derivative financial instruments 65.4 50.2 30.3%

In Q3 2011, interest expense on amounts due to credit institutions grew by 41.0% to GEL 26.0 million. For the consistent economic analysis of total interest costs the Bank combines net gains (losses) from derivative financial instruments (see Other Operating Non-Interest Income) with total interest expense. Net gains (losses) from derivative financial instruments comprise net gains (losses) from revaluation of the interest rate swap agreements entered by the Bank to hedge its variable interest rate risk. Decline in the fair value of the derivative financial liability recognised by the Bank on the basis of these swap agreements caused the net gain from derivative financial instruments in Q3 2011, compared to the loss from the same agreements during the similar period in 2010, caused by appreciation of the same derivative financial liability. Interest expense combined with the net gains (losses) from derivative financial instruments (“Adjusted Interest Expense”) comprised GEL 65.4 million and GEL 50.2 million in Q3 2011 and Q3 2010, respectively. As a result, the Adjusted Interest Expense increased by GEL 15.2 million, or 30.3% y-o-y, due to the increased average outstanding balances on client’s time deposit accounts.

As a result of the foregoing, the Bank’s Net Interest Income increased by 0.4% y-o-y, to GEL 60.8 million in Q3 2011. The Bank’s Adjusted Net Interest Income, calculated as the difference between interest income and the Adjusted Interest Expense, increased by GEL 6.9 million, or 12.4% y-o-y to GEL 63.4 million. Correspondingly, the Q3 2011 Net Interest Margin (NIM) was 7.4% compared to 9.0% in Q3 2010, while Q3 2011 Adjusted Net Interest Margin stood at 7.7% compared to the Q2 2010 Adjusted Net Interest Margin of 8.4%. The decline was primarily attributable to the increased liquidity and growth of interest-bearing liabilities.

The increase in overall business activity in Georgia drove the growth of the non- interest revenue items. Net fee and commission income grew 12.4% y-o-y to GEL 19.3 million, reflecting the overall improvement of the economic environment in Georgia and increased foreign trade turnover of Georgian businesses. Reflecting the continued improvements in claims management, Net insurance claims incurred by the Bank’s insurance business declined by 13.2% y-o-y, compared to 0.3% y-o-y decline in the Net insurance premiums earned, resulting in Net Insurance Revenue growth of 24.0% y-o-y in Q3 2011.

GEL millions, unless otherwise noted   Q3 2011   Q3 2010   Change y-o-y
Net gains (losses) from trading securities and investment securities available-for-sale (0.2) 0.4 NMF
Net gains (losses) from derivative financial instruments 2.6 (4.2) NMF
Net gains from foreign currencies 12.1 9.9 22.6%
Other operating income 7.7 2.2 247.1%
Other Operating Non-Interest Income 22.3 8.4 165.0%
Other Operating Non-Interest Income adjusted for

Net gains / (losses) from derivative financial instruments

19.7 12.6 56.8%

In Q3 2011, the Bank's Other Operating Non-Interest Income increased by GEL 13.9 million, or 165.0% y-o-y, to GEL 22.3 million. The Bank's Adjusted Other Operating Non-Interest Income, which excludes net gains (losses) from derivative financial instruments, increased by GEL 7.1 million, or 56.8% y-o-y, to GEL 19.7 million in Q3 2011. The increase was largely due to the 247.1% y-o-y increase in Other Operating Income, driven by the growth of the healthcare revenues as part of the Bank’s insurance business and by the increase in revenues generated by the Bank’s non-core subsidiaries. In addition, the increase in Adjusted Other Operating Non-Interest Income was in part due to a GEL 2.2 million, or 22.6% y-o-y, increase in net gains from foreign currencies, reflecting the increase in the volumes of foreign currency conversions by the Bank’s clients.

Cost of Credit Risk, Net Operating Income, Profit for the period

GEL millions, unless otherwise noted   Q3 2011   Q3 2010   Change y-o-y
Salaries and other employee benefits 30.7 26.9 14.1%
General and administrative expenses 16.3 19.2 -14.9%
Depreciation and amortization 6.6 6.8 -3.4%
Other operating expenses 1.7 4.0 -58.9%
Other Operating Non-Interest Expenses 55.3 56.9 -2.9%
Operating Income Before Cost of Credit Risk 52.1 33.2 56.8%
Cost of credit risk 5.2 10.3 -50.1%
Net Operating Income 47.0 22.9 105.0%
Share of profit of associates (0.1) - -
Other non-operating expense 1.0 - -
Profit before income tax expense 46.0 23.2 98.6%
Income tax expense 8.4 2.3 262.2%
Profit for the period 37.6 20.8 80.4%

In Q3 2011, the Bank's Other Operating Non-Interest Expense decreased by GEL 1.6 million, or 2.9% y-o-y, to GEL 55.3 million. The decrease was primarily due to a GEL 2.9 million, or 14.9% y-o-y, decrease in general and administrative expenses, a GEL 2.4 million, or 58.9% y-o-y, decrease in other operating expenses and a GEL 0.2 million, or 3.4%, decrease in depreciation and amortisation expenses, which was partially offset by a GEL 3.8 million, or 14.1% y-o-y, increase in salaries and other employee benefits. The decrease in general and administrative, other operating and depreciation and amortisation expenses was a result of the continued cost efficiency measures undertaken by the Bank and the effect of disposal of BG Bank in the beginning of 2011. The increase in salaries and other employee benefits was primarily a result of the increase in headcount and the bonus pool in line with the overall growth of business.

As a result of the foregoing factors, the Bank's Operating Income Before Cost of Credit Risk increased by GEL 18.9 million, or 56.8% y-o-y, to GEL 52.1 million in Q3 2011.

Cost of credit risk decreased by GEL 5.2 million, or 50.1% y-o-y, to GEL 5.2 million in Q3 2011. The decrease was primarily the result of a 43.8% y-o-y decrease in impairment charge on loans to customers, a result of improvements in the economy generally reflected in the improvement of the Bank's loan portfolio quality, and the disposal of BG Bank in the beginning of 2011. Allowance for loan impairment was GEL 121.6 million or 4.6% of total gross loans as of 30 September 2011, compared to 8.7% as of same date last year.

The Bank’s gross loans to customers past due more than 90 days comprised GEL 99.6 million as of 30 September 2011 compared to GEL 131.5 million as of 30 September 2010, decreasing by 24.3% y-o-y. The Bank’s loans to customers (excluding finance lease receivables) past due more than 90 days to total gross loans ratio decreased from 6.0% as of 30 September 2010 to 3.8% as of 30 September 2011.

Q3 2011 Net Operating Income amounted to GEL 47.0 million, up 105.0% y-o-y. The Bank’s Non-Operating Expense for the period amounted to GEL 0.9 million, resulting in Q3 2011 Profit Before Income Tax Expense From Continuing Operations of GEL 46.0 million, up 98.6% y-o-y. The Q3 2011 income tax expense reached GEL 8.4 million, an increase of 262.2% y-o-y. As a result, the Bank’s Q3 2011 Profit for the period stood at GEL 37.6 million, up by GEL 16.8 million, or 80.4% y-o-y.

Balance Sheet highlights

As of 30 September 2011, the Bank had total assets of GEL 4,359.4 million, a 5.7% increase compared to 30 June 2011 and 8.9% increase compared to 31 December 2010. On a quarterly basis, the GEL 236.1 million, or 5.7% q-o-q, increase in total assets was primarily due to a GEL 154.0 million, or 45.5%, increase in cash and cash equivalents and a GEL 122.2 million, or 5.1%, increase in loans to customers. On a year-to-date basis, the 8.9% YTD growth of the Bank’s total assets was attributed to the 6.2% YTD growth of the Bank’s net loan book, while the comparisons are impacted by the inclusion of BG Bank’s loan book in 2010 results.

As of 30 September 2011, the Bank had total liabilities of GEL 3,583.7 million, up 6.3% q-o-q and up 26.2% y-o-y. The increase in total liabilities on a quarterly basis was primarily due to a GEL 113.1 million, or 11.5% q-o-q, increase in amounts due to credit institutions, a GEL 94.4 million, or 4.2%, increase in amounts due to customers, to GEL 2,322.9 million. Client deposits grew by GEL 156.4 million to GEL 2,161.1 million, or 7.8% from 31 December 2010, when the results included client deposits of BG Bank. Amounts due to credit institutions declined by GEL 39.2 million, or 3.4% YTD.

Excluding BG Bank’s respective disclosures for 2010, the Bank’s net loan book and finance lease receivables grew 15.2% YTD, while amounts due to customers increased by 27.0% YTD as of 30 September 2011.

As of 30 September 2011, the Bank had shareholders' equity of GEL 775.7 million, as compared to shareholders' equity of GEL 751.8 million as of 30 June 2011 and GEL 693.3 million as of 31 December 2010. The Bank’s Book Value per share on 30 September 2011 stood at GEL 25.94 (US$15.62) compared to GEL 25.01 (US$ 15.01) as of 30 June 2011 and GEL 23.13 (US$13.05) as of 31 December 2010.

CONSOLIDATED Q3 2011 INCOME STATEMENT

 

Q3 2011

 

Q3 2010

 

Change

US$1   GEL US$   GEL Y-O-Y
 
Unaudited
Loans to customers 67,253 111,707 54,688 98,766 13.1%
Investment securities – available-for-sale 5,760 9,567 191 345 NMF
Amounts due from credit institutions 3,441 5,716 550 993 NMF
Finance lease receivables 1,050 1,744 599 1,081 61.3%
Investment securities – held-to-maturity 3,006 5,428 NMF
Interest income 77,504 128,734 59,033 106,613 20.7%
Amounts due to customers (25,254) (41,947) (15,307) (27,645) 51.7%
Amounts due to credit institutions (15,660) (26,012) (10,214) (18,447) 41.0%
Interest expense (40,915) (67,959) (25,522) (46,092) 47.4%
Net interest income 36,589 60,775 33,511 60,521 0.4%
Fee and commission income 14,279 23,717 11,280 20,372 16.4%
Fee and commission expense (2,680) (4,452) (1,790) (3,232) 37.7%
Net fee and commission income 11,598 19,265 9,491 17,140 12.4%
Net insurance premiums earned 7,079 11,758 6,532 11,796 -0.3%
Net insurance claims incurred (4,030) (6,694) (4,271) (7,713) -13.2%
Net insurance revenue 3,049 5,064 2,261 4,083 24.0%
Net gains from trading securities and investment

securities available-for-sale

(120) (200) 235 424 NMF
Net gains (losses) from derivative financial instruments 1,556 2,584 (2,298) (4,151) NMF
dealing 7,580 12,590 5,064 9,145 37.7%
translation differences (272) (451) 418 755 NMF
Other operating income 4,662 7,744 1,235 2,231 247.1%
Other operating non-interest income 13,406 22,267 4,653 8,404 165.0%
Revenue 64,642 107,371 49,916 90,148 19.1%
Salaries and other employee benefits (18,499) (30,727) (14,905) (26,919) 14.1%
General and administrative expenses (9,813) (16,299) (10,607) (19,156) -14.9%
Depreciation and amortization (3,960) (6,578) (3,770) (6,808) -3.4%
Other operating expenses (994) (1,651) (2,225) (4,018) -58.9%
Other operating non-interest expenses (33,266) (55,255) (31,507) (56,901) -2.9%
Operating income before cost of credit risk 31,376 52,116 18,409 33,247 56.8%
Impairment charge on loans to customers (3,426) (5,691) (5,610) (10,131) -43.8%
(Impairment charge) Reversal of impairment

on finance lease receivables

30 49 (35) (63) NMF
Impairment reversal (charge) on other assets and provisions 287 477 (85) (153) NMF
Cost of credit risk (3,110) (5,165) (5,729) (10,347) -50.1%
Net operating income 28,267 46,951 12,680 22,900 105.0%
Share of loss of associates 28 47 NMF
Non-operating income 150 271 NMF
Non-operating expenses (586) (974) NMF
Other non-operating expense (558) (927) 150 271 NMF
Profit before income tax expense from continuing operations 27,709 46,024 12,830 23,171 98.6%
Income tax expense (5,063) (8,410) (1,286) (2,322) 262.2%
Profit for the period from continuing operations 22,645 37,614 11,544 20,849 80.4%
 
Attributable to:
shareholders of the Bank 22,225 36,915 11,250 20,317 81.7%
non-controlling interests 421 699 295 532 31.4%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.661 per US$1.00, such exchange rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 September 2011 and GEL 1.806 per US$1.00, such exchange rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 September 2010

2 Growth calculations based on GEL values

CONSOLIDATED BALANCE SHEET

  30-Sep-2011   31-Dec-2010   Change
US$1   GEL US$   GEL Y-O-Y2
 
Unaudited
Assets
Cash and cash equivalents 296,479 492,452 344,943 611,584 -19.5%
Amounts due from credit institutions 161,552 268,338 65,690 116,469 130.4%
Investment securities:
available-for-sale 3 232,126 385,561 166,351 294,940 30.7%
held-to-maturity 13 21 12 21 0.0%
Loans to customers 1,503,512 2,497,334 1,326,394 2,351,697 6.2%
Finance lease receivables 38,147 63,362 8,133 14,419 339.4%
Investments in associates 2,371 3,938 3,177 5,632 -30.1%
Investment properties 63,016 104,669 64,014 113,496 -7.8%
Property and equipment 178,246 296,066 161,225 285,852 3.6%
Goodwill 33,842 56,212 39,037 69,212 -18.8%
Other intangible assets 12,631 20,980 12,628 22,390 -6.3%
Current income tax assets 4,595 7,632 1,267 2,247 239.7%
Deferred income tax assets 8,350 13,870 10,253 18,178 -23.7%
Prepayments 16,160 26,841 13,178 23,365 14.9%
Other assets 73,529 122,132 42,538 75,420 61.9%
Total assets 2,624,568 4,359,408 2,258,839 4,004,922 8.9%
 
Liabilities
Amounts due to customers 1,398,516 2,322,935 1,142,870 2,026,308 14.6%
Amounts due to credit institutions 662,084 1,099,722 642,373 1,138,927 -3.4%
Current income tax liabilities 148 246 2,398 4,251 -94.2%
Deferred income tax liabilities 18,713 31,083 17,429 30,901 0.6%
Provisions 193 320 2,486 4,407 -92.7%
Other liabilities 77,924 129,432 60,230 106,787 21.2%
Total liabilities 2,157,579 3,583,738 1,867,784 3,311,581 8.2%
 
Equity
Share capital 18,885 31,368 17,679 31,345 0.1%
Additional paid-in capital 285,771 474,665 269,196 477,285 -0.5%
Treasury shares (964) (1,602) (852) (1,510) 6.1%
Other reserves 15,724 26,117 15,125 26,816 -2.6%
Retained earnings 131,450 218,338 73,499 130,314 67.5%
Total equity attributable to shareholders of the Bank 450,865 748,886 374,647 664,250 12.7%
Non-controlling interests 16,125 26,784 16,408 29,091 -7.9%
Total equity 466,990 775,670 391,055 693,341 11.9%
 
Total liabilities and equity 2,624,568 4,359,408 2,258,839 4,004,922 8.9%

1 Converted to U.S. dollars for the convenience using a period-end exchange rate of GEL 1.661 per US$1.00, such exchange rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 September 2011 and GEL 1.773 per US$1.00, such exchange rate being the official Georgian Lari to U.S. dollar period-end exchange rate as reported by the National Bank of Georgia on 30 September 2010

2 Growth calculations based on GEL values

3 Available-for-sale investment securities mostly comprise of Treasury Bills issued by Ministry of Finance of Georgia and Certificates of Deposits issued by the NBG

KEY RATIOS

Ratios presented on a consolidated basis, unless otherwise noted

 

Q3 2011

 

Q3 2010

Profitability ratios:
ROAA(1) 3.52% 2.39%
ROAE(2) 19.84% 12.68%
Interest expense to interest income 52.8% 43.2%
Interest income to average interest earning assets 15.6% 15.9%
Cost of funds(3) 7.9% 6.8%
Net spread(4) 7.7% 9.1%
Net interest margin(5) 7.4% 9.0%
Net interest margin, adjusted (6) 7.7% 8.4%
Currency-blended loan yield(7) 17.3% 17.9%
Currency-blended deposit yield(8) 7.3% 7.0%
Net fee and commission income to revenue(9) 17.9% 19.0%
Net non-interest income to revenue(10) 43.4% 32.9%
Efficiency ratios:
Cost to income ratio(11) 51.5% 63.1%
Other operating non-interest expense to average total assets 5.2% 6.5%
Salaries and other employee benefits to total operating income(12) 28.6% 29.9%
Salaries and other employee benefits to other operating non-interest expense12) 55.6% 47.3%
Liquidity ratios (at period end):
Net loans to total assets 57.3% 57.5%
Net loans to amounts owed to customers 107.5% 123.1%
Net loans to total deposits(13) 95.2% 111.2%
Net loans to total liabilities 69.7% 71.0%
Interest earnings assets(5) to total assets 76.5% 77.1%
Liquid assets to total assets(14) 26.3% 24.0%
Total deposits to total assets(13) 60.2% 51.7%
Amounts due to customers to total deposits 88.6% 90.3%
Amounts due to customers to total equity (times) 3.0 2.4
Amounts due from credit institutions to amounts due to credit institutions, except for borrowings from international credit institutions 89.4% 90.9%
Total equity to net loans 31.1% 33.2%
Leverage, (times)(15) 4.6 4.2
Asset quality:
Allowance at period end for loan impairment to gross loans(16) 4.6% 8.7%
Impairment of interest earning assets for the period to average interest earning assets (Cost of risk) 0.7% 1.5%
Impairment charge on loans to customers to gross loans to customers 0.9% 1.8%
Capital adequacy (at period end):
BIS Tier I Capital Adequacy Ratio(17) 17.9% 20.2%
BIS Total Capital Adequacy Ratio(18) 26.1% 31.6%
NBG Tier I Capital Adequacy Ratio (19) 10.8% 15.2%
NBG Total Capital Adequacy Ratio (20) 15.0% 15.7%
Per Share Values:
Basic EPS (GEL) (21) 1.25 0.70
Basic EPS (US$) 0.76 0.39
Diluted EPS (GEL) (22) 1.19 0.69
Diluted EPS (US$) 0.72 0.38
Book Value Per Share (GEL) (23) 25.94 22.35
Book Value Per Share (US$) $15.62 $12.37
Ordinary Shares Outstanding - Weighted Average, Basic (24) 29,982,199 29,934,398
Ordinary Shares Outstanding - Period End 29,897,082 29,927,658
Ordinary Shares Outstanding - Diluted (22) 33,456,812 33,409,012

NOTES TO KEY RATIOS

(1) Return on average total assets: profit (loss) for the period from continuing operations divided by average totals assets of the period.

(2) Return on average total equity: profit (loss) for the period from continuing operations attributable to Bank Shareholders divided by average total equity of the period attributable to Bank Shareholders.

(3) Cost of funds equals interest expense divided by average interest bearing liabilities of the period. Interest bearing liabilities include amounts due to credit institutions and amounts due to customers.

(4) Net spread is calculated as the difference between cost of funds and interest income to average interest-earning assets.

(5) Net interest income divided by average interest-earning assets of the period. Interest-earning assets include time deposits with credit institutions with effective maturity up to 90 days, amounts due from credit institutions, loans to customers (net), finance lease receivables (net) and investment securities (interest-earning securities only).

(6) Adjusted net interest margin equals adjusted net interest income divided by average interest-earning assets for the period. Adjusted net interest income equals the difference between interest income and the adjusted interest expense. Adjusted interest expense is a combined amount of interest expense and net gains (losses) from derivative financial instruments.

(7) The currency-blended loan yield equals total interest income from loans for the period divided by the average total gross loans for the same period.

(8) The currency-blended customer deposit yield equals total interest expense from amounts due to customers for the period divided by the

average total amounts due to customers for the same period.

(9) Revenue includes net interest income, net fee and commission income, net insurance revenue and other operating non-interest income.

(10) Net non-interest income is the sum of net fee and commission income, net insurance revenue and other operating non-interest income.

(11) Cost to income ratio equals other operating non-interest expense divided by revenue of the period.

(12) Salaries and other employee benefits amounted to GEL 30.7 million and GEL 26.9 million for the three months ended 30 September 2011 and 2010, respectively.

(13) Total deposits include amounts due to customers and amounts due to credit institutions except for the borrowings from credit institutions.

(14) Liquid assets include cash and cash equivalents, amounts due from credit institutions and investment securities. Liquid assets amounted to GEL 843.5 million and GEL 1,146.4 million as of 30 September 2010 and 2011, respectively.

(15) Total liabilities divided by total equity.

(16) Allowance for loan impairment amounted to GEL 191.2 million and GEL 121.6 million as of 30 September 2010 and 2011, respectively.

(17) The consolidated Tier I capital adequacy ratio calculated in accordance with Basel I. The consolidated Tier I capital adequacy ratio of the Group equals the consolidated Tier I capital divided by the consolidated risk weighted assets. The consolidated Tier I capital amounted to GEL 600.9 million and GEL 725.2 million as of 30 September2010 and 2011, respectively. The consolidated risk weighted assets amounted to GEL 2,977.9 million and GEL 4,045.6 million as of 30 September 2010 and 2011, respectively.

(18) The consolidated total capital adequacy ratio calculated in accordance with Basel I. The consolidated total capital adequacy ratio of the Group equals total consolidated regulatory capital (Tier I + Tier II - deductions) divided by consolidated risk weighted assets. The consolidated regulatory capital (Tier I + Tier II - deductions) amounted to GEL 941.3 million and GEL 1,055.3 million as of 30 September 2010 and 2011, respectively.

(19) 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. The NBG Tier I capital amounted to GEL515.6 million as of 30 September 2011 and the risk weighted assets amounted to GEL 4,777.9 million as of 30 September 2011.

(20) 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 the National Bank of Georgia. The NBG total capital amounted to GEL 718.5 million as of 30 September 2011.

(21) EPS (Basic) equals profit for the period divided by weighted average number of Outstanding Shares for the period minus Treasury Shares

(22) Diluted shares equals weighted average number of Outstanding Shares for the period plus approximately 3.5 million shares allocated for the conversion of the convertible loans of EBRD and IFC

(23) Book Value per Share (Basic) equals total equity divided by outstanding number of shares at the end of the period.

(24) Does not include Treasury Shares