TIDMBGEO
RNS Number : 9467I
Bank of Georgia Group PLC
14 August 2019
Bank of Georgia
Group PLC
2(nd) quarter and half-year 2019 results
Name of authorised official of issuer responsible for making
notification:
Natia Kalandarishvili, Head of Investor Relations and
Funding
www.bankofgeorgiagroup.com
ABOUT BANK OF GEORGIA GROUP PLC
The Group: Bank of Georgia Group PLC ("Bank of Georgia Group" or
the "Group" - LSE: BGEO LN) is a UK incorporated holding company,
the new parent company of BGEO Group PLC. The Group combined a
Banking Business and an Investment Business prior to the Group
demerger on 29 May 2018, which resulted in the Investment
Business's separation from the Group effective from 29 May
2018.
The Group comprises: a) retail banking and payment services and
b) corporate and investment banking and wealth management
operations in Georgia, and c) banking operations in Belarus
("BNB"). JSC Bank of Georgia ("Bank of Georgia", "BOG" or the
"Bank"), the leading universal bank in Georgia, is the core entity
of the Group. The Group targets to benefit from superior growth of
the Georgian economy through both its retail banking and corporate
and investment banking services and aims to deliver on its
strategy, which is based on at least 20% ROAE and c.15% growth of
its loan book.
2Q19 AND 1H19 RESULTS AND CONFERENCE CALL DETAILS
Bank of Georgia Group PLC announces the Group's second quarter
and the first half of 2019 consolidated financial results. Unless
otherwise noted, numbers in this announcement are for 2Q19 and
comparisons are with 2Q18. The results are based on International
Financial Reporting Standards ("IFRS") as adopted by the European
Union, are unaudited and derived from management accounts. This
results announcement is also available on the Group's website at
www.bankofgeorgiagroup.com.
An investor/analyst conference call, organised by the Bank of
Georgia Group, will be held on, 14 August 2019, at 14:00 UK / 15:00
CEST / 09:00 U.S Eastern Time. The duration of the call will be 60
minutes and will consist of a 15-minute update and a 45-minute
Q&A session.
Dial-in numbers: 30-Day replay:
Pass code for replays/Conference Pass code for replays / Conference
ID: 6363857 ID: 6363857
International Dial-in: +44 (0) International Dial in: +44 (0)
2071 928000 3333009785
UK: 08445718892 UK National Dial In: 08717000471
US: 16315107495 UK Local Dial In: 08445718951
Austria: 019286559 USA Free Call Dial In: 1 (866)
Belgium: 024009874 331-1332
Czech Republic: 228881424
Denmark: 32728042
Finland: 0942450806
France: 0176700794
Germany: 06924437351
Hungary: 0614088064
Ireland: 014319615
Italy: 0687502026
Luxembourg: 27860515
Netherlands: 0207143545
Norway: 23960264
Spain: 914146280
Sweden: 0850692180
Switzerland: 0315800059
CONTENTS
4 2Q19 and 1H19 results highlights
6 Chief Executive Officer's statement
8 Discussion of results
12 Discussion of segment results
12 Retail Banking
16 Corporate and Investment Banking
19 Selected financial and operating information
24 Principal risks and uncertainties
31 Statement of Directors' responsibilities
32 Interim condensed consolidated financial statements
33 Independent review report
35 Interim condensed consolidated financial statements
42 Selected explanatory notes
70 Glossary
71 Company information
FORWARD LOOKING STATEMENTS
This announcement contains forward-looking statements,
including, but not limited to, statements concerning expectations,
projections, objectives, targets, goals, strategies, future events,
future revenues or performance, capital expenditures, financing
needs, plans or intentions relating to acquisitions, competitive
strengths and weaknesses, plans or goals relating to financial
position and future operations and development. Although Bank of
Georgia Group PLC believes that the expectations and opinions
reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations and opinions will
prove to have been correct. By their nature, these forward-looking
statements are subject to a number of known and unknown risks,
uncertainties and contingencies, and actual results and events
could differ materially from those currently being anticipated as
reflected in such statements. Important factors that could cause
actual results to differ materially from those expressed or implied
in forward-looking statements, certain of which are beyond our
control, include, among other things: currency fluctuations,
including depreciation of the Georgian Lari, and macroeconomic
risk; regional instability; loan portfolio quality; regulatory
risk; liquidity risk; operational risk, cyber security, information
systems and financial crime risk; and other key factors that
indicated could adversely affect our business and financial
performance, which are contained elsewhere in this document and in
our past and future filings and reports of the Group, including the
'Principal risks and uncertainties' included in Bank of Georgia
Group PLC's Annual Report and Accounts 2018 and in this
announcement. No part of this document constitutes, or shall be
taken to constitute, an invitation or inducement to invest in Bank
of Georgia Group PLC or any other entity within the Group, and must
not be relied upon in any way in connection with any investment
decision. Bank of Georgia Group PLC and other entities within the
Group undertake no obligation to update any forward-looking
statements, whether as a result of new information, future events
or otherwise, except to the extent legally required. Nothing in
this document should be construed as a profit forecast.
HIGHLIGHTS(1)
Continued strong profitability and balance sheet growth,
supported by outstanding capital and liquidity positions
Change Change Change
GEL thousands 2Q19 2Q18 y-o-y 1Q19 q-o-q 1H19 1H18 y-o-y
Banking Business Income Statement
Highlights(2)
Net interest income 181,622 186,582 -2.7% 182,941 -0.7% 364,563 366,831 -0.6%
Net fee and commission income 43,267 37,847 14.3% 42,180 2.6% 85,447 72,357 18.1%
Net foreign currency gain 36,700 25,000 46.8% 30,025 22.2% 66,724 39,252 70.0%
Net other income / (expense) (4,260) 3,705 NMF 3,568 NMF (691) 9,451 NMF
Operating income 257,329 253,134 1.7% 258,714 -0.5% 516,043 487,891 5.8%
Operating expenses (98,558) (93,144) 5.8% (91,927) 7.2% (190,485) (180,523) 5.5%
Profit from associates 254 376 -32.4% 188 35.1% 442 695 -36.4%
Operating income before cost
of risk 159,025 160,366 -0.8% 166,975 -4.8% 326,000 308,063 5.8%
Cost of risk (35,476) (37,526) -5.5% (42,652) -16.8% (78,129) (71,340) 9.5%
Net operating income before
non-recurring items 123,549 122,840 0.6% 124,323 -0.6% 247,871 236,723 4.7%
Net non-recurring items (2,538) (13,763) -81.6% (1,575) 61.1% (4,112) (16,711) -75.4%
Profit before income tax expense
and one-off costs 121,011 109,077 10.9% 122,748 -1.4% 243,759 220,012 10.8%
Income tax expense (9,871) (5,461) 80.8% (10,536) -6.3% (20,407) (14,744) 38.4%
Profit adjusted for one-off
costs 111,140 103,616 7.3% 112,212 -1.0% 223,352 205,268 8.8%
One-off termination costs
of former CEO and executive
management (after tax), one-off
demerger related expenses
(after tax) and one-off impact
of re-measurement of deferred
tax balances (3,996) (52,541) -92.4% (10,240) -61.0% (14,236) (52,541) -72.9%
Profit 107,144 51,075 109.8% 101,972 5.1% 209,116 152,727 36.9%
GEL thousands Jun-19 Jun-18 Change Mar-19 Change
y-o-y q-o-q
Banking Business Balance Sheet
Highlights
Liquid assets 4,537,545 4,266,417 6.4% 4,502,390 0.8%
Cash and cash equivalents 936,106 1,546,863 -39.5% 1,162,168 -19.5%
Amounts due from credit institutions 1,704,701 993,862 71.5% 1,391,630 22.5%
Investment securities 1,896,738 1,725,692 9.9% 1,948,592 -2.7%
Loans to customers and finance
lease receivables(3) 10,579,710 8,108,647 30.5% 9,570,691 10.5%
Property and equipment 358,921 313,627 14.4% 349,728 2.6%
Total assets 16,133,999 13,239,336 21.9% 15,054,569 7.2%
Client deposits and notes 8,855,616 7,174,234 23.4% 8,393,861 5.5%
Amounts due to credit institutions 2,960,519 2,740,595 8.0% 2,463,408 20.2%
Borrowings from DFIs 1,253,921 1,161,120 8.0% 1,309,976 -4.3%
Short-term loans from NBG 1,001,496 556,834 79.9% 585,797 71.0%
Loans and deposits from commercial
banks 705,102 1,022,641 -31.1% 567,635 24.2%
Debt securities issued 2,137,239 1,527,452 39.9% 2,045,428 4.5%
Total liabilities 14,215,780 11,571,671 22.8% 13,135,789 8.2%
Total equity 1,918,219 1,667,665 15.0% 1,918,780 0.0%
Banking Business Key Ratios 2Q19 2Q18 1Q19 1H19 1H18
ROAA2 2.9% 3.1% 3.1% 3.0% 3.2%
ROAE(2) 22.9% 25.4% 24.5% 23.7% 25.7%
Net interest margin 5.4% 6.9% 5.8% 5.6% 7.0%
Loan yield 11.8% 14.0% 12.2% 12.0% 13.9%
Cost of funds 4.8% 5.0% 4.8% 4.8% 4.9%
Cost / income(4) 38.3% 36.8% 35.5% 36.9% 37.0%
NPLs to Gross loans to clients 3.2% 3.4% 3.3% 3.2% 3.4%
NPL coverage ratio 88.1% 99.4% 92.2% 88.1% 99.4%
NPL coverage ratio, adjusted
for discounted value of collateral 131.5% 142.8% 132.6% 131.5% 142.8%
Cost of credit risk ratio 1.3% 1.6% 1.7% 1.5% 1.7%
NBG (Basel III) Tier I capital
adequacy ratio 13.3% 12.5% 12.7% 13.3% 12.5%
NBG (Basel III) Total capital
adequacy ratio 16.7% 17.5% 17.1% 16.7% 17.5%
(1) On 29 May 2018, the demerger of Bank of Georgia Group PLC's
Investment Business to Georgia Capital PLC became effective. The
results of operations of the Investment Business prior to demerger,
as well as the gain recorded by the Group as a result of the
Investment Business distribution are classified under the
"discontinued operations". The Group and Banking Business detailed
financials, as well as Discontinued Operations and inter-business
eliminations for previous periods are presented on pages 19 and 20.
Throughout this announcement, the discussion is focused on the
Banking Business results, which represents the continuing business
of the Group since the demerger
(2) The income statement adjusted profit excludes GEL 4.0mln in
2Q19 (1Q19: GEL 10.2mln) and GEL 14.2mln in 1H19 one-off employee
costs (net of income tax) related to former CEO and executive
management termination benefits. The amount is comprised of GEL
4.6mln in 2Q19 (1Q19: GEL 7.8mln) and GEL 12.4mln in 1H19 (gross of
income tax) excluded from salaries and other employee benefits and
GEL 4.0mln (gross of income tax) excluded from non-recurring items
in 1Q19 and in 1H19. The income statement adjusted profit for 2Q18
and 1H18 excludes GEL 52.5mln demerger related expenses (net of
income tax) and one-off impact of re-measurement of deferred tax
balances. ROAE and ROAA have been adjusted accordingly for all
periods presented. Full IFRS income statement is presented on pages
19 and 20. Management believes that one-off costs do not relate to
underlying performance of the Group, and hence, adjusted results
provide the best representation of the Group's performance
(3) Throughout this announcement, the gross loans to customers
and respective allowance for impairment are presented net of
expected credit loss (ECL) on contractually accrued interest
income. These do not have an effect on the net loans to customers
balance. Management believes that netted-off balances provide the
best representation of the Group's loan portfolio position
(4) Cost/income ratio adjusted for GEL 4.6mln in 2Q19 (1Q19: GEL
7.8mln) and GEL 12.4mln in 1H19 one-off employee costs (gross of
income tax) related to termination benefits of the former executive
management
KEY RESULTS HIGHLIGHTS
-- Strong quarterly performance. Profit adjusted for one-off
costs totalled GEL 111.1mln in 2Q19 (up 7.3% y-o-y and down 1.0%
q-o-q) and GEL 223.4mln in 1H19 (up 8.8% y-o-y), with profitability
remaining high at 22.9% and 23.7% ROAE(5) in 2Q19 and in the first
half of 2019, respectively
-- Strong asset quality. The cost of credit risk ratio improved
to 1.3% in 2Q19 (down 30bps y-o-y and down 40bps q-o-q) and to 1.5%
in 1H19 (down 20bps y-o-y). NPLs to gross loans ratio was 3.2% at
30 June 2019, while the NPL coverage ratio was 88.1% and the NPL
coverage ratio adjusted for discounted value of collateral was
131.5%
-- Loan book growth reached 30.5% y-o-y and 10.5% q-o-q at 30
June 2019. Growth on a constant-currency basis was 19.1% y-o-y and
6.4% q-o-q. Retail Banking loan book share in the total loan
portfolio was 67.2% at 30 June 2019 (70.3% at 30 June 2018 and
70.0% at 31 March 2019)
-- Strong capital position. Basel III Tier 1 and Total Capital
Adequacy ratios stood at 13.3% and 16.7%, respectively, at 30 June
2019, both above the minimum required level of 11.6% and 16.1%,
respectively. Common Equity Tier 1 (CET1) ratio stood at 11.0%,
compared to a 9.6% minimum requirement at 30 June 2019. In March
2019, JSC Bank of Georgia issued an inaugural US$100 million
11.125% Additional Tier 1 Capital Perpetual Subordinated Notes,
with regulatory approval on the classification of these securities
as Additional Tier 1 instruments received in April 2019
-- Retail Banking ("RB") continued to deliver solid net interest
income, coupled with strong net fee and commission income
generation during the period. The Retail Banking net loan book
reached GEL 6,771.2mln at 30 June 2019, up 25.1% y-o-y and up 6.0%
q-o-q. The growth was predominantly driven by mortgage and MSME
lending. At the same time, the RB client deposits increased to GEL
4,987.6mln at 30 June 2019, up 43.3% y-o-y and up 10.3% q-o-q
-- Corporate and Investment Banking ("CIB") demonstrated strong
growth in 2Q19, generating solid net interest income and net fee
and commission income, coupled with operating efficiencies and
strong asset quality. CIB's net loan book reached GEL 3,208.8mln at
30 June 2019, up 42.6% y-o-y and up 21.0% q-o-q. The growth on a
constant-currency basis was 25.3% y-o-y and 14.7% q-o-q. The top 10
CIB client concentration was 9.1% at 30 June 2019 (10.2% at 30 June
2018 and 9.1% at 31 March 2019)
-- Assets Under Management ("AUM") within the Group's Investment
Management business, increased to GEL 2,504.3mln in 2Q19, up 25.6%
y-o-y and up 5.6% q-o-q, reflecting an increase in client assets
and bond issuances at Galt & Taggart, our brokerage
subsidiary
-- Dollarisation of the loan book and client deposits. Loan book
in local currency accounted for 39.9% of the total loan book at 30
June 2019 (41.7% a year ago and 39.3% in the previous quarter).
Client deposits in local currency represented 31.4% of the total
deposit portfolio at 30 June 2019 (37.9% a year ago and 32.9% in
previous quarter)
-- Digital channels. We have actively continued the further
development of our digital strategy:
-- The Bank continued introducing new features to our mobile
banking application and our internet bank and introducing dedicated
digital spaces in our branches to incentivise offloading client
activity to digital channels. As a result, the number of active
internet and mobile banking users, as well as the number and volume
of transactions through our mobile and internet banking continued
to expand. In total, c.93% of daily banking transactions were
executed through digital channels in 1Q19 and 2Q19
-- In 1Q19, the Bank released a brand new business internet
banking platform (Business iBank) for MSME and corporate clients,
which comes with many features designed to make its use an
intuitive and smooth experience. We focused our efforts on making
the Business iBank even more useful for business transactions,
which should further incentivise offloading client activity to
digital channels. As a result, we already saw significant increase
in number and volume of transactions through new Business iBank in
2Q19 (up 33.8% and up 11.3% q-o-q, respectively). c.89% of daily
banking transactions were executed through internet bank in
2Q19
-- In 1Q19, the Group launched a cutting-edge full-service real
estate digital platform, area.ge. The platform is unique on the
Georgian real estate market and is the first platform to be fully
integrated with the Bank to provide its users a "one-click" live
credit limit appraisal and mortgage application experience. The
Group aims to boost its mortgage portfolio by gaining access to a
new clientèle, and simultaneously offering value-added services to
real estate developers and agencies. At 30 June 2019, more than
535,000 unique users and 527 developers were registered, and more
than 3,800 mortgage leads have been generated through the platform,
and disbursed mortgage loans amounted to more than GEL 6mln since
the launch
-- In 2Q19, the Group acquired a leading Georgian e-commerce
platform, extra.ge. The Platform facilitates consumer-to-consumer
(C2C) and business-to-consumer (B2C) sales through its website and
social media channels. Currently, extra.ge had c.350,000 returning
visitors per month. Around 80,000 registered buyers and sellers and
c.100,000 products and services are listed on extra.ge. The clients
will be able to access their Bank of Georgia banking products in a
fully integrated way: extra.ge will be integrated with the Bank's
current flexible single sign-on and payment system and will offer
the Bank's pre-approved instant installment loans to enable its
customers to purchase selected products. Bank's retail and MSME
clients will enjoy the excellent opportunities of a new consumer
experience and doing business in a dynamic and flexible digital
marketplace
-- In July 2019, Bank of Georgia signed an agreement with Public
Service Hall over the next three years, whereby we gained the right
to provide transactional services to c.4.3 million clients served
annually by Public Service Hall throughout 23 locations in
Georgia
(5) 2Q19 and 1H19 ROAE adjusted for GEL 4.0mln and GEL 14.2mln
one-off employee costs (net of income tax) related to termination
benefits of the former CEO and executive management,
respectively
CHIEF EXECUTIVE OFFICER'S STATEMENT
In the first half of 2019, the Group delivered another period of
strong balance sheet and fee and commission income growth, which
has continued to deliver superior profitability. Over the last 12
months, customer lending has increased by 30.5%, supported by 10.5%
customer lending growth in the second quarter of 2019, which
demonstrates the strength of the Bank of Georgia franchise. In
addition, we have continued to build our fully integrated digital
capacity; we improved our already strong capital position with the
issuance of US$100 million Additional Tier 1 capital notes, and
strengthened our executive management team. At the same time, the
Bank has successfully adopted a significant tranche of local
regulatory changes and the Georgian economy has continued to
deliver strong macro-economic growth, despite some regional
uncertainties.
Net profit for the first half of 2019 totalled GEL 209.1
million, despite the impact of GEL 14.2 million of one-off employee
costs (net of income tax) related to termination benefits of former
CEO and executive management members. Adjusting for these and other
2018 demerger related costs, net profit increased by 8.8%
year-on-year to GEL 223.4 million, and the return on average equity
was 23.7%. On the same basis, during the second quarter, the Group
delivered profit of GEL 111.1 million, up 7.3% year-on-year,
reflecting both strong customer lending growth and double-digit
growth in fee and commission income.
During the first half of 2019, we actively continued the further
development of our fully integrated digital strategy, an important
focus for us as we continue to digitise our full banking
platforms:
-- Introducing new features to our mobile banking application
and introducing dedicated digital spaces in our branches. As a
result, the number of active mobile banking users reached 418,155
at 30 June 2019, up 82.6% year-on-year and up 9.4%
quarter-on-quarter;
-- Releasing a brand new business internet banking platform
(Business iBank) for our MSME and corporate clients in 1Q19. As a
result, we already saw a significant increase in the number and
volume of transactions through new Business iBank, up 33.8% and up
11.3% quarter-on-quarter, respectively, in 2Q19;
-- Launching a cutting-edge full-service real estate digital
platform, area.ge, that is unique in doing business in the Georgian
real estate market. This is the first platform to be fully
integrated with the Bank to provide users with a "one-click" live
credit limit appraisal and mortgage application experience; and
-- Acquiring a leading Georgian e-commerce platform, extra.ge,
that facilitates consumer-to-consumer and business-to-consumer
sales through its website and social media channels
From a macro-economic perspective, Georgia's economic
performance remained strong in 2Q19 with an estimated 4.9% growth,
rising reserves and improved external balance. Goods exports,
remittances and tourism all posted increases in the second quarter,
while imports continued to decline. Government infrastructure
spending accelerated, but the fiscal deficit is projected to remain
below 3% of GDP in 2019 reflecting the Government's emphasis on
containing current spending. Annual inflation was 4.3% in June
2019, mostly reflecting the increase in excise tax on tobacco
(excluding this one-off, inflation stood at 3.0%). As recent
increases in inflation have been driven by temporary factors NBG
has maintained its' key rate unchanged. Tighter lending standards
slowed credit growth at 14.2% year-on-year excluding FX effect as
of June 2019, making lending growth more sustainable and with
higher quality. NBG continued to build-up reserves with US$ 30
million FX purchases in the second quarter, and international
reserves increased to US$3.7 billion at 30 June 2019. However,
these purchases, together with some currency speculation following
the cancellation of direct flights from Russia, weakened GEL by
6.6% against the US dollar during the second quarter of 2019.
Notwithstanding these pressures, Georgia's economic resilience
continues to be underpinned by its diversified economic base and
external economic linkages. While the direct Russian flight ban may
slightly reduce Georgia's GDP growth, it is not expected to have
any impact on the performance of the Group.
Whilst individual product loan yields have remained broadly
stable, our increasing focus on lending in the mortgage segment and
to finer margin corporate and SME clients has led to a negative mix
effect on the net interest margin which, when combined with some
competitive pricing pressure, increased minimum reserve
requirements mandated by NBG and the carry-cost of our recent AT1
capital notes issuance, reduced the net interest margin by 40 basis
points quarter-on-quarter to 5.4% in 2Q19. This shift in product
mix, which we expect to continue at a slower rate during the
remainder of 2019, improves asset quality and, particularly in the
case of the mortgage portfolio, reduces the risk-asset and capital
intensity of our lending growth. When we price individual products,
we continue to ensure that we obtain a return on equity in excess
of 20% on that product. In the Retail Banking segment, for example,
the improved capital efficiency of our lending portfolio ensured
that we increased the return on equity despite the net interest
margin falling. Costs throughout the Group remain well-controlled
and increased by 5.5% year-on-year in 1H19 (adjusted for one-off
employee costs related to termination benefits of former CEO and
executive management), reflecting the Bank's continuing investments
in the Agile transformation process and the Bank-wide digital
programmes.
Asset quality continues to be very robust, reflecting our good
lending discipline and the ongoing strength of the economy. The
annualised cost of credit risk ratio in the first half of 2019 was
1.5%, down 20bps year-on-year, broadly reflecting a very strong
performance in the Corporate and Investment Banking business
(annualised cost of credit risk ratio of 0.4%), which offset the
impact of the new regulatory changes in the Retail Banking
(annualised cost of credit risk ratio of 2.0%). The impact of these
recent regulatory changes has now been largely completed, and the
Retail Banking cost of credit risk ratio has now returned to more
normal levels, as expected. As a result, the Group's cost of credit
risk ratio reduced to 1.3% in the second quarter of 2019. The NPLs
to gross loans ratio improved slightly to 3.2% at 30 June 2019, 20
basis points lower than a year ago and 10 basis points lower
quarter-on-quarter. We continue to expect asset quality and credit
metrics to remain strong over the medium-term.
The Retail Bank continues to deliver strong franchise growth and
strong profitability. Customer lending increased by 6.0% during the
second quarter of the year, and by 25.1% over the last 12 months.
On a constant currency basis, the second quarter growth was 3.0%
and the annual growth was 16.7%, at a time when we have been
integrating significant regulatory changes to income verification
procedures, and payment-to-income and loan-to-value ratios targeted
to refocus retail lending towards the high quality secured mortgage
portfolio and micro lending, where we are the most technologically
advanced micro-lender in the country. Mortgage and micro lending
were particularly strong, supported by the strength of the Georgian
economy, growing by 9.2% and 7.4%, respectively, in the second
quarter. Going forward, the Retail Bank's clear focus will continue
to be on capturing the significant growth opportunities in the
mortgage and MSME portfolios. The overall impact of the regulatory
changes has been the reduction of the net interest margin of the
Retail Bank, however, we are now seeing the overall credit risk in
the Retail Banking reducing and leading to a sustainably lower
Retail cost of credit risk ratio. Importantly, however, the capital
efficiency of this portfolio shift remains strong and the Retail
Bank continues to deliver a very strong return on equity - 25.3% in
the first quarter and 26.9% in the second quarter of 2019 (adjusted
for one-off employee costs related to termination benefits of
former CEO and executive management).
The Retail Bank now has almost 2.5 million customers, an
increase of 3.9% over the last 12 months. Our fully transformed,
user-friendly, multi-feature mobile banking application, mBank,
continues to see significant growth in the number of digital
transactions, growing by 22.2% over the last three months alone, to
over 8 million transactions in the second quarter. In addition, we
have now comfortably exceeded our targeted 40,000 Solo clients by
the end of 2018, with almost 50,000 clients now benefiting from
Solo's concierge-style banking proposition.
Corporate and Investment Banking performed particularly strongly
during the first half of 2019. On a constant currency basis,
customer lending in CIB grew by 25.3% year-on-year and by 14.7%
quarter-on-quarter, while the net interest margin remained broadly
stable. This strong performance in CIB was driven by a 21.6%
year-on-year growth in net fee and commission income during the
first half of 2019, and an increase of 20.9% in operating income
year-on-year, that led to 42.7% year-on-year growth in profit
(adjusted for one-off employee costs related to termination
benefits of former CEO and executive management, and other 2018
demerger related costs).
The Group's capital and funding position remains strong, and our
issuance of US$100 million Additional Tier 1 capital notes in March
2019 has improved the efficiency of our capital structure,
introduced a natural hedge against dollarisation in the economy and
built in significant headroom over the fully-loaded Basel III
capital requirements for 2021 that are currently being phased-in.
These Additional Tier 1 capital notes received regulatory approval
in April 2019 and added approximately 230 basis points to our Tier
1 capital ratio. During April 2019, we took the opportunity to
repay US$65 million of Tier 2 capital subordinated debt, and this
will substantially reduce the carry-cost of the new Additional Tier
1 capital notes issuance. In addition, we continue to generate high
levels of internal capital as a result of both the Group's high
return on equity, and the improved risk asset intensity of our
current and expected lending growth. During the half of 2019, the
Bank's NBG (Basel III) Tier 1 capital adequacy ratio increased from
12.2% in December 2018, to 13.3% in June 2019.
Bank of Georgia has an indisputably strong brand and customer
franchise. Having taken over as Chief Executive of the Group during
the first quarter, we have considerably strengthened the executive
management team and we are working together to redefine the Group
with high levels of digitalisation, the use of advanced analytics,
and significantly improved efficiencies and processes to become the
solution-based bank for our entire customer franchise. At the same
time, the Bank has adapted to substantial regulatory change and has
already reset its base for the coming years. We are achieving
significant portfolio growth with continued profitability
comfortably in excess of our targeted 20%+ return on equity level.
With no further material regulatory changes expected, we are well
placed to deliver strong growth over the next few years.
Archil Gachechiladze,
CEO, Bank of Georgia Group PLC
13 August 2019
DISCUSSION OF RESULTS
The Group's business is primarily comprised of three segments.
(1) Retail Banking operations in Georgia principally provides
consumer loans, mortgage loans, overdrafts, credit cards and other
credit facilities, funds transfer and settlement services, and
handling customers' deposits for both individuals as well as legal
entities. Retail Banking targets the emerging retail, mass retail
and mass affluent segments, together with small and medium
enterprises and micro businesses. (2) Corporate and Investment
Banking comprises Corporate Banking and Investment Management
operations in Georgia. Corporate Banking principally provides loans
and other credit facilities, funds transfers and settlement
services, trade finance services, documentary operations support
and handles saving and term deposits for corporate and
institutional customers. The Investment Management business
principally provides private banking services to high net worth
clients. (3) BNB, comprising JSC Belarusky Narodny Bank,
principally provides retail and corporate banking services to
clients in Belarus.
OPERATING INCOME
GEL thousands, unless
otherwise Change Change Change
noted 2Q19 2Q18 y-o-y 1Q19 q-o-q 1H19 1H18 y-o-y
Interest income 342,224 329,880 3.7% 334,735 2.2% 676,959 643,559 5.2%
Interest expense (160,602) (143,298) 12.1% (151,794) 5.8% (312,396) (276,728) 12.9%
Net interest income 181,622 186,582 -2.7% 182,941 -0.7% 364,563 366,831 -0.6%
Fee and commission income 68,025 55,693 22.1% 62,531 8.8% 130,556 106,906 22.1%
Fee and commission expense (24,758) (17,846) 38.7% (20,351) 21.7% (45,109) (34,549) 30.6%
Net fee and commission
income 43,267 37,847 14.3% 42,180 2.6% 85,447 72,357 18.1%
Net foreign currency gain 36,700 25,000 46.8% 30,025 22.2% 66,724 39,252 70.0%
Net other income /
(expense) (4,260) 3,705 NMF 3,568 NMF (691) 9,451 NMF
Operating income 257,329 253,134 1.7% 258,714 -0.5% 516,043 487,891 5.8%
Net interest margin 5.4% 6.9% 5.8% 5.6% 7.0%
Average interest earning
assets 13,504,120 10,817,599 24.8% 12,752,388 5.9% 13,159,460 10,632,795 23.8%
Average interest bearing
liabilities 13,378,168 11,468,106 16.7% 12,717,669 5.2% 13,095,239 11,326,887 15.6%
Average net loans and
finance
lease receivables,
currency
blended 10,004,743 7,998,440 25.1% 9,453,255 5.8% 9,751,614 7,893,403 23.5%
Average net loans and
finance
lease receivables, GEL 3,977,481 3,313,608 20.0% 3,656,912 8.8% 3,825,608 3,199,612 19.6%
Average net loans and
finance
lease receivables, FC 6,027,262 4,684,832 28.7% 5,796,343 4.0% 5,926,006 4,693,791 26.3%
Average client deposits and
notes, currency blended 8,673,526 7,253,758 19.6% 8,278,823 4.8% 8,487,934 7,124,489 19.1%
Average client deposits
and notes, GEL 2,860,563 2,588,111 10.5% 2,718,201 5.2% 2,793,175 2,449,970 14.0%
Average client deposits
and notes, FC 5,812,963 4,665,647 24.6% 5,560,622 4.5% 5,694,759 4,674,519 21.8%
Average liquid assets,
currency
blended 4,528,508 4,349,730 4.1% 4,405,239 2.8% 4,461,800 4,301,382 3.7%
Average liquid assets,
GEL 2,049,163 1,833,260 11.8% 2,066,605 -0.8% 2,065,576 1,830,113 12.9%
Average liquid assets,
FC 2,479,345 2,516,470 -1.5% 2,338,634 6.0% 2,396,224 2,471,269 -3.0%
Liquid assets yield,
currency
blended 3.4% 3.8% 3.8% 3.6% 3.7%
Liquid assets yield, GEL 6.1% 7.0% 6.8% 6.5% 6.9%
Liquid assets yield, FC 1.1% 1.5% 1.1% 1.1% 1.3%
Loan yield, currency
blended 11.8% 14.0% 12.2% 12.0% 13.9%
Loan yield, GEL 17.3% 20.8% 18.4% 17.8% 21.0%
Loan yield, FC 8.2% 9.0% 8.3% 8.2% 9.0%
Cost of funds, currency
blended 4.8% 5.0% 4.8% 4.8% 4.9%
Cost of funds, GEL 6.8% 7.2% 7.0% 6.9% 7.1%
Cost of funds, FC 3.7% 3.7% 3.6% 3.6% 3.6%
Cost / income(6) 38.3% 36.8% 35.5% 36.9% 37.0%
(6) Cost/income ratio is adjusted for GEL 4.6mln in 2Q19 (1Q19:
GEL 7.8mln) and GEL 12.4mln in 1H19 one-off employee costs (gross
of income tax) related to termination benefits of the former
executive management
Performance highlights
-- Solid operating income of GEL 257.3mln in 2Q19 (up 1.7% y-o-y
and down 0.5% q-o-q), ending six months of 2019 with operating
income of GEL 516.0mln (up 5.8% y-o-y). Y-o-y operating income
growth in 2Q19 and 1H19 was primarily driven by strong growth in
net fee and commission income (up 14.3% y-o-y in 2Q19 and up 18.1%
y-o-y in 1H19) and net foreign currency gains (up 46.8% y-o-y in
2Q19 and up 70.0% y-o-y in 1H19), which benefited from a high level
of currency volatility in 2019
-- Our NIM was 5.4% in 2Q19 and 5.6% in 1H19. During second
quarter 2019, NIM was down 150bps y-o-y due to the 220bps y-o-y
decrease in loan yield, largely reflecting competition driven
pricing pressure and our shift towards a higher quality, finer
margin product mix on the back of tighter regulatory conditions for
unsecured consumer lending, partially offset by 20bps y-o-y decline
in cost of funds. On a q-o-q basis, loan yield decreased by 40bps,
while cost of funds remained flat, resulting in 40bps q-o-q decline
in 2Q19 NIM. On a half year basis, loan yield was down by 190bps
y-o-y, while cost of funds decreased by 10bps y-o-y, causing NIM to
decline by 140bps y-o-y. The decline in NIM in all periods
presented was also partially driven by the increased minimum
reserve requirements mandated by NBG as discussed in more details
below
-- Loan yield. Currency blended loan yield was 11.8% in 2Q19
(down 220bps y-o-y and down 40bps q-o-q) and 12.0% in the first
half of 2019 (down 190bps y-o-y). The y-o-y and q-o-q decline in
loan yields during the second quarter and first half of 2019 was
attributable to a decrease in both local and foreign currency loan
yields, which primarily reflected the change in product mix in our
loan portfolio and competition driven pricing pressure on the
market
-- Liquid assets yield. Our liquid assets yield was 3.4% in 2Q19
(down 40bps y-o-y and q-o-q) and 3.6% in 1H19 (down 10bps y-o-y).
The main contributor to y-o-y declining trend in both periods was
decrease in foreign currency denominated liquid assets yields (down
40bps y-o-y in 2Q19 and down 20bps y-o-y in 1H19), reflecting a)
increase in obligatory reserves with NBG, primarily driven by the
changes in minimum reserve requirements mandated by NBG since
September 2018, whereby the foreign currency funds raised by local
banks carried up to 25% reserve requirement depending on maturity,
and further increase of this requirement up to 30% since May 2019;
b) starting from 12 July 2018, NBG reduced interest rates on
foreign currency obligatory reserves (from US Fed rate minus 50bps
to Fed rate minus 200bps, floored at zero for US Dollar reserves,
and from ECB rate minus 20bps to ECB rate minus 200bps, floored at
negative 60bps for EUR denominated reserves)
-- Cost of funds. Cost of funds stood at 4.8% both in 2Q19 (down
20bps y-o-y and flat q-o-q) and in 1H19 (down 10bps y-o-y). Y-o-y
decline in cost of funds in 2Q19 and 1H19 was primarily on the back
of decline in the cost of client deposits and notes (down 30bps
y-o-y in 2Q19 and down 20bps y-o-y in 1H19), which represented
63.5% of total interest-bearing liabilities. This decline offset
the 40bps and 10bps y-o-y increase in cost of debt securities
issued in 2Q19 and 1H19, respectively, as a result of the issuance
of our inaugural US$ 100 million Additional Tier 1 capital
perpetual subordinated notes at the end of March 2019. On q-o-q
basis, the cost of funds remained flat, driven by lower cost of
amounts due to credit institutions on the back of repayment of US$
65mln subordinated debt in April 2019, coupled with decrease in
Libor and NBG monetary policy rates, and offset by increased cost
of debt securities issued as a result of issuance of the above
mentioned Additional Tier 1 capital subordinated notes
-- Net fee and commission income. Net fee and commission income
reached GEL 43.3mln in 2Q19 (up 14.3% y-o-y and up 2.6% q-o-q) and
GEL 85.4mln in 1H19 (up 18.1% y-o-y). Y-o-y growth was mainly
driven by the strong performance in our settlement operations
supported by the success of our Retail Banking franchise and a
strong increase in fees and commission income from guarantees and
letters of credit issued by the Corporate and Investment Banking
business
-- Net foreign currency gain. Net foreign currency gain was up
46.8% y-o-y and up 22.2% q-o-q in 2Q19, and up 70.0% y-o-y in 1H19,
primarily due to increased client-driven flows, as well as a high
level of currency volatility during first and second quarters of
2019
-- Net other income. Significant y-o-y decline in net other
income in 1H19 was largely driven by net losses from derivative
financial instruments (interest rate swap hedges) recorded during
the first and second quarters of 2019, partially offset by net
gains from investment securities during the same period
NET OPERATING INCOME BEFORE NON-RECURRING ITEMS; COST OF RISK; PROFIT
FOR THE PERIOD
GEL thousands, unless
otherwise Change Change Change
noted (7) 2Q19 2Q18 y-o-y 1Q19 q-o-q 1H19 1H18 y-o-y
Salaries and other employee
benefits (57,982) (53,925) 7.5% (52,418) 10.6% (110,399) (103,378) 6.8%
Administrative expenses (22,033) (26,862) -18.0% (22,741) -3.1% (44,774) (52,495) -14.7%
Depreciation and amortisation (17,295) (11,392) 51.8% (15,688) 10.2% (32,983) (22,914) 43.9%
Other operating expenses (1,248) (965) 29.3% (1,080) 15.6% (2,329) (1,736) 34.2%
Operating expenses (98,558) (93,144) 5.8% (91,927) 7.2% (190,485) (180,523) 5.5%
Profit from associate 254 376 -32.4% 188 35.1% 442 695 -36.4%
Operating income before
cost of risk 159,025 160,366 -0.8% 166,975 -4.8% 326,000 308,063 5.8%
Expected credit loss /
impairment
charge on loans to customers (32,436) (33,534) -3.3% (40,117) -19.1% (72,553) (70,211) 3.3%
Expected credit loss /
impairment
charge on finance lease
receivables (557) (266) 109.4% (446) 24.9% (1,003) (253) NMF
Other expected credit loss
/ impairment charge on other
assets and provisions (2,483) (3,726) -33.4% (2,089) 18.9% (4,573) (876) NMF
Cost of risk (35,476) (37,526) -5.5% (42,652) -16.8% (78,129) (71,340) 9.5%
Net operating income before
non-recurring items 123,549 122,840 0.6% 124,323 -0.6% 247,871 236,723 4.7%
Net non-recurring items (2,538) (13,763) -81.6% (1,575) 61.1% (4,112) (16,711) -75.4%
Profit before income tax
expense and one-off costs 121,011 109,077 10.9% 122,748 -1.4% 243,759 220,012 10.8%
Income tax expense (9,871) (5,461) 80.8% (10,536) -6.3% (20,407) (14,744) 38.4%
Profit adjusted for one-off
costs 111,140 103,616 7.3% 112,212 -1.0% 223,352 205,268 8.8%
One-off termination costs
of former CEO and executive
management (after tax),
one-off demerger related
expenses (after tax) and
one-off impact of
re-measurement
of deferred tax balances (3,996) (52,541) -92.4% (10,240) -61.0% (14,236) (52,541) -72.9%
Profit 107,144 51,075 109.8% 101,972 5.1% 209,116 152,727 36.9%
(7) The adjusted profit in the table excludes GEL 4.0mln in 2Q19
(1Q19: GEL 10.2mln) and GEL 14.2mln in 1H19 one-off employee costs
(net of income tax) related to the former CEO and executive
management termination benefits. The amount is comprised of GEL
4.6mln in 2Q19 (1Q19: GEL 7.8mln) and GEL 12.4mln in 1H19 (gross of
income tax) excluded from salaries and other employee benefits and
GEL 4.0mln (gross of income tax) excluded from non-recurring items
in 1Q19 and 1H19. The income statement adjusted profit for 2Q18 and
1H18 excludes GEL 52.5mln demerger related expenses (net of income
tax) and one-off impact of re-measurement of deferred tax
balances
-- Operating expenses adjusted for one-off employee costs
related to termination benefits of former executive management
members (acceleration of share-based compensation) were GEL 98.6mln
in 2Q19 (up 5.8% y-o-y and up 7.2% q-o-q) and GEL 190.5mln in 1H19
(up 5.5% y-o-y), driving the negative operating leverage of 4.2%
y-o-y and 7.7% q-o-q in 2Q19. The q-o-q increase in operating
expenses was primarily driven by higher salaries and other employee
benefits as a result of our increased investment in IT related
resources as part of the Agile transformation process and focus on
digitalisation
-- The decline in administrative expenses and increase in
depreciation and amortisation expenses is primarily driven by
adoption of a new standard IFRS 16, Leases replacing IAS 17, Leases
effective 1 January 2019. As a result of the adoption of the
standard the Group recorded on its balance sheet assets related to
the right to use the rented properties together with corresponding
liabilities for respective payments under the lease contracts.
There was no material impact on overall operating expenses in 1Q19
and 2Q19
-- Improved asset quality. The cost of credit risk ratio was
1.3% in 2Q19 (down 30bps y-o-y and down 40bps q-o-q) and 1.5% in
the first half of 2019 (down 20bps y-o-y). RB's cost of credit risk
ratio was 1.6% in 2Q19 (down 40bps y-o-y and down 80bps q-o-q) and
2.0% in 1H19 (down 10bps y-o-y), while CIB's cost of credit risk
ratio was 0.7% in 2Q19 (up 10bps y-o-y and up 60bps q-o-q) and 0.4%
in 1H19 (down 60bps y-o-y). The y-o-y and q-o-q decrease in RB's
cost of credit risk ratio reflected improved loan portfolio quality
due to our increasing focus on lending in the mortgage segment and
to finer margin SME clients
-- Quality of our loan book remained strong in 2Q19 as evidenced
by the following closely monitored metrics:
GEL thousands, unless otherwise noted Jun-19 Jun-18 Change Mar-19 Change
y-o-y q-o-q
Non-performing loans
NPLs 347,285 283,768 22.4% 326,127 6.5%
NPLs to gross loans 3.2% 3.4% 3.3%
NPLs to gross loans, RB 2.1% 2.1% 2.2%
NPLs to gross loans, CIB 5.3% 4.8% 5.7%
NPL coverage ratio 88.1% 99.4% 92.2%
NPL coverage ratio adjusted for the
discounted value of collateral 131.5% 142.8% 132.6%
Past due dates
Retail loans - 15 days past due rate 1.5% 1.6% 1.3%
Mortgage loans - 15 days past due
rate 1.4% 1.0% 1.1%
-- BNB - the Group's banking subsidiary in Belarus - continues
to remain strongly capitalised, with capital adequacy ratios well
above the requirements of the National Bank of the Republic of
Belarus ("NBRB"). At 30 June 2019, total capital adequacy ratio was
15.7%, above the 10% minimum requirement, while Tier I capital
adequacy ratio was 9.8%, above NBRB's 7% minimum requirement. ROAE
was 9.8% in 2Q19 (10.8% in 2Q18 and 12.1% in 1Q19) and 10.8% in
1H19 (11.5% in 1H18). For detailed financial results of BNB, please
see page 22
-- Net non-recurring items. Net non-recurring expenses adjusted
for one-off costs amounted to GEL 2.5mln in 2Q19 (GEL 13.8mln in
2Q18 and GEL 1.6mln in 1Q19) and GEL 4.1mln in 1H19 (GEL 16.7mln in
1H18), largely reflecting legal fees incurred during first and
second quarter of 2019
-- Overall, profit adjusted for one-off costs totalled GEL
111.1mln in 2Q19 (up 7.3% y-o-y and down 1.0% q-o-q), and GEL
223.4mln in the first half of 2019 (up 8.8% y-o-y), while ROAE(8)
was 22.9% in 2Q19 (25.4% in 2Q18 and 24.5% in 1Q19) and 23.7% in
1H19 (25.7% in 1H18)
(8) ROAE adjusted for GEL 4.0mln in 2Q19 (1Q19: GEL 10.2mln) and
GEL 14.2mln in 1H19 one-off employee costs (net of income tax)
related to termination benefits of the former CEO and executive
management. 2Q18 and 1H18 ROAE adjusted for GEL 52.5mln demerger
related expenses (net of income tax) and one-off impact of
re-measurement of deferred tax balances
BALANCE SHEET HIGHLIGHTS
GEL thousands, unless otherwise Jun-19 Jun-18 Change Mar-19 Change
noted y-o-y q-o-q
Liquid assets 4,537,545 4,266,417 6.4% 4,502,390 0.8%
Liquid assets, GEL 2,092,757 1,969,843 6.2% 2,005,142 4.4%
Liquid assets, FC 2,444,788 2,296,574 6.5% 2,497,248 -2.1%
Net loans and finance lease receivables 10,579,710 8,108,647 30.5% 9,570,691 10.5%
Net loans and finance lease receivables,
GEL 4,217,713 3,378,450 24.8% 3,758,320 12.2%
Net loans and finance lease receivables,
FC 6,361,997 4,730,197 34.5% 5,812,371 9.5%
Client deposits and notes 8,855,616 7,174,234 23.4% 8,393,861 5.5%
Amounts due to credit institutions 2,960,519 2,740,595 8.0% 2,463,408 20.2%
Borrowings from DFIs 1,253,921 1,161,120 8.0% 1,309,976 -4.3%
Short-term loans from central banks 1,001,496 556,834 79.9% 585,797 71.0%
Loans and deposits from commercial
banks 705,102 1,022,641 -31.1% 567,635 24.2%
Debt securities issued 2,137,239 1,527,452 39.9% 2,045,428 4.5%
Liquidity and CAR ratios
Net loans / client deposits and
notes 119.5% 113.0% 114.0%
Net loans / client deposits and
notes + DFIs 104.7% 97.3% 98.6%
Liquid assets / total assets 28.1% 32.2% 29.9%
Liquid assets / total liabilities 31.9% 36.9% 34.3%
NBG liquidity ratio 37.0% 30.2% 36.7%
NBG liquidity coverage ratio 114.3% 129.8% 133.1%
NBG (Basel III) Tier I capital adequacy
ratio 13.3% 12.5% 12.7%
NBG (Basel III) Total capital adequacy
ratio 16.7% 17.5% 17.1%
Our balance sheet remains highly liquid (NBG liquidity coverage
ratio of 114.3%) and strongly capitalised (NBG Basel III Tier I
capital adequacy ratio of 13.3%) with a well-diversified funding
base (client deposits and notes to total liabilities of 62.3%).
-- Liquidity. Liquid assets stood at GEL 4,537.5mln at 30 June
2019, up 6.4% y-o-y and up 0.8% q-o-q. The notable increase over
the year was in obligatory reserves with NBG, combined with excess
liquidity deployed with the credit institutions, NBG and Ministry
of Finance. Increase in obligatory reserves with NBG was primarily
driven by the changes in minimum reserve requirements mandated by
NBG since September 2018, whereby the foreign currency funds raised
by local banks carried up to 25% reserve requirement depending on
maturity. The reserve requirement on foreign currency funds was
further increased up to 30% depending on maturity starting from the
end of May 2019. The NBG Liquidity coverage ratio was 114.3% at 30
June 2019 (129.8% at 30 June 2018 and 133.1% at 31 March 2019),
well above the 100% minimum requirement level
-- Loan book. Our net loan book and finance lease receivables
reached GEL 10,579.7mln at 30 June 2019, up 30.5% y-o-y and up
10.5% q-o-q. As of 30 June 2019, the retail loan book represented
67.2% of the total loan portfolio (70.3% at 30 June 2018 and 70.0%
at 31 March 2019). Both local and foreign currency portfolios
experienced strong y-o-y growth of 24.8% and 34.5%, respectively.
Furthermore, local currency denominated loan portfolio was up 12.2%
q-o-q, while foreign currency denominated loan book grew by 9.5%
q-o-q. The local currency loan portfolio growth was partially
driven by the Government's de-dollarisation initiatives and our
goal to increase the share of local currency loans in our
portfolio
-- Dollarisation of our loan book and client deposits. The
retail client loan book in foreign currency accounted for 45.9% of
the total RB loan book at 30 June 2019 (46.0% at 30 June 2018 and
48.6% at 31 March 2019), while retail client foreign currency
deposits comprised 68.8% of total RB deposits at 30 June 2019
(70.6% at 30 June 2018 and 69.4% at 31 March 2019). At 30 June
2019, 83.6% of CIB's loan book was denominated in foreign currency
(80.2% at 30 June 2018 and 83.0% at 31 March 2019), while 63.2% of
CIB deposits were denominated in foreign currency (50.7% at 30 June
2018 and 60.2% at 31 March 2019). De-dollarisation of loans and
deposits is expected to pick-up pace as a result of the recent
NBG-mandated increase of local currency loan threshold from GEL
100,000 to GEL 200,000 from 1 January 2019 and increased mandatory
reserve requirements on funds attracted in foreign currency
introduced by NBG since May 2019
-- Net loans to customer funds and DFI ratio. Our net loans to
customer funds and DFI ratio, which is closely monitored by
management, remained strong at 104.7% at 30 June 2019 (up from
97.3% at 30 June 2018 and up from 98.6% at 31 March 2019)
-- Diversified funding base. Debt securities issued grew by
39.9% y-o-y and by 4.5% q-o-q at 30 June 2019. The y-o-y increase
was primarily driven by the issuance of US$ 100 million Additional
Tier 1 capital notes in March 2019 (see details below)
-- Capital Adequacy requirements. Basel III Tier 1 and Total
capital adequacy ratios stood at 13.3% and 16.7%, respectively, as
of 30 June 2019 compared to a minimum required level of 11.6% and
16.1%, respectively. At the same time, Common Equity Tier 1 (CET1)
ratio stood at 11.0% compared to a 9.6% minimum requirement at 30
June 2019. In March 2019, the Bank issued inaugural US$ 100 million
11.125% Additional Tier 1 capital perpetual subordinated notes
callable after 5.25 years and on every subsequent interest payment
date, subject to prior consent of the National Bank of Georgia at
an issue price of 100.00% (the "Notes"). The Notes are listed on
the Irish Stock Exchange and rated B- (Fitch). The issuance was the
first international offering of Additional Tier 1 Capital Notes
from Georgia and the South Caucasus region. Basel III regulations
recently introduced in Georgia now enable this type of capital
optimisation and this US Dollar issue provides the Bank with an
opportunity to diversify its capital structure from a foreign
currency perspective and provides a natural hedge against
dollarisation in the economy. The regulatory approval on the
classification of the Notes as Additional Tier 1 instruments was
received in April 2019
DISCUSSION OF SEGMENT RESULTS
RETAIL BANKING (RB)
Retail Banking provides consumer loans, mortgage loans,
overdrafts, credit card facilities and other credit facilities as
well as funds transfer and settlement services and the handling of
customer deposits for both individuals and legal entities (SME and
micro businesses only). RB is represented by the following four
sub-segments: (1) the emerging retail segment (through our Express
brand), (2) retail mass market segment; (3) SME and micro
businesses - "MSME" (through our Bank of Georgia brand), and (4)
the mass affluent segment (through our Solo brand).
GEL thousands, unless
otherwise Change Change Change
noted 2Q19 2Q18 y-o-y 1Q19 q-o-q 1H19 1H18 y-o-y
INCOME STATEMENT
HIGHLIGHTS(9)
Net interest income 128,167 138,485 -7.5% 130,987 -2.2% 259,154 273,938 -5.4%
Net fee and commission
income 34,605 29,153 18.7% 32,435 6.7% 67,039 55,292 21.2%
Net foreign currency gain 18,070 10,581 70.8% 13,240 36.5% 31,309 14,929 109.7%
Net other income / (expense) (3,753) 1,664 NMF 2,168 NMF (1,582) 4,770 NMF
Operating income 177,089 179,883 -1.6% 178,830 -1.0% 355,920 348,929 2.0%
Salaries and other employee
benefits (36,691) (34,639) 5.9% (33,874) 8.3% (70,564) (66,752) 5.7%
Administrative expenses (14,992) (20,544) -27.0% (15,796) -5.1% (30,788) (40,084) -23.2%
Depreciation and
amortisation (14,492) (9,818) 47.6% (13,287) 9.1% (27,779) (19,720) 40.9%
Other operating expenses (753) (602) 25.1% (536) 40.5% (1,290) (1,105) 16.7%
Operating expenses (66,928) (65,603) 2.0% (63,493) 5.4% (130,421) (127,661) 2.2%
Profit from associate 254 376 -32.4% 188 35.1% 442 695 -36.4%
Operating income before cost
of risk 110,415 114,656 -3.7% 115,525 -4.4% 225,941 221,963 1.8%
Cost of risk (26,542) (29,618) -10.4% (39,386) -32.6% (65,930) (58,072) 13.5%
Net operating income before
non-recurring items 83,873 85,038 -1.4% 76,139 10.2% 160,011 163,891 -2.4%
Net non-recurring items (64) (8,829) -99.3% (276) -76.8% (339) (10,803) -96.9%
Profit before income tax
expense and one-off costs 83,809 76,209 10.0% 75,863 10.5% 159,672 153,088 4.3%
Income tax expense (6,323) (3,173) 99.3% (6,101) 3.6% (12,425) (9,236) 34.5%
Profit adjusted for one-off
costs 77,486 73,036 6.1% 69,762 11.1% 147,247 143,852 2.4%
One-off termination costs
of former CEO and executive
management (after tax),
one-off
demerger related expenses
(after tax) and one-off
impact
of re-measurement of
deferred
tax balances (3,067) (33,544) -90.9% (7,075) -56.7% (10,142) (33,544) -69.8%
Profit 74,419 39,492 88.4% 62,687 18.7% 137,105 110,308 24.3%
BALANCE SHEET HIGHLIGHTS
Net loans, currency blended 6,771,223 5,414,566 25.1% 6,389,631 6.0% 6,771,223 5,414,566 25.1%
Net loans, GEL 3,661,673 2,923,737 25.2% 3,286,042 11.4% 3,661,673 2,923,737 25.2%
Net loans, FC 3,109,550 2,490,829 24.8% 3,103,589 0.2% 3,109,550 2,490,829 24.8%
Client deposits, currency
blended 4,987,611 3,479,938 43.3% 4,520,521 10.3% 4,987,611 3,479,938 43.3%
Client deposits, GEL 1,553,653 1,021,776 52.1% 1,385,451 12.1% 1,553,653 1,021,776 52.1%
Client deposits, FC 3,433,958 2,458,162 39.7% 3,135,070 9.5% 3,433,958 2,458,162 39.7%
of which:
Time deposits, currency
blended 2,866,525 1,952,610 46.8% 2,593,744 10.5% 2,866,525 1,952,610 46.8%
Time deposits, GEL 704,286 437,120 61.1% 637,522 10.5% 704,286 437,120 61.1%
Time deposits, FC 2,162,239 1,515,490 42.7% 1,956,222 10.5% 2,162,239 1,515,490 42.7%
Current accounts and demand
deposits, currency blended 2,121,086 1,527,328 38.9% 1,926,777 10.1% 2,121,086 1,527,328 38.9%
Current accounts and demand
deposits, GEL 849,367 584,656 45.3% 747,929 13.6% 849,367 584,656 45.3%
Current accounts and demand
deposits, FC 1,271,719 942,672 34.9% 1,178,848 7.9% 1,271,719 942,672 34.9%
KEY RATIOS
ROAE(9) 26.9% 30.6% 25.3% 26.2% 31.1%
Net interest margin,
currency
blended 5.9% 7.9% 6.4% 6.1% 8.1%
Cost of credit risk ratio 1.6% 2.0% 2.4% 2.0% 2.1%
Cost of funds, currency
blended 5.3% 5.9% 5.6% 5.4% 5.9%
Loan yield, currency blended 12.9% 15.7% 13.6% 13.2% 15.8%
Loan yield, GEL 17.7% 22.0% 19.3% 18.4% 22.2%
Loan yield, FC 7.3% 8.2% 7.7% 7.5% 8.3%
Cost of deposits, currency
blended 3.0% 2.9% 3.0% 3.0% 2.9%
Cost of deposits, GEL 5.2% 4.9% 5.2% 5.2% 4.8%
Cost of deposits, FC 2.1% 2.1% 2.1% 2.1% 2.1%
Cost of time deposits,
currency
blended 4.3% 4.2% 4.3% 4.3% 4.2%
Cost of time deposits, GEL 8.7% 8.7% 8.8% 8.7% 8.8%
Cost of time deposits, FC 2.9% 3.0% 2.9% 2.9% 3.0%
Current accounts and demand
deposits, currency blended 1.4% 1.1% 1.3% 1.3% 1.1%
Current accounts and demand
deposits, GEL 2.3% 2.0% 2.2% 2.2% 1.9%
Current accounts and demand
deposits, FC 0.8% 0.6% 0.7% 0.7% 0.6%
Cost / income ratio(10) 37.8% 36.5% 35.5% 36.6% 36.6%
(9) The income statement adjusted profit excludes GEL 3.1mln in
2Q19 (1Q19: GEL 7.1mln) and GEL 10.1mln in 1H19 one-off employee
costs (net of income tax) related to the former CEO and executive
management termination benefits. The amount is comprised of GEL
3.5mln in 2Q19 (1Q19: GEL 5.2mln) and GEL 8.6mln in 1H19 (gross of
income tax) excluded from salaries and other employee benefits and
GEL 2.9mln (gross of income tax) excluded from non-recurring items
in 1Q19 and 1H19. The income statement adjusted profit for 2Q18 and
1H18 excludes GEL 33.5mln demerger related expenses (net of income
tax) and one-off impact of re-measurement of deferred tax balances.
The ROAE has been adjusted accordingly for all respective periods
presented
(10) Cost/income ratio adjusted for GEL 3.5mln in 2Q19 (1Q19:
GEL 5.2mln) and GEL 8.6mln in 1H19 one-off employee costs (gross of
income tax) related to termination benefits of the former executive
management
Performance highlights
-- Retail Banking delivered solid quarterly results in each of
its major segments and generated operating income of GEL 177.1mln
in 2Q19 (down 1.6% y-o-y and down 1.0% q-o-q) and GEL 355.9mln in
1H19 (up 2.0% y-o-y)
-- RB's net interest income was down 7.5% y-o-y and down 2.2%
q-o-q in 2Q19, and down 5.4% y-o-y in 1H19, largely as a result of
the regulations introduced by the National Bank of Georgia on
consumer lending in 2018. Net interest income still benefits from
the growth of the local currency loan portfolio, which generated
10.4ppts and 10.9ppts higher yields than the foreign currency loan
portfolio in 2Q19 and 1H19, respectively
-- The Retail Banking net loan book reached GEL 6,771.2mln in
2Q19, up 25.1% y-o-y and up 6.0% q-o-q. On a constant currency
basis our retail loan book increased by 16.7% y-o-y and by 3.0%
q-o-q in 2Q19. Our local currency denominated loan book increased
by 25.2% y-o-y and by 11.4% q-o-q, while the foreign currency
denominated loan book grew by 24.8% y-o-y and was by 0.2% q-o-q. As
a result, the local currency denominated loan book accounted for
54.1% of the total Retail Banking loan book at 30 June 2019 (54.0%
at 30 June 2018 and 51.4% at 31 March 2019)
-- The loan portfolio composition reflects the shift towards a
higher quality, finer margin product mix on the back of tighter
lending conditions for unsecured consumer lending. The y-o-y and
q-o-q loan book growth reflected continued strong loan origination
levels in MSME and mortgage segments:
Retail Banking loan book by products
GEL million, unless otherwise Change Change Change
noted 2Q19 2Q18 y-o-y 1Q19 q-o-q 1H19 1H18 y-o-y
Loan originations
Consumer loans 407.6 346.5 17.6% 306.5 33.0% 714.0 710.6 0.5%
Mortgage loans 452.8 349.7 29.5% 209.5 116.1% 662.3 653.0 1.4%
Micro loans 323.4 248.5 30.2% 287.0 12.7% 610.5 532.1 14.7%
SME loans 239.4 152.7 56.8% 214.5 11.6% 453.9 283.6 60.1%
POS loans 18.4 30.9 -40.5% 14.5 27.3% 32.9 81.1 -59.4%
Outstanding balance
Consumer loans 1,447.5 1,322.1 9.5% 1,381.5 4.8% 1,447.5 1,322.1 9.5%
Mortgage loans 2,814.8 1,931.3 45.7% 2,578.5 9.2% 2,814.8 1,931.3 45.7%
Micro loans 1,408.4 1,144.6 23.0% 1,310.8 7.4% 1,408.4 1,144.6 23.0%
SME loans 795.7 631.9 25.9% 795.8 0.0% 795.7 631.9 25.9%
POS loans 38.2 92.8 -58.8% 44.4 -13.8% 38.2 92.8 -58.8%
-- Retail Banking client deposits increased to GEL 4,987.6mln,
up 43.3% y-o-y and up 10.3% q-o-q. The dollarisation level of our
deposits decreased to 68.8% at 30 June 2019 from 70.6% at 30 June
2018 and from 69.4% at 31 March 2019. The cost of foreign currency
denominated deposits stood at 2.1% in 2Q19 and in 1H19, flat both
y-o-y and q-o-q. The cost of local currency denominated deposits
increased by 30bps y-o-y and was flat q-o-q in 2Q19 and increased
by 40bps y-o-y in 1H19. The spread between the cost of RB's client
deposits in GEL and foreign currency widened to 3.1ppts during 2Q19
(GEL: 5.2%; FC: 2.1%) compared to 2.8ppts in 2Q18 (GEL: 4.9%; FC:
2.1%) and 3.1ppts in 1Q19 (GEL: 5.2%; FC: 2.1%). On a half year
basis, the spread was 3.1ppts in 1H19 (GEL: 5.2%; FC: 2.1%)
compared to 2.7ppts in 1H18 (GEL: 4.8%; FC: 2.1%). Local currency
denominated deposits increased at a faster pace to GEL 1,553.7mln
(up 52.1% y-o-y and up 12.1% q-o-q), as compared to foreign
currency denominated deposits that grew to GEL 3,434.0mln (up 39.7%
y-o-y and up 9.5% q-o-q)
-- Retail Banking NIM was 5.9% in 2Q19 (down 200bps y-o-y and
down 50bps q-o-q) and 6.1% in 1H19 (down 200bps y-o-y). The decline
in NIM was attributable to lower loan yields (down 280bps y-o-y and
down 70bps q-o-q in 2Q19 and down 260bps y-o-y in 1H19), mainly
driven by the change in the Retail Banking loan portfolio product
mix, with the lower yield-lower risk products share increasing in
total RB loan portfolio. Meanwhile, the cost of funds decreased by
60bps y-o-y and by 30bps q-o-q in 2Q19 and by 50bps y-o-y in 1H19,
primarily on the back of decrease in Libor and NBG monetary policy
rates
-- Strong growth in Retail Banking net fee and commission
income. The strong growth in net fee and commission income during
all reported periods was driven by an increase in settlement
operations and the strong underlying growth in our Solo, mass
retail and MSME segments
-- RB's asset quality improved in 2Q19 reflecting our increasing
focus on lending in the mortgage segment and to finer margin SME
clients. Cost of credit risk ratio was 1.6% in 2Q19 (down from 2.0%
in 2Q18 and from 2.4% in 1Q19) and 2.0% in 1H19 (down from 2.1% in
1H18)
-- Our Retail Banking business continued to deliver solid growth
as we further develop our strategy towards continuous
digitalisation, as demonstrated by the following performance
indicators:
Retail Banking performance indicators
Volume information in Change Change Change
GEL thousands 2Q19 2Q18 y-o-y 1Q19 q-o-q 1H19 1H18 y-o-y
Retail Banking
customers
Number of new customers 41,175 45,213 -8.9% 39,845 3.3% 81,020 108,834 -25.6%
Number of customers 2,475,292 2,382,139 3.9% 2,454,678 0.8% 2,475,292 2,382,139 3.9%
Cards
Number of cards issued 183,106 191,552 -4.4% 176,085 4.0% 359,191 437,690 -17.9%
Number of cards
outstanding 2,122,006 2,235,122 -5.1% 2,139,239 -0.8% 2,122,006 2,235,122 -5.1%
Express Pay terminals
Number of Express Pay
terminals 3,177 2,955 7.5% 3,152 0.8% 3,177 2,955 7.5%
Number of transactions
via Express Pay
terminals 27,499,428 27,479,192 0.1% 26,751,138 2.8% 54,250,566 53,314,273 1.8%
Volume of transactions
via Express Pay
terminals 1,951,441 1,639,313 19.0% 1,765,536 10.5% 3,716,977 3,135,482 18.5%
POS terminals
Number of desks 14,026 9,304 50.8% 12,766 9.9% 14,026 9,304 50.8%
Number of contracted
merchants 6,832 5,382 26.9% 5,902 15.8% 6,832 5,382 26.9%
Number of POS
terminals(11) 19,667 12,815 53.5% 17,684 11.2% 19,667 12,815 53.5%
Number of transactions
via POS terminals 20,805,141 15,737,715 32.2% 16,529,540 25.9% 37,334,681 28,944,587 29.0%
Volume of transactions
via POS terminals 617,763 470,194 31.4% 488,198 26.5% 1,105,961 865,294 27.8%
Internet banking
Number of active
users(12) 268,357 243,377 10.3% 277,960 -3.5% 268,357 243,377 10.3%
Number of transactions
via internet bank 1,338,941 1,446,014 -7.4% 1,421,135 -5.8% 2,760,076 2,933,076 -5.9%
Volume of transactions
via internet bank 557,660 451,944 23.4% 490,457 13.7% 1,048,117 878,958 19.2%
Mobile banking
Number of active
users(12) 418,155 228,980 82.6% 382,152 9.4% 418,155 228,980 82.6%
Number of transactions
via mobile bank 8,182,306 3,233,287 153.1% 6,697,926 22.2% 14,880,232 6,051,094 145.9%
Volume of transactions
via mobile bank 1,025,298 407,822 151.4% 790,201 29.8% 1,815,498 725,203 150.3%
- Growth in the client base was due to the increased offering of
cost-effective remote channels. The increase to 2,475,292 customers
in 2Q19 (up 3.9% y-o-y and up 0.8% q-o-q) reflects sustained growth
in our client base over recent periods and was one of the drivers
of the increase in our Retail Banking net fee and commission
income
- The number of outstanding cards decreased by 5.1% y-o-y and by
0.8% q-o-q in 2Q19 primarily due to Express cards which have been
declining in line with the recently introduced regulations on
consumer lending. Excluding the Express cards, total number of
cards outstanding as at 30 June 2019 increased by 19.2% y-o-y and
5.2% q-o-q. The number of Loyalty programme Plus+ cards, launched
in July 2017 as part of RB's client-centric approach, reached
721,700 as at 30 June 2019, up 58.7% y-o-y and up 10.9% q-o-q
- The utilisation of Express Pay terminals continued to grow in
2Q19. The volume of transactions increased by 19.0% y-o-y and by
10.5% q-o-q in 2Q19 and increased by 18.5% y-o-y in 1H19, while
number of transactions increased by 0.1% y-o-y and by 2.8% q-o-q in
2Q19 and increased by 1.8% y-o-y in 1H19. The fees charged to
clients for transactions executed through express pay terminals
amounted to GEL 5.6mln in 2Q19 (up 1.3% y-o-y and down 1.8% q-o-q)
and GEL 11.2mln in 1H19 (up 4.9% y-o-y)
- Digital penetration growth. For our mobile banking
application, mbank, the number of transactions (up 153.1% y-o-y and
up 22.2% q-o-q in 2Q19 and up 145.9% y-o-y in 1H19) and the volume
of transactions (up 151.4% y-o-y and up 29.8% q-o-q in 2Q19 and up
150.3% y-o-y in 1H19) continue to show outstanding growth. Since
its launch on 29 May 2017, 869,631 downloads have been made by the
Bank's customers. During the same period approximately 34.0 million
transactions were performed using the application
- Significant growth in loans issued and deposits opened through
Internet and Mobile Bank. In 2017, we started actively offering
loans and deposit products to our customers through the Internet
Bank. In 2Q19, 5,814 loans were issued with a total value of GEL
8.8mln, and 3,447 deposits were opened with a total value of GEL
7.0mln through Internet Bank. Starting from 2018, our customers
have been able to apply for a loan via mBank as well. In 2Q19,
16,385 loans were issued with a total value of GEL 18.4mln using
the mobile banking application. Moreover, in 3Q18 a new feature was
added to mBank and our customers can now open a deposit via our
mobile platform. During second quarter 2019, 8,782 deposit accounts
were opened with a total deposited amount of GEL 7.9mln. As a
result, around 93% of total daily banking transactions were
executed through digital channels during 2Q19 and 1H19
-- Solo, our premium banking brand, continues its strong growth
and investment in its lifestyle brand. We have now 12 Solo lounges,
of which 9 are located in Tbilisi, the capital of Georgia, and 3 in
major regional cities of Georgia. The number of Solo clients
reached 48,953 at 30 June 2019 (39,030 at 30 June 2018 and 47,057
at 31 March 2019). Solo is targeting doubling profit in 3 years to
GEL 112mln through excellence in customer service, higher
digitalisation and tailor-made bundled offering. In 2Q19, the
product to client ratio for the Solo segment was 5.3, compared to
2.1 for our retail franchise. While Solo clients currently
represent 2.0% of our total retail client base, they contributed
29.7% to our retail loan book, 39.4% to our retail deposits, 18.5%
and 22.8% to our net retail interest income and to our net retail
fee and commission income in 2Q19, respectively. The fee and
commission income from the Solo segment reached GEL 6.6mln in 2Q19
(GEL 5.5mln in 2Q18 and GEL 5.8mln in 1Q19) and GEL 12.4mln in 1H19
(GEL 10.0mln in 1H18). Solo Club, launched in 2Q17, a membership
group within Solo which offers exclusive access to Solo products
and offers ahead of other Solo clients at a higher fee, continued
to increase its client base. At 30 June 2019, Solo Club had 4,805
members, up 49.3% y-o-y and up 8.1% q-o-q
-- MSME banking delivered strong growth. The number of MSME
segment clients reached 217,913 at 30 June 2019, up 19.8% y-o-y and
up 4.9% q-o-q. MSME's loan portfolio reached GEL 2,376.7mln at 30
June 2019 (up 25.4% y-o-y and up 4.2% q-o-q) and client deposits
and notes increased to GEL 713.0mln (up 47.8% y-o-y and up 4.5%
q-o-q). The MSME segment generated operating income of GEL 49.9mln
in 2Q19 (up 32.4% y-o-y and up 9.8% q-o-q) and GEL 95.4mln in 1H19
(up 32.5% y-o-y)
-- Retail Banking profit adjusted for one-off costs (see details
in footnotes on page 12) was GEL 77.5mln in 2Q19 (up 6.1% y-o-y and
up 11.1% q-o-q) and GEL 147.2mln in 1H19 (up 2.4% y-o-y). Retail
Banking continued to deliver a strong ROAE(13) of 26.9% in 2Q19
(30.6% in 2Q18 and 25.3% in 1Q19) and 26.2% in 1H19 (31.1% in
1H18)
(11) Includes 2,892 and 2,650 POS terminals operating in public
transportation network in 2Q19 and 1Q19, respectively
(12) The users that log-in in internet and mobile bank at least
once in three months
(13) ROAE adjusted for GEL 3.1mln in 2Q19 (1Q19: GEL 7.1mln) and
GEL 10.1mln in 1H19 one-off employee costs (net of income tax)
related to termination benefits of the former CEO and executive
management. 2Q18 and 1H18 ROAE adjusted for GEL 33.5mln demerger
related expenses (net of income tax) and one-off impact of
re-measurement of deferred tax balances
CORPORATE AND INVESTMENT BANKING (CIB)
CIB provides (1) loans and other credit facilities to Georgia's
large corporate clients and other legal entities, excluding SME and
micro businesses; (2) services such as fund transfers and
settlements services, currency conversion operations, trade finance
services and documentary operations as well as handling savings and
term deposits; (3) finance lease facilities through the Bank's
leasing operations arm, the Georgian Leasing Company; (4) brokerage
services through Galt & Taggart; and (5) Wealth Management
private banking services to high-net-worth individuals and offers
investment management products in Georgia and internationally
through representative offices in Tbilisi, London, Budapest,
Istanbul, Tel Aviv and Limassol.
GEL thousands, unless
otherwise Change Change Change
noted 2Q19 2Q18 y-o-y 1Q19 q-o-q 1H19 1H18 y-o-y
INCOME STATEMENT
HIGHLIGHTS(14)
Net interest income 47,459 41,718 13.8% 45,679 3.9% 93,138 79,951 16.5%
Net fee and commission
income 7,113 6,355 11.9% 8,151 -12.7% 15,264 12,554 21.6%
Net foreign currency gain 15,667 10,259 52.7% 13,104 19.6% 28,771 16,903 70.2%
Net other income / (expense) (392) 2,078 NMF 1,386 NMF 994 4,873 -79.6%
Operating income 69,847 60,410 15.6% 68,320 2.2% 138,167 114,281 20.9%
Salaries and other employee
benefits (14,738) (13,725) 7.4% (12,439) 18.5% (27,177) (26,320) 3.3%
Administrative expenses (4,004) (3,700) 8.2% (4,027) -0.6% (8,031) (7,159) 12.2%
Depreciation and
amortisation (1,933) (1,269) 52.3% (1,701) 13.6% (3,634) (2,578) 41.0%
Other operating expenses (302) (253) 19.4% (203) 48.8% (505) (396) 27.5%
Operating expenses (20,977) (18,947) 10.7% (18,370) 14.2% (39,347) (36,453) 7.9%
Operating income before cost
of risk 48,870 41,463 17.9% 49,950 -2.2% 98,820 77,828 27.0%
Cost of risk (6,574) (5,603) 17.3% (1,824) NMF (8,398) (10,246) -18.0%
Net operating income before
non-recurring items 42,296 35,860 17.9% 48,126 -12.1% 90,422 67,582 33.8%
Net non-recurring items - (4,930) NMF (72) NMF (72) (5,203) -98.6%
Profit before income tax
expense and one-off costs 42,296 30,930 36.7% 48,054 -12.0% 90,350 62,379 44.8%
Income tax expense (3,169) (1,567) 102.2% (3,864) -18.0% (7,032) (4,010) 75.4%
Profit adjusted for one-off
costs 39,127 29,363 33.3% 44,190 -11.5% 83,318 58,369 42.7%
One-off termination costs
of former CEO and executive
management (after tax),
one-off
demerger related expenses
(after tax) and one-off
impact
of re-measurement of
deferred
tax balances (929) (12,924) -92.8% (3,165) -70.6% (4,094) (12,924) -68.3%
Profit 38,198 16,439 132.4% 41,025 -6.9% 79,224 45,445 74.3%
BALANCE SHEET HIGHLIGHTS
Net loans and finance lease
receivables, currency
blended 3,208,823 2,250,160 42.6% 2,652,838 21.0% 3,208,823 2,250,160 42.6%
Net loans and finance
lease
receivables, GEL 526,572 444,669 18.4% 451,360 16.7% 526,572 444,669 18.4%
Net loans and finance
lease
receivables, FC 2,682,251 1,805,491 48.6% 2,201,478 21.8% 2,682,251 1,805,491 48.6%
Client deposits, currency
blended 3,427,166 3,439,716 -0.4% 3,531,840 -3.0% 3,427,166 3,439,716 -0.4%
Client deposits, GEL 1,260,869 1,695,890 -25.7% 1,405,892 -10.3% 1,260,869 1,695,890 -25.7%
Client deposits, FC 2,166,297 1,743,826 24.2% 2,125,948 1.9% 2,166,297 1,743,826 24.2%
Time deposits, currency
blended 1,252,061 1,675,804 -25.3% 1,325,345 -5.5% 1,252,061 1,675,804 -25.3%
Time deposits, GEL 403,114 896,482 -55.0% 506,023 -20.3% 403,114 896,482 -55.0%
Time deposits, FC 848,947 779,322 8.9% 819,322 3.6% 848,947 779,322 8.9%
Current accounts and demand
deposits, currency blended 2,175,105 1,763,912 23.3% 2,206,495 -1.4% 2,175,105 1,763,912 23.3%
Current accounts and
demand
deposits, GEL 857,755 799,408 7.3% 899,869 -4.7% 857,755 799,408 7.3%
Current accounts and
demand
deposits, FC 1,317,350 964,504 36.6% 1,306,626 0.8% 1,317,350 964,504 36.6%
Letters of credit and
guarantees,
standalone* 1,141,715 657,902 73.5% 1,037,779 10.0% 1,141,715 657,902 73.5%
Assets under management 2,504,280 1,993,931 25.6% 2,371,002 5.6% 2,504,280 1,993,931 25.6%
RATIOS
ROAE(14) 22.0% 20.1% 27.1% 24.5% 20.0%
Net interest margin,
currency
blended 3.3% 3.5% 3.4% 3.4% 3.3%
Cost of credit risk ratio 0.7% 0.6% 0.1% 0.4% 1.0%
Cost of funds, currency
blended 4.7% 4.6% 4.1% 4.4% 4.5%
Loan yield, currency blended 9.5% 10.4% 9.1% 9.2% 10.2%
Loan yield, GEL 12.6% 13.2% 11.5% 12.0% 13.0%
Loan yield, FC 8.9% 9.8% 8.6% 8.7% 9.6%
Cost of deposits, currency
blended 3.7% 4.1% 3.6% 3.6% 4.0%
Cost of deposits, GEL 5.9% 6.4% 5.9% 5.9% 6.3%
Cost of deposits, FC 2.2% 2.4% 2.1% 2.1% 2.5%
Cost of time deposits,
currency
blended 5.7% 6.1% 5.6% 5.6% 5.9%
Cost of time deposits,
GEL 7.6% 7.8% 7.5% 7.5% 7.7%
Cost of time deposits, FC 4.5% 4.6% 4.3% 4.4% 4.6%
Current accounts and demand
deposits, currency blended 2.4% 2.8% 2.3% 2.4% 2.8%
Current accounts and
demand
deposits, GEL 4.8% 5.3% 4.8% 4.8% 5.3%
Current accounts and
demand
deposits, FC 0.7% 1.0% 0.7% 0.7% 1.1%
Cost / income ratio(15) 30.0% 31.4% 26.9% 28.5% 31.9%
Concentration of top ten
clients 9.1% 10.2% 9.1% 9.1% 10.2%
(*) Off-balance sheet item
(14) The income statement adjusted profit excludes GEL 0.9mln in
2Q19 (1Q19: GEL 3.2mln) and GEL 4.1mln in 1H19 one-off employee
costs (net-off income tax) related to the former CEO and executive
management termination benefits. The amount is comprised of GEL
1.1mln in 2Q19 (1Q19: GEL 2.7mln) and GEL 3.8mln in 1H19 (gross of
income tax) excluded from salaries and other employee benefits and
GEL 1.1mln (gross of income tax) excluded from non-recurring items
in 1Q19 and in 1H19. The income statement adjusted profit for 2Q18
and 1H18 excludes GEL 12.9mln demerger related expenses (net of
income tax) and one-off impact of re-measurement of deferred tax
balances. The ROAE has been adjusted accordingly for all respective
periods presented
(15) Cost/income ratio is adjusted for GEL 1.1mln in 2Q19 (1Q19:
GEL 2.7mln) and GEL 3.8mln in 1H19 one-off employee costs (gross of
income tax) related to termination benefits of the former executive
management
Performance highlights
-- Corporate and Investment Banking delivered strong quarterly
results. CIB continued further growth during the second quarter of
2019 and generated strong net interest income and net fee and
commission income during the period, coupled with solid operating
efficiencies and asset quality
-- CIB's net interest income increased by 13.8% y-o-y and by
3.9% q-o-q in 2Q19, and by 16.5% y-o-y in 1H19. CIB NIM stood at
3.3% in 2Q19 (down 20bps y-o-y and down 10bps q-o-q) and 3.4% in
1H19 (up 10bps y-o-y). In 2Q19, NIM was down 10bps q-o-q, as 60bps
increase in cost of funds was partially offset by 40bps q-o-q
growth in currency blended loan yields, while NIM was 20bps down
y-o-y, on the back of 90bps decline in currency-blended loan yields
coupled with 10bps increase in cost of funds. In the first half of
2019, 10bps y-o-y increase in NIM was supported by 10bps decrease
in cost of funds, partially offset by 100bps decline in loan yields
y-o-y
-- CIB's net fee and commission income reached GEL 7.1mln in
2Q19, up 11.9% y-o-y and down 12.7% q-o-q, ending the first half of
2019 with GEL 15.3mln fee and commission income, up 21.6% y-o-y.
The strong y-o-y increase in net fee and commission income in 2Q19
and 1H19 was largely driven by higher fees from guarantees and
letters of credit issued and higher placement fees during 2019
-- CIB's loan book and de-dollarisation. CIB loan portfolio
reached GEL 3,208.8mln at 30 June 2019, up 42.6% y-o-y and up 21.0%
q-o-q. On a constant currency basis, CIB loan book was up 25.3%
y-o-y and up 14.7% q-o-q. The concentration of the top 10 CIB
clients stood at 9.1% at 30 June 2019 (10.2% at 30 June 2018 and
9.1% at 31 March 2019). Foreign currency denominated loans
represented 83.6% of CIB's loan portfolio at 30 June 2019, compared
to 80.2% a year ago and 83.0% at 31 March 2019. The increase in
foreign currency denominated loans in 2Q19 y-o-y and q-o-q was
partially due to local currency depreciation in the first and
second quarters of 2019. At 30 June 2019, 54.5% of CIB loan
portfolio was US Dollar denominated, with 38.7% of total CIB loans
issued to US Dollar income borrowers and 15.8% to non-US Dollar
income borrowers
-- In 2Q19, dollarisation of our CIB deposits increased to 63.2%
at 30 June 2019 from 50.7% a year ago and from 60.2% at 31 March
2019. A y-o-y and q-o-q increase in foreign currency denominated
deposits was partially due to local currency depreciation in the
first and second quarters of 2019. Despite the y-o-y decline in
interest rates on local currency deposits in 2Q19 and 1H19, the
cost of deposits in local currency still remained well above the
cost of foreign currency deposits
-- Net other income. Significant y-o-y decline in net other
income in 1H19 was largely driven by net losses from derivative
financial instruments (interest rate swap hedges) recorded during
the first and second quarters of 2019, partially offset by net
gains from investment securities during the same period
-- Cost of credit risk. CIB's cost of credit risk ratio remained
well-controlled and stood at 0.7% in 2Q19 (up 10bps y-o-y and up
60bps q-o-q) and at 0.4% in the first half of 2019 (down 60bps
y-o-y), primarily driven by the improved quality of the CIB loan
portfolio. At the same time, CIB's NPL coverage ratio was 83.7% at
30 June 2019 (87.2% as at 30 June 2018 and 89.4% at 31 March 2019).
The slight decline in NPL coverage ratio y-o-y and q-o-q was
primarily due to the local currency depreciation in the second
quarter of 2019
-- As a result, CIB's profit adjusted for one-off costs (see
details in footnotes on page 16) was GEL 39.1mln in 2Q19, up 33.3%
y-o-y and down 11.5% q-o-q, and GEL 83.3mln in 1H19, up 42.7%
y-o-y. CIB ROAE(16) was 22.0% in 2Q19 (compared to 20.1% a year ago
and 27.1% in 1Q19) and 24.5% in 1H19 (compared to 20.0% in
1H18)
(16) ROAE adjusted for GEL 0.9mln in 2Q19 (1Q19: GEL 3.2mln) and
GEL 4.1mln in 1H19 one-off employee costs (net of income tax)
related to termination benefits of the former CEO and executive
management. 2Q18 and 1H18 ROAE adjusted for GEL 12.9mln demerger
related expenses (net of income tax) and one-off impact of
re-measurement of deferred tax balances
Performance highlights of wealth management operations
-- The Investment Management's AUM increased to GEL 2,504.3mln
in 2Q19, up 25.6% y-o-y and up 5.6% q-o-q. This includes a)
deposits of Wealth Management franchise clients, b) assets held at
Bank of Georgia Custody, c) Galt & Taggart brokerage client
assets, and d) Global certificates of deposit held by Wealth
Management clients. The y-o-y and q-o-q increase in AUM mostly
reflected increase in client assets and bond issuance activity at
Galt & Taggart
-- Wealth Management deposits reached GEL 1,278.6mln in 2Q19, up
17.7% y-o-y and up 2.9% q-o-q, growing at a compound annual growth
rate (CAGR) of 11.7% over the last five-year period. The cost of
deposits was 3.3% in 2Q19, down 20bps y-o-y and up 20bps q-o-q, and
3.2% in 1H19, down 30bps y-o-y
-- We served 1,531 wealth management clients from 74 countries
as of 30 June 2019, compared to 1,490 clients as of 30 June 2018
and 1,535 clients as of 31 March 2019
-- In January 2019, Bank of Georgia opened a brand new office in
the centre of Tbilisi, dedicated to serving its wealth management
clients. The office resides in a historic 19th century building,
which originally used to house the First Credit Society of Georgia
and is considered to be the first residence of a local banking
institution. The design concept was derived from the integration of
Georgian culture with western values, while the artistic expression
of the building has been left intact. The new office coincides with
a creation of a new brand identity of the Bank's wealth management
business and is in line with its strategy to become the regional
hub for private banking
-- Galt & Taggart, which brings under one brand corporate
advisory, debt and equity capital markets research and brokerage
services, continues to develop local capital markets in Georgia
-- During the first half of 2019 Galt & Taggart acted as
a:
- lead manager of JSC Microfinance Organisation Crystal's GEL
15mln local public bond issuance due in 2021, in February 2019
- co-manager of Bank of Georgia's inaugural US$ 100mln
international Additional Tier 1 bond issuance, in March 2019
- lead manager of JSC Microfinance Organisation Swiss Capital's
GEL 10mln local public bond issuance due in 2021, in March 2019
- lead manager for European Bank for Reconstruction and
Development (EBRD), facilitating GEL 90mln local private bond
issuance due in 2023, in March 2019
- lead manager for Nederlandse Financierings - Maatschappij Voor
Ontwikkelingslanden N.V. (FMO), facilitating GEL 26mln local
private bond issuance due in 2024, in March 2019
- buy-side advisor for Bank of Georgia Group on acquisition of
extra.ge online platform, in May 2019
- lead manager for Black Sea Trade and Development Bank (BSTDB),
facilitating GEL 10mln local private bond issuance due in 2022, in
June 2019
- sole sell-side advisor of Linnaeus Capital Partners B.V. on a
sale of 100% shareholding in Lilo1- logistics center, in June
2019
- lead manager for EBRD, facilitating c.GEL 28mln local private
bond issuance due in 2024, in July 2019
-- In February 2019, Global Finance Magazine named Galt &
Taggart Best Investment Bank in Georgia for the fifth consecutive
year
-- In February 2019, Galt & Taggart together with JSC Bank
of Georgia organised a conference under "G&T Industry Series"
to discuss the findings of Galt & Taggart's research on
Georgia's energy sector with an emphasis on ongoing reforms and
their impact on the sector development. The conference gathered
together all stakeholders including high level representatives from
the Government, private sector and IFIs. A follow-up conference was
held in April 2019 due to high interest from the Government and
private sector participants. The Deputy Minister of Economy and
Sustainable Development, Head of energy regulatory commission and
Head of Georgian Energy Development Fund presented the Government's
vision of the reform process, while Galt & Taggart focused on
the reform vision from private sector perspective. Presentations
were followed by panel discussions with key market players affected
by the reform process
-- In May 2019, Galt & Taggart participated in a competitive
tender process and won a three year exclusive mandate to manage the
private pension fund of a large Georgian corporate client
SELECTED FINANCIAL INFORMATION
INCOME STATEMENT Bank of Georgia Group Banking Business Discontinued Operations Eliminations
(QUARTERLY) Consolidated
GEL thousands, unless Change Change Change Change Change Change
otherwise noted 2Q19 2Q18 y-o-y 1Q19 q-o-q 2Q19 2Q18 y-o-y 1Q19 q-o-q 2Q19 2Q18 y-o-y 1Q19 q-o-q 2Q19 2Q18 1Q19
Interest income 342,224 327,496 4.5% 334,735 2.2% 342,224 329,880 3.7% 334,735 2.2% - - - - - - (2,384) -
Interest expense (160,602) (139,756) 14.9% (151,794) 5.8% (160,602) (143,298) 12.1% (151,794) 5.8% - - - - - - 3,542 -
Net interest income 181,622 187,740 -3.3% 182,941 -0.7% 181,622 186,582 -2.7% 182,941 -0.7% - - - - - - 1,158 -
Fee and commission
income 68,025 55,332 22.9% 62,531 8.8% 68,025 55,693 22.1% 62,531 8.8% - - - - - - (361) -
Fee and commission
expense (24,758) (17,680) 40.0% (20,351) 21.7% (24,758) (17,846) 38.7% (20,351) 21.7% - - - - - - 166 -
Net fee and commission
income 43,267 37,652 14.9% 42,180 2.6% 43,267 37,847 14.3% 42,180 2.6% - - - - - - (195) -
Net foreign currency
gain 36,700 25,427 44.3% 30,025 22.2% 36,700 25,000 46.8% 30,025 22.2% - - - - - - 427 -
Net other income /
(expense) (4,260) 3,379 NMF 3,568 NMF (4,260) 3,705 NMF 3,568 NMF - - - - - - (326) -
Operating income 257,329 254,198 1.2% 258,714 -0.5% 257,329 253,134 1.7% 258,714 -0.5% - - - - - - 1,064 -
Salaries and other
employee
benefits (excluding
one-offs) (57,982) (53,505) 8.4% (52,418) 10.6% (57,982) (53,925) 7.5% (52,418) 10.6% - - - - - - 420 -
One-off termination
costs
of former executive
management
(1) (4,570) - NMF (7,842) -41.7% (4,570) - NMF (7,842) -41.7% - - - - - - - -
Salaries and other
employee
benefits (62,552) (53,505) 16.9% (60,260) 3.8% (62,552) (53,925) 16.0% (60,260) 3.8% - - - - - - 420 -
Administrative
expenses (22,033) (26,717) -17.5% (22,741) -3.1% (22,033) (26,862) -18.0% (22,741) -3.1% - - - - - - 145 -
Depreciation and
amortisation (17,295) (11,392) 51.8% (15,688) 10.2% (17,295) (11,392) 51.8% (15,688) 10.2% - - - - - - - -
Other operating
expenses (1,248) (965) 29.3% (1,080) 15.6% (1,248) (965) 29.3% (1,080) 15.6% - - - - - - - -
Operating expenses (103,128) (92,579) 11.4% (99,769) 3.4% (103,128) (93,144) 10.7% (99,769) 3.4% - - - - - - 565 -
Profit from associates 254 376 -32.4% 188 35.1% 254 376 -32.4% 188 35.1% - - - - - - - -
Operating income
before
cost of risk 154,455 161,995 -4.7% 159,133 -2.9% 154,455 160,366 -3.7% 159,133 -2.9% - - - - - - 1,629 -
Expected credit loss
/ impairment charge
on
loans to customers (32,436) (33,534) -3.3% (40,117) -19.1% (32,436) (33,534) -3.3% (40,117) -19.1% - - - - - - - -
Expected credit loss
/ impairment charge
on
finance lease
receivables (557) (266) 109.4% (446) 24.9% (557) (266) 109.4% (446) 24.9% - - - - - - - -
Other expected credit
loss / impairment
charge
on other assets and
provisions (2,483) (3,726) -33.4% (2,089) 18.9% (2,483) (3,726) -33.4% (2,089) 18.9% - - - - - - - -
Cost of risk (35,476) (37,526) -5.5% (42,652) -16.8% (35,476) (37,526) -5.5% (42,652) -16.8% - - - - - - - -
Net operating income
before non-recurring
items 118,979 124,469 -4.4% 116,481 2.1% 118,979 122,840 -3.1% 116,481 2.1% - - - - - - 1,629 -
Net non-recurring
items
(excluding one-offs) (2,538) (13,591) -81.3% (1,575) 61.1% (2,538) (13,763) -81.6% (1,575) 61.1% - - - - - - 172 -
One-off termination
costs
of former CEO,
one-off
demerger related
expenses
(2) - (30,284) NMF (3,985) NMF - (30,284) NMF (3,985) NMF - - - - - - - -
Net non-recurring
items (2,538) (43,875) -94.2% (5,560) -54.4% (2,538) (44,047) -94.2% (5,560) -54.4% - - - - - - 172 -
Profit before income
tax expense from
continuing
operations 116,441 80,594 44.5% 110,921 5.0% 116,441 78,793 47.8% 110,921 5.0% - - - - - - 1,801 -
Income tax expense
(excluding
one-offs) (9,871) (5,461) 80.8% (10,536) -6.3% (9,871) (5,461) 80.8% (10,536) -6.3% - - - - - - - -
Income tax benefit
related
to one-off
termination
costs, one-off
demerger
related expenses and
one-off impact of
re-measurement
of deferred tax
balances
(3) 574 (22,257) NMF 1,587 -63.8% 574 (22,257) NMF 1,587 -63.8% - - - - - - - -
Income tax expense (9,297) (27,718) -66.5% (8,949) 3.9% (9,297) (27,718) -66.5% (8,949) 3.9% - - - - - - - -
Profit from continuing
operations 107,144 52,876 102.6% 101,972 5.1% 107,144 51,075 109.8% 101,972 5.1% - - - - - - 1,801 -
Profit from
discontinued
operations - 78,961 NMF - - - - - - - - 80,762 NMF - - - (1,801) -
Profit 107,144 131,837 -18.7% 101,972 5.1% 107,144 51,075 109.8% 101,972 5.1% - 80,762 NMF - - - - -
One-off items
(1)+(2)+(3) (3,996) (52,541) -92.4% (10,240) -61.0% (3,996) (52,541) -92.4% (10,240) -61.0%
Profit attributable
to:
- shareholders of
the
Group 106,642 125,686 -15.2% 101,512 5.1% 106,642 50,932 109.4% 101,512 5.1% - 74,754 NMF - - - - -
- non-controlling
interests 502 6,151 -91.8% 460 9.1% 502 143 NMF 460 9.1% - 6,008 NMF - - - - -
Profit from continuing
operations
attributable
to:
- shareholders of
the
Group 106,642 52,733 102.2% 101,512 5.1% 106,642 50,932 109.4% 101,512 5.1% - - - - - - 1,801 -
- non-controlling
interests 502 143 NMF 460 9.1% 502 143 NMF 460 9.1% - - - - - - - -
Profit from
discontinued
operations
attributable
to:
- shareholders of
the
Group - 72,953 NMF - - - - - - - - 74,754 NMF - - - (1,801) -
- non-controlling
interests - 6,008 NMF - - - - - - - - 6,008 NMF - - - - -
Earnings per share
(basic) 2.23 2.83 -21.2% 2.12 5.2%
- earnings per share
from continuing
operations 2.23 1.19 87.4% 2.12 5.2%
- earnings per share
from discontinued
operations - 1.64 NMF - -
Earnings per share
(diluted) 2.23 2.80 -20.4% 2.11 5.7%
- earnings per share
from continuing
operations 2.23 1.17 90.6% 2.11 5.7%
- earnings per share
from discontinued
operations - 1.63 NMF - -
INCOME STATEMENT Bank of Georgia Banking Business Discontinued Operations Eliminations
(HALF-YEAR) Group Consolidated
GEL thousands, unless
otherwise Change Change Change Change
noted 1H19 1H18 y-o-y 1H19 1H18 y-o-y 1H19 1H18 y-o-y 1H19 1H18 y-o-y
Interest income 676,959 638,771 6.0% 676,959 643,559 5.20% - - - - (4,788) NMF
Interest expense (312,396) (269,791) 15.8% (312,396) (276,728) 12.90% - - - - 6,937 NMF
Net interest income 364,563 368,980 -1.2% 364,563 366,831 -0.6% - - - - 2,149 NMF
Fee and commission
income 130,556 106,005 23.2% 130,556 106,906 22.1% - - - - (901) NMF
Fee and commission
expense (45,109) (34,168) 32.0% (45,109) (34,549) 30.6% - - - - 381 NMF
Net fee and commission
income 85,447 71,837 18.9% 85,447 72,357 18.1% - - - - (520) NMF
Net foreign currency
gain 66,724 38,577 73.0% 66,724 39,252 70.0% - - - - (675) NMF
Net other income /
(expense) (691) 8,898 NMF (691) 9,451 NMF - - - - (553) NMF
Operating income 516,043 488,292 5.7% 516,043 487,891 5.8% - - - - 401 NMF
Salaries and other
employee
benefits (excluding
one-offs) (110,399) (102,323) 7.9% (110,399) (103,378) 6.8% - - - - 1,055 NMF
One-off termination
costs of
former executive
management
(1) (12,412) - NMF (12,412) - NMF - - - - - -
Salaries and other
employee
benefits (122,811) (102,323) 20.0% (122,811) (103,378) 18.8% - - - - 1,055 NMF
Administrative
expenses (44,774) (51,885) -13.7% (44,774) (52,495) -14.7% - - - - 610 NMF
Depreciation and
amortisation (32,983) (22,914) 43.9% (32,983) (22,914) 43.9% - - - - - -
Other operating
expenses (2,329) (1,736) 34.2% (2,329) (1,736) 34.2% - - - - - -
Operating expenses (202,897) (178,858) 13.4% (202,897) (180,523) 12.4% - - - - 1,665 NMF
Profit from associates 442 695 -36.4% 442 695 -36.4% - - - - - -
Operating income
before cost
of risk 313,588 310,129 1.1% 313,588 308,063 1.8% - - - - 2,066 NMF
Expected credit loss /
impairment
charge on loans to
customers (72,553) (70,211) 3.3% (72,553) (70,211) 3.3% - - - - - -
Expected credit loss /
impairment
charge on finance
lease receivables (1,003) (253) NMF (1,003) (253) NMF - - - - - -
Other expected credit
loss
/ impairment charge
on other
assets and provisions (4,573) (876) NMF (4,573) (876) NMF - - - - - -
Cost of risk (78,129) (71,340) 9.5% (78,129) (71,340) 9.5% - - - - - -
Net operating income
before
non-recurring items 235,459 238,789 -1.4% 235,459 236,723 -0.5% - - - - 2,066 NMF
Net non-recurring
items (excluding
one-offs) (4,112) (16,539) -75.1% (4,112) (16,711) -75.4% - - - - 172 NMF
One-off termination
costs of
former CEO, one-off
demerger
related expenses (2) (3,985) (30,284) -86.8% (3,985) (30,284) -86.8% - - - - - -
Net non-recurring
items (8,097) (46,823) -82.7% (8,097) (46,995) -82.8% - - - - 172 NMF
Profit before income
tax expense
from continuing
operations 227,362 191,966 18.4% 227,362 189,728 19.8% - - - - 2,238 NMF
Income tax expense
(excluding
one-offs) (20,407) (14,744) 38.4% (20,407) (14,744) 38.4% - - - - - -
Income tax benefit
related
to one-off
termination costs,
one-off demerger
related expenses
and one-off impact
of re-measurement
of deferred tax
balances (3) 2,161 (22,257) NMF 2,161 (22,257) NMF - - - - - -
Income tax expense (18,246) (37,001) -50.7% (18,246) (37,001) -50.7% - - - - - -
Profit from continuing
operations 209,116 154,965 34.9% 209,116 152,727 36.9% - - - - 2,238 NMF
Profit from
discontinued
operations - 107,899 NMF - - - - 110,137 NMF - (2,238) NMF
Profit 209,116 262,864 -20.4% 209,116 152,727 36.9% - 110,137 NMF - - -
One-off items
(1)+(2)+(3) (14,236) (52,541) -72.9% (14,236) (52,541) -72.9%
Profit attributable
to:
- shareholders of
the Group 208,154 244,106 -14.7% 208,154 152,184 36.8% - 91,922 NMF - - -
- non-controlling
interests 962 18,758 -94.9% 962 543 77.2% - 18,215 NMF - - -
Profit from continuing
operations
attributable to:
- shareholders of
the Group 208,154 154,422 34.8% 208,154 152,184 36.8% - - - - 2,238 NMF
- non-controlling
interests 962 543 77.2% 962 543 77.2% - - - - - -
Profit from
discontinued
operations
attributable to:
- shareholders of
the Group - 89,684 NMF - - - - 91,922 NMF - (2,238) NMF
- non-controlling
interests - 18,215 NMF - - - - 18,215 NMF - - -
Earnings per share
(basic) 4.35 5.95 -26.9%
- earnings per share
from continuing
operations 4.35 3.76 15.7%
- earnings per share - 2.19 NMF
from discontinued
operations
Earnings per share
(diluted) 4.34 5.88 -26.2%
- earnings per share
from continuing
operations 4.34 3.72 16.7%
- earnings per share - 2.16 NMF
from discontinued
operations
BANK OF GEORGIA GROUP PLC
BALANCE SHEET Bank of Georgia Group Consolidated
GEL thousands, unless otherwise Jun-19 Jun-18 Change Mar-19 Change
noted y-o-y q-o-q
Cash and cash equivalents 936,106 1,546,863 -39.5% 1,162,168 -19.5%
Amounts due from credit
institutions 1,704,701 993,862 71.5% 1,391,630 22.5%
Investment securities 1,896,738 1,725,692 9.9% 1,948,592 -2.7%
Loans to customers and finance
lease receivables 10,579,710 8,108,647 30.5% 9,570,691 10.5%
Accounts receivable and
other loans 3,688 4,878 -24.4% 3,134 17.7%
Prepayments 36,026 74,238 -51.5% 31,621 13.9%
Inventories 11,748 11,085 6.0% 11,756 -0.1%
Right-of-use assets 105,874 - NMF 91,248 16.0%
Investment property 178,764 218,224 -18.1% 169,328 5.6%
Property and equipment 358,921 313,627 14.4% 349,728 2.6%
Goodwill 33,351 33,351 0.0% 33,351 0.0%
Intangible assets 93,515 61,462 52.2% 87,005 7.5%
Income tax assets 5,080 21,792 -76.7% 19,446 -73.9%
Other assets 149,233 125,615 18.8% 144,343 3.4%
Assets held for sale 40,544 - NMF 40,528 0.0%
Total assets 16,133,999 13,239,336 21.9% 15,054,569 7.2%
Client deposits and notes 8,855,616 7,174,234 23.4% 8,393,861 5.5%
Amounts due to credit institutions 2,960,519 2,740,595 8.0% 2,463,408 20.2%
Debt securities issued 2,137,239 1,527,452 39.9% 2,045,428 4.5%
Lease liabilities 100,172 - NMF 78,364 27.8%
Accruals and deferred income 34,748 33,397 4.0% 48,449 -28.3%
Income tax liabilities 30,361 43,762 -30.6% 37,396 -18.8%
Other liabilities 97,125 52,231 86.0% 68,883 41.0%
Total liabilities 14,215,780 11,571,671 22.8% 13,135,789 8.2%
Share capital 1,618 1,790 -9.6% 1,618 0.0%
Additional paid-in capital 493,890 463,130 6.6% 495,452 -0.3%
Treasury shares (49) (41) 19.5% (42) 16.7%
Other reserves 46,744 26,268 78.0% 36,474 28.2%
Retained earnings 1,367,632 1,169,364 17.0% 1,376,834 -0.7%
Total equity attributable
to shareholders of the Group 1,909,835 1,660,511 15.0% 1,910,336 0.0%
Non-controlling interests 8,384 7,154 17.2% 8,444 -0.7%
Total equity 1,918,219 1,667,665 15.0% 1,918,780 0.0%
Total liabilities and equity 16,133,999 13,239,336 21.9% 15,054,569 7.2%
Book value per share 40.06 34.75 15.3% 39.88 0.5%
BELARUSKY NARODNY BANK (BNB)
Change Change Change
INCOME STATEMENT, HIGHLIGHTS 2Q19 2Q18 y-o-y 1Q19 q-o-q 1H19 1H18 y-o-y
GEL thousands, unless
otherwise stated
Net interest income 6,360 6,354 0.1% 6,585 -3.4% 12,945 12,898 0.4%
Net fee and commission
income 1,798 2,503 -28.2% 1,812 -0.8% 3,611 4,780 -24.5%
Net foreign currency
gain 4,779 4,182 14.3% 3,955 20.8% 8,734 7,459 17.1%
Net other income 169 192 -12.0% 147 15.0% 314 309 1.6%
Operating income 13,106 13,231 -0.9% 12,499 4.9% 25,604 25,446 0.6%
Operating expenses (8,890) (8,184) 8.6% (7,847) 13.3% (16,737) (15,905) 5.2%
Operating income before
cost of risk 4,216 5,047 -16.5% 4,652 -9.4% 8,867 9,541 -7.1%
Cost of risk (1,536) (2,305) -33.4% (1,442) 6.5% (2,977) (3,022) -1.5%
Net non-recurring items (13) (5) NMF (50) -74.0% (63) (706) -91.1%
Profit before income
tax expense 2,667 2,737 -2.6% 3,160 -15.6% 5,827 5,813 0.2%
Income tax expense (379) (721) -47.4% (571) -33.6% (950) (1,498) -36.6%
Profit 2,288 2,016 13.5% 2,589 -11.6% 4,877 4,315 13.0%
BALANCE SHEET, HIGHLIGHTS Jun-19 Jun-18 Change Mar-19 Change
y-o-y q-o-q
GEL thousands, unless
otherwise stated
Cash and cash equivalents 93,097 86,932 7.1% 79,497 17.1%
Amounts due from credit
institutions 18,301 10,719 70.7% 20,556 -11.0%
Investment securities 128,486 38,815 NMF 116,082 10.7%
Loans to customers and
finance lease receivables 512,126 394,502 29.8% 451,665 13.4%
Other assets 57,098 40,833 39.8% 54,001 5.7%
Total assets 809,108 571,801 41.5% 721,801 12.1%
Client deposits and notes 503,309 297,756 69.0% 425,563 18.3%
Amounts due to credit
institutions 146,855 161,332 -9.0% 144,314 1.8%
Debt securities issued 50,238 32,453 54.8% 53,846 -6.7%
Other liabilities 7,044 3,723 89.2% 9,477 -25.7%
Total liabilities 707,446 495,264 42.8% 633,200 11.7%
Total equity 101,662 76,537 32.8% 88,601 14.7%
Total liabilities and
equity 809,108 571,801 41.5% 721,801 12.1%
BANKING BUSINESS KEY RATIOS 2Q19 2Q18 1Q19 1H19 1H18
Profitability
ROAA, annualised(17) 2.9% 3.1% 3.1% 3.0% 3.2%
ROAA, annualised (unadjusted) 2.8% 1.6% 2.8% 2.8% 2.4%
ROAE, annualised(17) 22.9% 25.4% 24.5% 23.7% 25.7%
RB ROAE(17) 26.9% 30.6% 25.3% 26.2% 31.1%
CIB ROAE(17) 22.0% 20.1% 27.1% 24.5% 20.0%
ROAE, annualised (unadjusted) 22.1% 12.5% 22.2% 22.2% 19.1%
Net interest margin, annualised 5.4% 6.9% 5.8% 5.6% 7.0%
RB NIM 5.9% 7.9% 6.4% 6.1% 8.1%
CIB NIM 3.3% 3.5% 3.4% 3.4% 3.3%
Loan yield, annualized 11.8% 14.0% 12.2% 12.0% 13.9%
RB Loan yield 12.9% 15.7% 13.6% 13.2% 15.8%
CIB Loan yield 9.5% 10.4% 9.1% 9.2% 10.2%
Liquid assets yield, annualised 3.4% 3.8% 3.8% 3.6% 3.7%
Cost of funds, annualized 4.8% 5.0% 4.8% 4.8% 4.9%
Cost of client deposits and
notes, annualised 3.3% 3.6% 3.3% 3.3% 3.5%
RB Cost of client deposits
and notes 3.0% 2.9% 3.0% 3.0% 2.9%
CIB Cost of client deposits
and notes 3.7% 4.1% 3.6% 3.6% 4.0%
Cost of amounts due to credit
institutions, annualised 7.2% 7.2% 7.6% 7.3% 7.0%
Cost of debt securities issued 8.1% 7.7% 7.8% 7.9% 7.8%
Operating leverage, y-o-y(18) -4.2% 4.1% 5.0% 0.3% 0.2%
Operating leverage, q-o-q(18) -7.7% 1.2% 3.6% 0.0% 0.0%
Efficiency
Cost / Income(18) 38.3% 36.8% 35.5% 36.9% 37.0%
RB Cost / Income(18) 37.8% 36.5% 35.5% 36.6% 36.6%
CIB Cost /Income(18) 30.0% 31.4% 26.9% 28.5% 31.9%
Cost / Income (unadjusted) 40.1% 36.8% 38.6% 39.3% 37.0%
Liquidity
NBG liquidity ratio (minimum
requirement 30%) 37.0% 30.2% 36.7% 37.0% 30.2%
NBG liquidity coverage ratio
(minimum requirement 100%) 114.3% 129.8% 133.1% 114.3% 129.8%
Liquid assets to total liabilities 31.9% 36.9% 34.3% 31.9% 36.9%
Net loans to client deposits
and notes 119.5% 113.0% 114.0% 119.5% 113.0%
Net loans to client deposits
and notes + DFIs 104.7% 97.3% 98.6% 104.7% 97.3%
Leverage (times) 7.4 6.9 6.8 7.4 6.9
Asset quality:
NPLs (in GEL) 347,285 283,768 326,127 347,285 283,768
NPLs to gross loans to clients 3.2% 3.4% 3.3% 3.2% 3.4%
NPL coverage ratio 88.1% 99.4% 92.2% 88.1% 99.4%
NPL coverage ratio, adjusted
for discounted value of collateral 131.5% 142.8% 132.6% 131.5% 142.8%
Cost of credit risk, annualised 1.3% 1.6% 1.7% 1.5% 1.7%
RB Cost of credit risk 1.6% 2.0% 2.4% 2.0% 2.1%
CIB Cost of credit risk 0.7% 0.6% 0.1% 0.4% 1.0%
Capital adequacy:
NBG (Basel III) CET1 capital
adequacy ratio 11.0% 12.5% 12.7% 11.0% 12.5%
Minimum regulatory requirement 9.6% 8.0% 9.6% 9.6% 8.0%
NBG (Basel III) Tier I capital
adequacy ratio 13.3% 12.5% 12.7% 13.3% 12.5%
Minimum regulatory requirement 11.6% 9.9% 11.6% 11.6% 9.9%
NBG (Basel III) Total capital
adequacy ratio 16.7% 17.5% 17.1% 16.7% 17.5%
Minimum regulatory requirement 16.1% 15.0% 16.1% 16.1% 15.0%
Selected operating data:
Total assets per FTE 2,184 1,821 2,017 2,184 1,821
Number of active branches,
of which: 276 284 276 276 284
- Express branches (including
Metro) 167 168 166 167 168
- Bank of Georgia branches 97 104 98 97 104
- Solo lounges 12 12 12 12 12
Number of ATMs 890 856 886 890 856
Number of cards outstanding,
of which: 2,122,006 2,235,122 2,139,239 2,122,006 2,235,122
- Debit cards 1,634,843 1,607,087 1,627,070 1,634,843 1,607,087
- Credit cards 487,163 628,035 512,169 487,163 628,035
Number of POS terminals(19) 19,667 12,816 17,684 19,667 12,816
FX Rates:
GEL/US$ exchange rate (period-end) 2.8687 2.4516 2.6914
GEL/GBP exchange rate (period-end) 3.6384 3.2209 3.5147
Jun-19 Jun-18 Mar-19
Full time employees (FTE),
of which: 7,386 7,270 7,465
- Full time employees, BOG
standalone 5,786 5,689 5,886
- Full time employees, BNB 632 699 644
- Full time employees, BB
other 968 882 935
Shares outstanding Jun-19 Jun-18 Mar-19
Ordinary shares 47,669,887 47,779,684 47,899,817
Treasury shares 1,499,541 1,389,746 1,269,611
Total shares outstanding 49,169,428 49,169,430 49,169,428
(17) 2Q19, 1Q19 and 1H19 ratios adjusted for one-off employee
costs related to termination benefits of the former CEO and
executive management. 2Q18 and 1H18 ratios adjusted for demerger
related expenses and one-off impact of re-measurement of deferred
tax balances
(18) 2Q19, 1Q19 and 1H19 results adjusted for one-off employee
costs related to termination benefits of the former executive
management
(19) Includes 2,892 and 2,650 POS terminals operating in public
transportation network in 2Q19 and 1Q19, respectively
PRINCIPAL RISKS AND UNCERTAINTIES
Understanding our risks
In the Group's 2018 Annual Report and Accounts we disclosed the
principal risks and uncertainties and their potential impact, as
well as the trends and outlook associated with these risks and the
actions we take to mitigate these risks. We have updated this
disclosure to reflect recent developments and this is set out in
full below. If any of the following risks occur, the Group's
business, financial condition, results of operations or prospects
could be materially affected. The order in which the principal
risks and uncertainties appear does not denote their order of
priority. It is not possible to fully mitigate all of our risks.
Any system of risk management and internal control is designed to
manage rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
The risks and uncertainties described below may not be the only
ones the Group faces. Additional risks and uncertainties, including
those that the Group is currently not aware of or deems immaterial,
may also result in decreased revenues, incurred expenses or other
events that could result in a decline in the value of the Group's
securities.
CURRENCY AND MACROECONOMIC ENVIRONMENT
PRINCIPAL RISK Macroeconomic factors relating to Georgia, including
/ UNCERTAINTY depreciation of the Lari against the US Dollar, may
have a material impact on our loan book.
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KEY DRIVERS The Group's operations are primarily located in, and
/ TRS most of its revenue is sourced from, Georgia. Macroeconomic
factors relating to Georgia, such as changes in GDP,
inflation and interest rates, may have a material impact
on the quality of our loan portfolio, loan losses, our
margins, and customer demand for our products and services.
The Georgian economy delivered a solid 4.9% estimated
real GDP growth in the first half of 2019, after the
real GDP growth of 4.7% in 2018 and 4.8% growth in 2017,
according to Geostat. Uncertain and volatile global
economic conditions could have substantial political
and macroeconomic ramifications globally which in turn
could impact the Georgian economy.
In the first half of 2019, the Lari depreciated against
the US Dollar by 7.2%, after depreciating by 3.3% in
2018. The volatility of Lari against the Dollar has
affected, and may continue to adversely affect, the
quality of our loan portfolio, as well as increase the
cost of credit risk and expected credit loss/impairment
provisions. The creditworthiness of our customers may
be adversely affected by the depreciation of the Lari
against the US Dollar, which could result in them having
difficulty repaying their loans. The depreciation of
the Lari may also adversely affect the value of our
customers' collateral.
At 30 June 2019, approximately 83.6% and 45.9% of our
Corporate and Investment Banking and Retail Banking
loans, respectively, were denominated in foreign currency
(predominantly US Dollar), while US Dollar income revenue
loans covered 5.8% of Retail Banking gross loans and
38.7% of Corporate and Investment Banking gross loans.
Our cost of credit risk was 1.5% in the first half of
2019 compared to 1.7% in the first half of 2018.
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MITIGATION The Group continuously monitors market conditions and
reviews market changes, and also performs stress and
scenario testing to test its position under adverse
economic conditions, including adverse currency movements.
The Bank's Asset and Liability Management Committee
sets our open currency position limits and the Bank's
proprietary trading position limits, which are currently
more conservative than those imposed by the National
Bank of Georgia (NBG), our regulator. The Treasury department
manages our open currency position on a day-to-day basis.
The open currency position is also monitored by the
Bank's Quantitative Risk Management and Risk Analytics
department.
In order to assess the creditworthiness of our customers,
we take into account currency volatility when there
is a currency mismatch between the customer's loan and
the revenue. We allocate 75% additional capital to the
foreign currency loans of clients, whose source of income
is denominated in Lari.
The Bank's Credit Committees and Credit Risk department
set counterparty limits by using a credit risk classification
and scoring system for approving individual transactions.
The credit quality review process is continuous and
provides early identification of possible changes in
the creditworthiness of customers, including regular
collateral revaluations, potential losses and corrective
actions needed to reduce risk, which may include obtaining
additional collateral in accordance with underlying
loan agreements.
Since 2016, NBG has actively implemented various measures
to de-dollarise the Georgian economy. In January 2019,
in order to hedge the borrowers against foreign currency
risks, NBG raised a threshold of small size loans that
must be issued only in local currency from GEL 100,000
to GEL 200,000.
Among NBG's initiatives towards de-dollarisation and
increasing access to long-term lending in the local
currency is Liquidity Coverage Ratio (LCR) under Basel
III, effective since September 2017. NBG's preferential
treatment for Georgian Lari is translated into 75% LCR
for the local currency high quality liquid assets, while
the mandatory ratio stands at 100% for the foreign currency
as well as for all currencies in total.
Moreover, NBG mandated changes in minimum reserve requirements
on funds attracted in national and foreign currencies.
NBG raised the minimum reserve requirement on foreign
currency funds from 20% to 25% depending on maturity,
effective from 1 September 2018, and then further to
30%, effective by the end of May 2019. In June 2018,
in order to encourage the financial institutions to
raise funding in the local currency, NBG decreased minimum
reserve requirements on local currency funding from
7% to 5%.
Since the beginning of 2016, we have focused on increasing
local currency lending. We actively work with IFIs to
raise long-term Lari funding to increase our Lari-denominated
loans to customers. Furthermore, in June 2017, we completed
the inaugural local currency denominated international
bond issuance in the amount of GEL500 million to support
local currency lending.
Applicable from the beginning of 2017, the NBG expanded
the list of assets that banks are permitted to use as
collateral for REPO transactions, which provides an
additional funding source for our Lari-denominated loan
book.
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REGIONAL INSTABILITY
PRINCIPAL RISK The Georgian economy and our business may be adversely
/ UNCERTAINTY affected by regional tensions and instability.
The Group's operations are primarily located in, and
most of its revenue is sourced from, Georgia. The Georgian
economy is dependent on economies of the region, in
particular Russia, Turkey, Azerbaijan and Armenia who
are key trading partners.
There has been ongoing geopolitical tension, political
and economic instability and military conflict in the
region, which may have an adverse effect on our business
and financial position.
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KEY DRIVERS Russian troops continue to occupy the Abkhazia and the
/ TRS Tskhinvali/South Ossetia regions and tensions between
Russia and Georgia persist. Russia is opposed to the
eastward enlargement of the NATO, including the former
Soviet republics such as Georgia. The introduction of
a free trade regime between Georgia and the EU in September
2014 and the visa-free travel in the EU granted to Georgian
citizens in March 2017 may intensify tensions between
the neighbours. The Government has taken certain steps
towards improving relations with Russia, but, as of
the date of this announcement these have not resulted
in any formal or legal changes in the relationship between
the two countries.
In June 2018, as a result of early parliamentary and
presidential elections, amendments to the Turkish constitution
became effective. The amendments which grant the president
wider powers are expected to transform Turkey's system
of government away from a parliamentary system which
could have a negative impact on political stability
in Turkey.
On 8 July 2019, Russia's ban on direct flights to Georgia,
imposed earlier in June over anti-occupation protests
in Tbilisi, came into effect. The sanctions are expected
to affect the Georgian tourism sector, however, they
also provide more incentives to further diversify its
tourist base.
There is an ongoing conflict between Azerbaijan and
Armenia which impacts the region.
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MITIGATION The Group actively monitors regional and local market
conditions and risks related to political instability,
and performs stress and scenario tests in order to assess
our financial position. Responsive strategies and action
plans are also developed.
Recent Russian sanctions imposed on direct flights from
Russia to Georgia are expected to weigh on Georgian
economy, but unlike the 2006 Russian embargo, the country
is better placed to deal with negative shocks. Georgia's
key positives lie in its economic and trade diversification,
the success of implemented reforms, its macroeconomic
resilience, low public debt level and strong banking
sector. These factors are expected to ensure economic
resilience in the face of upcoming Russian sanctions
on Georgia's tourism. Dealing with Russian sanctions
is not a new challenge for Georgia. The 2006 Russian
embargo forced Georgia to redirect its focus from Russian
market, which expanded export destinations and improved
the quality of Georgian products. This also deepened
economic ties with the rest of the world, with the EU-Georgia
free trade agreement signed in 2014, followed by free
trade deals with China and other countries. Therefore,
while lower global commodity prices and macroeconomic
factors have affected Georgia's regional trading partners,
leading to lower exports within the region, Georgia
has benefited from increased exports earnings from non-traditional
markets such as Switzerland, China, Egypt, Saudi Arabia,
South Korea and Singapore. Hence, we believe that upcoming
Russian sanctions will further intensify Georgia's economic
diversification, use potential of new large markets
- the EU and China, and enhance its institutions. Georgia's
exposure (as defined by combination of four channels:
exports, tourism, remittances and FDI) to Russia accounted
for 9.3% of GDP in 2018.
In April 2017, the IMF approved a new three-year US$285
million economic programme, aimed at preserving macroeconomic
and financial stability and addressing structural weaknesses
in the Georgian economy to support a higher and inclusive
growth. Implementation of the IMF programme is on track,
with the authorities achieving all structural benchmarks
set for specific periods. On 19 June 2019, the Executive
Board of the IMF completed the Fourth Review of Georgia's
economic reform programme. The completion of the review
released Special Drawing Rights (SDR) 30 million (about
US$ 41.4 million) to Georgia, bringing total disbursements
under the arrangement to SDR 150 million (about US$
207.2 million).
During the first half of 2019, Georgia delivered an
estimated real GDP growth of 4.9%, whilst inflation
was above NBG's 3.0% target level and reached 4.3% in
June 2019, mostly explained by increased excises on
tobacco. Tourist arrivals and remittances, significant
sources of Dollar inflows in the country, continued
to increase. The current account deficit halved in the
first quarter of 2019 and, despite the expected loss
of tourism revenues from reduced arrivals from Russia,
the external balance is expected to improve on the back
of anticipated adjustments in imports.
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LOAN PORTFOLIO QUALITY
PRINCIPAL RISK The Group may not be able to maintain the quality of
/ UNCERTAINTY its loan portfolio.
The quality of the Group's loan portfolio may deteriorate
due to external factors beyond the Group's control such
as negative developments in Georgia's economy or in
the economies of its neighbouring countries, the unavailability
or limited availability of credit information on certain
of its customers, any failure of its risk management
procedures or rapid expansion of its loan portfolio.
The Group's Corporate and Investment Banking loan portfolio
is concentrated and to the extent that such borrowers
enter into further loan arrangements with the Group,
this will increase the credit and general counterparty
risk of the Group with respect to those counterparties
and could result in deterioration of the Group's loan
portfolio quality.
Furthermore, the collateral values that the Group holds
against the loans may decline, which may have an adverse
effect on the business and financial position of the
Group.
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KEY DRIVERS During the first half of 2019, the Group's cost of credit
/ TRS risk ratio was 1.5%, as compared to 1.7% in the first
six months of 2018. Expected credit loss/impairment
charges and, in turn, the Group's cost of credit risk
could increase if a single large borrower defaults or
a material concentration of smaller borrowers default.
As of 30 June 2019, 31 December 2018 and 2017, the Group's
non-performing loans accounted for 3.2%, 3.3%, and 3.8%
of gross loans, respectively.
The Corporate and Investment Banking loan portfolio
is concentrated, with the Group's top ten Corporate
and Investment Banking borrowers accounting for 9.1%
of the loan portfolio (gross of allowances for impairment)
at 30 June 2019, as compared to 9.8% at 31 December
2018 and 10.7% at 31 December 2017.
At 30 June 2019, the Group held collateral against gross
loans covering 85.8% of the total gross loans. The main
forms of collateral taken in respect of Corporate and
Investment Banking loans are liens over real estate,
property plant and equipment, corporate guarantees,
inventory, deposits and securities, transportation equipment
and gold. The most common form of collateral accepted
in Retail Banking loans is a lien over residential property.
Downturns in the residential and commercial real estate
markets or a general deterioration of economic conditions
in the industries in which the Group's customers operate
may result in illiquidity and a decline in the value
of the collateral securing loans, including a decline
to levels below the outstanding principal balance of
those loans. In addition, declining or unstable prices
of collateral in Georgia may make it difficult for the
Group to accurately value collateral it holds. If the
fair value of the collateral that the Group holds declines
significantly in the future, it could be required to
record additional provisions and could experience lower
than expected recovery levels on collateralised loans
past due more than 90 days. Further changes to laws
or regulations may impair the value of such collateral.
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MITIGATION The Group continuously monitors market conditions and
reviews market changes, and also performs stress and
scenario testing to test its position under adverse
economic conditions.
Our Credit Committees and Credit Risk department set
counterparty limits by using a credit risk classification
and scoring system for approving individual transactions.
The credit quality review process is continuous and
provides early identification of possible changes in
the creditworthiness of customers, including regular
collateral revaluations, potential losses and corrective
actions needed to reduce risk, which may include obtaining
additional collateral in accordance with underlying
loan agreements.
The Group continuously monitors the market value of
the collateral it holds against the loans. When evaluating
collateral, the Group discounts the market value of
the assets to reflect the liquidation value of the collateral.
In terms of Corporate and Investment Banking loan portfolio
concentration, the Group aims to adhere strictly to
the limits set by the NBG for client exposures, monitors
the level of concentration in its loan portfolio and
the financial performance of its largest borrowers and
uses collateral to minimise loss given default on its
largest exposures, reduces guarantee exposures in the
riskier sector and maintains a well-diversified loan
book sector concentration.
In order to de-risk Georgian Banking sector and encourage
responsible lending practice in the market, NBG introduced
macroprudential policy instruments that modifies lending
conditions to individuals. The payment-to-income ratio
(PTI) and the loan-to-value ratio (LTV), effective since
1 November 2018 for commercial banks and since 1 January
2019 for all loan issuers, require the financial institutions
to issue loans based on the rigorous assessment of clients'
debt paying ability and aim at reducing high-risk products
in the market. This initiative ensures the sustainability
of the financial sector in the event of real estate
price reductions and further reduces the risk of the
loan portfolio quality.
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REGULATORY RISK
PRINCIPAL RISK The Group operates in an evolving regulatory environment
/ UNCERTAINTY and is subject to regulatory oversight of the National
Bank of Georgia, supervising the banking sector and
the securities market in Georgia.
The financial sector in Georgia is highly regulated.
The regulatory environment continues to evolve. We,
however, cannot predict what additional regulatory changes
will be introduced in the future or the impact they
may have on our operations.
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KEY DRIVERS Our banking operations must comply with capital adequacy
/ TRS and other regulatory ratios set by our regulator, the
NBG, including reserve requirements and mandatory financial
ratios. Our ability to comply with existing or amended
NBG requirements may be affected by a number of factors,
including those outside of our control, such as an increase
in the Bank's risk-weighted assets, our ability to raise
capital, losses resulting from deterioration in our
asset quality and/or a reduction in income levels and/or
an increase in expenses, decline in the value of the
Bank's securities portfolio, as well as weakening of
global and Georgian economies.
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MITIGATION Continued investment in our people and processes is
enabling us to meet our current regulatory requirements
and means that we are well placed to respond to any
future changes in regulation.
In line with our integrated control framework, we carefully
evaluate the impact of legislative and regulatory changes
as part of our formal risk identification and assessment
processes and, to the extent possible, proactively participate
in the drafting of relevant legislation. As part of
this process, we engage in constructive dialogue with
regulatory bodies, where possible, and seek external
advice on potential changes to legislation. We then
develop appropriate policies, procedures and controls,
as required, to fulfil our compliance obligations.
Our compliance framework, at all levels, is subject
to regular review by the Bank's Internal Audit and external
assurance service providers.
--------------------------------------------------------------------
LIQUIDITY RISK
PRINCIPAL RISK The Group is exposed to liquidity risk when the maturities
/ UNCERTAINTY of its assets and liabilities do not coincide.
Although the Group expects to have sufficient funding
over the next 18 months and beyond to execute its strategy
and to have sufficient liquidity over the next 18 months
and beyond, liquidity risk is nevertheless inherent
in banking operations and may be heightened by a number
of factors, including an over-reliance on, or an inability
to access, a particular source of funding, changes in
credit ratings or market-wide phenomena, such as financial
market instability.
Credit markets worldwide have in recent years experienced,
and may continue to experience, a reduction in liquidity
and long-term funding as a result of global economic
and financial factors. The availability of credit in
emerging markets, in particular, is significantly influenced
by the level of investor confidence and, as such, any
factors that affect investor confidence (for example,
a downgrade in credit ratings of the Bank, Georgia,
or state interventions or debt restructurings in a relevant
industry) could affect the price or availability of
funding for the Group companies, operating in any of
these markets.
--------------------------------------------------------------------
KEY DRIVERS The Group's current liquidity may be affected by unfavourable
/ TRS financial market conditions. If assets held by the Group
in order to provide liquidity become illiquid or their
value drops substantially, the Group may be required,
or may choose, to rely on other sources of funding to
finance its operations and future growth. Only a limited
amount of funding, however, is available on the Georgian
inter-bank market, and recourse to other funding sources
may pose additional risks, including the possibility
that other funding sources may be more expensive and
less flexible. In addition, the Group's ability to access
such external funding sources depends on the level of
credit lines available to it, and this, in turn, is
dependent on the Group's financial and credit condition,
as well as general market liquidity.
In terms of current and short-term liquidity, the Group
is exposed to the risk of unexpected, rapid withdrawal
of deposits by its customers in large volumes. Circumstances
in which customers are more likely to withdraw deposits
in large volumes rapidly include, among others, a severe
economic downturn, a loss in consumer confidence, an
erosion of trust in financial institutions or a period
of social, economic or political instability. If a substantial
portion of customers rapidly or unexpectedly withdraw
their demand or term deposits or do not roll over their
term deposits upon maturity, this could have a material
adverse effect on the Group's business, financial condition
and results of operations.
--------------------------------------------------------------------
MITIGATION The Group manages its liquidity risk through the liquidity
risk management framework, which models the ability
of the Group to meet its payment obligations under both
normal conditions and crisis.
The Bank has developed a model based on the Basel III
liquidity guidelines. It maintains a solid buffer on
top of Liquidity Coverage Ratio (LCR) requirement of
100% mandated by NBG since September 2017. A strong
LCR enhances the Group's short-term resilience. Moreover,
the Bank holds a comfortable buffer on top of Net Stable
Funding Ratio (NSFR) requirement of 100%, which will
come into effect on 1 September 2019. A solid buffer
over NSFR provides stable funding sources over a longer
time span. This approach is designed to ensure that
the funding framework is sufficiently flexible to secure
liquidity under a wide range of market conditions.
Among other things, the Group maintains a diverse funding
base comprising of short-term sources of funding (including
Retail Banking and Corporate and Investment Banking
customer deposits, inter-bank borrowings and borrowings
from the NBG) and longer-term sources of funding (including
term Retail Banking and Corporate and Investment Banking
deposits, borrowing from international credit institutions,
sales and purchases of securities and long-term debt
securities).
Client deposits and notes are one of the most important
sources of funding for the Group. As of 30 June 2019,
31 December 2018 and 31 December 2017, 89.4%, 90.8%,
and 91.4%, respectively, of client deposits and notes
had contractual maturities of one year or less, of which
54.8%, 55.1%, and 56.5%, respectively, were payable
on demand. However, as of the same dates, the ratio
of net loans to client deposits and notes was 119.5%,
115.5%, and 109.4%, respectively, and the NBG liquidity
coverage ratios were 114.3%, 120.1%, and 112.4%, respectively.
--------------------------------------------------------------------
OPERATIONAL RISK, CYBER-SECURITY, INFORMATION SYSTEMS AND FINANCIAL
CRIME
PRINCIPAL RISK We are at risk of experiencing cyber-security breaches,
/ UNCERTAINTY unauthorised access to our systems and financial crime,
or failures in our banking activity processes or systems
or human error, which could disrupt our customer services,
result in financial loss, have legal or regulatory implications
and/or affect our reputation.
We are highly dependent on the proper functioning of
our risk management, internal controls and systems,
and internal processes including those related to data
protection, IT and information security in order to
manage these threats.
We may be adversely affected if we fail to mitigate
the risk of our products and services being used to
facilitate a financial crime.
--------------------------------------------------------------------
KEY DRIVERS Cyber-security threats have continued to increase over
/ TRS the past few years and we saw a number of major organisations
subject to cyber-attacks, although fortunately, our
operations were not materially affected. The external
threat profile is continuously changing and we expect
threats to continue to increase.
Over the past few years, as our operations have expanded,
we have seen an increase in electronic crimes, including
fraud, although losses have not been significant. Money
laundering (ML) and Terrorism financing (FT) risks,
which the Bank has measures in place to guard against,
continue to evolve globally. The Bank continues to face
stringent regulatory and supervisory requirements related
to the fight against ML/TF. Failure to comply with these
requirements may lead to enforcement action by the regulator,
which can result in a pecuniary penalty and negatively
impact the Group's reputation.
--------------------------------------------------------------------
MITIGATION We have an integrated control framework encompassing
operational risk management, IT systems, corporate and
other data security, each of which is managed by a separate
department.
We have an anti-money laundering (AML)/counter-terrorist
financing (CTF) framework which includes a risk-based
approach (RBA) towards the ML/FT risks, know your customer
(KYC), transaction monitoring, sanctions and transaction
screening, transaction reporting, correspondent relationship
assessment and monitoring, and training programmes.
The framework is designed to comply with the local legislation,
international standards (Financial Action Task Force
(FATF) recommendations), and international financial
sanctions programmes. We continue to enhance our AML
compliance function by strengthening the Bank's AML
compliance framework, policies and procedures (including
ML/FT risk management policy, KYC and Customer Acceptance
Policy). We have invested significant resources to further
improve our ML/FT risk management capabilities (including
transaction monitoring solutions). We have a regulatory
change management process in place ensuring timely compliance
with the new regulations.
We identify and assess operational risk categories within
our risk management framework, identify critical risk
areas or groups of operations with an increased risk
level and develop policies and security procedures to
mitigate these risks.
We have security controls in place including policies,
procedures and security technologies. We also regularly
carry out IT and information security checks internally
and with the assistance of external consultants. We
have sophisticated anti-virus protection and firewalls
to help protect against potentially malicious software.
We have increased our internal and external penetration
testing and have back-up disaster recovery and business
continuity plans in place across the Bank. We improved
access control and password protections through the
implementation of "Privileged Access Monitoring" for
employees with the highest privileged access to confidential
and customer data. We have implemented secure email
gateway solution which decreased the number of malware
attachments by 95%. We have also implemented a Security
Information and Event Management (SIEM) solution which
now gives us a complete view of the changes and events
happening in our infrastructure. Oracle database firewall
solution has been optimised. Oracle Audit Vault and
Database Firewall (AVDF) includes an enterprise quality
audit data warehouse, reporting and analysis tools,
alert framework, audit dashboard, and sophisticated
next-generation database firewall. We have created policies
with the help of Cloud Data Loss Prevention (DLP) and
now we monitor and restrict any critical data upload
on our internal communication platform including pictures,
office files, account numbers, etc. We have established
a cyber-security framework, information security risk
management framework and information security-related
policies. We have dedicated a highly qualified team
to security operations unit. We continue to invest in
technology to enhance our ability to prevent, detect
and respond to increasing and evolving threats.
The Bank's Internal Audit function provides assurance
on the adequacy and effectiveness of our risk management,
internal controls and systems in place. These types
of operational risk are on the Audit Committee's regular
agenda and are also frequently discussed at the Board
level.
--------------------------------------------------------------------
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We, the Directors, confirm that to the best of our
knowledge:
-- The interim condensed consolidated financial statements have
been prepared in accordance with International Accounting Standard
(IAS) 34 "Interim Financial Reporting" as adopted by the European
Union, and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group;
-- This Results Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year); and
-- This Results Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.8R
(disclosure of related parties' transactions and changes
therein)
After considering the Group's financial and cash flow forecasts
and all other available information and possible outcomes or
responses to events, the Board is satisfied that the Group has
adequate resources to continue in operational existence for the
foreseeable future and therefore, the Directors considered it
appropriate to adopt the going concern basis in preparing this
Results Report.
The Directors of the Group are as follows:
Neil Janin
Archil Gachechiladze
Hanna Loikkanen
Alasdair Breach
Tamaz Georgadze
Jonathan Muir
Cecil Quillen
Andreas Wolf
Véronique McCarroll
By order of the Board
Neil Janin Archil Gachechiladze
Chairman Chief Executive Officer
13 August 2019
INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
CONTENTS
INDEPENT REVIEW REPORT
Interim Condensed Consolidated Statement of Financial
Position...............................................................................................
35
Interim Condensed Consolidated Income
Statement.....................................................................................................................
36
Interim Condensed Consolidated Statement of Comprehensive
Income.....................................................................................
38
Interim Condensed Consolidated Statement of Changes in Equity
.............................................................................................
39
Interim Condensed Consolidated Statement of Cash Flows
........................................................................................................
40
SELECTED EXPLANATORY NOTES TO INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. Principal Activities
2. Basis of Preparation
3. Summary of Significant Accounting Policies
4. Discontinued Operations
5. Restatement and Reclassification
6. Segment Information
7. Cash and Cash Equivalents
8. Amounts Due from Credit Institutions
9. Investment Securities
10. Loans to Customers and Finance Lease Receivables
11. Client Deposits and Notes
12. Amounts Owed to Credit Institutions
13. Debt Securities Issued
14. Commitments and Contingencies
15. Equity
16. Net Interest Income.
17. Net Fee and Commission Income
18. Net Non-recurring Items
19. Income Tax Expense
20. Fair Value Measurements
21. Maturity Analysis of Financial Assets and Liabilities
22. Related Party Disclosures
23. Capital Adequacy
24. Events after the Reporting Period
INDEPENT REVIEW REPORT TO BANK OF GEORGIA GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report as at
and for the six months ended 30 June 2019 which comprises Interim
Condensed Consolidated Statement of Financial Position, Interim
Condensed Consolidated Income Statement, Interim Condensed
Consolidated Statement of Comprehensive Income, Interim Condensed
Consolidated Statement of Changes in Equity, Interim Condensed
Consolidated Statement of Cash Flows and related notes 1 to 24. We
have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report as at and for the six months
ended 30 June 2019 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
13 August 2019
Notes:
1. The maintenance and integrity of the Bank of Georgia Group
PLC's web site is the responsibility of the directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the financial statements
since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
As at 30 June 2019
(Thousands of Georgian Lari)
As at
------------- ------------
Notes 30 June 2019 31 December
(unaudited) 2018
------ ------------- ------------
Assets
Cash and cash equivalents 7 936,106 1,215,799
Amounts due from credit institutions 8 1,704,701 1,305,216
Investment securities 9 1,896,738 2,019,017
Loans to customers and finance
lease receivables 10 10,579,710 9,397,747
Accounts receivable and other
loans 3,688 2,849
Prepayments 36,026 44,294
Inventories 11,748 13,292
Right of use assets 105,874 -
Investment properties 178,764 151,446
Property and equipment 358,921 344,059
Goodwill 33,351 33,351
Intangible assets 93,515 83,366
Income tax assets 5,080 19,451
Other assets 149,233 126,008
Assets held for sale 40,544 42,408
------------- ------------
Total assets 16,133,999 14,798,303
============= ============
Liabilities
Client deposits and notes 11 8,855,616 8,133,853
Amounts owed to credit institutions 12 2,960,519 2,994,879
Debt securities issued 13 2,137,239 1,730,414
Lease liability 100,172 -
Accruals and deferred income 34,748 47,063
Income tax liabilities 30,361 28,855
Other liabilities 97,125 64,966
------------- ------------
Total liabilities 14,215,780 13,000,030
------------- ------------
Equity 15
Share capital 1,618 1,618
Additional paid-in capital 493,890 480,555
Treasury shares (49) (51)
Other reserves 46,744 30,515
Retained earnings 1,367,632 1,277,732
------------- ------------
Total equity attributable to shareholders
of the Group 1,909,835 1,790,369
Non-controlling interests 8,384 7,904
------------- ------------
Total equity 1,918,219 1,798,273
------------- ------------
Total liabilities and equity 16,133,999 14,798,303
============= ============
The financial statements on pages 35 to 69 were approved by the
Board of Directors on 13 August 2019 and signed on its behalf
by:
Archil Gachechiladze
Chief Executive Officer
13 August 2019
Bank of Georgia Group PLC
Registered No. 10917019
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2019
(Thousands of Georgian Lari)
For the six months
ended
---------------------------------------
Notes 30 June 30 June
2019 (unaudited) 2018 (unaudited)*
------ ------------------ -------------------
Interest income calculated using
EIR method 665,752 629,948
Other interest income 11,207 8,823
Interest income 676,959 638,771
Interest expense (308,569) (267,217)
Deposit insurance fees (3,827) (2,574)
Net interest income 16 364,563 368,980
------------------ -------------------
Fee and commission income 130,556 106,005
Fee and commission expense (45,109) (34,168)
------------------ -------------------
Net fee and commission income 17 85,447 71,837
------------------ -------------------
Net foreign currency gain 66,724 38,577
Net other (expense) income (691) 8,898
Operating income 516,043 488,292
------------------ -------------------
Salaries and other employee benefits (122,811) (102,323)
Administrative expenses (44,774) (51,885)
Depreciation and amortisation (32,983) (22,914)
Other operating expenses (2,329) (1,736)
------------------ -------------------
Operating expenses (202,897) (178,858)
------------------ -------------------
Profit from associates 442 695
Operating income before cost of
risk 313,588 310,129
------------------ -------------------
* Certain amounts do not correspond to the 2018 interim
condensed consolidated financial statements as they reflect the
adjustments made for the adoption of new standards as described in
Note 5.
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)
For the year ended 30 June 2019
(Thousands of Georgian Lari)
For the six months
ended
---------------------------------------
Notes 30 June 30 June
2019 (unaudited) 2018 (unaudited)*
------ ------------------ -------------------
Operating income before cost of
risk 313,588 310,129
------------------ -------------------
Expected credit loss /impairment
charge on
loans to customers 10 (72,553) (70,211)
Expected credit loss /impairment
charge on
finance lease receivables (1,003) (253)
Other expected credit (loss) /
recovery (1,014) 3,644
Impairment charge on other assets
and provisions (3,559) (4,520)
------------------ -------------------
Cost of risk (78,129) (71,340)
------------------ -------------------
Net operating income before non-recurring
items 235,459 238,789
------------------ -------------------
Net non-recurring items 18 (8,097) (46,823)
------------------ -------------------
Profit before income tax expense
from continuing
operations 227,362 191,966
Income tax expense 19 (18,246) (37,001)
Profit from continuing operations 209,116 154,965
================== ===================
Profit from discontinued operations 4 - 107,899
Profit for the period 209,116 262,864
================== ===================
Total profit attributable to:
- shareholders of the Group 208,154 244,106
- non-controlling interests 962 18,758
------------------ -------------------
209,116 262,864
================== ===================
Profit from continuing operations
attributable to:
- shareholders of the Group 208,154 154,422
- non-controlling interests 962 543
------------------ -------------------
209,116 154,965
================== ===================
Profit from discontinued operations
attributable to:
- shareholders of the Group - 89,684
- non-controlling interests - 18,215
- 107,899
================== ===================
Basic earnings per share: 15 4.3505 5.9469
- earnings per share from continuing
operations 4.3505 3.7620
- earnings per share from discontinued
operations - 2.1849
Diluted earnings per share: 15 4.3350 5.8783
- earnings per share from continuing
operations 4.3350 3.7187
- earnings per share from discontinued
operations - 2.1596
* Certain amounts do not correspond to the 2018 interim
condensed consolidated financial statements as they reflect the
adjustments made for the adoption of new standards as described in
Note 5.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
For the year ended 30 June 2019
(Thousands of Georgian Lari)
For the six months
ended
---------------------------------------
Notes 30 June 30 June
2019 (unaudited) 2018 (unaudited)*
------ ------------------ -------------------
Profit for the period 209,116 262,864
------------------ -------------------
Other comprehensive (loss) income from continuing
operations
Other comprehensive income (loss) from continuing
operations to be reclassified to profit or
loss in subsequent periods:
- Net change in fair value on investments
in debt instruments measured at FVOCI 12,961 (5,280)
- Realised (gain) / loss on financial assets
measured at FVOCI (6,361) 357
-Change in allowance for expected credit losses
on investments in debt instruments measured
at FVOCI reclassified to the consolidated
income statement 1,727 (702)
- Gain (loss) from currency translation differences 13,200 (5,923)
Income tax impact - (696)
------------------ -------------------
Net other comprehensive income (loss) from
continuing operations to be reclassified to
profit or loss in subsequent periods 21,527 (12,244)
Other comprehensive income from continuing
operations not to be reclassified to profit
or loss in subsequent periods:
- Revaluation of property and equipment reclassified
to investment property - 3,450
- Net gain on investments in equity instruments 185 -
designated at FVOCI
------------------ -------------------
Net other comprehensive income from continuing
operations not to be reclassified to profit
or loss in subsequent periods 185 3,450
Other comprehensive loss for the period from
discontinued operations to be reclassified
to profit or loss in subsequent periods 4 - (10,881)
Other comprehensive income (loss) for the
period, net of tax 21,712 (19,675)
------------------ -------------------
Total comprehensive income for the period
from continuing operations 230,828 146,171
Total comprehensive income for the period
from discontinued operations - 97,018
Total comprehensive income for the period 230,828 243,189
================== ===================
Total comprehensive income attributable to:
- shareholders of the Group 229,727 224,139
- non-controlling interests 1,101 19,050
------------------ -------------------
230,828 243,189
================== ===================
Total comprehensive income from continuing
operations attributable to:
- shareholders of the Group 229,727 145,336
- non-controlling interests 1,101 835
------------------ -------------------
230,828 146,171
================== ===================
Total comprehensive income from discontinued
operations attributable to:
- shareholders of the Group - 78,803
- non-controlling interests - 18,215
- 97,018
================== ===================
* Certain amounts do not correspond to the 2018 interim
condensed consolidated financial statements as they reflect the
adjustments made for the adoption of new standards as described in
Note 5.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the year ended 30 June 2019
(Thousands of Georgian Lari)
Attributable to shareholders of the
Group
-------------------------------------------------------------------------------------- ---------------- ------------
Reserves
of
disposal
group
Additional held
Share paid-in Treasury Other for Retained Non-controlling Total
capital capital shares reserves sale earnings Total interests equity
------------ ----------- --------- --------- --------- ------------ ------------ ---------------- ------------
31 December 2017 1,151 106,086 (66) 122,082 10,934 2,180,415 2,420,602 311,768 2,732,370
============ =========== ========= ========= ========= ============ ============ ================ ============
Adoption of IFRS
9 (Note 3) - - - 3,267 - (18,237) (14,970) (2,724) (17,694)
1 January 2018 1,151 106,086 (66) 125,349 10,934 2,162,178 2,405,632 309,044 2,714,676
============ =========== ========= ========= ========= ============ ============ ================ ============
Profit for the
six months
ended
30 June 2018
(unaudited) - - - - - 244,106 244,106 18,758 262,864
Other
comprehensive
income (loss)
for the six
months
ended 30 June
2018
(unaudited) - - - (17,575) - (2,392) (19,967) 292 (19,675)
Total
comprehensive
income (loss)
for the six
months ended
30 June 2018
(unaudited) - - - (17,575) - 241,714 224,139 19,050 243,189
Depreciation
of property and
equipment
revaluation
reserve, net
of tax - - - (333) - 333 - - -
Increase in
equity
arising from
share-based
payments - 70,681 38 - - - 70,719 1,014 71,733
Dividends to
shareholders
of the Group
(Note 15) - - - - - (5,412) (5,412) - (5,412)
Dilution of
interests
in subsidiaries - - - - - - - 1,876 1,876
Acquisition of
non-controlling
interests in
existing
subsidiaries - - - (5,020) - - (5,020) (8,044) (13,064)
Purchase of
treasury
shares - (93,113) (13) - - - (93,126) - (93,126)
Issue of share
capital (Note
15) 4,375,378 - - - - - 4,375,378 - 4,375,378
Capital
reduction
(Note 15) (4,375,061) (196,438) - - - 196,293 (4,375,206) - (4,375,206)
Distribution
of Investment
Business to
shareholders
of the Group* 322 575,914 - (76,153) (10,934) (1,425,742) (936,593) (315,786) (1,252,379)
30 June 2018
(unaudited) 1,790 463,130 (41) 26,268 - 1,169,364 1,660,511 7,154 1,667,665
============ =========== ========= ========= ========= ============ ============ ================ ============
31 December 2018 1,618 480,555 (51) 30,515 - 1,277,732 1,790,369 7,904 1,798,273
============ =========== ========= ========= ========= ============ ============ ================ ============
Profit for the
six months
ended
30 June 2019
(unaudited) - - - - - 208,154 208,154 962 209,116
Other
comprehensive
income for the
six months
ended
30 June 2019
(unaudited) - - - 16,229 - 5,344 21,573 139 21,712
Total
comprehensive
income for the
six months
ended
30 June 2019
(unaudited) - - - 16,229 - 213,498 229,727 1,101 230,828
Increase in
equity
arising from
share-based
payments - 37,893 13 - - - 37,906 - 37,906
Purchase of
treasury
shares - (24,558) (11) - - - (24,569) - (24,569)
Dividends to
shareholders
of the Group
(Note 15) - - - - - (123,598) (123,598) - (123,598)
Dividends of
subsidiaries
to
non-controlling
shareholders - - - - - - - (621) (621)
30 June 2019
(unaudited) 1,618 493,890 (49) 46,744 - 1,367,632 1,909,835 8,384 1,918,219
============ =========== ========= ========= ========= ============ ============ ================ ============
* Increase in additional paid in capital from distribution of
Investment Business to shareholders of the Group includes Demerger
costs in amount of GEL 23,170.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(CONTINUED)
For the year ended 30 June 2019
(Thousands of Georgian Lari)
For the six months
ended
--------------------------------------
Notes 30 June 30 June
2019 (unaudited) 2018 (unaudited)
------- ------------------ ------------------
Cash flows from operating activities
Interest received 655,576 620,479
Interest paid (292,660) (262,639)
Fees and commissions received 108,728 114,976
Fees and commissions paid (45,109) (33,839)
Net realised gain from foreign currencies 44,354 38,895
Recoveries of loans to customers previously
written off 1,727 21,793
Other income received (expense paid) 8,443 (18,883)
Salaries and other employee benefits
paid (89,147) (90,967)
General and administrative and operating
expenses paid (29,435) (64,197)
Cash flows from operating activities
from continuing operations before
changes in operating assets and liabilities 362,477 325,618
Net (increase) decrease in operating
assets
Amounts due from credit institutions (278,765) 156,427
Loans to customers and finance lease
receivables (779,163) (820,920)
Prepayments and other assets (9,271) (21,685)
Net increase (decrease) in operating
liabilities
Amounts due to credit institutions (124,375) 315,825
Debt securities issued 306,397 (77,419)
Client deposits and notes 273,561 379,874
Lease liability (1,093) -
Other liabilities (13,322) (9,432)
------------------ ------------------
Net cash flows (used in) from operating
activities from continuing operations
before income tax (263,554) 248,288
Income tax paid (2,369) (32,777)
------------------ ------------------
Net cash flows (used in) from operating
activities from continuing operations (265,923) 215,511
------------------ ------------------
Net cash flows from operating activities
of
discontinued operations - 260,166
------------------ ------------------
Net cash flows (used in) from operating
activities (265,923) 475,677
------------------ ------------------
Cash flows from (used in) investing
activities
Net sales (purchases) of investment
securities 131,599 (115,328)
Proceeds from sale of investment properties
and
assets held for sale 19,813 34,999
Proceeds from sale of property and
equipment and
intangible assets 2,913 3,292
Purchase of property and equipment
and intangible assets (50,543) (28,840)
Dividends received 210 -
------------------ ------------------
Net cash flows from (used in) investing
activities from continuing operations 103,992 (105,877)
------------------ ------------------
Net cash flows used in investing activities
of
discontinued operations - (283,621)
------------------ ------------------
Net cash flows from (used in) investing
activities 103,992 (389,498)
------------------ ------------------
For the six months
ended
--------------------------------------
Notes 30 June 30 June
2019 (unaudited) 2018 (unaudited)
------ ------------------ ------------------
Cash flows used in financing activities
Dividends paid (123,765) (5,423)
Purchase of treasury shares (24,569) (76,719)
Cash disposed as a result of Investment
Business
distribution - (78,180)
Net cash used in financing activities
from
continuing operations (148,334) (160,322)
------------------ ------------------
Net cash from financing activities
of
discontinued operations - 2,334
------------------ ------------------
Net cash used in financing activities (148,334) (157,988)
------------------ ------------------
Effect of exchange rates changes on
cash and cash equivalents 30,509 13,789
Effect of expected credit losses on 63 -
cash and cash equivalents
Net decrease in cash and cash equivalents (279,693) (58,020)
------------------ ------------------
Cash and cash equivalents, beginning
of the period 7 1,215,799 1,582,435
Cash and cash equivalents of disposal
group held for sale,
beginning of the period - 22,448
Cash and cash equivalents, end of
the period 7 936,106 1,546,863
Bank of Georgia Group PLC and Subsidiaries
Selected Explanatory Notes to Interim Condensed Consolidated
Financial Statements
(Thousands of Georgian Lari)
1. Principal Activities
Bank of Georgia Group PLC ("BOGG") is a public limited liability
company incorporated in England and Wales with registered number
10917019. BOGG holds 99.55% of the share capital of JSC Bank of
Georgia (the "Bank") as at 30 June 2019, representing the Bank's
ultimate parent company. Together with the Bank and other
subsidiaries, the Group makes up a group of companies (the "Group")
and provides banking, leasing, brokerage and investment management
services to corporate and individual customers. The shares of BOGG
("BOGG Shares") are admitted to the premium listing segment of the
Official List of the UK Listing Authority and admitted to trading
on the London Stock Exchange PLC's Main Market for listed
securities, effective 21 May 2018. The Bank is the Group's main
operating unit and accounts for most of the Group's activities.
JSC Bank of Georgia was established on 21 October 1994 as a
joint stock company ("JSC") under the laws of Georgia. The Bank
operates under a general banking license issued by the National
Bank of Georgia ("NBG"; the Central Bank of Georgia) on 15 December
1994
The Bank accepts deposits from the public and extends credit,
transfers payments in Georgia and internationally and exchanges
currencies. Its main office is in Tbilisi, Georgia. At 30 June
2019, the Bank has 276 operating outlets in all major cities of
Georgia (31 December 2018: 276). The Bank's registered legal
address is 29a Gagarini Street, Tbilisi 0160, Georgia.
On 3 July 2017 BGEO Group PLC, ("BGEO"), former ultimate holding
company of the Group, announced its intention to demerge BGEO Group
PLC into a London-listed banking business (the "Banking Business"),
Bank of Georgia Group PLC, and a London-listed investment business
(the "Investment Business"), Georgia Capital PLC.
As part of the Demerger, Bank of Georgia Group PLC was
incorporated and on 18 May 2018 issued 39,384,712 ordinary shares
in exchange for the entire issued capital of BGEO Group PLC and
became the parent company of BGEO. On 29 May 2018 the demerger
("Demerger") of the Group's investment business ("Investment
Business") to Georgia Capital PLC ("GCAP") become effective. As a
result of the Demerger, the Group distributed the investments in
the Investment Business with a fair value of GEL 1,441,552
thousands to the shareholders of the Company. In addition, BOGG has
issued and allotted a further 9,784,716 BOGG Shares (the
"Consideration Shares", equivalent to 19.9% of BOGG's issued
ordinary share capital) to GCAP in consideration for the transfer
to BOGG by GCAP of GCAP's stake in the JSC Bank of Georgia and JSC
BG Financial. As set out in the BOGG prospectus dated 26 March
2018, for as long as GCAP's percentage holding in BOGG is greater
than 9.9%, GCAP will exercise its voting rights at BOGG general
meetings in accordance with the votes cast by all other BOGG
shareholders on BOGG votes at general meetings.
BOGG's registered legal address is 84 Brook Street, London, W1K
5EH, England.
As at 30 June 2019 and 31 December 2018, the following
shareholders owned more than 3% of the total outstanding shares of
BOGG. Other shareholders individually owned less than 3% of the
outstanding shares.
As at
--------------------------------
30 June 31 December
Shareholder 2019 (unaudited) 2018
------------------ ------------
JSC Georgia Capital 19.90% 19.90%
Harding Loevner Management LP 4.93% 4.66%
JP Morgan Asset Management 3.01% 3.01%
Others 72.16% 72.43%
Total* 100.00% 100.00%
================== ============
* For the purposes of calculating percentage of shareholding,
the denominator includes total number of issued shares, which
includes shares held in the trust for the share-based compensation
purposes of the Group.
2. Basis of Preparation
General
The financial information set out in these interim condensed
consolidated financial statements does not constitute Bank of
Georgia Group PLC's statutory financial statements within the
meaning of section 434 of the Companies Act 2006. Statutory
financial statements were prepared for the year ended 31 December
2018 under IFRS, as adopted by the European Union and reported on
by BOGG's auditors and delivered to the Registrar of Companies. The
auditor's report was unqualified and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
These interim condensed consolidated financial statements of
Bank of Georgia Group PLC represent continuation of consolidated
financial statements of BGEO Group PLC prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted by
the European Union ("EU").
These interim condensed consolidated financial statements for
the six months ended 30 June 2019 were prepared in accordance with
International Accounting Standard (IAS) 34 "Interim Financial
Reporting", as adopted by the European Union, and the Disclosure
and Transparency Rules of the Financial Conduct Authority.
The preparation of the interim condensed consolidated financial
statements requires management to make estimates and assumptions
that affect the reported income and expense, assets and liabilities
and disclosure of contingencies at the date of the interim
condensed consolidated financial statements. Although these
estimates and assumptions are based on management's best judgment
at the date of the interim condensed consolidated financial
statements, actual results may differ from these estimates.
Assumptions and significant estimates in these interim condensed
consolidated financial statements are consistent with those applied
in the preparation of the Group's annual consolidated financial
statements for the year ended 31 December 2018.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
consolidated financial statements, and should be read in
conjunction with the Group's annual consolidated financial
statements as at and for the year ended 31 December 2018, signed
and authorized for release on 27 March 2019.
These interim condensed consolidated financial statements are
presented in thousands of Georgian Lari ("GEL"), except per share
amounts, which are presented in Georgian Lari, and unless otherwise
noted.
The interim condensed consolidated financial statements are
unaudited, reviewed by the auditors and their review conclusion is
included in this report.
Going concern
The Board of Directors of BOGG has made an assessment of the
Group's ability to continue as a going concern and is satisfied
that it has the resources to continue in business for a period of
at least 12 months from the date of approval of the interim
condensed consolidated financial statements. Furthermore,
management is not aware of any material uncertainties that may cast
significant doubt upon the Group's ability to continue as a going
concern for the foreseeable future. Therefore, the interim
condensed consolidated financial statements continue to be prepared
on the going concern basis.
3. Summary of Significant Accounting Policies
The accounting policies and methods of computation applied in
the preparation of these interim condensed consolidated financial
statements are consistent with those disclosed in the annual
consolidated financial statements of the Group as at and for the
year ended 31 December 2018, except for the adoption of new
standards effective as of 1 January 2019.
The nature and the effect of these changes are disclosed
below.
Adoption of IFRS 16
The Group has adopted IFRS 16 from the mandatory adoption date
of 1 January 2019. The Group has applied the new standard using a
modified retrospective approach with no initial application effect
on retained earnings as at 1 January 2019. As a result, the Group
did not restate comparative amounts for the year prior to the first
adoption date. The standard was applied to contracts that were
previously identified as leases in accordance with IAS 17 and IFRIC
4.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the Group's incremental borrowing
rates as of 1 January 2019. The weighted average incremental
borrowing rate applied to the lease liabilities on 1 January 2019
was 5%.
Right-of-use asset was measured on transition at an amount equal
to the lease liability, adjusted by the amount of any prepaid
amounts recognized immediately before the date of initial
application. As a result, the Group did not recognize any
transition effect on its retained earnings on 1 January 2019.
The effect of transition to IFRS 16 on the Group's financial
statements was as follows:
Effect of
transition
to IFRS 16
------------
Right of use assets 89,869
Prepayments reclassified to right
of use assets (14,352)
Lease liability 75,517
The below table shows the reconciliation between the operating
lease commitments disclosed by the Group as at 31 December 2018 and
the Lease liabilities recognized under the new standard as at 1
January 2019.
Lease liabilities recognised as
at 1 January 2019 75,517
Effect of discounting (using the incremental borrowing
rate as at 1 January 2019) 56,055
Recognition exemption for:
- Short-term leases 729
- Leases of low-value assets 191
Operating lease commitment at 31
December 2018 as disclosed in the
Group's consolidated financial statements 132,492
========
Lease contracts
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. The Group considers the commencement date of the
lease the date on which the lessor makes an underlying asset
available for use to the Group. If the lease contract contains
several lease components, the Group allocates the consideration in
the contact to each lease component on the basis of their relative
stand-alone prices and accounts for them separately.
The Group's leasing activities include the leases of service
centres, ATM spaces and warehouses. Lease payments are fixed in
most cases. The contacts don't generally carry extension or
termination options for the lease term and do not impose any
covenants.
3. Summary of Significant Accounting Policies (continued)
Adoption of IFRS 16 (continued)
Recognition of right of use assets and lease liability
Until the 2018 financial year, leases of property and equipment
were classified as either finance or operating leases. Payments
made under operating leases were charged to profit or loss on a
straight-line basis over the period of the lease.
Under the new standard, the Group recognizes a right of use
asset and a lease liability at the lease commencement date. The
right of use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial
direct costs incurred and an estimated amount for dismantling
costs, if any. The right of use asset is subsequently depreciated
using the straight-line method over the lease term. The Group
applies the cost model to right of use assets, except for those
assets that meet the definition of investment property, in which
case the revaluation model is applied. As at 30 June 2019, there
were no right of use assets meeting the definition of investment
property.
The lease liability is initially measured at the present value
of the future lease payments discounted using the Group's
incremental borrowing rate.
The lease liability is subsequently measured at amortized cost
using the effective interest method.
Recognition exemptions
The Group applies the recognition exemptions on lease contracts
for which the lease term ends within 12 months as of the date of
initial application, and lease contracts for which the underlying
asset is of low value. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis
over the lease term.
Modifications of lease contracts
If the lease contract is modified by either changing the scope
of the lease, or the consideration for a lease that was not part of
the original terms and conditions of the lease, the Group
determines whether the modification results in:
-- a separate lease; or
-- a change in the accounting for the existing lease.
The Group accounts for a lease modification as a separate lease
when both of the following conditions are met:
-- the modification increases the scope of the lease by adding
the right to use one or more underlying assets; and
-- the consideration for the lease increases commensurate with
the stand-alone price for the increase in scope and any adjustments
to that stand-alone price reflect the circumstances of the
particular contract.
For the lease modifications that are not accounted as separate
leases, the Group re-measures the lease liability by:
-- decreasing the carrying amount of the right of use asset to
reflect the partial or full termination of the lease for lease
modifications that decrease the scope of the lease. The Group
recognizes in profit or loss any gain or loss relating to the
partial or full termination of the lease; or
-- making a corresponding adjustment to the right of use asset
for all other lease modifications.
Amendments effective from 1 January 2019
IAS 12, Income Taxes
The amendment to IAS 12 clarifies that the income tax
consequences (if any) of dividends as defined in IFRS 9 (i.e.
distributions of profits to holders of equity instruments in
proportion to their holdings) must be recognised:
-- at the same time as the liability to pay those dividends is recognised; and
-- in profit or loss, other comprehensive income, or the
statement of changes in equity according to where the entity
originally recognised the past transactions or events that
generated the distributable profits from which the dividends are
being paid.
The amendment did not have material effect on Group's interim
condensed consolidated financial statements.
4. Discontinued Operations
In 2018 the Group classified the Investment Business as disposal
group held for distribution and its results of operations were
reported under "discontinued operations" as a single amount in the
consolidated income statement. As a result, discontinued operations
were further adjusted to reflect the whole Investment Business
classification as disposal group held for distribution.
On 29 May 2018 the Demerger became effective and the Investment
Business was distributed to the shareholders of the Group. For
details refer to Note 1 and Note 15.
Below are presented income statement line items of the Group
excluding intra-group elimination attributable to discontinued
operations:
Period ended
29 May
2018
-------------
Net insurance premiums earned 42,954
Net insurance claims incurred (24,945)
-------------
Gross insurance profit 18,009
-------------
Healthcare and pharma revenue 326,655
Cost of healthcare and pharma services (225,159)
-------------
Gross healthcare and pharma profit 101,496
-------------
Real estate revenue 47,787
Cost of real estate (38,708)
-------------
Gross real estate profit 9,079
-------------
Utility and energy revenue 53,999
Cost of utility and energy (15,635)
-------------
Gross utility and energy profit 38,364
-------------
Gross other profit 15,678
Revenue 182,626
-------------
Salaries and other employee benefits (54,711)
Administrative expenses (38,109)
Other operating expenses (3,828)
Operating expenses (96,648)
-------------
EBITDA 85,978
-------------
Net gains from disposal of investment businesses 90,653
Depreciation and amortisation (15,192)
Net foreign currency gain 12,421
Interest income 8,854
Interest expense (34,623)
-------------
Net operating income before non-recurring items and
impairment 148,091
-------------
Impairment charge on insurance premiums receivable,
accounts receivable, other assets and provisions (5,078)
Net non-recurring items (31,690)
-------------
Profit before income tax expense 111,323
Income tax expense (1,186)
Profit for the period 110,137
=============
4. Discontinued Operations (continued)
The difference between profit for the year and profit from
discontinued operations presented in consolidated income statements
is due to intra-group eliminations in amount of GEL 2,238 net
income for the year ended 31 December 2018.
Below are presented other comprehensive statement line items of
the Group attributable to discontinued operations for the year
ended 31 December 2018:
Period ended
29 May
2018
-------------
Other comprehensive loss
Other comprehensive loss from discontinuing operations
to be
reclassified to profit or loss in subsequent periods:
- Net change in fair value on investments in debt
instruments measured at FVOCI (695)
- Realised loss on financial assets measured at FVOCI
reclassified to
the consolidated income statement 650
- Loss from currency translation differences (10,836)
-------------
Net other comprehensive loss from discontinued operations
to be reclassified to
profit or loss in subsequent periods (10,881)
-------------
Other comprehensive loss for the period from discontinued
operations (10,881)
-------------
Total comprehensive income for the period from discontinued
operations 97,018
=============
5. Restatement and Reclassification
Changes in accounting policies
The Group has adopted IFRS 9 from the mandatory adoption date of
1 January 2018. As a result, in the annual consolidated financial
statements of the Group as at and for the year ended 31 December
2018, the Group recognized the reinstatement effect of previously
written-off gross loans to customers due to the change in write-off
policy, both on retained earnings as at 1 January 2018 and
throughout the consolidated income statement of the Group for the
year ended 31 December 2018. However, the reinstatement effect was
not recognized within the interim condensed consolidated financial
statements of the Group as at and for the six months ended 30 June
2018. Therefore, the comparative amounts have been restated within
these interim condensed consolidated financial statements of the
Group as at and for the six months ended 30 June 2019.
Below are presented income statement line items of the Group
affected by the reinstatement effect:
Consolidated income statement for the As previously Effect As currently
six months ended 30 June 2018 reported of the reported
change
-------------- -------- -------------
Interest income calculated using EIR
method 629,570 378 629,948
Net foreign currency gain 39,916 (1,339) 38,577
Expected credit loss /impairment charge
on
loans to customers (76,684) 6,473 (70,211)
Income tax expense (36,565) (436) (37,001)
Change in the presentation of financial statements
As a result of the Demerger, the Group has updated certain line
items' titles within these interim condensed consolidated financial
statements of the Group as at and for the six months ended 30 June
2019, in order to be in compliance with the current common practice
evidenced throughout the financial institutions.
Below are presented income statement line items of the Group
affected by the change:
Consolidated income statement for the As previously Reclassification As reclassified
six months ended 30 June 2018 reported
-------------- ----------------- ----------------
Revenue 488,292 (488,292) -
Operating income - 488,292 488,292
Operating income before cost of credit
risk 310,129 (310,129) -
Operating income before cost of risk - 310,129 310,129
Cost of credit risk (71,340) 71,340 -
Cost of risk - (71,340) (71,340)
6. Segment Information
The Group disaggregated revenue from contracts with customers by
products and services for each of our segments, as the Group
believes it best depicts how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic
factors.
The Group has aggregated the Investment Business segments and
presented them as discontinued operations in one single
segment.
For management purposes, the Group is organised into the
following operating segments based on products and services as
follows:
RB - Retail Banking (excluding Retail Banking of BNB) -
principally provides consumer loans, mortgage loans, overdrafts,
credit cards and other credit facilities, funds transfers and
settlement services, and handling of customers' deposits for both
individuals and legal entities, The Retail Banking business targets
the emerging retail, mass retail and mass affluent segments,
together with small and medium enterprises and micro
businesses;
CIB - Corporate and Investment Banking - comprises Corporate
Banking and Investment Management operations in Georgia. Corporate
Banking principally provides loans and other credit facilities,
funds transfers and settlement services, trade finance services,
documentary operations support and handles saving and term deposits
for corporate and institutional customers. The Investment
Management business principally provides private banking services
to high net worth clients;
BNB - Comprising JSC Belarusky Narodny Bank, principally
providing retail and corporate banking services in Belarus.
Other BB - Comprising of holding companies: providing
compliance, governance services for the Group's operating
businesses and several small corporate and social responsibility
companies.
Management monitors the operating results of its segments
separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance, as
explained in the table below, is measured in the same manner as
profit or loss in the consolidated income statement.
Transactions between operating segments are on an arm's length
basis in a similar manner to transactions with third parties.
The Group's operations are primarily concentrated in Georgia,
except for BNB, which operates in Belarus.
No revenue from transactions with a single external customer or
counterparty amounted to 10% or more of the Group's total operating
income during the six months ended 30 June 2019 and 30 June
2018.
6. Segment Information (continued)
The following table presents the income statement and certain
asset and liability information regarding the Group's operating
segments as at and for the six months ended 30 June 2019:
Retail Corporate BNB Other Eliminations Group
banking investment Total
banking
----------- -------- --------
Net interest income 259,154 93,138 12,945 (686) 12 364,563
Net fee and commission income 67,039 15,264 3,611 (478) 11 85,447
Net foreign currency gain
(loss) 31,309 28,771 8,734 (2,090) - 66,724
Net other (expense) income (1,582) 994 314 55 (472) (691)
Operating income 355,920 138,167 25,604 (3,199) (449) 516,043
---------- ----------- -------- -------- ------------ ----------
Operating expenses (139,060) (43,120) (16,737) (4,429) 449 (202,897)
Profit from associates 442 - - - - 442
Operating income (expense)
before cost of risk 217,302 95,047 8,867 (7,628) - 313,588
Cost of risk (65,930) (8,398) (2,977) (824) - (78,129)
Net operating income (loss)
before non-recurring items 151,372 86,649 5,890 (8,452) - 235,459
---------- ----------- -------- -------- ------------ ----------
Net non-recurring expense/loss (3,220) (1,176) (63) (3,638) - (8,097)
Profit (loss) before income
tax 148,152 85,473 5,827 (12,090) - 227,362
---------- ----------- -------- -------- ------------ ----------
Income tax expense (11,047) (6,249) (950) - - (18,246)
Profit (loss) for the period 137,105 79,224 4,877 (12,090) - 209,116
---------- ----------- -------- -------- ------------ ----------
Assets and liabilities
Total assets 10,252,786 5,082,924 809,108 84,196 (95,015) 16,133,999
Total liabilities 9,132,074 4,351,800 707,446 119,475 (95,015) 14,215,780
Other segment information
Property and equipment 34,850 3,738 693 44 - 39,325
Intangible assets 14,156 1,316 861 - - 16,333
---------- ----------- -------- -------- ------------ ----------
Capital expenditure 49,006 5,054 1,554 44 - 55,658
Depreciation & amortisation (27,779) (3,634) (1,568) (2) - (32,983)
========== =========== ======== ======== ============ ==========
6. Segment Information (continued)
The following table presents the income statement and certain
asset and liability information regarding the Group's operating
segments as at and for the six months ended 30 June 2018:
Banking Business
-----------
Retail Corporate BNB Other Banking Banking Investment Inter-
banking investment Banking Business Business Business Business Group
banking Business Eliminations Eliminations Total
---------- ----------- --------- --------- ------------- ----------- ----------- ------------- -----------
Net interest
income 273,938 79,951 12,898 26 18 366,831 - 2,149 368,980
Net fee and
commission
income 55,292 12,554 4,780 (276) 7 72,357 - (520) 71,837
Net foreign
currency
gain (loss) 14,929 16,903 7,459 (39) - 39,252 - (675) 38,577
Net other
income 4,770 4,873 309 - (501) 9,451 - (553) 8,898
Operating
income 348,929 114,281 25,446 (289) (476) 487,891 - 401 488,292
---------- ----------- --------- --------- ------------- ----------- ----------- ------------- -----------
Operating
expenses (127,661) (36,453) (15,905) (980) 476 (180,523) - 1,665 (178,858)
Profit from
associates 695 - - - - 695 - - 695
Operating
income
(expense)
before
cost of risk 221,963 77,828 9,541 (1,269) - 308,063 2,066 310,129
---------- ----------- --------- --------- ------------- ----------- ----------- ------------- -----------
Operating
income
(expense)
before
cost of risk 221,963 77,828 9,541 (1,269) - 308,063 - 2,066 310,129
Cost of risk (58,072) (10,246) (3,022) - - (71,340) - - (71,340)
Net operating
income (loss)
before
non-recurring
items 163,891 67,582 6,519 (1,269) - 236,723 - 2,066 238,789
---------- ----------- --------- --------- ------------- ----------- ----------- ------------- -----------
Net
non-recurring
(expense/loss)
income/gain (29,073) (11,144) (706) (6,072) - (46,995) - 172 (46,823)
Profit (loss)
before income
tax expense
from
continuing
operations 134,818 56,438 5,813 (7,341) - 189,728 - 2,238 191,966
---------- ----------- --------- --------- ------------- ----------- ----------- ------------- -----------
Income tax
expense (24,510) (10,993) (1,498) - - (37,001) - - (37,001)
Profit (loss)
for the period
from
continuing
operations 110,308 45,445 4,315 (7,341) - 152,727 - 2,238 154,965
---------- ----------- --------- --------- ------------- ----------- ----------- ------------- -----------
Profit (loss)
from
discontinued
operations - - - - - - 110,137 (2,238) 107,899
Profit (loss)
for the period 110,308 45,445 4,315 (7,341) - 152,727 110,137 - 262,864
---------- ----------- --------- --------- ------------- ----------- ----------- ------------- -----------
Assets and
liabilities
Total assets 9,571,500 4,559,037 680,550 137,203 (149,987) 14,798,303 - - 14,798,303
Total
liabilities 8,455,246 3,955,420 595,287 144,064 (149,987) 13,000,030 - - 13,000,030
Other segment
information
Property and
equipment 17,058 1,967 808 - - 19,833 127,834 - 147,667
Intangible
assets 9,361 1,125 458 51 - 10,995 559 - 11,554
Capital
expenditure 26,419 3,092 1,266 51 - 30,828 128,393 - 159,221
Depreciation
& amortisation (19,720) (2,578) (616) - - (22,914) - - (22,914)
7. Cash and Cash Equivalents
As at
30 June 31 December
2019 (unaudited) 2018
Cash on hand 474,800 502,060
Current accounts with central banks,
excluding obligatory reserves 204,892 298,788
Current accounts with credit institutions 213,389 243,622
Time deposits with credit institutions
with maturities of up to 90 days 43,104 171,471
Cash and cash equivalents 936,185 1,215,941
Less - Allowance for expected credit
loss (79) (142)
Cash and cash equivalents 936,106 1,215,799
As at 30 June 2019, GEL 233,667 (31 December 2018: GEL 316,083)
was placed on current and time deposit accounts with
internationally recognised OECD banks and central banks that are
the counterparties of the Group in performing international
settlements. The Group earned up to 0.68% interest per annum on
these deposits (31 December 2018: up to 3.00%). Management does not
expect any losses from non-performance by the counterparties
holding cash and cash equivalents, and there are no material
differences between their book and fair values.
During the period expected credit recovery recognized on cash
and cash equivalents amounted GEL 63 (30 June 2018: expected credit
loss of GEL 35).
8. Amounts Due from Credit Institutions
As at
30 June 31 December
2019 (unaudited) 2018
Obligatory reserves with central
banks 1,676,487 1,244,885
Time deposits with maturities of
more than 90 days 16,601 43,484
Deposits pledged as security for
open commitments 5,298 -
Inter-bank loan receivables 7,067 17,586
Amounts due from credit institutions 1,705,453 1,305,955
===========
Less - Allowance for expected credit
loss (752) (739)
Amounts due from credit institutions 1,704,701 1,305,216
===========
Obligatory reserves with central banks represent amounts
deposited with the NBG and National Bank of the Republic of Belarus
(the "NBRB"). Credit institutions are required to maintain cash
deposits (obligatory reserve) with the NBG and with the NBRB, the
amount of which depends on the level of funds attracted by the
credit institution. The Group's ability to withdraw these deposits
is restricted by regulation. The Group earned up to 0.50% interest
on obligatory reserves with NBG and NBRB for the years ended 30
June 2019 (31 December 2018: 1.00%).
As at 30 June 2019, inter-bank loan receivables include GEL
7,067 (31 December 2018: GEL 17,586) placed with non-OECD
banks.
During the period expected credit loss recognized on amounts due
from credit institutions amounted GEL 13 (30 June 2018: expected
credit loss of GEL 124).
9. Investment Securities
As at
30 June 31 December
2019 (unaudited) 2018
Investment securities measured at
FVOCI - debt instruments 1,894,171 2,018,061
Investment securities designated
as at FVOCI - equity investments 2,567 956
Investment securities 1,896,738 2,019,017
As at
30 June 31 December
2019 (unaudited) 2018
Georgian ministry of Finance treasury
bonds* 830,887 927,594
Georgian ministry of Finance treasury
bills** 73,467 100,111
Certificates of deposit of central
banks 83,782 71,156
Other debt instruments*** 906,035 919,200
Investment securities measured at
FVOCI - debt instruments 1,894,171 2,018,061
* GEL 342,456 was pledged for short-term loans from the NBG (31
December 2018: GEL 573,517).
** GEL 57,152 was pledged for short-term loans from the NBG (31
December 2018: Nil).
*** GEL 484,895 was pledged for short-term loans from the NBG
(31 December 2018: GEL 674,616).
Other debt instruments as at 30 June 2019 mainly comprises bonds
issued by the European Bank for Reconstruction and Development of
GEL 283,878 (31 December 2018: GEL 249,659), GEL-denominated bonds
issued by The Netherlands Development Finance Company of GEL
163,688 (31 December 2018: 163,454), GEL-denominated bonds issued
by Black Sea Trade and Development Bank of GEL 146,609 (31 December
2018: GEL 136,504), GEL-denominated bonds issued by International
Finance Corporation GEL 110,539 (31 December 2018: GEL 110,545),
and GEL-denominated bonds issued by Asian Development Bank of GEL
65,008 (31 December 2018: GEL 65,145).
During the period expected credit loss recognised on investment
securities measured at FVOCI - debt instruments amounted GEL 1,727
(30 June 2018: expected credit loss of GEL 703), which was mainly
due to the increase in gross carrying value for the period.
10. Loans to Customers and Finance Lease Receivables
As at
30 June 31 December
2019 (unaudited) 2018
Commercial loans 3,579,098 2,956,446
Consumer loans 1,958,767 1,876,888
Micro and SME loans 2,328,948 2,129,215
Residential mortgage loans 2,826,778 2,549,453
Gold - pawn loans 84,202 80,770
Loans to customers at amortised cost,
gross 10,777,793 9,592,772
Less - Allowance for expected credit
loss (333,540) (311,843)
Loans to customers at amortised cost,
net 10,444,253 9,280,929
Finance lease receivables, gross 138,313 110,087
Less - Allowance for expected credit
loss (2,856) (1,648)
Finance lease receivables, net 135,457 108,439
Loans and advances to customers at
FVTPL - 8,379
Total loans to customers and finance
lease receivables 10,579,710 9,397,747
10. Loans to Customers and Finance Lease Receivables (continued)
As at 30 June 2019, loans to customers carried at GEL 554,990
(31 December 2018: GEL 357,342) were pledged for short-term loans
from the NBG.
Allowance for loan impairment
Gross loans and impairment by stages of impairment are as
follows:
30 June 2019 (unaudited)
Purchased
Stage Stage Stage or credit
1 2 3 impaired Total
Commercial loans 2,960,836 332,329 278,424 7,509 3,579,098
Residential mortgage
loans 2,556,456 131,648 112,526 26,148 2,826,778
Consumer loans 1,715,457 109,253 126,723 7,334 1,958,767
Micro and SME loans 2,089,316 97,493 140,282 1,857 2,328,948
Gold - pawn loans 78,617 780 4,805 - 84,202
Loans to customers,
gross 9,400,682 671,503 662,760 42,848 10,777,793
30 June 2019 (unaudited)
Purchased
Stage Stage Stage or credit
1 2 3 impaired Total
Commercial loans (9,083) (2,619) (171,845) (550) (184,097)
Residential mortgage
loans (523) (147) (7,980) (1,676) (10,326)
Consumer loans (16,883) (7,558) (60,690) (296) (85,427)
Micro and SME loans (14,437) (6,376) (31,904) (744) (53,461)
Gold - pawn loans (15) (4) (210) - (229)
Allowance for loan
impairment (40,941) (16,704) (272,629) (3,266) (333,540)
31 December 2018
Purchased
Stage Stage Stage or credit
1 2 3 impaired Total
Commercial loans 2,379,160 327,830 242,419 7,037 2,956,446
Residential mortgage
loans 2,351,207 86,809 88,249 23,188 2,549,453
Consumer loans 1,650,080 101,146 121,191 4,471 1,876,888
Micro and SME loans 1,913,964 85,311 127,705 2,235 2,129,215
Gold - pawn loans 75,483 541 4,746 - 80,770
Loans to customers,
gross 8,369,894 601,637 584,310 36,931 9,592,772
31 December 2018
Purchased
Stage Stage Stage or credit
1 2 3 impaired Total
Commercial loans (6,119) (5,552) (156,384) (523) (168,578)
Residential mortgage
loans (238) (31) (5,383) (1,089) (6,741)
Consumer loans (19,654) (9,355) (62,143) (389) (91,541)
Micro and SME loans (9,439) (5,453) (29,726) (70) (44,688)
Gold - pawn loans (12) - (283) - (295)
Allowance for loan
impairment (35,462) (20,391) (253,919) (2,071) (311,843)
10. Loans to Customers and Finance Lease Receivables (continued)
Allowance for loan impairment (continued)
Expected credit loss/impairment charge on loans to customers
For the six months ended
30 June 2019 30 June 2018
(unaudited) (unaudited)
Commercial loans 8,044 12,365
Consumer loans 36,237 51,143
Micro and SME loans 24,298 4,712
Residential mortgage loans 3,917 1,991
Gold - pawn loans 57 -
Expected credit loss 72,553 70,211
During the six months ending 30 June 2019 loans to customers
written off amounted GEL 70,980 (for the six months ending 30 June
2018: GEL 124,626 ) and recoveries of amounts previously written
off amounted GEL 18,752 (for the six months ending 30 June 2018:
GEL 18,518 ).
Concentration of loans to customers
As at 30 June 2019, the concentration of loans granted by the
Group to the ten largest third party borrowers comprised GEL
988,990 accounting for 9% of the gross loan portfolio of the Group
(31 December 2018: GEL 952,411 and 10% respectively). An allowance
of GEL 80,247 (31 December 2018: GEL 45,658) was established
against these loans.
As at 30 June 2019, the concentration of loans granted by the
Group to the ten largest third party group of borrowers comprised
GEL 1,309,414 accounting for 12% of the gross loan portfolio of the
Group (31 December 2018: GEL 1,231,913 and 13% respectively). An
allowance of GEL 4,386 (31 December 2018: GEL 43,687) was
established against these loans.
As at 30 June 2019 and 31 December 2018, loans were principally
issued within Georgia, and their distribution by industry sector
was as follows:
As at
30 June 31 December
2019 (unaudited) 2018
Individuals 6,043,389 5,509,279
Manufacturing 1,227,277 1,101,649
Trade 1,181,332 1,032,155
Real estate 542,344 436,450
Construction 517,599 366,009
Hospitality 256,185 301,415
Service 207,787 128,535
Transport & communication 140,065 132,588
Mining and quarrying 138,402 127,835
Electricity, gas and water supply 80,838 76,574
Financial intermediation 68,015 62,180
Other 374,560 326,482
Loans to customers, gross 10,777,793 9,601,151
Less - Allowance for expected credit loss (333,540) (311,843)
Loans to customers, net 10,444,253 9,289,308
Loans have been extended to the following types of
customers:
As at
30 June 31 December
2019 (unaudited) 2018
Private companies 4,732,388 4,089,095
Individuals 6,043,389 5,509,279
State-owned entities 2,016 2,777
Loans to customers, gross 10,777,793 9,601,151
Less - Allowance for expected credit
loss (333,540) (311,843)
Loans to customers, net 10,444,253 9,289,308
11. Client Deposits and Notes
The amounts due to customers include the following:
As at
30 June 31 December
2019 (unaudited) 2018
Time deposits 4,514,369 4,061,604
Current accounts 4,341,247 4,072,249
Client deposits and notes 8,855,616 8,133,853
Held as security against letters
of credit and guarantees (Note14) 115,609 125,393
At 30 June 2019, amounts due to customers of GEL 807,360 (9%)
were due to the ten largest customers (31 December 2018: GEL
962,322 (12%)).
Amounts due to customers include accounts with the following
types of customers:
As at
30 June 31 December
2019 (unaudited) 2018
Individuals 5,636,954 4,832,966
Private enterprises 2,821,497 2,760,667
State and state-owned entities 397,165 540,220
Client deposits and notes 8,855,616 8,133,853
The breakdown of customer accounts by industry sector is as
follows:
As at
30 June 31 December
2019 (unaudited) 2018
Individuals 5,636,954 4,832,966
Trade 530,248 536,619
Construction 490,040 572,628
Financial intermediation 396,845 397,638
Government services 379,167 508,410
Transport & communication 360,962 342,745
Service 292,531 300,671
Manufacturing 253,435 178,619
Real estate 125,697 101,020
Hospitality 77,484 40,216
Electricity, gas and water supply 56,879 95,987
Other 255,374 226,334
Client deposits and notes 8,855,616 8,133,853
12. Amounts Owed to Credit Institutions
Amounts due to credit institutions comprise:
As at
30 June 31 December
2019 (unaudited) 2018
Borrowings from international credit
institutions 1,078,863 989,740
Short-term loans from the National
Bank of Georgia 1,001,496 1,118,957
Time deposits and inter-bank loans 356,579 214,479
Correspondent accounts 93,140 118,692
Other borrowings* 143,414 133,830
2,673,492 2,575,698
Non-convertible subordinated debt 287,027 419,181
Amounts due to credit institutions 2,960,519 2,994,879
* Other borrowings represent borrowings from JSC Georgia Capital
on arm's length terms.
During the six months ended 30 June 2019, the Group paid up to
6.50% on US$ borrowings from international credit institutions (six
months ended 30 June 2018: up to 5.96%). During the six months
ended 30 June 2019, the Group paid up to 10.40% on Dollar
subordinated debt (six months ended 30 June 2018: up to 9.26%).
Some long-term borrowings from international credit institutions
are received upon certain conditions (the "Lender Covenants") that
the Group maintains different limits for capital adequacy,
liquidity, currency positions, credit exposures, leverage and
others. At 30 June 2019 and 31 December 2018 the Group complied
with all the Lender Covenants of the significant borrowings from
international credit institutions.
13. Debt Securities Issued
Debt securities issued comprise:
As at
30 June 31 December
2019 (unaudited) 2018
Eurobonds and notes issued 1,413,429 1,349,853
Additional Tier 1 capital notes issued 289,701 -
Local bonds 58,024 57,389
Certificates of deposit 376,085 323,172
Debt securities issued 2,137,239 1,730,414
On 21 March 2019, JSC Bank of Georgia successfully priced
inaugural US$ 100 million offering of 11.125% Additional Tier 1
Capital Perpetual Subordinated Notes callable after 5.25 years and
on every subsequent interest payment date, subject to prior consent
of the National Bank of Georgia (the "Notes"). The Notes are being
issued in accordance with Regulation S and sold at an issue price
of 100.00%.
14. Commitments and Contingencies
Legal
Sai-invest
As at 30 June 2019, the Bank was engaged in a litigation
proceeding with Sai-Invest LLC in relation to a deposit pledge in
the amount of EUR 7 million used to reduce the outstanding loan of
LTD Sport Invest towards JSC Bank of Georgia. The Bank's management
is of the opinion that the probability of incurring material losses
on this claim is low, and accordingly no provision has been made in
these consolidated financial statements.
Rustavi Azoti
At 30 June 2019, the Bank was engaged in litigation proceedings
in Tbilisi City Court with East-West United Bank S.A., Agrochim
S.A. and Systema Holding Limited (claimants) in relation to
foreclosure on security (movable and immovable property and
intangible assets) through auction on a defaulted loan of Rustavi
Azoti LLC. Claimants request reinstatement of the title to the
property owned by Rustavi Azoti LLC and compensation of damages in
the amount of around USD 93.6m. No provision has been made as the
Bank's management believes that the claim is groundless and it is
extremely unlikely that any significant loss will eventuate from
this claim.
At 30 June 2019, BGEO Group Limited (former BGEO Group PLC), was
engaged in litigation proceedings in the High Court of Justice of
England and Wales (Commercial Court) with Roman Pipia (claimant),
who asserts that BGEO Group Limited is liable to the claimant under
Georgian law in relation to the loss of the Rustavi Azoti plant,
which he alleges he formerly beneficially owned. The Bank had
initiated the sale of collateral pledged by Rustavi Azoti LLC and
its parent company to secure loans granted by the Bank following
default by the borrowers in 2016. Based on the revised claim
submitted in December 2018, the claimed amount is around USD 286.5m
(alternatively USD 291m). No provision has been made as the Group
believes that the claim is groundless and it is extremely unlikely
that any significant loss will eventuate from this claim.
In the ordinary course of business, the Group and BOGG are
subject to legal actions and complaints. Management believes that
the ultimate liability, if any, arising from such actions or
complaints will not have a material adverse effect on the financial
condition or the results of future operations of the Group or
BOGG.
Financial commitments and contingencies
As at 30 June 2019 and 31 December 2018 the Group's financial
commitments and contingencies comprised the following:
As at
30 June 31 December
2019 (unaudited) 2018
Credit-related commitments
Guarantees issued 1,123,051 1,015,566
Undrawn loan facilities 256,854 278,254
Letters of credit 46,412 42,009
1,426,317 1,335,829
Less - Cash held as security against
letters of credit and
guarantees (Note 11) (115,609) (125,393)
Less - Provisions (5,298) (4,582)
Operating lease commitments
Not later than 1 year 3,528 29,397
Later than 1 year but not later than
5 years 1,845 74,341
Later than 5 years 225 28,754
5,598 132,492
Capital expenditure commitments 6,245 6,616
During the period expected credit recovery recognized on
financial guarantees and letter of credits amounted GEL 663 (30
June 2018: expected credit loss of GEL 2,852).
15. Equity
Share capital
As at 30 June 2019, issued share capital comprised 49,169,428
common shares of BOGG (31 December 2018: 49,169,428 of BOGG), all
of which were fully paid. Each share has a nominal value of one (1)
British Penny. Shares issued and outstanding as at 30 June 2019 are
described below:
Number Amount
of shares of shares
Ordinary Ordinary
31 December 2017 (BGEO Group PLC) 39,384,712 1,151
Replacement of BGEO as the Group's
parent (39,384,712) (1,151)
Establishement and share issue by
the new parent company 39,384,714 4,375,378
Capital reduction - (4,373,910)
Issue of share capital in course
of demerger 9,784,716 322
30 June 2018 (Bank of Georgia Group
PLC) (unaudited) 49,169,430 1,790
31 December 2018 (Bank of Georgia
Group PLC) 49,169,428 1,618
30 June 2019 (Bank of Georgia Group
PLC) (unaudited) 49,169,428 1,618
As part of the Demerger, Bank of Georgia Group PLC was
established and on 18 May 2018 issued 39,384,712 additional
ordinary shares at nominal value of GBP32 each in exchange for the
entire issued capital of BGEO Group PLC and became the parent
company of BGEO. On 23 May 2018 the Company undertook a planned
reduction of capital to create distributable reserves for Bank of
Georgia Group PLC.
Following the reduction of capital, the nominal value of the
Company's ordinary shares was reduced to one (1) British Penny from
thirty-two (32) British Pounds. As a result of the capital
reduction, resources which became distributable to the shareholders
were fully reclassified to retained earnings. The reduction of
capital was a legal and accounting adjustment without any changes
in assets and liabilities of the Group.
15. Equity (continued)
Share capital (continued)
On 29 May 2018 as a result of the Demerger the Company
distributed its investment in the Investment Business with a fair
value of GEL 1,441,552 thousands to the shareholders of BOGG.
On 29 May 2018 BOGG issued additional 9,784,716 ordinary shares
at nominal value of one (1) British Penny each.
Treasury shares
Treasury shares are held by the Group solely for the purpose of
future employee share-based compensation.
The number of treasury shares held by the Group as at 30 June
2019 comprised 1,499,541 (31 December 2018: 1,543,281), with
nominal amount of GEL 49 (31 December 2018: GEL 51).
Dividends
Shareholders are entitled to dividends in British Pounds
Sterling.
On 17 May 2019, the Shareholders of Bank of Georgia Group PLC
declared an final dividend for 2018 of Georgian Lari 2.55 per
share. The currency conversion date was set at 31 May 2019, with
the official GEL: GBP exchange rate of 3.5337, resulting in a
GBP-denominated final dividend of 0.7216 per share. Payment of the
total GEL 123,598 final dividends was received by shareholders on
28 June 2019.
On 9 July 2018, the Shareholders of Bank of Georgia Group PLC
declared an interim dividend for 2018 of Georgian Lari 2.44 per
share. The currency conversion date was set at 20 July 2018, with
the official GEL: GBP exchange rate of 3.2167, resulting in a
GBP-denominated final dividend of 0.7585 per share. Payment of the
total GEL 122,199 final dividends was received by shareholders on
27 July 2018.
Earnings per share
For the six months
ended
30 June 30 June
2019 (unaudited) 2018 (unaudited)
Basic earnings per share
Profit for the period attributable to ordinary
shareholders of the Group 208,154 244,106
Profit for the period from continuing operations
attributable to
ordinary shareholders of the Group 208,154 154,422
Profit for the period from discontinued operations
attributable to
ordinary shareholders of the Group - 89,684
Weighted average number of ordinary shares
outstanding during the period 47,846,288 41,047,494
Basic earnings per share 4.3505 5.9469
Earnings per share from continuing operations 4.3505 3.7620
Earnings per share from discontinued operations - 2.1849
For the six months
ended
30 June 30 June
2019 (unaudited) 2018 (unaudited)
Diluted earnings per share
Effect of dilution on weighted average
number of ordinary shares:
Dilutive unvested share options 170,395 479,488
Weighted average number of ordinary
shares adjusted for the effect of dilution 48,016,683 41,526,982
Diluted earnings per share 4.3350 5.8783
Diluted earnings per share from continuing
operations 4.3350 3.7187
Diluted earnings per share from discontinued
operations - 2.1596
16. Net Interest Income
For the six months ended
30 June 30 June
2019 (unaudited) 2018 (unaudited)
Interest income calculated using
EIR method 665,752 629,948
From loans to customers 593,257 551,975
From investment securities 68,448 61,511
From amounts due from credit institutions 10,656 16,462
Net loss on modification of financial
assets (6,609) -
Other interest income 11,207 8,823
From finance lease receivable 11,015 8,170
From loans and advances to customers
measured at FVTPL 192 653
Interest Income 676,959 638,771
On client deposits and notes (135,964) (118,686)
On amounts owed to credit institutions (95,683) (93,518)
On debt securities issued (74,504) (55,013)
On lease liability (2,418) -
Interest Expense (308,569) (267,217)
Deposit insurance fees (3,827) (2,574)
Net Interest Income 364,563 368,980
17. Net Fee and Commission Income
For the six months ended
30 June 30 June
2019 (unaudited) 2018 (unaudited)
Settlements operations 103,186 86,089
Guarantees and letters of credit 11,220 8,568
Cash operations 6,611 6,047
Currency conversion operations 4,115 185
Brokerage service fees 1,895 2,078
Advisory 1,225 955
Other 2,304 2,083
Fee and commission income 130,556 106,005
Settlements operations (36,856) (28,339)
Cash operations (3,816) (2,229)
Guarantees and letters of credit (683) (742)
Insurance brokerage service fees (1,129) (2,066)
Currency conversion operations (604) (8)
Advisory (83) -
Other (1,938) (784)
Fee and commission expense (45,109) (34,168)
Net fee and commission income 85,447 71,837
18. Net Non-recurring Items
For the six months ended
30 June 30 June
2019 (unaudited) 2018 (unaudited)
Demerger related expenses* - (30,284)
Corporate social responsibility expense** - (13,462)
Termination benefits (3,985) -
Other (4,112) (3,077)
Net non-recurring expense/loss (8,097) (46,823)
* Demerger-related expenses comprise of: employee compensation
expenses in amount of GEL 21,141 including acceleration of
share-based compensation of Investment Business employees, Demerger
costs recognised in the consolidated income statement in amount of
GEL 7,736 and other Demerger-related expenses in amount of GEL
1,407.
** Corporate social responsibility comprises the one-off project
to support the fibre-optic broadband infrastructure development in
rural Georgia.
19. Income Tax Expense
The corporate income tax expense comprises:
For the six months ended
30 June 30 June
2019 (unaudited) 2018 (unaudited)
Current income expense (16,201) (4,553)
Deferred income tax expense (2,045) (33,634)
Income tax expense (18,246) (38,187)
Income tax expense attributable to
continuing operations (18,246) (37,001)
Income tax expense attributable to
a discontinued operation (Note 4) - (1,186)
On 12 June 2018, an amendment to the current corporate taxation
model applicable to financial institutions, including banks and
insurance businesses, became effective. The change implies a zero
corporate tax rate on retained earnings and a 15% corporate tax
rate on distributed earnings starting from 1 January 2023, instead
of 1 January 2019 as previously enacted in 2016.
20. Fair Value Measurements
Fair value hierarchy
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability. The
following tables show analysis of assets and liabilities measured
at fair value or for which fair values are disclosed by level of
the fair value hierarchy:
30 June 2019 (unaudited) Level Level Level Total
1 2 3
Assets measured at fair
value
Total investment properties - - 178,764 178,764
Land - - 7,060 7,060
Residential properties - - 81,748 81,748
Non-residential properties - - 89,956 89,956
Investment securities - 1,895,587 1,151 1,896,738
Other assets - derivative
financial assets - 30,479 - 30,479
Other assets - trading
securities owned 13,968 - - 13,968
Loans to customers and - - - -
finance lease receivables
Assets for which fair values
are disclosed
Cash and cash equivalents - 936,106 - 936,106
Amounts due from credit
institutions - 1,704,701 - 1,704,701
Loans to customers and
finance lease receivables - - 10,833,356 10,833,356
Liabilities measured at
fair value
Other liabilities - derivative
financial liabilities - 21,913 - 21,913
Liabilities for which fair
values are disclosed
Client deposits and notes - 8,853,355 - 8,853,355
Amounts owed to credit
institutions - 2,464,444 496,075 2,960,519
Debt securities issued - 2,034,178 108,991 2,143,169
Lease liability - 100,172 - 100,172
31 December 2018 Level Level Level Total
1 2 3
Assets measured at fair
value
Total investment properties - - 151,446 151,446
Land - - 15,094 15,094
Residential properties - - 71,434 71,434
Non-residential properties - - 64,918 64,918
Investment securities - 2,018,622 395 2,019,017
Other assets - derivative
financial assets - 35,557 - 35,557
Other assets - trading
securities owned 4,652 - - 4,652
Loans to customers and
finance lease receivables - - 8,379 8,379
Assets for which fair values
are disclosed
Cash and cash equivalents - 1,215,799 - 1,215,799
Amounts due from credit
institutions - 1,305,216 - 1,305,216
Loans to customers and
finance lease receivables - - 9,359,858 9,359,858
Liabilities measured at
fair value
Other liabilities - derivative
financial liabilities - 11,569 - 11,569
Liabilities for which fair
values are disclosed
Client deposits and notes - 8,129,794 - 8,129,794
Amounts owed to credit
institutions - 2,560,563 434,316 2,994,879
Debt securities issued - 1,373,161 380,775 1,753,936
20. Fair Value Measurements (continued)
Fair value hierarchy (continued)
The following is a description of the determination of fair
value for financial instruments which are recorded at fair value
using valuation techniques. These incorporate the Group's estimate
of assumptions that a market participant would make when valuing
the instruments.
Derivative financial instruments
Derivative financial instruments valued using a valuation
technique with market observable inputs are mainly interest rate
swaps, currency swaps, forward foreign exchange contracts and
option contracts. The most frequently applied valuation techniques
include forward pricing and swap models, using present value
calculations, as well as standard option pricing models. The models
incorporate various inputs including the credit quality of
counterparties, foreign exchange spot and forward rates, interest
rate curves and implied volatilities.
Trading securities and investment securities
Trading securities and a certain part of investment securities
are quoted equity and debt securities. Investment securities valued
using a valuation technique or pricing models consist of unquoted
equity and debt securities. These securities are valued using
models which sometimes only incorporate data observable in the
market and at other times use both observable and non-observable
data. The non-observable inputs to the models include assumptions
regarding the future financial performance of the investee, its
risk profile, and economic assumptions regarding the industry and
geographical jurisdiction in which the investee operates.
Fair value of financial instruments that are not carried at fair
value in the financial statements
Set out below is a comparison by class of the carrying amounts
and fair values of the Group's financial instruments. The table
does not include the fair values of non-financial assets and
non-financial liabilities, or fair values of other smaller
financials assets and financial liabilities, fair values of which
are materially close to their carrying values.
Carrying Fair Unrecognised Carrying Fair Unrecognised
value value gain value value loss
2019 2019 (loss) 2018 2018 2018
2019
Financial assets
Cash and cash equivalents 936,106 936,106 - 1,215,799 1,215,799 -
Amounts due from
credit institutions 1,704,701 1,704,701 - 1,305,216 1,305,216 -
Loans to customers
and finance lease
receivables 10,579,710 10,833,356 253,646 9,389,368 9,359,858 (29,510)
Financial liabilities
Client deposits
and notes 8,855,616 8,853,355 2,261 8,133,853 8,129,794 4,059
Amounts owed to
credit institutions 2,960,519 2,960,519 - 2,994,879 2,994,879 -
Debt securities
issued 2,137,239 2,143,169 (5,930) 1,730,414 1,753,936 (23,522)
Lease liability 100,172 100,172 - - - -
Total unrecognised
change in unrealised
fair value 249,977 (48,973)
The following describes the methodologies and assumptions used
to determine fair values for those financial instruments which are
not already recorded at fair value in the consolidated financial
statements.
Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid
or have a short-term maturity (less than three months), it is
assumed that the carrying amounts approximate to their fair value.
This assumption is also applied to demand deposits, savings
accounts without a specific maturity and variable rate financial
instruments.
Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities
carried at amortised cost are estimated by comparing market
interest rates when they were first recognised with current market
rates offered for similar financial instruments. The estimated fair
value of fixed interest-bearing deposits is based on discounted
cash flows using prevailing money-market interest rates for debts
with similar credit risk and maturity.
21. Maturity Analysis of Financial Assets and Liabilities
The table below shows an analysis of financial assets and
liabilities according to their contractual maturities, except for
current accounts as described below.
30 June 2019 (unaudited)
On Up to Up to Up to Up to Up to Over Total
Demand 3 Months 6 Months 1 Year 3 Years 5 Years 5 Years
Financial assets
Cash and cash
equivalents 894,057 42,049 - - - - - 936,106
Amounts due
from credit
institutions 1,669,828 12,253 460 7,491 3,216 200 11,253 1,704,701
Investment
securities 753,503 944,896 7,850 17,946 62,367 79,912 30,264 1,896,738
Loans to customers
and finance
lease receivables - 1,756,180 705,898 1,528,557 2,778,643 1,672,617 2,137,815 10,579,710
Total 3,317,388 2,755,378 714,208 1,553,994 2,844,226 1,752,729 2,179,332 15,117,255
Financial liabilities
Client deposits
and notes 1,757,155 1,675,299 726,605 3,759,822 833,744 59,692 43,299 8,855,616
Amounts owed
to credit institutions 93,140 1,309,802 120,126 329,826 579,567 315,774 212,284 2,960,519
Debt securities
issued - 206,801 3,363 608,343 64,918 1,253,814 - 2,137,239
Lease liability - 5,241 5,240 10,513 35,041 21,435 22,702 100,172
Total 1,850,295 3,197,143 855,334 4,708,504 1,513,270 1,650,715 278,285 14,053,546
Net 1,467,093 (441,765) (141,126) (3,154,510) 1,330,956 102,014 1,901,047 1,063,709
Accumulated
gap 1,467,093 1,025,328 884,202 (2,270,308) (939,352) (837,338) 1,063,709
31 December 2018
On Up to Up to Up to Up to Up to Over Total
Demand 3 Months 6 Months 1 Year 3 Years 5 Years 5 Years
Financial assets
Cash and cash
equivalents 1,047,670 168,129 - - - - - 1,215,799
Amounts due
from credit
institutions 1,234,277 50,292 976 7,880 - - 11,791 1,305,216
Investment securities 751,662 943,600 42,499 37,052 141,608 69,601 32,995 2,019,017
Loans to customers
and finance
lease receivables - 1,419,736 642,309 1,393,967 2,500,443 1,342,016 2,099,276 9,397,747
Total 3,033,609 2,581,757 685,784 1,438,899 2,642,051 1,411,617 2,144,062 13,937,779
Financial liabilities
Client deposits
and notes 1,528,349 1,524,125 732,660 3,602,837 654,676 52,372 38,834 8,133,853
Amounts owed
to credit institutions 118,691 1,269,126 91,295 189,155 710,208 454,901 161,503 2,994,879
Debt securities
issued 2 60,976 175,965 173,740 566,129 753,602 - 1,730,414
Total 1,647,042 2,854,227 999,920 3,965,732 1,931,013 1,260,875 200,337 12,859,146
Net 1,386,567 (272,470) (314,136) (2,526,833) 711,038 150,742 1,943,725 1,078,633
Accumulated
gap 1,386,567 1,114,097 799,961 (1,726,872) (1,015,834) (865,092) 1,078,633
The Group's capability to discharge its liabilities relies on
its ability to realise equivalent assets within the same period of
time. In the Georgian marketplace, where most of the Group's
business is concentrated, many short-term credits are granted with
the expectation of renewing the loans at maturity. As such, the
ultimate maturity of assets may be different from the analysis
presented above. To reflect the historical stability of current
accounts, the Group calculates the minimum daily balance of current
accounts over the past two years and includes the amount in the up
to 1 year category in the table above. The remaining current
accounts are included in the On demand category.
21. Maturity Analysis of Financial Assets and Liabilities (continued)
The Group's principal sources of liquidity are as follows:
-- deposits;
-- borrowings from international credit institutions;
-- inter-bank deposit agreements;
-- debt issues;
-- proceeds from sale of securities;
-- principal repayments on loans;
-- interest income; and
-- fees and commissions income.
As at 30 June 2019 client deposits and notes amounted to GEL
8,855,616 (31 December 2018: GEL 8,133,853) and represented 62% (31
December 2018: 63%) of the Group's total liabilities. These funds
continue to provide a majority of the Group's funding and represent
a diversified and stable source of funds. As at 30 June 2019
amounts owed to credit institutions amounted to GEL 2,960,519 (31
December 2018: GEL 2,994,879) and represented 21% (31 December
2018: 23%) of total liabilities. As at 30 June 2019 debt securities
issued amounted to GEL 2,137,239 (31 December 2018: GEL 1,730,414)
and represented 15% (31 December 2018: 13%) of total liabilities.
As at 30 June 2019 lease liability amounted to GEL 100,172 (31
December 2018: n/a) and represented 1% (31 December 2018: n/a) of
total liabilities.
In the Board's opinion, liquidity is sufficient to meet the
Group's present requirements.
The table below shows an analysis of assets and liabilities
analysed according to when they are expected to be recovered or
settled, except for current accounts which are included in up to 1
year time bucket, noting that respective contractual maturity may
expand over significantly longer periods:
30 June 2019 (unaudited) 31 December 2018
Less More Total Less More Total
than than than than
1 Year 1 Year 1 Year 1 Year
Cash and cash equivalents 936,106 - 936,106 1,215,799 - 1,215,799
Amounts due from credit
institutions 1,690,032 14,669 1,704,701 1,293,425 11,791 1,305,216
Investment securities 1,724,195 172,543 1,896,738 1,774,813 244,204 2,019,017
Loans to customers and
finance lease receivables 3,990,635 6,589,075 10,579,710 3,456,012 5,941,735 9,397,747
Accounts receivable
and other loans 3,688 - 3,688 2,849 - 2,849
Prepayments 32,132 3,894 36,026 27,170 17,124 44,294
Inventories 11,748 - 11,748 12,818 474 13,292
Investment properties - 178,764 178,764 - 151,446 151,446
Right of use assets - 105,874 105,874 - - -
Property and equipment - 358,921 358,921 - 344,059 344,059
Goodwill - 33,351 33,351 - 33,351 33,351
Intangible assets - 93,515 93,515 - 83,366 83,366
Income tax assets 4,866 214 5,080 19,328 123 19,451
Other assets 135,162 14,071 149,233 107,562 18,446 126,008
Assets held for sale 40,544 - 40,544 42,408 - 42,408
Total assets 8,569,108 7,564,891 16,133,999 7,952,184 6,846,119 14,798,303
-----------
Client deposits and
notes 7,918,881 936,735 8,855,616 7,387,971 745,882 8,133,853
Amounts owed to credit
institutions 1,852,894 1,107,625 2,960,519 1,668,267 1,326,612 2,994,879
Debt securities issued 818,507 1,318,732 2,137,239 410,683 1,319,731 1,730,414
Lease liability 20,993 79,179 100,172 - - -
Accruals and deffered
income 25,974 8,774 34,748 41,287 5,776 47,063
Income tax liabilities 950 29,411 30,361 1,009 27,846 28,855
Other liabilities 97,125 - 97,125 64,966 - 64,966
Total liabilities 10,735,324 3,480,456 14,215,780 9,574,183 3,425,847 13,000,030
-----------
Net (2,166,216) 4,084,435 1,918,219 (1,621,999) 3,420,272 1,798,273
22. Related Party Disclosures
In accordance with IAS 24 "Related Party Disclosures", parties
are considered to be related if one party has the ability to
control the other party or exercise significant influence over the
other party in making financial or operational decisions. In
considering each possible related party relationship, attention is
directed to the substance of the relationship, not merely the legal
form.
Related parties may enter into transactions which unrelated
parties might not, and transactions between related parties may not
be effected on the same terms, conditions and amounts as
transactions between unrelated parties. All transactions with
related parties disclosed below have been conducted on an arm's
length basis.
The volumes of related party transactions, outstanding balances
at the year-end, and related expenses and income for the year are
as follows:
30 June 2019 (unaudited) 30 June 2018 (unaudited)
Key Key
management management
Associates personnel* Associates personnel*
Loans outstanding at 1
January, gross - 1,756 17,053 2,913
Loans issued during the
period - 2,529 - 1,184
Loan repayments during
the period - (2,087) - (1,836)
Other movements** - 337 (17,053) (1,607)
Loans outstanding at 30
June, gross - 2,535 - 654
Loans outstanding at 30
June, net - 2,535 - 654
Interest income on loans - 93 529 56
Expected credit loss - (14) - -
Deposits at 1 January 809 14,748 2,005 38,842
Deposits received during
the period 712 20,791 - 9,435
Deposits repaid during
the period - (2,955) (763) (930)
Other movements** (401) (1,105) (502) (32,135)
Deposits at 30 June 1,120 31,479 740 15,212
Interest expense on deposits - (447) (2) (222)
Other income - - - 3
Deferred income - - - -
Real estate revenue - - - -
* Key management personnel includes members of BOGG's Board of
Directors and key executives of the Group.
**Other movements during the six months ended 30 June 2018
mainly relate to the Demerger.
Compensation of key management personnel comprised the
following:
For the six months ended
30 June 30 June
2019 (unaudited) 2018 (unaudited)
Salaries and other benefits 5,084 4,735
Share-based payments compensation
* 26,712 54,893
Cash compensations - 2,273
Social security costs 11 35
Total key management compensation 31,807 61,936
* During the six months ended 30 June 2019, share-based
compensation included an amount of GEL 3,985 (during the six months
ended 30 June 2018: GEL 13,557) for key management personnel
reflected in the non-recurring items and nil reflected in
discontinued operations (during the six months ended 30 June 2018:
GEL 23,278).
Key management personnel do not receive cash-settled
compensation, except for fixed salaries. The major part of the
total compensation is share-based. The number of key management
personnel at 30 June 2019 was 16 (30 June 2018: 13).
23. Capital Adequacy
The Group maintains an actively managed capital base to cover
risks inherent to the business. The adequacy of the Group's capital
is monitored using, among other measures, the ratios established by
the NBG in supervising the Bank.
During the year ended 30 June 2019, the Bank and the Group
complied in full with all its externally imposed capital
requirements.
The primary objectives of the Group's capital management are to
ensure that the Bank complies with externally imposed capital
requirements and that the Group maintains strong credit ratings and
healthy capital ratios in order to support its business and to
maximise shareholder value.
The Group manages its capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk
characteristics of its activities. In order to maintain or adjust
the capital structure, the Group may adjust the amount of dividend
payment to shareholders, return capital to shareholders or issue
capital securities. No changes were made in the objectives,
policies and processes from the previous years.
NBG (Basel III) capital adequacy ratio
In December 2017, the NBG adopted amendments to the regulations
relating to capital adequacy requirements, including amendments to
the regulation on capital adequacy requirements for commercial
banks, and introduced new requirements on the determination of the
countercyclical buffer rate, on the identification of
systematically important banks, on determining systemic buffer
requirements and on additional capital buffer requirements for
commercial banks within Pillar 2. The NBG requires the Bank to
maintain a minimum total capital adequacy ratio of risk-weighted
assets, computed based on the Bank's standalone special purpose
financial statements prepared in accordance with NBG regulations
and pronouncements, based on Basel III requirements. As at 30 June
2019 and 31 December 2018, the Bank's capital adequacy ratio on
this basis was as follows:
As at
30 June 31 December
2019 (unaudited) 2018
Core Tier 1 capital 1,385,932 1,379,953
Additional Tier 1 capital 286,870 -
Tier 1 capital 1,672,802 1,379,953
Tier 2 capital 423,425 502,355
Total capital 2,096,227 1,882,308
Risk-weighted assets 12,558,785 11,338,660
Total capital ratio 16.7% 16.6%
Min Requirement 16.1% 15.9%
24.
24. Events after the Reporting Period
GEL 28 million 5-year loan agreement with EBRD
On 12 July 2019, JSC Bank of Georgia attracted a c. GEL 28
million loan from the European Bank for Reconstruction and
Development ("EBRD") with a maturity of 5 years. EBRD obtained the
local currency funds through a private placement of GEL-denominated
bonds arranged by Galt & Taggart - a wholly owned brokerage
subsidiary of Bank of Georgia Group PLC.
JSC Bank of Georgia signs GEL 100 million 5-year loan agreement
with IFC
On 1 August 2019, JSC Bank of Georgia and the International
Finance Corporation ("IFC") signed a GEL 100 million loan agreement
with a maturity of 5 years. IFC will raise the local currency funds
through a private placement of GEL-denominated bonds to be arranged
by Galt & Taggart - a wholly owned brokerage subsidiary of Bank
of Georgia Group PLC.
JSC Bank of Georgia signs US$50 million Trade Finance Facility
with Citi
On 24 July 2019, JSC Bank of Georgia has signed a one-year US$50
million Trade Finance Facility ("the Facility") with Citi. The
Facility been arranged under the Continuing Agreement for
Reimbursement of Trade Advances ("CARTA"), signed with Citi in
2011, and is the third successful transaction between Citi and Bank
of Georgia under this agreement.
GLOSSARY
-- Alternative performance measures (APMs) In this announcement
the management uses various APMs, which they believe provide
additional useful information for understanding the financial
performance of the Group. These APMs are not defined by
International Financial Reporting Standards, and also may not be
directly comparable with other companies who use similar measures.
We believe that these APMs provide the best representation of our
financial performance as these measures are used by management to
evaluate the Group's operating performance and make day-to-day
operating decisions;
-- Cost of funds Interest expense of the period divided by
monthly average interest bearing liabilities;
-- Cost of credit risk Expected loss/impairment charge for loans
to customers and finance lease receivables for the period divided
by monthly average gross loans to customers and finance lease
receivables over the same period;
-- Cost to income ratio Operating expenses divided by operating
income;
-- Interest bearing liabilities Amounts due to credit
institutions, client deposits and notes, and debt securities
issued;
-- Interest earning assets (excluding cash) Amounts due from
credit institutions, investment securities (but excluding corporate
shares) and net loans to customers and finance lease
receivables;
-- Leverage (times) Total liabilities divided by total
equity;
-- Liquid assets Cash and cash equivalents, amounts due from
credit institutions and investment securities;
-- Liquidity coverage ratio (LCR) High quality liquid assets (as
defined by NBG) divided by net cash outflows over the next 30 days
(as defined by NBG);
-- Loan yield Interest income from loans to customers and
finance lease receivables divided by monthly average gross loans to
customers and finance lease receivables;
-- NBG liquidity ratio Daily average liquid assets (as defined
by NBG) during the month divided by daily average liabilities (as
defined by NBG) during the month;
-- NBG (Basel III) Common Equity Tier I capital adequacy ratio
Common Equity Tier I capital divided by total risk weighted assets,
both calculated in accordance with the requirements of the National
Bank of Georgia instructions;
-- NBG (Basel III) Tier I capital adequacy ratio Tier I capital
divided by total risk weighted assets, both calculated in
accordance with the requirements of the National Bank of Georgia
instructions;
-- NBG (Basel III) Total capital adequacy ratio Total regulatory
capital divided by total risk weighted assets, both calculated in
accordance with the requirements of the National Bank of Georgia
instructions;
-- Net interest margin (NIM) Net interest income of the period
divided by monthly average interest earning assets excluding cash
for the same period;
-- Non-performing loans (NPLs) The principal and interest on
loans overdue for more than 90 days and any additional potential
losses estimated by management;
-- NPL coverage ratio Allowance for expected credit
loss/impairment loss of loans and finance lease receivables divided
by NPLs;
-- NPL coverage ratio adjusted for discounted value of
collateral Allowance for expected credit loss/impairment loss of
loans and finance lease receivables divided by NPLs (discounted
value of collateral is added back to allowance for expected credit
loss/impairment loss);
-- Operating leverage Percentage change in operating income less
percentage change in operating expenses;
-- Return on average total assets (ROAA) Profit for the period
divided by monthly average total assets for the same period;
-- Return on average total equity (ROAE) Profit for the period
attributable to shareholders of the Group divided by monthly
average equity attributable to shareholders of the Group for the
same period;
-- NMF Not meaningful
COMPANY INFORMATION
Bank of Georgia Group PLC
Registered Address
84 Brook Street
London W1K 5EH
United Kingdom
www.bankofgeorgiagroup.com
Registered under number 10917019 in England and Wales
Secretary
Link Company Matters Limited
65 Gresham Street
London EC2V 7NQ
United Kingdom
Stock Listing
London Stock Exchange PLC's Main Market for listed
securities
Ticker: "BGEO.LN"
Contact Information
Bank of Georgia Group PLC Investor Relations
Telephone: +44(0) 203 178 4052; +995 322 444444 (9282)
E-mail: ir@bog.ge
Auditors
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
United Kingdom
Please note that Investor Centre is a free, secure online
service run by our Registrar, Computershare,
giving you convenient access to information on your
shareholdings.
Investor Centre Web Address - www.investorcentre.co.uk.
Investor Centre Shareholder Helpline - +44 (0)370 873 5866
Share price information
Shareholders can access both the latest and historical prices
via the website
www.bankofgeorgiagroup.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BXLLFKVFFBBL
(END) Dow Jones Newswires
August 14, 2019 02:01 ET (06:01 GMT)
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