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RNS
Bank of Georgia Holdings PLC  -  BGEO   

Final Results

Released 07:00 19-Feb-2013

RNS Number : 1483Y
Bank of Georgia Holdings PLC
19 February 2013
 



                                                               

     

 

BANK OF GEORGIA

HOLDINGS PLC

PRELIMINARY RESULTS ANNOUNCEMENT

2012

 

 

 

 

 

 

 

 

FORWARD LOOKING STATEMENTS

This document contains statements that constitute "forward-looking statements", including , but not limited to, statements con-cerning 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.

While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other factors could cause actual developments and results to differ materially from our expectations.

These factors include, but are not limited to, (1) general market, macroeconomic, governmental, legislative and regulatory trends, (2) movements in local and international currency exchange rates; interest rates and securities markets, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or credit worthiness of our customers, obligors and counter-parties and developments in the market in which they operate, (6) management changes and changes to our group structure and (7) other key factors that we have 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, including those filed with the respective authorities.

When relying on forward-looking statements, investors should carefully consider the foregoing factors and other uncertainties and events. Accordingly, we are under no obligations (and expressly disclaim and such obligations) to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise.

 

 

 

 

 

The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011. No statutory accounts for the Company for 2011 have been delivered to the Registrar of Companies, and those for 2012 will be delivered in due course.

 

 

2012 Overview

Bank of Georgia Holdings plc (LSE: BGEO LN) (the "Bank"), the holding company of JSC Bank of Georgia and its subsidiaries, Georgia's leading bank, announces today the consolidated results for year ended 31 December 2012 (IFRS based, derived from management accounts with such announcement approved by the board of directors of BGH on 15 February 2013). The Bank reported full-year 2012 profit of GEL 179.6 million (US$ 108.4 million/GBP 67.4 million), or GEL 5.22 per share (US$3.15 per share/GBP1.96 per share). Unless otherwise mentioned, all comparisons refer to the full year 2011 results.

 

·      Positive operating leverage maintained with strong profitability

o    Net interest margin of 7.9% in 2012, compared to 7.8% in 2011; 

§ Q4 2012 NIM increased to 7.8% from 7.3% in Q3 2012.

o Revenue increased by GEL 64.5 million, or 14.9%, y-o-y, to GEL 498.3 million; excluding the benefit of the one-off currency hedge gains in 2011, revenue increased by 21.9%;

§ Q4 2012 revenue grew 11.1% y-o-y to GEL 128.3 million; excluding the benefit of the one-off currency hedge in Q4 2011, Q4 2012 revenue grew 15.5%.

o Positive operating leverage maintained, as operating expenses increased at a lower rate than revenue, up 5.2% y-o-y to GEL 221.2 million; excluding the 2011 one-off gains, operating leverage was 16.7%;

§ Q4 2012 operating expenses were largely flat q-o-q at GEL 54.0 million.

o Cost to Income ratio improved to 44.4% from 48.5% in 2011, and to 42.1% in Q4 2012 from 44.4% in Q3 2012.

o Profit before tax from continuing operations of GEL 212.8 million, up by GEL 40.7 million, or 23.7%; excluding the benefit of one-off currency hedge gains in 2011, profit grew 44.7%.

o Profit for the period increased by GEL 43.8 million, or 32.3%, to GEL 179.6 million.

o Earnings per share (basic) increased by 17.6% to GEL 5.22.

o Return on Average Assets (ROAA) increased to 3.5%, compared to 3.2%.

o Return on Average Equity (ROAE) increased to 19.1%, from 18.3%.

·  Strong balance sheet and capital position maintained

o Cost of Funds declined to 7.3% in 2012, compared to 8.0%.

§ Q4 2012 Cost of Funds of 6.6%, down from 7.1% in Q3 2012 and 8.4% in Q4 2011.

o Net loan book increased by 18.2% during the year , while client deposits increased 2.7%, reflecting the Bank's strategy to improve its cost of funding by reducing high interest paying corporate deposits;

§ In US$ terms the net loan book increased by 19.2% reflecting the stable currency position.

§ Retail Banking client deposits grew 15.5%, Wealth Management client deposits grew 33.2%, Corporate Banking declined 17.1%, reflecting the targeted outflow of high-interest paying deposits.

o Cost of Risk increased to 1.3% in 2012 from 0.9% in 2011, reflecting the absence of the previous year's net releases and recoveries and higher provisions in the second half of 2012.

o Strong funding and liquidity position with a Net Loans to Customer Funds ratio of 114.8%.  Net Loans to Customer Funds and Long-Term IFI Funding ratio was 91.9%. National Bank of Georgia (NBG) liquidity ratio of 41.1%, compared to 37.8% a year ago and to a 30% minimum requirement by the NBG.

o BIS Tier 1 capital adequacy ratio improved to 22.0%.

o Book Value per Share increased by 16.7% y-o-y to GEL 30.33 (US$18.31/GBP11.38).

o Balance Sheet leverage reduced to 4.3 times at 31 December 2012, compared to 4.7 times at 31 December 2011 and 4.5 times at 30 September 2012.

·  Business highlights

o Strong performances from each of the Bank's businesses in Georgia - Corporate Banking and Retail Banking reported continued loan growth and improving efficiencies.

o Retail Banking continues to deliver strong franchise growth, supported by the successful roll-out of the Express Banking strategy in 2012.

o Corporate Banking has delivered strong, well-diversified balance sheet growth over the last 12 months; customer lending grew 23.1%

o Wealth Management continued to expand its client franchise with deposits increasing by 33.2% to GEL 605.2 million during the year.

o Excellent progress in developing the Bank's synergistic businesses: Insurance and Healthcare business expansion through acquisition of Imedi L International. Integration successfully executed, realising annual synergies of GEL 8.7 million; Affordable Housing completed its pilot project of an 123 apartment building realising SBRE's first profit of GEL 1.7 million; a second 522 apartment building project is in progress.

 

 

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

 

"In 2012 your company reported another record profit of GEL 179.6 million, an increase of 32.3% from the profit delivered by Bank of Georgia in 2011. This strong progress continues to reflect the strength of the Bank's earnings power and resulted in a Return on Average Equity of 19.1%, up from 18.3%, and EPS growth of 17.6% to GEL 5.22, reflecting a strong business performance, significantly reduced cost of funding and improved efficiency across the business.

 

On 28 February 2012 Bank of Georgia Holdings PLC started trading on the LSE Main Market and in June 2012 became a FTSE 250 constituent company, which in turn has markedly improved the liquidity of your stock, positively affecting the price of BGEO LN, which grew 30.3% since the premium listing almost one year ago on the back of average trading volume of approximately 102 thousand shares per day (GBP 1.1 million). We have a well-diversified shareholder base including our long-time investors across various geographies and the addition of many new non-Emerging Markets focused institutional investors, who now make up circa 15% of our investor base.

 

2012 was a momentous year for Georgia as well. Following the parliamentary elections in October 2012, we witnessed a democratic passing of power for the first time in the country's history. The new government has asserted its commitment to the continuation of Georgia's investor and business friendly policies and in December 2012 the newly-elected parliament approved a well-balanced budget for 2013 that forecasts 6% real GDP growth, further improvements in general government debt ratios and a continous focus on infrastructure sector development. In Q4 2012, the uncertainty in respect of the change of political leadership resulted in a relative slow-down of corporate business lending growth throughout the Georgian banking sector. While we may continue to see this slower trend over the next few months, we have been encouraged by higher levels of business activity in January 2013.

 

Our revenue this year totalled GEL 498.3 million, up 21.9% (revenue adjusted for one-off currency hedge) compared to 2011. The significant increase in revenue was due to the robust performances of our businesses and the effects of our diversified sources of growth. Strong interest income was driven by the growth of both the retail and corporate loan books, especially in the first nine months of the year. Fee income increased 14.8% to GEL 86.5 million, reflecting our leadership in money transmission payments and the superior fee generating capabilities of our corporate banking business. We enjoy an estimated 50% market share in card acquiring business in Georgia, have unmatched client reach through the largest network of ATMs and Self Service Terminals, American Express card exclusivity in Georgia, as well as the exclusive management of transportation system payments.

 

Our Insurance and Healthcare businesses, which had an eventful year in terms of M&A activity, contributed 11.5% to the consolidated revenue and 8.7% to the consolidated profit, becoming an increasingly meaningful source of the Bank's income.

Our affordable housing business successfully completed its pilot project, contributing GEL 15.5 million to the mortgage loan book and SBRE realising profit of GEL 1.7 million . Non-interest income amounted to 43.0% of revenue, an achievement that is particularly striking compared to four years ago, when this ratio stood at 34.3%.

 

We have become more efficient. For the past five quarters we have consistently delivered strong positive operating leverage, as our operating costs have regularly increased at only half the rate of revenue growth. Several factors behind this achievement are described below.

 

We successfully strengthened and expanded further our retail franchise through our Express banking strategy, which entails the rollout out of cost-efficient small-sized express branches, avoiding the need to build costly flagship branches, to continue to serve our ever-increasing client base. With Express banking in place, we have pushed further the ongoing shift to transactional banking by means of a wide-range of electronic channels, away from regular or flagship branches, which are now focusing on selling more value-added products and services. We have continued to invest in IT to minimise and, in certain cases, eliminate document flow, and stepped-up optimisation of the centralised retail banking back office. These developments coupled with the ongoing cost control measures that we already have in place, have resulted in a substantial improvement in the retail cost to income ratio to 44% from 51% last year while the corporate banking cost to income ratio improved to 33% from 43% in 2011. The increasing benefits we are delivering from these improved efficiencies are expected to underpin further improvements in our cost to income ratio over the next few years. It has been a rewarding and exciting experience to observe the effects of economies of scale.

 

Credit quality has continued to be robust, albeit the cost of credit risk was at the top end of our expected range, increasing by GEL 22.5 million to GEL 44.7 million, or 1.3% of customer lending. This largely reflected the absence of last year's releases and recoveries, and an increase in the retail banking impairment charge as a result of job reductions made in a large payroll client during the first half of the year. We did however see an increase in corporate provisions in the fourth quarter, reflecting the impact of a provision of GEL 14.2 million relating to one single corporate credit. This was offset however by the impact of the 2008 and 2009 stress years dropping out of our retail banking provision methodology.                                                  

 

I would also like to highlight the excellent progress we have made against our liability management objectives. Throughout the year we have consistently sought to optimise our funding structure and cost base. Strong branding and our pre-eminence in the retail segment has enabled aggressive deposit pricing on the back of the Bank's growing retail deposit base, while the more competitive corporate environment led to the outflow of expensive Lari corporate deposits, allowing us to replace them with less-costly long-term international borrowing. The funding profile of corporate banking has improved markedly as the corporate banking cost of deposits declined to a historic low of 6.2% in Q4 2012, also benefiting from superior access to trade finance lines, which represent substantially cheaper long-term funding. Overall, the Bank's cost of funding decreased to 7.3% from 8.0% last year, and as low as 6.6% in Q4 2012.

 

In 2013, we do not expect any changes to the fundamentals of our business strategy. We intend to continue to focus on the Georgian market, with retail banking and corporate banking continuing to drive profitability. The full effects of our recent scaling up of the business are still to be realised, as more customers shift to electronic channels. The introduction of a sophisticated CRM system will further enhance product penetration and boost revenues per client, thus further improving our efficiency.  In corporate banking we intend to further expand our export and trade finance businesses and to build on our strong fee generating capabilities, supported by research and advisory services. We are set to build our regional asset management business on the currently AUM US$ 365.3 million-strong wealth management platform.

 

The potential health insurance reform, the structure of which is still under consideration, envisages the provision of basic healthcare coverage for the entire Georgian population in addition to existing state-subsidised socially vulnerable groups. We expect these reforms to be a positive factor for the healthcare revenues of Aldagi BCI, the country's leading healthcare provider.

 

While we are very pleased with our progress in cost optimisation in 2012, we see lots of opportunities to further improve efficiency and to ensure that our costs continue to increase at a lower rate than our revenue growth. In 2013, we will be vigilant of our asset quality and determined to continue to enhance our risk management practices.

 

At the end of December 2012, the Bank's total capital ratio, on a Basel 1 basis, was 27.0% and the tier 1 capital ratio was 22.0%.  As a result, the Bank continues to maintain an extremely strong capital position with capital ratios significantly in excess of its minimum capital requirements.  The Bank is well positioned to further improve its performance in 2013 and this, combined with continued strong profitability and capital ratios, has led the Board to review the Bank's dividend policy. The Board intends to recommend at the AGM an annual dividend of GEL 1.5 per share payable in British Sterling at the prevailing rate. This represents a significant increase of 114.3%, compared to the annual dividend of GEL 0.70 per share last year, a payout ratio of 28.7% and a dividend yield for shareholders of 5.5%, calculated on the basis of the preliminary results and using the 31 December 2012 share price of GBP 10.30. When the Bank announces that the Board is recommending any dividend to the AGM, the Bank will also announce details of the dividend timetable applicable to such dividend. Going forward, the Board will aim to maintain a dividend payout ratio in the 25%-40% range," commented Irakli Gilauri, Chief Executive Officer of Bank of Georgia Holdings PLC and JSC Bank of Georgia.



 

 

1.6567 GEL/US$ 31 December 2012

1.6593 GEL/US$ 30 September 2012                        

1.6703 GEL/US$ 31 December 2011

2.6653 GEL/GBP 31 December 2012

2.6881 GEL/GBP 30 September 2012

2.5776 GEL/GBP 31 December 2011

 

FINANCIAL SUMMARY

 

 

BGH (Consolidated, IFRS-based)

Year ended

Change

Income Statement Summary

31 Dec 12

31 Dec 11

Y-O-Y1

GEL thousands, unless otherwise noted


          Audited






Revenue2

498,255

433,753

14.9%

Operating expenses3

(221,152)

(210,165)

5.2%

Operating income before cost of credit risk

277,103

223,588

23.9%

Cost of credit risk4

(44,717)

(22,196)

101.5%

Net operating income

232,386

201,392

15.4%

Net non-operating expense, including goodwill impairment

(19,634)

(29,338)

-33.1%

Profit

179,552

135,710

32.3%

 

BGH (Consolidated, IFRS-based)

31 Dec 12

31 Dec 11

Change

Statement of Financial Position


         Audited

 Y-O-Y









Total assets

5,655,595

4,665,261

21.2%

Net loans5

3,092,320

2,616,361

18.2%

Customer funds6

2,693,025

2,735,222

-1.5%

Leverage7

4.3

4.7


 

 

                                   

KEY PERFORMANCE MEASURES









Performance Indicators

2012

2011


ROAE

19.1%

18.3%


Cost to Income Ratio

44.4%

48.5%


Net Interest Margin

7.9%

7.8%


Tier I Capital Adequacy Ratio (BIS)8

22.0%

19.9%


Total Capital Adequacy Ratio (BIS)8

27.0%

28.5%


NBG Tier I Capital Adequacy Ratio9

13.8%

10.5%


NBG Total Capital Adequacy Ratio9

16.2%

16.2%


EPS (GEL)

5.22

4.44


Loan portfolio growth

18.2%

10.6%


 

           

 

1 Compared to the respective period in 2011; growth calculations based on GEL values

2 Revenue includes net interest income, net fee and commission income, net insurance revenue, net healthcare revenue and other operating non-interest income

3 Operating expenses equal operating non-interest expenses

4 Cost of credit risk includes impairment charge (reversal of impairment) on: loans to customers, finance lease receivables and other assets

5 Net loans equal to net loans to customers and finance lease receivables

6 Customer funds equal amounts due to customers

7  Leverage (Times) equals Total Liabilities divided by Total Equity

8 BIS Tier I Capital Adequacy Ratio equals consolidated Tier I capital as of the period end divided by total consolidated risk weighted assets as of the same date. BIS total capital equals total consolidated capital as of the period divided by total consolidated risk weighted assets. Both ratios calculated in accordance with the requirements of Basel Accord I

9 NBG Tier I Capital and Total Capital Adequacy ratios calculated in accordance with the requirements of the National Bank of Georgia (NBG)

 

 

 

 

DISCUSSION OF RESULTS

 

This summary compares the financial results for the year ended 31 December 2012 to the comparable period in 2011.

 

Revenue

 


Year ended

     Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y




Audited



Loans to customers

509,339


438,989


16.0%

Investment securities11

33,950


37,701


-9.9%

Amounts due from credit institutions

15,813


18,103


-12.6%

Finance lease receivables

8,701


6,565


32.5%

Interest income

567,803


501,358


13.3%

Amounts due to customers

(202,484)


(167,294)


21.0%

Amounts due to credit institutions

(79,492)


(99,763)


-20.3%

Interest expense

(281,976)


(267,057)


5.6%

Net interest income before interest rate swaps

285,827


234,301


22.0%

Net (losses) gains from derivative financial instruments 

(1,710)


4,984


NMF

Net interest income

284,117


239,285


18.7%

Fee and commission income

109,278


93,541


16.8%

Fee and commission expense

(22,791)


(18,204)


25.2%

Net fee and commission income

86,487


75,337


14.8%

Net insurance premiums earned

91,176


46,396


96.5%

Net insurance claims incurred

(57,038)


(28,658)


99.0%

Net insurance revenue

34,138


17,738


92.5%

Healthcare revenue

54,376


5,700


NMF

Cost of healthcare services

(31,030)


(3,242)


NMF

Net healthcare revenue

23,346


2,458


NMF

Net gain from trading and investment securities

2,308


1,382


67.0%

Net gain from revaluation of investment property

-


1,984


-100.0%

Net gain from foreign currencies

49,571


51,385


-3.5%

Other operating income

18,288


19,128


-4.4%

Other operating non-interest income

70,167


73,879


-5.0%

Revenue adjusted for gain from BYR hedge

498,255


408,697


21.9%

Gain from BYR hedge

-


25,056


-100.0%

Revenue

498,255


433,753


14.9%

 

11Investment securities primarily consist of Georgian government treasury bills and bonds and National Bank of Georgia's Certificates of deposits (CDs)

 

The Bank maintained strong growth momentum across all main revenue items in 2012, delivering a record revenue of GEL 498.3 million, up 14.9% year-on-year. The key driver of solid revenue growth was net interest income, which increased by 18.7% to GEL 284.1 million as a result of growing interest earning assets and largely stable loan yields coupled with lower funding costs. A rapid expansion of the Bank's insurance and healthcare businesses, as a result of a combination of organic growth and acquisitions also boosted net insurance and net healthcare revenues and the two businesses together contributed 11.5% to the consolidated revenue in 2012, compared to 4.7% in 2011.   

 

The 22.0% growth in net interest income before interest rate swaps, to GEL 285.8 million, was a result of a 13.3% increase in interest income and slower growth of interest expense, which grew at 5.6%, or less than half the interest income growth rate. Interest income growth was primarily driven by the healthy growth of the loan book on the back of stable loan yields maintained at 17.5% in 2012, compared to 17.6% in 2011. The reduction in the cost of funds from 8.0% in 2011 to 7.3% in 2012, reflected reduced deposit costs and the partial repayment of costly international borrowings following the Eurobond issuance in July 2012.  Cost of funds to credit institutions were down by 161 basis points to 7.2% in 2012, as a result of targeted liability management throughout the year. Reflecting continued discipline with deposit pricing, the cost of client deposits declined from 7.6% in 2011 to 7.3% in 2012, while average customer funds increased by 25.0% during the year, which in turn resulted in a 21.0% increase in interest expense due to customers.

 

The Net Interest Margin (NIM) in the second half of the year remained broadly flat at 7.9%, despite the impact of the carrying cost of the Eurobond issued in July 2012.  

 

Net Interest Margin


Year ended

      Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y







Net interest income

284,117


239,285


18.7%

Net Interest Margin

7.9%


7.8%


1.3%

Average interest earning assets10

3,614,921


3,082,850


17.3%

Average interest bearing liabilities10

3,904,874


3,292,724


18.6%

Average customer funds outstanding

2,772,597


2,217,275


25.0%

 

 

10Monthly averages are used for calculation of average interest earning assets and average interest bearing liabilities

 

 

In a positive shift towards diversifying revenue sources, net non-interest income grew 26.4% in 2012 and amounted to 43.0% of total revenue compared to 41.5% in 2011(excluding the effects of one-off gains from the Belarusian currency hedge in 2011). Net insurance revenue almost doubled from GEL 17.7 million to GEL 34.1 million, net healthcare revenue grew nearly tenfold to GEL 23.3 million, and net fee and commission income increased from GEL 75.3 million to GEL 86.5 million. Adjusted  for the impact of the last year's one-off currency (Belarusian Ruble) hedge gains, total revenue increased by 21.9% y-o-y.

 

Net fee and commission income


Year ended

Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y




Audited



Fee and commission income

109,278


93,541


16.8%

Fee and commission expense

(22,791)


(18,204)


25.2%

Net fee and commission income

86,487


75,337


14.8%

 

An increase in the level of economic activity in 2012 had a positive effect on clients' activity across all lines of settlement operations, including the Bank's card business operations, guarantees and letters of credit and cash operations. The growth of our Express banking service, through which the Bank delivers extremely cost-effective self-service transactional and remote banking facilities, has supported strong growth in banking operations. As a result, net fee and commission income, grew 14.8% to GEL 86.5 million in 2012. 

 

Net insurance revenue and net healthcare revenue


Year ended

          Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y




Audited



Net insurance premiums earned

91,176


46,396


96.5%

Net insurance claims incurred

(57,038)


(28,658)


99.0%

Net insurance revenue

34,138


17,738


92.5%

Healthcare revenue

54,376


5,700


NMF

Cost of healthcare services, of which:

(31,030)


(3,242)


NMF

Salaries and other employee benefits

(21,602)


(2,021)


NMF

Other operating expenses

(9,428)


(1,221)


NMF

Net healthcare revenue

23,346


2,458


NMF

 

Aldagi BCI had an eventful year in terms of M&A activity and delivered a record earnings performance becoming the undisputed leader in the Georgian insurance market. In May 2012, Aldagi BCI acquired Georgia's third largest insurance company, Imedi L International (Imedi L). The acquisition, along with the organic growth of Aldagi BCI, led to the excellent growth of our insurance businesses, which in turn translated into strong growth of the insurance policy portfolio. As a result, net insurance revenue nearly doubled in 2012 to GEL 34.1 million and contributed 6.9% to the total revenue of the Group compared to just 4.3% in 2011 revenue (adjusted for BYR hedge). The increase in net insurance claims mostly reflected the acquisition of Imedi L.

 

The growth of the healthcare business, following the expansion of healthcare operations by Aldagi BCI as a result of recent acquisitions, led to a tenfold growth in net healthcare revenue to GEL 23.3 million in 2012. The share of healthcare business to total revenue (adjusted for BYR hedge) increased from 0.6% in 2011 to 4.7% in 2012.

 

Other operating non-interest income


Year ended

      Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y




Audited



Net gain from trading and investment securities

2,308


1,382


67.0%

Net gain from revaluation of investment property

-


1,984


-100.0%

Net gain from foreign currencies

49,571


51,385


-3.5%

Other operating income*

18,288


19,128


-4.4%

Other operating non-interest income adjusted for gain from BYR hedge

70,167


73,879


-5.0%

Gain from BYR hedge

-


25,056


-100.0%

Other operating non-interest income

70,167


98,935


-29.1%

 

*Other operating income includes Net revenue from sale of goods of the Bank's non-banking subsidiaries

 

Other operating non-interest income, adjusted for one-off gains from the BYR currency hedge, decreased 5.0% to GEL 70.2 million, as a result of a 3.5% decline in net gain from foreign currencies reflecting the slowdown in economic activity in the second half of 2012 and a 4.4% decrease in other operating income. Affordable Housing and the Bank's non-core segments contributed GEL 4.4 million and GEL 9.6 million respectively to other operating income in 2012. Overall, other operating non-interest income declined by 29.1% y-o-y, due to the one-off gain of GEL 25.1 million on the BYR currency hedge in 2011.

 

Net operating income, cost of credit risk, profit for the period

 


Year ended

     Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y




Audited



Salaries and other employee benefits

(122,556)


(114,622)


6.9%

General and administrative expenses

(67,041)


(61,942)


8.2%

Depreciation and amortization expenses

(28,606)


(27,254)


5.0%

Other operating expenses

(2,949)


(6,347)


-53.5%

Operating non-interest expenses

(221,152)


(210,165)


5.2%

Operating income before cost of credit risk

277,103


223,588


23.9%

Impairment charge on loans to customers

(39,186)


(23,216)


68.8%

Impairment charge on finance lease receivables

(495)


(317)


56.2%

Impairment reversal (charge) on other assets and provisions

(5,036)


1,337


NMF

Cost of credit risk

(44,717)


(22,196)


101.5%

Net operating income

232,386


201,392


15.4%

Net non-operating expense

(19,634)


(29,338)


-33.1%

Profit before income tax expense

212,752


172,054


23.7%

Income tax expense

(33,200)


(21,125)


57.2%

Profit from continuing operations

179,552


150,929


19.0%

Net loss from discontinued operations

-


(15,219)


-100.0%

Profit

179,552


135,710


32.3%

 

The Bank successfully continues to deliver positive operating leverage on an ongoing basis. During 2012, the Bank's operating non-interest expenses increased by 5.2% to GEL 221.2 million, significantly lagging the revenue growth rate of 14.9%. Adjusted for the one-off currency hedge gain in 2011, operating leverage was 16.7% in 2012. The increase in expenses primarily reflected a 6.9% increase in salaries and other employee benefits as a result of the Bank's headcount growth to service Bank of Georgia's and its subsidiaries' increased revenue base over the last twelve months. General and administrative expenses for the reporting period grew by 8.2% to GEL 67.0 million, which included expenditure on new branches, distribution channels such as ATMs and self-service terminals, and marketing costs. The Cost to Income ratio improved further to 44.4% in 2012 from 48.5%, benefiting from ongoing cost efficiency measures undertaken by the Bank. When adjusted for the one-off revenue gains in 2011, the Cost to Income ratio improved substantially from 51.4% adjusted for BYR hedge gains to 44.4%, reflecting significant underlying cost efficiency improvements.

 

The Bank's operating income before the cost of credit risk increased by 23.9%, to GEL 277.1 million.

 

The cost of credit risk increased by GEL 22.5 million to GEL 44.7 million in 2012, reflecting the absence of the previous year's recoveries, the increase in the retail banking impairment charge as a result of job reductions made in a large payroll client during the first half of the year and the increase in the corporate banking cost of risk in the second half of the year, predominantly due to provisions attributed to a single corporate client in Q4 2012. In Q4 2012, an impairment charge of GEL14.2 million (increasing respective allowance for losses to 50% of total balance sheet exposure) was recognised in respect to one of the larger corporate clients of the Bank in the infrastructure sector, with a total exposure of GEL 58.8 million, of which GEL 36.2 million comprises of a loan and GEL 22.6 million off-balance sheet guarantee. Bankruptcy procedures have been initiated against the borrower, and while the Bank expects to be able to recover the un-provisioned amount of the loan from the borrower's assets (including pledged collateral) in the bankruptcy proceeding it will continue to assess objective evidence of further impairment of the overall exposure in 2013.  These factors that negatively affected the cost of risk were partially offset by the effects of a change in the methodology for provisioning non-specific risks in the loan portfolio. The loss experience used to determine the appropriate general risk provision was changed from seven years to three years in Retail banking in 2012. As a result of the changes, Retail Banking NPL coverage ratio decreased from 222.5% in Q3 2012 to 143.0% at the end of Q4 2012.  As a result of the foregoing, in 2012 cost of risk amounted to 1.3%, up from 0.9% in 2011. The allowance for loan impairment was GEL 110.5 million or 3.5% of total gross loans as of 31 December 2012, compared to 4.2% as of 31 December 2011.

 

The Bank's non-performing loans (NPLs increased to GEL 126.3 million as of 31 December 2012 from GEL 100.3 million a year earlier, reflecting the addition of the above-mentioned corporate client. NPLs are defined as the principal and interest on loans overdue for more than 90 days any additional losses estimated by management. The Bank's NPLs to total gross loans ratio stood at 3.9% as of 31 December 2012, up from 3.7% a year ago, while NPL coverage ratio was at 87.5% at the year end.

 

The Bank's net operating income totalled GEL 232.4 million, up 15.4% year-on-year. Adjusted for the one-off gain in 2011, the net operating income in 2012 was up 31.8% y-o-y.  In 2012, the Bank's net non-operating expenses declined to GEL 19.6 million from GEL 29.3 million in 2011. The non-operating expenses in 2012 were largely incurred for the purposes of tender offer and premium listing.

 

As a result of the foregoing, profit before income tax from continuing operations in 2012 totalled GEL 212.8 million, an increase of GEL 40.7 million, or 23.7% y-o-y. After income tax expense of GEL 33.2 million, the Bank's profit for the period stood at GEL 179.6 million, up by GEL 28.6 million, or 19.0%, while profit for the period adjusted for the net loss from discontinued operations in 2011, grew 32.3% y-o-y to GEL 179.6 million.

 

Balance Sheet highlights

 

As of 31 December 2012, the Bank's total assets stood at GEL 5,655.6 million, an increase of 21.2% since 31 December 2011. The annual growth in total assets reflects a strong growth in net loan book, which increased by GEL 476.0 million or 18.2%. On a constant currency basis, the net loan book grew by 19.2%.

 

The Bank's liquid assets, comprised of high quality assets including National Bank CDs, Georgian government treasury bills and bonds and interbank deposits and cash and cash equivalents, grew by 21.3% to GEL 1,624.3 million at 31 December 2012. The funds raised as a result of the Eurobond issuance by JSC Bank of Georgia in July 2012 contributed to the significant increase in the liquidity pool.

 

The growth of the loan book over the last twelve months was driven by a 10.4% increase in retail banking lending to GEL 1,348.3 million and a 23.1% increase in corporate banking lending to GEL 1,696.3 million. Loans denominated in foreign currencies (primarily in US$) accounted for 68.4% of the Bank's net loan book as of 31 December 2012, compared to 69.6% as of 31 December 2011 and 69.5% as of 30 September 2012.

 

Total liabilities amounted to GEL 4,596.1 million, up 19.3% year-to-date, driven by the growth in borrowed funds, up 42.0% to GEL 1,225.8 million as a result of the Eurobond issued in July 2012. The Bank's average customer funds grew 25.0% to GEL 2,772.6 million during the year, while the deposit rate cuts throughout the year led to a reduction of the more costly GEL denominated deposit base, bringing period end customer funds down by 1.5%, compared to last year, to GEL 2,693.0 million as of 31 December 2012. The planned deposit repricing resulted in the further reduction in the Cost of Client Deposits to 6.6% in Q4 2012, compared to 8.2% in Q4 2011 and 7.1% in Q3 2012. Correspondingly, the resulting outflow of the more costly GEL denominated deposits, increased the level of client deposits denominated in foreign currency to 68.7% of the Bank's client deposits as of 31 December 2012, from 59.1% as of 31 December 2011.

 

Shareholders' equity totalled GEL 1,059.5 million, a 16.3% increase since 28 February 2012, when Bank of Georgia Holdings PLC acquired 98.3% of the entire issued capital of JSC Bank of Georgia as a result of the Tender Offer (tender offer by BGH to Bank of Georgia shareholders as announced in December 2011 and completed in February 2012). Shareholders' equity increased by GEL 246.9 million compared to JSC Bank of Georgia's shareholders' equity as of 31 December 2011, the increase reflecting the inclusion of the current year's profit and the conversion of loan notes by EBRD and IFC into shareholders' equity in February 2012.

 

The Bank's Book Value per share on 31 December 2012 stood at GEL 30.33 (US$18.31/GBP11.38) compared to GEL 28.81/(US$17.36/GBP10.72)  as of 30 September 2012 and GEL 25.98 (US$15.55/GBP10.08) as of 31 December 2011.

 

Liquidity, Funding and Capital Management


 

 




Change




Change

 GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y


30 Sep 12


Q-O-Q




Audited







Amounts due to credit institutions, of which:

1,657,162


921,172


79.9%


1,454,045


14.0%

Borrowed funds

1,225,793


863,004


42.0%


1,091,314


12.3%

Inter-bank loans and deposits

431,369


58,168


NMF


362,731


18.9%

Customer Funds

2,693,025


2,735,222


-1.5%


2,795,794


-3.7%

Client deposits

2,622,911


2,554,084


2.7%


2,688,540


-2.4%

Promissory notes

70,114


181,138


-61.3%


107,254


-34.6%

Net Loans / Customer Funds

114.8%


95.7%




109.6%



Liquid assets

1,624,317


1,338,952


21.3%


1,530,830


6.1%

Liquid assets as percent of total assets

28.7%


28.7%




27.7%



Liquid assets as percent of total liabilities

35.3%


34.8%




33.8%



NBG liquidity ratio

41.1%


37.8%




42.0%



 

The Bank continues to maintain a strong liquidity position, considerably in excess of conservative regulatory requirements. The liquidity ratio, as per requirements of the National Bank of Georgia, stood at 41.1% against the required minimum of 30%, while liquid assets, comprised of cash and cash equivalents, investment securities consisting of National Bank of Georgia CDs, government treasury bills and bonds and interbank deposits accounted for 28.7% of total assets and 35.3% of total liabilities as of the end of December 2012.

 

The composition of the Bank's balance sheet reflects its aim to maintain a diversified funding base, while optimising funding costs. Customer lending was largely funded by customer deposits as the increase of the average client loans by GEL 426.0 million in 2012 compares to the increase of average customer funds/deposits by GEL 555.3 million. The strong trend of client deposit inflows in the first half of year was reversed in the second of 2012, as reduced deposit pricing led to lower customer account balances of corporate clients in particular in Q4 2012. The change in the funding structure also reflected the issuance of the Eurobond in July 2012, resulting in the increase of the Bank's Net Loans to Customer Funds ratio to 114.8% from 109.6% in Q3 2012 and 95.7% in Q4 2011.  Net Loans to Customer Funds and Long-Term IFI Funding Ratio was 91.9% as of 31 December 2012 (72.7% in 2011), as the Bank's borrowed funds predominantly comprised of long-term borrowing from International Financial Institutions, which accounted for 54.9% of the Bank's borrowed funds and 14.6% of total liabilities.

 

Capital Adequacy BIS

 

 




Change


  GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y





Audited




Ordinary shares

36,513


32,878


11.1%


Share premium

608,546


473,732


28.5%


Retained earnings

408,538


257,767


58.5%


Tier I capital

1,053,597


764,377


37.8%


General loan loss provisions

59,823


47,993


24.6%


Revaluation reserves

13,717


14,478


-5.3%


Subordinated debt

211,591


317,830


-33.4%


Tier II capital

285,132


380,301


-25.0%


Deductions from capital

(46,121)


(49,341)


-6.5%


Total Capital

1,292,608


1,095,337


18.0%


Risk-weighted assets

4,785,870


3,839,462


24.6%


Tier I capital adequacy ratio (BIS)

22.0%


19.9%


2.1%


Total capital adequacy ratio (BIS)

27.0%


28.5%


-1.5%


 

Regulatory Capital and Capital Adequacy NBG

 

 




Change


  GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y





Audited




Ordinary shares

36,049


29,731


21.2%


Share premium

555,903


460,737


20.7%


Retained earnings

188,749


62,836


200.4%


Less: Intangible Assets

(40,821)


(41,066)


-0.6%


Tier I capital

739,880


512,238


44.4%


Current year profit

134,349


152,835


-12.1%


General loan loss provisions

63,827


54,871


16.3%


Subordinated debt

191,509


256,119


-25.2%


Tier II capital

389,685


463,825


-16.0%


Deductions from capital

(262,616)


(184,323)


42.5%


Total Capital

866,949


791,740


9.5%


Risk-weighted assets

5,352,187


4,872,931


9.8%


Tier I capital adequacy ratio (NBG)

13.8%


10.5%


3.3%


Total capital adequacy ratio (NBG)

16.2%


16.2%


-


 

The Bank ended the year with an extremely strong capital position with robust Tier I ratio (BIS) of 22.0%. This is a further improvement from the 19.9% Tier I Capital of JSC Bank of Georgia in 2011.

 

Risk weighted assets increased 24.6% to GEL 4,785.9 million, reflecting the increase in interest earning assets during the year, while Tier 1 Capital (BIS) increased by GEL 289.2 million, of which GEL 150.8 million was generated by retained profits and GEL 73.9 million was due to the conversion of the EBRD and IFC subordinated and convertible loans into JSC Bank of Georgia's equity, subsequently acquired by BGH upon the completion of Tender Offer. Total capital resources increased by GEL 197.3 million.

  

 

SEGMENT RESULTS

 

 

Strategic Businesses Segment Result Discussion

 

Segment result discussion is presented for the Bank of Georgia's retail banking (RB), corporate banking (CB) and wealth management (WM) operations in Georgia, excluding inter-company eliminations.

 

Retail banking

 


Year ended                

          Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y







Net interest income


144,396


Net fee and commission income


49,512


Net gain from foreign currencies


12,992


Other operating non-interest income

3,365


3,996


-15.8%

Revenue

246,273


210,896


16.8%

Operating non-interest expenses


(107,936)


Operating income before cost of credit risk

137,232


102,960


33.3%

Cost of credit risk


2,575


Net non-operating expense


(6,224)


Profit before income tax expense

117,922


99,311


18.7%

Income tax expense

(16,392)


(9,582)


71.1%

Profit from continuing operations

101,530


89,729


13.2%

Net loss from discontinued operations


(7,183)


Profit


82,546


Net loans, standalone

1,348,331


1,221,443


10.4%

Client deposits, standalone

816,709


707,136


15.5%

Loan yield


21.0%


Cost of deposits


6.7%


Cost / income ratio


51.2%


 

 

Retail banking provides consumer loans, mortgage loans, overdrafts, credit card facilities and other credit facilities as well as funds transfer and settlement services and handling customer deposits for both individuals and legal entities, encompassing the mass affluent segment, retail mass markets, SME and micro businesses.

 

In 2012, retail banking revenue grew 16.8% y-o-y to GEL 246.3 million, driven by a 20.8% increase in net interest income to GEL 174.4 million reflecting the strong growth of the retail net loan book, which increased by GEL 126.9 million to GEL 1,348.3 million. Loan yields increased by 36 basis points to 21.4% y-o-y, while cost of deposits decreased from 6.7% in 2011 to 6.1% in 2012, reflecting the Bank's leadership in Georgia's retail segment. Net fees and commission income increased by 8.2% to GEL 53.6 million as a result of a growth of the Bank's card operations, boosted by the launch of the Bank's Express Banking franchise, while net gains from foreign currencies were up 15.3% to GEL 15.0 million.

 

In 2012, retail banking again reported strong positive operating leverage, with the expenses growth rate of 1.0% lagging significantly behind retail revenue growth of 16.8%. Increased efficiencies of scale, supported by the build-out of the Bank's Express banking franchise and prudent cost control measures, resulted in a markedly improved retail banking Cost to Income ratio, which was 44.3% in 2012 compared to 51.2% in 2011. As a result of the foregoing, operating income before cost of credit risk grew by 33.3% to GEL 137.2 million.

 

The Cost of credit risk of GEL 12.5 million was largely attributed to the consumer and credit card portfolio, reflecting provisions and impairments on credit card and consumer loan balances of employees of a large payroll client that implemented a significant layoff during the year. Retail banking profit before income tax expense amounted to GEL 117.9 million, an increase of 18.7%.

 

Deposits from retail clients increased by GEL 109.6 million, or 15.5% to GEL 816.7 million as of 31 December 2012 despite interest rate reductions that led to a decrease in the cost of retail deposits by 66 basis points to 6.1% in 2012. In Q4 2012, retail client deposits increased 9.6% q-o-q. US$ denominated deposits amounted to 69.4% of retail deposits, down from 73.2% in 2011.

 

 

Highlights

 

§ Under its Express banking strategy, launched contactless Express cards for the first time in Georgia. Express cards also serve as a metro and bus transport contactless payment card and offer loyalty programmes to clients. Since the launch on 5 September 2012, 193,007 Express cards have been issued as of the date of this report.

§ Increased its branch network, adding 30 Express branches since 31 December 2011 bringing the total Express branches and Metro branches to 63 (of which 24 Metro branches).

§ Increased number of Self Service Terminals from 99 to 221 as of 31 December 2012. Self Service Terminals are used for bank transactions such as credit card and consumer loan payments, cash deposits, utility bill payments and mobile telephone top-ups.

§ Issued 151,991 debit cards, including Express cards, in Q4 2012 bringing the total debit cards outstanding to 718,239 up 34.2% y-o-y.

§ Issued 20,167 credit cards of which 18,346 were American Express cards in Q4 2012. A total of 156,385 American Express cards have been issued since the launch in November 2009. The total number of active credit cards outstanding amounted to 107,261 (of which 94,591 were American Express Cards).

§ Outstanding number of Retail Banking clients totalled 1,054,248 up 18.6% y-o-y.

§ Acquired 855 new clients in the Solo business line, the Bank's mass affluent sub-brand in Q4 2012. As of 31 December 2012, the number of Solo clients reached 5,413.

§ Increased Point of Sales (POS) footprint: as of 31 December 2012, 231 desks at 474contracted merchants, up from 179 desks and 369 merchants as of 31 December 2011. GEL 56.4 million POS loans were issued in 2012, compared to GEL 40.1 million POS loans issued in 2011. POS loans outstanding amounted to GEL 30.5 million, up from GEL 24.7 million as of 31 December 2011.

§ POS terminals outstanding reached 3,725, up 31.7% y-o-y. The volume of transactions through the Bank's POS terminals grew 36.5% y-o-y to GEL 336.8 million, while number of POS transactions increased by 1.4 million in 2012 from 3.0 million to 4.4 million.

§ Consumer loan originations of GEL 434.5 million resulted in consumer loans outstanding totalling of GEL 350.5 million as of 31 December 2012 up 21.6% year-to-date.

§ Micro loan originations of GEL 339.6 million resulted in micro loans outstanding totalling GEL 257.8 million as of 31 December 2012, up 5.4% year-to-date.

§ SME loan originations of GEL 151.1 million resulted in SME loans outstanding totalling GEL 106.6 million as of 31 December 2012, up 44.1% year-to-date.

§ Mortgage loans originations of GEL 132.4 million resulted in mortgage loans outstanding of GEL 388.7 million as of 31 December 2012, up 3.6% year-to-date.

§ RB loan yield amounted to 21.3% in Q4 2012 (20.3% in Q4 2011) and RB deposit cost declined to 5.8% in Q4 2012 (6.8% in Q4 2011).

 

 

Corporate banking


Year ended

Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y







Net interest income

92,276


77,900


18.5%

Net fee and commission income

28,701


20,559


39.6%

Net gain from foreign currencies

29,819


27,383


8.9%

Other operating non-interest income

3,996


5,275


-24.2%

Revenue

154,792


131,117


18.1%

Operating non-interest expenses

(51,323)


(56,282)


-8.8%

Operating income before cost of credit risk

103,469


74,835


38.3%

Cost of credit risk

(29,490)


(21,553)


36.8%

Net non-operating expense

(8,415)


(6,318)


33.2%

Profit before income tax expense

65,564


46,964


39.6%

Income tax expense

(9,936)


(4,896)


102.9%

Profit from continuing operations

55,628


42,068


32.2%

Net loss from discontinued operations

-


(7,807)


-100.0%

Profit

55,628


34,261


62.4%

Net loans, standalone

1,696,325


1,378,147


23.1%

Client deposits, standalone

1,148,913


1,383,983


-17.0%

Loan yield

13.9%


14.4%



Cost of deposits

7.2%


7.1%



Cost / income ratio

33.2%


42.9%



 

Corporate banking business in Georgia comprises of loans and other credit facilities to the country's large corporate clients as well as other legal entities, excluding SME and micro businesses. The services include fund transfers and settlements services, currency conversion operations, trade finance services and documentary operations as well as handling savings and term deposits for corporate and institutional customers. Corporate banking business also includes finance lease facility provided by the Bank's leasing operations (Georgian Leasing Company).

 

The 18.1% growth of corporate banking revenue during 2012 was driven by an 18.5% growth in net interest income to GEL 92.3 million and strong growth of net fees and commission income, up by 39.6% to GEL 28.7 million, in line with the Bank's focus on further developing its fee generating business for corporate clients. Net gains from foreign currencies rose to GEL 29.8 million, or 8.9% y-o-y, reflecting the increase in volumes of foreign currency conversions by the Bank's corporate clients. Further improvements in operating efficiency resulted in an 8.8% decline in corporate banking operating costs to GEL 51.3 million, translating into an improved corporate banking Cost to Income ratio of 33.2%, down from 42.9% in 2011.

 

As described above, in 2012, the corporate banking cost of credit risk increased to GEL 29.5 million from GEL 21.6 million in 2011As a result of its strong positive operating leverage, corporate banking posted profit before income tax expense of GEL 65.6 million, an increase of 39.6%.

 

Corporate banking net loans increased by GEL 318.2 million, or 23.1%, to GEL 1,696.3 million during the period, while corporate banking client deposits decreased by 17.0% to GEL 1,148.9 million. Aggressive corporate deposit pricing during the year resulted in the targeted ouflow of costly Lari denominated deposits which in turn led to the reduction of corporate cost of deposits to 6.2% in Q4 2012, which has not been fully reflected in the full year ratio. US$ denominated deposits amounted to 50.2% of corporate deposits, up from 38.4% in 2011.

 

Highlights

 

§ The slight increase in corporate banking deposit cost is attributed to the strong inflow of costly GEL denominated deposits in Q4 2011 and Q1 2012. The subsequent reduction of the deposit rates has been partially reflected in Q4 2012 corporate banking deposit costs, which came down to 6.2% in Q4 2012 from 8.3% in Q1 2012 to 7.3% in Q2 2012 and 6.8% in Q3 2012.

§ Corporate banking loan yield amounted to 13.9% in 2012 (14.4% in 2011) and Corporage banking deposit cost amounted to 7.2%  (7.1% in 2011).

§ Increased the number of corporate clients using the Bank's payroll services from 2,387 as of 31 December 2011 to 3,429 as of 31 December 2012. As of 31 December 2012, the number of individual clients serviced through the corporate payroll programmes administered by the Bank amounted to 204,629.

§ Since its launch in June 2012, Bank of Georgia Research has initiated research coverage of Georgian Electricity Sector, Georgian Oil and Gas Corporation, Georgian Railway,  and issued notes on Georgian State Budget and the Tourism Sector as of the date of this report. The Bank of Georgia research platform is aimed at supporting the growth of CB's fee generating business.

§ Substantially increased the aggregate trade finance limits from international partner credit institutions from US$178.4 million equivalent to US$308.8 million diversified across different currencies (US$, EUR, CHF). The number of partner credit institutions that opened trade finance lines with the Bank increased from 10 to 14.

 

Asset and Wealth Management


Year end

     Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y







Net interest income

12,644


6,000


110.7%

Net fee and commission income

523


604


-13.4%

Net gain from foreign currencies

682


740


-7.8%

Other operating non-interest income

73


24


NMF

Revenue

13,922


7,368


89.0%

Operating non-interest expenses

(4,665)


(3,967)


17.6%

Operating income before cost of credit risk

9,257


3,401


172.2%

Cost of credit risk

727


87


NMF

Net non-operating expense

(305)


(197)


54.8%

Profit before income tax expense

9,679


3,291


194.1%

Income tax expense

(1,339)


(318)


NMF

Profit from continuing operations

8,340


2,973


180.5%

Net loss from discontinued operations

-


(229)


-100.0%

Profit

8,340


2,744


198.9%

Net loans, standalone

38,644


35,774


8.0%

Client deposits, standalone

605,183


454,178


33.2%

Loan yield

11.3%


12.7%



Cost of deposits

8.9%


9.9%



Cost / income ratio

33.5%


53.8%



 

 

The Bank's wealth management business provides private banking services to resident and non-resident clients by ensuring an individual approach and exclusivity in providing banking services such as holding the clients' savings and term deposits, fund transfers, currency exchange and settlement operations. In addition, wealth management involves providing wealth and asset management services to its clients through a wide range investment opportunities and specifically designed investment products.

 

In 2012, net interest income from wealth management more than doubled to GEL 12.6 million translating into a 89.0% y-o-y growth in revenue to GEL 13.9 million. Profit before income tax expense of the wealth management business grew from GEL 3.3 million in 2011 to GEL 9.7 million, as a result of considerably higher revenue growth compared to operating costs, which increased 17.6% to GEL 4.7 million. Client deposits of the wealth management business grew by GEL 151.0 million, or 33.2%, to GEL 605.2 million.

 

Highlights

 

§ Expanded the representative office network by opening its third representative office for Eastern Europe, in Budapest, in September 2012.

§ The Asset and Wealth Management (AWM) business currently serves over 1,300 clients from more than 60 countries. Client funds attracted by AWM have grown more than three times since the end of 2009 to GEL 605.2 million as of 31 December 2012, of which approximately GEL 100 million has been attracted from clients in Hungary.

§ Bank of Georgia started a Certificates of Deposit (CD) Programme in December 2012 (official launch January 2013). Certificates of Deposit are tradable securities offering attractive yields to investors in both Local and Foreign currencies. CDs can be traded through both the Bank treasury department (Bid and Offer is published on the following link: http://bankofgeorgia.ge/ge/services/treasury-operations/deposit-certificates), and any authorised third party. The CD Programme is expected to further contribute to both expanding the client base and efficient liquidity management for the Bank.

 

 

Synergistic Businesses

 

 

Insurance and Healthcare (Aldagi BCI)  

 


Year ended 31 Dec 2012


Year ended 31 Dec 2011


Change, Y-O-Y

GEL thousands, unless otherwise noted

Insurance

Healthcare

Eliminations

Total


Insurance

Healthcare

Eliminations

Total


Insurance

Healthcare

Total

Gross premiums written

127,922

-

-

127,922


61,845

-

-

61,845


106.8%

-

106.8%

Net interest income (expense)

1,825

(6,481)

-

(4,656)


(249)

(143)

-

(392)


NMF

NMF

NMF

Net fee and commission expenses

(107)

-

-

(107)


-

-

-

-


-

-

-

Net insurance revenue

29,661

-

6,422

36,083


17,725

-

1,900

19,625


67.3%

-

83.9%

Net healthcare revenue (loss)

-

29,768

(6,422)

23,346


-

4,358

(1,900)

2,458


-

NMF

NMF

Net gain (loss) from foreign currencies

238

(1,090)

-

(852)


(779)

-

-

(779)


NMF

-

9.4%

Other operating non-interest income

1,000

257

(209)

1,048


1,294

802

-

2,096


-22.7%

-68.0%

-50.0%

Revenue

32,617

22,454

(209)

54,862


17,991

5,017

-

23,008


81.3%

NMF

138.4%

Operating non-interest expenses

(17,437)

(17,917)

209

(35,145)


(12,382)

(3,582)

-

(15,964)


40.8%

NMF

120.2%

Operating income before cost of credit risk

15,180

4,537

-

19,717


5,609

1,435

-

7,044


170.6%

NMF

179.9%

Cost of credit risk

(1,502)

(802)

-

(2,304)


(1,885)

-

-

(1,885)


-20.3%

-

22.2%

Net non-operating income

-

440

-

440


702

1,402

-

2,104


-100.0%

-68.6%

-79.1%

Profit before income tax expense

13,678

4,175

-

17,853


4,426

2,837

-

7,263


NMF

47.2%

145.8%

Income tax expense

(2,068)

(242)

-

(2,310)


(702)

(43)

-

(745)


194.6%

NMF

NMF

Profit from continuing operations

11,610

3,933

-

15,543


3,724

2,794

-

6,518


NMF

40.8%

138.5%

Net gain from discontinued operations

-

-

-

-


-

-

-

-


-

-

-

Profit

11,610

3,933

-

15,543


3,724

2,794

-

6,518


NMF

40.8%

138.5%

Cost / income ratio

53.5%

79.8%


64.1%


68.8%

71.4%


69.4%





 

 

 

Aldagi BCI, the Bank's wholly-owned subsidiary, provides life and non-life insurance and healthcare products and services in Georgia. A leader in the Georgian life and non-life insurance markets, with a market share of 33.5% based on gross insurance premium revenue, Aldagi BCI cross-sells its insurance products with the Bank's retail banking, corporate banking and wealth management products. Aldagi BCI's healthcare business consists of My Family Clinic, Georgia's leading healthcare provider, operating a chain of healthcare centers in Georgia, in line with the Bank's strategy of vertically integrating its insurance and healthcare businesses.

 

In 2012, insurance and healthcare revenue increased to GEL 54.9 million from GEL 23.0 million in 2011, reflecting the growth of both the insurance and healthcare businesses through organic growth as well as through recent acquisitions, mainly Imedi L in May 2012. The Bank's insurance business doubled gross premiums written during the period and saw improvements in insurance claims management as a result of the successful integration of Imedi L Insurance. Operating costs growth of 40.8% y-o-y compares to a 81.3% growth of revenue, resulting in a strong increase of 170.6% in operating income before the cost of credit risk of the insurance operation. Net healthcare revenue grew from GEL 5.0 million in 2011 to GEL 22.5 million in 2012, driving the significant growth of operating income before cost of risk in the healthcare business from GEL 1.4 million to GEL 4.5 million in 2012.

 

As a result, Aldagi BCI posted revenue of GEL 54.9 million, up 138.4%, and profit before tax of GEL 17.9 million, up 145.8%. Excluding inter-company eliminations, the year-end profit of Aldagi BCI on a standalone basis amounted to GEL 16.4 million.

 

 

Highlights

 

§ Completed the integration of business with Imedi L within three months of its acquisition.

§ Increased market share by Gross insurance premium revenue to 33.5% as of 30 Sep 2012 from 20.0% at the end of December 2011.

§ Increased number of insurance clients from 220,000 as of end of December 2011 to 607,000 as of 31 December 2012.

§ As of Q4 2012, Aldagi BCI operated 22 hospitals with a total of 919 beds.

§ In October 2012, Murtaz Kikoria replaced Nikoloz Gamkrelidze as Chief Executive Officer of Aldagi BCI. Prior to this appointment, Murtaz Kikoria served as Deputy CEO, Finance at JSC Bank of Georgia.

 

 

Affordable Housing



                                                 Year ended

 

GEL thousands, unless otherwise noted

31 December 2012


31 December 2011


Change, Y-O-Y, %


SBRE

Mortgages

Total


SBRE

Mortgages

Total


SBRE

Mortgages

Total













Net interest income (expense)

(276)

423

147


(840)

35

(805)


-67.1%

NMF

NMF

Net fee and commission income

196

-

196


-

-

-


-

-

-

Net loss from foreign currencies

(145)

-

(145)


(51)

-

(51)


184.3%

-

184.3%

Other operating non-interest income

4,378

-

4,378


3,378

-

3,378


29.6%

-

29.6%

Revenue

4,153

423

4,576


2,487

35

2,522


67.0%

NMF

81.4%

Operating non-interest expenses

(2,381)

-

(2,381)


(2,029)

-

(2,029)


17.3%

-

17.3%

Operating income before cost of credit risk

1,772

423

2,195


458

35

493


NMF

NMF

NMF

Cost of credit risk

-

(219)

(219)


-

(32)

(32)


-

NMF

NMF

Net non-operating income

282

-

282


8

-

8


NMF

-

NMF

Profit before Income tax benefit (expense)

2,054

204

2,258


466

3

469


NMF

NMF

NMF

Income tax benefit (expense)

(307)

-

(307)


178

-

178


NMF

-

NMF

Profit from continuing operations

1,747

204

1,951


644

3

647


171.3%

NMF

NMF

Net gain from discontinued operations

-

-

-


-

-

-


-

-

-

Profit

1,747

204

1,951


644

3

647


171.3%

NMF

NMF

Cost / income ratio

57.3%

0.0%

52.0%


81.6%

0.0%

80.5%





 

 

The Affordable Housing business consists of the Bank's wholly-owned subsidiary SBRE, which holds investment properties repossessed by the Bank from defaulted borrowers. With the aim to improve liquidity of these repossessed real estate assets and stimulate the Bank's mortgage lending business capitalising on the market opportunity in the affordable housing segment in Georgia, the Bank develops and leases such real estate assets through SBRE. SBRE outsources the construction and architecture works and focuses on project management and sales of apartments and mortgages through its well-established branch network and sales force, thus representing a synergistic business for the Bank's mortgage business.

 

SBRE completed its pilot apartment project, recognising other operating income of GEL 4.4 million, which includes revenues from sale of apartments and rentals, compared to other operating income of GEL 3.4 million in 2011.

 

Highlights

 

§ Pilot project of 123 apartment building with a total buildable area of 15,015 square meters completed; 117 of the units pre-sold. The total sales from the pilot project amounted to US$8.6 million. Project IRR estimated at 43%.

§ Total mortgage loans extended under pilot project of the Affordable Housing amounted to GEL equivalent of US$4.1 million. Number of mortgages sold 71.

§ Construction of a second project of 522 apartment building with a total buildable area of 63,247 square meters in progress. 227 already pre-sold. The total sales from this project amounted to US$18.2 million. Number of mortgages sold 113.

§ Total mortgage loans extended under the second Affordable Housing project amounted to US$6.9 million.

§ Drew down two tranches each in the amount of US$5 million of the US$20 million financing raised from FMO, Dutch Development Bank.

§ Cash balance (comprising cash and cash equivalents and amounts due form credit institutions) of SBRE as of 31 December 2012 amounted to GEL 23.3 million.

 

 

Non-Core Businesses

 

The Bank's non-core businesses that accounted for 4.3% of total assets and 5.6% of total revenue in 2012, comprise BNB, our Belarusian banking operation, and Liberty Consumer, a Georgia focused investment company in which the Bank holds a 67% stake. In order for the Bank to focus on its strategic businesses, the Bank has announced its intention to exit from its non-core operations. In line with its intention of exiting from its non-core operations, the Bank continued to sell and/or liquidate non-performing assets held by Liberty Consumer. As of 31 December 2012, the Bank still held Teliani Valley, a Georgian wine producer, through Liberty Consumer. The Bank intends to sell this remaining asset in due course. The Bank's 2011 consolidated results include the results of the operation of BG Bank, Ukraine for two months ended 28 February 2011. The Bank sold, its 80% equity interest in BG Bank in February 2011.

 

BNB


Year ended

         Change

GEL thousands, unless otherwise noted

31 Dec 12


31 Dec 11


Y-O-Y







Net interest income

12,074


13,183


-8.4%

Net fee and commission income

3,809


2,028


87.8%

Net gain from foreign currencies

5,306


35,764


-85.2%

Other operating non-interest income

68


(15)


NMF

Revenue

21,257


50,960


-58.3%

Operating non-interest expenses

(10,327)


(13,321)


-22.5%

Operating income before cost of credit risk

10,930


37,639


-71.0%

Cost of credit risk

(1,306)


(1,398)


-6.6%

Net non-operating expense

(443)


(18,225)


-97.6%

Profit before Income tax expense

9,181


18,016


-49.0%

Income tax expense

(2,367)


(6,009)


-60.6%

Profit from continuing operations

6,814


12,007


-43.2%

Net gain from discontinued operations

-


-


-

Profit

6,814


12,007


-43.2%

Cost / income ratio

48.6%


26.1%



 

 

Through BNB, the Bank provides retail banking and corporate banking services in Belarus. BNB reported good results attributed to strong growth in fee and commission income and decline in operating costs during the period. BNB's performance in 2012 resulted in a return on average equity of 16.4%, up from 4.1% as of year-end 2010 but down 35.4% from as of year end 2011 having been affected by hyperinflation and currency hedge. BNB's net loan book increased 2.4 times to GEL 112.1 million, while client funds amounted to GEL 105.2 million, up 2.4 times year on year. As of 31 December 2012, BNB's total assets stood at GEL 185.0 million, net loan book at GEL 117.3 million, client deposits at GEL 105.2 million and equity at GEL 45.7 million, representing 3.3%, 3.8% and 4.0% of the Bank's total assets, loan book and client deposits, respectively.

    

    

Highlights

 

§ As of 31 December 2012, BNB was the 19th bank in Belarus by assets (2011: 23rd) and 13th by profit (2011: 20th).

§ Increased revenues from trade finance operations by 54% to US$0.7 million.

§ Stepped up plastic card issuance by 71% year-on-year to 20,000 cards outstanding as of 31 December 2012.

§ Signed MSME US$ 8 million credit line facility with EBRD.

§ Received Straight Through Processing (STP) Award from Commerzbank.

§ Won "Best Belarusian Call center" contest among the banks in Belarus.

 

 

   RESULTS BY QUARTER

 

 

Revenue






Change




Change

GEL thousands, unless otherwise noted

Q4 2012


Q4 2011


Y-O-Y


Q3 2012


Q-O-Q





















Loans to customers

134,451


115,816


16.1%


129,923


3.5%

Investment securities11

8,018


9,782


-18.0%


8,125


-1.3%

Amounts due from credit institutions

2,141


4,718


-54.6%


4,049


-47.1%

Finance lease receivables

2,327


3,099


-24.9%


2,241


3.8%

Interest income

146,937


133,415


10.1%


144,338


1.8%

Amounts due to customers

(46,284)


(49,719)


-6.9%


(52,435)


-11.7%

Amounts due to credit institutions

(23,943)


(23,536)


1.7%


(21,502)


11.4%

Interest expense

(70,227)


(73,255)


-4.1%


(73,937)


-5.0%

Net interest income before interest rate swaps

76,710


60,160


27.5%


70,401


9.0%

Net gain (loss) from interest rate swaps

(171)


(92)


85.9%


(485)


-64.7%

Net interest income

76,539


60,068


27.4%


69,916


9.5%

Fee and commission income

28,028


26,188


7.0%


29,773


-5.9%

Fee and commission expense

(6,906)


(4,086)


69.0%


(5,942)


16.2%

Net fee and commission income

21,122


22,102


-4.4%


23,831


-11.4%

Net insurance premiums earned

32,956


11,515


186.2%


25,837


27.6%

Net insurance claims incurred

(20,698)


(7,937)


160.8%


(15,915)


30.1%

Net insurance revenue

12,258


3,578


NMF


9,922


23.5%

Healthcare revenue

15,751


3,630


NMF


16,038


-1.8%

Cost of healthcare services

(8,626)


(2,318)


NMF


(9,013)


-4.3%

Net healthcare revenue

7,125


1,312


NMF


7,025


1.4%

Net gain from trading and investment securities

73


850


-91.4%


1,282


-94.3%

Net gain from revaluation of investment property

-


1,984


-100.0%


-


-

Net gain from foreign currencies

10,878


16,520


-34.2%


12,502


-13.0%

Other operating income

293


4,665


-93.7%


6,503


-95.5%

Other operating non-interest income

11,244


24,019


-53.2%


20,287


-44.6%

Revenue adjusted for gain from BYR hedge

128,288


111,079


15.5%


130,981


-2.1%

Gain from BYR hedge

-


4,371


-100.0%


-


-

Revenue

128,288


115,450


11.1%


130,981


-2.1%

 

11primarily consist of Georgian government treasury bills and bonds and National Bank of Georgia's Certificates of deposits 

 

The Bank's Q4 2012 revenue of GEL 128.3 million grew 11.1% y-o-y and but decreased 2.1% q-o-q due to the quiet post-election period. On a year-on-year basis, 27.4% increase in net interest income drove the growth in revenue, which was partially offset by lower net fee and commission income and the decline of net gains from foreign currencies as a result of lower demand of forex transactions in Q4 2012. The growth of net interest income during the period reflects the decreasing interest expense, down 4.1% y-o-y, as a result of the reduced Cost of Funds over the past twelve months. Cost of funds decreased to 6.6% in Q4 2012 from 8.4% in 2011. Insurance business posted strong results in Q4 2012, with net insurance revenue increasing 3.4 times y-o-y to GEL 12.3 million.

 

 

Net Interest Margin

 






Change




Change

GEL thousands, unless otherwise noted

Q4 2012


Q4 2011


Y-O-Y


Q3 2012


Q-O-Q











Net interest income

76,539


60,068


27.4%


69,916


9.5%

Net Interest Margin

7.8%


7.3%


6.8%


7.3%


6.8%

Average interest earning assets12

3,891,637


3,259,481


19.4%


3,815,503


2.0%

Average interest bearing liabilities12

4,264,983


3,458,812


23.3%


4,196,393


1.6%

 

12monthly averages are used for calculation of average interest earning assets and average interest bearing liabilities

 

The Q4 2012 Net Interest Margin increased from 7.3% to 7.8% y-o-y reflecting solid growth of net interest income on y-o-y basis as a sharp decline in the Cost of Funds from 8.4% to 6.6% significantly offset the slight decline in loan yield from 17.5% to 17.1% and the faster growth of average interest bearing liabilities compared to average interest earning assets. The q-o-q growth of the NIM was also driven by higher net interest income as a result of declining interest expense due to a reduction in the Cost of Funds from 7.1% to 6.6% q-o-q.

 

Net insurance revenue and net healthcare revenue

 






Change




Change

GEL thousands, unless otherwise noted

Q4 2012


Q4 2011


Y-O-Y


Q3 2012


Q-O-Q











Net insurance premiums earned

32,956


11,515


186.2%


25,837


27.6%

Net insurance claims incurred

(20,698)


(7,937)


160.8%


(15,915)


30.1%

Net insurance revenue

12,258


3,578


NMF


9,922


23.5%

Healthcare revenue

15,751


3,630


NMF


16,038


-1.8%

Cost of healthcare services, of which:

(8,626)


(2,318)


NMF


(9,013)


-4.3%

     Salaries and other employee benefits

(5,793)


(1,463)


NMF


(6,343)


-8.7%

     Other Operating expenses

(2,833)


(855)


NMF


(2,670)


6.1%

Net healthcare revenue

7,125


1,312


NMF


7,025


1.4%

 

 

The strong financial performance in insurance and healthcare business during the quarter was underpinned by organic growth and recent acquisitions. The insurance business posted strong results in Q4 2012, with net insurance revenue of GEL 12.3 million for the quarter increasing 3.4 times y-o-y and by 23.5% q-o-q. The healthcare business growth benefited from the integration from the recently acquired Imedi L and Q4 2012 net healthcare revenue increased more than fivefold to GEL 7.1 million, as a result of solid growth in healthcare revenue.

 

Net operating income, cost of credit risk, profit for the period

 






Change




Change

GEL thousands, unless otherwise noted

Q4 2012


Q4 2011


Y-O-Y


Q3 2012


Q-O-Q











Salaries and other employee benefits

(32,383)


(28,356)


14.2%


(32,340)


0.1%

General and administrative expenses

(15,278)


(16,169)


-5.5%


(18,002)


-15.1%

Depreciation and amortization expenses

(7,303)


(7,735)


-5.6%


(7,384)


-1.1%

Other operating expenses

998


(1,600)


NMF


(388)


NMF

Operating non-interest expenses

(53,966)


(53,860)


0.2%


(58,114)


-7.1%

Operating income before cost of credit risk

74,322


61,590


20.7%


72,867


2.0%

Impairment charge on loans to customers

(13,898)


(6,194)


124.4%


(12,287)


13.1%

Impairment reversal (charge) on finance lease receivables

(286)


(195)


46.7%


32


NMF

Impairment charge on other assets and provisions

(1,940)


(2,380)


-18.5%


(2,390)


-18.8%

Cost of credit risk

(16,124)


(8,769)


83.9%


(14,645)


10.1%

Net operating income

58,198


52,821


10.2%


58,222


0.0%

Net non-operating expense

(4,189)


(9,709)


-56.9%


(3,051)


37.3%

Profit before income tax expense

54,009


43,112


25.3%


55,171


-2.1%

Income tax expense

(7,134)


(5,788)


23.3%


(8,528)


-16.3%

Profit from continuing operations

46,875


37,324


25.6%


46,643


0.5%

Net loss from discontinued operations

-


(2,972)


-100.0%


-


-

Profit

46,875


34,352


36.5%


46,643


0.5%

 

 

In Q4 2012 the Bank maintained positive operating leverage on a year-on-year basis as operating non-interest expenses stayed broadly flat, compared to 11.1% revenue growth over the same period, driving the operating income before the cost of credit risk up 20.7% y-o-y to GEL 74.3 million. As a result of a decline in operating non-interest expenses by 7.1% q-o-q, operating income before cost of credit risk increased 2.0% q-o-q and operating leverage remained positive at 5.1%

 

In Q4 2012, the cost of credit risk increased from GEL 14.6 million to GEL 16.1 million q-o-q. In Q4 2012, the Bank changed the methodology of collective impairment assessment, whereby the loss experience used to determine the appropriate general risk provision was changed from seven years to three years in Retail banking in 2012, thus eliminating the stress years of 2008 and 2009 in the calculation.

 

As a result of the foregoing, the Bank's net operating income totalled GEL 58.2 million in Q4 2012, up GEL 5.4 million, or 10.2% year-on-year. The Bank's net non-operating expenses for the period declined to GEL 4.2 million from GEL 9.7 million in Q4 2011. Profit before income tax from continuing operations in the fourth quarter of 2012 therefore totalled GEL 54.0 million, an increase of GEL 10.9 million, or 25.3%. After income tax expense of GEL 7.1 million, the Bank's Q4 2012 profit stood at GEL 46.9 million, compared to GEL 34.4 million in the fourth quarter of 2011 and GEL 46.6 million in the third quarter of 2012.



CONSOLIDATED FINANCIAL STATEMENTS

 

 

CONSOLIDATED INCOME STATEMENT

 


Dec-12

Dec-11

Change

GEL thousands, unless otherwise noted

YTD

YTD

Y-O-Y


Unaudited

Audited

%





Loans to customers

509,339

438,989

16.0%

Investment securities

33,950

37,701

-9.9%

Amounts due from credit institutions

15,813

18,103

-12.6%

Finance lease receivables

8,701

6,565

32.5%

Interest income

567,803

501,358

13.3%

Amounts due to customers

(202,484)

(167,294)

21.0%

Amounts due to credit institutions

(79,492)

(99,763)

-20.3%

Interest expense

(281,976)

(267,057)

5.6%

Net interest income before interest rate swaps

285,827

234,301

22.0%

Net gain (loss) from interest rate swaps

(1,710)

4,984

NMF

Net interest income

284,117

239,285

18.7%

Fee and commission income

109,278

93,541

16.8%

Fee and commission expense

(22,791)

(18,204)

25.2%

Net fee and commission income

86,487

75,337

14.8%

Net insurance premiums earned

91,176

46,396

96.5%

Net insurance claims incurred

(57,038)

(28,658)

99.0%

Net insurance revenue

34,138

17,738

92.5%

Healthcare revenue

54,376

5,700

NMF

Cost of healthcare services

(31,030)

(3,242)

NMF

Net healthcare revenue

23,346

2,458

NMF

Net gain from trading and investment securities

2,308

1,382

67.0%

Net gain from revaluation of investment property

-

1,984

-100.0%

Net gain from foreign currencies

49,571

76,441

-35.2%

Other operating income

18,288

19,128

-4.4%

Other operating non-interest income

70,167

98,935

-29.1%

Revenue

498,255

433,753

14.9%

Salaries and other employee benefits

(122,556)

(114,622)

6.9%

General and administrative expenses

(67,041)

(61,942)

8.2%

Depreciation and amortization expenses

(28,606)

(27,254)

5.0%

Other operating expenses

(2,949)

(6,347)

-53.5%

Operating non-interest expenses

(221,152)

(210,165)

5.2%

Operating income before cost of credit risk

277,103

223,588

23.9%

Impairment charge on loans to customers

(39,186)

(23,216)

68.8%

Impairment charge on finance lease receivables

(495)

(317)

56.2%

Impairment reversal (charge) on other assets and provisions

(5,036)

1,337

NMF

Cost of credit risk

(44,717)

(22,196)

101.5%

Net operating income

232,386

201,392

15.4%

Net non-operating expense

(19,634)

(29,338)

-33.1%

Profit before Income tax expense

212,752

172,054

23.7%

Income tax expense

(33,200)

(21,125)

57.2%

Profit from continuing operations

179,552

150,929

19.0%

Net loss from discontinued operations

-

(15,219)

-100.0%

Profit

179,552

135,710

32.3%

Attributable to:




- shareholders of the Group

174,437

132,531

31.6%

- non-controlling interests

5,115

3,179

60.9%





Earning per share (basic)

5.22

4.44

17.6%

Earning per share (diluted)

5.17

4.20

23.1%

 

                                             

  

 

CONSOLIDATED INCOME STATEMENT

 

 


Q4 - 2012

Q4 - 2011

Change

Q3 - 2012

Change

GEL thousands, unless otherwise noted

Quarter

Quarter

Y-O-Y

Quarter

Q-O-Q


Unaudited

Unaudited

%

Unaudited

%







Loans to customers

134,451

115,816

16.1%

129,923

3.5%

Investment securities

8,018

9,782

-18.0%

8,125

-1.3%

Amounts due from credit institutions

2,141

4,718

-54.6%

4,049

-47.1%

Finance lease receivables

2,327

3,099

-24.9%

2,241

3.8%

Interest income

146,937

133,415

10.1%

144,338

1.8%

Amounts due to customers

(46,284)

(49,719)

-6.9%

(52,435)

-11.7%

Amounts due to credit institutions

(23,943)

(23,536)

1.7%

(21,502)

11.4%

Interest expense

(70,227)

(73,255)

-4.1%

(73,937)

-5.0%

Net interest income before interest rate swaps

76,710

60,160

27.5%

70,401

9.0%

Net gain (loss) from interest rate swaps

(171)

(92)

85.9%

(485)

-64.7%

Net interest income

76,539

60,068

27.4%

69,916

9.5%

Fee and commission income

28,028

26,188

7.0%

29,773

-5.9%

Fee and commission expense

(6,906)

(4,086)

69.0%

(5,942)

16.2%

Net fee and commission income

21,122

22,102

-4.4%

23,831

-11.4%

Net insurance premiums earned

32,956

11,515

186.2%

25,837

27.6%

Net insurance claims incurred

(20,698)

(7,937)

160.8%

(15,915)

30.1%

Net insurance revenue

12,258

3,578

NMF

9,922

23.5%

Healthcare revenue

15,751

3,630

NMF

16,038

-1.8%

Cost of healthcare services

(8,626)

(2,318)

NMF

(9,013)

-4.3%

Net healthcare revenue

7,125

1,312

NMF

7,025

1.4%

Net gain from trading and investment securities

73

850

-91.4%

1,282

-94.3%

Net gain from revaluation of investment property

-

1,984

-100.0%

-

-

Net gain from foreign currencies, of which:

10,878

20,891

-47.9%

12,502

-13.0%

Other operating income

293

4,665

-93.7%

6,503

-95.5%

Other operating non-interest income

11,244

28,390

-60.4%

20,287

-44.6%

Revenue

128,288

115,450

11.1%

130,981

-2.1%

Salaries and other employee benefits

(32,383)

(28,356)

14.2%

(32,340)

0.1%

General and administrative expenses

(15,278)

(16,169)

-5.5%

(18,002)

-15.1%

Depreciation and amortization expenses

(7,303)

(7,735)

-5.6%

(7,384)

-1.1%

Other operating expenses

998

(1,600)

NMF

(388)

NMF

Operating non-interest expenses

(53,966)

(53,860)

0.2%

(58,114)

-7.1%

Operating income before cost of credit risk

74,322

61,590

20.7%

72,867

2.0%

Impairment charge on loans to customers

(13,898)

(6,194)

124.4%

(12,287)

13.1%

Impairment reversal (charge) on finance lease receivables

(286)

(195)

46.7%

32

NMF

Impairment charge on other assets and provisions

(1,940)

(2,380)

-18.5%

(2,390)

-18.8%

Cost of credit risk

(16,124)

(8,769)

83.9%

(14,645)

10.1%

Net operating income

58,198

52,821

10.2%

58,222

0.0%

Net non-operating expense

(4,189)

(9,709)

-56.9%

(3,051)

37.3%

Profit before Income tax expense

54,009

43,112

25.3%

55,171

-2.1%

Income tax expense

(7,134)

(5,788)

23.3%

(8,528)

-16.3%

Profit from continuing operations

46,875

37,324

25.6%

46,643

0.5%

Net loss from discontinued operations

-

(2,972)

-100.0%

-

-

Profit

46,875

34,352

36.5%

46,643

0.5%

Attributable to:






- shareholders of the Group

45,228

31,972

41.5%

44,994

0.5%

- non-controlling interests

1,647

2,380

-30.8%

1,649

-0.1%







Earnings per share (basic)

1.33

1.08

23.1%

1.35

-1.5%

Earnings per share (diluted)

1.33

1.03

29.1%

1.35

-1.5%

  

 

CONSOLIDATED BALANCE SHEET

 

 


Dec-12

Dec-11

Change

Sep-12

Change




Y-O-Y


Q-O-Q

 GEL thousands, unless otherwise noted

Unaudited

Audited

%

Unaudited

%







Cash and cash equivalents

762,827

628,731

21.3%

666,896

14.4%

Amounts due from credit institutions

396,559

289,530

37.0%

487,275

-18.6%

Investment securities

463,960

419,576

10.6%

375,853

23.4%

Loans to customers and finance lease receivables

3,092,320

2,616,361

18.2%

3,063,390

0.9%

Investments in associates

2,441

3,014

-19.0%

3,020

-19.2%

Investment property

160,353

101,686

57.7%

149,904

7.0%

Property and equipment

430,877

348,110

23.8%

412,487

4.5%

Goodwill

45,657

46,195

-1.2%

45,463

0.4%

Intangible assets

23,078

21,222

8.7%

20,667

11.7%

Income tax assets

15,296

23,339

-34.5%

23,883

-36.0%

Prepayments

41,147

29,929

37.5%

47,748

-13.8%

Other assets

221,080

137,568

60.7%

233,931

-5.5%

Total assets

5,655,595

4,665,261

21.2%

5,530,517

2.3%







Amounts due to customers, of which:

2,693,025

2,735,222

-1.5%

2,795,794

-3.7%

  Client deposits

2,622,911

2,554,084

2.7%

2,688,540

-2.4%

  Promissory notes and CDs issued

70,114

181,138

-61.3%

107,254

-34.6%

Amounts due to credit institutions

1,657,162

921,172

79.9%

1,454,045

14.0%

Income tax liabilities

60,002

37,416

60.4%

61,646

-2.7%

Provisions

683

386

76.9%

603

13.3%

Other liabilities

185,211

158,462

16.9%

210,481

-12.0%

Total liabilities

4,596,083

3,852,658

19.3%

4,522,569

1.6%







Share capital

957

32,878

-97.1%

965

-0.8%

Additional paid-in capital

14,767

473,732

-96.9%

-

-

Treasury shares

(69)

(3,146)

-97.8%

(68)

1.5%

Other reserves

14,097

14,478

-2.6%

15,980

-11.8%

Retained earnings

981,322

254,588

NMF

945,006

3.8%

Total equity attributable to shareholders of the Group

1,011,074

772,530

30.9%

961,883

5.1%

Non-controlling interests

48,438

40,073

20.9%

46,065

5.2%

Total equity

1,059,512

812,603

30.4%

1,007,948

5.1%

Total liabilities and equity

5,655,595

4,665,261

21.2%

5,530,517

2.3%







Book value per share

30.33

25.98

16.7%

28.81

5.3%

 

 

  

CONSOLIDATED INCOME STATEMENT

 

 




Dec-12

Dec-11

Change


Dec-12

Dec-11

Change

GEL thousands, unless otherwise noted

YTD

YTD

Y-O-Y


YTD

YTD

Y-O-Y


Unaudited

Audited

%


Unaudited

Audited

%









Loans to customers

307,442

262,820

17.0%


191,100

170,309

12.2%

Investment securities

20,493

22,571

-9.2%


12,738

14,626

-12.9%

Amounts due from credit institutions

9,545

10,838

-11.9%


5,933

7,023

-15.5%

Finance lease receivables

5,251

3,931

33.6%


3,264

2,548

28.1%

Interest income

342,731

300,160

14.2%


213,035

194,506

9.5%

Amounts due to customers

(122,221)

(100,158)

22.0%


(75,970)

(64,903)

17.1%

Amounts due to credit institutions

(47,982)

(59,727)

-19.7%


(29,825)

(38,704)

-22.9%

Interest expense

(170,203)

(159,885)

6.5%


(105,795)

(103,607)

2.1%

Net interest income before interest rate swaps

172,528

140,275

23.0%


107,240

90,899

18.0%

Net gain (loss) from interest rate swaps

(1,032)

2,984

NMF


(641)

1,933

NMF

Net interest income

171,496

143,259

19.7%


106,599

92,832

14.8%

Fee and commission income

65,961

56,003

17.8%


41,000

36,290

13.0%

Fee and commission expense

(13,757)

(10,899)

26.2%


(8,551)

(7,062)

21.1%

Net fee and commission income

52,204

45,104

15.7%


32,449

29,228

11.0%

Net insurance premiums earned

55,035

27,777

98.1%


34,209

18,000

90.1%

Net insurance claims incurred

(34,429)

(17,157)

100.7%


(21,401)

(11,118)

92.5%

Net insurance revenue

20,606

10,620

94.0%


12,808

6,882

86.1%

Healthcare revenue

32,822

3,413

NMF


20,401

2,211

NMF

Cost of healthcare services

(18,730)

(1,941)

NMF


(11,642)

(1,257)

NMF

Net healthcare revenue

14,092

1,472

NMF


8,759

954

NMF

Net gain from trading and investment securities

1,393

827

68.4%


866

536

61.6%

Net gain from revaluation of investment property

-

1,188

-100.0%


-

770

-100.0%

Net gain from foreign currencies

29,922

45,765

-34.6%


18,599

29,656

-37.3%

Other operating income

11,038

11,451

-3.6%


6,861

7,420

-7.5%

Other operating non-interest income

42,353

59,231

-28.5%


26,326

38,382

-31.4%

Revenue

300,751

259,686

15.8%


186,941

168,278

11.1%

Salaries and other employee benefits

(73,976)

(68,624)

7.8%


(45,982)

(44,468)

3.4%

General and administrative expenses

(40,467)

(37,084)

9.1%


(25,153)

(24,031)

4.7%

Depreciation and amortization expenses

(17,267)

(16,317)

5.8%


(10,733)

(10,573)

1.5%

Other operating expenses

(1,779)

(3,800)

-53.2%


(1,106)

(2,463)

-55.1%

Operating non-interest expenses

(133,489)

(125,825)

6.1%


(82,974)

(81,535)

1.8%

Operating income before cost of credit risk

167,262

133,861

25.0%


103,967

86,743

19.9%

Impairment charge on loans to customers

(23,653)

(13,899)

70.2%


(14,702)

(9,007)

63.2%

Impairment charge on finance lease receivables

(299)

(190)

57.4%


(186)

(123)

51.2%

Impairment reversal (charge) on other assets and provisions

(3,040)

800

NMF


(1,890)

519

NMF

Cost of credit risk

(26,992)

(13,289)

103.1%


(16,778)

(8,611)

94.8%

Net operating income

140,270

120,572

16.3%


87,189

78,132

11.6%

Net non-operating expense

(11,851)

(17,564)

-32.5%


(7,366)

(11,382)

-35.3%

Profit before income tax expense

128,419

103,008

24.7%


79,823

66,750

19.6%

Income tax expense

(20,040)

(12,648)

58.4%


(12,456)

(8,196)

52.0%

Profit from continuing operations

108,379

90,360

19.9%


67,367

58,554

15.1%

Net loss from discontinued operations

-

(9,111)

-100.0%


-

(5,904)

-100.0%

Profit

108,379

81,249

33.4%


67,367

52,650

28.0%

Attributable to:








 - shareholders of the Group

105,292

79,346

32.7%


65,448

51,417

27.3%

 - non-controlling interests

3,087

1,903

62.2%


1,919

1,233

55.6%









Earnings per share (basic)

3.15

2.66

18.4%


1.96

1.72

14.0%

Earnings per share (diluted)

3.12

2.51

24.3%


1.94

1.63

19.0%

 

  

      

CONSOLIDATED INCOME STATEMENT

 


USD


GBP

INCOME STATEMENT

Q4-2012

Q4-2011

Change

Q3-2012

Change


Q4-2012

Q4-2011

Change

Q3-2012

Change

QUARTERLY

Quarter

Quarter

Y-O-Y

Quarter

Q-O-Q


Quarter

Quarter

Y-O-Y

Quarter

Q-O-Q


Unaudited

Unaudited

%

Unaudited

%


Unaudited

Unaudited

%

Unaudited

%













Loans to customers

81,156

69,338

17.0%

78,300

3.6%


50,445

44,932

12.3%

48,333

4.4%

Investment securities

4,840

5,856

-17.3%

4,897

-1.2%


3,008

3,795

-20.7%

3,023

-0.5%

Amounts due from credit institutions

1,292

2,825

-54.3%

2,440

-47.0%


803

1,830

-56.1%

1,506

-46.7%

Finance lease receivables

1,405

1,856

-24.3%

1,350

4.1%


874

1,202

-27.3%

833

4.9%

Interest income

88,693

79,875

11.0%

86,987

2.0%


55,130

51,759

6.5%

53,695

2.7%

Amounts due to customers

(27,937)

(29,767)

-6.1%

(31,601)

-11.6%


(17,365)

(19,289)

-10.0%

(19,506)

-11.0%

Amounts due to credit institutions

(14,452)

(14,091)

2.6%

(12,958)

11.5%


(8,983)

(9,131)

-1.6%

(7,999)

12.3%

Interest expense

(42,390)

(43,857)

-3.3%

(44,559)

-4.9%


(26,349)

(28,420)

-7.3%

(27,505)

-4.2%

Net interest income before interest rate swaps

46,303

36,017

28.6%

42,428

9.1%


28,781

23,340

23.3%

26,190

9.9%

Net gain (loss) from interest rate swaps

(103)

(55)

87.3%

(292)

-64.7%


(64)

(36)

77.8%

(181)

-64.6%

Net interest income

46,200

35,962

28.5%

42,136

9.6%


28,717

23,304

23.2%

26,009

10.4%

Fee and commission income

16,918

15,679

7.9%

17,943

-5.7%


10,516

10,160

3.5%

11,076

-5.1%

Fee and commission expense

(4,169)

(2,447)

70.4%

(3,581)

16.4%


(2,591)

(1,585)

63.5%

(2,211)

17.2%

Net fee and commission income

12,749

13,232

-3.7%

14,362

-11.2%


7,925

8,575

-7.6%

8,865

-10.6%

Net insurance premiums earned

19,893

6,894

188.6%

15,571

27.8%


12,365

4,467

176.8%

9,612

28.6%

Net insurance claims incurred

(12,494)

(4,752)

162.9%

(9,591)

30.3%


(7,766)

(3,079)

152.2%

(5,921)

31.2%

Net insurance revenue

7,399

2,142

NMF

5,980

23.7%


4,599

1,388

NMF

3,691

24.6%

Healthcare revenue

9,507

2,173

NMF

9,666

-1.6%


5,910

1,408

NMF

5,966

-0.9%

Cost of healthcare services

(5,206)

(1,388)

NMF

(5,432)

-4.2%


(3,237)

(899)

NMF

(3,353)

-3.5%

Net healthcare revenue

4,301

785

NMF

4,234

1.6%


2,673

509

NMF

2,613

2.3%

Net gain from trading and investment securities

44

509

-91.4%

773

-94.3%


27

330

-91.8%

477

-94.3%

Net gain from revaluation of investment property

-

1,188

-100.0%

-

-


-

770

-100.0%

-

-

Net gain from foreign currencies

6,566

12,507

-47.5%

7,535

-12.9%


4,081

8,105

-49.6%

4,651

-12.3%

Other operating income

177

2,794

-93.7%

3,918

-95.5%


111

1,809

-93.9%

2,420

-95.4%

Other operating non-interest income

6,787

16,998

-60.1%

12,226

-44.5%


4,219

11,014

-61.7%

7,548

-44.1%

Revenue

77,436

69,119

12.0%

78,938

-1.9%


48,133

44,790

7.5%

48,726

-1.2%

Salaries and other employee benefits

(19,547)

(16,977)

15.1%

(19,490)

0.3%


(12,150)

(11,001)

10.4%

(12,031)

1.0%

General and administrative expenses

(9,222)

(9,680)

-4.7%

(10,849)

-15.0%


(5,732)

(6,273)

-8.6%

(6,697)

-14.4%

Depreciation and amortization expenses

(4,408)

(4,631)

-4.8%

(4,450)

-0.9%


(2,740)

(3,001)

-8.7%

(2,747)

-0.3%

Other operating expenses

602

(957)

NMF

(235)

NMF


374

(621)

NMF

(144)

NMF

Operating non-interest expenses

(32,575)

(32,245)

1.0%

(35,024)

-7.0%


(20,248)

(20,896)

-3.1%

(21,619)

-6.3%

Operating income before cost of credit risk

44,861

36,874

21.7%

43,914

2.2%


27,885

23,894

16.7%

27,107

2.9%

Impairment charge on loans to customers

(8,389)

(3,708)

126.2%

(7,405)

13.3%


(5,214)

(2,403)

117.0%

(4,571)

14.1%

Impairment reversal (charge) on finance lease receivables

(173)

(117)

47.9%

19

NMF


(107)

(76)

40.8%

12

NMF

Impairment charge on other assets and provisions

(1,170)

(1,425)

-17.9%

(1,440)

-18.8%


(729)

(923)

-21.0%

(889)

-18.0%

Cost of credit risk

(9,732)

(5,250)

85.4%

(8,826)

10.3%


(6,050)

(3,402)

77.8%

(5,448)

11.0%

Net operating income

35,129

31,624

11.1%

35,088

0.1%


21,835

20,492

6.6%

21,659

0.8%

Net non-operating expense

(2,529)

(5,813)

-56.5%

(1,838)

37.6%


(1,571)

(3,766)

-58.3%

(1,135)

38.4%

Profit before Income tax expense

32,600

25,811

26.3%

33,250

-2.0%


20,264

16,726

21.2%

20,524

-1.3%

Income tax expense

(4,306)

(3,465)

24.3%

(5,140)

-16.2%


(2,677)

(2,246)

19.2%

(3,172)

-15.6%

Profit from continuing operations

28,294

22,346

26.6%

28,110

0.7%


17,587

14,480

21.5%

17,352

1.4%

Net loss from discontinued operations

-

(1,780)

-100.0%

-

-


-

(1,153)

-100.0%

-

-

Profit

28,294

20,566

37.6%

28,110

0.7%


17,587

13,327

32.0%

17,352

1.4%

Attributable to:












- shareholders of the Group

27,300

19,141

42.6%

27,116

0.7%


16,969

12,404

36.8%

16,739

1.4%

- non-controlling interests

994

1,425

-30.2%

994

0.0%


618

923

-33.0%

613

0.8%













Earnings per share (basic)

0.80

0.65

23.1%

0.81

-1.2%


0.50

0.42

19.0%

0.50

0.0%

Earnings per share (diluted)

0.80

0.62

29.0%

0.81

-1.2%


0.50

0.40

25.0%

0.50

0.0%

 

 

  

CONSOLIDATED BALANCE SHEET

 

 


USD


    GBP



Dec-12

Dec-11

Change

Sep-12

Change


Dec-12

Dec-11

Change

Sep-12

Change




Y-O-Y


Q-O-Q




Y-O-Y


Q-O-Q


Unaudited

Audited

%

Unaudited

%


Unaudited

Audited

%

Unaudited

%













Cash and cash equivalents

460,450

376,418

22.3%

401,914

14.6%


286,207

243,921

17.3%

248,092

15.4%

Amounts due from credit institutions

239,367

173,340

38.1%

293,663

-18.5%


148,786

112,325

32.5%

181,271

-17.9%

Investment securities

280,051

251,198

11.5%

226,513

23.6%


174,074

162,778

6.9%

139,821

24.5%

Loans to customers and finance lease receivables

1,866,554

1,566,402

19.2%

1,846,194

1.1%


1,160,215

1,015,038

14.3%

1,139,612

1.8%

Investments in associates

1,473

1,804

-18.3%

1,820

-19.1%


916

1,169

-21.6%

1,123

-18.4%

Investment property

96,791

60,879

59.0%

90,342

7.1%


60,163

39,450

52.5%

55,766

7.9%

Property and equipment

260,081

208,412

24.8%

248,591

4.6%


161,662

135,052

19.7%

153,449

5.4%

Goodwill

27,559

27,657

-0.4%

27,399

0.6%


17,130

17,922

-4.4%

16,913

1.3%

Intangible assets

13,930

12,706

9.6%

12,455

11.8%


8,659

8,233

5.2%

7,688

12.6%

Income tax assets

9,233

13,973

-33.9%

14,393

-35.9%


5,739

9,055

-36.6%

8,885

-35.4%

Prepayments

24,837

17,918

38.6%

28,776

-13.7%


15,438

11,611

33.0%

17,763

-13.1%

Other assets

133,445

82,361

62.0%

140,982

-5.3%


82,947

53,370

55.4%

87,024

-4.7%

Total assets

3,413,771

2,793,068

22.2%

3,333,042

2.4%


2,121,936

1,809,924

17.2%

2,057,407

3.1%













Amounts due to customers, of which:

1,625,535

1,637,563

-0.7%

1,684,924

-3.5%


1,010,402

1,061,151

-4.8%

1,040,064

-2.9%

Client deposits

1,583,214

1,529,117

3.5%

1,620,286

-2.3%


984,096

990,877

-0.7%

1,000,164

-1.6%

Promissory notes and CDs issued

42,321

108,446

-61.0%

64,638

-34.5%


26,306

70,274

-62.6%

39,900

-34.1%

Amounts due to credit institutions

1,000,279

551,501

81.4%

876,300

14.1%


621,754

357,376

74.0%

540,919

14.9%

Income tax liabilities

36,218

22,401

61.7%

37,152

-2.5%


22,512

14,516

55.1%

22,933

-1.8%

Provisions

412

231

78.4%

363

13.5%


256

150

70.7%

224

14.3%

Other liabilities

111,796

94,870

17.8%

126,850

-11.9%


69,491

61,476

13.0%

78,301

-11.3%

Total liabilities

2,774,240

2,306,566

20.3%

2,725,589

1.8%


1,724,415

1,494,669

15.4%

1,682,441

2.5%













Share capital

578

19,684

-97.1%

582

-0.7%


359

12,755

-97.2%

359

0.0%

Additional paid-in capital

8,914

283,621

-96.9%

-

-


5,540

183,788

-97.0%

-

-

Treasury shares

(42)

(1,883)

-97.8%

(41)

2.4%


(26)

(1,221)

-97.9%

(25)

4.0%

Other reserves

8,509

8,667

-1.8%

9,630

-11.6%


5,290

5,618

-5.8%

5,944

-11.0%

Retained earnings

592,335

152,421

NMF

569,521

4.0%


368,184

98,769

NMF

351,552

4.7%

Total equity attributable to shareholders of the Group

610,294

462,510

32.0%

579,692

5.3%


379,347

299,709

26.6%

357,830

6.0%

Non-controlling interests

29,237

23,992

21.9%

27,761

5.3%


18,174

15,546

16.9%

17,136

6.1%

Total equity

639,531

486,502

31.5%

607,453

5.3%


397,521

315,255

26.1%

374,966

6.0%

Total liabilities and equity

3,413,771

2,793,068

22.2%

3,333,042

2.4%


2,121,936

1,809,924

17.2%

2,057,407

3.1%













Book value per share (basic)

18.31

15.55

17.7%

17.36

5.5%


11.38

10.08

12.9%

10.72

6.2%

 

 

 

 

RATIOS

 

 

KEY RATIOS YTD

Dec-12

Dec-11




Profitability



ROAA1

3.5%

3.2%

ROAE2

19.1%

18.3%

Net Interest Margin3

7.9%

7.8%

Loan Yield4

17.5%

17.6%

Cost of Funds5

7.3%

8.0%

Cost of Client Deposits

7.3%

7.6%

Cost of Amounts Due to Credit Institutions

7.2%

8.8%

Operating Leverage, Y-O-Y6

9.6%

19.7%

Efficiency



Cost / Income7

44.4%

48.5%

Liquidity



NBG Liquidity Ratio8

41.1%

37.8%

Liquid Assets To Total Liabilities9

35.3%

34.8%

Net Loans To Customer Funds

114.8%

95.7%

Leverage (Times)10

4.3

4.7

Asset Quality:



NPLs (in GEL)

126,337

100,342

NPLs To Gross Loans To Clients

3.9%

3.7%

NPL Coverage Ratio11

87.5%

114.7%

Cost of Risk, Annualised12

1.3%

0.9%

Capital Adequacy:



BIS Tier I Capital Adequacy Ratio, Consolidated13

22.0%

19.9%

BIS Total Capital Adequacy Ratio, Consolidated14

27.0%

28.5%

NBG Tier I Capital Adequacy Ratio15

13.8%

10.5%

NBG Total Capital Adequacy Ratio16

16.2%

16.2%

Per Share Values:



Basic EPS (GEL)17

5.22

4.44

Diluted EPS (GEL)

5.17

4.20

Book Value Per Share (GEL)18

30.33

25.98

Ordinary Shares Outstanding - Weighted Average, Basic19

33,405,181

29,866,366

Ordinary Shares Outstanding - Weighted Average, Diluted20

33,931,562

33,501,366

Ordinary Shares Outstanding - Period End, Basic

33,332,636

29,731,407

Treasury Shares Outstanding - Period End

(2,576,747)

(3,146,140)

Selected Operating Data:



Full Time Employees, Group, Of Which:

11,095

7,301

 - Full Time Employees, BOG Stand-Alone

3,734

3,364

 - Full Time Employees, Aldagi BCI Insurance

515

338

 - Full Time Employees, Aldagi BCI Healthcare

5,749

2,573

 - Full Time Employees, BNB

323

260

 - Full Time Employees, Other

774

766

Total Assets Per Banking FTE (in GEL thousands)

1,445

1,347

Number Of Active Branches, Of Which:

194

158

 - Flagship Branches

34

34

 - Standard Branches

97

91

 - Express Branches (including Metro)

63

33

Number Of ATMs

478

426

Number Of Cards Outstanding, Of Which:

825,500

663,205

 - Debit cards

718,239

535,385

 - Credit cards

107,261

127,820

Number Of POS Terminals

3,725

2,828

 

  

 

OTHER RATIOS YTD

Dec-12

Dec-11




Profitability Ratios:



ROE

17.3%

17.2%

Interest Income / Average Int. Earning Assets21

15.7%

16.3%

Net F&C Inc. To Av. Int. Earn. Ass.,

2.1%

2.2%

Net Fee And Commission Income To Revenue

17.4%

17.4%

Operating Leverage, Y-O-Y

9.6%

19.7%

Revenue to Total Assets

8.8%

9.3%

Recurring Earning Power 22

5.5%

5.3%

Profit To Revenue

36.0%

31.3%

Efficiency Ratios:



Operating Cost to Av. Total Ass.23

4.4%

5.0%

Cost to Average Total Assets,

4.8%

6.0%

Personnel Cost to Revenue

24.6%

26.4%

Personnel Cost to Operating Cost

55.4%

54.5%

Personnel Cost to Average Total Assets,

2.4%

2.7%

Liquidity Ratios:



Liquid Assets To Total Assets

28.7%

28.7%

Net Loans to Total Assets

54.7%

56.1%

Average Net Loans to Average Total Assets

56.1%

57.5%

Interest Earning Assets to Total Assets

77.9%

81.0%

Average Interest Earning Assets/Average Total Assets

79.3%

82.1%

Net Loans to Client Deposits

117.9%

102.4%

Average Net Loans to Av. Client Deposits

107.9%

114.8%

Net Loans to Total Deposits

101.2%

100.2%

Net Loans to (Total Deposits + Equity)

75.2%

76.4%

Net Loans to Total Liabilities

67.3%

67.9%

Total Deposits to Total Liabilities

66.5%

67.8%

Client Deposits to Total Deposits

85.9%

97.8%

Client Deposits to Total Liabilities

57.1%

66.3%

Total Deposits to Total Assets

54.0%

56.0%

Client Deposits to Total Assets

46.4%

54.7%

Client Deposits to Total Equity (Times)

2.5

3.1

Total Equity to Net Loans

34.3%

31.1%

Asset Quality:



Reserve For Loan Losses to Gross Loans to Clients24

3.5%

4.2%

% of Loans to Clients collateralised

87.1%

85.0%

Equity to Average Net Loans to Clients

34.3%

31.1%

 

   

KEY RATIOS QUARTERLY

Q4-2012

Q4-2011

Q3-2012





Profitability




ROAA, Annualised1

3.4%

3.1%

3.4%

ROAE, Annualised2

18.2%

16.6%

19.2%

Net Interest Margin, Annualised3

7.8%

7.3%

7.3%

Loan Yield, Annualised4

17.1%

17.5%

17.0%

Cost of Funds, Annualised5

6.6%

8.4%

7.1%

Cost of Client Deposits, Annualised

6.6%

8.2%

7.1%

Cost of Amounts Due to Credit Institutions, Annualised

6.3%

9.1%

6.7%

Operating Leverage, Y-O-Y6

10.9%

1.0%

14.8%

Efficiency




Cost / Income7

42.1%

46.7%

44.4%

Liquidity




NBG Liquidity Ratio8

41.1%

37.8%

42.0%

Liquid Assets To Total Liabilities9

35.3%

34.8%

33.8%

Net Loans To Customer Funds

114.8%

95.7%

109.6%

Leverage (Times)10

4.3

4.7

4.5

Asset Quality:




NPLs (in GEL)

126,337

100,342

102,719

NPLs To Gross Loans To Clients

3.9%

3.7%

3.2%

NPL Coverage Ratio11

87.5%

114.7%

105.2%

Cost of Risk, Annualised12

1.8%

0.9%

1.6%

Capital Adequacy:




BIS Tier I Capital Adequacy Ratio, Consolidated13

22.0%

19.9%

20.4%

BIS Total Capital Adequacy Ratio, Consolidated14

27.0%

28.5%

25.9%

NBG Tier I Capital Adequacy Ratio15

13.8%

10.5%

13.4%

NBG Total Capital Adequacy Ratio16

16.2%

16.2%

15.9%

Per Share Values:




Basic EPS (GEL)17

1.33

1.08

1.35

Diluted EPS (GEL)

1.33

1.03

1.35

Book Value Per Share (GEL)18

30.33

25.98

28.81

Ordinary Shares Outstanding - Weighted Average, Basic19

33,940,021

29,734,272

33,350,984

Ordinary Shares Outstanding - Weighted Average, Diluted20

33,940,021

33,369,272

33,350,984

Ordinary Shares Outstanding - Period End, Basic

33,332,636

29,731,407

33,388,904

Treasury Shares Outstanding - Period End

(2,576,747)

(3,146,140)

(2,520,479)

Selected Operating Data:




Full Time Employees, Group, Of Which:

11,095

7,301

10,537

 - Full Time Employees, BOG Stand-Alone

3,734

3,364

3,635

 - Full Time Employees, Aldagi BCI Insurance

515

338

509

 - Full Time Employees, Aldagi BCI Healthcare

5,749

2,573

5,328

 - Full Time Employees, BNB

323

260

309

 - Full Time Employees, Other

774

766

756

Total Assets Per Banking FTE (in GEL thousands)

1,445

1,347

1,452

Number Of Active Branches, Of Which:

194

158

187

 - Flagship Branches

34

34

34

 - Standard Branches

97

91

95

 - Express Branches (including Metro)

63

33

58

Number Of ATMs

478

426

468

Number Of Cards Outstanding, Of Which:

825,500

663,205

896,234

 - Debit cards

718,239

535,385

766,132

 - Credit cards

107,261

127,820

130,102

Number Of POS Terminals

3,725

2,828

3,528

  

 

OTHER RATIOS QUARTERLY

Q4 - 2012

Q4 - 2011

Q3 - 2012





Profitability Ratios:




ROE, Annualised,

17.8%

16.4%

18.6%

Interest Income / Average Int. Earning Assets, Annualised21

15.0%

16.2%

15.0%

Net F&C Inc. To Av. Int. Earn. Ass., Annualised

1.9%

2.4%

2.2%

Net Fee And Commission Income To Revenue

16.5%

19.1%

18.2%

Operating Leverage, Q-O-Q

5.1%

8.0%

2.5%

Revenue to Total Assets, Annualised

9.0%

9.8%

9.4%

Recurring Earning Power, Annualised22

5.3%

5.5%

5.3%

Profit To Revenue

36.5%

29.8%

35.6%

Efficiency Ratios:




Operating Cost to Av. Total Ass., Annualised23

3.9%

4.8%

4.3%

Cost to Average Total Assets, Annualised

4.2%

6.4%

4.5%

Personnel Cost to Revenue

25.2%

24.6%

24.7%

Personnel Cost to Operating Cost

60.0%

52.6%

55.6%

Personnel Cost to Average Total Assets, Annualised

2.3%

2.5%

2.4%

Liquidity Ratios:




Liquid Assets To Total Assets

28.7%

28.7%

27.7%

Net Loans to Total Assets

54.7%

56.1%

55.4%

Average Net Loans to Average Total Assets

55.3%

58.2%

55.0%

Interest Earning Assets to Total Assets

77.9%

81.0%

77.1%

Average Interest Earning Assets/Average Total Assets

77.7%

83.0%

79.2%

Net Loans to Client Deposits

117.9%

102.4%

113.9%

Average Net Loans to Av. Client Deposits

116.0%

113.3%

106.0%

Net Loans to Total Deposits

101.2%

100.2%

100.4%

Net Loans to (Total Deposits + Equity)

75.2%

76.4%

75.5%

Net Loans to Total Liabilities

67.3%

67.9%

67.7%

Total Deposits to Total Liabilities

66.5%

67.8%

67.5%

Client Deposits to Total Deposits

85.9%

97.8%

88.1%

Client Deposits to Total Liabilities

57.1%

66.3%

59.4%

Total Deposits to Total Assets

54.0%

56.0%

55.2%

Client Deposits to Total Assets

46.4%

54.7%

48.6%

Client Deposits to Total Equity (Times)

                            2.5

                            3.1

                     2.7

Total Equity to Net Loans

34.3%

31.1%

32.9%

Asset Quality:




Reserve For Loan Losses to Gross Loans to Clients24

3.5%

4.2%

3.4%

% of Loans to Clients collateralised

87.1%

85.0%

86.7%

Equity to Average Net Loans to Clients

34.3%

31.1%

32.9%

 

  

 NOTES TO RATIOS

 

1 Return On Average Total Assets (ROAA) equals Profit for the period from continuing operations divided by monthly Average Total Assets for the same period;

2 Return On Average Total Equity (ROAE) equals Profit for the period from continuing operations attributable to shareholders of the Bank divided by monthly Average Equity attributable to shareholders of the Bank for the same period;

3 Net Interest Margin equals Net Interest Income of the period (adjusted for the gains or losses from revaluation of interest rate derivatives) divided by monthly Average Interest Earning Assets Including Cash for the same period; Interest Earning Assets Including Cash include: Amounts Due From Credit Institutions, Investment Securities (but excluding corporate shares and other equity instruments) and Loans To Customers And Finance Lease Receivables;

4 Loan Yield equals Interest Income From Loans To Customers And Finance Lease Receivables divided by monthly Average Gross Loans To Customers And Finance Lease Receivables;

5 Cost Of Funds equals Interest Expense of the period (adjusted for the gains or losses from revaluation of interest rate derivatives) divided by monthly Average Interest Bearing Liabilities; Interest Bearing Liabilities Include: Amounts Due To Credit Institutions and Amounts Due To Customers;

6 Operating Leverage equals percentage change in Revenue less percentage change in Other Operating Non-Interest Expenses;

7 Cost / Income Ratio equals Other Operating Non-Interest Expenses divided by Revenue;

8 Average liquid assets during the month (as defined by NBG) divided by selected average liabilities and selected average off-balance sheet commitments (both as defined by NBG);

9 Liquid Assets include: Cash And Cash Equivalents, Amounts Due From Credit Institutions and Investment Securities;

10 Leverage (Times) equals Total Liabilities divided by Total Equity;

11 NPL Coverage Ratio equals Allowance For Impairment Of Loans And Finance Lease Receivables divided by NPLs;

12 Cost Of Risk equals 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;

13 BIS Tier I Capital Adequacy Ratio equals Tier I Capital divided by Total Risk Weighted Assets, both calculated in accordance with the requirements of Basel Accord I;

14 BIS Total Capital Adequacy Ratio equals Total Capital divided by Total Risk Weighted Assets, both calculated in accordance with the requirements of Basel Accord I;

15 NBG Tier I Capital Adequacy Ratio equals Tier I Capital a divided by Total Risk Weighted Assets, both calculated in accordance with the requirements the National Bank of Georgia instructions;

16 NBG Total Capital Adequacy Ratio equals Total Capital divided by Total Risk Weighted Assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions;

17 Basic EPS equals Profit for the period from continuing operations attributable to shareholders of the Bank divided by the weighted average number of outstanding ordinary shares over the same period;

18 Book Value Per Share equals Total Equity attributable to shareholders of the Bank divided by Net Ordinary Shares Outstanding at period end; Net Ordinary Shares Outstanding equals total number of Ordinary Shares Outstanding at period end less number of Treasury Shares at period end;

19 Weighted average number of ordinary shares equal average of daily outstanding number of shares less daily outstanding number of treasury shares;

20 Weighted average diluted number of ordinary shares equals weighted average number of ordinary shares plus weighted average dilutive number of shares known to the management during the same period;

21 Average Interest Earning Assets are calculated on a monthly basis; Interest Earning Assets Excluding Cash include: Investment Securities (but excluding corporate shares and other equity instruments) and Loans To Customers And Finance Lease Receivables;

22 Recurring Earning Power equals Operating Income Before Cost of Credit Risk for the period divided by monthly average Total Assets of the same period;

23 Operating Cost equals Other Operating Non-Interest Expenses;

24 Reserve For Loan Losses To Gross Loans equals Allowance For Impairment Of Loans And Finance Lease Receivables divided by Gross Loans And Finance Lease Receivables.

 

  

 

SHAREHOLDER INFORMATION

BANK OF GEORGIA HOLDINGS PLC

 

Registered Address

84 Brook Street

London W1K 5EH

United Kingdom

www.bogh.co.uk

Registered under number 7811410 in England and Wales

Incorporation date: 14 October 2011

 

Stock Listing

London Stock Exchange plc's Main Market for

listed securities

Ticker: "BGEO.LN"

 

Contact Information

Bank of Georgia Holdings Plc Investor Relations

Telephone: +44 (0) 20 3178 4052

E:mail: ir@bog.ge

www.bogh.co.uk

 

Auditors

Ernst & Young LLP

1 More London Place

London SE1 2AF

United Kingdom

 

Registrar

Computershare Investor Services PLC

The Pavilions

Bridgewater Road

Bristol BS13 8AE

United Kingdom

 

Share price information

BGH shareholders can access both the latest and historical prices via our website, www.bogh.co.uk

 

 

 

 

 

 

 

 


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