TIDMBGEO
RNS Number : 5568S
Bank of Georgia Group PLC
07 November 2019
Bank of Georgia
Group PLC
3(rd) quarter and first nine months 2019 results
Name of authorised official of issuer responsible for making
notification:
Natia Kalandarishvili, Head of Investor Relations and
Funding
www.bankofgeorgiagroup.com
ABOUT BANK OF GEORGIA GROUP PLC
The Group: Bank of Georgia Group PLC ("Bank of Georgia Group" or
the "Group" - LSE: BGEO LN) is a UK incorporated holding company,
the new parent company of BGEO Group PLC. The Group combined a
Banking Business and an Investment Business prior to the Group
demerger on 29 May 2018, which resulted in the Investment
Business's separation from the Group effective from 29 May
2018.
The Group comprises: a) retail banking and payment services and
b) corporate and investment banking and wealth management
operations in Georgia, and c) banking operations in Belarus
("BNB"). JSC Bank of Georgia ("Bank of Georgia", "BOG" or the
"Bank"), the leading universal bank in Georgia, is the core entity
of the Group. The Group targets to benefit from superior growth of
the Georgian economy through both its retail banking and corporate
and investment banking services and aims to deliver on its
strategy, which is based on at least 20% ROAE and c.15% growth of
its loan book.
3Q19 AND 9M19 RESULTS AND CONFERENCE CALL DETAILS
Bank of Georgia Group PLC announces the Group's third quarter
and the first nine months of 2019 consolidated financial results.
Unless otherwise noted, numbers in this announcement are for 3Q19
and comparisons are with 3Q18. The results are based on
International Financial Reporting Standards ("IFRS") as adopted by
the European Union, are unaudited and derived from management
accounts. This results announcement is also available on the
Group's website at www.bankofgeorgiagroup.com.
An investor/analyst conference call, organised by the Bank of
Georgia Group, will be held on 7 November 2019, at 13:00 UK / 14:00
CET / 08:00 U.S Eastern Time. The duration of the call will be 60
minutes and will consist of a 15-minute update and a 45-minute
Q&A session.
Dial-in numbers: 30-Day replay:
Pass code for replays/Conference Pass code for replays / Conference
ID: 3438648 ID: 3438648
International Dial-in: +44 (0) International Dial in: +44 (0)
2071 928000 3333009785
UK: 08445718892 UK Local Dial In: 08445718951
US: 16315107495 UK Free Call Dial In: 08082380667
Austria: 019286559 USA Free Call Dial In: 1 (866)
Belgium: 024009874 331-1332
Czech Republic: 228881424
Denmark: 32728042
Finland: 0942450806
France: 0176700794
Germany: 06924437351
Hungary: 0614088064
Ireland: 014319615
Italy: 0687502026
Luxembourg: 27860515
Netherlands: 0207143545
Norway: 23960264
Spain: 914146280
Sweden: 0850692180
Switzerland: 0315800059
CONTENTS
4 3Q19 and 9M19 results highlights
6 Chief Executive Officer's statement
8 Discussion of results
12 Discussion of segment results
12 Retail Banking
16 Corporate and Investment Banking
19 Selected financial and operating information
24 Glossary
25 Company information
FORWARD LOOKING STATEMENTS
This announcement contains forward-looking statements,
including, but not limited to, statements concerning expectations,
projections, objectives, targets, goals, strategies, future events,
future revenues or performance, capital expenditures, financing
needs, plans or intentions relating to acquisitions, competitive
strengths and weaknesses, plans or goals relating to financial
position and future operations and development. Although Bank of
Georgia Group PLC believes that the expectations and opinions
reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations and opinions will
prove to have been correct. By their nature, these forward-looking
statements are subject to a number of known and unknown risks,
uncertainties and contingencies, and actual results and events
could differ materially from those currently being anticipated as
reflected in such statements. Important factors that could cause
actual results to differ materially from those expressed or implied
in forward-looking statements, certain of which are beyond our
control, include, among other things: currency fluctuations,
including depreciation of the Georgian Lari, and macroeconomic
risk; regional instability; loan portfolio quality; regulatory
risk; liquidity risk; operational risk, cyber security, information
systems and financial crime risk; and other key factors that
indicated could adversely affect our business and financial
performance, which are contained elsewhere in this document and in
our past and future filings and reports of the Group, including the
'Principal risks and uncertainties' included in Bank of Georgia
Group PLC's 2Q19 and 1H19 results announcement and in Annual Report
and Accounts 2018. No part of this document constitutes, or shall
be taken to constitute, an invitation or inducement to invest in
Bank of Georgia Group PLC or any other entity within the Group, and
must not be relied upon in any way in connection with any
investment decision. Bank of Georgia Group PLC and other entities
within the Group undertake no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise, except to the extent legally required.
Nothing in this document should be construed as a profit
forecast.
HIGHLIGHTS(1)
Continued strong momentum - excellent quarterly growth with
improved asset quality and profitability
Change Change Change
GEL thousands 3Q19 3Q18 y-o-y 2Q19 q-o-q 9M19 9M18 y-o-y
Banking Business Income Statement
Highlights(2)
Net interest income 188,682 185,335 1.8% 181,622 3.9% 553,245 552,166 0.2%
Net fee and commission income 48,009 39,481 21.6% 43,267 11.0% 133,456 111,838 19.3%
Net foreign currency gain 44,543 36,827 21.0% 36,700 21.4% 111,268 76,079 46.3%
Net other income / (expense) 3,728 7,437 -49.9% (4,260) NMF 3,035 16,888 -82.0%
Operating income 284,962 269,080 5.9% 257,329 10.7% 801,004 756,971 5.8%
Operating expenses (107,917) (97,137) 11.1% (98,558) 9.5% (298,401) (277,660) 7.5%
Profit from associates 194 326 -40.5% 254 -23.6% 636 1,021 -37.7%
Operating income before cost
of risk 177,239 172,269 2.9% 159,025 11.5% 503,239 480,332 4.8%
Cost of risk (15,223) (48,107) -68.4% (35,476) -57.1% (93,351) (119,447) -21.8%
Net operating income before
non-recurring items 162,016 124,162 30.5% 123,549 31.1% 409,888 360,885 13.6%
Net non-recurring items (5,019) (3,747) 33.9% (2,538) 97.8% (9,132) (20,458) -55.4%
Profit before income tax expense
and one-off costs 156,997 120,415 30.4% 121,011 29.7% 400,756 340,427 17.7%
Income tax expense (22,697) (9,316) 143.6% (9,871) 129.9% (43,104) (24,060) 79.2%
Profit adjusted for one-off
costs 134,300 111,099 20.9% 111,140 20.8% 357,652 316,367 13.0%
One-off termination costs
of former CEO and executive
management (after tax), one-off
demerger related expenses
(after tax) and one-off impact
of re-measurement of deferred
tax balances - - - (3,996) NMF (14,236) (52,541) -72.9%
Profit 134,300 111,099 20.9% 107,144 25.3% 343,416 263,826 30.2%
GEL thousands Sep-19 Sep-18 Change Jun-19 Change
y-o-y q-o-q
Banking Business Balance Sheet
Highlights
Liquid assets 5,099,111 4,696,808 8.6% 4,537,545 12.4%
Cash and cash equivalents 1,369,169 1,237,867 10.6% 936,106 46.3%
Amounts due from credit institutions 1,834,220 1,398,061 31.2% 1,704,701 7.6%
Investment securities 1,895,722 2,060,880 -8.0% 1,896,738 -0.1%
Loans to customers and finance
lease receivables(3) 11,339,745 8,762,413 29.4% 10,579,710 7.2%
Property and equipment 364,405 315,980 15.3% 358,921 1.5%
Total assets 17,540,692 14,314,932 22.5% 16,133,999 8.7%
Client deposits and notes 9,613,718 7,932,536 21.2% 8,855,616 8.6%
Amounts due to credit institutions 3,437,718 3,006,739 14.3% 2,960,519 16.1%
Borrowings from DFIs 1,355,426 1,261,960 7.4% 1,253,921 8.1%
Short-term loans from NBG 1,271,027 1,016,431 25.0% 1,001,496 26.9%
Loans and deposits from commercial
banks 811,265 728,348 11.4% 705,102 15.1%
Debt securities issued 2,175,820 1,578,532 37.8% 2,137,239 1.8%
Total liabilities 15,500,833 12,644,984 22.6% 14,215,780 9.0%
Total equity 2,039,859 1,669,948 22.2% 1,918,219 6.3%
Banking Business Key Ratios 3Q19 3Q18 2Q19 9M19 9M18
ROAA2 3.2% 3.2% 2.9% 3.0% 3.2%
ROAE(2) 26.8% 26.8% 22.9% 24.7% 26.2%
Net interest margin 5.1% 6.4% 5.4% 5.4% 6.8%
Loan yield 11.5% 13.5% 11.8% 11.8% 13.7%
Cost of funds 4.8% 5.0% 4.8% 4.8% 5.0%
Cost / income(4) 37.9% 36.1% 38.3% 37.3% 36.7%
NPLs to Gross loans to clients 2.9% 3.5% 3.2% 2.9% 3.5%
NPL coverage ratio 85.3% 91.7% 88.1% 85.3% 91.7%
NPL coverage ratio, adjusted
for discounted value of collateral 129.3% 136.9% 131.5% 129.3% 136.9%
Cost of credit risk ratio 0.5% 2.0% 1.3% 1.1% 1.8%
NBG (Basel III) CET1 capital
adequacy ratio 11.1% 11.0% 11.0% 11.1% 11.0%
NBG (Basel III) Tier I capital
adequacy ratio 13.3% 11.0% 13.3% 13.3% 11.0%
NBG (Basel III) Total capital
adequacy ratio 16.8% 15.9% 16.7% 16.8% 15.9%
(1) On 29 May 2018, the demerger of Bank of Georgia Group PLC's
Investment Business to Georgia Capital PLC became effective. The
results of operations of the Investment Business prior to demerger,
as well as the gain recorded by the Group as a result of the
Investment Business distribution are classified under the
"discontinued operations". The Group and Banking Business detailed
financials, as well as Discontinued Operations and inter-business
eliminations for previous periods are presented on pages 19-21.
Throughout this announcement, the discussion is focused on the
Banking Business results, which represents the continuing business
of the Group since the demerger
(2) The income statement adjusted profit excludes GEL 4.0mln in
2Q19 and GEL 14.2mln in 9M19 one-off employee costs (net of income
tax) related to former CEO and executive management termination
benefits. The amount is comprised of GEL 4.6mln in 2Q19 and GEL
12.4mln in 9M19 (gross of income tax) excluded from salaries and
other employee benefits and GEL 4.0mln (gross of income tax)
excluded from non-recurring items in 9M19. The income statement
adjusted profit for 9M18 excludes GEL 52.5mln demerger related
expenses (net of income tax) and one-off impact of re-measurement
of deferred tax balances. ROAE and ROAA have been adjusted
accordingly for all periods presented. Full IFRS income statement
is presented on pages 19 and 20. Management believes that one-off
costs do not relate to underlying performance of the Group, and
hence, adjusted results provide the best representation of the
Group's performance
(3) Throughout this announcement, the gross loans to customers
and respective allowance for impairment are presented net of
expected credit loss (ECL) on contractually accrued interest
income. These do not have an effect on the net loans to customers
balance. Management believes that netted-off balances provide the
best representation of the Group's loan portfolio position
(4) Cost/income ratio adjusted for GEL 4.6mln in 2Q19 and GEL
12.4mln in 9M19 one-off employee costs (gross of income tax)
related to termination benefits of the former executive
management
KEY RESULTS HIGHLIGHTS
-- Outstanding quarterly performance. Profit adjusted for
one-off costs totalled GEL 134.3mln in 3Q19 (up 20.9% y-o-y and up
20.8% q-o-q) and GEL 357.7mln in 9M19 (up 13.0% y-o-y), with
profitability reaching 26.8% and 24.7% ROAE(5) in 3Q19 and in the
first nine months of 2019, respectively
-- Strong asset quality. The cost of credit risk ratio improved
to 0.5% in 3Q19 (down 150bps y-o-y and down 80bps q-o-q) and to
1.1% in 9M19 (down 70bps y-o-y). NPLs to gross loans ratio
decreased to 2.9% at 30 September 2019, while the NPL coverage
ratio was 85.3% and the NPL coverage ratio adjusted for discounted
value of collateral was 129.3%
-- Loan book growth totalled 29.4% y-o-y and 7.2% q-o-q at 30
September 2019. Growth on a constant-currency basis was 20.6% y-o-y
and 5.3% q-o-q. Retail Banking loan book share in the total loan
portfolio was 65.8% at 30 September 2019 (69.8% at 30 September
2018 and 67.2% at 30 June 2019)
-- Dollarisation of the loan book and client deposits. Loan book
in local currency accounted for 41.1% of the total loan book at 30
September 2019 (39.3% a year ago and 39.9% in the previous
quarter). Client deposits in local currency represented 30.7% of
the total deposit portfolio at 30 September 2019 (34.4% a year ago
and 31.4% in previous quarter)
-- Strong capital position. Basel III Common Equity Tier 1
(CET1), Tier 1 and Total Capital Adequacy ratios stood at 11.1%,
13.3% and 16.8%, respectively, at 30 September 2019, all
comfortably above the minimum required level of 9.5%, 11.6% and
16.1%, respectively
-- Retail Banking ("RB") continued to deliver solid net interest
income, coupled with strong net fee and commission income
generation during the period. The Retail Banking net loan book
reached GEL 7,083.4mln at 30 September 2019, up 21.6% y-o-y and up
4.6% q-o-q. The growth was predominantly driven by mortgage and
MSME lending. At the same time, RB client deposits increased to GEL
5,384.4mln at 30 September 2019, up 33.6% y-o-y and up 8.0% q-o-q.
The Retail Banking net interest margin stabilised at 5.9% in the
third quarter 2019
-- Corporate and Investment Banking ("CIB") demonstrated strong
growth in 3Q19, generating solid net interest income and net fee
and commission income, coupled with strong asset quality. CIB's net
loan book reached GEL 3,588.1mln at 30 September 2019, up 44.8%
y-o-y and up 11.8% q-o-q. The growth on a constant-currency basis
was 31.1% y-o-y and 9.1% q-o-q. The top 10 CIB client concentration
was 9.4% at 30 September 2019 (9.9% at 30 September 2018 and 9.1%
at 30 June 2019)
-- Assets Under Management ("AUM") within the Group's Investment
Management business, increased to GEL 2,547.6mln in 3Q19, up 16.9%
y-o-y and up 1.7% q-o-q, reflecting an increase in client assets
and bond issuances at Galt & Taggart, our brokerage
subsidiary
-- Digital channels. We have actively continued the further
development of our digital strategy:
-- The Bank continued to introduce new features to our mobile
banking application and our internet bank, introducing dedicated
digital spaces in our branches to incentivise the movement of
client activity to digital channels. As a result, the number of
active internet and mobile banking users (up 8.6% and up 81.1%
y-o-y, respectively), as well as the number and volume of
transactions through our mobile and internet banking continued to
expand (95.8% y-o-y increase in number of transactions and 76.2%
y-o-y increase in volume of transactions during first nine months
of 2019). In total, more than 93% of daily transactions were
executed through digital channels during the first nine months of
2019
-- In 1Q19, the Bank released a new business internet banking
platform (Business iBank) for MSME and corporate clients, which
comes with many features designed to make its use an intuitive and
smooth experience. We focused our efforts on making the Business
iBank even more useful for business transactions, which should
further incentivise offloading client activity to digital channels.
As a result, we already saw a significant increase in the number
and volume of transactions through Business iBank during the first
nine months of 2019 (up 53.3% and up 32.0% y-o-y, respectively).
90% of daily transactions were executed through internet bank in
the first nine months of 2019
-- Digital ecosystem developments. Following the launch of a
cutting-edge full-service real estate digital platform, area.ge in
1Q19 and the acquisition of a leading Georgian e-commerce platform,
extra.ge in 2Q19, in September 2019, the Group launched Optimo - a
digital solution for our MSME customers to run their business sales
and solutions. The platform is designed to address the needs of
micro, small and medium sized enterprises in optimising their
day-to-day operations and better managing their businesses in
general. Optimo's cutting-edge digital inventory management and POS
solution, with integrated software and a rich variety of functions
and analytical tools, enables businesses to easily manage sales and
inventory, as well as access their most recent data on sales
transactions, inventory, revenues and profitability, anytime and
anywhere, and make timely decisions with relevant information at
hand
(5) 2Q19 and 9M19 ROAE adjusted for GEL 4.0mln and GEL 14.2mln
one-off employee costs (net of income tax) related to termination
benefits of the former CEO and executive management,
respectively
CHIEF EXECUTIVE OFFICER'S STATEMENT
The third quarter of 2019 has been important in a number of ways
and I would like to highlight two important messages:
1) we have turned the corner in the new banking regulatory
environment and delivered excellent growth and profitability,
and
2) the new management team has started to execute on our new
strategy and this is being reflected throughout the business as we
are delivering strong profitability coupled with market share
gains, while investing in our future digital capabilities and brand
franchise.
Given the significant changes in the regulatory environment over
the last 12 months, 2019 is a new base year. Now, at the end of the
third quarter, we can see how the year is shaping up. The
high-yield, high-risk unsecured consumer loan portfolio is largely
matured out of our balance sheet and has been replaced with a
lower-risk, higher-volume portfolio, leading to lower systemic risk
in the banking sector overall and therefore, in our loan profile.
This is a new environment with a lower net interest margin and
lower cost of credit risk. As a consequence, we have successfully
reshuffled the portfolio composition and yet delivered net interest
income growth of 3.9% q-o-q in the third quarter 2019, while net
fee and commission income generation and net foreign currency gains
both showed over 20% y-o-y growth. Some of the benefits of the
lower-risk portfolio are already reflected in a lower cost of
credit risk, which was down 150bps y-o-y to 0.5% in the third
quarter of 2019. The historic cost of credit risk on the rebalanced
portfolio mix is c.1.2%, and we expect the net interest margin to
stabilise at around 5%. This combination has resulted in 5.9% y-o-y
and 10.7% q-o-q growth of operating income and a 26.8% ROAE in
3Q19.
Our new mission has been established: we are here to help people
achieve more of their potential. In this context, a new brand
platform has been adopted and our first new brand campaign was
launched in the beginning of October 2019. Bank of Georgia is the
brand that stands for taking action and doing something about it;
we are here to empower and support our customers and employees.
Bank of Georgia is the general sponsor of the Olympic Committee and
has just become general sponsor of the Paralympic Committee. We are
here to support and celebrate people who strive to succeed,
regardless of their challenges. This is all of us. This is what
Bank of Georgia stands for.
Our new Corporate Social Responsibility strategy has been
aligned with our new mission - to help people achieve more of their
potential. We do this through focusing on three main pillars:
education, employment and MSME development.
The success of our new strategy depends on two main pillars:
customer satisfaction and employee engagement. We have revised the
KPIs of the top management to include Net Promoter Score (NPS) and
Employee Net Promoter Score (ENPS). There are very encouraging
signs throughout the business lines showing improved customer
satisfaction (CSAT) and higher employee engagement scores. Not to
stop there, we have invested in the leading customer experience
management platform, Medallia, which will help us capture and
prioritise large amounts of customer feedback. It is being rolled
out first throughout the Bank's digital channels.
The new management team is coming together and helping each
other to take on challenges, or upsides as we refer to them
internally. The entire team is working towards the common goal, and
we are seeing strong numbers across all business lines, especially
in Corporate and Investment Banking, SME and mortgages, growing at
26.8%(6) , 31.5%(6) and 21.8% y-o-y, respectively, on a constant
currency basis. While other loan products have delivered slower
growth due to the new regulations, the overall loan book grew by
20.6% y-o-y on a constant currency basis at 30 September 2019.
We are investing in digital capabilities, doubling our digital
staff over a 12 month period as announced in June 2019. On one side
this has contributed to higher operating expenses, up 11.1% y-o-y
in the third quarter of 2019; but the investment has also
translated into results. As an example, this has already been
reflected in a significantly higher number of mobile banking
transactions, reaching 9.5 million in the third quarter, up 131.0%
y-o-y. Overall, 93% of daily transactions are now performed through
digital channels.
The Georgian economy continued to deliver strong real growth
numbers, estimated at 5.7% in the third quarter of 2019. In July
2019, Russia banned direct flights to Georgia, resulting in slower
growth of tourist arrivals. While the impact of fewer Russian
tourists on the economy has been small, the negative expectations
have partly resulted in the 6.0% depreciation of the GEL vs US
Dollar exchange rate since 20 June 2019, which has had a subsequent
impact on headline inflation, coming in at 6.4% in September 2019.
To curb this inflation, the National Bank of Georgia has increased
the monetary policy rate from 6.5% to 8.5% over the last two
months. This is expected to result in slower mortgage growth for
the next three to six months.
(6) The growth figures are presented excluding the
reclassification of GEL 120mln loan portfolio from SME to CIB
during the second quarter 2019
Notwithstanding this small "hiccup", we remain very positive on
the Georgian economy. On 11 October 2019, S&P Global Ratings
upgraded the Georgia's sovereign credit rating by one notch to BB,
a testament to the positive changes as a result of the Government's
recent reforms. With a ranking of 7(th) , Georgia remains in the
top 10 of best places in the world to do business in 2020 according
to the World Bank's ranking. Most notably, the recent corporate
income tax reform has resulted in Georgian corporates having more
equity which is starting to be leveraged and invested. Also,
exports are showing healthy growth, while imports are shrinking,
resulting in the expected current account deficit falling below 5%
of GDP, down from the 2016 highs of 13.1%.
In summary, the new management has started to successfully
execute on the new strategy, resulting in strong growth and
profitability numbers in the significantly reshaped regulatory
environment. Most importantly, the pace of positive change is
accelerating and very encouraging.
Archil Gachechiladze,
CEO, Bank of Georgia Group PLC
6 November 2019
DISCUSSION OF RESULTS
The Group's business is composed of three segments. (1) Retail
Banking operations in Georgia principally provides consumer loans,
mortgage loans, overdrafts, credit cards and other credit
facilities, funds transfer and settlement services, and handling
customers' deposits for both individuals as well as legal entities.
Retail Banking targets the emerging and mass retail and mass
affluent segments, together with small and medium enterprises and
micro businesses. (2) Corporate and Investment Banking comprises
Corporate Banking and Investment Management operations in Georgia.
Corporate Banking principally provides loans and other credit
facilities, funds transfers and settlement services, trade finance
services, documentary operations support and handles saving and
term deposits for corporate and institutional customers. The
Investment Management business principally provides private banking
services to high net worth clients. (3) BNB, comprising JSC
Belarusky Narodny Bank, principally provides retail and corporate
banking services to clients in Belarus.
OPERATING INCOME
GEL thousands, unless
otherwise Change Change Change
noted 3Q19 3Q18 y-o-y 2Q19 q-o-q 9M19 9M18 y-o-y
Interest income 366,721 337,766 8.6% 342,224 7.2% 1,043,680 981,325 6.4%
Interest expense (178,039) (152,431) 16.8% (160,602) 10.9% (490,435) (429,159) 14.3%
Net interest income 188,682 185,335 1.8% 181,622 3.9% 553,245 552,166 0.2%
Fee and commission income 76,166 60,413 26.1% 68,025 12.0% 206,721 167,319 23.5%
Fee and commission expense (28,157) (20,932) 34.5% (24,758) 13.7% (73,265) (55,481) 32.1%
Net fee and commission
income 48,009 39,481 21.6% 43,267 11.0% 133,456 111,838 19.3%
Net foreign currency gain 44,543 36,827 21.0% 36,700 21.4% 111,268 76,079 46.3%
Net other income /
(expense) 3,728 7,437 -49.9% (4,260) NMF 3,035 16,888 -82.0%
Operating income 284,962 269,080 5.9% 257,329 10.7% 801,004 756,971 5.8%
Net interest margin 5.1% 6.4% 5.4% 5.4% 6.8%
Average interest earning
assets 14,643,462 11,422,113 28.2% 13,504,120 8.4% 13,651,149 10,929,220 24.9%
Average interest bearing
liabilities 14,704,688 12,002,162 22.5% 13,378,168 9.9% 13,643,188 11,585,458 17.8%
Average net loans and
finance
lease receivables,
currency
blended 10,984,723 8,387,388 31.0% 10,004,743 9.8% 10,162,048 8,069,473 25.9%
Average net loans and
finance
lease receivables, GEL 4,425,551 3,420,314 29.4% 3,977,481 11.3% 4,026,375 3,270,009 23.1%
Average net loans and
finance
lease receivables, FC 6,559,172 4,967,074 32.1% 6,027,262 8.8% 6,135,673 4,799,464 27.8%
Average client deposits and
notes, currency blended 9,276,227 7,547,942 22.9% 8,673,526 6.9% 8,766,483 7,288,896 20.3%
Average client deposits
and notes, GEL 2,891,726 2,732,988 5.8% 2,860,563 1.1% 2,833,929 2,535,994 11.7%
Average client deposits
and notes, FC 6,384,501 4,814,954 32.6% 5,812,963 9.8% 5,932,554 4,752,902 24.8%
Average liquid assets,
currency
blended 4,808,233 4,517,487 6.4% 4,528,508 6.2% 4,592,799 4,391,321 4.6%
Average liquid assets,
GEL 2,081,990 2,071,502 0.5% 2,049,163 1.6% 2,069,463 1,912,933 8.2%
Average liquid assets,
FC 2,726,243 2,445,985 11.5% 2,479,345 10.0% 2,523,336 2,478,388 1.8%
Liquid assets yield,
currency
blended 3.2% 3.8% 3.4% 3.4% 3.7%
Liquid assets yield, GEL 6.4% 7.0% 6.1% 6.4% 6.9%
Liquid assets yield, FC 0.8% 1.1% 1.1% 1.0% 1.3%
Loan yield, currency
blended 11.5% 13.5% 11.8% 11.8% 13.7%
Loan yield, GEL 16.5% 19.9% 17.3% 17.3% 20.6%
Loan yield, FC 8.2% 9.0% 8.2% 8.2% 9.0%
Cost of funds, currency
blended 4.8% 5.0% 4.8% 4.8% 5.0%
Cost of funds, GEL 6.7% 7.2% 6.8% 6.8% 7.1%
Cost of funds, FC 3.7% 3.6% 3.7% 3.7% 3.6%
Cost / income(7) 37.9% 36.1% 38.3% 37.3% 36.7%
(7) Adjusted for GEL 4.6mln in 2Q19 and GEL 12.4mln in 9M19
one-off employee costs (gross of income tax) related to termination
benefits of the former executive management
Performance highlights
-- Solid operating income of GEL 285.0mln in 3Q19 (up 5.9% y-o-y
and up 10.7% q-o-q), ending the first nine months of 2019 with
operating income of GEL 801.0mln (up 5.8% y-o-y). Operating income
growth in 3Q19 and 9M19 was primarily driven by strong growth in
net fee and commission income (up 21.6% y-o-y and up 11.0% q-o-q in
3Q19 and up 19.3% y-o-y in 9M19) and net foreign currency gains (up
21.0% y-o-y and up 21.4% q-o-q in 3Q19 and up 46.3% y-o-y in 9M19),
which benefited from a high level of currency volatility in
2019
-- Our NIM was 5.1% in 3Q19 and 5.4% in 9M19. During third
quarter 2019, NIM was down 130bps y-o-y due to the 200bps y-o-y
decrease in loan yield, largely reflecting our shift towards a
higher quality, finer margin product mix on the back of tighter
regulatory conditions for unsecured consumer lending, partially
offset by 20bps y-o-y decline in cost of funds. On a q-o-q basis,
loan yield decreased by 30bps, while cost of funds remained flat,
resulting in 30bps q-o-q decline in 3Q19 NIM. On a nine months
basis, loan yield was down 190bps y-o-y, while cost of funds
decreased by 20bps y-o-y, causing NIM to decline by 140bps y-o-y.
The decline in NIM was also partially driven by the increased
minimum reserve requirements mandated by NBG as discussed in more
detail later
-- Loan yield. Currency blended loan yield was 11.5% in 3Q19
(down 200bps y-o-y and down 30bps q-o-q) and 11.8% in the first
nine months of 2019 (down 190bps y-o-y). The y-o-y decline in loan
yields during the third quarter and first nine months of 2019 was
attributable to a decrease in both local and foreign currency loan
yields, which primarily reflected the change in product mix in our
loan portfolio
-- Liquid assets yield. Both local currency and foreign currency
denominated liquid assets yields decreased y-o-y in 3Q19 and 9M19.
The foreign currency denominated liquid assets yields were down
30bps y-o-y in 3Q19 and 9M19, reflecting a) an increase in
obligatory reserves with NBG, primarily driven by the changes in
minimum reserve requirements mandated by NBG since September 2018,
whereby the foreign currency funds raised by local banks carried up
to a 25% reserve requirement depending on maturity, and further
increase of this requirement up to 30% since May 2019 (although the
mandatory reserve requirements on funds attracted in foreign
currency was reduced to 25% in October 2019); b) starting from 12
July 2018, NBG reduced interest rates on foreign currency
obligatory reserves from US Fed rate upper bound minus 50bps to Fed
rate upper bound minus 200bps, floored at zero for US Dollar
reserves, and from ECB rate minus 50bps to ECB rate minus 200bps,
floored at negative 60bps for EUR denominated reserves (however,
starting from 3 October 2019, following rates are in place - US Fed
rate upper bound minus 50bps for US Dollar reserves, and ECB rate
minus 20bps for EUR denominated reserves). As for the local
currency denominated liquid assets yields, the y-o-y decline both
in 3Q19 and 9M19 and q-o-q increase in 3Q19 was primarily driven by
the NBG monetary policy rate movements
-- Cost of funds. Cost of funds stood at 4.8% both in 3Q19 (down
20bps y-o-y and flat q-o-q) and in 9M19 (down 20bps y-o-y). Y-o-y
decline in cost of funds in 3Q19 and 9M19 was primarily due to
decline in the cost of client deposits and notes (down 40bps y-o-y
in 3Q19 and down 20bps y-o-y in 9M19), which represented 63.1% of
total interest-bearing liabilities at 30 September 2019. This
decline offset the 40bps and 20bps y-o-y increase in cost of debt
securities issued in 3Q19 and 9M19, respectively, as a result of
the issuance of inaugural US$ 100 million Additional Tier 1 capital
perpetual subordinated notes at the end of March 2019. On a q-o-q
basis, the cost of funds remained flat, driven by lower cost of
amounts due to credit institutions on the back of repayment of US$
65mln subordinated debt in April 2019, coupled with a decrease in
Libor rate, partly offset by increased cost of debt securities
issued as a result of issuance of the Additional Tier 1 capital
subordinated notes
-- Net fee and commission income. Net fee and commission income
reached GEL 48.0mln in 3Q19 (up 21.6% y-o-y and up 11.0% q-o-q) and
GEL 133.5mln in 9M19 (up 19.3% y-o-y). Outstanding growth was
mainly driven by the strong performance in our settlement
operations supported by the success of our Retail Banking franchise
and a strong increase in fees and commission income from guarantees
and letters of credit issued by the Corporate and Investment
Banking business
-- Net foreign currency gain. Net foreign currency gain was up
21.0% y-o-y and up 21.4% q-o-q in 3Q19, and up 46.3% y-o-y in 9M19,
primarily due to increased client-driven flows, as well as the high
level of currency volatility during 2019
-- Net other income. Significant y-o-y decline in net other
income in 9M19 was largely driven by net losses from derivative
financial instruments (interest rate swap hedges) recorded during
2019 (the long-term contracts were closed in 3Q19), partially
offset by net gains from investment securities during the same
period
NET OPERATING INCOME BEFORE NON-RECURRING ITEMS; COST OF RISK; PROFIT
FOR THE PERIOD
GEL thousands, unless
otherwise Change Change Change
noted (8) 3Q19 3Q18 y-o-y 2Q19 q-o-q 9M19 9M18 y-o-y
Salaries and other employee
benefits (59,539) (54,107) 10.0% (57,982) 2.7% (169,938) (157,485) 7.9%
Administrative expenses (26,251) (30,759) -14.7% (22,033) 19.1% (71,025) (83,254) -14.7%
Depreciation, amortisation
and impairment (21,320) (11,162) 91.0% (17,295) 23.3% (54,303) (34,077) 59.4%
Other operating expenses (807) (1,109) -27.2% (1,248) -35.3% (3,135) (2,844) 10.2%
Operating expenses (107,917) (97,137) 11.1% (98,558) 9.5% (298,401) (277,660) 7.5%
Profit from associate 194 326 -40.5% 254 -23.6% 636 1,021 -37.7%
Operating income before
cost of risk 177,239 172,269 2.9% 159,025 11.5% 503,239 480,332 4.8%
Expected credit loss /
impairment
charge on loans to
customers (13,617) (43,505) -68.7% (32,436) -58.0% (86,170) (113,716) -24.2%
Expected credit loss /
impairment
charge on finance lease
receivables (333) (426) -21.8% (557) -40.2% (1,336) (678) 97.1%
Other expected credit loss
/ impairment charge on
other
assets and provisions (1,273) (4,176) -69.5% (2,483) -48.7% (5,845) (5,053) 15.7%
Cost of risk (15,223) (48,107) -68.4% (35,476) -57.1% (93,351) (119,447) -21.8%
Net operating income before
non-recurring items 162,016 124,162 30.5% 123,549 31.1% 409,888 360,885 13.6%
Net non-recurring items (5,019) (3,747) 33.9% (2,538) 97.8% (9,132) (20,458) -55.4%
Profit before income tax
expense and one-off costs 156,997 120,415 30.4% 121,011 29.7% 400,756 340,427 17.7%
Income tax expense (22,697) (9,316) 143.6% (9,871) 129.9% (43,104) (24,060) 79.2%
Profit adjusted for one-off
costs 134,300 111,099 20.9% 111,140 20.8% 357,652 316,367 13.0%
One-off termination costs
of former CEO and executive
management (after tax),
one-off demerger related
expenses (after tax) and
one-off impact of
re-measurement
of deferred tax balances - - - (3,996) NMF (14,236) (52,541) -72.9%
Profit 134,300 111,099 20.9% 107,144 25.3% 343,416 263,826 30.2%
(8) The adjusted profit in the table excludes GEL 4.0mln in 2Q19
and GEL 14.2mln in 9M19 one-off employee costs (net of income tax)
related to the former CEO and executive management termination
benefits. The amount is comprised of GEL 4.6mln in 2Q19 and GEL
12.4mln in 9M19 (gross of income tax) excluded from salaries and
other employee benefits and GEL 4.0mln (gross of income tax)
excluded from non-recurring items in 9M19. The income statement
adjusted profit for 9M18 excludes GEL 52.5mln demerger related
expenses (net of income tax) and one-off impact of re-measurement
of deferred tax balances
-- Operating expenses adjusted for one-off employee costs
related to termination benefits of former executive management
members (acceleration of share-based compensation) were GEL
107.9mln in 3Q19 (up 11.1% y-o-y and up 9.5% q-o-q) and GEL
298.4mln in 9M19 (up 7.5% y-o-y), driving the negative operating
leverage of 5.2% y-o-y and 1.7% y-o-y in 3Q19 and 9M19,
respectively. The increase in operating expenses was primarily
driven by our increased investment in IT related resources as part
of the Agile transformation process and focus on digitalisation
-- The decline in administrative expenses and increase in
depreciation, amortisation and impairment expenses is primarily
driven by the adoption of a new standard IFRS 16, Leases replacing
IAS 17, Leases effective 1 January 2019. As a result of the
adoption of the standard the Group recorded on its balance sheet
assets related to the right to use the rented properties together
with corresponding liabilities for respective payments under the
lease contracts. Excluding this impact, the increase in
depreciation, amortisation and impairment expenses was due to
increased investments during 2019
-- Improved asset quality. The cost of credit risk ratio was
0.5% in 3Q19 (down 150bps y-o-y and down 80bps q-o-q) and 1.1% in
the first nine months of 2019 (down 70bps y-o-y). RB's cost of
credit risk ratio was 0.9% in 3Q19 (down 150bps y-o-y and down
70bps q-o-q) and 1.6% in 9M19 (down 60bps y-o-y), while CIB's cost
of credit risk ratio stood at a net credit of 0.2% in 3Q19 (down
from 1.5% in 3Q18 and down from 0.7% in 2Q19) and at 0.2% in the
first nine months of 2019 (down 100bps y-o-y). The y-o-y and q-o-q
decrease in RB's cost of credit risk ratio reflected improved loan
portfolio quality due to our increasing focus on lending in the
mortgage segment and to SME clients, while CIB's cost of credit
risk ratio improvement was primarily driven by the recovery of
several mid- to low-sized corporate loans in 2019
-- Quality of our loan book remained strong in 3Q19 as evidenced
by the following closely monitored metrics:
GEL thousands, unless otherwise noted Sep-19 Sep-18 Change Jun-19 Change
y-o-y q-o-q
Non-performing loans
NPLs 339,118 312,203 8.6% 347,285 -2.4%
NPLs to gross loans 2.9% 3.5% 3.2%
NPLs to gross loans, RB 1.8% 2.4% 2.1%
NPLs to gross loans, CIB 5.0% 4.4% 5.3%
NPL coverage ratio 85.3% 91.7% 88.1%
NPL coverage ratio adjusted for the
discounted value of collateral 129.3% 136.9% 131.5%
Past due dates
Retail loans - 15 days past due rate 1.3% 1.6% 1.5%
Mortgage loans - 15 days past due
rate 1.1% 1.3% 1.4%
-- BNB - the Group's banking subsidiary in Belarus - continues
to remain strongly capitalised, with capital adequacy ratios well
above the requirements of the National Bank of the Republic of
Belarus ("NBRB"). At 30 September 2019, total capital adequacy
ratio was 15.2%, above the 10% minimum requirement, while Tier I
capital adequacy ratio was 9.4%, above NBRB's 7% minimum
requirement. ROAE was 18.1% in 3Q19 (15.2% in 3Q18 and 9.8% in
2Q19) and 13.6% in 9M19 (12.8% in 9M18). For detailed financial
results of BNB, please see page 22
-- Net non-recurring items. Net non-recurring expenses adjusted
for one-off costs amounted to GEL 5.0mln in 3Q19 (GEL 3.7mln in
3Q18 and GEL 2.5mln in 2Q19) and GEL 9.1mln in 9M19 (GEL 20.5mln in
9M18), largely reflecting legal fees incurred during the first nine
months of 2019
-- Income tax expense. Income tax expense amounted to GEL
22.7mln in 3Q19 (up 143.6% y-o-y and up 129.9% q-o-q) and GEL
43.1mln in 9M19 (up 79.2% y-o-y). The increase was primarily driven
by a one-off GEL 8.5mln additional tax expense posted in the third
quarter 2019 as a result of reassessment of deferred tax balances
in relation to changes in the assumptions made in June 2018
relating to the amendments to the corporate taxation model
applicable to financial institutions
-- Overall, profit adjusted for one-off costs totalled GEL
134.3mln in 3Q19 (up 20.9% y-o-y and up 20.8% q-o-q) and GEL
357.7mln in the first nine months of 2019 (up 13.0% y-o-y), while
ROAE(9) was 26.8% in 3Q19 (26.8% in 3Q18 and 22.9% in 2Q19) and
24.7% in 9M19 (26.2% in 9M18)
(9) ROAE adjusted for GEL 4.0mln in 2Q19 and GEL 14.2mln in 9M19
one-off employee costs (net of income tax) related to termination
benefits of the former CEO and executive management. 9M18 ROAE
adjusted for GEL 52.5mln demerger related expenses (net of income
tax) and one-off impact of re-measurement of deferred tax
balances
BALANCE SHEET HIGHLIGHTS
GEL thousands, unless otherwise Sep-19 Sep-18 Change Jun-19 Change
noted y-o-y q-o-q
Liquid assets 5,099,111 4,696,808 8.6% 4,537,545 12.4%
Liquid assets, GEL 2,136,320 2,072,122 3.1% 2,092,757 2.1%
Liquid assets, FC 2,962,791 2,624,686 12.9% 2,444,788 21.2%
Net loans and finance lease receivables 11,339,745 8,762,413 29.4% 10,579,710 7.2%
Net loans and finance lease receivables,
GEL 4,655,533 3,444,621 35.2% 4,217,713 10.4%
Net loans and finance lease receivables,
FC 6,684,212 5,317,792 25.7% 6,361,997 5.1%
Client deposits and notes 9,613,718 7,932,536 21.2% 8,855,616 8.6%
Amounts due to credit institutions 3,437,718 3,006,739 14.3% 2,960,519 16.1%
Borrowings from DFIs 1,355,426 1,261,960 7.4% 1,253,921 8.1%
Short-term loans from central banks 1,271,027 1,016,431 25.0% 1,001,496 26.9%
Loans and deposits from commercial
banks 811,265 728,348 11.4% 705,102 15.1%
Debt securities issued 2,175,820 1,578,532 37.8% 2,137,239 1.8%
Sep-19 Sep-18 Jun-19
Liquidity and CAR ratios
Net loans / client deposits and
notes 118.0% 110.5% 119.5%
Net loans / client deposits and
notes + DFIs 103.4% 95.3% 104.7%
Liquid assets / total assets 29.1% 32.8% 28.1%
Liquid assets / total liabilities 32.9% 37.1% 31.9%
NBG liquidity ratio 36.8% 32.5% 37.0%
NBG liquidity coverage ratio 118.5% 113.6% 114.3%
NBG (Basel III) Tier I capital adequacy
ratio 13.3% 11.0% 13.3%
NBG (Basel III) Total capital adequacy
ratio 16.8% 15.9% 16.7%
Our balance sheet remains highly liquid (NBG liquidity coverage
ratio of 118.5%) and strongly capitalised (NBG Basel III Tier I
capital adequacy ratio of 13.3%) with a well-diversified funding
base (client deposits and notes to total liabilities of 62.0%).
-- Liquidity. Liquid assets stood at GEL 5,099.1mln at 30
September 2019, up 8.6% y-o-y and up 12.4% q-o-q. The notable
increase over the year was in obligatory reserves with NBG,
combined with excess liquidity deployed with credit institutions,
NBG and Ministry of Finance. Increase in obligatory reserves with
NBG was primarily driven by the changes in minimum reserve
requirements mandated by NBG since September 2018, whereby the
foreign currency funds raised by local banks carried up to 25%
reserve requirement depending on maturity. The reserve requirement
on foreign currency funds was further increased up to 30% depending
on maturity starting from the end of May 2019. The NBG Liquidity
coverage ratio was 118.5% at 30 September 2019 (113.6% at 30
September 2018 and 114.3% at 30 June 2019), well above the 100%
minimum requirement level
-- Loan book. Our net loan book and finance lease receivables
reached GEL 11,339.7mln at 30 September 2019, up 29.4% y-o-y and up
7.2% q-o-q. As of 30 September 2019, the retail loan book
represented 65.8% of the total loan portfolio (69.8% at 30
September 2018 and 67.2% at 30 June 2019). Both local and foreign
currency portfolios experienced strong y-o-y growth of 35.2% and
25.7%, respectively. Furthermore, local currency denominated loan
portfolio was up 10.4% q-o-q, while foreign currency denominated
loan book grew by 5.1% q-o-q. The local currency loan portfolio
growth was partially driven by the Government's de-dollarisation
initiatives and our goal to increase the share of local currency
loans in our portfolio
-- Dollarisation of our loan book and client deposits. The
retail client loan book in foreign currency accounted for 43.9% of
the total RB loan book at 30 September 2019 (48.9% at 30 September
2018 and 45.9% at 30 June 2019), while retail client foreign
currency deposits comprised 69.2% of total RB deposits at 30
September 2019 (71.7% at 30 September 2018 and 68.8% at 30 June
2019). At 30 September 2019, 82.1% of CIB's loan book was
denominated in foreign currency (81.7% at 30 September 2018 and
83.6% at 30 June 2019), while 64.1% of CIB deposits were
denominated in foreign currency (55.4% at 30 September 2018 and
63.2% at 30 June 2019)
-- Net loans to customer funds and DFI ratio. Our net loans to
customer funds and DFI ratio, which is closely monitored by
management, remained strong at 103.4% at 30 September 2019 (95.3%
at 30 September 2018 and 104.7% at 30 June 2019)
-- Diversified funding base. Debt securities issued grew by
37.8% y-o-y and by 1.8% q-o-q at 30 September 2019. The y-o-y
increase was primarily driven by the issuance of US$ 100 million
Additional Tier 1 capital notes in March 2019 (see details
below)
-- Capital Adequacy requirements. Basel III Tier 1 and Total
capital adequacy ratios stood at 13.3% and 16.8%, respectively, as
of 30 September 2019 compared to a minimum required level of 11.6%
and 16.1%, respectively. At the same time, Common Equity Tier 1
(CET1) ratio stood at 11.1% compared to a 9.5% minimum requirement
at 30 September 2019. In March 2019, the Bank issued its inaugural
US$ 100 million 11.125% Additional Tier 1 capital perpetual
subordinated notes callable after 5.25 years and on every
subsequent interest payment date, subject to prior consent of the
National Bank of Georgia at an issue price of 100.00% (the
"Notes"). The Notes are listed on the Irish Stock Exchange and
rated B- (Fitch). The issuance was the first international offering
of Additional Tier 1 Capital Notes from Georgia and the South
Caucasus region. Basel III regulations recently introduced in
Georgia now enable this type of capital optimisation and this US
Dollar issue provides the Bank with an opportunity to diversify its
capital structure from a foreign currency perspective and provides
a natural hedge against dollarisation in the economy. The
regulatory approval on the classification of the Notes as
Additional Tier 1 instruments was received in April 2019
DISCUSSION OF SEGMENT RESULTS
RETAIL BANKING (RB)
Retail Banking provides consumer loans, mortgage loans,
overdrafts, credit card facilities and other credit facilities as
well as funds transfer and settlement services and the handling of
customer deposits for both individuals and legal entities (SME and
micro businesses only). RB is represented by the following
sub-segments: (1) the emerging retail segment (through our Express
brand), (2) retail mass market segment; (3) SME and micro
businesses - "MSME" (through our Bank of Georgia brand), and (4)
the mass affluent segment (through our Solo brand).
GEL thousands, unless
otherwise Change Change Change
noted 3Q19 3Q18 y-o-y 2Q19 q-o-q 9M19 9M18 y-o-y
INCOME STATEMENT
HIGHLIGHTS(10)
Net interest income 136,148 136,040 0.1% 128,167 6.2% 395,302 409,978 -3.6%
Net fee and commission
income 36,696 30,651 19.7% 34,605 6.0% 103,735 85,943 20.7%
Net foreign currency gain 20,464 17,381 17.7% 18,070 13.2% 51,773 32,310 60.2%
Net other income / (expense) 581 2,021 -71.3% (3,753) NMF (1,002) 6,791 NMF
Operating income 193,889 186,093 4.2% 177,089 9.5% 549,808 535,022 2.8%
Salaries and other employee
benefits (37,732) (34,830) 8.3% (36,691) 2.8% (108,296) (101,583) 6.6%
Administrative expenses (17,585) (22,619) -22.3% (14,992) 17.3% (48,374) (62,703) -22.9%
Depreciation, amortisation
and impairment (17,973) (9,556) 88.1% (14,492) 24.0% (45,753) (29,276) 56.3%
Other operating expenses (379) (590) -35.8% (753) -49.7% (1,666) (1,694) -1.7%
Operating expenses (73,669) (67,595) 9.0% (66,928) 10.1% (204,089) (195,256) 4.5%
Profit from associate 194 326 -40.5% 254 -23.6% 636 1,021 -37.7%
Operating income before cost
of risk 120,414 118,824 1.3% 110,415 9.1% 346,355 340,787 1.6%
Cost of risk (16,831) (35,155) -52.1% (26,542) -36.6% (82,760) (93,226) -11.2%
Net operating income before
non-recurring items 103,583 83,669 23.8% 83,873 23.5% 263,595 247,561 6.5%
Net non-recurring items (575) (1,948) -70.5% (64) NMF (915) (12,753) -92.8%
Profit before income tax
expense and one-off costs 103,008 81,721 26.0% 83,809 22.9% 262,680 234,808 11.9%
Income tax expense (14,060) (5,998) 134.4% (6,323) 122.4% (26,484) (15,233) 73.9%
Profit adjusted for one-off
costs 88,948 75,723 17.5% 77,486 14.8% 236,196 219,575 7.6%
One-off termination costs
of former CEO and executive
management (after tax),
one-off
demerger related expenses
(after tax) and one-off
impact
of re-measurement of
deferred
tax balances - - - (3,067) NMF (10,142) (33,544) -69.8%
Profit 88,948 75,723 17.5% 74,419 19.5% 226,054 186,031 21.5%
BALANCE SHEET HIGHLIGHTS
Net loans, currency blended 7,083,432 5,826,396 21.6% 6,771,223 4.6% 7,083,432 5,826,396 21.6%
Net loans, GEL 3,974,913 2,975,672 33.6% 3,661,673 8.6% 3,974,913 2,975,672 33.6%
Net loans, FC 3,108,519 2,850,724 9.0% 3,109,550 0.0% 3,108,519 2,850,724 9.0%
Client deposits, currency
blended 5,384,371 4,029,996 33.6% 4,987,611 8.0% 5,384,371 4,029,996 33.6%
Client deposits, GEL 1,657,025 1,141,849 45.1% 1,553,653 6.7% 1,657,025 1,141,849 45.1%
Client deposits, FC 3,727,346 2,888,147 29.1% 3,433,958 8.5% 3,727,346 2,888,147 29.1%
of which:
Time deposits, currency
blended 3,074,292 2,193,682 40.1% 2,866,525 7.2% 3,074,292 2,193,682 40.1%
Time deposits, GEL 753,198 489,535 53.9% 704,286 6.9% 753,198 489,535 53.9%
Time deposits, FC 2,321,094 1,704,147 36.2% 2,162,239 7.3% 2,321,094 1,704,147 36.2%
Current accounts and demand
deposits, currency blended 2,310,079 1,836,314 25.8% 2,121,086 8.9% 2,310,079 1,836,314 25.8%
Current accounts and demand
deposits, GEL 903,827 652,314 38.6% 849,367 6.4% 903,827 652,314 38.6%
Current accounts and demand
deposits, FC 1,406,252 1,184,000 18.8% 1,271,719 10.6% 1,406,252 1,184,000 18.8%
KEY RATIOS
ROAE(10) 30.7% 30.9% 26.9% 27.6% 31.2%
Net interest margin,
currency
blended 5.9% 7.2% 5.9% 6.0% 7.8%
Cost of credit risk ratio 0.9% 2.4% 1.6% 1.6% 2.2%
Cost of funds, currency
blended 5.2% 5.8% 5.3% 5.3% 5.8%
Loan yield, currency blended 12.8% 14.8% 12.9% 13.1% 15.4%
Loan yield, GEL 17.0% 20.8% 17.7% 17.9% 21.7%
Loan yield, FC 7.5% 7.9% 7.3% 7.5% 8.1%
Cost of deposits, currency
blended 3.0% 2.8% 3.0% 3.0% 2.8%
Cost of deposits, GEL 5.0% 4.9% 5.2% 5.1% 4.9%
Cost of deposits, FC 2.1% 2.0% 2.1% 2.1% 2.0%
Cost of time deposits,
currency
blended 4.2% 4.2% 4.3% 4.3% 4.2%
Cost of time deposits, GEL 8.4% 8.7% 8.7% 8.6% 8.8%
Cost of time deposits, FC 2.9% 2.9% 2.9% 2.9% 2.9%
Current accounts and demand
deposits, currency blended 1.3% 1.1% 1.4% 1.3% 1.1%
Current accounts and demand
deposits, GEL 2.2% 2.1% 2.3% 2.2% 1.9%
Current accounts and demand
deposits, FC 0.7% 0.5% 0.8% 0.7% 0.6%
Cost / income ratio(11) 38.0% 36.3% 37.8% 37.1% 36.5%
(10) The income statement adjusted profit excludes GEL 3.1mln in
2Q19 and GEL 10.1mln in 9M19 one-off employee costs (net of income
tax) related to the former CEO and executive management termination
benefits. The amount is comprised of GEL 3.5mln in 2Q19 and GEL
8.6mln in 9M19 (gross of income tax) excluded from salaries and
other employee benefits and GEL 2.9mln (gross of income tax)
excluded from non-recurring items in 9M19. The income statement
adjusted profit for 9M18 excludes GEL 33.5mln demerger related
expenses (net of income tax) and one-off impact of re-measurement
of deferred tax balances. The ROAE has been adjusted accordingly
for all respective periods presented
(11) Cost/income ratio adjusted for GEL 3.5mln in 2Q19 and GEL
8.6mln in 9M19 one-off employee costs (gross of income tax) related
to termination benefits of the former executive management
Performance highlights
-- Retail Banking delivered strong quarterly results in each of
its major segments and generated operating income of GEL 193.9mln
in 3Q19 (up 4.2% y-o-y and up 9.5% q-o-q) and GEL 549.8mln in 9M19
(up 2.8% y-o-y)
-- RB's net interest income was up 0.1% y-o-y and up 6.2% q-o-q
in 3Q19, and down 3.6% y-o-y in 9M19, largely driven by the
regulations introduced by the National Bank of Georgia on consumer
lending in 2018. Net interest income still benefits from the growth
of the local currency loan portfolio, which generated 9.5ppts and
10.4ppts higher yields than the foreign currency loan portfolio in
3Q19 and 9M19, respectively
-- The Retail Banking net loan book reached GEL 7,083.4mln in
3Q19, up 21.6% y-o-y and up 4.6% q-o-q. On a constant currency
basis our retail loan book increased by 15.4% y-o-y and by 3.3%
q-o-q in 3Q19. Our local currency denominated loan book increased
by 33.6% y-o-y and by 8.6% q-o-q, while the foreign currency
denominated loan book grew by 9.0% y-o-y and was flat q-o-q. As a
result, the local currency denominated loan book accounted for
56.1% of the Retail Banking loan book at 30 September 2019 (51.1%
at 30 September 2018 and 54.1% at 30 June 2019)
-- The loan portfolio composition reflects the shift towards a
higher quality, finer margin product mix on the back of tighter
lending conditions for unsecured consumer lending. The y-o-y and
q-o-q loan book growth reflected continued strong loan origination
levels in MSME and mortgage segments. The y-o-y decline in the
mortgage loan originations is reflective of the consumer lending
regulation change in 2018 becoming effective from 1 January 2019,
which drove higher demand on this product in the second half of
2018 on the back of upcoming regulation expectations. Furthermore,
the GEL devaluation since June 2019 has also contributed to slow
down of originations, which is also reflected in q-o-q
decrease:
Retail Banking loan book by products
GEL million, unless otherwise Change Change Change
noted 3Q19 3Q18 y-o-y 2Q19 q-o-q 9M19 9M18 y-o-y
Loan originations
Consumer loans 396.4 344.9 14.9% 407.6 -2.7% 1,110.5 1,055.6 5.2%
Mortgage loans 365.0 606.6 -39.8% 452.8 -19.4% 1,027.3 1,259.6 -18.4%
Micro loans 281.9 270.5 4.2% 323.4 -12.9% 892.4 802.7 11.2%
SME loans 273.9 190.5 43.8% 239.4 14.4% 727.8 474.0 53.5%
POS loans 20.9 23.5 -11.2% 18.4 13.5% 53.8 104.6 -48.6%
Outstanding balance
Consumer loans 1,505.0 1,329.1 13.2% 1,447.5 4.0% 1,505.0 1,329.1 13.2%
Mortgage loans 2,948.5 2,254.1 30.8% 2,814.8 4.7% 2,948.5 2,254.1 30.8%
Micro loans 1,427.1 1,200.4 18.9% 1,408.4 1.3% 1,427.1 1,200.4 18.9%
SME loans(12) 899.1 703.2 27.9% 795.7 13.0% 899.1 703.2 27.9%
POS loans 37.1 66.5 -44.2% 38.2 -3.0% 37.1 66.5 -44.2%
-- Retail Banking client deposits increased to GEL 5,384.4mln as
at 30 September 2019, up 33.6% y-o-y and up 8.0% q-o-q. The
dollarisation level of our deposits stood at 69.2% at 30 September
2019, compared to 71.7% at 30 September 2018 and 68.8% at 30 June
2019. The cost of foreign currency denominated deposits stood at
2.1% in 3Q19 and in 9M19, up 10bps y-o-y both in 3Q19 and in 9M19
and flat q-o-q. The cost of local currency denominated deposits
increased by 10bps y-o-y and was down 20bps q-o-q in 3Q19 and
increased by 20bps y-o-y in 9M19. The spread between the cost of
RB's client deposits in GEL and foreign currency was 2.9ppts during
3Q19 (GEL: 5.0%; FC: 2.1%) compared to 2.9ppts in 3Q18 (GEL: 4.9%;
FC: 2.0%) and 3.1ppts in 2Q19 (GEL: 5.2%; FC: 2.1%). On a nine
months basis, the spread widened to 3.0ppts in 9M19 (GEL: 5.1%; FC:
2.1%) compared to 2.9ppts in 9M18 (GEL: 4.9%; FC: 2.0%). Local
currency denominated deposits increased at a faster pace to GEL
1,657.0mln (up 45.1% y-o-y and up 6.7% q-o-q), as compared to
foreign currency denominated deposits that grew to GEL 3,727.3mln
(up 29.1% y-o-y and up 8.5% q-o-q)
-- Retail Banking NIM was 5.9% in 3Q19 (down 130bps y-o-y and
flat q-o-q) and 6.0% in 9M19 (down 180bps y-o-y). The y-o-y decline
in NIM in 3Q19 and 9M19 was attributable to lower loan yields (down
200bps y-o-y in 3Q19 and down 230bps y-o-y in 9M19), mainly driven
by the change in the Retail Banking loan portfolio product mix,
with the lower yield-lower risk products share increasing in the
total RB loan portfolio. Meanwhile, the cost of funds decreased by
60bps y-o-y in 3Q19 and by 50bps y-o-y in 9M19, primarily on the
back of decrease in Libor and NBG monetary policy rates (although
NBG increased the monetary policy rate twice in September 2019 by a
cumulative 100bps and by another 100bps in October 2019). On a
quarter-on-quarter basis, 10bps decline in loan yields were offset
by 10bps decline in cost of funds, resulting in a flat NIM q-o-q in
3Q19
-- Strong growth in Retail Banking net fee and commission
income. The strong growth in net fee and commission income during
all reported periods was driven by an increase in settlement
operations and the strong underlying growth in our Solo, mass
retail and MSME segments
-- RB's asset quality improved significantly in 3Q19 reflecting
our increasing focus on lending in the mortgage segment and to
finer margin SME clients. Cost of credit risk ratio was 0.9% in
3Q19 (down from 2.4% in 3Q18 and from 1.6% in 2Q19) and 1.6% in
9M19 (down from 2.2% in 9M18)
(12) SME portfolio was up 31.5% y-o-y on a constant currency
basis excluding the GEL 120mln loan portfolio reclassification from
SME to CIB in the second quarter of 2019
-- Our Retail Banking business continued to deliver solid growth
as we further develop our strategy towards continuous
digitalisation, as demonstrated by the following performance
indicators:
Retail Banking performance indicators
Volume information in Change Change Change
GEL thousands 3Q19 3Q18 y-o-y 2Q19 q-o-q 9M19 9M18 y-o-y
Retail Banking
customers
Number of new customers 42,534 38,577 10.3% 41,175 3.3% 123,554 147,411 -16.2%
Number of customers 2,500,826 2,408,223 3.8% 2,475,292 1.0% 2,500,826 2,408,223 3.8%
Cards
Number of cards issued 176,922 152,274 16.2% 183,106 -3.4% 536,113 589,964 -9.1%
Number of cards
outstanding 2,121,830 2,192,870 -3.2% 2,122,006 0.0% 2,121,830 2,192,870 -3.2%
Express Pay terminals
Number of Express Pay
terminals 3,231 3,054 5.8% 3,177 1.7% 3,231 3,054 5.8%
Number of transactions
via Express Pay
terminals 26,644,743 27,001,597 -1.3% 27,499,428 -3.1% 80,895,309 80,315,870 0.7%
Volume of transactions
via Express Pay
terminals 2,193,261 1,757,019 24.8% 1,951,441 12.4% 5,910,238 4,892,501 20.8%
POS terminals
Number of desks 15,185 10,078 50.7% 14,026 8.3% 15,185 10,078 50.7%
Number of contracted
merchants 7,545 5,357 40.8% 6,832 10.4% 7,545 5,357 40.8%
Number of POS terminals 21,088 15,568 35.5% 19,667 7.2% 21,088 15,568 35.5%
Number of transactions
via POS terminals 21,646,160 16,232,785 33.3% 20,805,141 4.0% 58,980,841 45,177,372 30.6%
Volume of transactions
via POS terminals 707,049 534,430 32.3% 617,763 14.5% 1,813,010 1,399,724 29.5%
Internet banking
Number of active
users(13) 268,053 246,897 8.6% 268,357 -0.1% 268,053 246,897 8.6%
Number of transactions
via internet bank 1,273,318 1,417,638 -10.2% 1,338,941 -4.9% 4,033,394 4,350,714 -7.3%
Volume of transactions
via internet bank 579,426 530,368 9.2% 557,660 3.9% 1,627,543 1,409,326 15.5%
Mobile banking
Number of active
users(13) 448,176 247,418 81.1% 418,155 7.2% 448,176 247,418 81.1%
Number of transactions
via mobile bank 9,516,173 4,119,141 131.0% 8,182,306 16.3% 24,396,405 10,170,235 139.9%
Volume of transactions
via mobile bank 1,265,778 538,609 135.0% 1,025,298 23.5% 3,081,276 1,263,812 143.8%
-- Growth in the client base was due to the increased offering
of cost-effective remote channels. The increase to 2,500,826
customers as at 30 September 2019 (up 3.8% y-o-y and up 1.0% q-o-q)
reflects sustained growth in our client base over recent periods
and was one of the drivers of the increase in our Retail Banking
net fee and commission income
-- The number of outstanding cards decreased by 3.2% y-o-y and
were largely flat q-o-q at 30 September 2019 primarily due to
Express cards which have been declining in line with the recently
introduced regulations on consumer lending. Excluding the Express
cards, total number of cards outstanding as at 30 September 2019
increased by 21.0% y-o-y and 5.4% q-o-q. The number of Loyalty
programme Plus+ cards, launched in July 2017 as part of RB's
client-centric approach, reached 792,031 as at 30 September 2019,
up 52.4% y-o-y and up 9.7% q-o-q
-- Digital channels. We have actively continued the further
development of our digital strategy. The Bank continued introducing
new features to our mobile banking application and our internet
bank and introducing dedicated digital spaces in our branches to
incentivise offloading client activity to digital channels. As a
result, the number of active internet and mobile banking users, as
well as the number and volume of transactions through our mobile
and internet banking continued to expand
- mBank digital penetration growth. For our mobile banking
application, the number of transactions (up 131.0% y-o-y and up
16.3% q-o-q in 3Q19 and up 139.9% y-o-y in 9M19) and the volume of
transactions (up 135.0% y-o-y and up 23.5% q-o-q in 3Q19 and up
143.8% y-o-y in 9M19) continue to show outstanding growth. Since
its launch on 29 May 2017, 1,091,241 downloads have been made by
the Bank's customers. During the same period approximately 43.5
million transactions were performed using the application
- Significant growth in loans issued and deposits opened through
Internet and Mobile Bank. In 2017, we started actively offering
loans and deposit products to our customers through the Internet
Bank. In 9M19, 17,435 loans were issued with a total value of GEL
26.1mln, and 10,365 deposits were opened with a total value of GEL
24.2mln through Internet Bank. Starting from 2018, our customers
have been able to apply for a loan and open a deposit account via
mBank as well. In 9M19, 49,794 loans were issued with a total value
of GEL 51.6mln, and 34,338 deposit accounts were opened with a
total deposited amount of GEL 30.3mln using the mobile banking
application. As a result, more than 93% of total daily transactions
were executed through digital channels during 3Q19 and 9M19
- The utilisation of Express Pay terminals continued to grow in
3Q19. The volume of transactions increased by 24.8% y-o-y and by
12.4% q-o-q in 3Q19 and increased by 20.8% y-o-y in 9M19, while
number of transactions slightly decreased by 1.3% y-o-y and by 3.1%
q-o-q in 3Q19 and increased by 0.7% y-o-y in 9M19. The decline in
number of transactions was primarily due to the migration of
customers to mobile and internet banking platforms. The fees
charged to clients for transactions executed through express pay
terminals amounted to GEL 5.7mln in 3Q19 (largely flat y-o-y and up
1.7% q-o-q) and GEL 16.9mln in 9M19 (up 3.0% y-o-y)
(13) The users that log-in in internet and mobile bank at least
once in three months
-- Digital ecosystem developments:
- In 1Q19, the Group launched a cutting-edge full-service real
estate digital platform, area.ge. The platform is unique on the
Georgian real estate market and is the first platform to be fully
integrated with the Bank to provide its users a "one-click" live
credit limit appraisal and mortgage application experience. The
Group aims to boost its mortgage portfolio by gaining access to a
new clientèle, and simultaneously offering value-added services to
real estate developers and agencies. At 30 September 2019, up to
300,000 monthly unique visitors and 527 developers and real estate
agencies were registered, and up to 5,000 mortgage leads have been
generated through the platform, and disbursed mortgage loans
amounted to c.GEL 10mln since the launch
- In 2Q19, the Group acquired a leading Georgian e-commerce
platform, extra.ge. Currently, the platform facilitates
consumer-to-consumer (C2C) sales through its website and social
media channels and has c.400,000 unique visitors per month. Around
50,000 verified registered buyers and sellers and c.20,000 products
and services are listed on extra.ge. The Group is in process of
transforming the platform into vibrant and dynamic full-scale
digital marketplace and the full-scale re-launch is planned in the
first quarter of 2020. The revamped extra.ge will facilitate
consumer-to-consumer (C2C), business-to-consumer (B2C), and
business-to-business (B2B) sales through its website and social
media channels. In 2020, we target up to 600,000 unique visitors
per month, around 100,000 verified registered buyers and sellers
and c.100,000 products and services to be listed on extra.ge. The
clients will be able to access their Bank of Georgia banking
products in a fully integrated way: extra.ge will be integrated
with the Bank's current flexible single sign-on and payment system
and will offer the Bank's pre-approved instant installment loans to
enable its customers to purchase selected products. The Bank's
retail and MSME clients will enjoy the excellent opportunities of a
new consumer experience and doing business in a dynamic and
flexible digital marketplace
- In September 2019, the Group launched Optimo - a digital
solution for our MSME customers to run their business sales and
solutions. The platform is designed to address the needs of micro,
small and medium sized enterprises in optimising their day-to-day
operations and better managing their businesses in general.
Optimo's cutting-edge digital inventory management and POS
solution, with integrated software and a rich variety of functions
and analytical tools, enables businesses to easily manage sales and
inventory, as well as access their most recent data on sales
transactions, inventory, revenues and profitability, anytime and
anywhere, and make timely decisions with relevant information at
hand
-- Solo, our premium banking brand, continues its strong growth
and investment in its lifestyle brand. We have now 12 Solo lounges,
of which 9 are located in Tbilisi, the capital of Georgia, and 3 in
major regional cities of Georgia. The number of Solo clients
reached 51,692 at 30 September 2019 (41,720 at 30 September 2018
and 48,953 at 30 June 2019). Solo is targeting doubling profit in 3
years to GEL 112mln through excellence in customer service, higher
digitalisation and tailor-made bundled offerings. In 3Q19, the
product to client ratio for the Solo segment was 5.2, compared to
2.1 for our retail franchise. While Solo clients currently
represent 2.1% of our total retail client base, they contributed
29.9% to our retail loan book, 40.0% to our retail deposits, 19.6%
and 21.9% to our net retail interest income and to our net retail
fee and commission income in 3Q19, respectively. The fee and
commission income from the Solo segment reached GEL 6.7mln in 3Q19
(GEL 5.6mln in 3Q18 and GEL 6.6mln in 2Q19) and GEL 19.1mln in 9M19
(GEL 15.6mln in 9M18). Solo Club, a membership group within Solo
which offers exclusive access to Solo products and offers ahead of
other Solo clients at a higher fee, continued to increase its
client base. At 30 September 2019, Solo Club had 5,152 members, up
45.0% y-o-y and up 7.2% q-o-q
-- MSME banking delivered strong growth. The number of MSME
segment clients reached 219,543 at 30 September 2019, up 17.4%
y-o-y and up 0.7% q-o-q. MSME's loan portfolio reached GEL
2,498.9mln at 30 September 2019 (up 22.1% y-o-y and up 5.1% q-o-q)
and client deposits and notes increased to GEL 758.7mln (up 10.5%
y-o-y and up 6.4% q-o-q). The MSME segment generated operating
income of GEL 57.2mln in 3Q19 (up 29.7% y-o-y and up 14.4% q-o-q)
and GEL 152.6mln in 9M19 (up 31.4% y-o-y)
-- Retail Banking profit adjusted for one-off costs (see details
in footnotes on page 12) was GEL 88.9mln in 3Q19 (up 17.5% y-o-y
and up 14.8% q-o-q) and GEL 236.2mln in 9M19 (up 7.6% y-o-y).
Retail Banking continued to deliver a an outstanding ROAE(14) of
30.7% in 3Q19 (30.9% in 3Q18 and 26.9% in 2Q19) and 27.6% in 9M19
(31.2% in 9M18)
(14) ROAE adjusted for GEL 3.1mln in 2Q19 and GEL 10.1mln in
9M19 one-off employee costs (net of income tax) related to
termination benefits of the former CEO and executive management.
9M18 ROAE adjusted for GEL 33.5mln demerger related expenses (net
of income tax) and one-off impact of re-measurement of deferred tax
balances
CORPORATE AND INVESTMENT BANKING (CIB)
CIB provides (1) loans and other credit facilities to Georgia's
large corporate clients and other legal entities, excluding SME and
micro businesses; (2) services such as fund transfers and
settlements services, currency conversion operations, trade finance
services and documentary operations as well as handling savings and
term deposits; (3) finance lease facilities through the Bank's
leasing operations arm, the Georgian Leasing Company; (4) brokerage
services through Galt & Taggart; and (5) Wealth Management
private banking services to high-net-worth individuals and offers
investment management products in Georgia and internationally
through representative offices in Tbilisi, London, Budapest,
Istanbul and Tel Aviv.
GEL thousands, unless
otherwise Change Change Change
noted 3Q19 3Q18 y-o-y 2Q19 q-o-q 9M19 9M18 y-o-y
INCOME STATEMENT
HIGHLIGHTS(15)
Net interest income 45,571 42,076 8.3% 47,459 -4.0% 138,709 122,027 13.7%
Net fee and commission
income 9,826 7,187 36.7% 7,113 38.1% 25,090 19,741 27.1%
Net foreign currency gain 19,766 13,815 43.1% 15,667 26.2% 48,537 30,718 58.0%
Net other income / (expense) 3,300 5,277 -37.5% (392) NMF 4,294 10,150 -57.7%
Operating income 78,463 68,355 14.8% 69,847 12.3% 216,630 182,636 18.6%
Salaries and other employee
benefits (15,304) (13,827) 10.7% (14,738) 3.8% (42,481) (40,147) 5.8%
Administrative expenses (5,866) (5,329) 10.1% (4,004) 46.5% (13,897) (12,488) 11.3%
Depreciation, amortisation
and impairment (2,416) (1,245) 94.1% (1,933) 25.0% (6,050) (3,823) 58.3%
Other operating expenses (241) (432) -44.2% (302) -20.2% (746) (828) -9.9%
Operating expenses (23,827) (20,833) 14.4% (20,977) 13.6% (63,174) (57,286) 10.3%
Operating income before cost
of risk 54,636 47,522 15.0% 48,870 11.8% 153,456 125,350 22.4%
Cost of risk 1,239 (12,234) NMF (6,574) NMF (7,159) (22,480) -68.2%
Net operating income before
non-recurring items 55,875 35,288 58.3% 42,296 32.1% 146,297 102,870 42.2%
Net non-recurring items (3) (776) -99.6% - - (75) (5,978) -98.7%
Profit before income tax
expense and one-off costs 55,872 34,512 61.9% 42,296 32.1% 146,222 96,892 50.9%
Income tax expense (7,444) (2,433) NMF (3,169) 134.9% (14,477) (6,444) 124.7%
Profit adjusted for one-off
costs 48,428 32,079 51.0% 39,127 23.8% 131,745 90,448 45.7%
One-off termination costs
of former CEO and executive
management (after tax),
one-off
demerger related expenses
(after tax) and one-off
impact
of re-measurement of
deferred
tax balances - - - (929) NMF (4,094) (12,924) -68.3%
Profit 48,428 32,079 51.0% 38,198 26.8% 127,651 77,524 64.7%
BALANCE SHEET HIGHLIGHTS
Net loans and finance lease
receivables, currency
blended 3,588,099 2,477,267 44.8% 3,208,823 11.8% 3,588,099 2,477,267 44.8%
Net loans and finance
lease
receivables, GEL 640,555 453,908 41.1% 526,572 21.6% 640,555 453,908 41.1%
Net loans and finance
lease
receivables, FC 2,947,544 2,023,359 45.7% 2,682,251 9.9% 2,947,544 2,023,359 45.7%
Client deposits, currency
blended 3,720,322 3,552,321 4.7% 3,427,166 8.6% 3,720,322 3,552,321 4.7%
Client deposits, GEL 1,337,082 1,583,941 -15.6% 1,260,869 6.0% 1,337,082 1,583,941 -15.6%
Client deposits, FC 2,383,240 1,968,380 21.1% 2,166,297 10.0% 2,383,240 1,968,380 21.1%
Time deposits, currency
blended 1,321,057 1,739,849 -24.1% 1,252,061 5.5% 1,321,057 1,739,849 -24.1%
Time deposits, GEL 411,438 868,391 -52.6% 403,114 2.1% 411,438 868,391 -52.6%
Time deposits, FC 909,619 871,458 4.4% 848,947 7.1% 909,619 871,458 4.4%
Current accounts and demand
deposits, currency blended 2,399,265 1,812,472 32.4% 2,175,105 10.3% 2,399,265 1,812,472 32.4%
Current accounts and
demand
deposits, GEL 925,644 715,550 29.4% 857,755 7.9% 925,644 715,550 29.4%
Current accounts and
demand
deposits, FC 1,473,621 1,096,922 34.3% 1,317,350 11.9% 1,473,621 1,096,922 34.3%
Letters of credit and
guarantees,
standalone (off-balance
sheet
item) 1,282,865 679,324 88.8% 1,141,715 12.4% 1,282,865 679,324 88.8%
Assets under management 2,547,604 2,180,100 16.9% 2,504,280 1.7% 2,547,604 2,180,100 16.9%
RATIOS
ROAE(15) 24.6% 22.6% 22.0% 24.5% 20.8%
Net interest margin,
currency
blended 2.8% 3.4% 3.3% 3.1% 3.4%
Cost of credit risk ratio -0.2% 1.5% 0.7% 0.2% 1.2%
Cost of funds, currency
blended 4.9% 4.8% 4.7% 4.6% 4.6%
Loan yield, currency blended 8.9% 10.8% 9.5% 9.1% 10.3%
Loan yield, GEL 11.5% 13.5% 12.6% 11.8% 13.2%
Loan yield, FC 8.4% 10.2% 8.9% 8.6% 9.8%
Cost of deposits, currency
blended 3.4% 4.4% 3.7% 3.5% 4.1%
Cost of deposits, GEL 5.6% 6.6% 5.9% 5.7% 6.4%
Cost of deposits, FC 2.2% 2.4% 2.2% 2.2% 2.4%
Cost of time deposits,
currency
blended 5.4% 6.2% 5.7% 5.5% 6.0%
Cost of time deposits,
GEL 7.1% 7.7% 7.6% 7.3% 7.8%
Cost of time deposits, FC 4.5% 4.5% 4.5% 4.4% 4.5%
Current accounts and demand
deposits, currency blended 2.3% 2.6% 2.4% 2.3% 2.7%
Current accounts and
demand
deposits, GEL 4.7% 5.3% 4.8% 4.8% 5.3%
Current accounts and
demand
deposits, FC 0.8% 0.7% 0.7% 0.7% 1.0%
Cost / income ratio(16) 30.4% 30.5% 30.0% 29.2% 31.4%
Concentration of top ten
clients 9.4% 9.9% 9.1% 9.4% 9.9%
(15) The income statement adjusted profit excludes GEL 0.9mln in
2Q19 and GEL 4.1mln in 9M19 one-off employee costs (net-off income
tax) related to the former CEO and executive management termination
benefits. The amount is comprised of GEL 1.1mln in 2Q19 and GEL
3.8mln in 9M19 (gross of income tax) excluded from salaries and
other employee benefits and GEL 1.1mln (gross of income tax)
excluded from non-recurring items in 9M19. The income statement
adjusted profit for 9M18 excludes GEL 12.9mln demerger related
expenses (net of income tax) and one-off impact of re-measurement
of deferred tax balances. The ROAE has been adjusted accordingly
for all respective periods presented
(16) Cost/income ratio is adjusted for GEL 1.1mln in 2Q19 and
GEL 3.8mln in 9M19 one-off employee costs (gross of income tax)
related to termination benefits of the former executive
management
Performance highlights
-- Corporate and Investment Banking delivered strong quarterly
results. CIB continued further growth during the third quarter of
2019 and generated strong net fee and commission income and net
foreign currency gains during the period, coupled with efficient
cost discipline and improved asset quality, resulting in
outstanding profitability during the quarter
-- CIB delivered solid net interest income during the third
quarter 2019 (up by 8.3% y-o-y, but slightly down by 4.0% q-o-q,
and up by 13.7% y-o-y in 9M19). CIB NIM was 2.8% in 3Q19 (down
60bps y-o-y and down 50bps q-o-q) and 3.1% in 9M19 (down 30bps
y-o-y). In 3Q19, decline in NIM both y-o-y and q-o-q was due to an
increase in cost of funds (up 10bps y-o-y and up 20bps q-o-q),
coupled with a decline in currency blended loan yields (down 190bps
y-o-y and down 60bps q-o-q). In the first nine months of 2019,
30bps y-o-y decrease in NIM was driven by flat cost of funds and
120bps decline in loan yields y-o-y
-- CIB's net fee and commission income reached GEL 9.8mln in
3Q19, up 36.7% y-o-y and up 38.1% q-o-q, ending the first nine
months of 2019 with GEL 25.1mln net fee and commission income, up
27.1% y-o-y. The outstanding growth in net fee and commission
income in all periods presented was largely driven by increased
fees from guarantees and letters of credit issued and higher
placement fees during 2019
-- CIB's loan book and de-dollarisation. CIB loan portfolio
reached GEL 3,588.1mln at 30 September 2019, up 44.8% y-o-y and up
11.8% q-o-q. On a constant currency basis, CIB loan book was up
31.1% y-o-y and up 9.1% q-o-q (up 26.8% y-o-y excluding the GEL
120mln loan portfolio reclassification from SME to CIB in the
second quarter 2019). The concentration of the top 10 CIB clients
stood at 9.4% at 30 September 2019 (9.9% at 30 September 2018 and
9.1% at 30 June 2019). Foreign currency denominated net loans
represented 82.1% of CIB's loan portfolio at 30 September 2019,
compared to 81.7% a year ago and 83.6% at 30 June 2019. At 30
September 2019, 38.9% of total gross CIB loans were issued in
foreign currency with exposure to foreign currency risk in regards
of income, while 43.3% of total gross CIB loans were issued in
foreign currency with no or minimal exposure to foreign currency
risk
-- Dollarisation of CIB deposits increased to 64.1% at 30
September 2019 from 55.4% a year ago and from 63.2% at 30 June
2019. A y-o-y and q-o-q increase in foreign currency denominated
deposits was partially due to local currency depreciation in 2019.
Despite the y-o-y decline in interest rates on local currency
deposits in 3Q19 and 9M19, the cost of deposits in local currency
still remained well above the cost of foreign currency deposits
-- Net other income. Significant y-o-y decline in net other
income in 3Q19 and 9M19 was largely driven by net losses from
derivative financial instruments (interest rate swap hedges)
recorded during the first and second quarters of 2019 (the
long-term contracts were closed in 3Q19). These losses were
partially offset by net gains from investment securities during the
same periods
-- Cost of credit risk. CIB's cost of credit risk ratio remained
well-controlled and stood at net credit of 0.2% in 3Q19 (down from
1.5% in 3Q18 and down from 0.7% in 2Q19) and at 0.2% in the first
nine months of 2019 (down 100bps y-o-y), primarily driven by the
improved quality of the CIB loan portfolio and the recovery of
several mid- to low-sized corporate loans in 3Q19. At the same
time, CIB's NPL coverage ratio was 78.5% at 30 September 2019
(87.5% as at 30 September 2018 and 83.7% at 30 June 2019)
-- As a result, CIB's profit adjusted for one-off costs (see
details in footnotes on page 16) was GEL 48.4mln in 3Q19, up 51.0%
y-o-y and up 23.8% q-o-q, and GEL 131.7mln in 9M19, up 45.7% y-o-y.
CIB ROAE(17) was 24.6% in 3Q19 (22.6% a year ago and 22.0% in 2Q19)
and 24.5% in 9M19 (compared to 20.8% in 9M18)
(17) ROAE adjusted for GEL 0.9mln in 2Q19 and GEL 4.1mln in 9M19
one-off employee costs (net of income tax) related to termination
benefits of the former CEO and executive management. 9M18 ROAE
adjusted for GEL 12.9mln demerger related expenses (net of income
tax) and one-off impact of re-measurement of deferred tax
balances
Performance highlights of investment management operations
-- The Investment Management's AUM increased to GEL 2,547.6mln
in 3Q19, up 16.9% y-o-y and up 1.7% q-o-q. This includes a)
deposits of Wealth Management franchise clients, b) assets held at
Bank of Georgia Custody, c) Galt & Taggart brokerage client
assets, and d) Global certificates of deposit held by Wealth
Management clients. The y-o-y and q-o-q increase in AUM mostly
reflected increase in client assets and bond issuance activity at
Galt & Taggart
-- Wealth Management deposits reached GEL 1,383.0mln in 3Q19, up
18.1% y-o-y and up 8.2% q-o-q, growing at a compound annual growth
rate (CAGR) of 12.5% over the last five-year period. The cost of
deposits was 3.2% in 3Q19, flat y-o-y and down 10bps q-o-q, and
3.2% in 9M19, down 20bps y-o-y
-- We served 1,537 wealth management clients from 77 countries
as of 30 September 2019, compared to 1,510 clients as of 30
September 2018 and 1,531 clients as of 30 June 2019
-- In January 2019, Bank of Georgia opened a new office in the
centre of Tbilisi, dedicated to serving its wealth management
clients. The office resides in a historic 19th century building,
which originally used to house the First Credit Society of Georgia
and is considered to be the first residence of a local banking
institution. The design concept was derived from the integration of
Georgian culture with western values, while the artistic expression
of the building has been left intact. The new office coincides with
a creation of a new brand identity of the Bank's wealth management
business and is in line with its strategy to become the regional
hub for private banking
-- Galt & Taggart, which brings under one brand corporate
advisory, debt and equity capital markets research and brokerage
services, continues to develop local capital markets in Georgia
-- During the first nine months of 2019 Galt & Taggart acted
as a:
- lead manager of JSC Microfinance Organisation Crystal's GEL
15mln local public bond issuance due in 2021, in February 2019
- co-manager of Bank of Georgia's inaugural US$ 100mln
international Additional Tier 1 bond issuance, in March 2019
- lead manager of JSC Microfinance Organisation Swiss Capital's
GEL 10mln local public bond issuance due in 2021, in March 2019
- lead manager for European Bank for Reconstruction and
Development (EBRD), facilitating GEL 90mln local private bond
issuance due in 2023, in March 2019
- lead manager for Nederlandse Financierings - Maatschappij Voor
Ontwikkelingslanden N.V. (FMO), facilitating GEL 26mln local
private bond issuance due in 2024, in March 2019
- buy-side advisor for Bank of Georgia Group on acquisition of
extra.ge online platform, in May 2019
- lead manager for Black Sea Trade and Development Bank (BSTDB),
facilitating GEL 10mln local private bond issuance due in 2022, in
June 2019
- sole sell-side advisor of Linnaeus Capital Partners B.V. on a
sale of 100% shareholding in Lilo1- logistics center, in June
2019
- lead manager for EBRD, facilitating c.GEL 28mln local private
bond issuance due in 2024, in July 2019
- lead manager of Georgian Leasing Company LTD's US$ 10mln local
public bond issuance due in 2021, in July 2019
- lead manager for Black Sea Trade and Development Bank (BSTDB),
facilitating GEL 5mln local private bond issuance due in 2022, in
September 2019
-- In February 2019, Global Finance Magazine named Galt &
Taggart Best Investment Bank in Georgia for the fifth consecutive
year
-- In February 2019, Galt & Taggart together with JSC Bank
of Georgia organised a conference under "G&T Industry Series"
to discuss the findings of Galt & Taggart's research on
Georgia's energy sector with an emphasis on ongoing reforms and
their impact on the sector development. The conference gathered
together all stakeholders including high level representatives from
the Government, private sector and IFIs. A follow-up conference was
held in April 2019 due to high interest from the Government and
private sector participants. The Deputy Minister of Economy and
Sustainable Development, Head of energy regulatory commission and
Head of Georgian Energy Development Fund presented the Government's
vision of the reform process, while Galt & Taggart focused on
the reform vision from private sector perspective. Presentations
were followed by panel discussions with key market players affected
by the reform process
-- In May 2019, Galt & Taggart participated in a competitive
tender process and won a three year exclusive mandate to manage the
private pension fund of a large Georgian corporate client
SELECTED FINANCIAL INFORMATION
INCOME STATEMENT (QUARTERLY) Bank of Georgia Group Consolidated
GEL thousands, unless otherwise Change Change
noted 3Q19 3Q18 y-o-y 2Q19 q-o-q
Interest income 366,721 337,766 8.6% 342,224 7.2%
Interest expense (178,039) (152,431) 16.8% (160,602) 10.9%
Net interest income 188,682 185,335 1.8% 181,622 3.9%
Fee and commission income 76,166 60,413 26.1% 68,025 12.0%
Fee and commission expense (28,157) (20,932) 34.5% (24,758) 13.7%
Net fee and commission income 48,009 39,481 21.6% 43,267 11.0%
Net foreign currency gain 44,543 36,827 21.0% 36,700 21.4%
Net other income 3,728 7,437 -49.9% (4,260) NMF
Operating income 284,962 269,080 5.9% 257,329 10.7%
Salaries and other employee benefits
(excluding one-offs) (59,539) (54,107) 10.0% (57,982) 2.7%
One-off termination costs of former - - - (4,570) NMF
executive management (1)
Salaries and other employee benefits (59,539) (54,107) 10.0% (62,552) -4.8%
Administrative expenses (26,251) (30,759) -14.7% (22,033) 19.1%
Depreciation, amortisation and
impairment (21,320) (11,162) 91.0% (17,295) 23.3%
Other operating expenses (807) (1,109) -27.2% (1,248) -35.3%
Operating expenses (107,917) (97,137) 11.1% (103,128) 4.6%
Profit from associates 194 326 -40.5% 254 -23.6%
Operating income before cost of
risk 177,239 172,269 2.9% 154,455 14.8%
Expected credit loss / impairment
charge on loans to customers (13,617) (43,505) -68.7% (32,436) -58.0%
Expected credit loss / impairment
charge on finance lease receivables (333) (426) -21.8% (557) -40.2%
Other expected credit loss / impairment
charge on other assets and provisions (1,273) (4,176) -69.5% (2,483) -48.7%
Cost of risk (15,223) (48,107) -68.4% (35,476) -57.1%
Net operating income before non-recurring
items 162,016 124,162 30.5% 118,979 36.2%
Net non-recurring items (5,019) (3,747) 33.9% (2,538) 97.8%
Profit before income tax expense 156,997 120,415 30.4% 116,441 34.8%
Income tax expense (excluding one-offs) (22,697) (9,316) 143.6% (9,871) 129.9%
Income tax benefit related to one-off - - - 574 NMF
termination costs, one-off demerger
related expenses and one-off impact
of re-measurement of deferred tax
balances (2)
Income tax expense (22,697) (9,316) 143.6% (9,297) 144.1%
Profit 134,300 111,099 20.9% 107,144 25.3%
One-off items (1)+(2) - - - (3,996) NMF
Profit attributable to:
- shareholders of the Group 133,687 110,651 20.8% 106,642 25.4%
- non-controlling interests 613 448 36.8% 502 22.1%
Earnings per share (basic) 2.81 2.32 21.1% 2.23 26.0%
Earnings per share (diluted) 2.81 2.32 21.1% 2.23 26.0%
INCOME STATEMENT (NINE Bank of Georgia Banking Business Discontinued Operations Eliminations
MONTHS) Group Consolidated
GEL thousands, unless
otherwise Change Change Change Change
noted 9M19 9M18 y-o-y 9M19 9M18 y-o-y 9M19 9M18 y-o-y 9M19 9M18 y-o-y
Interest income 1,043,680 976,537 6.9% 1,043,680 981,325 6.40% - - - - (4,788) NMF
Interest expense (490,435) (422,222) 16.2% (490,435) (429,159) 14.30% - - - - 6,937 NMF
Net interest income 553,245 554,315 -0.2% 553,245 552,166 0.2% - - - - 2,149 NMF
Fee and commission
income 206,721 166,418 24.2% 206,721 167,319 23.5% - - - - (901) NMF
Fee and commission
expense (73,265) (55,100) 33.0% (73,265) (55,481) 32.1% - - - - 381 NMF
Net fee and commission
income 133,456 111,318 19.9% 133,456 111,838 19.3% - - - - (520) NMF
Net foreign currency
gain 111,268 75,404 47.6% 111,268 76,079 46.3% - - - - (675) NMF
Net other income /
(expense) 3,035 16,335 -81.4% 3,035 16,888 -82.0% - - - - (553) NMF
Operating income 801,004 757,372 5.8% 801,004 756,971 5.8% - - - - 401 NMF
Salaries and other
employee
benefits (excluding
one-offs) (169,938) (156,430) 8.6% (169,938) (157,485) 7.9% - - - - 1,055 NMF
One-off termination
costs of
former executive
management
(1) (12,412) - NMF (12,412) - NMF - - - - - -
Salaries and other
employee
benefits (182,350) (156,430) 16.6% (182,350) (157,485) 15.8% - - - - 1,055 NMF
Administrative
expenses (71,025) (82,644) -14.1% (71,025) (83,254) -14.7% - - - - 610 NMF
Depreciation,
amortisation
and impairment (54,303) (34,077) 59.4% (54,303) (34,077) 59.4% - - - - - -
Other operating
expenses (3,135) (2,844) 10.2% (3,135) (2,844) 10.2% - - - - - -
Operating expenses (310,813) (275,995) 12.6% (310,813) (277,660) 11.9% - - - - 1,665 NMF
Profit from associates 636 1,021 -37.7% 636 1,021 -37.7% - - - - - -
Operating income
before cost
of risk 490,827 482,398 1.7% 490,827 480,332 2.2% - - - - 2,066 NMF
Expected credit loss /
impairment
charge on loans to
customers (86,170) (113,716) -24.2% (86,170) (113,716) -24.2% - - - - - -
Expected credit loss /
impairment
charge on finance
lease receivables (1,336) (678) 97.1% (1,336) (678) 97.1% - - - - - -
Other expected credit
loss
/ impairment charge
on other
assets and provisions (5,845) (5,053) 15.7% (5,845) (5,053) 15.7% - - - - - -
Cost of risk (93,351) (119,447) -21.8% (93,351) (119,447) -21.8% - - - - - -
Net operating income
before
non-recurring items 397,476 362,951 9.5% 397,476 360,885 10.1% - - - - 2,066 NMF
Net non-recurring
items (excluding
one-offs) (9,132) (20,286) -55.0% (9,132) (20,458) -55.4% - - - - 172 NMF
One-off termination
costs of
former CEO, one-off
demerger
related expenses (2) (3,985) (30,284) -86.8% (3,985) (30,284) -86.8% - - - - - -
Net non-recurring
items (13,117) (50,570) -74.1% (13,117) (50,742) -74.1% - - - - 172 NMF
Profit before income
tax expense
from continuing
operations 384,359 312,381 23.0% 384,359 310,143 23.9% - - - - 2,238 NMF
Income tax expense
(excluding
one-offs) (43,104) (24,060) 79.2% (43,104) (24,060) 79.2% - - - - - -
Income tax benefit
related
to one-off
termination costs,
one-off demerger
related expenses
and one-off impact
of re-measurement
of deferred tax
balances (3) 2,161 (22,257) NMF 2,161 (22,257) NMF - - - - - -
Income tax expense (40,943) (46,317) -11.6% (40,943) (46,317) -11.6% - - - - - -
Profit from continuing
operations 343,416 266,064 29.1% 343,416 263,826 30.2% - - - - 2,238 NMF
Profit from
discontinued
operations - 107,899 NMF - - - - 110,137 NMF - (2,238) NMF
Profit 343,416 373,963 -8.2% 343,416 263,826 30.2% - 110,137 NMF - - -
One-off items
(1)+(2)+(3) (14,236) (52,541) -72.9% (14,236) (52,541) -72.9%
Profit attributable
to:
- shareholders of
the Group 341,841 354,757 -3.6% 341,841 262,835 30.1% - 91,922 NMF - - -
- non-controlling
interests 1,575 19,206 -91.8% 1,575 991 58.9% - 18,215 NMF - - -
Profit from continuing
operations
attributable to:
- shareholders of
the Group 341,841 265,073 29.0% 341,841 262,835 30.1% - - - - 2,238 NMF
- non-controlling
interests 1,575 991 58.9% 1,575 991 58.9% - - - - - -
Profit from
discontinued
operations
attributable to:
- shareholders of
the Group - 89,684 NMF - - - - 91,922 NMF - (2,238) NMF
- non-controlling
interests - 18,215 NMF - - - - 18,215 NMF - - -
Earnings per share
(basic) 7.16 8.20 -12.7%
- earnings per share
from continuing
operations 7.16 6.13 16.8%
- earnings per share - 2.07 NMF
from discontinued
operations
Earnings per share
(diluted) 7.14 8.11 -12.0%
- earnings per share
from continuing
operations 7.14 6.06 17.8%
- earnings per share - 2.05 NMF
from discontinued
operations
BALANCE SHEET Bank of Georgia Group Consolidated
GEL thousands, unless otherwise Sep-19 Sep-18 Change Jun-19 Change
noted y-o-y q-o-q
Cash and cash equivalents 1,369,169 1,237,867 10.6% 936,106 46.3%
Amounts due from credit
institutions 1,834,220 1,398,061 31.2% 1,704,701 7.6%
Investment securities 1,895,722 2,060,880 -8.0% 1,896,738 -0.1%
Loans to customers and finance
lease receivables 11,339,745 8,762,413 29.4% 10,579,710 7.2%
Accounts receivable and
other loans 4,475 3,256 37.4% 3,688 21.3%
Prepayments 43,795 48,444 -9.6% 36,026 21.6%
Inventories 11,257 18,598 -39.5% 11,748 -4.2%
Right-of-use assets 106,130 - NMF 105,874 0.2%
Investment property 193,499 216,715 -10.7% 178,764 8.2%
Property and equipment 364,405 315,980 15.3% 358,921 1.5%
Goodwill 33,351 33,351 0.0% 33,351 0.0%
Intangible assets 95,829 85,247 12.4% 93,515 2.5%
Income tax assets 7,682 28,236 -72.8% 5,080 51.2%
Other assets 202,426 105,884 91.2% 149,233 35.6%
Assets held for sale 38,987 - NMF 40,544 -3.8%
Total assets 17,540,692 14,314,932 22.5% 16,133,999 8.7%
Client deposits and notes 9,613,718 7,932,536 21.2% 8,855,616 8.6%
Amounts due to credit institutions 3,437,718 3,006,739 14.3% 2,960,519 16.1%
Debt securities issued 2,175,820 1,578,532 37.8% 2,137,239 1.8%
Lease liabilities 105,285 - NMF 100,172 5.1%
Accruals and deferred income 41,521 35,977 15.4% 34,748 19.5%
Income tax liabilities 39,251 38,705 1.4% 30,361 29.3%
Other liabilities 87,520 52,495 66.7% 97,125 -9.9%
Total liabilities 15,500,833 12,644,984 22.6% 14,215,780 9.0%
Share capital 1,618 1,618 0.0% 1,618 0.0%
Additional paid-in capital 498,593 464,960 7.2% 493,890 1.0%
Treasury shares (53) (44) 20.5% (49) 8.2%
Other reserves 28,472 34,283 -17.0% 46,744 -39.1%
Retained earnings 1,502,248 1,161,983 29.3% 1,367,632 9.8%
Total equity attributable
to shareholders of the Group 2,030,878 1,662,800 22.1% 1,909,835 6.3%
Non-controlling interests 8,981 7,148 25.6% 8,384 7.1%
Total equity 2,039,859 1,669,948 22.2% 1,918,219 6.3%
Total liabilities and equity 17,540,692 14,314,932 22.5% 16,133,999 8.7%
Book value per share 42.69 34.89 22.4% 40.06 6.6%
BELARUSKY NARODNY BANK (BNB)
Change Change Change
INCOME STATEMENT, HIGHLIGHTS 3Q19 3Q18 y-o-y 2Q19 q-o-q 9M19 9M18 y-o-y
GEL thousands, unless
otherwise stated
Net interest income 7,447 6,525 14.1% 6,360 17.1% 20,392 19,423 5.0%
Net fee and commission
income 1,956 1,669 17.2% 1,798 8.8% 5,567 6,449 -13.7%
Net foreign currency
gain 5,405 3,885 39.1% 4,779 13.1% 14,140 11,344 24.6%
Net other income 57 105 -45.7% 169 -66.3% 371 414 -10.4%
Operating income 14,865 12,184 22.0% 13,106 13.4% 40,470 37,630 7.5%
Operating expenses (9,135) (7,571) 20.7% (8,890) 2.8% (25,873) (23,476) 10.2%
Operating income before
cost of risk 5,730 4,613 24.2% 4,216 35.9% 14,597 14,154 3.1%
Cost of risk 293 (718) NMF (1,536) NMF (2,684) (3,741) -28.3%
Net non-recurring items (1) (3) -66.7% (13) -92.3% (64) (708) -91.0%
Profit before income
tax expense 6,022 3,892 54.7% 2,667 125.8% 11,849 9,705 22.1%
Income tax expense (1,193) (885) 34.8% (379) NMF (2,143) (2,383) -10.1%
Profit 4,829 3,007 60.6% 2,288 111.1% 9,706 7,322 32.6%
BALANCE SHEET, HIGHLIGHTS Sep-19 Sep-18 Change Jun-19 Change
y-o-y q-o-q
GEL thousands, unless
otherwise stated
Cash and cash equivalents 170,787 65,808 159.5% 93,097 83.5%
Amounts due from credit
institutions 22,534 11,469 96.5% 18,301 23.1%
Investment securities 101,511 109,798 -7.5% 128,486 -21.0%
Loans to customers and
finance lease receivables 556,541 394,749 41.0% 512,126 8.7%
Other assets 59,397 42,038 41.3% 57,098 4.0%
Total assets 910,770 623,862 46.0% 809,108 12.6%
Client deposits and notes 588,647 363,233 62.1% 503,309 17.0%
Amounts due to credit
institutions 132,648 146,932 -9.7% 146,855 -9.7%
Debt securities issued 72,931 28,825 153.0% 50,238 45.2%
Other liabilities 8,239 4,433 85.9% 7,044 17.0%
Total liabilities 802,465 543,423 47.7% 707,446 13.4%
Total equity 108,305 80,439 34.6% 101,662 6.5%
Total liabilities and
equity 910,770 623,862 46.0% 809,108 12.6%
BANKING BUSINESS KEY RATIOS 3Q19 3Q18 2Q19 9M19 9M18
Profitability
ROAA, annualised(18) 3.2% 3.2% 2.9% 3.0% 3.2%
ROAA, annualised (unadjusted) 3.2% 3.2% 2.8% 2.9% 2.6%
ROAE, annualised(18) 26.8% 26.8% 22.9% 24.7% 26.2%
RB ROAE(18) 30.7% 30.9% 26.9% 27.6% 31.2%
CIB ROAE(18) 24.6% 22.6% 22.0% 24.5% 20.8%
ROAE, annualised (unadjusted) 26.8% 26.8% 22.1% 23.7% 21.8%
Net interest margin, annualised 5.1% 6.4% 5.4% 5.4% 6.8%
RB NIM 5.9% 7.2% 5.9% 6.0% 7.8%
CIB NIM 2.8% 3.4% 3.3% 3.1% 3.4%
Loan yield, annualised 11.5% 13.5% 11.8% 11.8% 13.7%
RB Loan yield 12.8% 14.8% 12.9% 13.1% 15.4%
CIB Loan yield 8.9% 10.8% 9.5% 9.1% 10.3%
Liquid assets yield, annualised 3.2% 3.8% 3.4% 3.4% 3.7%
Cost of funds, annualised 4.8% 5.0% 4.8% 4.8% 5.0%
Cost of client deposits and
notes, annualised 3.2% 3.6% 3.3% 3.3% 3.5%
RB Cost of client deposits
and notes 3.0% 2.8% 3.0% 3.0% 2.8%
CIB Cost of client deposits
and notes 3.4% 4.4% 3.7% 3.5% 4.1%
Cost of amounts due to credit
institutions, annualised 7.1% 7.4% 7.2% 7.2% 7.1%
Cost of debt securities issued 8.2% 7.8% 8.1% 8.0% 7.8%
Operating leverage, y-o-y(19) -5.2% 6.8% -4.2% -1.7% 2.5%
Operating leverage, q-o-q(19) 1.2% 2.0% -7.7% 0.0% 0.0%
Efficiency
Cost / Income(19) 37.9% 36.1% 38.3% 37.3% 36.7%
RB Cost / Income(19) 38.0% 36.3% 37.8% 37.1% 36.5%
CIB Cost /Income(19) 30.4% 30.5% 30.0% 29.2% 31.4%
Cost / Income (unadjusted) 37.9% 36.1% 40.1% 38.8% 36.7%
Liquidity
NBG liquidity ratio (minimum
requirement 30%) 36.8% 32.5% 37.0% 36.8% 32.5%
NBG liquidity coverage ratio
(minimum requirement 100%) 118.5% 0.0% 114.3% 118.5% 0.0%
Liquid assets to total liabilities 32.9% 37.1% 31.9% 32.9% 37.1%
Net loans to client deposits
and notes 118.0% 110.5% 119.5% 118.0% 110.5%
Net loans to client deposits
and notes + DFIs 103.4% 95.3% 104.7% 103.4% 95.3%
Leverage (times) 7.6 7.6 7.4 7.6 7.6
Asset quality:
NPLs (in GEL) 339,118 312,203 347,285 339,118 312,203
NPLs to gross loans to clients 2.9% 3.5% 3.2% 2.9% 3.5%
NPL coverage ratio 85.3% 91.7% 88.1% 85.3% 91.7%
NPL coverage ratio, adjusted
for discounted value of collateral 129.3% 136.9% 131.5% 129.3% 136.9%
Cost of credit risk, annualised 0.5% 2.0% 1.3% 1.1% 1.8%
RB Cost of credit risk 0.9% 2.4% 1.6% 1.6% 2.2%
CIB Cost of credit risk -0.2% 1.5% 0.7% 0.2% 1.2%
Capital adequacy:
NBG (Basel III) CET1 capital
adequacy ratio 11.1% 11.0% 11.0% 11.1% 11.0%
Minimum regulatory requirement 9.5% 8.0% 9.6% 9.5% 8.0%
NBG (Basel III) Tier I capital
adequacy ratio 13.3% 11.0% 13.3% 13.3% 11.0%
Minimum regulatory requirement 11.6% 9.9% 11.6% 11.6% 9.9%
NBG (Basel III) Total capital
adequacy ratio 16.8% 15.9% 16.7% 16.8% 15.9%
Minimum regulatory requirement 16.1% 14.9% 16.1% 16.1% 14.9%
Selected operating data:
Total assets per FTE 2,402 1,961 2,184 2,402 1,961
Number of active branches,
of which: 276 285 276 276 285
- Express branches (including
Metro) 167 169 167 167 169
- Bank of Georgia branches 97 104 97 97 104
- Solo lounges 12 12 12 12 12
Number of ATMs 911 858 890 911 858
Number of cards outstanding,
of which: 2,121,830 2,192,870 2,122,006 2,121,830 2,192,870
- Debit cards 1,674,105 1,603,960 1,634,843 1,674,105 1,603,960
- Credit cards 447,725 588,910 487,163 447,725 588,910
Number of POS terminals 21,088 15,569 19,667 21,088 15,569
FX Rates:
GEL/US$ exchange rate (period-end) 2.9552 2.6151 2.8687
GEL/GBP exchange rate (period-end) 3.6319 3.4130 3.6384
Sep-19 Sep-18 Jun-19
Full time employees (FTE),
of which: 7,304 7,300 7,386
- Full time employees, BOG
standalone 5,706 5,709 5,786
- Full time employees, BNB 584 705 632
- Full time employees, BB
other 1,014 886 968
Shares outstanding Sep-19 Sep-18 Jun-19
Ordinary shares 47,574,153 47,656,452 47,669,887
Treasury shares 1,595,275 1,512,978 1,499,541
Total shares outstanding 49,169,428 49,169,430 49,169,428
(18) 2Q19 and 9M19 ratios adjusted for one-off employee costs
related to termination benefits of the former CEO and executive
management. 9M18 ratios adjusted for demerger related expenses and
one-off impact of re-measurement of deferred tax balances
(19) 2Q19 and 9M19 results adjusted for one-off employee costs
related to termination benefits of the former executive
management
GLOSSARY
-- Alternative performance measures (APMs) In this announcement
the management uses various APMs, which they believe provide
additional useful information for understanding the financial
performance of the Group. These APMs are not defined by
International Financial Reporting Standards, and also may not be
directly comparable with other companies who use similar measures.
We believe that these APMs provide the best representation of our
financial performance as these measures are used by management to
evaluate the Group's operating performance and make day-to-day
operating decisions;
-- Cost of funds Interest expense of the period divided by
monthly average interest bearing liabilities;
-- Cost of credit risk Expected loss/impairment charge for loans
to customers and finance lease receivables for the period divided
by monthly average gross loans to customers and finance lease
receivables over the same period;
-- Cost to income ratio Operating expenses divided by operating
income;
-- Interest bearing liabilities Amounts due to credit
institutions, client deposits and notes, and debt securities
issued;
-- Interest earning assets (excluding cash) Amounts due from
credit institutions, investment securities (but excluding corporate
shares) and net loans to customers and finance lease
receivables;
-- Leverage (times) Total liabilities divided by total
equity;
-- Liquid assets Cash and cash equivalents, amounts due from
credit institutions and investment securities;
-- Liquidity coverage ratio (LCR) High quality liquid assets (as
defined by NBG) divided by net cash outflows over the next 30 days
(as defined by NBG);
-- Loan yield Interest income from loans to customers and
finance lease receivables divided by monthly average gross loans to
customers and finance lease receivables;
-- NBG liquidity ratio Daily average liquid assets (as defined
by NBG) during the month divided by daily average liabilities (as
defined by NBG) during the month;
-- NBG (Basel III) Common Equity Tier I capital adequacy ratio
Common Equity Tier I capital divided by total risk weighted assets,
both calculated in accordance with the requirements of the National
Bank of Georgia instructions;
-- NBG (Basel III) Tier I capital adequacy ratio Tier I capital
divided by total risk weighted assets, both calculated in
accordance with the requirements of the National Bank of Georgia
instructions;
-- NBG (Basel III) Total capital adequacy ratio Total regulatory
capital divided by total risk weighted assets, both calculated in
accordance with the requirements of the National Bank of Georgia
instructions;
-- Net interest margin (NIM) Net interest income of the period
divided by monthly average interest earning assets excluding cash
for the same period;
-- Non-performing loans (NPLs) The principal and interest on
loans overdue for more than 90 days and any additional potential
losses estimated by management;
-- NPL coverage ratio Allowance for expected credit
loss/impairment loss of loans and finance lease receivables divided
by NPLs;
-- NPL coverage ratio adjusted for discounted value of
collateral Allowance for expected credit loss/impairment loss of
loans and finance lease receivables divided by NPLs (discounted
value of collateral is added back to allowance for expected credit
loss/impairment loss);
-- Operating leverage Percentage change in operating income less
percentage change in operating expenses;
-- Return on average total assets (ROAA) Profit for the period
divided by monthly average total assets for the same period;
-- Return on average total equity (ROAE) Profit for the period
attributable to shareholders of the Group divided by monthly
average equity attributable to shareholders of the Group for the
same period;
-- NMF Not meaningful
COMPANY INFORMATION
Bank of Georgia Group PLC
Registered Address
84 Brook Street
London W1K 5EH
United Kingdom
www.bankofgeorgiagroup.com
Registered under number 10917019 in England and Wales
Secretary
Link Company Matters Limited
65 Gresham Street
London EC2V 7NQ
United Kingdom
Stock Listing
London Stock Exchange PLC's Main Market for listed
securities
Ticker: "BGEO.LN"
Contact Information
Bank of Georgia Group PLC Investor Relations
Telephone: +44(0) 203 178 4052; +995 322 444444 (9282)
E-mail: ir@bog.ge
Auditors
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
United Kingdom
Please note that Investor Centre is a free, secure online
service run by our Registrar, Computershare,
giving you convenient access to information on your
shareholdings.
Investor Centre Web Address - www.investorcentre.co.uk.
Investor Centre Shareholder Helpline - +44 (0)370 873 5866
Share price information
Shareholders can access both the latest and historical prices
via the website
www.bankofgeorgiagroup.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRTUGGRUGUPBGBQ
(END) Dow Jones Newswires
November 07, 2019 02:00 ET (07:00 GMT)
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