Bank of Georgia Group PLC 1st Quarter Results

Fecha : 14/05/2019 @ 01:00
Fuente : UK Regulatory (RNS & others)
Emisora : Bank Of Georgia Group Plc (BGEO)
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Bank of Georgia Group PLC 1st Quarter Results

Bank Of Georgia (LSE:BGEO)
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6 Meses : De Abr 2019 a Oct 2019

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RNS Number : 8894Y

Bank of Georgia Group PLC

14 May 2019

Bank of Georgia

Group PLC

1(st) quarter 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 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 investment banking services and aims to deliver on its strategy, which is based on at least 20% ROAE and 15-20% growth of its loan book.

1Q19 RESULTS AND CONFERENCE CALL DETAILS

Bank of Georgia Group PLC announces the Group's first quarter 2019 consolidated results. Unless otherwise noted, numbers in this announcement are for 1Q19 and comparisons are with 1Q18. The results are based on International Financial Reporting Standards ("IFRS") as adopted by the European Union, are unaudited and derived from management accounts. This results announcement is also available on the Group's website at www.bankofgeorgiagroup.com.

An investor/analyst conference call, organised by the Bank of Georgia Group, will be held on, 14 May 2019, at 14:00 UK / 15:00 CET / 09:00 U.S Eastern Time. The duration of the call will be 60 minutes and will consist of a 15-minute update and a 45-minute Q&A session.

 
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CONTENTS

 
 4    1Q19 results highlights 
 
 6    Chief Executive Officer's statement 
 
 8    Discussion of results 
 
 12   Discussion of segment results 
 12         Retail Banking 
 16         Corporate Investment Banking 
 
 19   Selected financial and operating information 
 
 23   Glossary 
 
 24   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 tensions and instability; loan portfolio quality; regulatory risk; liquidity risk; operational risk, cyber security, information systems and financial crime risk; and other key factors that indicated could adversely affect our business and financial performance, which are contained elsewhere in this document and in our past and future filings and reports of the Group, including the 'Principal Risks and Uncertainties' included in Bank of Georgia Group PLC's Annual Report and Accounts 2018. 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)

Strong profitability and balance sheet growth, supported by outstanding capital and liquidity positions

 
                                                                         Change               Change 
GEL thousands, except per share information            1Q19       1Q18    y-o-y        4Q18    q-o-q 
Banking Business Income Statement Highlights(2) 
Net interest income                                 182,941    180,249     1.5%     187,438    -2.4% 
Net fee and commission income                        42,180     34,511    22.2%      41,344     2.0% 
Net foreign currency gain                            30,025     14,253   110.7%      53,358   -43.7% 
Net other income / (expense)                          3,568      5,744   -37.9%     (9,073)      NMF 
Operating income                                    258,714    234,757    10.2%     273,067    -5.3% 
Operating expenses                                 (91,927)   (87,379)     5.2%   (100,857)    -8.9% 
Profit from associates                                  188        318   -40.9%         318   -40.9% 
Operating profit before cost of risk                166,975    147,696    13.1%     172,528    -3.2% 
Cost of risk                                       (42,652)   (33,813)    26.1%    (40,778)     4.6% 
Net operating profit before non-recurring 
 items and income tax                               124,323    113,883     9.2%     131,750    -5.6% 
Net non-recurring items                             (1,575)    (2,948)   -46.6%     (2,185)   -27.9% 
Profit before income tax expense and 
 one-off termination costs                          122,748    110,935    10.6%     129,565    -5.3% 
Income tax expense                                 (10,536)    (9,283)    13.5%    (10,888)    -3.2% 
Profit adjusted for one-off termination 
 costs                                              112,212    101,652    10.4%     118,677    -5.4% 
One-off termination costs of former CEO                (10, 
 and executive management (after tax)                  240)          -      NMF     (3,861)      NMF 
Profit                                              101,972    101,652     0.3%     114,816   -11.2% 
 
 
                                                                          Change                Change 
GEL thousands, except per share information           1Q19         1Q18    y-o-y         4Q18    q-o-q 
Banking Business Balance Sheet Highlights 
Liquid assets                                    4,502,390    4,514,326    -0.3%    4,540,032    -0.8% 
    Cash and cash equivalents                    1,162,168    1,754,920   -33.8%    1,215,799    -4.4% 
    Amounts due from credit institutions         1,391,630      955,175    45.7%    1,305,216     6.6% 
    Investment securities                        1,948,592    1,804,231     8.0%    2,019,017    -3.5% 
Loans to customers and finance lease 
 receivables(3)                                  9,570,691    7,819,773    22.4%    9,397,747     1.8% 
Property and equipment                             349,728      324,810     7.7%      344,059     1.6% 
Total assets                                    15,054,570   13,194,528    14.1%   14,798,303     1.7% 
Client deposits and notes                        8,393,861    7,296,110    15.0%    8,133,853     3.2% 
Amounts due to credit institutions               2,463,408    2,642,427    -6.8%    2,994,879   -17.7% 
    Borrowings from DFI                          1,309,976    1,191,605     9.9%    1,302,679     0.6% 
    Short-term loans from NBG                      585,797      729,244   -19.7%    1,118,957   -47.6% 
    Loans and deposits from commercial banks       567,635      721,578   -21.3%      573,243    -1.0% 
Debt securities issued                           2,045,428    1,569,404    30.3%    1,730,414    18.2% 
Total liabilities                               13,135,789   11,597,058    13.3%   13,000,030     1.0% 
Total equity                                     1,918,781    1,597,470    20.1%    1,798,273     6.7% 
 
 
Banking Business Key Ratios                      1Q19     1Q18     4Q18 
 
ROAA2                                            3.1%     3.2%     3.3% 
ROAE(2)                                         24.5%    26.2%    27.0% 
Net interest margin                              5.8%     7.0%     6.0% 
Loan yield                                      12.2%    13.9%    12.8% 
Cost of funds                                    4.8%     4.8%     5.0% 
Cost / income(4)                                35.5%    37.2%    36.9% 
NPLs to Gross loans to clients                   3.3%     3.5%     3.3% 
NPL coverage ratio                              92.2%   101.2%    90.5% 
NPL coverage ratio, adjusted for discounted 
 value of collateral                           132.6%   143.2%   129.9% 
Cost of credit risk                              1.7%     1.8%     1.1% 
NBG (Basel III) Tier I capital adequacy 
 ratio                                          12.7%    12.4%    12.2% 
NBG (Basel III) Total capital adequacy 
 ratio                                          17.1%    17.3%    16.6% 
 

(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, Banking Business and Discontinued Operations detailed financials, including inter-business eliminations are provided on pages 19 and 20

(2) The income statement adjusted profit excludes GEL 10.2mln in 1Q19 (4Q18: GEL 3.9mln) one-off employee costs (net of income tax) related to former CEO and executive management termination benefits. The amount is comprised of GEL 4.0mln (gross of income tax) excluded from non-recurring items (4Q18: GEL 4.4mln) and GEL 7.8mln (gross of income tax) excluded from salaries and other employee benefits. 1Q19 and 4Q18 ROAE and ROAA have been adjusted accordingly. Full IFRS income statement is presented on page 19. Management believes that one-off employee termination 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) 1Q19 cost/income ratio adjusted for GEL 7.8mln one-off employee costs (gross of income tax) related to termination benefits of the former executive management

KEY RESULTS HIGHLIGHTS

-- Strong quarterly performance. Profit adjusted for one-off termination costs of the former CEO and executive management totalled GEL 112.2mln in 1Q19, with profitability remaining high at 24.5%(5) ROAE

-- Solid Asset quality. NPLs to gross loans ratio was 3.3% at 31 March 2019, while the NPL coverage ratio was 92.2% and the NPL coverage ratio adjusted for discounted value of collateral increased to 132.6%. The cost of credit risk ratio stood at 1.7% in 1Q19, down 10bps y-o-y and up 60bps q-o-q. The q-o-q increase reflected normal seasonality, as well as recent regulatory changes on unsecured consumer lending

-- Loan book growth was 22.4% y-o-y and 1.8% q-o-q at 31 March 2019. Growth on a constant-currency basis was 14.7% y-o-y and 1.5% q-o-q. Retail Banking loan book share in the total loan portfolio was 70.0% at 31 March 2019 (69.5% at 31 March 2018 and 69.8% at 31 December 2018)

-- Strong capital position. Basel III Tier 1 and Total Capital Adequacy ratios stood at 12.7% and 17.1%, respectively, as of 31 March 2019, both above the minimum required level of 11.6% and 16.1%, respectively. Common Equity Tier 1 (CET1) ratio stood at 12.7%, compared to a 9.6% minimum requirement at 31 March 2019 and already above the estimated fully-loaded Basel III CET1 requirement for 2021

-- In 1Q19, JSC Bank of Georgia issued an inaugural US$100 million 11.125% Additional Tier 1 Capital Perpetual Subordinated Notes. Regulatory approval on the classification of these securities as Additional Tier 1 instruments was received in April 2019, therefore, the AT1 instruments were not reflected in the capital ratios reported as of 31 March 2019. This issuance has added approximately 230 basis points to the Bank's Tier 1 capital ratio, which is also now above the estimated fully-loaded Basel III Tier 1 capital requirement for 2021

-- Retail Banking ("RB") continued to deliver solid growth. RB's operating income reached GEL 178.8mln in 1Q19, up 5.8% y-o-y and down 5.1% q-o-q. The Retail Banking net loan book reached GEL 6,389.6mln at 31 March 2019, up 23.2% y-o-y and up 2.0% q-o-q. The growth was predominantly driven by mortgage and micro and SME lending. At the same time, the RB client deposits increased to GEL 4,520.5mln at 31 March 2019, up 36.8% y-o-y and 4.2% q-o-q

-- Corporate Investment Banking ("CIB") demonstrated strong growth in 1Q19, generating solid net interest income and net fee and commission income during the period, coupled with operating efficiencies and improved asset quality. CIB's net loan book reached GEL 2,652.8mln at 31 March 2019, up 19.4% y-o-y and up 1.3% q-o-q. The growth on a constant-currency basis was 9.2% y-o-y and 0.8% q-o-q. The top 10 CIB client concentration was 9.1% at the end of 1Q19 (10.3% at 31 March 2018 and 9.8% at 31 December 2018)

-- Assets Under Management ("AUM") within the Group's Investment Management business, increased to GEL 2,371.0mln in 1Q19, up 29.1% y-o-y and up 4.4% q-o-q, reflecting an increase in client assets and bond issuances at Galt & Taggart, our brokerage subsidiary

-- De-dollarisation of the loan book and client deposits. Loan book in local currency accounted for 39.3% of the total book at 31 March 2019 (41.2% a year ago and 38.3% in the previous quarter). Client deposits in local currency represented 32.9% of the total deposit portfolio at 31 March 2019 (33.8% a year ago and 32.5% in previous quarter)

-- Remote channels. We have actively continued the further development of our digital strategy:

-- The Bank continued introducing new features to both our mobile banking application and our internet bank and introducing dedicated digital spaces in our branches to increase client penetration and incentivise offloading client activity to digital channels. As a result, the number of active internet and mobile banking users in 1Q19 reached 277,960 (up 16.5% y-o-y) and 382,152 (up 84.2% y-o-y), respectively. Both the number and volume of transactions through our mobile and internet banking continued to expand in 1Q19. In total, c.82% of daily banking transactions were executed through remote channels during first quarter of 2019

-- In 1Q19, the Bank released a brand new business internet banking platform (Business iBank) for MSME and corporate clients, which comes with many features designed to make its use an intuitive and smooth experience. We focused our efforts on making the Business iBank even more useful for business transactions, accounting, payments, money transfers, administration, which should further incentivise offloading client activity to digital channels

-- In 1Q19, the Group launched a cutting-edge full-service real estate digital platform that is unique in doing business in the Georgian real estate market. The platform offers a single space for the more convenient, timely and efficient interaction and information exchange to all stakeholders involved in buying, selling, renting, developing real estate in Georgia. We believe it is the most up-to-date, comprehensive and reliable offering in 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 and serving a new clientèle, and simultaneously offering value-added services to real estate developers and agencies

(5) 1Q19 ROAE adjusted for GEL 10.2mln one-off employee costs (net of income tax) related to termination benefits of the former CEO and executive management

CHIEF EXECUTIVE OFFICER'S STATEMENT

In the first quarter of 2019, the Group delivered another period of good balance sheet and fee income growth, in the seasonally quiet first quarter of the year, combined with continued superior profitability. In addition, we have continued to build our fully integrated digital capacity; we improved our already strong capital position with the issuance of US$100 million Additional Tier 1 capital, and announced the strengthening of our executive management team. At the same time, the Bank has adopted a significant tranche of local regulatory changes and the Georgian economy has continued to achieve strong macro-economic growth.

Net profit for the quarter totalled GEL 102.0 million, despite the impact of GEL 10.2 million of one-off employee costs (net of income tax) related to termination benefits of former CEO and executive management members. Adjusting for these costs, net profit increased by 10.4% y-o-y to GEL 112.2 million, and the return on average equity was 24.5%. During the quarter, the Group delivered operating income of GEL 258.7 million, up 10.2% year-on-year, reflecting both customer lending growth and particularly strong levels of fee and commission income. Customer lending increased 22.4% over the last twelve months, and by 1.8% during the quarter, and we continue to expect c.15% customer lending growth for 2019.

During the quarter we actively continued the further development of our fully integrated digital strategy, an important focus for us as we seek to digitise our full banking platforms:

-- Introducing new features to both our mobile banking application and our internet bank and introducing dedicated digital spaces in our branches. As a result, the number of active internet and mobile banking users in 1Q19 reached 277,960 (up 16.5% y-o-y) and 382,152 (up 84.2% y-o-y), respectively;

-- Releasing a brand new business internet banking platform (Business iBank) for our MSME and corporate clients; and

-- Launching a cutting-edge full-service real estate digital platform that is unique in doing business in the Georgian real estate market. This is the first platform to be fully integrated with the Bank to provide users with a "one-click" live credit limit appraisal and mortgage application experience.

From a macro-economic perspective, the economy continued to perform well, with Georgia's real GDP growth at 4.7% in 1Q19. External pressures continued to ease as goods exports, remittances and tourism all posted increases while imports declined. In the first three months of the year, inflation remained close to the National Bank of Georgia's 3% target, and at 3.7% in March 2019. With subdued inflation expectations, the NBG cut the policy rate to 6.5% in 1Q19. Continued growth in external inflows enabled the NBG to purchase US$186 million in 1Q19. This lifted international reserves to US$3.5 billion as of 31 March 2019. Despite these FX purchases, the Georgian Lari remained relatively stable against US$ throughout the quarter. Notably, Georgia's macro fundamentals remain strong with its track record of resilience to negative external developments. This was acknowledged by a one-notch sovereign credit rating upgrade from Fitch Ratings in February 2019 and an improved rating outlook from S&P in April 2019. Georgia's economic resilience continues to be underpinned by its diversified economic base and external economic linkages, as well as prudent economic policy-making and a healthy banking sector.

Whilst individual product loan yields have remained broadly stable, our increasing focus on lending in the mortgage segment and to finer margin corporate and SME clients, has led to a negative mix effect on the net interest margin, which reduced by 20 basis points quarter-on-quarter to 5.8% at the Group level, and by 30 basis points in the Retail Bank. This shift in product mix, which we expect to continue at a slower rate during 2019, improves asset quality and, particularly in the case of the mortgage portfolio, reduces the risk-asset and capital intensity of our lending growth. Costs remain well controlled and, adjusting for impact of the one-off employee termination costs, the Group delivered positive operating leverage of 5.0 percentage points y-o-y, and improved its cost/income ratio to 35.5%.

Asset quality continues to be extremely robust, reflecting our good lending discipline and the ongoing strength of the economy. The annualised cost of risk ratio in the quarter was 1.7%, broadly reflecting a very strong performance in CIB (annualised cost of risk of 0.1%), which offset the impact of first quarter seasonality and the new regulatory changes in the Retail Bank (annualised cost of risk of 2.4%), as we have reduced our Express lending portfolio significantly. This process has now been largely completed, and we expect the Retail Bank cost of risk to return to more normal levels over the next few quarters. The NPLs to gross loans ratio was stable at 3.3% during the quarter, 20 basis points lower than a year ago and flat q-o-q. Provisions coverage ratios improved during the quarter, and we continue to expect asset quality and credit metrics to remain strong over the medium-term.

The Retail Bank continues to deliver strong franchise growth. Customer lending increased 2.0% during the traditionally quietest quarter of the year, and 23.2% over the last 12 months, at a time when we have been integrating significant regulatory changes to income verification procedures, and payment-to-income and loan-to-value ratios targeted to refocus retail lending towards the high quality secured mortgage portfolio and MSME lending. MSME lending in the quarter was particularly strong, supported by the strength of the Georgian economy, growing by 4.7% in the quarter. Going forward, the Retail Bank's clear focus will be on capturing the significant growth opportunities in the mortgage and MSME portfolios. The overall impact of the regulatory changes has been the reduction of the net interest margin of the Retail Bank and, temporarily while the higher margin Express loan portfolio has been substantially run down, increase in the retail cost of credit risk ratio. Importantly however, the capital efficiency of this portfolio shift remains strong and the Retail Bank continues to deliver a very strong return on equity - 25.3% in the first quarter.

The Retail Bank now has almost 2.5 million customers, an increase of more than 4% over the last 12 months. Our fully transformed, user-friendly, multi-feature mobile banking application, mBank, continues to see significant growth in the number of digital transaction, growing 21.6% over the last three months alone. In addition, we have now comfortably exceeded our targeted 40,000 Solo clients by the end of 2018, with over 47,000 clients now benefiting from Solo's concierge-style banking proposition.

Corporate Investment Banking (CIB) performed particularly strongly during the quarter. Customer lending in CIB grew 1.3% quarter-on-quarter, while the net interest margin increased by 20 basis points to 3.4%. This strong performance in CIB was driven by a 31.5% y-o-y (17.5% q-o-q) growth in net fees and commission, and an increase of 26.8% in operating income y-o-y, that led to 52.3% y-o-y growth in profit (adjusted for one-off employee costs related to termination benefits of former CEO and executive management).

The Group's capital and funding position remains strong, and our issuance of US$100 million Additional Tier 1 capital in March 2019 has improved the efficiency of our capital structure, introduced a natural hedge against dollarisation in the economy and built in significant headroom over the fully-loaded Basel III capital requirements for 2021 that are currently being introduced. This Additional Tier 1 capital received regulatory approval in April 2019 and will therefore add approximately 230 basis points to our Tier 1 capital ratio with immediate effect. During April 2019, we took the opportunity to repay US$65 million of Tier 2 capital, and this will substantially reduce the carry-cost of the new Additional Tier 1 capital issuance. In addition, we continue to generate high levels of internal capital as a result of both the Group's high return on equity, and the improved risk asset intensity of our current and expected lending growth.

Over the last 12 months, the banking sector in Georgia has been in a significant transition period following the implementation of a number of regulatory changes, particularly affecting lending guidelines in the retail banking sector. Following the introduction, in January 2019, of the increase in the GEL 100,000 limit, to GEL 200,000, below which lending must be issued to individuals in GEL, we are not aware of any further significant new regulatory changes over the foreseeable future. Looking forward, we expect that banks will see a shift towards lending to corporates and the MSME sector, and in the mortgage sector, improving the overall quality of banking balance sheets, and driving further progress in the dedollarisation of the banking sector. This is expected to support increased capital efficiency, and continuing strong profitability for Bank of Georgia.

Having taken over as Chief Executive of the Bank during the quarter, I have been impressed by the strength of the Bank's customer franchise, and undisputed brand strength. We have considerably strengthened the executive management team and I look forward to working with the whole management team and colleagues to ensure we capture the many opportunities available in the Georgian financial services sector to develop more digital, efficient and modern financial services throughout Georgia.

Archil Gachechiladze,

CEO, Bank of Georgia Group PLC

13 May 2019

DISCUSSION OF RESULTS

The Group's business is primarily comprised of three segments. (1) Retail Banking operations in Georgia principally provides consumer loans, mortgage loans, overdrafts, credit cards and other credit facilities, funds transfer and settlement services, and handling customers' deposits for both individuals as well as legal entities. Retail Banking targets the emerging retail, mass retail and mass affluent segments, together with small and medium enterprises and micro businesses. (2) Corporate 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 
                                                                     Change                Change 
GEL thousands, unless otherwise noted            1Q19         1Q18    y-o-y         4Q18    q-o-q 
 
Interest income                               334,735      313,679     6.7%      345,760    -3.2% 
Interest expense                            (151,794)    (133,430)    13.8%    (158,322)    -4.1% 
Net interest income                           182,941      180,249     1.5%      187,438    -2.4% 
Fee and commission income                      62,531       51,213    22.1%       62,350     0.3% 
Fee and commission expense                   (20,351)     (16,702)    21.8%     (21,006)    -3.1% 
Net fee and commission income                  42,180       34,511    22.2%       41,344     2.0% 
Net foreign currency gain                      30,025       14,253   110.7%       53,358   -43.7% 
Net other income / (expense)                    3,568        5,744   -37.9%      (9,073)      NMF 
Operating income                              258,714      234,757    10.2%      273,067    -5.3% 
 
Net interest margin                              5.8%         7.0%                  6.0% 
Average interest earning assets            12,752,388   10,434,536    22.2%   12,496,355     2.0% 
Average interest bearing liabilities       12,717,669   11,230,932    13.2%   12,562,852     1.2% 
Average net loans and finance lease 
 receivables, currency blended              9,453,255    7,769,959    21.7%    9,095,309     3.9% 
    Average net loans and finance lease 
     receivables, GEL                       3,656,912    3,091,398    18.3%    3,529,999     3.6% 
    Average net loans and finance lease 
     receivables, FC                        5,796,343    4,678,561    23.9%    5,565,310     4.2% 
Average client deposits and notes, 
 currency blended                           8,278,823    7,038,125    17.6%    7,946,145     4.2% 
   Average client deposits and notes, 
    GEL                                     2,718,201    2,315,919    17.4%    2,654,640     2.4% 
   Average client deposits and notes, 
    FC                                      5,560,622    4,722,206    17.8%    5,291,505     5.1% 
Average liquid assets, currency blended     4,405,239    4,306,271     2.3%    4,481,396    -1.7% 
   Average liquid assets, GEL               2,066,605    1,804,602    14.5%    2,142,122    -3.5% 
   Average liquid assets, FC                2,338,634    2,501,669    -6.5%    2,339,274     0.0% 
Liquid assets yield, currency blended            3.8%         3.6%                  3.8% 
   Liquid assets yield, GEL                      6.8%         7.0%                  6.8% 
   Liquid assets yield, FC                       1.1%         1.2%                  1.0% 
Loan yield, currency blended                    12.2%        13.9%                 12.8% 
   Loan yield, GEL                              18.4%        21.0%                 19.7% 
   Loan yield, FC                                8.3%         9.1%                  8.3% 
Cost of funds, currency blended                  4.8%         4.8%                  5.0% 
   Cost of funds, GEL                            7.0%         7.0%                  7.2% 
   Cost of funds, FC                             3.6%         3.6%                  3.7% 
Cost / income(6)                                35.5%        37.2%                 36.9% 
 

(6) 1Q19 cost/income ratio adjusted for GEL 7.8mln one-off employee costs (gross of income tax) related to termination benefits of the former executive management

Performance highlights

-- Solid operating income of GEL 258.7mln in 1Q19 (up 10.2% y-o-y). Y-o-y operating income growth in 1Q19 was primarily driven by an impressive 22.2% growth in net fee and commission income and 1.5% increase in net interest income. Net foreign currency gains (up 110.7% y-o-y) also contributed to y-o-y growth in operating income during the first quarter 2019, although they were 43.7% lower than in the fourth quarter of 2018, which benefited from a high level of currency volatility

-- Our NIM was 5.8% in 1Q19. During first quarter 2019, NIM was down 120bps y-o-y due to the 170bps 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, while cost of funds remained flat at 4.8%. On a q-o-q basis, loan yield decreased by 60bps, while cost of funds reduced by 20bps, resulting in 20bps q-o-q decline in 1Q19 NIM

-- Loan yield. Currency blended loan yield was 12.2% in 1Q19 (down 170bps y-o-y and down 60bps q-o-q). The y-o-y and q-o-q decline in loan yields during the first quarter of 2019 was attributable to a decrease in both local and foreign currency loan yields, which primarily reflects 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 1Q19. However, the currency blended liquid assets yield increased to 3.8% in 1Q19 (up 20bps y-o-y and flat q-o-q), primarily reflecting an increase in the portion of higher yielding local currency liquid assets in the total liquid assets portfolio

-- Cost of funds. Cost of funds stood at 4.8% in 1Q19 (flat y-o-y and down 20bps q-o-q). Y-o-y cost of funds remained stable on the back of a 10bps decline in the cost of client deposits and notes (which represent 65.1% of total interest-bearing liabilities), offsetting the 70bps increase in the cost of amounts due to credit institutions, primarily driven by increased local currency denominated borrowings from Development Finance Institutions (DFIs), and 10bps increase in cost of debt securities issued. On a q-o-q basis, decrease in cost of funds was due to lower costs of both client deposits and notes (down 10bps) and cost of amounts due to credit institutions (down 30bps, primarily on the back of decrease in Libor and NBG monetary policy rates), while cost of debt securities issued remained flat

-- Net fee and commission income. The first quarter of 2019 was exceptionally strong in terms of net fee and commission income generation. Net fee and commission income reached GEL 42.2mln in 1Q19 (up 22.2% y-o-y and up 2.0% q-o-q). Y-o-y growth was mainly driven by the strong performance in our settlement operations supported by the success of our Retail Banking franchise and a strong increase in fees and commission income from guarantees and letters of credit issued by Corporate Investment Banking business

-- Net foreign currency gain. In line with the increase of client-driven flows, as well as robust interest from foreign financial institutions in local currency, the net foreign currency gain was up 110.7% y-o-y, although they were 43.7% lower than in the fourth quarter of 2018, which primarily benefited from a high level of currency volatility

-- Net other income. Net other income in 1Q19 largely reflects net gains from investment securities recorded during the quarter, partially offset by net losses from derivative financial instruments (interest rate swap hedges)

 
 NET OPERATING PROFIT BEFORE NON-RECURRING ITEMS; COST OF RISK; PROFIT 
  FOR THE PERIOD 
 GEL thousands, unless otherwise noted                              Change               Change 
  (7)                                             1Q19       1Q18    y-o-y        4Q18    q-o-q 
 
 Salaries and other employee benefits         (52,418)   (49,453)     6.0%    (58,331)   -10.1% 
 Administrative expenses                      (22,741)   (25,633)   -11.3%    (30,010)   -24.2% 
 Depreciation and amortisation                (15,688)   (11,522)    36.2%    (11,365)    38.0% 
 Other operating expenses                      (1,080)      (771)    40.1%     (1,151)    -6.2% 
 Operating expenses                           (91,927)   (87,379)     5.2%   (100,857)    -8.9% 
 Profit from associate                             188        318   -40.9%         318   -40.9% 
 Operating profit before cost of risk          166,975    147,696    13.1%     172,528    -3.2% 
 Expected credit loss / impairment charge 
  on loans to customers                       (40,117)   (36,676)     9.4%    (25,783)    55.6% 
 Expected credit loss / impairment charge 
  on finance lease receivables                   (446)         13      NMF         514      NMF 
 Other expected credit loss / impairment 
  charge on other assets and provisions        (2,089)      2,850      NMF    (15,509)   -86.5% 
 Cost of risk                                 (42,652)   (33,813)    26.1%    (40,778)     4.6% 
 Net operating profit before non-recurring 
  items and income tax                         124,323    113,883     9.2%     131,750    -5.6% 
 Net non-recurring items                       (1,575)    (2,948)   -46.6%     (2,185)   -27.9% 
 Profit before income tax and one-off 
  termination costs                            122,748    110,935    10.6%     129,565    -5.3% 
 Income tax expense                           (10,536)    (9,283)    13.5%    (10,888)    -3.2% 
 Profit adjusted for one-off termination 
  costs                                        112,212    101,652    10.4%     118,677    -5.4% 
 One-off termination costs of former 
  CEO and executive management (after 
  tax)                                        (10,240)          -      NMF     (3,861)      NMF 
 Profit                                        101,972    101,652     0.3%     114,816   -11.2% 
 
 

-- Operating expenses adjusted for one-off employee costs related to termination benefits of former executive management members (acceleration of share-based compensation) were GEL 91.9mln in 1Q19 (up 5.2% y-o-y and down 8.9% q-o-q), driving the positive operating leverage of 5.0% y-o-y and 3.6% q-o-q

-- The decline in administrative expenses and increase in depreciation and amortisation expenses is primarily driven by adoption of a new standard IFRS 16, Leases replacing IAS 17, Leases effective 1 January 2019. As a result of the adoption of the standard the Group recorded on its balance sheet assets related to the right to use the rented properties together with corresponding liabilities for respective payments under the lease contracts. There was no material impact on overall operating expenses in 1Q19

-- Cost of credit risk ratio. The cost of credit risk ratio was 1.7% in 1Q19, down 10bps y-o-y and up 60bps q-o-q. RB's cost of credit risk ratio was 2.4% in 1Q19, up 20bps y-o-y and up 70bps q-o-q, while CIB's cost of credit risk ratio was 0.1%, down 120bps y-o-y and up 30bps q-o-q. The y-o-y and q-o-q increase in RB's cost of credit risk ratio reflected tighter conditions on unsecured consumer lending, which primarily affected the quality of high-yielding express and micro express loans as expected in the short-term. The q-o-q increase was also due to seasonal factors

(7) The adjusted profit in the table excludes GEL 10.2mln in 1Q19 (4Q18: GEL 3.9mln) one-off employee costs (net of income tax) related to the former CEO and executive management termination benefits. The amount is comprised of GEL 4.0mln (gross of income tax) excluded from non-recurring items (4Q18: GEL 4.4mln) and GEL 7.8mln (gross of income tax) excluded from salaries and other employee benefits

-- Quality of our loan book remained strong in 1Q19 as evidenced by the following closely monitored metrics:

 
 GEL thousands, unless otherwise noted     Mar-19      Mar-18   Change    Dec-18   Change 
                                                                 y-o-y              q-o-q 
 
 Non-performing loans 
 NPLs                                     326,127     279,754    16.6%   318,356     2.4% 
 NPLs to gross loans                         3.3%        3.5%               3.3% 
  NPLs to gross loans, RB                    2.2%        1.9%               2.1% 
  NPLs to gross loans, CIB                   5.7%        5.3%               5.6% 
 NPL coverage ratio                         92.2%      101.2%              90.5% 
 NPL coverage ratio adjusted for the 
  discounted value of collateral           132.6%      143.2%             129.9% 
 
 Past due dates 
 Retail loans - 15 days past due rate        1.3%        1.2%               1.1% 
 Mortgage loans - 15 days past due 
  rate                                       1.1%        0.8%               0.7% 
 

-- 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 31 March 2019, total capital adequacy ratio was 15.5%, above the 10% minimum requirement, while Tier I capital adequacy ratio was 9.6%, above NBRB's 6% minimum requirement. ROAE was 12.1% in 1Q19 (12.3% in 1Q18 and 19.5% in 4Q18). For detailed financial results of BNB, please see page 21

-- Net non-recurring items. Net non-recurring expenses adjusted for one-off employee costs related to the termination benefits of former CEO (acceleration of share-based compensation) amounted to GEL 1.6mln in 1Q19 (GEL 2.9mln in 1Q18 and GEL 2.2mln in 4Q18). These largely reflect legal fees

-- Overall, profit adjusted for one-off employee costs related to termination benefits of the former CEO and executive management members (acceleration of share-based compensation) totalled GEL 112.2mln in 1Q19 (up 10.4% y-o-y and down 5.4% q-o-q), while ROAE(8) was 24.5% in 1Q19 (26.2% in 1Q18 and 27.0% in 4Q18)

(8) 1Q19 ROAE adjusted for GEL 10.2mln (4Q18: GEL 3.9mln) one-off employee costs (net of income tax) related to termination benefits of the former CEO and executive management

 
 BALANCE SHEET HIGHLIGHTS 
 GEL thousands, unless otherwise                   Mar-19      Mar-18   Change      Dec-18   Change 
  noted                                                                  y-o-y                q-o-q 
 
 Liquid assets                                  4,502,390   4,514,326    -0.3%   4,540,032    -0.8% 
    Liquid assets, GEL                          2,005,142   1,740,858    15.2%   2,283,812   -12.2% 
    Liquid assets, FC                           2,497,248   2,773,468   -10.0%   2,256,220    10.7% 
 Net loans and finance lease receivables        9,570,691   7,819,773    22.4%   9,397,747     1.8% 
    Net loans and finance lease receivables, 
     GEL                                        3,758,320   3,222,735    16.6%   3,597,826     4.5% 
    Net loans and finance lease receivables, 
     FC                                         5,812,371   4,597,038    26.4%   5,799,921     0.2% 
 Client deposits and notes                      8,393,861   7,296,110    15.0%   8,133,853     3.2% 
 Amounts due to credit institutions             2,463,408   2,642,427    -6.8%   2,994,879   -17.7% 
    Borrowings from DFIs                        1,309,976   1,191,605     9.9%   1,302,679     0.6% 
    Short-term loans from central banks           585,797     729,244   -19.7%   1,118,957   -47.6% 
    Loans and deposits from commercial 
     banks                                        567,635     721,578   -21.3%     573,243    -1.0% 
 Debt securities issued                         2,045,428   1,569,404    30.3%   1,730,414    18.2% 
 Liquidity and CAR ratios 
 Net loans / client deposits and 
  notes                                            114.0%      107.2%               115.5% 
 Net loans / client deposits and 
  notes + DFIs                                      98.6%       92.1%                99.6% 
 Liquid assets / total assets                       29.9%       34.2%                30.7% 
 Liquid assets / total liabilities                  34.3%       38.9%                34.9% 
 NBG liquidity ratio                                36.7%       36.5%                31.9% 
 NBG liquidity coverage ratio                      133.1%      135.2%               120.1% 
 NBG (Basel III) Tier I capital adequacy 
  ratio                                             12.7%       12.4%                12.2% 
 NBG (Basel III) Total capital adequacy 
  ratio                                             17.1%       17.3%                16.6% 
 

Our balance sheet remains highly liquid (NBG liquidity coverage ratio of 133.1%) and strongly capitalised (NBG Basel III Tier I capital adequacy ratio of 12.7%) with a well-diversified funding base (client deposits and notes to total liabilities of 63.9%).

-- Liquidity. Liquid assets stood at GEL 4,502.4mln at 31 March 2019, largely flat both y-o-y and q-o-q. The notable increase over the year was in obligatory reserves with NBG, combined with excess liquidity deployed with the credit institutions, NBG and Ministry of Finance. Increase in obligatory reserves with NBG was primarily driven by the changes in minimum reserve requirements mandated by NBG since September 2018, whereby the foreign currency funds raised by local banks now carry up to 25% reserve requirement depending on maturity. As announced by the NBG on 13 March 2019, the reserve requirements on foreign currency funds will increase up to 30% depending on maturity by the end of May 2019. The NBG Liquidity coverage ratio was 133.1% at 31 March 2019 (135.2% at 31 March 2018 and 120.1% at 31 December 2018), well above the 100% minimum requirement level

-- Loan book. Our net loan book and finance lease receivables reached GEL 9,570.7mln at 31 March 2019, up 22.4% y-o-y and up 1.8% q-o-q. As of 31 March 2019, the retail book represented 70.0% of the total loan portfolio (69.5% at 31 March 2018 and 69.8% at 31 December 2018). Both local and foreign currency portfolios experienced strong y-o-y growth of 16.6% and 26.4%, respectively. Furthermore, local currency denominated loan portfolio was up 4.5% q-o-q. The local currency loan portfolio growth was partially driven by the Government's de-dollarisation initiatives and our goal to increase the share of local currency loans in our portfolio

-- Dollarisation of our loan book and client deposits. The retail client loan book in foreign currency accounted for 48.6% of the total RB loan book at 31 March 2019 (46.2% at 31 March 2018 and 50.3% at 31 December 2018), while retail client foreign currency deposits comprised 69.4% of total RB deposits at 31 March 2019 (71.0% at 31 March 2018 and 69.7% at 31 December 2018). At 31 March 2019, 83.0% of CIB's loan book was denominated in foreign currency (80.7% at 31 March 2018 and 82.3% at 31 December 2018), while 60.2% of CIB deposits were denominated in foreign currency (60.2% at 31 March 2018 and 61.2% at 31 December 2018). De-dollarisation of loans and deposits is expected to pick-up the pace in 2019 as a result of the recent NBG-mandated increase of local currency loan threshold from GEL 100,000 to GEL 200,000 and increased mandatory reserve requirements on funds attracted in foreign currency introduced by NBG in March 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 98.6% (up from 92.1% at 31 March 2018 and down from 99.6% at 31 December 2018)

-- Diversified funding base. Debt securities issued grew by 30.3% y-o-y and by 18.2% q-o-q. The y-o-y and q-o-q 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 12.7% and 17.1%, respectively, as of 31 March 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 12.7% compared to a 9.6% minimum requirement at 31 March 2019. In March 2019, the Bank issued inaugural US$ 100 million 11.125% Additional Tier 1 capital perpetual subordinated notes callable after 5.25 years and on every subsequent interest payment date, subject to prior consent of the National Bank of Georgia at an issue price of 100.00% (the "Notes"). The Notes are listed on the Irish Stock Exchange and rated B- (Fitch). The issuance was the first international offering of Additional Tier 1 Capital Notes from Georgia and the South Caucasus region. Basel III regulations recently introduced in Georgia now enable this type of capital optimisation and this US Dollar issue provides the Bank with an opportunity to diversify its capital structure from a foreign currency perspective and provide a natural hedge against dollarisation in the economy. The Bank received regulatory approval on the classification of the Notes as Additional Tier 1 instruments in April 2019, therefore, it has not been reflected in the capital ratios reported as of 31 March 2019. This issuance added approximately 230 basis points to the Bank's Tier 1 capital ratio. That said, CET1 and Tier 1 capital adequacy ratios are already above the estimated fully-loaded requirements for 2021

DISCUSSION OF SEGMENT RESULTS

RETAIL BANKING (RB)

Retail Banking provides consumer loans, mortgage loans, overdrafts, credit card facilities and other credit facilities as well as funds transfer and settlement services and the handling of customer deposits for both individuals and legal entities (SME and micro businesses only). RB is represented by the following four sub-segments: (1) the emerging retail segment (through our Express brand), (2) retail mass market segment; (3) SME and micro businesses - "MSME" (through our Bank of Georgia brand), and (4) the mass affluent segment (through our Solo brand).

 
                                                                      Change               Change 
 GEL thousands, unless otherwise noted             1Q19        1Q18    y-o-y        4Q18    q-o-q 
 
 INCOME STATEMENT HIGHLIGHTS(9) 
 Net interest income                            130,987     135,454    -3.3%     136,895    -4.3% 
 Net fee and commission income                   32,435      26,141    24.1%      32,915    -1.5% 
 Net foreign currency gain                       13,240       4,349      NMF      24,047   -44.9% 
 Net other income / (expense)                     2,168       3,102   -30.1%     (5,421)      NMF 
 Operating income                               178,830     169,046     5.8%     188,436    -5.1% 
 Salaries and other employee benefits          (33,874)    (32,112)     5.5%    (37,052)    -8.6% 
 Administrative expenses                       (15,796)    (19,541)   -19.2%    (21,620)   -26.9% 
 Depreciation and amortisation                 (13,287)     (9,902)    34.2%     (9,857)    34.8% 
 Other operating expenses                         (536)       (503)     6.6%       (638)   -16.0% 
 Operating expenses                            (63,493)    (62,058)     2.3%    (69,167)    -8.2% 
 Profit from associate                              188         318   -40.9%         318   -40.9% 
 Operating profit before cost of risk           115,525     107,306     7.7%     119,587    -3.4% 
 Cost of risk                                  (39,386)    (28,453)    38.4%    (37,488)     5.1% 
 Net operating profit before non-recurring 
  items and income tax                           76,139      78,853    -3.4%      82,099    -7.3% 
 Net non-recurring items                          (276)     (1,976)   -86.0%       (778)   -64.5% 
 Profit before income tax and one-off 
  termination costs                              75,863      76,877    -1.3%      81,321    -6.7% 
 Income tax expense                             (6,101)     (6,060)     0.7%     (6,155)    -0.9% 
 Profit adjusted for one-off termination 
  costs                                          69,762      70,817    -1.5%      75,166    -7.2% 
 One-off termination costs of former CEO 
  and executive management (after tax)          (7,075)           -      NMF     (2,939)   140.7% 
 Profit                                          62,687      70,817   -11.5%      72,227   -13.2% 
 
 BALANCE SHEET HIGHLIGHTS 
 Net loans, currency blended                  6,389,631   5,184,596    23.2%   6,267,071     2.0% 
  Net loans, GEL                              3,286,042   2,790,705    17.7%   3,117,454     5.4% 
  Net loans, FC                               3,103,589   2,393,891    29.6%   3,149,617    -1.5% 
 Client deposits, currency blended            4,520,521   3,304,319    36.8%   4,338,712     4.2% 
  Client deposits, GEL                        1,385,451     959,084    44.5%   1,314,902     5.4% 
  Client deposits, FC                         3,135,070   2,345,235    33.7%   3,023,810     3.7% 
 of which: 
 Time deposits, currency blended              2,593,744   1,838,699    41.1%   2,430,311     6.7% 
  Time deposits, GEL                            637,522     412,140    54.7%     566,490    12.5% 
  Time deposits, FC                           1,956,222   1,426,559    37.1%   1,863,821     5.0% 
 Current accounts and demand deposits, 
  currency blended                            1,926,777   1,465,620    31.5%   1,908,401     1.0% 
  Current accounts and demand deposits, 
   GEL                                          747,929     546,944    36.7%     748,412    -0.1% 
  Current accounts and demand deposits, 
   FC                                         1,178,848     918,676    28.3%   1,159,989     1.6% 
 
 KEY RATIOS 
 ROAE(9)                                          25.3%       31.8%                28.4% 
 Net interest margin, currency blended             6.4%        8.2%                 6.7% 
 Cost of credit risk                               2.4%        2.2%                 1.7% 
 Cost of funds, currency blended                   5.6%        5.8%                 5.7% 
 Loan yield, currency blended                     13.6%       15.8%                14.2% 
  Loan yield, GEL                                 19.3%       22.4%                20.7% 
  Loan yield, FC                                   7.7%        8.4%                 7.4% 
 Cost of deposits, currency blended                3.0%        2.8%                 2.9% 
  Cost of deposits, GEL                            5.2%        4.8%                 5.0% 
  Cost of deposits, FC                             2.1%        2.1%                 2.1% 
 Cost of time deposits, currency blended           4.3%        4.3%                 4.2% 
  Cost of time deposits, GEL                       8.8%        8.9%                 8.7% 
  Cost of time deposits, FC                        2.9%        3.0%                 2.9% 
 Current accounts and demand deposits, 
  currency blended                                 1.3%        1.0%                 1.2% 
  Current accounts and demand deposits, 
   GEL                                             2.2%        1.7%                 2.1% 
  Current accounts and demand deposits, 
   FC                                              0.7%        0.6%                 0.7% 
 Cost / income ratio(10)                          35.5%       36.7%                36.7% 
 

(9) The income statement adjusted profit excludes GEL 7.1mln in 1Q19 (4Q18: GEL 2.9mln) one-off employee costs (net of income tax) related to the former CEO and executive management termination benefits. The amount is comprised of GEL 2.9mln (gross of income tax) excluded from non-recurring items (4Q18: GEL 3.3mln) and GEL 5.2mln (gross of income tax) excluded from salaries and other employee benefits. The 1Q19 and 4Q18 ROAE has been adjusted accordingly

(10) 1Q19 cost/income ratio adjusted for GEL 5.2mln one-off employee costs (gross of income tax) related to termination benefits of the former executive management

Performance highlights

-- Retail Banking delivered solid quarterly results in each of its major segments, in the seasonally quiet quarter, and generated operating income of GEL 178.8mln in 1Q19 (up 5.8% y-o-y and down 5.1% q-o-q)

-- RB's net interest income was down 3.3% y-o-y and down 4.3% q-o-q in 1Q19 largely as a result of the regulations introduced by the National Bank of Georgia on consumer lending in 2018. Net interest income still benefits from the growth of the local currency loan portfolio, which generated 11.6ppts higher yield than the foreign currency loan portfolio in 1Q19

-- The Retail Banking net loan book reached GEL 6,389.6mln in 1Q19, up 23.2% y-o-y and up 2.0% q-o-q. On a constant currency basis our retail loan book increased by 17.1% y-o-y and by 1.7% q-o-q in 1Q19. Our local currency denominated loan book increased by 17.7% y-o-y and by 5.4% q-o-q, while the foreign currency denominated loan book grew by 29.6% y-o-y and but decreased by 1.5% q-o-q. As a result, the local currency denominated loan book accounted for 51.4% of the total Retail Banking loan book at 31 March 2019 (53.8% at 31 March 2018 and 49.7% at 31 December 2018)

-- 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 loan book growth reflected continued strong loan origination levels in MSME segment. The slow-down in loan originations in mortgage segment is primarily on the back of regulation on consumer lending effective 1 January 2019. The q-o-q decline in mortgage and consumer loan originations also reflected the seasonal factors:

 
 Retail Banking loan book by products 
                                                            Change             Change 
 GEL million, unless otherwise noted       1Q19      1Q18    y-o-y      4Q18    q-o-q 
 Loan originations 
 Consumer loans                           306.5     364.2   -15.8%     326.0    -6.0% 
 Mortgage loans                           209.5     303.3   -30.9%     466.4   -55.1% 
 Micro loans                              287.0     283.6     1.2%     263.6     8.9% 
 SME loans                                214.5     130.8    64.0%     186.1    15.3% 
 POS loans                                 14.5      50.1   -71.1%      14.4     0.4% 
 
 Outstanding balance 
 Consumer loans                         1,381.5   1,293.5     6.8%   1,379.7     0.1% 
 Mortgage loans                         2,578.5   1,771.5    45.6%   2,539.3     1.5% 
 Micro loans                            1,310.8   1,098.2    19.4%   1,246.3     5.2% 
 SME loans                                795.8     604.2    31.7%     758.7     4.9% 
 POS loans                                 44.4     120.2   -63.1%      58.6   -24.2% 
 

-- Retail Banking client deposits increased to GEL 4,520.5mln, up 36.8% y-o-y and up 4.2% q-o-q. The dollarisation level of our deposits decreased to 69.4% at 31 March 2019 from 71.0% at 31 March 2018 and from 69.7% at 31 December 2018. The cost of foreign currency denominated deposits stood at 2.1%, flat both y-o-y and q-o-q. The cost of local currency denominated deposits increased by 40bps y-o-y and by 20bps q-o-q in 1Q19. The spread between the cost of RB's client deposits in GEL and foreign currency widened to 3.1ppts during 1Q19 (GEL: 5.2%; FC: 2.1%) compared to 2.7ppts in 1Q18 (GEL: 4.8%; FC: 2.1%) and 2.9ppts in 4Q18 (GEL: 5.0%; FC: 2.1%)

-- Retail Banking NIM was 6.4% in 1Q19 (down 180bps y-o-y and down 30bps q-o-q). The decline in NIM was attributable to lower loan yields (down 220bps y-o-y and down 60bps q-o-q), mainly driven by the change in the Retail Banking loan portfolio product mix, with the lower yield-lower risk products share increasing in total RB loan portfolio. Meanwhile, the cost of funds decreased by 20bps y-o-y and by 10bps q-o-q in 1Q19

-- Strong growth in Retail Banking net fee and commission income. Exceptionally strong 24.1% y-o-y growth in net fee and commission income was driven by an increase in settlement operations and the strong underlying growth in our Solo and MSME segments

-- RB's cost of credit risk ratio was 2.4% in 1Q19 (up from 2.2% in 1Q18 and from 1.7% in 4Q18). The y-o-y and q-o-q increase in cost of credit risk ratio reflected tighter conditions on unsecured consumer lending, which primarily affected the quality of high-yielding express and micro express loans as expected in the short-term. The q-o-q increase in cost of credit risk ratio is also due to seasonal factors

-- 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 
                                                                       Change                Change 
 Volume information in GEL thousands               1Q19         1Q18    y-o-y         4Q18    q-o-q 
 Retail Banking customers 
 Number of new customers                         39,845       63,621   -37.4%       54,975   -27.5% 
 Number of customers                          2,454,678    2,356,294     4.2%    2,440,754     0.6% 
 Cards 
 Number of cards issued                         176,085      246,138   -28.5%      243,843   -27.8% 
 Number of cards outstanding                  2,139,239    2,246,396    -4.8%    2,177,273    -1.7% 
 Express Pay terminals 
 Number of Express Pay terminals                  3,152        2,825    11.6%        3,115     1.2% 
 Number of transactions via Express 
  Pay terminals                              26,751,138   25,835,081     3.5%   27,924,360    -4.2% 
 Volume of transactions via Express 
  Pay terminals                               1,765,536    1,496,169    18.0%    1,848,746    -4.5% 
 POS terminals 
 Number of desks                                 12,766        9,300    37.3%       10,009    27.5% 
 Number of contracted merchants                   5,902        5,112    15.5%        5,575     5.9% 
 Number of POS terminals(11)                     17,684       12,571    40.7%       16,870     4.8% 
 Number of transactions via POS terminals    16,529,540   13,206,872    25.2%   16,932,793    -2.4% 
 Volume of transactions via POS terminals       488,198      395,099    23.6%      537,668    -9.2% 
 Internet banking 
 Number of active users(12)                     277,960      238,618    16.5%      295,226    -5.8% 
 Number of transactions via internet 
  bank                                        1,421,135    1,487,062    -4.4%    1,541,779    -7.8% 
 Volume of transactions via internet 
  bank                                          490,457      427,014    14.9%      620,273   -20.9% 
 Mobile banking 
 Number of active users(12)                     382,152      207,485    84.2%      333,698    14.5% 
 Number of transactions via mobile bank       6,697,926    2,817,807   137.7%    5,506,212    21.6% 
 Volume of transactions via mobile bank         790,201      317,381   149.0%      697,296    13.3% 
 

- Growth in the client base was due to the increased offering of cost-effective remote channels. The increase to 2,454,678 customers in 1Q19 (up 4.2% y-o-y and up 0.6% 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 4.8% y-o-y and by 1.7% q-o-q in 1Q19 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 at 31 March 2019 increased by 22.8% y-o-y and 4.0% q-o-q. Loyalty programme Plus+ cards, launched in July 2017 as part of RB's client-centric approach, almost doubled y-o-y. We had 651,009 active Plus+ cards outstanding as at 31 March 2019, up 9.9% q-o-q

- The utilisation of Express Pay terminals continued to grow in 1Q19 y-o-y. The volume and the number of transactions increased by 18.0% and by 3.5% y-o-y, respectively. The fees charged to clients for transactions executed through express pay terminals amounted to GEL 5.7mln in 1Q19 (up 8.8% y-o-y and up 0.2% q-o-q)

- Digital penetration growth. For our mobile banking application, mbank, the number of transactions (up 137.7% y-o-y and up 21.6% q-o-q) and the volume of transactions (up 149.0% y-o-y and up 13.3% q-o-q) continue to show outstanding growth. Since its launch on 29 May 2017, 765,177 downloads have been made by the Bank's customers. During the same period approximately 26.0 million online 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 1Q19, 5,654 loans were issued with a total value of GEL 8.7mln, and 3,420 deposits were opened with a total value of GEL 8.8mln through Internet Bank. Starting from 2018, our customers have been able to apply for a loan via mBank as well. In 1Q19, 9,900 loans were issued with a total value of GEL 11.0mln using the mobile banking application. Moreover, in 3Q18 a new feature was added to mBank and our customers can now open a deposit via our mobile platform. During first quarter 2019, 8,199 (5,124 in 4Q18) deposit accounts were opened with a total deposited amount of GEL 5.7mln (GEL 3.1mln in 4Q18). As a result, the c.82% of total daily banking transactions were executed through digital channels during 1Q19

-- 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 47,057 at 31 March 2019 (35,803 at 31 March 2018 and 44,292 at 31 December 2018), up 468.2% since its re-launch in April 2015. Solo is targeting growth through increasing our engagement with existing clients and maximising profit per client and product per client measures. In 1Q19, the product to client ratio for the Solo segment was 5.4, compared to 2.1 for our retail franchise. While Solo clients currently represent 1.9% of our total retail client base, they contributed 28.7% to our retail loan book, 38.7% to our retail deposits, 17.9% and 21.4% to our net retail interest income and to our net retail fee and commission income in 1Q19, respectively. The fee and commission income from the Solo segment reached GEL 5.8mln in 1Q19 (GEL 4.5mln in 1Q18 and GEL 5.6mln in 4Q18). Solo Club, launched in 2Q17, a membership group within Solo which offers exclusive access to Solo products and offers ahead of other Solo clients at a higher fee, continued to increase its client base. At 31 March 2019, Solo Club had 4,446 members, up 55.9% y-o-y and up 16.2% q-o-q

-- MSME banking delivered strong growth. The number of MSME segment clients reached 207,833 at 31 March 2019, up 19.2% y-o-y and up 6.5% q-o-q. MSME's loan portfolio reached GEL 2,281.1mln at 31 March 2019 (up 26.2% y-o-y and up 4.8% q-o-q) and client deposits and notes increased to GEL 682.1mln (up 36.9% y-o-y and up 2.7% q-o-q). The MSME segment generated operating income of GEL 45.5mln in 1Q19 (up 27.1% y-o-y and down 8.0% q-o-q)

-- In 4Q18, the Bank introduced a new payment method, QR PAY to the local small business market. QR PAY has been designed by the Bank as an alternative payment mechanism to the traditional point of sale terminal for small Georgian businesses that previously relied on cash transactions as a means for their customers to settle payments. QR PAY is a significant advantage for small businesses with low turnover. For customers who use Bank of Georgia's mobile bank and a debit or credit card, settling payments with QR PAY application is simple, safe and user-friendly. Currently, there are already up to 2,000 small businesses connected to QR PAY, with the number and the volume of transactions via QR PAY having increased around 8 and 4 times, respectively, since its launch. With QR PAY the Bank has now taken a step further and aims to make digital transactions even more widespread among both our retail and business clients

-- Retail Banking profit adjusted for one-off employee costs related to termination benefits of the former CEO and executive management members (acceleration of share-based compensation) was GEL 69.8mln in 1Q19 (down 1.5% y-o-y and down 7.2% q-o-q). Retail Banking continued to deliver a strong ROAE(13) of 25.3% in 1Q19 (31.8% in 1Q18 and 28.4% in 4Q18)

(11) Includes 2,650 POS terminals operating in public transportation network in 1Q19 and 4Q18

(12) The users that log-in in internet and mobile bank at least once in three months

(13) 1Q19 ROAE adjusted for GEL 7.1mln (4Q18: GEL 2.9mln) one-off employee costs (net of income tax) related to termination benefits of the former CEO and executive management

CORPORATE 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 internationally through representative offices in London, Budapest, Istanbul, Tel Aviv and Limassol.

 
                                                                          Change               Change 
 GEL thousands, unless otherwise noted                 1Q19        1Q18    y-o-y        4Q18    q-o-q 
 INCOME STATEMENT HIGHLIGHTS(14) 
 Net interest income                                 45,679      38,232    19.5%      43,696     4.5% 
 Net fee and commission income                        8,151       6,198    31.5%       6,939    17.5% 
 Net foreign currency gain                           13,104       6,644    97.2%      23,984   -45.4% 
 Net other income / (expense)                         1,386       2,797   -50.4%     (3,451)      NMF 
 Operating income                                    68,320      53,871    26.8%      71,168    -4.0% 
 Salaries and other employee benefits              (12,439)    (12,595)    -1.2%    (14,645)   -15.1% 
 Administrative expenses                            (4,027)     (3,459)    16.4%     (4,921)   -18.2% 
 Depreciation and amortisation                      (1,701)     (1,309)    29.9%     (1,122)    51.6% 
 Other operating expenses                             (203)       (143)    42.0%       (347)   -41.5% 
 Operating expenses                                (18,370)    (17,506)     4.9%    (21,035)   -12.7% 
 Operating profit before cost of risk                49,950      36,365    37.4%      50,133    -0.4% 
 Cost of risk                                       (1,824)     (4,643)   -60.7%     (3,407)   -46.5% 
 Net operating profit before non-recurring 
  items and income tax                               48,126      31,722    51.7%      46,726     3.0% 
 Net non-recurring items                               (72)       (272)   -73.5%       (619)   -88.4% 
 Profit before income tax and one-off 
  termination costs                                  48,054      31,450    52.8%      46,107     4.2% 
 Income tax expense                                 (3,864)     (2,444)    58.1%     (3,571)     8.2% 
 Profit adjusted for one-off termination 
  costs                                              44,190      29,006    52.3%      42,536     3.9% 
 One-off termination costs of former CEO 
  and executive management (after tax)              (3,165)           -      NMF       (922)      NMF 
 Profit                                              41,025      29,006    41.4%      41,614    -1.4% 
 
 BALANCE SHEET HIGHLIGHTS 
 Net loans and finance lease receivables, 
  currency blended                                2,652,838   2,221,225    19.4%   2,618,489     1.3% 
    Net loans and finance lease receivables, 
     GEL                                            451,360     428,556     5.3%     464,397    -2.8% 
    Net loans and finance lease receivables, 
     FC                                           2,201,478   1,792,669    22.8%   2,154,092     2.2% 
 Client deposits, currency blended                3,531,840   3,661,710    -3.5%   3,473,054     1.7% 
    Client deposits, GEL                          1,405,892   1,457,437    -3.5%   1,347,754     4.3% 
    Client deposits, FC                           2,125,948   2,204,273    -3.6%   2,125,300     0.0% 
 Time deposits, currency blended                  1,325,345   1,351,490    -1.9%   1,337,112    -0.9% 
    Time deposits, GEL                              506,023     569,850   -11.2%     491,622     2.9% 
    Time deposits, FC                               819,322     781,640     4.8%     845,490    -3.1% 
 Current accounts and demand deposits, 
  currency blended                                2,206,495   2,310,220    -4.5%   2,135,942     3.3% 
    Current accounts and demand deposits, 
     GEL                                            899,869     887,587     1.4%     856,132     5.1% 
    Current accounts and demand deposits, 
     FC                                           1,306,626   1,422,633    -8.2%   1,279,810     2.1% 
 Letters of credit and guarantees, standalone*    1,037,779     605,778    71.3%   1,035,630     0.2% 
 Assets under management                          2,371,002   1,835,873    29.1%   2,271,543     4.4% 
 
 RATIOS 
 ROAE(14)                                             27.1%       19.8%                28.5% 
 Net interest margin, currency blended                 3.4%        3.2%                 3.2% 
 Cost of credit risk                                   0.1%        1.3%                -0.2% 
 Cost of funds, currency blended                       4.1%        4.4%                 4.6% 
 Loan yield, currency blended                          9.1%        9.9%                 9.8% 
    Loan yield, GEL                                   11.5%       12.8%                12.8% 
    Loan yield, FC                                     8.6%        9.4%                 9.2% 
 Cost of deposits, currency blended                    3.6%        3.9%                 4.0% 
    Cost of deposits, GEL                              5.9%        6.1%                 6.2% 
    Cost of deposits, FC                               2.1%        2.5%                 2.3% 
 Cost of time deposits, currency blended               5.6%        5.7%                 5.9% 
    Cost of time deposits, GEL                         7.5%        7.6%                 7.8% 
    Cost of time deposits, FC                          4.3%        4.6%                 4.4% 
 Current accounts and demand deposits, 
  currency blended                                     2.3%        2.7%                 2.3% 
    Current accounts and demand deposits, 
     GEL                                               4.8%        5.2%                 4.9% 
    Current accounts and demand deposits, 
     FC                                                0.7%        1.2%                 0.6% 
 Cost / income ratio(15)                              26.9%       32.5%                29.6% 
 Concentration of top ten clients                      9.1%       10.3%                 9.8% 
 

(*) Off-balance sheet item

(14) The income statement adjusted profit excludes GEL 3.2mln in 1Q19 (4Q18: GEL 0.9mln) 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 (gross of income tax) excluded from non-recurring items (4Q18: GEL 1.1mln) and GEL 2.7mln (gross of income tax) excluded from salaries and other employee benefits. The 1Q19 and 4Q18 ROAE has been adjusted accordingly

(15) 1Q19 cost/income ratio adjusted for GEL 2.7mln one-off employee costs (gross of income tax) related to termination benefits of the former executive management

Performance highlights

-- Corporate Investment Banking delivered strong quarterly results. CIB continued further growth during the first quarter of 2019 and generated strong net interest income and net fee and commission income during the period, coupled with operating efficiencies and improved asset quality

-- CIB's net interest income increased by 19.5% y-o-y and by 4.5% q-o-q in 1Q19. CIB NIM reached 3.4% in 1Q19, up 20bps y-o-y and q-o-q. In 1Q19, the y-o-y and q-o-q increase in NIM was primarily driven by lower cost of funds (down 30bps y-o-y and down 50bps q-o-q, standing at 4.1% at 31 March 2019), on the back of a decline in interest rates on both local and foreign currency deposits. The y-o-y and q-o-q decrease in cost of funds was slightly offset by decrease in currency blended loan yields, which were down 80bps y-o-y and down 70bps q-o-q in 1Q19, driven by the decline in both local and foreign currency loan yields

-- CIB's net fee and commission income reached GEL 8.2mln in 1Q19, up 31.5% y-o-y and up 17.5% q-o-q. The outstanding y-o-y and q-o-q increase in net fee and commission income was largely driven by higher fees from guarantees and letters of credit issued and higher placement and advisory fees during the first quarter of 2019. CIB's net fee and commission income represented 11.9% of total CIB's operating income in 1Q19 as compared to 11.5% in 1Q18 and 9.8% in 4Q18

-- CIB's loan book and de-dollarisation. CIB loan portfolio reached GEL 2,652.8mln as of 31 March 2019, up 19.4% y-o-y and up 1.3% q-o-q. On a constant currency basis, CIB loan book was up 9.2% y-o-y and up 0.8% q-o-q. The concentration of the top 10 CIB clients further decreased to 9.1% at 31 March 2019 (10.3% at 31 March 2018 and 9.8% at 31 December 2018). Foreign currency denominated loans represented 83.0% of CIB's loan portfolio as at 31 March 2019, compared to 80.7% a year ago and 82.3% at 31 December 2018. The increase in foreign currency denominated loans in 1Q19 y-o-y was partially due to local currency depreciation in the first quarter 2019. At 31 March 2019, 59.2% of CIB loan portfolio was US Dollar denominated, with 40.4% of total CIB loans issued to US Dollar income borrowers and 18.8% to non-US Dollar income borrowers

-- As at 31 March 2019, dollarisation of our CIB deposits remained flat y-o-y at 60.2% and decreased from 61.2% as at 31 December 2018. A y-o-y decrease in foreign currency denominated deposits was in line with the decreasing trend in the interest rates on foreign currency deposits (down 40bps y-o-y and down 20bps q-o-q in 1Q19). Despite the decline in interest rates on local currency deposits, the cost of deposits in local currency still remained well above the cost of foreign currency deposits

-- Net other income. Net other income in 1Q19 was largely composed of net gains from investment securities recorded during the quarter, partially offset by net losses from derivative financial instruments (interest rate swap hedges)

-- Cost of credit risk. CIB's cost of credit risk ratio improved significantly y-o-y and stood at 0.1% in 1Q19 (compared to a cost of 1.3% in 1Q18 and net credit of 0.2% in 4Q18), primarily driven by the improved quality of the CIB loan portfolio. At the same time, CIB's NPL coverage ratio was 89.4% at 31 March 2019 (87.7% as at 31 March 2018 and 90.3% at 31 December 2018)

-- As a result, CIB's profit adjusted for one-off employee costs related to termination benefits of the former CEO and executive management members (acceleration of share-based compensation) was GEL 44.2mln in 1Q19, up 52.3% y-o-y and up 3.9% q-o-q. CIB ROAE(16) reached 27.1% in 1Q19, compared to 19.8% a year ago and 28.5% in 4Q18

Performance highlights of wealth management operations

-- The Investment Management's AUM increased to GEL 2,371.0mln in 1Q19, up 29.1% y-o-y and up 4.4% 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 1,242.5mln in 1Q19, up 17.5% y-o-y and down 2.0% q-o-q, growing at a compound annual growth rate (CAGR) of 12.1% over the last five-year period. The cost of deposits stood at 3.1% in 1Q19, down 40bps y-o-y and down 10bps q-o-q

-- We served 1,535 wealth management clients from 76 countries as of 31 March 2019, compared to 1,438 clients as of 31 March 2018 and 1,528 clients as of 31 December 2018

-- In January 2019, Bank of Georgia opened a brand new office in the centre of Tbilisi, dedicated to serving its wealth management clients. The office resides in a historic 19th century building, which originally used to house the First Credit Society of Georgia and is considered to be the first residence of a local banking institution. The design concept was derived from the integration of Georgian culture with western values, while the artistic expression of the building has been left intact. The new office coincides with a creation of a new brand identity of the Bank's wealth management business and is in line with its strategy to become the regional hub for private banking

-- Galt & Taggart, which brings under one brand corporate advisory, debt and equity capital markets research and brokerage services, continues to develop local capital markets in Georgia

-- During 1Q19 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

-- 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

(16) 1Q19 ROAE adjusted for GEL 3.2mln (4Q18: GEL 0.9mln) one-off employee costs (net of income tax) related to termination benefits of the former CEO and executive management

SELECTED FINANCIAL INFORMATION

 
INCOME STATEMENT                     Bank of Georgia Group                              Banking Business                       Discontinued Operations           Eliminations 
                                          Consolidated 
GEL thousands, unless                         Change             Change                        Change             Change                Change        Change 
 otherwise noted             1Q19       1Q18   y-o-y       4Q18   q-o-q       1Q19       1Q18   y-o-y       4Q18   q-o-q  1Q19    1Q18   y-o-y  4Q18   q-o-q  1Q19     1Q18  4Q18 
 
Interest income           334,735    311,275    7.5%    345,760   -3.2%    334,735    313,679    6.7%    345,760   -3.2%     -       -       -     -       -     -  (2,404)     - 
Interest expense        (151,794)  (130,035)   16.7%  (158,322)   -4.1%  (151,794)  (133,430)   13.8%  (158,322)   -4.1%     -       -       -     -       -     -    3,395     - 
Net interest income       182,941    181,240    0.9%    187,438   -2.4%    182,941    180,249    1.5%    187,438   -2.4%     -       -       -     -       -     -      991     - 
Fee and commission 
 income                    62,531     50,673   23.4%     62,350    0.3%     62,531     51,213   22.1%     62,350    0.3%     -       -       -     -       -     -    (540)     - 
Fee and commission 
 expense                 (20,351)   (16,488)   23.4%   (21,006)   -3.1%   (20,351)   (16,702)   21.8%   (21,006)   -3.1%     -       -       -     -       -     -      214     - 
Net fee and commission 
 income                    42,180     34,185   23.4%     41,344    2.0%     42,180     34,511   22.2%     41,344    2.0%     -       -       -     -       -     -    (326)     - 
Net foreign currency 
 gain                      30,025     13,151  128.3%     53,358  -43.7%     30,025     14,253  110.7%     53,358  -43.7%     -       -       -     -       -     -  (1,102)     - 
Net other income / 
 (expense)                  3,568      5,518  -35.3%    (9,073)     NMF      3,568      5,744  -37.9%    (9,073)     NMF     -       -       -     -       -     -    (226)     - 
Operating income          258,714    234,094   10.5%    273,067   -5.3%    258,714    234,757   10.2%    273,067   -5.3%     -       -       -     -       -     -    (663)     - 
 Salaries and other 
  employee 
  benefits (excluding 
  one-offs)              (52,418)   (48,818)    7.4%   (58,331)  -10.1%   (52,418)   (49,453)    6.0%   (58,331)  -10.1%     -       -       -     -       -     -      635     - 
 One-off termination 
  costs 
  of former executive 
  management 
  (1)                     (7,842)          -     NMF          -     NMF    (7,842)          -     NMF          -     NMF     -       -       -     -       -     -        -     - 
Salaries and other 
 employee 
 benefits                (60,260)   (48,818)   23.4%   (58,331)    3.3%   (60,260)   (49,453)   21.9%   (58,331)    3.3%     -       -       -     -       -     -      635     - 
Administrative 
 expenses                (22,741)   (25,168)   -9.6%   (30,010)  -24.2%   (22,741)   (25,633)  -11.3%   (30,010)  -24.2%     -       -       -     -       -     -      465     - 
Depreciation and 
 amortisation            (15,688)   (11,522)   36.2%   (11,365)   38.0%   (15,688)   (11,522)   36.2%   (11,365)   38.0%     -       -       -     -       -     -        -     - 
Other operating 
 expenses                 (1,080)      (771)   40.1%    (1,151)   -6.2%    (1,080)      (771)   40.1%    (1,151)   -6.2%     -       -       -     -       -     -        -     - 
Operating expenses       (99,769)   (86,279)   15.6%  (100,857)   -1.1%   (99,769)   (87,379)   14.2%  (100,857)   -1.1%     -       -       -     -       -     -    1,100     - 
Profit from associates        188        318  -40.9%        318  -40.9%        188        318  -40.9%        318  -40.9%     -       -       -     -       -     -        -     - 
Operating profit 
 before 
 cost of risk             159,133    148,133    7.4%    172,528   -7.8%    159,133    147,696    7.7%    172,528   -7.8%     -       -       -     -       -     -      437     - 
Expected credit loss 
 / impairment charge 
 on 
 loans to customers      (40,117)   (36,676)    9.4%   (25,783)   55.6%   (40,117)   (36,676)    9.4%   (25,783)   55.6%     -       -       -     -       -     -        -     - 
Expected credit loss 
 / impairment charge 
 on 
 finance lease 
 receivables                (446)         13     NMF        514     NMF      (446)         13     NMF        514     NMF     -       -       -     -       -     -        -     - 
Other expected credit 
 loss / impairment 
 charge 
 on other assets and 
 provisions               (2,089)      2,850     NMF   (15,509)  -86.5%    (2,089)      2,850     NMF   (15,509)  -86.5%     -       -       -     -       -     -        -     - 
Cost of risk             (42,652)   (33,813)   26.1%   (40,778)    4.6%   (42,652)   (33,813)   26.1%   (40,778)    4.6%     -       -       -     -       -     -        -     - 
Net operating profit 
 before non-recurring 
 items and income tax     116,481    114,320    1.9%    131,750  -11.6%    116,481    113,883    2.3%    131,750  -11.6%     -       -       -     -       -     -      437     - 
 Net non-recurring 
  items 
  (excluding one-offs)    (1,575)    (2,948)  -46.6%    (2,185)  -27.9%    (1,575)    (2,948)  -46.6%    (2,185)  -27.9%     -       -       -     -       -     -        -     - 
 One-off termination 
  costs 
  of former CEO (2)       (3,985)          -     NMF    (4,401)   -9.5%    (3,985)          -     NMF    (4,401)   -9.5%     -       -       -     -       -     -        -     - 
Net non-recurring 
 items                    (5,560)    (2,948)   88.6%    (6,586)  -15.6%    (5,560)    (2,948)   88.6%    (6,586)  -15.6%     -       -       -     -       -     -        -     - 
Profit before income 
 tax                      110,921    111,372   -0.4%    125,164  -11.4%    110,921    110,935    0.0%    125,164  -11.4%     -       -       -     -       -     -      437     - 
 Income tax expense 
  (excluding 
  one-offs)              (10,536)    (9,283)   13.5%   (10,888)   -3.2%   (10,536)    (9,283)   13.5%   (10,888)   -3.2%     -       -       -     -       -     -        -     - 
 Income tax benefit 
  related 
  to one-off 
  termination 
  costs (3)                 1,587          -     NMF        540     NMF      1,587          -     NMF        540     NMF     -       -       -     -       -     -        -     - 
Income tax expense        (8,949)    (9,283)   -3.6%   (10,348)  -13.5%    (8,949)    (9,283)   -3.6%   (10,348)  -13.5%     -       -       -     -       -     -        -     - 
Profit from continuing 
 operations               101,972    102,089   -0.1%    114,816  -11.2%    101,972    101,652    0.3%    114,816  -11.2%     -       -       -     -       -     -      437     - 
Profit from 
 discontinued 
 operations                     -     28,938     NMF          -       -          -          -       -          -       -     -  29,375     NMF     -       -     -    (437)     - 
Profit                    101,972    131,027  -22.2%    114,816  -11.2%    101,972    101,652    0.3%    114,816  -11.2%     -  29,375     NMF     -       -     -        -     - 
 
One-off termination 
 costs 
 (1)+(2)+(3)             (10,240)          -     NMF    (3,861)     NMF   (10,240)          -     NMF    (3,861)     NMF 
 
 
Profit attributable 
to: 
  - shareholders of 
   the 
   Group                  101,512    118,420  -14.3%    114,240  -11.1%    101,512    101,252    0.3%    114,240  -11.1%     -  17,168     NMF     -       -     -        -     - 
  - non-controlling 
   interests                  460     12,607  -96.4%        576  -20.1%        460        400   15.0%        576  -20.1%     -  12,207     NMF     -       -     -        -     - 
 
Profit from continuing 
operations 
attributable 
to: 
  - shareholders of 
   the 
   Group                  101,512    101,689   -0.2%    114,240  -11.1%    101,512    101,252    0.3%    114,240  -11.1%     -       -       -     -       -     -      437     - 
  - non-controlling 
   interests                  460        400   15.0%        576  -20.1%        460        400   15.0%        576  -20.1%     -       -       -     -       -     -        -     - 
 
Profit from 
discontinued 
operations 
attributable 
to: 
  - shareholders of 
   the 
   Group                        -     16,731     NMF          -       -          -          -       -          -       -     -  17,168     NMF     -       -     -    (437)     - 
  - non-controlling 
   interests                    -     12,207     NMF          -       -          -          -       -          -       -     -  12,207     NMF     -       -     -        -     - 
 
Earnings per share 
 (basic)                     2.12       3.15  -32.7%       2.40  -11.7% 
  - earnings per share 
   from continuing 
   operations                2.12       2.71  -21.8%       2.40  -11.7% 
  - earnings per share 
   from discontinued 
   operations                   -       0.44     NMF          -       - 
 
Earnings per share 
 (diluted)                   2.11       3.04  -30.6%       2.40  -12.1% 
  - earnings per share 
   from continuing 
   operations                2.11       2.61  -19.2%       2.40  -12.1% 
  - earnings per share 
   from discontinued 
   operations                   -       0.43     NMF          -       - 
 
 
 BALANCE SHEET                Bank of Georgia Group Consolidated                                Banking Business                                 Discontinued Operations                      Eliminations 
 GEL thousands,         Mar-19       Mar-18   Change       Dec-18   Change       Mar-19       Mar-18   Change       Dec-18   Change   Mar-19      Mar-18   Change   Dec-18   Change   Mar-19        Mar-18   Dec-18 
 unless otherwise                              y-o-y                 q-o-q                              y-o-y                 q-o-q                         y-o-y             q-o-q 
 noted 
 
 Cash and cash 
  equivalents        1,162,168    1,754,920   -33.8%    1,215,799    -4.4%    1,162,168    1,754,920   -33.8%    1,215,799    -4.4%        -           -        -        -        -        -             -        - 
 Amounts due 
  from credit 
  institutions       1,391,630      941,804    47.8%    1,305,216     6.6%    1,391,630      955,175    45.7%    1,305,216     6.6%        -           -        -        -        -        -      (13,371)        - 
 Investment 
  securities         1,948,592    1,748,728    11.4%    2,019,017    -3.5%    1,948,592    1,804,231     8.0%    2,019,017    -3.5%        -           -        -        -        -        -      (55,503)        - 
 Loans to 
  customers 
  and finance 
  lease 
  receivables        9,570,691    7,755,233    23.4%    9,397,747     1.8%    9,570,691    7,819,773    22.4%    9,397,747     1.8%        -           -        -        -        -        -      (64,540)        - 
 Accounts 
  receivable 
  and other loans        3,134        3,453    -9.2%        2,849    10.0%        3,134        6,537   -52.1%        2,849    10.0%        -           -        -        -        -        -       (3,084)        - 
 Prepayments            31,621       79,600   -60.3%       44,294   -28.6%       31,621       79,600   -60.3%       44,294   -28.6%        -           -        -        -        -        -             -        - 
 Inventories            11,756       10,371    13.4%       13,292   -11.6%       11,756       10,371    13.4%       13,292   -11.6%        -           -        -        -        -        -             -        - 
 Right-of-use 
  assets                91,248            -      NMF            -      NMF       91,248            -      NMF            -      NMF        -           -        -        -        -        -             -        - 
 Investment 
  property             169,328      218,142   -22.4%      151,446    11.8%      169,328      218,142   -22.4%      151,446    11.8%        -           -        -        -        -        -             -        - 
 Property and 
  equipment            349,728      324,810     7.7%      344,059     1.6%      349,728      324,810     7.7%      344,059     1.6%        -           -        -        -        -        -             -        - 
 Goodwill               33,352       33,351     0.0%       33,351     0.0%       33,352       33,351     0.0%       33,351     0.0%        -           -        -        -        -        -             -        - 
 Intangible 
  assets                87,005       57,139    52.3%       83,366     4.4%       87,005       57,139    52.3%       83,366     4.4%        -           -        -        -        -        -             -        - 
 Income tax 
  assets                19,446       13,189    47.4%       19,451     0.0%       19,446       13,189    47.4%       19,451     0.0%        -           -        -        -        -        -             -        - 
 Other assets          144,343      113,824    26.8%      126,008    14.6%      144,343      117,290    23.1%      126,008    14.6%        -           -        -        -        -        -       (3,466)        - 
 Assets held 
  for sale              40,528            -      NMF       42,408    -4.4%       40,528            -      NMF       42,408    -4.4%        -           -        -        -        -        -             -        - 
 Assets of 
  disposal 
  group held 
  for 
  distribution               -    2,447,592      NMF            -        -            -            -        -            -        -        -   3,841,004      NMF        -        -        -   (1,393,412)        - 
 Total assets       15,054,570   15,502,156    -2.9%   14,798,303     1.7%   15,054,570   13,194,528    14.1%   14,798,303     1.7%        -   3,841,004      NMF        -        -        -   (1,533,376)        - 
 Client deposits 
  and notes          8,393,861    6,762,071    24.1%    8,133,853     3.2%    8,393,861    7,296,110    15.0%    8,133,853     3.2%        -           -        -        -        -        -     (534,039)        - 
 Amounts due 
  to credit 
  institutions       2,463,408    2,521,291    -2.3%    2,994,879   -17.7%    2,463,408    2,642,427    -6.8%    2,994,879   -17.7%        -           -        -        -        -        -     (121,136)        - 
 Debt securities 
  issued             2,045,428    1,524,600    34.2%    1,730,414    18.2%    2,045,428    1,569,404    30.3%    1,730,414    18.2%        -           -        -        -        -        -      (44,804)        - 
 Lease 
  liabilities           78,364            -      NMF            -      NFM       78,364            -      NMF            -      NMF        -           -        -        -        -        -             -        - 
 Accruals and 
  deferred income       48,449       27,478    76.3%       47,063     2.9%       48,449       27,478    76.3%       47,063     2.9%        -           -        -        -        -        -             -        - 
 Income tax 
  liabilities           37,396       19,763    89.2%       28,855    29.6%       37,396       19,763    89.2%       28,855    29.6%        -           -        -        -        -        -             -        - 
 Other 
  liabilities           68,883       41,073    67.7%       64,966     6.0%       68,883       41,876    64.5%       64,966     6.0%        -           -        -        -        -        -         (803)        - 
 Liabilities 
  of disposal 
  group held 
  for 
  distribution               -    1,837,869      NMF            -        -            -            -        -            -        -        -   1,964,463      NMF        -        -        -     (126,594)        - 
 Total 
  liabilities       13,135,789   12,734,145     3.2%   13,000,030     1.0%   13,135,789   11,597,058    13.3%   13,000,030     1.0%        -   1,964,463      NMF        -        -        -     (827,376)        - 
 Share capital           1,618        1,151    40.6%        1,618     0.0%        1,618        1,151    40.6%        1,618     0.0%        -           -        -        -        -        -             -        - 
 Additional 
  paid-in capital      495,452       64,530      NMF      480,555     3.1%      495,452            -      NMF      480,555     3.1%        -      64,530      NMF        -        -        -             -        - 
 Treasury shares          (42)         (57)   -26.3%         (51)   -17.6%         (42)         (57)   -26.3%         (51)   -17.6%        -           -        -        -        -        -             -        - 
 Other reserves         36,474      101,967   -64.2%       30,515    19.5%       36,474    (117,684)      NMF       30,515    19.5%        -     797,564      NMF        -        -        -     (577,913)        - 
 Retained 
  earnings           1,376,834    2,273,536   -39.4%    1,277,732     7.8%    1,376,834    1,706,937   -19.3%    1,277,732     7.8%        -     694,686      NMF        -        -        -     (128,087)        - 
 Reserves of 
  disposal group 
  held for 
  distribution               -       15,828      NMF            -        -            -            -        -            -        -        -      15,828      NMF        -        -        -             -        - 
 Total equity 
  attributable 
  to shareholders 
  of the Group       1,910,336    2,456,955   -22.2%    1,790,369     6.7%    1,910,336    1,590,347    20.1%    1,790,369     6.7%        -   1,572,608      NMF        -        -        -     (706,000)        - 
 Non-controlling 
  interests              8,445      311,056   -97.3%        7,904     6.8%        8,445        7,123    18.6%        7,904     6.8%        -     303,933      NMF        -        -        -             -        - 
 Total equity        1,918,781    2,768,011   -30.7%    1,798,273     6.7%    1,918,781    1,597,470    20.1%    1,798,273     6.7%        -   1,876,541      NMF        -        -        -     (706,000)        - 
 Total 
  liabilities 
  and equity        15,054,570   15,502,156    -2.9%   14,798,303     1.7%   15,054,570   13,194,528    14.1%   14,798,303     1.7%        -   3,841,004      NMF        -        -        -   (1,533,376)        - 
 Book value 
  per share(17)          39.88        65.64   -39.2%        37.59     6.1% 
 

(17) The y-o-y decline in Book value per share as at 31 March 2019 is driven by the demerger of Investment Business to Georgia Capital PLC on 29 May 2018 and the issuance and allotment of additional 9,784,716 Bank of Georgia Group shares (equivalent to 19.9% of Bank of Georgia Group's issued ordinary share capital) to Georgia Capital

BELARUSKY NARODNY BANK (BNB)

 
                                                     Change             Change 
 INCOME STATEMENT, HIGHLIGHTS       1Q19      1Q18    y-o-y      4Q18    q-o-q 
 GEL thousands, unless 
  otherwise stated 
 
  Net interest income              6,585     6,544     0.6%     6,471     1.8% 
  Net fee and commission 
   income                          1,812     2,277   -20.4%     1,356    33.6% 
  Net foreign currency 
   gain                            3,955     3,277    20.7%     5,261   -24.8% 
  Net other income                   147       117    25.6%       332   -55.7% 
  Operating income                12,499    12,215     2.3%    13,420    -6.9% 
  Operating expenses             (7,847)   (7,721)     1.6%   (8,785)   -10.7% 
  Operating profit before 
   cost of risk                    4,652     4,494     3.5%     4,635     0.4% 
  Cost of risk                   (1,442)     (717)   101.1%       670      NMF 
  Net non-recurring items           (50)     (700)   -92.9%       (8)      NMF 
  Profit before income 
   tax                             3,160     3,077     2.7%     5,297   -40.3% 
  Income tax expense               (571)     (779)   -26.7%   (1,162)   -50.9% 
  Profit                           2,589     2,298    12.7%     4,135   -37.4% 
 
 
 BALANCE SHEET, HIGHLIGHTS      Mar-19    Mar-18   Change    Dec-18   Change 
                                                    y-o-y              q-o-q 
 GEL thousands, unless 
  otherwise stated 
 
 Cash and cash equivalents      79,497    77,403     2.7%   110,340   -28.0% 
 Amounts due from credit 
  institutions                  20,556    10,387    97.9%    19,664     4.5% 
 Investment securities         116,082    40,819      NMF    67,734    71.4% 
 Loans to customers and 
  finance lease receivables    451,665   377,680    19.6%   432,657     4.4% 
 Other assets                   54,001    37,731    43.1%    50,155     7.7% 
 Total assets                  721,801   544,020    32.7%   680,550     6.1% 
 Client deposits and notes     425,563   288,337    47.6%   389,001     9.4% 
 Amounts due to credit 
  institutions                 144,314   144,208     0.1%   162,823   -11.4% 
 Debt securities issued         53,846    30,726    75.2%    38,163    41.1% 
 Other liabilities               9,477     7,331    29.3%     5,300    78.8% 
 Total liabilities             633,200   470,602    34.6%   595,287     6.4% 
 Total equity                   88,601    73,418    20.7%    85,263     3.9% 
 Total liabilities and 
  equity                       721,801   544,020    32.7%   680,550     6.1% 
 
 
 BANKING BUSINESS KEY RATIOS                  1Q19        1Q18        4Q18 
 Profitability 
  ROAA, annualised(18)                        3.1%        3.2%        3.3% 
  ROAA, annualised (unadjusted)               2.8%        3.2%        3.2% 
  ROAE, annualised(18)                       24.5%       26.2%       27.0% 
       RB ROAE(18)                           25.3%       31.8%       28.4% 
       CIB ROAE(18)                          27.1%       19.8%       28.5% 
  ROAE, annualised (unadjusted)              22.2%       26.2%       26.2% 
  Net interest margin, annualised             5.8%        7.0%        6.0% 
       RB NIM                                 6.4%        8.2%        6.7% 
       CIB NIM                                3.4%        3.2%        3.2% 
  Loan yield, annualised                     12.2%       13.9%       12.8% 
       RB Loan yield                         13.6%       15.8%       14.2% 
       CIB Loan yield                         9.1%        9.9%        9.8% 
  Liquid assets yield, annualised             3.8%        3.6%        3.8% 
  Cost of funds, annualised                   4.8%        4.8%        5.0% 
  Cost of client deposits and 
   notes, annualised                          3.3%        3.4%        3.4% 
       RB Cost of client deposits 
        and notes                             3.0%        2.8%        2.9% 
       CIB Cost of client deposits 
        and notes                             3.6%        3.9%        4.0% 
  Cost of amounts due to credit 
   institutions, annualised                   7.6%        6.9%        7.9% 
  Cost of debt securities issued              7.8%        7.7%        7.8% 
  Operating leverage, y-o-y(19)               5.0%       -3.6%        3.8% 
  Operating leverage, q-o-q(19)               3.6%        2.6%       -2.3% 
 Efficiency 
  Cost / Income(19)                          35.5%       37.2%       36.9% 
       RB Cost / Income(19)                  35.5%       36.7%       36.7% 
       CIB Cost /Income(19)                  26.9%       32.5%       29.6% 
  Cost / Income (unadjusted)                 38.6%       37.2%       36.9% 
 Liquidity 
  NBG liquidity ratio (minimum 
   requirement 30%)                          36.7%       36.5%       31.9% 
  NBG liquidity coverage ratio 
   (minimum requirement 100%)               133.1%      135.2%      120.1% 
  Liquid assets to total liabilities         34.3%       38.9%       34.9% 
  Net loans to client deposits 
   and notes                                114.0%      107.2%      115.5% 
  Net loans to client deposits 
   and notes + DFIs                          98.6%       92.1%       99.6% 
  Leverage (times)                             6.8         7.3         7.2 
 Asset quality: 
  NPLs (in GEL)                            326,127     279,754     318,356 
  NPLs to gross loans to clients              3.3%        3.5%        3.3% 
  NPL coverage ratio                         92.2%      101.2%       90.5% 
  NPL coverage ratio, adjusted 
   for discounted value of collateral       132.6%      143.2%      129.9% 
  Cost of credit risk, annualised             1.7%        1.8%        1.1% 
       RB Cost of credit risk                 2.4%        2.2%        1.7% 
       CIB Cost of credit risk                0.1%        1.3%       -0.2% 
 Capital adequacy: 
  NBG (Basel III) Tier I capital 
   adequacy ratio                            12.7%       12.4%       12.2% 
    Minimum regulatory requirement           11.6%       10.2%       11.4% 
  NBG (Basel III) Total capital 
   adequacy ratio                            17.1%       17.3%       16.6% 
    Minimum regulatory requirement           16.1%       14.4%       15.9% 
 
 Selected operating data: 
  Total assets per FTE                       2,017       1,858       1,995 
  Number of active branches, 
   of which:                                   276         282         276 
   - Express branches (including 
    Metro)                                     166         156         165 
   - Bank of Georgia branches                   98         114          99 
   - Solo lounges                               12          12          12 
  Number of ATMs                               886         842         876 
  Number of cards outstanding, 
   of which:                             2,139,239   2,246,396   2,177,273 
   - Debit cards                         1,627,070   1,597,662   1,630,235 
   - Credit cards                          512,169     648,734     547,038 
  Number of POS terminals(20)               17,684      12,571      16,870 
 
    FX Rates: 
  GEL/US$ exchange rate (period-end)        2.6914      2.4144      2.6766 
  GEL/GBP exchange rate (period-end)        3.5147      3.3932      3.3955 
 
 
                                Mar-19   Mar-18   Dec-18 
 Full time employees (FTE), 
  of which:                      7,465    7,102    7,416 
  - Full time employees, BOG 
   standalone                    5,886    5,505    5,828 
  - Full time employees, BNB       644      708      669 
  - Full time employees, BB 
   other                           935      889      919 
 
 
 Shares outstanding              Mar-19       Mar-18       Dec-18 
 Ordinary shares             47,899,817   37,431,257   47,626,147 
 Treasury shares              1,269,611    1,953,455    1,543,281 
 Total shares outstanding    49,169,428   39,384,712   49,169,428 
 

(18) 1Q19 and 4Q18 ratios adjusted for one-off employee costs related to termination benefits of the former CEO and executive management

(19) 1Q19 results adjusted for one-off employee costs related to termination benefits of the former executive management

(20) Includes 2,650 POS terminals operating in public transportation network in 1Q19 and 4Q18

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) 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.

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P: V:mx D:20191023 23:11:26