TIDMBGEO
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.
Dial-in numbers: 30-Day replay:
Pass code for replays/Conference Pass code for replays / Conference
ID: 3266299 ID: 3266299
International Dial-in: +44 (0) International Dial in: +44 (0)
2071 928000 3333009785
UK: 08445718892 UK National Dial In: 08717000471
US: 16315107495 UK Local Dial In: 08445718951
Austria: 019286559 USA Free Call Dial In: 1 (866)
Belgium: 024009874 331-1332
Czech Republic: 228881424
Denmark: 32728042
Finland: 0942450806
France: 0176700794
Germany: 06924437351
Hungary: 0614088064
Ireland: 014319615
Italy: 0687502026
Luxembourg: 27860515
Netherlands: 0207143545
Norway: 23960264
Spain: 914146280
Sweden: 0850692180
Switzerland: 0315800059
CONTENTS
4 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.
END
QRFGGUCPAUPBGBW
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