Bank of Georgia Group PLC 3rd Quarter Results

Date : 11/07/2019 @ 7:00AM
Source : UK Regulatory (RNS & others)
Stock : Bank Of Georgia Group Plc (BGEO)
Quote : 836.0  -70.0 (-7.73%) @ 4:35PM
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Bank of Georgia Group PLC 3rd Quarter Results

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Bank of Georgia Group PLC

07 November 2019

Bank of Georgia

Group PLC

3(rd) quarter and first nine months 2019 results

Name of authorised official of issuer responsible for making notification:

Natia Kalandarishvili, Head of Investor Relations and Funding

www.bankofgeorgiagroup.com

ABOUT BANK OF GEORGIA GROUP PLC

The Group: Bank of Georgia Group PLC ("Bank of Georgia Group" or the "Group" - LSE: BGEO LN) is a UK incorporated holding company, the new parent company of BGEO Group PLC. The Group combined a Banking Business and an Investment Business prior to the Group demerger on 29 May 2018, which resulted in the Investment Business's separation from the Group effective from 29 May 2018.

The Group comprises: a) retail banking and payment services and b) corporate and investment banking and wealth management operations in Georgia, and c) banking operations in Belarus ("BNB"). JSC Bank of Georgia ("Bank of Georgia", "BOG" or the "Bank"), the leading universal bank in Georgia, is the core entity of the Group. The Group targets to benefit from superior growth of the Georgian economy through both its retail banking and corporate and investment banking services and aims to deliver on its strategy, which is based on at least 20% ROAE and c.15% growth of its loan book.

3Q19 AND 9M19 RESULTS AND CONFERENCE CALL DETAILS

Bank of Georgia Group PLC announces the Group's third quarter and the first nine months of 2019 consolidated financial results. Unless otherwise noted, numbers in this announcement are for 3Q19 and comparisons are with 3Q18. The results are based on International Financial Reporting Standards ("IFRS") as adopted by the European Union, are unaudited and derived from management accounts. This results announcement is also available on the Group's website at www.bankofgeorgiagroup.com.

An investor/analyst conference call, organised by the Bank of Georgia Group, will be held on 7 November 2019, at 13:00 UK / 14:00 CET / 08:00 U.S Eastern Time. The duration of the call will be 60 minutes and will consist of a 15-minute update and a 45-minute Q&A session.

 
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CONTENTS

 
 4    3Q19 and 9M19 results highlights 
 
 6    Chief Executive Officer's statement 
 
 8    Discussion of results 
 
 12   Discussion of segment results 
 12         Retail Banking 
 16         Corporate and Investment Banking 
 
 19   Selected financial and operating information 
 
 24   Glossary 
 
 25   Company information 
 

FORWARD LOOKING STATEMENTS

This announcement contains forward-looking statements, including, but not limited to, statements concerning expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, competitive strengths and weaknesses, plans or goals relating to financial position and future operations and development. Although Bank of Georgia Group PLC believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct. By their nature, these forward-looking statements are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ materially from those currently being anticipated as reflected in such statements. Important factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements, certain of which are beyond our control, include, among other things: currency fluctuations, including depreciation of the Georgian Lari, and macroeconomic risk; regional instability; loan portfolio quality; regulatory risk; liquidity risk; operational risk, cyber security, information systems and financial crime risk; and other key factors that indicated could adversely affect our business and financial performance, which are contained elsewhere in this document and in our past and future filings and reports of the Group, including the 'Principal risks and uncertainties' included in Bank of Georgia Group PLC's 2Q19 and 1H19 results announcement and in Annual Report and Accounts 2018. No part of this document constitutes, or shall be taken to constitute, an invitation or inducement to invest in Bank of Georgia Group PLC or any other entity within the Group, and must not be relied upon in any way in connection with any investment decision. Bank of Georgia Group PLC and other entities within the Group undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required. Nothing in this document should be construed as a profit forecast.

HIGHLIGHTS(1)

Continued strong momentum - excellent quarterly growth with improved asset quality and profitability

 
                                                            Change              Change                        Change 
GEL thousands                             3Q19       3Q18    y-o-y       2Q19    q-o-q       9M19       9M18   y-o-y 
Banking Business Income Statement 
 Highlights(2) 
Net interest income                    188,682    185,335     1.8%    181,622     3.9%    553,245    552,166    0.2% 
Net fee and commission income           48,009     39,481    21.6%     43,267    11.0%    133,456    111,838   19.3% 
Net foreign currency gain               44,543     36,827    21.0%     36,700    21.4%    111,268     76,079   46.3% 
Net other income / (expense)             3,728      7,437   -49.9%    (4,260)      NMF      3,035     16,888  -82.0% 
Operating income                       284,962    269,080     5.9%    257,329    10.7%    801,004    756,971    5.8% 
Operating expenses                   (107,917)   (97,137)    11.1%   (98,558)     9.5%  (298,401)  (277,660)    7.5% 
Profit from associates                     194        326   -40.5%        254   -23.6%        636      1,021  -37.7% 
Operating income before cost 
 of risk                               177,239    172,269     2.9%    159,025    11.5%    503,239    480,332    4.8% 
Cost of risk                          (15,223)   (48,107)   -68.4%   (35,476)   -57.1%   (93,351)  (119,447)  -21.8% 
Net operating income before 
 non-recurring items                   162,016    124,162    30.5%    123,549    31.1%    409,888    360,885   13.6% 
Net non-recurring items                (5,019)    (3,747)    33.9%    (2,538)    97.8%    (9,132)   (20,458)  -55.4% 
Profit before income tax expense 
 and one-off costs                     156,997    120,415    30.4%    121,011    29.7%    400,756    340,427   17.7% 
Income tax expense                    (22,697)    (9,316)   143.6%    (9,871)   129.9%   (43,104)   (24,060)   79.2% 
Profit adjusted for one-off 
 costs                                 134,300    111,099    20.9%    111,140    20.8%    357,652    316,367   13.0% 
One-off termination costs 
 of former CEO and executive 
 management (after tax), one-off 
 demerger related expenses 
 (after tax) and one-off impact 
 of re-measurement of deferred 
 tax balances                                -          -        -    (3,996)      NMF   (14,236)   (52,541)  -72.9% 
Profit                                 134,300    111,099    20.9%    107,144    25.3%    343,416    263,826   30.2% 
 
 
GEL thousands                                   Sep-19       Sep-18   Change       Jun-19   Change 
                                                                       y-o-y                 q-o-q 
Banking Business Balance Sheet 
 Highlights 
Liquid assets                                5,099,111    4,696,808     8.6%    4,537,545    12.4% 
    Cash and cash equivalents                1,369,169    1,237,867    10.6%      936,106    46.3% 
    Amounts due from credit institutions     1,834,220    1,398,061    31.2%    1,704,701     7.6% 
    Investment securities                    1,895,722    2,060,880    -8.0%    1,896,738    -0.1% 
Loans to customers and finance 
 lease receivables(3)                       11,339,745    8,762,413    29.4%   10,579,710     7.2% 
Property and equipment                         364,405      315,980    15.3%      358,921     1.5% 
Total assets                                17,540,692   14,314,932    22.5%   16,133,999     8.7% 
Client deposits and notes                    9,613,718    7,932,536    21.2%    8,855,616     8.6% 
Amounts due to credit institutions           3,437,718    3,006,739    14.3%    2,960,519    16.1% 
    Borrowings from DFIs                     1,355,426    1,261,960     7.4%    1,253,921     8.1% 
    Short-term loans from NBG                1,271,027    1,016,431    25.0%    1,001,496    26.9% 
    Loans and deposits from commercial 
     banks                                     811,265      728,348    11.4%      705,102    15.1% 
Debt securities issued                       2,175,820    1,578,532    37.8%    2,137,239     1.8% 
Total liabilities                           15,500,833   12,644,984    22.6%   14,215,780     9.0% 
Total equity                                 2,039,859    1,669,948    22.2%    1,918,219     6.3% 
 
 
Banking Business Key Ratios              3Q19     3Q18     2Q19    9M19    9M18 
 
ROAA2                                    3.2%     3.2%     2.9%    3.0%    3.2% 
ROAE(2)                                 26.8%    26.8%    22.9%   24.7%   26.2% 
Net interest margin                      5.1%     6.4%     5.4%    5.4%    6.8% 
Loan yield                              11.5%    13.5%    11.8%   11.8%   13.7% 
Cost of funds                            4.8%     5.0%     4.8%    4.8%    5.0% 
Cost / income(4)                        37.9%    36.1%    38.3%   37.3%   36.7% 
NPLs to Gross loans to clients           2.9%     3.5%     3.2%    2.9%    3.5% 
NPL coverage ratio                      85.3%    91.7%    88.1%   85.3%   91.7% 
NPL coverage ratio, adjusted 
 for discounted value of collateral    129.3%   136.9%   131.5%  129.3%  136.9% 
Cost of credit risk ratio                0.5%     2.0%     1.3%    1.1%    1.8% 
NBG (Basel III) CET1 capital 
 adequacy ratio                         11.1%    11.0%    11.0%   11.1%   11.0% 
NBG (Basel III) Tier I capital 
 adequacy ratio                         13.3%    11.0%    13.3%   13.3%   11.0% 
NBG (Basel III) Total capital 
 adequacy ratio                         16.8%    15.9%    16.7%   16.8%   15.9% 
 

(1) On 29 May 2018, the demerger of Bank of Georgia Group PLC's Investment Business to Georgia Capital PLC became effective. The results of operations of the Investment Business prior to demerger, as well as the gain recorded by the Group as a result of the Investment Business distribution are classified under the "discontinued operations". The Group and Banking Business detailed financials, as well as Discontinued Operations and inter-business eliminations for previous periods are presented on pages 19-21. Throughout this announcement, the discussion is focused on the Banking Business results, which represents the continuing business of the Group since the demerger

(2) The income statement adjusted profit excludes GEL 4.0mln in 2Q19 and GEL 14.2mln in 9M19 one-off employee costs (net of income tax) related to former CEO and executive management termination benefits. The amount is comprised of GEL 4.6mln in 2Q19 and GEL 12.4mln in 9M19 (gross of income tax) excluded from salaries and other employee benefits and GEL 4.0mln (gross of income tax) excluded from non-recurring items in 9M19. The income statement adjusted profit for 9M18 excludes GEL 52.5mln demerger related expenses (net of income tax) and one-off impact of re-measurement of deferred tax balances. ROAE and ROAA have been adjusted accordingly for all periods presented. Full IFRS income statement is presented on pages 19 and 20. Management believes that one-off costs do not relate to underlying performance of the Group, and hence, adjusted results provide the best representation of the Group's performance

(3) Throughout this announcement, the gross loans to customers and respective allowance for impairment are presented net of expected credit loss (ECL) on contractually accrued interest income. These do not have an effect on the net loans to customers balance. Management believes that netted-off balances provide the best representation of the Group's loan portfolio position

(4) Cost/income ratio adjusted for GEL 4.6mln in 2Q19 and GEL 12.4mln in 9M19 one-off employee costs (gross of income tax) related to termination benefits of the former executive management

KEY RESULTS HIGHLIGHTS

-- Outstanding quarterly performance. Profit adjusted for one-off costs totalled GEL 134.3mln in 3Q19 (up 20.9% y-o-y and up 20.8% q-o-q) and GEL 357.7mln in 9M19 (up 13.0% y-o-y), with profitability reaching 26.8% and 24.7% ROAE(5) in 3Q19 and in the first nine months of 2019, respectively

-- Strong asset quality. The cost of credit risk ratio improved to 0.5% in 3Q19 (down 150bps y-o-y and down 80bps q-o-q) and to 1.1% in 9M19 (down 70bps y-o-y). NPLs to gross loans ratio decreased to 2.9% at 30 September 2019, while the NPL coverage ratio was 85.3% and the NPL coverage ratio adjusted for discounted value of collateral was 129.3%

-- Loan book growth totalled 29.4% y-o-y and 7.2% q-o-q at 30 September 2019. Growth on a constant-currency basis was 20.6% y-o-y and 5.3% q-o-q. Retail Banking loan book share in the total loan portfolio was 65.8% at 30 September 2019 (69.8% at 30 September 2018 and 67.2% at 30 June 2019)

-- Dollarisation of the loan book and client deposits. Loan book in local currency accounted for 41.1% of the total loan book at 30 September 2019 (39.3% a year ago and 39.9% in the previous quarter). Client deposits in local currency represented 30.7% of the total deposit portfolio at 30 September 2019 (34.4% a year ago and 31.4% in previous quarter)

-- Strong capital position. Basel III Common Equity Tier 1 (CET1), Tier 1 and Total Capital Adequacy ratios stood at 11.1%, 13.3% and 16.8%, respectively, at 30 September 2019, all comfortably above the minimum required level of 9.5%, 11.6% and 16.1%, respectively

-- Retail Banking ("RB") continued to deliver solid net interest income, coupled with strong net fee and commission income generation during the period. The Retail Banking net loan book reached GEL 7,083.4mln at 30 September 2019, up 21.6% y-o-y and up 4.6% q-o-q. The growth was predominantly driven by mortgage and MSME lending. At the same time, RB client deposits increased to GEL 5,384.4mln at 30 September 2019, up 33.6% y-o-y and up 8.0% q-o-q. The Retail Banking net interest margin stabilised at 5.9% in the third quarter 2019

-- Corporate and Investment Banking ("CIB") demonstrated strong growth in 3Q19, generating solid net interest income and net fee and commission income, coupled with strong asset quality. CIB's net loan book reached GEL 3,588.1mln at 30 September 2019, up 44.8% y-o-y and up 11.8% q-o-q. The growth on a constant-currency basis was 31.1% y-o-y and 9.1% q-o-q. The top 10 CIB client concentration was 9.4% at 30 September 2019 (9.9% at 30 September 2018 and 9.1% at 30 June 2019)

-- Assets Under Management ("AUM") within the Group's Investment Management business, increased to GEL 2,547.6mln in 3Q19, up 16.9% y-o-y and up 1.7% q-o-q, reflecting an increase in client assets and bond issuances at Galt & Taggart, our brokerage subsidiary

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

-- The Bank continued to introduce new features to our mobile banking application and our internet bank, introducing dedicated digital spaces in our branches to incentivise the movement of client activity to digital channels. As a result, the number of active internet and mobile banking users (up 8.6% and up 81.1% y-o-y, respectively), as well as the number and volume of transactions through our mobile and internet banking continued to expand (95.8% y-o-y increase in number of transactions and 76.2% y-o-y increase in volume of transactions during first nine months of 2019). In total, more than 93% of daily transactions were executed through digital channels during the first nine months of 2019

-- In 1Q19, the Bank released a new business internet banking platform (Business iBank) for MSME and corporate clients, which comes with many features designed to make its use an intuitive and smooth experience. We focused our efforts on making the Business iBank even more useful for business transactions, which should further incentivise offloading client activity to digital channels. As a result, we already saw a significant increase in the number and volume of transactions through Business iBank during the first nine months of 2019 (up 53.3% and up 32.0% y-o-y, respectively). 90% of daily transactions were executed through internet bank in the first nine months of 2019

-- Digital ecosystem developments. Following the launch of a cutting-edge full-service real estate digital platform, area.ge in 1Q19 and the acquisition of a leading Georgian e-commerce platform, extra.ge in 2Q19, in September 2019, the Group launched Optimo - a digital solution for our MSME customers to run their business sales and solutions. The platform is designed to address the needs of micro, small and medium sized enterprises in optimising their day-to-day operations and better managing their businesses in general. Optimo's cutting-edge digital inventory management and POS solution, with integrated software and a rich variety of functions and analytical tools, enables businesses to easily manage sales and inventory, as well as access their most recent data on sales transactions, inventory, revenues and profitability, anytime and anywhere, and make timely decisions with relevant information at hand

(5) 2Q19 and 9M19 ROAE adjusted for GEL 4.0mln and GEL 14.2mln one-off employee costs (net of income tax) related to termination benefits of the former CEO and executive management, respectively

CHIEF EXECUTIVE OFFICER'S STATEMENT

The third quarter of 2019 has been important in a number of ways and I would like to highlight two important messages:

1) we have turned the corner in the new banking regulatory environment and delivered excellent growth and profitability, and

2) the new management team has started to execute on our new strategy and this is being reflected throughout the business as we are delivering strong profitability coupled with market share gains, while investing in our future digital capabilities and brand franchise.

Given the significant changes in the regulatory environment over the last 12 months, 2019 is a new base year. Now, at the end of the third quarter, we can see how the year is shaping up. The high-yield, high-risk unsecured consumer loan portfolio is largely matured out of our balance sheet and has been replaced with a lower-risk, higher-volume portfolio, leading to lower systemic risk in the banking sector overall and therefore, in our loan profile. This is a new environment with a lower net interest margin and lower cost of credit risk. As a consequence, we have successfully reshuffled the portfolio composition and yet delivered net interest income growth of 3.9% q-o-q in the third quarter 2019, while net fee and commission income generation and net foreign currency gains both showed over 20% y-o-y growth. Some of the benefits of the lower-risk portfolio are already reflected in a lower cost of credit risk, which was down 150bps y-o-y to 0.5% in the third quarter of 2019. The historic cost of credit risk on the rebalanced portfolio mix is c.1.2%, and we expect the net interest margin to stabilise at around 5%. This combination has resulted in 5.9% y-o-y and 10.7% q-o-q growth of operating income and a 26.8% ROAE in 3Q19.

Our new mission has been established: we are here to help people achieve more of their potential. In this context, a new brand platform has been adopted and our first new brand campaign was launched in the beginning of October 2019. Bank of Georgia is the brand that stands for taking action and doing something about it; we are here to empower and support our customers and employees. Bank of Georgia is the general sponsor of the Olympic Committee and has just become general sponsor of the Paralympic Committee. We are here to support and celebrate people who strive to succeed, regardless of their challenges. This is all of us. This is what Bank of Georgia stands for.

Our new Corporate Social Responsibility strategy has been aligned with our new mission - to help people achieve more of their potential. We do this through focusing on three main pillars: education, employment and MSME development.

The success of our new strategy depends on two main pillars: customer satisfaction and employee engagement. We have revised the KPIs of the top management to include Net Promoter Score (NPS) and Employee Net Promoter Score (ENPS). There are very encouraging signs throughout the business lines showing improved customer satisfaction (CSAT) and higher employee engagement scores. Not to stop there, we have invested in the leading customer experience management platform, Medallia, which will help us capture and prioritise large amounts of customer feedback. It is being rolled out first throughout the Bank's digital channels.

The new management team is coming together and helping each other to take on challenges, or upsides as we refer to them internally. The entire team is working towards the common goal, and we are seeing strong numbers across all business lines, especially in Corporate and Investment Banking, SME and mortgages, growing at 26.8%(6) , 31.5%(6) and 21.8% y-o-y, respectively, on a constant currency basis. While other loan products have delivered slower growth due to the new regulations, the overall loan book grew by 20.6% y-o-y on a constant currency basis at 30 September 2019.

We are investing in digital capabilities, doubling our digital staff over a 12 month period as announced in June 2019. On one side this has contributed to higher operating expenses, up 11.1% y-o-y in the third quarter of 2019; but the investment has also translated into results. As an example, this has already been reflected in a significantly higher number of mobile banking transactions, reaching 9.5 million in the third quarter, up 131.0% y-o-y. Overall, 93% of daily transactions are now performed through digital channels.

The Georgian economy continued to deliver strong real growth numbers, estimated at 5.7% in the third quarter of 2019. In July 2019, Russia banned direct flights to Georgia, resulting in slower growth of tourist arrivals. While the impact of fewer Russian tourists on the economy has been small, the negative expectations have partly resulted in the 6.0% depreciation of the GEL vs US Dollar exchange rate since 20 June 2019, which has had a subsequent impact on headline inflation, coming in at 6.4% in September 2019. To curb this inflation, the National Bank of Georgia has increased the monetary policy rate from 6.5% to 8.5% over the last two months. This is expected to result in slower mortgage growth for the next three to six months.

(6) The growth figures are presented excluding the reclassification of GEL 120mln loan portfolio from SME to CIB during the second quarter 2019

Notwithstanding this small "hiccup", we remain very positive on the Georgian economy. On 11 October 2019, S&P Global Ratings upgraded the Georgia's sovereign credit rating by one notch to BB, a testament to the positive changes as a result of the Government's recent reforms. With a ranking of 7(th) , Georgia remains in the top 10 of best places in the world to do business in 2020 according to the World Bank's ranking. Most notably, the recent corporate income tax reform has resulted in Georgian corporates having more equity which is starting to be leveraged and invested. Also, exports are showing healthy growth, while imports are shrinking, resulting in the expected current account deficit falling below 5% of GDP, down from the 2016 highs of 13.1%.

In summary, the new management has started to successfully execute on the new strategy, resulting in strong growth and profitability numbers in the significantly reshaped regulatory environment. Most importantly, the pace of positive change is accelerating and very encouraging.

Archil Gachechiladze,

CEO, Bank of Georgia Group PLC

6 November 2019

DISCUSSION OF RESULTS

The Group's business is composed of three segments. (1) Retail Banking operations in Georgia principally provides consumer loans, mortgage loans, overdrafts, credit cards and other credit facilities, funds transfer and settlement services, and handling customers' deposits for both individuals as well as legal entities. Retail Banking targets the emerging and mass retail and mass affluent segments, together with small and medium enterprises and micro businesses. (2) Corporate and Investment Banking comprises Corporate Banking and Investment Management operations in Georgia. Corporate Banking principally provides loans and other credit facilities, funds transfers and settlement services, trade finance services, documentary operations support and handles saving and term deposits for corporate and institutional customers. The Investment Management business principally provides private banking services to high net worth clients. (3) BNB, comprising JSC Belarusky Narodny Bank, principally provides retail and corporate banking services to clients in Belarus.

 
OPERATING INCOME 
GEL thousands, unless 
 otherwise                                              Change                Change                          Change 
 noted                              3Q19         3Q18    y-o-y         2Q19    q-o-q        9M19        9M18   y-o-y 
 
Interest income                  366,721      337,766     8.6%      342,224     7.2%   1,043,680     981,325    6.4% 
Interest expense               (178,039)    (152,431)    16.8%    (160,602)    10.9%   (490,435)   (429,159)   14.3% 
Net interest income              188,682      185,335     1.8%      181,622     3.9%     553,245     552,166    0.2% 
Fee and commission income         76,166       60,413    26.1%       68,025    12.0%     206,721     167,319   23.5% 
Fee and commission expense      (28,157)     (20,932)    34.5%     (24,758)    13.7%    (73,265)    (55,481)   32.1% 
Net fee and commission 
 income                           48,009       39,481    21.6%       43,267    11.0%     133,456     111,838   19.3% 
Net foreign currency gain         44,543       36,827    21.0%       36,700    21.4%     111,268      76,079   46.3% 
Net other income / 
 (expense)                         3,728        7,437   -49.9%      (4,260)      NMF       3,035      16,888  -82.0% 
Operating income                 284,962      269,080     5.9%      257,329    10.7%     801,004     756,971    5.8% 
 
Net interest margin                 5.1%         6.4%                  5.4%                 5.4%        6.8% 
Average interest earning 
 assets                       14,643,462   11,422,113    28.2%   13,504,120     8.4%  13,651,149  10,929,220   24.9% 
Average interest bearing 
 liabilities                  14,704,688   12,002,162    22.5%   13,378,168     9.9%  13,643,188  11,585,458   17.8% 
Average net loans and 
 finance 
 lease receivables, 
 currency 
 blended                      10,984,723    8,387,388    31.0%   10,004,743     9.8%  10,162,048   8,069,473   25.9% 
    Average net loans and 
     finance 
     lease receivables, GEL    4,425,551    3,420,314    29.4%    3,977,481    11.3%   4,026,375   3,270,009   23.1% 
    Average net loans and 
     finance 
     lease receivables, FC     6,559,172    4,967,074    32.1%    6,027,262     8.8%   6,135,673   4,799,464   27.8% 
Average client deposits and 
 notes, currency blended       9,276,227    7,547,942    22.9%    8,673,526     6.9%   8,766,483   7,288,896   20.3% 
   Average client deposits 
    and notes, GEL             2,891,726    2,732,988     5.8%    2,860,563     1.1%   2,833,929   2,535,994   11.7% 
   Average client deposits 
    and notes, FC              6,384,501    4,814,954    32.6%    5,812,963     9.8%   5,932,554   4,752,902   24.8% 
Average liquid assets, 
 currency 
 blended                       4,808,233    4,517,487     6.4%    4,528,508     6.2%   4,592,799   4,391,321    4.6% 
   Average liquid assets, 
    GEL                        2,081,990    2,071,502     0.5%    2,049,163     1.6%   2,069,463   1,912,933    8.2% 
   Average liquid assets, 
    FC                         2,726,243    2,445,985    11.5%    2,479,345    10.0%   2,523,336   2,478,388    1.8% 
Liquid assets yield, 
 currency 
 blended                            3.2%         3.8%                  3.4%                 3.4%        3.7% 
   Liquid assets yield, GEL         6.4%         7.0%                  6.1%                 6.4%        6.9% 
   Liquid assets yield, FC          0.8%         1.1%                  1.1%                 1.0%        1.3% 
Loan yield, currency 
 blended                           11.5%        13.5%                 11.8%                11.8%       13.7% 
   Loan yield, GEL                 16.5%        19.9%                 17.3%                17.3%       20.6% 
   Loan yield, FC                   8.2%         9.0%                  8.2%                 8.2%        9.0% 
Cost of funds, currency 
 blended                            4.8%         5.0%                  4.8%                 4.8%        5.0% 
   Cost of funds, GEL               6.7%         7.2%                  6.8%                 6.8%        7.1% 
   Cost of funds, FC                3.7%         3.6%                  3.7%                 3.7%        3.6% 
Cost / income(7)                   37.9%        36.1%                 38.3%                37.3%       36.7% 
 

(7) Adjusted for GEL 4.6mln in 2Q19 and GEL 12.4mln in 9M19 one-off employee costs (gross of income tax) related to termination benefits of the former executive management

Performance highlights

-- Solid operating income of GEL 285.0mln in 3Q19 (up 5.9% y-o-y and up 10.7% q-o-q), ending the first nine months of 2019 with operating income of GEL 801.0mln (up 5.8% y-o-y). Operating income growth in 3Q19 and 9M19 was primarily driven by strong growth in net fee and commission income (up 21.6% y-o-y and up 11.0% q-o-q in 3Q19 and up 19.3% y-o-y in 9M19) and net foreign currency gains (up 21.0% y-o-y and up 21.4% q-o-q in 3Q19 and up 46.3% y-o-y in 9M19), which benefited from a high level of currency volatility in 2019

-- Our NIM was 5.1% in 3Q19 and 5.4% in 9M19. During third quarter 2019, NIM was down 130bps y-o-y due to the 200bps y-o-y decrease in loan yield, largely reflecting our shift towards a higher quality, finer margin product mix on the back of tighter regulatory conditions for unsecured consumer lending, partially offset by 20bps y-o-y decline in cost of funds. On a q-o-q basis, loan yield decreased by 30bps, while cost of funds remained flat, resulting in 30bps q-o-q decline in 3Q19 NIM. On a nine months basis, loan yield was down 190bps y-o-y, while cost of funds decreased by 20bps y-o-y, causing NIM to decline by 140bps y-o-y. The decline in NIM was also partially driven by the increased minimum reserve requirements mandated by NBG as discussed in more detail later

-- Loan yield. Currency blended loan yield was 11.5% in 3Q19 (down 200bps y-o-y and down 30bps q-o-q) and 11.8% in the first nine months of 2019 (down 190bps y-o-y). The y-o-y decline in loan yields during the third quarter and first nine months of 2019 was attributable to a decrease in both local and foreign currency loan yields, which primarily reflected the change in product mix in our loan portfolio

-- Liquid assets yield. Both local currency and foreign currency denominated liquid assets yields decreased y-o-y in 3Q19 and 9M19. The foreign currency denominated liquid assets yields were down 30bps y-o-y in 3Q19 and 9M19, reflecting a) an increase in obligatory reserves with NBG, primarily driven by the changes in minimum reserve requirements mandated by NBG since September 2018, whereby the foreign currency funds raised by local banks carried up to a 25% reserve requirement depending on maturity, and further increase of this requirement up to 30% since May 2019 (although the mandatory reserve requirements on funds attracted in foreign currency was reduced to 25% in October 2019); b) starting from 12 July 2018, NBG reduced interest rates on foreign currency obligatory reserves from US Fed rate upper bound minus 50bps to Fed rate upper bound minus 200bps, floored at zero for US Dollar reserves, and from ECB rate minus 50bps to ECB rate minus 200bps, floored at negative 60bps for EUR denominated reserves (however, starting from 3 October 2019, following rates are in place - US Fed rate upper bound minus 50bps for US Dollar reserves, and ECB rate minus 20bps for EUR denominated reserves). As for the local currency denominated liquid assets yields, the y-o-y decline both in 3Q19 and 9M19 and q-o-q increase in 3Q19 was primarily driven by the NBG monetary policy rate movements

-- Cost of funds. Cost of funds stood at 4.8% both in 3Q19 (down 20bps y-o-y and flat q-o-q) and in 9M19 (down 20bps y-o-y). Y-o-y decline in cost of funds in 3Q19 and 9M19 was primarily due to decline in the cost of client deposits and notes (down 40bps y-o-y in 3Q19 and down 20bps y-o-y in 9M19), which represented 63.1% of total interest-bearing liabilities at 30 September 2019. This decline offset the 40bps and 20bps y-o-y increase in cost of debt securities issued in 3Q19 and 9M19, respectively, as a result of the issuance of inaugural US$ 100 million Additional Tier 1 capital perpetual subordinated notes at the end of March 2019. On a q-o-q basis, the cost of funds remained flat, driven by lower cost of amounts due to credit institutions on the back of repayment of US$ 65mln subordinated debt in April 2019, coupled with a decrease in Libor rate, partly offset by increased cost of debt securities issued as a result of issuance of the Additional Tier 1 capital subordinated notes

-- Net fee and commission income. Net fee and commission income reached GEL 48.0mln in 3Q19 (up 21.6% y-o-y and up 11.0% q-o-q) and GEL 133.5mln in 9M19 (up 19.3% y-o-y). Outstanding growth was mainly driven by the strong performance in our settlement operations supported by the success of our Retail Banking franchise and a strong increase in fees and commission income from guarantees and letters of credit issued by the Corporate and Investment Banking business

-- Net foreign currency gain. Net foreign currency gain was up 21.0% y-o-y and up 21.4% q-o-q in 3Q19, and up 46.3% y-o-y in 9M19, primarily due to increased client-driven flows, as well as the high level of currency volatility during 2019

-- Net other income. Significant y-o-y decline in net other income in 9M19 was largely driven by net losses from derivative financial instruments (interest rate swap hedges) recorded during 2019 (the long-term contracts were closed in 3Q19), partially offset by net gains from investment securities during the same period

 
 NET OPERATING INCOME BEFORE NON-RECURRING ITEMS; COST OF RISK; PROFIT 
  FOR THE PERIOD 
 GEL thousands, unless 
  otherwise                                            Change              Change                           Change 
  noted (8)                          3Q19       3Q18    y-o-y       2Q19    q-o-q        9M19        9M18    y-o-y 
 
 Salaries and other employee 
  benefits                       (59,539)   (54,107)    10.0%   (57,982)     2.7%   (169,938)   (157,485)     7.9% 
 Administrative expenses         (26,251)   (30,759)   -14.7%   (22,033)    19.1%    (71,025)    (83,254)   -14.7% 
 Depreciation, amortisation 
  and impairment                 (21,320)   (11,162)    91.0%   (17,295)    23.3%    (54,303)    (34,077)    59.4% 
 Other operating expenses           (807)    (1,109)   -27.2%    (1,248)   -35.3%     (3,135)     (2,844)    10.2% 
 Operating expenses             (107,917)   (97,137)    11.1%   (98,558)     9.5%   (298,401)   (277,660)     7.5% 
 Profit from associate                194        326   -40.5%        254   -23.6%         636       1,021   -37.7% 
 Operating income before 
  cost of risk                    177,239    172,269     2.9%    159,025    11.5%     503,239     480,332     4.8% 
 Expected credit loss / 
  impairment 
  charge on loans to 
  customers                      (13,617)   (43,505)   -68.7%   (32,436)   -58.0%    (86,170)   (113,716)   -24.2% 
 Expected credit loss / 
  impairment 
  charge on finance lease 
  receivables                       (333)      (426)   -21.8%      (557)   -40.2%     (1,336)       (678)    97.1% 
 Other expected credit loss 
  / impairment charge on 
  other 
  assets and provisions           (1,273)    (4,176)   -69.5%    (2,483)   -48.7%     (5,845)     (5,053)    15.7% 
 Cost of risk                    (15,223)   (48,107)   -68.4%   (35,476)   -57.1%    (93,351)   (119,447)   -21.8% 
 Net operating income before 
  non-recurring items             162,016    124,162    30.5%    123,549    31.1%     409,888     360,885    13.6% 
 Net non-recurring items          (5,019)    (3,747)    33.9%    (2,538)    97.8%     (9,132)    (20,458)   -55.4% 
 Profit before income tax 
  expense and one-off costs       156,997    120,415    30.4%    121,011    29.7%     400,756     340,427    17.7% 
 Income tax expense              (22,697)    (9,316)   143.6%    (9,871)   129.9%    (43,104)    (24,060)    79.2% 
 Profit adjusted for one-off 
  costs                           134,300    111,099    20.9%    111,140    20.8%     357,652     316,367    13.0% 
 One-off termination costs 
  of former CEO and executive 
  management (after tax), 
  one-off demerger related 
  expenses (after tax) and 
  one-off impact of 
  re-measurement 
  of deferred tax balances              -          -        -    (3,996)      NMF    (14,236)    (52,541)   -72.9% 
 Profit                           134,300    111,099    20.9%    107,144    25.3%     343,416     263,826    30.2% 
 

(8) The adjusted profit in the table excludes GEL 4.0mln in 2Q19 and GEL 14.2mln in 9M19 one-off employee costs (net of income tax) related to the former CEO and executive management termination benefits. The amount is comprised of GEL 4.6mln in 2Q19 and GEL 12.4mln in 9M19 (gross of income tax) excluded from salaries and other employee benefits and GEL 4.0mln (gross of income tax) excluded from non-recurring items in 9M19. The income statement adjusted profit for 9M18 excludes GEL 52.5mln demerger related expenses (net of income tax) and one-off impact of re-measurement of deferred tax balances

-- Operating expenses adjusted for one-off employee costs related to termination benefits of former executive management members (acceleration of share-based compensation) were GEL 107.9mln in 3Q19 (up 11.1% y-o-y and up 9.5% q-o-q) and GEL 298.4mln in 9M19 (up 7.5% y-o-y), driving the negative operating leverage of 5.2% y-o-y and 1.7% y-o-y in 3Q19 and 9M19, respectively. The increase in operating expenses was primarily driven by our increased investment in IT related resources as part of the Agile transformation process and focus on digitalisation

-- The decline in administrative expenses and increase in depreciation, amortisation and impairment expenses is primarily driven by the adoption of a new standard IFRS 16, Leases replacing IAS 17, Leases effective 1 January 2019. As a result of the adoption of the standard the Group recorded on its balance sheet assets related to the right to use the rented properties together with corresponding liabilities for respective payments under the lease contracts. Excluding this impact, the increase in depreciation, amortisation and impairment expenses was due to increased investments during 2019

-- Improved asset quality. The cost of credit risk ratio was 0.5% in 3Q19 (down 150bps y-o-y and down 80bps q-o-q) and 1.1% in the first nine months of 2019 (down 70bps y-o-y). RB's cost of credit risk ratio was 0.9% in 3Q19 (down 150bps y-o-y and down 70bps q-o-q) and 1.6% in 9M19 (down 60bps y-o-y), while CIB's cost of credit risk ratio stood at a net credit of 0.2% in 3Q19 (down from 1.5% in 3Q18 and down from 0.7% in 2Q19) and at 0.2% in the first nine months of 2019 (down 100bps y-o-y). The y-o-y and q-o-q decrease in RB's cost of credit risk ratio reflected improved loan portfolio quality due to our increasing focus on lending in the mortgage segment and to SME clients, while CIB's cost of credit risk ratio improvement was primarily driven by the recovery of several mid- to low-sized corporate loans in 2019

-- Quality of our loan book remained strong in 3Q19 as evidenced by the following closely monitored metrics:

 
 GEL thousands, unless otherwise noted     Sep-19    Sep-18   Change    Jun-19   Change 
                                                               y-o-y              q-o-q 
 
 Non-performing loans 
 NPLs                                     339,118   312,203     8.6%   347,285    -2.4% 
 NPLs to gross loans                         2.9%      3.5%               3.2% 
  NPLs to gross loans, RB                    1.8%      2.4%               2.1% 
  NPLs to gross loans, CIB                   5.0%      4.4%               5.3% 
 NPL coverage ratio                         85.3%     91.7%              88.1% 
 NPL coverage ratio adjusted for the 
  discounted value of collateral           129.3%    136.9%             131.5% 
 
 Past due dates 
 Retail loans - 15 days past due rate        1.3%      1.6%               1.5% 
 Mortgage loans - 15 days past due 
  rate                                       1.1%      1.3%               1.4% 
 

-- BNB - the Group's banking subsidiary in Belarus - continues to remain strongly capitalised, with capital adequacy ratios well above the requirements of the National Bank of the Republic of Belarus ("NBRB"). At 30 September 2019, total capital adequacy ratio was 15.2%, above the 10% minimum requirement, while Tier I capital adequacy ratio was 9.4%, above NBRB's 7% minimum requirement. ROAE was 18.1% in 3Q19 (15.2% in 3Q18 and 9.8% in 2Q19) and 13.6% in 9M19 (12.8% in 9M18). For detailed financial results of BNB, please see page 22

-- Net non-recurring items. Net non-recurring expenses adjusted for one-off costs amounted to GEL 5.0mln in 3Q19 (GEL 3.7mln in 3Q18 and GEL 2.5mln in 2Q19) and GEL 9.1mln in 9M19 (GEL 20.5mln in 9M18), largely reflecting legal fees incurred during the first nine months of 2019

-- Income tax expense. Income tax expense amounted to GEL 22.7mln in 3Q19 (up 143.6% y-o-y and up 129.9% q-o-q) and GEL 43.1mln in 9M19 (up 79.2% y-o-y). The increase was primarily driven by a one-off GEL 8.5mln additional tax expense posted in the third quarter 2019 as a result of reassessment of deferred tax balances in relation to changes in the assumptions made in June 2018 relating to the amendments to the corporate taxation model applicable to financial institutions

-- Overall, profit adjusted for one-off costs totalled GEL 134.3mln in 3Q19 (up 20.9% y-o-y and up 20.8% q-o-q) and GEL 357.7mln in the first nine months of 2019 (up 13.0% y-o-y), while ROAE(9) was 26.8% in 3Q19 (26.8% in 3Q18 and 22.9% in 2Q19) and 24.7% in 9M19 (26.2% in 9M18)

(9) ROAE adjusted for GEL 4.0mln in 2Q19 and GEL 14.2mln in 9M19 one-off employee costs (net of income tax) related to termination benefits of the former CEO and executive management. 9M18 ROAE adjusted for GEL 52.5mln demerger related expenses (net of income tax) and one-off impact of re-measurement of deferred tax balances

 
 BALANCE SHEET HIGHLIGHTS 
 GEL thousands, unless otherwise                    Sep-19      Sep-18   Change       Jun-19   Change 
  noted                                                                   y-o-y                 q-o-q 
 
 Liquid assets                                   5,099,111   4,696,808     8.6%    4,537,545    12.4% 
    Liquid assets, GEL                           2,136,320   2,072,122     3.1%    2,092,757     2.1% 
    Liquid assets, FC                            2,962,791   2,624,686    12.9%    2,444,788    21.2% 
 Net loans and finance lease receivables        11,339,745   8,762,413    29.4%   10,579,710     7.2% 
    Net loans and finance lease receivables, 
     GEL                                         4,655,533   3,444,621    35.2%    4,217,713    10.4% 
    Net loans and finance lease receivables, 
     FC                                          6,684,212   5,317,792    25.7%    6,361,997     5.1% 
 Client deposits and notes                       9,613,718   7,932,536    21.2%    8,855,616     8.6% 
 Amounts due to credit institutions              3,437,718   3,006,739    14.3%    2,960,519    16.1% 
    Borrowings from DFIs                         1,355,426   1,261,960     7.4%    1,253,921     8.1% 
    Short-term loans from central banks          1,271,027   1,016,431    25.0%    1,001,496    26.9% 
    Loans and deposits from commercial 
     banks                                         811,265     728,348    11.4%      705,102    15.1% 
 Debt securities issued                          2,175,820   1,578,532    37.8%    2,137,239     1.8% 
                                                    Sep-19      Sep-18                Jun-19 
 Liquidity and CAR ratios 
 Net loans / client deposits and 
  notes                                             118.0%      110.5%                119.5% 
 Net loans / client deposits and 
  notes + DFIs                                      103.4%       95.3%                104.7% 
 Liquid assets / total assets                        29.1%       32.8%                 28.1% 
 Liquid assets / total liabilities                   32.9%       37.1%                 31.9% 
 NBG liquidity ratio                                 36.8%       32.5%                 37.0% 
 NBG liquidity coverage ratio                       118.5%      113.6%                114.3% 
 NBG (Basel III) Tier I capital adequacy 
  ratio                                              13.3%       11.0%                 13.3% 
 NBG (Basel III) Total capital adequacy 
  ratio                                              16.8%       15.9%                 16.7% 
 

Our balance sheet remains highly liquid (NBG liquidity coverage ratio of 118.5%) and strongly capitalised (NBG Basel III Tier I capital adequacy ratio of 13.3%) with a well-diversified funding base (client deposits and notes to total liabilities of 62.0%).

-- Liquidity. Liquid assets stood at GEL 5,099.1mln at 30 September 2019, up 8.6% y-o-y and up 12.4% q-o-q. The notable increase over the year was in obligatory reserves with NBG, combined with excess liquidity deployed with credit institutions, NBG and Ministry of Finance. Increase in obligatory reserves with NBG was primarily driven by the changes in minimum reserve requirements mandated by NBG since September 2018, whereby the foreign currency funds raised by local banks carried up to 25% reserve requirement depending on maturity. The reserve requirement on foreign currency funds was further increased up to 30% depending on maturity starting from the end of May 2019. The NBG Liquidity coverage ratio was 118.5% at 30 September 2019 (113.6% at 30 September 2018 and 114.3% at 30 June 2019), well above the 100% minimum requirement level

-- Loan book. Our net loan book and finance lease receivables reached GEL 11,339.7mln at 30 September 2019, up 29.4% y-o-y and up 7.2% q-o-q. As of 30 September 2019, the retail loan book represented 65.8% of the total loan portfolio (69.8% at 30 September 2018 and 67.2% at 30 June 2019). Both local and foreign currency portfolios experienced strong y-o-y growth of 35.2% and 25.7%, respectively. Furthermore, local currency denominated loan portfolio was up 10.4% q-o-q, while foreign currency denominated loan book grew by 5.1% q-o-q. The local currency loan portfolio growth was partially driven by the Government's de-dollarisation initiatives and our goal to increase the share of local currency loans in our portfolio

-- Dollarisation of our loan book and client deposits. The retail client loan book in foreign currency accounted for 43.9% of the total RB loan book at 30 September 2019 (48.9% at 30 September 2018 and 45.9% at 30 June 2019), while retail client foreign currency deposits comprised 69.2% of total RB deposits at 30 September 2019 (71.7% at 30 September 2018 and 68.8% at 30 June 2019). At 30 September 2019, 82.1% of CIB's loan book was denominated in foreign currency (81.7% at 30 September 2018 and 83.6% at 30 June 2019), while 64.1% of CIB deposits were denominated in foreign currency (55.4% at 30 September 2018 and 63.2% at 30 June 2019)

-- Net loans to customer funds and DFI ratio. Our net loans to customer funds and DFI ratio, which is closely monitored by management, remained strong at 103.4% at 30 September 2019 (95.3% at 30 September 2018 and 104.7% at 30 June 2019)

-- Diversified funding base. Debt securities issued grew by 37.8% y-o-y and by 1.8% q-o-q at 30 September 2019. The y-o-y increase was primarily driven by the issuance of US$ 100 million Additional Tier 1 capital notes in March 2019 (see details below)

-- Capital Adequacy requirements. Basel III Tier 1 and Total capital adequacy ratios stood at 13.3% and 16.8%, respectively, as of 30 September 2019 compared to a minimum required level of 11.6% and 16.1%, respectively. At the same time, Common Equity Tier 1 (CET1) ratio stood at 11.1% compared to a 9.5% minimum requirement at 30 September 2019. In March 2019, the Bank issued its inaugural US$ 100 million 11.125% Additional Tier 1 capital perpetual subordinated notes callable after 5.25 years and on every subsequent interest payment date, subject to prior consent of the National Bank of Georgia at an issue price of 100.00% (the "Notes"). The Notes are listed on the Irish Stock Exchange and rated B- (Fitch). The issuance was the first international offering of Additional Tier 1 Capital Notes from Georgia and the South Caucasus region. Basel III regulations recently introduced in Georgia now enable this type of capital optimisation and this US Dollar issue provides the Bank with an opportunity to diversify its capital structure from a foreign currency perspective and provides a natural hedge against dollarisation in the economy. The regulatory approval on the classification of the Notes as Additional Tier 1 instruments was received in April 2019

DISCUSSION OF SEGMENT RESULTS

RETAIL BANKING (RB)

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

 
 GEL thousands, unless 
  otherwise                                             Change               Change                           Change 
  noted                              3Q19        3Q18    y-o-y        2Q19    q-o-q        9M19        9M18    y-o-y 
 
 INCOME STATEMENT 
  HIGHLIGHTS(10) 
 Net interest income              136,148     136,040     0.1%     128,167     6.2%     395,302     409,978    -3.6% 
 Net fee and commission 
  income                           36,696      30,651    19.7%      34,605     6.0%     103,735      85,943    20.7% 
 Net foreign currency gain         20,464      17,381    17.7%      18,070    13.2%      51,773      32,310    60.2% 
 Net other income / (expense)         581       2,021   -71.3%     (3,753)      NMF     (1,002)       6,791      NMF 
 Operating income                 193,889     186,093     4.2%     177,089     9.5%     549,808     535,022     2.8% 
 Salaries and other employee 
  benefits                       (37,732)    (34,830)     8.3%    (36,691)     2.8%   (108,296)   (101,583)     6.6% 
 Administrative expenses         (17,585)    (22,619)   -22.3%    (14,992)    17.3%    (48,374)    (62,703)   -22.9% 
 Depreciation, amortisation 
  and impairment                 (17,973)     (9,556)    88.1%    (14,492)    24.0%    (45,753)    (29,276)    56.3% 
 Other operating expenses           (379)       (590)   -35.8%       (753)   -49.7%     (1,666)     (1,694)    -1.7% 
 Operating expenses              (73,669)    (67,595)     9.0%    (66,928)    10.1%   (204,089)   (195,256)     4.5% 
 Profit from associate                194         326   -40.5%         254   -23.6%         636       1,021   -37.7% 
 Operating income before cost 
  of risk                         120,414     118,824     1.3%     110,415     9.1%     346,355     340,787     1.6% 
 Cost of risk                    (16,831)    (35,155)   -52.1%    (26,542)   -36.6%    (82,760)    (93,226)   -11.2% 
 Net operating income before 
  non-recurring items             103,583      83,669    23.8%      83,873    23.5%     263,595     247,561     6.5% 
 Net non-recurring items            (575)     (1,948)   -70.5%        (64)      NMF       (915)    (12,753)   -92.8% 
 Profit before income tax 
  expense and one-off costs       103,008      81,721    26.0%      83,809    22.9%     262,680     234,808    11.9% 
 Income tax expense              (14,060)     (5,998)   134.4%     (6,323)   122.4%    (26,484)    (15,233)    73.9% 
 Profit adjusted for one-off 
  costs                            88,948      75,723    17.5%      77,486    14.8%     236,196     219,575     7.6% 
 One-off termination costs 
  of former CEO and executive 
  management (after tax), 
  one-off 
  demerger related expenses 
  (after tax) and one-off 
  impact 
  of re-measurement of 
  deferred 
  tax balances                          -           -        -     (3,067)      NMF    (10,142)    (33,544)   -69.8% 
 Profit                            88,948      75,723    17.5%      74,419    19.5%     226,054     186,031    21.5% 
 
 BALANCE SHEET HIGHLIGHTS 
 Net loans, currency blended    7,083,432   5,826,396    21.6%   6,771,223     4.6%   7,083,432   5,826,396    21.6% 
  Net loans, GEL                3,974,913   2,975,672    33.6%   3,661,673     8.6%   3,974,913   2,975,672    33.6% 
  Net loans, FC                 3,108,519   2,850,724     9.0%   3,109,550     0.0%   3,108,519   2,850,724     9.0% 
 Client deposits, currency 
  blended                       5,384,371   4,029,996    33.6%   4,987,611     8.0%   5,384,371   4,029,996    33.6% 
  Client deposits, GEL          1,657,025   1,141,849    45.1%   1,553,653     6.7%   1,657,025   1,141,849    45.1% 
  Client deposits, FC           3,727,346   2,888,147    29.1%   3,433,958     8.5%   3,727,346   2,888,147    29.1% 
 of which: 
 Time deposits, currency 
  blended                       3,074,292   2,193,682    40.1%   2,866,525     7.2%   3,074,292   2,193,682    40.1% 
  Time deposits, GEL              753,198     489,535    53.9%     704,286     6.9%     753,198     489,535    53.9% 
  Time deposits, FC             2,321,094   1,704,147    36.2%   2,162,239     7.3%   2,321,094   1,704,147    36.2% 
 Current accounts and demand 
  deposits, currency blended    2,310,079   1,836,314    25.8%   2,121,086     8.9%   2,310,079   1,836,314    25.8% 
  Current accounts and demand 
   deposits, GEL                  903,827     652,314    38.6%     849,367     6.4%     903,827     652,314    38.6% 
  Current accounts and demand 
   deposits, FC                 1,406,252   1,184,000    18.8%   1,271,719    10.6%   1,406,252   1,184,000    18.8% 
 
 KEY RATIOS 
 ROAE(10)                           30.7%       30.9%                26.9%                27.6%       31.2% 
 Net interest margin, 
  currency 
  blended                            5.9%        7.2%                 5.9%                 6.0%        7.8% 
 Cost of credit risk ratio           0.9%        2.4%                 1.6%                 1.6%        2.2% 
 Cost of funds, currency 
  blended                            5.2%        5.8%                 5.3%                 5.3%        5.8% 
 Loan yield, currency blended       12.8%       14.8%                12.9%                13.1%       15.4% 
  Loan yield, GEL                   17.0%       20.8%                17.7%                17.9%       21.7% 
  Loan yield, FC                     7.5%        7.9%                 7.3%                 7.5%        8.1% 
 Cost of deposits, currency 
  blended                            3.0%        2.8%                 3.0%                 3.0%        2.8% 
  Cost of deposits, GEL              5.0%        4.9%                 5.2%                 5.1%        4.9% 
  Cost of deposits, FC               2.1%        2.0%                 2.1%                 2.1%        2.0% 
 Cost of time deposits, 
  currency 
  blended                            4.2%        4.2%                 4.3%                 4.3%        4.2% 
  Cost of time deposits, GEL         8.4%        8.7%                 8.7%                 8.6%        8.8% 
  Cost of time deposits, FC          2.9%        2.9%                 2.9%                 2.9%        2.9% 
 Current accounts and demand 
  deposits, currency blended         1.3%        1.1%                 1.4%                 1.3%        1.1% 
  Current accounts and demand 
   deposits, GEL                     2.2%        2.1%                 2.3%                 2.2%        1.9% 
  Current accounts and demand 
   deposits, FC                      0.7%        0.5%                 0.8%                 0.7%        0.6% 
 Cost / income ratio(11)            38.0%       36.3%                37.8%                37.1%       36.5% 
 

(10) The income statement adjusted profit excludes GEL 3.1mln in 2Q19 and GEL 10.1mln in 9M19 one-off employee costs (net of income tax) related to the former CEO and executive management termination benefits. The amount is comprised of GEL 3.5mln in 2Q19 and GEL 8.6mln in 9M19 (gross of income tax) excluded from salaries and other employee benefits and GEL 2.9mln (gross of income tax) excluded from non-recurring items in 9M19. The income statement adjusted profit for 9M18 excludes GEL 33.5mln demerger related expenses (net of income tax) and one-off impact of re-measurement of deferred tax balances. The ROAE has been adjusted accordingly for all respective periods presented

(11) Cost/income ratio adjusted for GEL 3.5mln in 2Q19 and GEL 8.6mln in 9M19 one-off employee costs (gross of income tax) related to termination benefits of the former executive management

Performance highlights

-- Retail Banking delivered strong quarterly results in each of its major segments and generated operating income of GEL 193.9mln in 3Q19 (up 4.2% y-o-y and up 9.5% q-o-q) and GEL 549.8mln in 9M19 (up 2.8% y-o-y)

-- RB's net interest income was up 0.1% y-o-y and up 6.2% q-o-q in 3Q19, and down 3.6% y-o-y in 9M19, largely driven by the regulations introduced by the National Bank of Georgia on consumer lending in 2018. Net interest income still benefits from the growth of the local currency loan portfolio, which generated 9.5ppts and 10.4ppts higher yields than the foreign currency loan portfolio in 3Q19 and 9M19, respectively

-- The Retail Banking net loan book reached GEL 7,083.4mln in 3Q19, up 21.6% y-o-y and up 4.6% q-o-q. On a constant currency basis our retail loan book increased by 15.4% y-o-y and by 3.3% q-o-q in 3Q19. Our local currency denominated loan book increased by 33.6% y-o-y and by 8.6% q-o-q, while the foreign currency denominated loan book grew by 9.0% y-o-y and was flat q-o-q. As a result, the local currency denominated loan book accounted for 56.1% of the Retail Banking loan book at 30 September 2019 (51.1% at 30 September 2018 and 54.1% at 30 June 2019)

-- The loan portfolio composition reflects the shift towards a higher quality, finer margin product mix on the back of tighter lending conditions for unsecured consumer lending. The y-o-y and q-o-q loan book growth reflected continued strong loan origination levels in MSME and mortgage segments. The y-o-y decline in the mortgage loan originations is reflective of the consumer lending regulation change in 2018 becoming effective from 1 January 2019, which drove higher demand on this product in the second half of 2018 on the back of upcoming regulation expectations. Furthermore, the GEL devaluation since June 2019 has also contributed to slow down of originations, which is also reflected in q-o-q decrease:

 
 Retail Banking loan book by products 
 GEL million, unless otherwise                        Change             Change                       Change 
  noted                              3Q19      3Q18    y-o-y      2Q19    q-o-q      9M19      9M18    y-o-y 
 Loan originations 
 Consumer loans                     396.4     344.9    14.9%     407.6    -2.7%   1,110.5   1,055.6     5.2% 
 Mortgage loans                     365.0     606.6   -39.8%     452.8   -19.4%   1,027.3   1,259.6   -18.4% 
 Micro loans                        281.9     270.5     4.2%     323.4   -12.9%     892.4     802.7    11.2% 
 SME loans                          273.9     190.5    43.8%     239.4    14.4%     727.8     474.0    53.5% 
 POS loans                           20.9      23.5   -11.2%      18.4    13.5%      53.8     104.6   -48.6% 
 
 Outstanding balance 
 Consumer loans                   1,505.0   1,329.1    13.2%   1,447.5     4.0%   1,505.0   1,329.1    13.2% 
 Mortgage loans                   2,948.5   2,254.1    30.8%   2,814.8     4.7%   2,948.5   2,254.1    30.8% 
 Micro loans                      1,427.1   1,200.4    18.9%   1,408.4     1.3%   1,427.1   1,200.4    18.9% 
 SME loans(12)                      899.1     703.2    27.9%     795.7    13.0%     899.1     703.2    27.9% 
 POS loans                           37.1      66.5   -44.2%      38.2    -3.0%      37.1      66.5   -44.2% 
 

-- Retail Banking client deposits increased to GEL 5,384.4mln as at 30 September 2019, up 33.6% y-o-y and up 8.0% q-o-q. The dollarisation level of our deposits stood at 69.2% at 30 September 2019, compared to 71.7% at 30 September 2018 and 68.8% at 30 June 2019. The cost of foreign currency denominated deposits stood at 2.1% in 3Q19 and in 9M19, up 10bps y-o-y both in 3Q19 and in 9M19 and flat q-o-q. The cost of local currency denominated deposits increased by 10bps y-o-y and was down 20bps q-o-q in 3Q19 and increased by 20bps y-o-y in 9M19. The spread between the cost of RB's client deposits in GEL and foreign currency was 2.9ppts during 3Q19 (GEL: 5.0%; FC: 2.1%) compared to 2.9ppts in 3Q18 (GEL: 4.9%; FC: 2.0%) and 3.1ppts in 2Q19 (GEL: 5.2%; FC: 2.1%). On a nine months basis, the spread widened to 3.0ppts in 9M19 (GEL: 5.1%; FC: 2.1%) compared to 2.9ppts in 9M18 (GEL: 4.9%; FC: 2.0%). Local currency denominated deposits increased at a faster pace to GEL 1,657.0mln (up 45.1% y-o-y and up 6.7% q-o-q), as compared to foreign currency denominated deposits that grew to GEL 3,727.3mln (up 29.1% y-o-y and up 8.5% q-o-q)

-- Retail Banking NIM was 5.9% in 3Q19 (down 130bps y-o-y and flat q-o-q) and 6.0% in 9M19 (down 180bps y-o-y). The y-o-y decline in NIM in 3Q19 and 9M19 was attributable to lower loan yields (down 200bps y-o-y in 3Q19 and down 230bps y-o-y in 9M19), mainly driven by the change in the Retail Banking loan portfolio product mix, with the lower yield-lower risk products share increasing in the total RB loan portfolio. Meanwhile, the cost of funds decreased by 60bps y-o-y in 3Q19 and by 50bps y-o-y in 9M19, primarily on the back of decrease in Libor and NBG monetary policy rates (although NBG increased the monetary policy rate twice in September 2019 by a cumulative 100bps and by another 100bps in October 2019). On a quarter-on-quarter basis, 10bps decline in loan yields were offset by 10bps decline in cost of funds, resulting in a flat NIM q-o-q in 3Q19

-- Strong growth in Retail Banking net fee and commission income. The strong growth in net fee and commission income during all reported periods was driven by an increase in settlement operations and the strong underlying growth in our Solo, mass retail and MSME segments

-- RB's asset quality improved significantly in 3Q19 reflecting our increasing focus on lending in the mortgage segment and to finer margin SME clients. Cost of credit risk ratio was 0.9% in 3Q19 (down from 2.4% in 3Q18 and from 1.6% in 2Q19) and 1.6% in 9M19 (down from 2.2% in 9M18)

(12) SME portfolio was up 31.5% y-o-y on a constant currency basis excluding the GEL 120mln loan portfolio reclassification from SME to CIB in the second quarter of 2019

-- Our Retail Banking business continued to deliver solid growth as we further develop our strategy towards continuous digitalisation, as demonstrated by the following performance indicators:

 
 Retail Banking performance indicators 
 Volume information in                               Change                Change                             Change 
  GEL thousands                  3Q19         3Q18    y-o-y         2Q19    q-o-q         9M19         9M18    y-o-y 
 Retail Banking 
 customers 
 Number of new customers       42,534       38,577    10.3%       41,175     3.3%      123,554      147,411   -16.2% 
 Number of customers        2,500,826    2,408,223     3.8%    2,475,292     1.0%    2,500,826    2,408,223     3.8% 
 Cards 
 Number of cards issued       176,922      152,274    16.2%      183,106    -3.4%      536,113      589,964    -9.1% 
 Number of cards 
  outstanding               2,121,830    2,192,870    -3.2%    2,122,006     0.0%    2,121,830    2,192,870    -3.2% 
 Express Pay terminals 
 Number of Express Pay 
  terminals                     3,231        3,054     5.8%        3,177     1.7%        3,231        3,054     5.8% 
 Number of transactions 
  via Express Pay 
  terminals                26,644,743   27,001,597    -1.3%   27,499,428    -3.1%   80,895,309   80,315,870     0.7% 
 Volume of transactions 
  via Express Pay 
  terminals                 2,193,261    1,757,019    24.8%    1,951,441    12.4%    5,910,238    4,892,501    20.8% 
 POS terminals 
 Number of desks               15,185       10,078    50.7%       14,026     8.3%       15,185       10,078    50.7% 
 Number of contracted 
  merchants                     7,545        5,357    40.8%        6,832    10.4%        7,545        5,357    40.8% 
 Number of POS terminals       21,088       15,568    35.5%       19,667     7.2%       21,088       15,568    35.5% 
 Number of transactions 
  via POS terminals        21,646,160   16,232,785    33.3%   20,805,141     4.0%   58,980,841   45,177,372    30.6% 
 Volume of transactions 
  via POS terminals           707,049      534,430    32.3%      617,763    14.5%    1,813,010    1,399,724    29.5% 
 Internet banking 
 Number of active 
  users(13)                   268,053      246,897     8.6%      268,357    -0.1%      268,053      246,897     8.6% 
 Number of transactions 
  via internet bank         1,273,318    1,417,638   -10.2%    1,338,941    -4.9%    4,033,394    4,350,714    -7.3% 
 Volume of transactions 
  via internet bank           579,426      530,368     9.2%      557,660     3.9%    1,627,543    1,409,326    15.5% 
 Mobile banking 
 Number of active 
  users(13)                   448,176      247,418    81.1%      418,155     7.2%      448,176      247,418    81.1% 
 Number of transactions 
  via mobile bank           9,516,173    4,119,141   131.0%    8,182,306    16.3%   24,396,405   10,170,235   139.9% 
 Volume of transactions 
  via mobile bank           1,265,778      538,609   135.0%    1,025,298    23.5%    3,081,276    1,263,812   143.8% 
 

-- Growth in the client base was due to the increased offering of cost-effective remote channels. The increase to 2,500,826 customers as at 30 September 2019 (up 3.8% y-o-y and up 1.0% q-o-q) reflects sustained growth in our client base over recent periods and was one of the drivers of the increase in our Retail Banking net fee and commission income

-- The number of outstanding cards decreased by 3.2% y-o-y and were largely flat q-o-q at 30 September 2019 primarily due to Express cards which have been declining in line with the recently introduced regulations on consumer lending. Excluding the Express cards, total number of cards outstanding as at 30 September 2019 increased by 21.0% y-o-y and 5.4% q-o-q. The number of Loyalty programme Plus+ cards, launched in July 2017 as part of RB's client-centric approach, reached 792,031 as at 30 September 2019, up 52.4% y-o-y and up 9.7% q-o-q

-- Digital channels. We have actively continued the further development of our digital strategy. The Bank continued introducing new features to our mobile banking application and our internet bank and introducing dedicated digital spaces in our branches to incentivise offloading client activity to digital channels. As a result, the number of active internet and mobile banking users, as well as the number and volume of transactions through our mobile and internet banking continued to expand

- mBank digital penetration growth. For our mobile banking application, the number of transactions (up 131.0% y-o-y and up 16.3% q-o-q in 3Q19 and up 139.9% y-o-y in 9M19) and the volume of transactions (up 135.0% y-o-y and up 23.5% q-o-q in 3Q19 and up 143.8% y-o-y in 9M19) continue to show outstanding growth. Since its launch on 29 May 2017, 1,091,241 downloads have been made by the Bank's customers. During the same period approximately 43.5 million transactions were performed using the application

- Significant growth in loans issued and deposits opened through Internet and Mobile Bank. In 2017, we started actively offering loans and deposit products to our customers through the Internet Bank. In 9M19, 17,435 loans were issued with a total value of GEL 26.1mln, and 10,365 deposits were opened with a total value of GEL 24.2mln through Internet Bank. Starting from 2018, our customers have been able to apply for a loan and open a deposit account via mBank as well. In 9M19, 49,794 loans were issued with a total value of GEL 51.6mln, and 34,338 deposit accounts were opened with a total deposited amount of GEL 30.3mln using the mobile banking application. As a result, more than 93% of total daily transactions were executed through digital channels during 3Q19 and 9M19

- The utilisation of Express Pay terminals continued to grow in 3Q19. The volume of transactions increased by 24.8% y-o-y and by 12.4% q-o-q in 3Q19 and increased by 20.8% y-o-y in 9M19, while number of transactions slightly decreased by 1.3% y-o-y and by 3.1% q-o-q in 3Q19 and increased by 0.7% y-o-y in 9M19. The decline in number of transactions was primarily due to the migration of customers to mobile and internet banking platforms. The fees charged to clients for transactions executed through express pay terminals amounted to GEL 5.7mln in 3Q19 (largely flat y-o-y and up 1.7% q-o-q) and GEL 16.9mln in 9M19 (up 3.0% y-o-y)

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

-- Digital ecosystem developments:

- In 1Q19, the Group launched a cutting-edge full-service real estate digital platform, area.ge. The platform is unique on the Georgian real estate market and is the first platform to be fully integrated with the Bank to provide its users a "one-click" live credit limit appraisal and mortgage application experience. The Group aims to boost its mortgage portfolio by gaining access to a new clientèle, and simultaneously offering value-added services to real estate developers and agencies. At 30 September 2019, up to 300,000 monthly unique visitors and 527 developers and real estate agencies were registered, and up to 5,000 mortgage leads have been generated through the platform, and disbursed mortgage loans amounted to c.GEL 10mln since the launch

- In 2Q19, the Group acquired a leading Georgian e-commerce platform, extra.ge. Currently, the platform facilitates consumer-to-consumer (C2C) sales through its website and social media channels and has c.400,000 unique visitors per month. Around 50,000 verified registered buyers and sellers and c.20,000 products and services are listed on extra.ge. The Group is in process of transforming the platform into vibrant and dynamic full-scale digital marketplace and the full-scale re-launch is planned in the first quarter of 2020. The revamped extra.ge will facilitate consumer-to-consumer (C2C), business-to-consumer (B2C), and business-to-business (B2B) sales through its website and social media channels. In 2020, we target up to 600,000 unique visitors per month, around 100,000 verified registered buyers and sellers and c.100,000 products and services to be listed on extra.ge. The clients will be able to access their Bank of Georgia banking products in a fully integrated way: extra.ge will be integrated with the Bank's current flexible single sign-on and payment system and will offer the Bank's pre-approved instant installment loans to enable its customers to purchase selected products. The Bank's retail and MSME clients will enjoy the excellent opportunities of a new consumer experience and doing business in a dynamic and flexible digital marketplace

- In September 2019, the Group launched Optimo - a digital solution for our MSME customers to run their business sales and solutions. The platform is designed to address the needs of micro, small and medium sized enterprises in optimising their day-to-day operations and better managing their businesses in general. Optimo's cutting-edge digital inventory management and POS solution, with integrated software and a rich variety of functions and analytical tools, enables businesses to easily manage sales and inventory, as well as access their most recent data on sales transactions, inventory, revenues and profitability, anytime and anywhere, and make timely decisions with relevant information at hand

-- Solo, our premium banking brand, continues its strong growth and investment in its lifestyle brand. We have now 12 Solo lounges, of which 9 are located in Tbilisi, the capital of Georgia, and 3 in major regional cities of Georgia. The number of Solo clients reached 51,692 at 30 September 2019 (41,720 at 30 September 2018 and 48,953 at 30 June 2019). Solo is targeting doubling profit in 3 years to GEL 112mln through excellence in customer service, higher digitalisation and tailor-made bundled offerings. In 3Q19, the product to client ratio for the Solo segment was 5.2, compared to 2.1 for our retail franchise. While Solo clients currently represent 2.1% of our total retail client base, they contributed 29.9% to our retail loan book, 40.0% to our retail deposits, 19.6% and 21.9% to our net retail interest income and to our net retail fee and commission income in 3Q19, respectively. The fee and commission income from the Solo segment reached GEL 6.7mln in 3Q19 (GEL 5.6mln in 3Q18 and GEL 6.6mln in 2Q19) and GEL 19.1mln in 9M19 (GEL 15.6mln in 9M18). Solo Club, a membership group within Solo which offers exclusive access to Solo products and offers ahead of other Solo clients at a higher fee, continued to increase its client base. At 30 September 2019, Solo Club had 5,152 members, up 45.0% y-o-y and up 7.2% q-o-q

-- MSME banking delivered strong growth. The number of MSME segment clients reached 219,543 at 30 September 2019, up 17.4% y-o-y and up 0.7% q-o-q. MSME's loan portfolio reached GEL 2,498.9mln at 30 September 2019 (up 22.1% y-o-y and up 5.1% q-o-q) and client deposits and notes increased to GEL 758.7mln (up 10.5% y-o-y and up 6.4% q-o-q). The MSME segment generated operating income of GEL 57.2mln in 3Q19 (up 29.7% y-o-y and up 14.4% q-o-q) and GEL 152.6mln in 9M19 (up 31.4% y-o-y)

-- Retail Banking profit adjusted for one-off costs (see details in footnotes on page 12) was GEL 88.9mln in 3Q19 (up 17.5% y-o-y and up 14.8% q-o-q) and GEL 236.2mln in 9M19 (up 7.6% y-o-y). Retail Banking continued to deliver a an outstanding ROAE(14) of 30.7% in 3Q19 (30.9% in 3Q18 and 26.9% in 2Q19) and 27.6% in 9M19 (31.2% in 9M18)

(14) ROAE adjusted for GEL 3.1mln in 2Q19 and GEL 10.1mln in 9M19 one-off employee costs (net of income tax) related to termination benefits of the former CEO and executive management. 9M18 ROAE adjusted for GEL 33.5mln demerger related expenses (net of income tax) and one-off impact of re-measurement of deferred tax balances

CORPORATE AND INVESTMENT BANKING (CIB)

CIB provides (1) loans and other credit facilities to Georgia's large corporate clients and other legal entities, excluding SME and micro businesses; (2) services such as fund transfers and settlements services, currency conversion operations, trade finance services and documentary operations as well as handling savings and term deposits; (3) finance lease facilities through the Bank's leasing operations arm, the Georgian Leasing Company; (4) brokerage services through Galt & Taggart; and (5) Wealth Management private banking services to high-net-worth individuals and offers investment management products in Georgia and internationally through representative offices in Tbilisi, London, Budapest, Istanbul and Tel Aviv.

 
 GEL thousands, unless 
  otherwise                                             Change               Change                           Change 
  noted                              3Q19        3Q18    y-o-y        2Q19    q-o-q        9M19        9M18    y-o-y 
 INCOME STATEMENT 
  HIGHLIGHTS(15) 
 Net interest income               45,571      42,076     8.3%      47,459    -4.0%     138,709     122,027    13.7% 
 Net fee and commission 
  income                            9,826       7,187    36.7%       7,113    38.1%      25,090      19,741    27.1% 
 Net foreign currency gain         19,766      13,815    43.1%      15,667    26.2%      48,537      30,718    58.0% 
 Net other income / (expense)       3,300       5,277   -37.5%       (392)      NMF       4,294      10,150   -57.7% 
 Operating income                  78,463      68,355    14.8%      69,847    12.3%     216,630     182,636    18.6% 
 Salaries and other employee 
  benefits                       (15,304)    (13,827)    10.7%    (14,738)     3.8%    (42,481)    (40,147)     5.8% 
 Administrative expenses          (5,866)     (5,329)    10.1%     (4,004)    46.5%    (13,897)    (12,488)    11.3% 
 Depreciation, amortisation 
  and impairment                  (2,416)     (1,245)    94.1%     (1,933)    25.0%     (6,050)     (3,823)    58.3% 
 Other operating expenses           (241)       (432)   -44.2%       (302)   -20.2%       (746)       (828)    -9.9% 
 Operating expenses              (23,827)    (20,833)    14.4%    (20,977)    13.6%    (63,174)    (57,286)    10.3% 
 Operating income before cost 
  of risk                          54,636      47,522    15.0%      48,870    11.8%     153,456     125,350    22.4% 
 Cost of risk                       1,239    (12,234)      NMF     (6,574)      NMF     (7,159)    (22,480)   -68.2% 
 Net operating income before 
  non-recurring items              55,875      35,288    58.3%      42,296    32.1%     146,297     102,870    42.2% 
 Net non-recurring items              (3)       (776)   -99.6%           -        -        (75)     (5,978)   -98.7% 
 Profit before income tax 
  expense and one-off costs        55,872      34,512    61.9%      42,296    32.1%     146,222      96,892    50.9% 
 Income tax expense               (7,444)     (2,433)      NMF     (3,169)   134.9%    (14,477)     (6,444)   124.7% 
 Profit adjusted for one-off 
  costs                            48,428      32,079    51.0%      39,127    23.8%     131,745      90,448    45.7% 
 One-off termination costs 
  of former CEO and executive 
  management (after tax), 
  one-off 
  demerger related expenses 
  (after tax) and one-off 
  impact 
  of re-measurement of 
  deferred 
  tax balances                          -           -        -       (929)      NMF     (4,094)    (12,924)   -68.3% 
 Profit                            48,428      32,079    51.0%      38,198    26.8%     127,651      77,524    64.7% 
 
 BALANCE SHEET HIGHLIGHTS 
 Net loans and finance lease 
  receivables, currency 
  blended                       3,588,099   2,477,267    44.8%   3,208,823    11.8%   3,588,099   2,477,267    44.8% 
    Net loans and finance 
     lease 
     receivables, GEL             640,555     453,908    41.1%     526,572    21.6%     640,555     453,908    41.1% 
    Net loans and finance 
     lease 
     receivables, FC            2,947,544   2,023,359    45.7%   2,682,251     9.9%   2,947,544   2,023,359    45.7% 
 Client deposits, currency 
  blended                       3,720,322   3,552,321     4.7%   3,427,166     8.6%   3,720,322   3,552,321     4.7% 
    Client deposits, GEL        1,337,082   1,583,941   -15.6%   1,260,869     6.0%   1,337,082   1,583,941   -15.6% 
    Client deposits, FC         2,383,240   1,968,380    21.1%   2,166,297    10.0%   2,383,240   1,968,380    21.1% 
 Time deposits, currency 
  blended                       1,321,057   1,739,849   -24.1%   1,252,061     5.5%   1,321,057   1,739,849   -24.1% 
    Time deposits, GEL            411,438     868,391   -52.6%     403,114     2.1%     411,438     868,391   -52.6% 
    Time deposits, FC             909,619     871,458     4.4%     848,947     7.1%     909,619     871,458     4.4% 
 Current accounts and demand 
  deposits, currency blended    2,399,265   1,812,472    32.4%   2,175,105    10.3%   2,399,265   1,812,472    32.4% 
    Current accounts and 
     demand 
     deposits, GEL                925,644     715,550    29.4%     857,755     7.9%     925,644     715,550    29.4% 
    Current accounts and 
     demand 
     deposits, FC               1,473,621   1,096,922    34.3%   1,317,350    11.9%   1,473,621   1,096,922    34.3% 
 Letters of credit and 
  guarantees, 
  standalone (off-balance 
  sheet 
  item)                         1,282,865     679,324    88.8%   1,141,715    12.4%   1,282,865     679,324    88.8% 
 Assets under management        2,547,604   2,180,100    16.9%   2,504,280     1.7%   2,547,604   2,180,100    16.9% 
 
 RATIOS 
 ROAE(15)                           24.6%       22.6%                22.0%                24.5%       20.8% 
 Net interest margin, 
  currency 
  blended                            2.8%        3.4%                 3.3%                 3.1%        3.4% 
 Cost of credit risk ratio          -0.2%        1.5%                 0.7%                 0.2%        1.2% 
 Cost of funds, currency 
  blended                            4.9%        4.8%                 4.7%                 4.6%        4.6% 
 Loan yield, currency blended        8.9%       10.8%                 9.5%                 9.1%       10.3% 
    Loan yield, GEL                 11.5%       13.5%                12.6%                11.8%       13.2% 
    Loan yield, FC                   8.4%       10.2%                 8.9%                 8.6%        9.8% 
 Cost of deposits, currency 
  blended                            3.4%        4.4%                 3.7%                 3.5%        4.1% 
    Cost of deposits, GEL            5.6%        6.6%                 5.9%                 5.7%        6.4% 
    Cost of deposits, FC             2.2%        2.4%                 2.2%                 2.2%        2.4% 
 Cost of time deposits, 
  currency 
  blended                            5.4%        6.2%                 5.7%                 5.5%        6.0% 
    Cost of time deposits, 
     GEL                             7.1%        7.7%                 7.6%                 7.3%        7.8% 
    Cost of time deposits, FC        4.5%        4.5%                 4.5%                 4.4%        4.5% 
 Current accounts and demand 
  deposits, currency blended         2.3%        2.6%                 2.4%                 2.3%        2.7% 
    Current accounts and 
     demand 
     deposits, GEL                   4.7%        5.3%                 4.8%                 4.8%        5.3% 
    Current accounts and 
     demand 
     deposits, FC                    0.8%        0.7%                 0.7%                 0.7%        1.0% 
 Cost / income ratio(16)            30.4%       30.5%                30.0%                29.2%       31.4% 
 Concentration of top ten 
  clients                            9.4%        9.9%                 9.1%                 9.4%        9.9% 
 

(15) The income statement adjusted profit excludes GEL 0.9mln in 2Q19 and GEL 4.1mln in 9M19 one-off employee costs (net-off income tax) related to the former CEO and executive management termination benefits. The amount is comprised of GEL 1.1mln in 2Q19 and GEL 3.8mln in 9M19 (gross of income tax) excluded from salaries and other employee benefits and GEL 1.1mln (gross of income tax) excluded from non-recurring items in 9M19. The income statement adjusted profit for 9M18 excludes GEL 12.9mln demerger related expenses (net of income tax) and one-off impact of re-measurement of deferred tax balances. The ROAE has been adjusted accordingly for all respective periods presented

(16) Cost/income ratio is adjusted for GEL 1.1mln in 2Q19 and GEL 3.8mln in 9M19 one-off employee costs (gross of income tax) related to termination benefits of the former executive management

Performance highlights

-- Corporate and Investment Banking delivered strong quarterly results. CIB continued further growth during the third quarter of 2019 and generated strong net fee and commission income and net foreign currency gains during the period, coupled with efficient cost discipline and improved asset quality, resulting in outstanding profitability during the quarter

-- CIB delivered solid net interest income during the third quarter 2019 (up by 8.3% y-o-y, but slightly down by 4.0% q-o-q, and up by 13.7% y-o-y in 9M19). CIB NIM was 2.8% in 3Q19 (down 60bps y-o-y and down 50bps q-o-q) and 3.1% in 9M19 (down 30bps y-o-y). In 3Q19, decline in NIM both y-o-y and q-o-q was due to an increase in cost of funds (up 10bps y-o-y and up 20bps q-o-q), coupled with a decline in currency blended loan yields (down 190bps y-o-y and down 60bps q-o-q). In the first nine months of 2019, 30bps y-o-y decrease in NIM was driven by flat cost of funds and 120bps decline in loan yields y-o-y

-- CIB's net fee and commission income reached GEL 9.8mln in 3Q19, up 36.7% y-o-y and up 38.1% q-o-q, ending the first nine months of 2019 with GEL 25.1mln net fee and commission income, up 27.1% y-o-y. The outstanding growth in net fee and commission income in all periods presented was largely driven by increased fees from guarantees and letters of credit issued and higher placement fees during 2019

-- CIB's loan book and de-dollarisation. CIB loan portfolio reached GEL 3,588.1mln at 30 September 2019, up 44.8% y-o-y and up 11.8% q-o-q. On a constant currency basis, CIB loan book was up 31.1% y-o-y and up 9.1% q-o-q (up 26.8% y-o-y excluding the GEL 120mln loan portfolio reclassification from SME to CIB in the second quarter 2019). The concentration of the top 10 CIB clients stood at 9.4% at 30 September 2019 (9.9% at 30 September 2018 and 9.1% at 30 June 2019). Foreign currency denominated net loans represented 82.1% of CIB's loan portfolio at 30 September 2019, compared to 81.7% a year ago and 83.6% at 30 June 2019. At 30 September 2019, 38.9% of total gross CIB loans were issued in foreign currency with exposure to foreign currency risk in regards of income, while 43.3% of total gross CIB loans were issued in foreign currency with no or minimal exposure to foreign currency risk

-- Dollarisation of CIB deposits increased to 64.1% at 30 September 2019 from 55.4% a year ago and from 63.2% at 30 June 2019. A y-o-y and q-o-q increase in foreign currency denominated deposits was partially due to local currency depreciation in 2019. Despite the y-o-y decline in interest rates on local currency deposits in 3Q19 and 9M19, the cost of deposits in local currency still remained well above the cost of foreign currency deposits

-- Net other income. Significant y-o-y decline in net other income in 3Q19 and 9M19 was largely driven by net losses from derivative financial instruments (interest rate swap hedges) recorded during the first and second quarters of 2019 (the long-term contracts were closed in 3Q19). These losses were partially offset by net gains from investment securities during the same periods

-- Cost of credit risk. CIB's cost of credit risk ratio remained well-controlled and stood at net credit of 0.2% in 3Q19 (down from 1.5% in 3Q18 and down from 0.7% in 2Q19) and at 0.2% in the first nine months of 2019 (down 100bps y-o-y), primarily driven by the improved quality of the CIB loan portfolio and the recovery of several mid- to low-sized corporate loans in 3Q19. At the same time, CIB's NPL coverage ratio was 78.5% at 30 September 2019 (87.5% as at 30 September 2018 and 83.7% at 30 June 2019)

-- As a result, CIB's profit adjusted for one-off costs (see details in footnotes on page 16) was GEL 48.4mln in 3Q19, up 51.0% y-o-y and up 23.8% q-o-q, and GEL 131.7mln in 9M19, up 45.7% y-o-y. CIB ROAE(17) was 24.6% in 3Q19 (22.6% a year ago and 22.0% in 2Q19) and 24.5% in 9M19 (compared to 20.8% in 9M18)

(17) ROAE adjusted for GEL 0.9mln in 2Q19 and GEL 4.1mln in 9M19 one-off employee costs (net of income tax) related to termination benefits of the former CEO and executive management. 9M18 ROAE adjusted for GEL 12.9mln demerger related expenses (net of income tax) and one-off impact of re-measurement of deferred tax balances

Performance highlights of investment management operations

-- The Investment Management's AUM increased to GEL 2,547.6mln in 3Q19, up 16.9% y-o-y and up 1.7% q-o-q. This includes a) deposits of Wealth Management franchise clients, b) assets held at Bank of Georgia Custody, c) Galt & Taggart brokerage client assets, and d) Global certificates of deposit held by Wealth Management clients. The y-o-y and q-o-q increase in AUM mostly reflected increase in client assets and bond issuance activity at Galt & Taggart

-- Wealth Management deposits reached GEL 1,383.0mln in 3Q19, up 18.1% y-o-y and up 8.2% q-o-q, growing at a compound annual growth rate (CAGR) of 12.5% over the last five-year period. The cost of deposits was 3.2% in 3Q19, flat y-o-y and down 10bps q-o-q, and 3.2% in 9M19, down 20bps y-o-y

-- We served 1,537 wealth management clients from 77 countries as of 30 September 2019, compared to 1,510 clients as of 30 September 2018 and 1,531 clients as of 30 June 2019

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

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

-- During the first nine months of 2019 Galt & Taggart acted as a:

- lead manager of JSC Microfinance Organisation Crystal's GEL 15mln local public bond issuance due in 2021, in February 2019

- co-manager of Bank of Georgia's inaugural US$ 100mln international Additional Tier 1 bond issuance, in March 2019

- lead manager of JSC Microfinance Organisation Swiss Capital's GEL 10mln local public bond issuance due in 2021, in March 2019

- lead manager for European Bank for Reconstruction and Development (EBRD), facilitating GEL 90mln local private bond issuance due in 2023, in March 2019

- lead manager for Nederlandse Financierings - Maatschappij Voor Ontwikkelingslanden N.V. (FMO), facilitating GEL 26mln local private bond issuance due in 2024, in March 2019

- buy-side advisor for Bank of Georgia Group on acquisition of extra.ge online platform, in May 2019

- lead manager for Black Sea Trade and Development Bank (BSTDB), facilitating GEL 10mln local private bond issuance due in 2022, in June 2019

- sole sell-side advisor of Linnaeus Capital Partners B.V. on a sale of 100% shareholding in Lilo1- logistics center, in June 2019

- lead manager for EBRD, facilitating c.GEL 28mln local private bond issuance due in 2024, in July 2019

- lead manager of Georgian Leasing Company LTD's US$ 10mln local public bond issuance due in 2021, in July 2019

- lead manager for Black Sea Trade and Development Bank (BSTDB), facilitating GEL 5mln local private bond issuance due in 2022, in September 2019

-- In February 2019, Global Finance Magazine named Galt & Taggart Best Investment Bank in Georgia for the fifth consecutive year

-- In February 2019, Galt & Taggart together with JSC Bank of Georgia organised a conference under "G&T Industry Series" to discuss the findings of Galt & Taggart's research on Georgia's energy sector with an emphasis on ongoing reforms and their impact on the sector development. The conference gathered together all stakeholders including high level representatives from the Government, private sector and IFIs. A follow-up conference was held in April 2019 due to high interest from the Government and private sector participants. The Deputy Minister of Economy and Sustainable Development, Head of energy regulatory commission and Head of Georgian Energy Development Fund presented the Government's vision of the reform process, while Galt & Taggart focused on the reform vision from private sector perspective. Presentations were followed by panel discussions with key market players affected by the reform process

-- In May 2019, Galt & Taggart participated in a competitive tender process and won a three year exclusive mandate to manage the private pension fund of a large Georgian corporate client

SELECTED FINANCIAL INFORMATION

 
INCOME STATEMENT (QUARTERLY)                      Bank of Georgia Group Consolidated 
GEL thousands, unless otherwise                                   Change             Change 
 noted                                           3Q19       3Q18   y-o-y       2Q19   q-o-q 
 
Interest income                               366,721    337,766    8.6%    342,224    7.2% 
Interest expense                            (178,039)  (152,431)   16.8%  (160,602)   10.9% 
Net interest income                           188,682    185,335    1.8%    181,622    3.9% 
Fee and commission income                      76,166     60,413   26.1%     68,025   12.0% 
Fee and commission expense                   (28,157)   (20,932)   34.5%   (24,758)   13.7% 
Net fee and commission income                  48,009     39,481   21.6%     43,267   11.0% 
Net foreign currency gain                      44,543     36,827   21.0%     36,700   21.4% 
Net other income                                3,728      7,437  -49.9%    (4,260)     NMF 
Operating income                              284,962    269,080    5.9%    257,329   10.7% 
 Salaries and other employee benefits 
  (excluding one-offs)                       (59,539)   (54,107)   10.0%   (57,982)    2.7% 
 One-off termination costs of former                -          -       -    (4,570)     NMF 
  executive management (1) 
Salaries and other employee benefits         (59,539)   (54,107)   10.0%   (62,552)   -4.8% 
Administrative expenses                      (26,251)   (30,759)  -14.7%   (22,033)   19.1% 
Depreciation, amortisation and 
 impairment                                  (21,320)   (11,162)   91.0%   (17,295)   23.3% 
Other operating expenses                        (807)    (1,109)  -27.2%    (1,248)  -35.3% 
Operating expenses                          (107,917)   (97,137)   11.1%  (103,128)    4.6% 
Profit from associates                            194        326  -40.5%        254  -23.6% 
Operating income before cost of 
 risk                                         177,239    172,269    2.9%    154,455   14.8% 
Expected credit loss / impairment 
 charge on loans to customers                (13,617)   (43,505)  -68.7%   (32,436)  -58.0% 
Expected credit loss / impairment 
 charge on finance lease receivables            (333)      (426)  -21.8%      (557)  -40.2% 
Other expected credit loss / impairment 
 charge on other assets and provisions        (1,273)    (4,176)  -69.5%    (2,483)  -48.7% 
Cost of risk                                 (15,223)   (48,107)  -68.4%   (35,476)  -57.1% 
Net operating income before non-recurring 
 items                                        162,016    124,162   30.5%    118,979   36.2% 
Net non-recurring items                       (5,019)    (3,747)   33.9%    (2,538)   97.8% 
Profit before income tax expense              156,997    120,415   30.4%    116,441   34.8% 
 Income tax expense (excluding one-offs)     (22,697)    (9,316)  143.6%    (9,871)  129.9% 
 Income tax benefit related to one-off              -          -       -        574     NMF 
  termination costs, one-off demerger 
  related expenses and one-off impact 
  of re-measurement of deferred tax 
  balances (2) 
Income tax expense                           (22,697)    (9,316)  143.6%    (9,297)  144.1% 
Profit                                        134,300    111,099   20.9%    107,144   25.3% 
 
One-off items (1)+(2)                               -          -       -    (3,996)     NMF 
 
 
Profit attributable to: 
  - shareholders of the Group                 133,687    110,651   20.8%    106,642   25.4% 
  - non-controlling interests                     613        448   36.8%        502   22.1% 
 
Earnings per share (basic)                       2.81       2.32   21.1%       2.23   26.0% 
Earnings per share (diluted)                     2.81       2.32   21.1%       2.23   26.0% 
 
 
INCOME STATEMENT (NINE         Bank of Georgia              Banking Business        Discontinued Operations      Eliminations 
MONTHS)                       Group Consolidated 
GEL thousands, unless 
 otherwise                                    Change                        Change                   Change                 Change 
 noted                       9M19       9M18   y-o-y       9M19       9M18   y-o-y  9M19     9M18     y-o-y  9M19     9M18   y-o-y 
 
Interest income         1,043,680    976,537    6.9%  1,043,680    981,325   6.40%     -        -         -     -  (4,788)     NMF 
Interest expense        (490,435)  (422,222)   16.2%  (490,435)  (429,159)  14.30%     -        -         -     -    6,937     NMF 
Net interest income       553,245    554,315   -0.2%    553,245    552,166    0.2%     -        -         -     -    2,149     NMF 
Fee and commission 
 income                   206,721    166,418   24.2%    206,721    167,319   23.5%     -        -         -     -    (901)     NMF 
Fee and commission 
 expense                 (73,265)   (55,100)   33.0%   (73,265)   (55,481)   32.1%     -        -         -     -      381     NMF 
Net fee and commission 
 income                   133,456    111,318   19.9%    133,456    111,838   19.3%     -        -         -     -    (520)     NMF 
Net foreign currency 
 gain                     111,268     75,404   47.6%    111,268     76,079   46.3%     -        -         -     -    (675)     NMF 
Net other income / 
 (expense)                  3,035     16,335  -81.4%      3,035     16,888  -82.0%     -        -         -     -    (553)     NMF 
Operating income          801,004    757,372    5.8%    801,004    756,971    5.8%     -        -         -     -      401     NMF 
 Salaries and other 
  employee 
  benefits (excluding 
  one-offs)             (169,938)  (156,430)    8.6%  (169,938)  (157,485)    7.9%     -        -         -     -    1,055     NMF 
 One-off termination 
  costs of 
  former executive 
  management 
  (1)                    (12,412)          -     NMF   (12,412)          -     NMF     -        -         -     -        -       - 
Salaries and other 
 employee 
 benefits               (182,350)  (156,430)   16.6%  (182,350)  (157,485)   15.8%     -        -         -     -    1,055     NMF 
Administrative 
 expenses                (71,025)   (82,644)  -14.1%   (71,025)   (83,254)  -14.7%     -        -         -     -      610     NMF 
Depreciation, 
 amortisation 
 and impairment          (54,303)   (34,077)   59.4%   (54,303)   (34,077)   59.4%     -        -         -     -        -       - 
Other operating 
 expenses                 (3,135)    (2,844)   10.2%    (3,135)    (2,844)   10.2%     -        -         -     -        -       - 
Operating expenses      (310,813)  (275,995)   12.6%  (310,813)  (277,660)   11.9%     -        -         -     -    1,665     NMF 
Profit from associates        636      1,021  -37.7%        636      1,021  -37.7%     -        -         -     -        -       - 
Operating income 
 before cost 
 of risk                  490,827    482,398    1.7%    490,827    480,332    2.2%     -        -         -     -    2,066     NMF 
Expected credit loss / 
 impairment 
 charge on loans to 
 customers               (86,170)  (113,716)  -24.2%   (86,170)  (113,716)  -24.2%     -        -         -     -        -       - 
Expected credit loss / 
 impairment 
 charge on finance 
 lease receivables        (1,336)      (678)   97.1%    (1,336)      (678)   97.1%     -        -         -     -        -       - 
Other expected credit 
 loss 
 / impairment charge 
 on other 
 assets and provisions    (5,845)    (5,053)   15.7%    (5,845)    (5,053)   15.7%     -        -         -     -        -       - 
Cost of risk             (93,351)  (119,447)  -21.8%   (93,351)  (119,447)  -21.8%     -        -         -     -        -       - 
Net operating income 
 before 
 non-recurring items      397,476    362,951    9.5%    397,476    360,885   10.1%     -        -         -     -    2,066     NMF 
 Net non-recurring 
  items (excluding 
  one-offs)               (9,132)   (20,286)  -55.0%    (9,132)   (20,458)  -55.4%     -        -         -     -      172     NMF 
 One-off termination 
  costs of 
  former CEO, one-off 
  demerger 
  related expenses (2)    (3,985)   (30,284)  -86.8%    (3,985)   (30,284)  -86.8%     -        -         -     -        -       - 
Net non-recurring 
 items                   (13,117)   (50,570)  -74.1%   (13,117)   (50,742)  -74.1%     -        -         -     -      172     NMF 
Profit before income 
 tax expense 
 from continuing 
 operations               384,359    312,381   23.0%    384,359    310,143   23.9%     -        -         -     -    2,238     NMF 
 Income tax expense 
  (excluding 
  one-offs)              (43,104)   (24,060)   79.2%   (43,104)   (24,060)   79.2%     -        -         -     -        -       - 
 Income tax benefit 
  related 
  to one-off 
  termination costs, 
  one-off demerger 
  related expenses 
  and one-off impact 
  of re-measurement 
  of deferred tax 
  balances (3)              2,161   (22,257)     NMF      2,161   (22,257)     NMF     -        -         -     -        -       - 
Income tax expense       (40,943)   (46,317)  -11.6%   (40,943)   (46,317)  -11.6%     -        -         -     -        -       - 
Profit from continuing 
 operations               343,416    266,064   29.1%    343,416    263,826   30.2%     -        -         -     -    2,238     NMF 
Profit from 
 discontinued 
 operations                     -    107,899     NMF          -          -       -     -  110,137       NMF     -  (2,238)     NMF 
Profit                    343,416    373,963   -8.2%    343,416    263,826   30.2%     -  110,137       NMF     -        -       - 
 
One-off items 
 (1)+(2)+(3)             (14,236)   (52,541)  -72.9%   (14,236)   (52,541)  -72.9% 
 
 
Profit attributable 
to: 
  - shareholders of 
   the Group              341,841    354,757   -3.6%    341,841    262,835   30.1%     -   91,922       NMF     -        -       - 
  - non-controlling 
   interests                1,575     19,206  -91.8%      1,575        991   58.9%     -   18,215       NMF     -        -       - 
 
Profit from continuing 
operations 
attributable to: 
  - shareholders of 
   the Group              341,841    265,073   29.0%    341,841    262,835   30.1%     -        -         -     -    2,238     NMF 
  - non-controlling 
   interests                1,575        991   58.9%      1,575        991   58.9%     -        -         -     -        -       - 
 
Profit from 
discontinued 
operations 
attributable to: 
  - shareholders of 
   the Group                    -     89,684     NMF          -          -       -     -   91,922       NMF     -  (2,238)     NMF 
  - non-controlling 
   interests                    -     18,215     NMF          -          -       -     -   18,215       NMF     -        -       - 
 
Earnings per share 
 (basic)                     7.16       8.20  -12.7% 
  - earnings per share 
   from continuing 
   operations                7.16       6.13   16.8% 
  - earnings per share          -       2.07     NMF 
  from discontinued 
  operations 
 
Earnings per share 
 (diluted)                   7.14       8.11  -12.0% 
  - earnings per share 
   from continuing 
   operations                7.14       6.06   17.8% 
  - earnings per share          -       2.05     NMF 
   from discontinued 
   operations 
 
 
 BALANCE SHEET                                   Bank of Georgia Group Consolidated 
 GEL thousands, unless otherwise           Sep-19       Sep-18   Change       Jun-19   Change 
  noted                                                           y-o-y                 q-o-q 
 
 Cash and cash equivalents              1,369,169    1,237,867    10.6%      936,106    46.3% 
 Amounts due from credit 
  institutions                          1,834,220    1,398,061    31.2%    1,704,701     7.6% 
 Investment securities                  1,895,722    2,060,880    -8.0%    1,896,738    -0.1% 
 Loans to customers and finance 
  lease receivables                    11,339,745    8,762,413    29.4%   10,579,710     7.2% 
 Accounts receivable and 
  other loans                               4,475        3,256    37.4%        3,688    21.3% 
 Prepayments                               43,795       48,444    -9.6%       36,026    21.6% 
 Inventories                               11,257       18,598   -39.5%       11,748    -4.2% 
 Right-of-use assets                      106,130            -      NMF      105,874     0.2% 
 Investment property                      193,499      216,715   -10.7%      178,764     8.2% 
 Property and equipment                   364,405      315,980    15.3%      358,921     1.5% 
 Goodwill                                  33,351       33,351     0.0%       33,351     0.0% 
 Intangible assets                         95,829       85,247    12.4%       93,515     2.5% 
 Income tax assets                          7,682       28,236   -72.8%        5,080    51.2% 
 Other assets                             202,426      105,884    91.2%      149,233    35.6% 
 Assets held for sale                      38,987            -      NMF       40,544    -3.8% 
 Total assets                          17,540,692   14,314,932    22.5%   16,133,999     8.7% 
 Client deposits and notes              9,613,718    7,932,536    21.2%    8,855,616     8.6% 
 Amounts due to credit institutions     3,437,718    3,006,739    14.3%    2,960,519    16.1% 
 Debt securities issued                 2,175,820    1,578,532    37.8%    2,137,239     1.8% 
 Lease liabilities                        105,285            -      NMF      100,172     5.1% 
 Accruals and deferred income              41,521       35,977    15.4%       34,748    19.5% 
 Income tax liabilities                    39,251       38,705     1.4%       30,361    29.3% 
 Other liabilities                         87,520       52,495    66.7%       97,125    -9.9% 
 Total liabilities                     15,500,833   12,644,984    22.6%   14,215,780     9.0% 
 Share capital                              1,618        1,618     0.0%        1,618     0.0% 
 Additional paid-in capital               498,593      464,960     7.2%      493,890     1.0% 
 Treasury shares                             (53)         (44)    20.5%         (49)     8.2% 
 Other reserves                            28,472       34,283   -17.0%       46,744   -39.1% 
 Retained earnings                      1,502,248    1,161,983    29.3%    1,367,632     9.8% 
 Total equity attributable 
  to shareholders of the Group          2,030,878    1,662,800    22.1%    1,909,835     6.3% 
 Non-controlling interests                  8,981        7,148    25.6%        8,384     7.1% 
 Total equity                           2,039,859    1,669,948    22.2%    1,918,219     6.3% 
 Total liabilities and equity          17,540,692   14,314,932    22.5%   16,133,999     8.7% 
 Book value per share                       42.69        34.89    22.4%        40.06     6.6% 
 

BELARUSKY NARODNY BANK (BNB)

 
                                                     Change             Change                         Change 
 INCOME STATEMENT, HIGHLIGHTS       3Q19      3Q18    y-o-y      2Q19    q-o-q       9M19       9M18    y-o-y 
 GEL thousands, unless 
  otherwise stated 
 
  Net interest income              7,447     6,525    14.1%     6,360    17.1%     20,392     19,423     5.0% 
  Net fee and commission 
   income                          1,956     1,669    17.2%     1,798     8.8%      5,567      6,449   -13.7% 
  Net foreign currency 
   gain                            5,405     3,885    39.1%     4,779    13.1%     14,140     11,344    24.6% 
  Net other income                    57       105   -45.7%       169   -66.3%        371        414   -10.4% 
  Operating income                14,865    12,184    22.0%    13,106    13.4%     40,470     37,630     7.5% 
  Operating expenses             (9,135)   (7,571)    20.7%   (8,890)     2.8%   (25,873)   (23,476)    10.2% 
  Operating income before 
   cost of risk                    5,730     4,613    24.2%     4,216    35.9%     14,597     14,154     3.1% 
  Cost of risk                       293     (718)      NMF   (1,536)      NMF    (2,684)    (3,741)   -28.3% 
  Net non-recurring items            (1)       (3)   -66.7%      (13)   -92.3%       (64)      (708)   -91.0% 
  Profit before income 
   tax expense                     6,022     3,892    54.7%     2,667   125.8%     11,849      9,705    22.1% 
  Income tax expense             (1,193)     (885)    34.8%     (379)      NMF    (2,143)    (2,383)   -10.1% 
  Profit                           4,829     3,007    60.6%     2,288   111.1%      9,706      7,322    32.6% 
 
 
 BALANCE SHEET, HIGHLIGHTS      Sep-19    Sep-18   Change    Jun-19   Change 
                                                    y-o-y              q-o-q 
 GEL thousands, unless 
  otherwise stated 
 
 Cash and cash equivalents     170,787    65,808   159.5%    93,097    83.5% 
 Amounts due from credit 
  institutions                  22,534    11,469    96.5%    18,301    23.1% 
 Investment securities         101,511   109,798    -7.5%   128,486   -21.0% 
 Loans to customers and 
  finance lease receivables    556,541   394,749    41.0%   512,126     8.7% 
 Other assets                   59,397    42,038    41.3%    57,098     4.0% 
 Total assets                  910,770   623,862    46.0%   809,108    12.6% 
 Client deposits and notes     588,647   363,233    62.1%   503,309    17.0% 
 Amounts due to credit 
  institutions                 132,648   146,932    -9.7%   146,855    -9.7% 
 Debt securities issued         72,931    28,825   153.0%    50,238    45.2% 
 Other liabilities               8,239     4,433    85.9%     7,044    17.0% 
 Total liabilities             802,465   543,423    47.7%   707,446    13.4% 
 Total equity                  108,305    80,439    34.6%   101,662     6.5% 
 Total liabilities and 
  equity                       910,770   623,862    46.0%   809,108    12.6% 
 
 
 BANKING BUSINESS KEY RATIOS                  3Q19        3Q18        2Q19        9M19        9M18 
 Profitability 
  ROAA, annualised(18)                        3.2%        3.2%        2.9%        3.0%        3.2% 
  ROAA, annualised (unadjusted)               3.2%        3.2%        2.8%        2.9%        2.6% 
  ROAE, annualised(18)                       26.8%       26.8%       22.9%       24.7%       26.2% 
       RB ROAE(18)                           30.7%       30.9%       26.9%       27.6%       31.2% 
       CIB ROAE(18)                          24.6%       22.6%       22.0%       24.5%       20.8% 
  ROAE, annualised (unadjusted)              26.8%       26.8%       22.1%       23.7%       21.8% 
  Net interest margin, annualised             5.1%        6.4%        5.4%        5.4%        6.8% 
       RB NIM                                 5.9%        7.2%        5.9%        6.0%        7.8% 
       CIB NIM                                2.8%        3.4%        3.3%        3.1%        3.4% 
  Loan yield, annualised                     11.5%       13.5%       11.8%       11.8%       13.7% 
       RB Loan yield                         12.8%       14.8%       12.9%       13.1%       15.4% 
       CIB Loan yield                         8.9%       10.8%        9.5%        9.1%       10.3% 
  Liquid assets yield, annualised             3.2%        3.8%        3.4%        3.4%        3.7% 
  Cost of funds, annualised                   4.8%        5.0%        4.8%        4.8%        5.0% 
  Cost of client deposits and 
   notes, annualised                          3.2%        3.6%        3.3%        3.3%        3.5% 
       RB Cost of client deposits 
        and notes                             3.0%        2.8%        3.0%        3.0%        2.8% 
       CIB Cost of client deposits 
        and notes                             3.4%        4.4%        3.7%        3.5%        4.1% 
  Cost of amounts due to credit 
   institutions, annualised                   7.1%        7.4%        7.2%        7.2%        7.1% 
  Cost of debt securities issued              8.2%        7.8%        8.1%        8.0%        7.8% 
  Operating leverage, y-o-y(19)              -5.2%        6.8%       -4.2%       -1.7%        2.5% 
  Operating leverage, q-o-q(19)               1.2%        2.0%       -7.7%        0.0%        0.0% 
 Efficiency 
  Cost / Income(19)                          37.9%       36.1%       38.3%       37.3%       36.7% 
       RB Cost / Income(19)                  38.0%       36.3%       37.8%       37.1%       36.5% 
       CIB Cost /Income(19)                  30.4%       30.5%       30.0%       29.2%       31.4% 
  Cost / Income (unadjusted)                 37.9%       36.1%       40.1%       38.8%       36.7% 
 Liquidity 
  NBG liquidity ratio (minimum 
   requirement 30%)                          36.8%       32.5%       37.0%       36.8%       32.5% 
  NBG liquidity coverage ratio 
   (minimum requirement 100%)               118.5%        0.0%      114.3%      118.5%        0.0% 
  Liquid assets to total liabilities         32.9%       37.1%       31.9%       32.9%       37.1% 
  Net loans to client deposits 
   and notes                                118.0%      110.5%      119.5%      118.0%      110.5% 
  Net loans to client deposits 
   and notes + DFIs                         103.4%       95.3%      104.7%      103.4%       95.3% 
  Leverage (times)                             7.6         7.6         7.4         7.6         7.6 
 Asset quality: 
  NPLs (in GEL)                            339,118     312,203     347,285     339,118     312,203 
  NPLs to gross loans to clients              2.9%        3.5%        3.2%        2.9%        3.5% 
  NPL coverage ratio                         85.3%       91.7%       88.1%       85.3%       91.7% 
  NPL coverage ratio, adjusted 
   for discounted value of collateral       129.3%      136.9%      131.5%      129.3%      136.9% 
  Cost of credit risk, annualised             0.5%        2.0%        1.3%        1.1%        1.8% 
       RB Cost of credit risk                 0.9%        2.4%        1.6%        1.6%        2.2% 
       CIB Cost of credit risk               -0.2%        1.5%        0.7%        0.2%        1.2% 
 Capital adequacy: 
  NBG (Basel III) CET1 capital 
   adequacy ratio                            11.1%       11.0%       11.0%       11.1%       11.0% 
  Minimum regulatory requirement              9.5%        8.0%        9.6%        9.5%        8.0% 
  NBG (Basel III) Tier I capital 
   adequacy ratio                            13.3%       11.0%       13.3%       13.3%       11.0% 
    Minimum regulatory requirement           11.6%        9.9%       11.6%       11.6%        9.9% 
  NBG (Basel III) Total capital 
   adequacy ratio                            16.8%       15.9%       16.7%       16.8%       15.9% 
    Minimum regulatory requirement           16.1%       14.9%       16.1%       16.1%       14.9% 
 
 Selected operating data: 
  Total assets per FTE                       2,402       1,961       2,184       2,402       1,961 
  Number of active branches, 
   of which:                                   276         285         276         276         285 
   - Express branches (including 
    Metro)                                     167         169         167         167         169 
   - Bank of Georgia branches                   97         104          97          97         104 
   - Solo lounges                               12          12          12          12          12 
  Number of ATMs                               911         858         890         911         858 
  Number of cards outstanding, 
   of which:                             2,121,830   2,192,870   2,122,006   2,121,830   2,192,870 
   - Debit cards                         1,674,105   1,603,960   1,634,843   1,674,105   1,603,960 
   - Credit cards                          447,725     588,910     487,163     447,725     588,910 
  Number of POS terminals                   21,088      15,569      19,667      21,088      15,569 
 
    FX Rates: 
  GEL/US$ exchange rate (period-end)        2.9552      2.6151      2.8687 
  GEL/GBP exchange rate (period-end)        3.6319      3.4130      3.6384 
 
 
                                Sep-19   Sep-18   Jun-19 
 Full time employees (FTE), 
  of which:                      7,304    7,300    7,386 
  - Full time employees, BOG 
   standalone                    5,706    5,709    5,786 
  - Full time employees, BNB       584      705      632 
  - Full time employees, BB 
   other                         1,014      886      968 
 
 
 Shares outstanding              Sep-19       Sep-18       Jun-19 
 Ordinary shares             47,574,153   47,656,452   47,669,887 
 Treasury shares              1,595,275    1,512,978    1,499,541 
 Total shares outstanding    49,169,428   49,169,430   49,169,428 
 

(18) 2Q19 and 9M19 ratios adjusted for one-off employee costs related to termination benefits of the former CEO and executive management. 9M18 ratios adjusted for demerger related expenses and one-off impact of re-measurement of deferred tax balances

(19) 2Q19 and 9M19 results adjusted for one-off employee costs related to termination benefits of the former executive management

GLOSSARY

-- Alternative performance measures (APMs) In this announcement the management uses various APMs, which they believe provide additional useful information for understanding the financial performance of the Group. These APMs are not defined by International Financial Reporting Standards, and also may not be directly comparable with other companies who use similar measures. We believe that these APMs provide the best representation of our financial performance as these measures are used by management to evaluate the Group's operating performance and make day-to-day operating decisions;

-- Cost of funds Interest expense of the period divided by monthly average interest bearing liabilities;

-- Cost of credit risk Expected loss/impairment charge for loans to customers and finance lease receivables for the period divided by monthly average gross loans to customers and finance lease receivables over the same period;

-- Cost to income ratio Operating expenses divided by operating income;

-- Interest bearing liabilities Amounts due to credit institutions, client deposits and notes, and debt securities issued;

-- Interest earning assets (excluding cash) Amounts due from credit institutions, investment securities (but excluding corporate shares) and net loans to customers and finance lease receivables;

-- Leverage (times) Total liabilities divided by total equity;

-- Liquid assets Cash and cash equivalents, amounts due from credit institutions and investment securities;

-- Liquidity coverage ratio (LCR) High quality liquid assets (as defined by NBG) divided by net cash outflows over the next 30 days (as defined by NBG);

-- Loan yield Interest income from loans to customers and finance lease receivables divided by monthly average gross loans to customers and finance lease receivables;

-- NBG liquidity ratio Daily average liquid assets (as defined by NBG) during the month divided by daily average liabilities (as defined by NBG) during the month;

-- NBG (Basel III) Common Equity Tier I capital adequacy ratio Common Equity Tier I capital divided by total risk weighted assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions;

-- NBG (Basel III) Tier I capital adequacy ratio Tier I capital divided by total risk weighted assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions;

-- NBG (Basel III) Total capital adequacy ratio Total regulatory capital divided by total risk weighted assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions;

-- Net interest margin (NIM) Net interest income of the period divided by monthly average interest earning assets excluding cash for the same period;

-- Non-performing loans (NPLs) The principal and interest on loans overdue for more than 90 days and any additional potential losses estimated by management;

-- NPL coverage ratio Allowance for expected credit loss/impairment loss of loans and finance lease receivables divided by NPLs;

-- NPL coverage ratio adjusted for discounted value of collateral Allowance for expected credit loss/impairment loss of loans and finance lease receivables divided by NPLs (discounted value of collateral is added back to allowance for expected credit loss/impairment loss);

-- Operating leverage Percentage change in operating income less percentage change in operating expenses;

-- Return on average total assets (ROAA) Profit for the period divided by monthly average total assets for the same period;

-- Return on average total equity (ROAE) Profit for the period attributable to shareholders of the Group divided by monthly average equity attributable to shareholders of the Group for the same period;

-- NMF Not meaningful

COMPANY INFORMATION

Bank of Georgia Group PLC

Registered Address

84 Brook Street

London W1K 5EH

United Kingdom

www.bankofgeorgiagroup.com

Registered under number 10917019 in England and Wales

Secretary

Link Company Matters Limited

65 Gresham Street

London EC2V 7NQ

United Kingdom

Stock Listing

London Stock Exchange PLC's Main Market for listed securities

Ticker: "BGEO.LN"

Contact Information

Bank of Georgia Group PLC Investor Relations

Telephone: +44(0) 203 178 4052; +995 322 444444 (9282)

E-mail: ir@bog.ge

Auditors

Ernst & Young LLP

25 Churchill Place

Canary Wharf

London E14 5EY

United Kingdom

Registrar

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol BS13 8AE

United Kingdom

Please note that Investor Centre is a free, secure online service run by our Registrar, Computershare,

giving you convenient access to information on your shareholdings.

Investor Centre Web Address - www.investorcentre.co.uk.

Investor Centre Shareholder Helpline - +44 (0)370 873 5866

Share price information

Shareholders can access both the latest and historical prices via the website

www.bankofgeorgiagroup.com

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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November 07, 2019 02:00 ET (07:00 GMT)

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