Bank of Georgia Investor Presentation May 2010 · JSC Bank of Georgia investor presentation. May...
Transcript of Bank of Georgia Investor Presentation May 2010 · JSC Bank of Georgia investor presentation. May...
May 2010
GROWTH AT THE RIGHT PRICELSE: BGEO / GSE:GEB
JSC Bank of Georgia investor presentation
May 2010 Page 2
Introduction to Bank of GeorgiaThe leading universal bank in Georgia
No.1 by assets (34.3%), (1) gross loans (32.7%), (1) client deposits (29.9%) (1) and equity (39.3%) (1)
Assets of GEL 3.1 bn, Net Loans of GEL 1.8 bn, Client Deposits of GEL 1.4 bn and Equity of GEL 611.7 million Leading retail banking, with top brand, best distribution network and broadest range of services of any bank in Georgia
March 2010 December 2009 September 2009
Number of Retail Clients 732,900+ 730,800+ 700,000+
Retail Accounts 996,500+ 999,000+ 895,000+
Cards Outstanding 570,600+ 537,000+ 569,000+
Branches 140 141 140
ATMs 379 382 394
Leading corporate bank with approximately 85,500 legal entities and over 157,600 current accountsLeading card-processing, leasing, insurance, wealth management and brokerage services providerBanking operations in Ukraine and Belarus, with BG Bank (Ukraine) and BNB (Belarus) accounting for less than 10% of BoG’sconsolidated total assets The only Georgian entity with credit ratings from all three global rating agencies
S&P: ‘B/B’ – at the sovereign ceilingFitch Ratings: ‘B/B’Moody’s: ‘B3/NP (FC)’ & ‘Ba3/NP (LC)’
Listed on the London Stock Exchange (GDRs) and Georgian Stock ExchangeMarket Cap (LSE) US$ 396 mln as of 14 April 2010Approximately 95% free float
Issue of the first ever Eurobonds in GeorgiaBloomberg: BKGEO; 5 year, 9%, US$200 mlnB/Ba2/B (composite B+)
(1) All data according to the NBG as of 31 March 2010
Management & Employees**, 6.2%
Institutional Shareholders*,
91.3%
Local Shares Held by Domestic and
Foreign Retail Shareholders, 2.5%
Ownership Structure
* 5.8% of total shares outstanding held in local shares** Includes GDRs held as part of EECP
May 2010
The Georgian Economy
May 2010 Page 4
Georgia’s Economy – Basic Facts
Area: 69,700 sq kmPopulation: 4.4 million (as of January 1, 2009)Life expectancy: 76.5 yearsOfficial language: GeorgianLiteracy: 100%Capital: TbilisiCurrency (code): Lari (GEL)GDP (2009A): US$10.7 billionGDP real growth rate 2009A: -3.9%GDP real growth rate 2010F: 2%GDP per capita 2009A (market): US$ 2,450GDP per capita 2009F (PPP): US$ 4,747Current account deficit 2009: US$ 1.1bn, 11.9% of GDPBudget Deficit 2009E: 9.5% of GDPBudget Deficit 2010F: 7.3 % of GDPInflation rate (October, 12-month rate) 2009: 3.2%External public debt / GDP 2009E: 27%Sovereign ratings:
Fitch B+/StableS&P B/B
White White Stream Stream
(proposed)(proposed)
May 2010 Page 5
Q1 2010 – selected macro economic data
CPI
Exports and imports of goodsQuarterly net remittances
Quarterly tax revenue by categories
Source: National Statistics Office of Georgia, Government of Georgia
6.2%
8.8%
11.0%
5.5%
3.0%
5.8%
8.2%
9.2% 9.2%
10.0%
1.7%2.2%
0%
2%
4%
6%
8%
10%
12%
2005 2006 2007 2008 2009 Mar-10
CPI (e-o-p) CPI (average)
184
225236
273
146
176
216228
182
0
50
100
150
200
250
300
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
US$ mln
329467 443
257 219 295 307 314 339
1,405
1,7921,611 1,497
965 1,020 1,1301,263
1,020
(1,076)(1,325)
(1,168) (1,240)
(746) (724) (823)(949)
(681)
(1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
US$ mln
Export Import TBD
Q1 2010 Net remittances increased by 24.4% y-o-y
Trade balance deficit decreased by 8.7% compared to Q1 2009 and 37% compared to Q1 2008
Q1 2010 tax revenue increased by 13% y-o-y
Q1 2010 VAT revenue increased 15% y-o-y
475 433 497
259 252275
192171
188116
100105
8144
65
0
200
400
600
800
1000
1200
Q1 2008 Q1 2009 Q1 2010
GEL mln
VAT PIT CIT Excise Other
1,123 1,1301,000
May 2010
• Agricultural product exports of US$282m in 2009• Ferroalloy exports of US$426m in 2008• Aircraft, rail car, vessels and vehicles exports of US$122m
in 2008 and US$107m in 2009• Fertilizers exports of US$105m in 2008 and US$60m 2009• Machinery exports of US$29m in 2008 and US$30m in
2009 • Oil and gas pipelines
– Russia-Georgia-Armenia pipeline – 5.8 bcm/year– Shah-Deniz (BTE) gas pipeline - 6.6 bcm/year– Iran-Azerbaijan-Georgia (IAG) gas pipeline – 3.5
bcm/year– Baku-Supsa oil pipeline – 5.75 mt/year– Baku-Tbilisi-Ceyhan (BTC) oil pipeline - 50 mt/year
• Huge untapped hydro-power resources – only 18% of Georgia’s hydro potential is being utilized; current export capacity of c. 150 MW
• Consumer spending in 2008 - US$3.8bn– estimated average household size of 3.5, far
higher than in most CEE/CIS peers– new construction has not caught up with the
cumulative deterioration of the Soviet-built housing stock
– less than 18,000 households (out of the estimated total of 1.3 million) have mortgages
• Consumer debt per capita (including mortgages) stood at US$92 as of 31 December 2009
• Organized retail trade (supermarkets, hypermarkets, consumer electronics & white goods, etc) account for a low share of total
• Debt /GDP under 30%; Retail loans/GDP under 10%
Economic growth is supported by§ FDI expected at US$0.8 bn in 2010§ Free industrial zones created around Poti (port), Kutaisi (second largest city) etc. (Tax rates in zones largely 0%)§ Net transfers from abroad§ Increasing consumer spending§ Sustained government spendingSource: Ministry of Economic Development, Ministry of Finance, National Statistics Office of Georgia
Key drivers of economic growthExport-led growth with sufficient diversity Increasing domestic consumption
Page 6
May 2010 Page 7
Source: National Bank of Georgia
GDP Breakdown, 2009GDP breakdown: trade, logistics, services
Agriculture, hunting and forestry; fishing, 8.3%
Mining and quarrying, 0.6%
Manufacturing, 7.3%
Utilities & household processing, 5.3%
Construction, 5.3%
Trade (Retail & Wholesale), 12.4%
Hotels and restaurants, 2.0%Transport & Communication,
10.6%
Financial intermediation, 2.5%
Real estate, renting and business activities, 3.5%
Public administration, 13.7%
Education, 4.2%
Health, social and community work, 5.6%
May 2010 Page 8
Libertarian economic policies kick-start modernizationTax and tax rates slashed
Now only 6 taxes, down from 21Flat personal income tax of 20% (to come down to 15% by 2013) Corporate income tax 15%By 2012, no taxes on dividends, interest income, or world-wide income“Liberty Act”:
Referendum is required for an increase in tax ratesBudget expenditure capped at 30% of GDP, effective FY 2012 Budget deficit capped at 3% of GDP, effective FY2012 Public debt capped at 60% of GDP, effective FY2012 Budget earmarks are limited
Red tape and import duties cutCustoms code harmonized with EU. Customs procedures reduced from 15 to 7Capital controls abolished since 1990sCorruption significantly reduced
In the World Bank’s Ease of Doing Business survey in 2009 Georgia was 11th (out of 183), from 112th in 2005In the 2009 Transparency International Corruption Index Georgia was 66th (4.1 score), just below Turkey (61st, 4.4), the same as Croatia and above Brazil (75th, 3.7), China (79th, 3.6), India (84th, 3.4) and Russia & Ukraine (146th= 2.2)According to the International Republican Institute survey, 98% of Georgians didn’t have to pay a bribe in the past 12 monthsIn Forbes Tax Misery & Reform Index, Georgia was 4th best behind Hong Kong, UAE & Qatar
Ambition: Create a fast-growing free enterprise economy that attracts investment and become regional logistical and banking hub
May 2010 Page 9
GDP per capita is low, leaving much room to climbGDP per capita across countries
Source: IMF, National Bank of Georgia
US$
2,555 2,641 2,7372,921 2,984 3,012
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Bulgaria 2003 Turkey 2002 Romania 2003 Georgia 2008 Russia 2003 Serbia 2004
US$
2,520 2,450 3,850 5,1907,770 8,230
10,58012,530 13,980
39,000
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Ukraine Georgia China Belarus Romania Russia Poland Hungary Estonia Western Europeaverage (EU
15+)
May 2010 Page 10
Strong economic growth before crisis … starting again?
GDP per capita
Gross domestic product (GDP)
Source: National Statistics Office of Georgia
4.05.1
6.47.8
10.2
12.8
10.7 11.011.1%
5.9%
9.6% 9.4%
12.3%
2%2.1%
-3.9%-2
0
2
4
6
8
10
12
14
2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010F
USD billion
-5%
-3%
-1%
1%
3%
5%
7%
9%
11%
13%
15%
Nominal GDP (LHS) Real GDP Growth (RHS)
2920
4900
9191,188
1,4841,764
2,315
2,921
2,450
2,9663,242
3,6444,038
4,664 4,863 4,747
0
1,000
2,000
3,000
4,000
5,000
6,000
2003 2004 2005 2006 2007 2008 2009 2010F
USD
Nominal GDP per capita GDP per capita PPP
May 2010
US$
mln
98.3 261.7 942.0 1,092.6
2,971.61,261.5
276.2176.7160.3342.4389.4 1,240.6 2,043.8682.8
(353.5)(383.3) (1,174.6) (1,274.3)(709.2) (2,915.3)(2,009.1)
2.6% 2.9% 2.3%4.2%
-6.9%
-19.7%
-9.6%
-22.8%
-15.1%-11.1% -11.9%
7.8%
3.1%
10.1%
-4,000-3,000-2,000-1,000
01,0002,0003,0004,0005,000
-25.0%
-20.0%-15.0%
-10.0%-5.0%
0.0%
5.0%10.0%
15.0%
Donor inflows (DI) Total private capital inflows (TPCI) CAD CAD as % of GDP CAD+TPCI+DI as % of GDP
2009200820072006200520042003
Page 11
Current Account Deficit
Current Account Deficit
Exports and Imports*
*Export and Import of goods and services
Source: Central Bank of Georgia
Donor Inflows include both public and private sectors. Donor inflows in 2009 adjusted according to the banking sector foreign debt outflows
Source: Central Bank of Georgia, Minister of Finance of Georgia
US$
mln
1,865.32,492.8
3,317.9
4,412.9
5,916.9
7,499.0
5,266.8
3,199.22,551.62,187.5
1,288.5
3,182.43,688.4
1,646.9
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2003 2004 2005 2006 2007 2008 2009
Remit tances Exports of goods & services CAGR ('04-09): 14% Imports of goods & services CAGR ('04-'09): 16%
165.8
212.7 315.4
420.5
755.4
917.9
766.5
May 2010
US$ 2.11 bn
US$1.48 bnUS$0.93 bn
US$ 1.36 bn
US$0.19 bn
US$0.49 bnUS$0.38 bn
US$ 2,20 bn
1.9
1.31.0
1.1
0.8
0.8
0.8
1.8
0
500
1000
1500
2000
2500
2003 2004 2005 2006 2007 2008 2009 Mar '100.0
0.5
1.0
1.5
2.0
2.5Fx reserves FX/M2
Page 12
…so FX reserves rose, while inflows funded investment
NBG Interventions
FX reserves, $ mln
Source: National Bank of Georgia, Ministry of Finance of Georgia
Inflation
2003-2009CAGR =48.6%
156.7 124.0(42.9)
(341.2)
(182.7)
(660.8)
432.4
(800.0)
(600.0)
(400.0)
(200.0)
0.0
200.0
400.0
600.0
2004 2005 2006 2007 2008 2009 Mar '10
0.0
0.5
1.0
1.5
2.0
2.5NBG Interventions Average Lari/US$
Record high for Georgia
0
20
40
60
80
100
120
140
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Mar
-10
-4-20246810121416
Real effective rate, Jan05=100 (LHS) CPI (e-o-p) CPI (average)
103.3113.5
103.8103.2 106.8
8.2%
2.2%
10.0%
9.2%9.2%
6.2%
5.8%5.5%
11.0%8.8%
May 2010 Page 13
FDI picking up again…
Cumulative net FDI breakdown by origin
FDI InflowsQuarterly FDI inflows
FDI breakdown by sectors, 20092004- 2009
Country US$ ‘000s %UK 743,438 11.9%UAE 583,076 9.4%USA 484,902 7.8%Turkey 515,407 8.3%Netherlands 500,328 8.0%British Virgin Islands 416,323 6.7%Kazakhstan 307,651 4.9%Czech Republic 290,804 4.7%Cyprus 296,459 4.8%Subtotal 4,138,387 66.5%Other countries 2,084,856 33.5%Total 6,223,243 100.0%
223.
6
253.
9151.
8
129.
8
286.
2
134.
7
605.
4
537.
7
702.
9
489.
1
401.
5
421.
4
456.
7
280.
7
306.
9
146.
0
178.
9
75.610
5.9
89.4
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
US$ mln
Banking system, 6.0%Other, 1.3%
Industry, 26.9%
Hotels & Restaurants, 17.7%
Real estate, 17.4%
Construction, 10.5%
Transports and Communications,
20.2%
499.1 449.8
1,190.4
2,014.8
1,564.0
759.1 800
9.7%
7.0%
15.3%
19.8%
12.2%
7.1% 7.3%
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
2004 2005 2006 2007 2008 2009 2010F
US$ mln
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Net FDI Net FDI as % of GDP
Source: National Statistics Office of Georgia
May 2010 Page 14
Net remittances
Cumulative net remittances, 2007 – Q1 2010
Net remittances by countries, Q1 2010Net remittances
Cumulative net remittances by countries, 2007 – Q1 2010
Country US$ '000s % of totalRussia 1,601,669 61.1%USA 254,739 9.7%Greece 143,656 5.5%Spain 73,086 2.8%Ukraine 127,481 4.9%Turkey 54,815 2.1%UK 21,417 0.8%Israel 24,063 0.9%Kazakhstan 27,031 1.0%Germany 18,335 0.7%Other countries 275,143 10.5%Total 2,621,437 100.0%Source: National Bank of Georgia, National Statistics Office of Georgia
Russia, 55.2%
USA, 8.3%
Greece, 8.0%
Spain, 3.0%
Ukraine, 6.6%
UK, 0.7%
Israel, 1.0%
Kazakhstan, 0.2%
Turkey, 2.9%
Germany, 1.1%
Other countries, 13.1%
USA, 9.7%
Greece, 5.5%
Spain, 2.8%
UK, 0.8%
Israel, 0.9%
Kazakhstan, 1.0%
Other countries, 10.5%
Russia, 61.1%
Germany, 0.7%
Ukraine, 4.9%
Turkey, 2.1%
212.7315.4
420.5
755.4917.9
766.5
4.2%
4.9%5.4%
7.4% 7.2% 7.2%
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1000.0
2004A 2005A 2006A 2007A 2008A 2009
US$ mln
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Net remittances (LHS) Net remittances as % of GDP (RHS)
May 2010 Page 15
…and more donor money to continue to flow
500 kv. power transmission line (EBRD, EIB, KfW)East-West highway improvement project (WB, Japan)Adjara bypass road (ADB)Vaziani-Gombori-Telavi road (WB)
South Georgia road (MCG)Secondary and local roads (WB)Rehabilitation of infrastructure facilities in Batumi (KfW)Regional and municipal infrastructure development projects (ADB, EBRD)
Source: Ministry of Finance of Georgia
Financia l institutions & organizations,
53.7%US$2,438 mln
United Sta tes, 22.0%US$1,000 mln
European Community,
14.1%US$638 mln
Japan, 4.4%US$200 mln
EU member sta tes, 3.8%US$173 mln
Norway, 0.9%US$40 mln
Switzerland, 0.4%US$19 mln
Other, 0.6%US$29 mln
EBRD, 20.4%US$926.84 mln
World Bank, 11.7%
US$ 530 mln
IFC, 7.7%US$350 mln
European Investment Bank, 7.3%
US$329.6 mln
Asian Development Bank, 6.6%
US$ 300 mln
CoEB, 0.03%US$1.32 mln
Total pledged funds (October 2008): US$4.5 bnEntered into contractual commitment for US$ 3 bn of which circa US$ 1.4 bn disbursed as of YE 2009
IMF’s Stand-By arrangement (September 2008): US$750 mlnIn addition…Approved access to US$1,189 million under SBA by IMF until June 2011 (August 2009)The U.S. committed US$124 million investment in energy infrastructure development (February 2010)US$70 million from ADB for infrastructure repairs in 2009
May 2010 Page 16
Fiscal indicators: The worst seems pastOverall fiscal balance of the state budget, 2004-2009F
Fiscal revenue performance
-815.7
-1,258.6
-1,720.5-1,390.1
-935.7-468.9
-4.5%-3.4%
-4.8%
-6.6%-7.3%
-9.4%-2,000.0
-1,600.0
-1,200.0
-800.0
-400.0
0.02006 2007 2008 2009F 2010F 2011F
GEL mln
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
Overall fiscal balance Overall fiscal balance as % of GDP
Source: National Bank of Georgia, National Statistics Office of Georgia
305.
5
263.
1 379.
4
308.
4
377.
9
358.
4
444.
3
352.
2
390.
5
346.
3
362.
5 502.
6
303.
5
319.
6
499.
5
442.
5
415.
3
459.
2
316.
1 408.
1
367.
1
366.
8 447.
3
266.
4
266.
0
573.
2
314.
6
316.
8
293.
0 352.
1
320.
4 373.
0
328.
2
334.
9
446.
2
407.
6
505.
1
290.
8
280.
6
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
January February March April May June July August September October November December
GEL mln
2007 2008 2009 2010
May 2010 Page 17
Public debt
External public debt service
Breakdown of public debt
Public debt as % of GDP, 2009
Georgia’s economy is quite unleveraged compared to other emerging market economiesGeorgia’s public debt is 35.6% of GDP in 2009 down from 56% in 2003Paris club rescheduling in 2001 and 2004The external debt is all multilateral or bilateral and significant share is highly concessionalThis explains why the government debt service burden is lowEurobonds debut issuance of US$500 mln in April 2008, maturity date 2013
Source: “The Georgian Economy Overview”, Government of Georgia Presentation,
Source: “The Georgian Economy Overview”, Government of Georgia Presentation, June 2009. Source: World Bank, International Monetary Fund
103.8 110.6
152.2
102.1
173.3
118.7
8.8%
7.1% 7.3%
2.9%
5.5%
3.4%
0
20
40
60
80
100
120
140
160
180
200
2004A 2005A 2006A 2007A 2008A 2009F
US$ mln
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
External debt service External debt service as % of budget revenue0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Czech Republic
Estonia
Hungary
Kazakhstan
Latvia
Poland
Georgia
Slovak Republic
Lithuania
Ukraine
Bulgaria
Turkey
Russia
1.86 1.73 1.7 1.792.48
3.38
0.83 0.85 0.85 0.89
0.97
1.040.4%
32.6%41.1%
28.7%
52.7%
26.3%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2004A 2005A 2006A 2007A 2008A 2009A
US$ billion
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
External public debt Internal public debt Total public debt as % of GDP
May 2010 Page 18
Source: National Statistics Office of Georgia
Page 18
WTO member since 2000No quantitative restrictions on tradeSimplified customs regime since August 2006, new customs code becomes effective in January 2007One of the two beneficiaries of the EU GSP+ Scheme in the CIS since 2006, granting local companies the right to export 7,200 categories of goods duty-freeAs of November 2007 Georgia has entered into a free trade agreement with TurkeyUS-Georgia charter on strategic partnership envisions an update of Bilateral Investment Treaty, expansion of Georgian access to the General System of Preferences and the possibility of entry into Free Trade Agreement
Import structure by country, Q1 2010
Import structure by product, Q1 2010
Export structure by country, Q1 2010
Export structure by product, Q1 2010
Trade structure
Turkey, 15.6%
Azerbaijan, 13.6%Canada, 6.8%
Ukraine, 6.0%
Armenia, 9.3%
United Arab Emirates, 1.4%
China, 1.3%
Kazakhstan, 1.1%Russia, 0.8%
USA, 8.1%EU Countries,
24.2%
Other, 11.6%
Ores, 7.1%
Equipment & Rail Cars, 2.6%
Oil & Gas, 4.0%
Pharmaceuticals, 1.9%
Vessels & Aircraft, 1.5%
Cement, 1.1%Fertilizers, 5.1%
Gems & Precious Stones, 7.0%
Ferrous Metals, 23.6%
Others, 25.3%
Vehicles, 12.4%
Beverages, Spirits & Vinegar, 8.3%
United Arab
Emirates, 3.4%
USA, 4.3%
Armenia, 0.9%
Kazakhstan, 1.6%
Turkmenistan, 1.1%
EU Countries, 27.1%
Turkey, 15.6%
Azerbaijan, 8.9%Ukraine, 10.5%
Others, 13.2%
Russia, 6.9%
China, 6.6%
Vehicles, 9.6%
Ferrous Metal Products, 3.4%
Cereals, 3.9%Plastic, 2.8%
Paper, 2.1%
Sugar, 1.8%
Ferrous Metals, 2.5%
Apparel & footwear, 3.7%Pharmaceuticals,
4.5%
Others, 32.6%
Oil & Gas, 17.9%
Mechanical Equipment &
Electrical Machinery, 15.2%
May 2010
Management target for 2010
May 2010 Page 20
Targeted financial performance 2010
Target net provision expense for 2010
AssumptionsTarget pre-provision profit for 2010
2010 real GDP growth of 2%* in Georgia2010 inflation rate of 3.2%* in GeorgiaThe GEL/US$ exchange rate remains stable during 2010Geo-political stability is sustained in the region
* IMF Estimates
Target net income for 2010
68.02
21.85
13.035.73
135.0
27.0
127.9
106.8
0
40
80
120
160
2007 2008 2009 2010F
GEL mln
Profit before provisions Goodwill Impairment associated with BG BankLosses related to Real Estate Losses related to investmentsOther
135.6
50.0
133.1128.7
17.0
0.0
40.0
80.0
120.0
160.0
2007 2008 2009 2010F
GEL mln
75.6
0.2
(98.9)
72.3
(100.0)
(80.0)
(60.0)
(40.0)
(20.0)
-
20.0
40.0
60.0
80.0
100.0
2007 2008 2009 2010F
GEL mln
May 2010
Strategy
May 2010 Page 22
Enhance operational efficiency through technological improvements:Temenos T24, core banking software, acquired in October ‘09 is in the process of implementation; Deployment of Softscape, talent management solution, and CRIF, credit scoring solution, is under way
Page 22
Strategic objectives: grow at the right price
Wealth Management services launched in Israel and UkraineDeposits from international clients reach GEL 100 mln in ’09, c. 8% of total depositsPremier Banking launched for the affluent client base supported by the exclusivity of Amex Card issuing and acquiring business in Georgia
More efficient
Deposit funding
Lending machine
International operations, Divesting of non-core
assets
Despite high rate of bank debt growth in ’05-’09, ample room for growth with total loans/GDP under 30%; retail loans/GDP under 10%Lending rates decreased from 16-18% to 14.5-16.5% as lending stepped up to top borrowers in GeorgiaEmphasis on micro loans, SMEs, consumer loans and mortgages in Georgia
Scale down operations of BG Bank; leverage on corporate banking and brokerage to build trade finance business in Ukraine to capture growing (c.U$1 bn) trade between Georgia and Ukraine
Focus on high margin, unattended SME sector in Belarus; explore the possibility of third party investor, such as IFIs, in BNB First stage of restructuring of equity investment business completed
Controlling stake in investment management company sold in Oct ‘09
Challenges in 2010: Cost control combined with Loan book growth
May 2010
Intention to pay dividends
May 2010 Page 24
The Bank intends to propose the establishment of a progressive dividend policy at the 2010 AGMThe intention is to recommend GEL 0.30 dividend per share in 2011 in respect of 2010 financial year performanceDividend payment is subject to management achieving 2010 financial targets outlined aboveThe Bank anticipates increasing the dividend payment in the future
The new dividend policy is to set dividend payments while taking into consideration the need to maintain proper balance between the ability to finance growth and preserving progressive dividend
The new dividend policy will serve to further increase capital management discipline as we consider investing in our growth going forwardEstimated dividend payout for 2010 performance - GEL 9.4 million
Page 24
# of Shares outstandingIntention to pay dividends for 2010
25,202,00927,154,918
31,252,553 31,306,071
YE 2006 YE 2007 YE 2008 YE 2009
May 2010
Governance
May 2010 Page 26
26 26
• 7 non-executive SB members; non-executive Chairman
Supervisory Board
SB members• Nicholas Enukidze, Chairman
experience: MD at Concorde, Ukrainian investment bank; ABN AMRO Corporate finance in Moscow and London, Global One Communications, VA. USA
• Ian Hague, Firebird Management LLC• Allan Hirst, Independent Director
experience: 25 years at Citibank, including CEO of Citibank, Russia; various senior capacities at Citibank
• Kaha Kiknavelidze, Independent Directorcurrently managing partner of Rioni Capital, London based investment fund; previously Executive Director of Oil and Gas research team for UBS
• Jyrki Talvitie, East Capital• David Morrison, Independent Director
experience: senior partner at Sullivan & Cromwell LLP prior to retirement
• Al Breach, Advisor to SB, to replace Irakli Gilauri as SB member subject to the next AGMexperience: Head of Research, Strategist & Economist at UBS: Russia and CIS economist at Goldman Sachs
• Chief Executive Officer and 8 Deputies
Management Board
MB members• Irakli Gilauri, CEO; formerly EBRD banker in Tbilisi and London, MS from
CASS Business School, London• Giorgi Chiladze, Finance; formerly CEO of BTA Bank (Georgia);
Program Trading Desk at Bear Sterns, NYC• Archil Gachechiladze, Corporate Banking; formerly Deputy CEO
of TBC Bank, Georgia; Lehman Brothers Private Equity, London; MBA from Cornell University
• Avto Namicheishvili, Legal; previously partner at Begiashvili &Co, law firm in Georgia. LLM from CEU, Hungary
• Irakli Burdiladze, COO; previously CFO at GMT Group, Georgian real estate developer. Masters degree from Johns Hopkins University
• Sulkhan Gvalia, Risk; founder of TUB, Georgian bank acquired by BOG in 2004
• Murtaz Kikoria, acting CEO of BG Bank; formerly senior banker at EBRD; Head of Banking Supervision at the National Bank of Georgia.
• Mikheil Gomarteli, Retail Banking; 10 years work experience at BOG
• Nick Shurgaia, International Business; previously CEO of VTB Georgia, Senior Banker at EBRD, London; MBA from LBS
• Vasil Revishvili, Head of Wealth Management; previously Head of the Investment Risk Unit and Senior Investment Manager at Pictet Asset Management in London and Geneva. MS in Finance from London Business School
Page 26
A move to classical two-tier board structure
May 2010
Q1 2010 results highlights
May 2010 Page 28
Assets
Corporate loan book breakdown, BoG Standalone
Loan book, grossTotal assets
Retail loan book breakdown, BoG Standalone
Total assets increased by 7.2% q-o-q in Q1 2010
Gross loans increased by 5.7% q-o-q in Q12010
Standalone Gross loans grew 6.0% q-o-q in Q1 2010
Liquid funds increased by GEL 73.3 mln, 10.6%, to GEL 767.1 mlnin Q1 2010
GEL 317.7 mln of excess liquidity at Q1 2010
88.5% of total loan book collateralized
91% of total retail loan book collateralized
97% of total corporate loan book collateralized
1,855.7 2,106.7 2,059.7 2,189.4 2,046.8 1,904.7 1,833.1 1,851.9 1,957.3
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
Gross loans
3,124.12,913.42,980.22,907.8
3,186.83,258.93,154.33,400.7
3,147.7
Credit cards and overdrafts, 16%
Micro loans, 14%
Mortgage loans, 43%
Consumer and other, 27%
CB, 43.6%
RB & WM, 45.3%
BG Bank, 9.4%
BNB, 1.7%
FMCG, 15%
Energy, 9%
Industry & State, 17%
Construction & Real Estate, 19%
Other, 6%
Pharmaceuticals and Healthcare,
2%
Trade, 32%
May 2010 Page 29
Loan portfolio quality
NPLs, BoG Standalone
NPLs ConsolidatedLoan quality under the following stress tests
Loan loss reserve, Consolidated
Armed conflict with Russia in August 2008
17% devaluation of Lari against US$ in one day in November 2008
Political crisis in Georgia peak in Spring 2009
* Other NPLs include BNB and BG Bank
GEL mln
173.6173.7155.1
135.2
108.8
129.0
44.439.6
180.09.4%
8.1%
6.6%
5.0%
6.3%
2.1%2.1%
9.5%
9.2%
7.6%
1.5%
7.8%
5.1%
2.9%1.1%
1.0%
7.6%8.6%
0
20
40
60
80
100
120
140
160
180
200
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 20100%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Loan loss reserves
Reserve For Loan Losses To Gross Loans, BoG Consolidated
Consolidated NPLs to Gross Loans, BoG Consolidated
8.1 9.7 12.022.7
35.9
67.6
10.9 11.3
61.4
75.4
69.2
7.7
17.2
30.123.9 28.6
32.1
67.446.3 54.5
51.3
41.1
41.622.4
208.4%
554.4%
124.1%
169.1%124.2%129.3% 104.2%
138.3%
106.6%
0
20
40
60
80
100
120
140
160
180
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL m ln
0%
100%
200%
300%
400%
500%
600%
RB &WM CB Other* NPL coverage ratio
GEL mln
136.8111.3115.9
118.7
87.4
56.6
23.332.119.0
7.4%
7.5%
6.4%
6.9%
4.7%
3.2%
1.3%1.7%
1.2%
7.0%
7.4%
2.0%
6.7%5.5%4.9%
6.8%
1.9%
7.5%
0
20
40
60
80
100
120
140
160
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 20100%
1%
2%
3%
4%
5%
6%
7%
8%
NPLs % of Gross loans Loan loss reserve as % of gross loans
May 2010
76.5 81.670.4
96.7 93.3
103.7
131.4 163.1 180.7
-
20.0
40.0
60.0
80.0
100.0
120.0
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
376.1
331.2
285.0280.4
319.0326.0
403.4
363.6
414.7
0
100
200
300
400
500
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
912.0795.1
903.6 947.8
1,137.8 1,162.8
1,011.4918.6 913.3
0
250
500
750
1000
1250
1500
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
Page 30
Liabilities
Borrowed funds
Client deposits
Retail banking deposits
Total Client deposits grew by 23.1 y-o-y% in Q1 2010 (9.6% q-o-qWM client deposits grew 10.8% q-o-q in Q1 ‘10RB client deposits 59.2% y-o-y(30.4% q-o-q) in Q1 10CB client deposits grew 14.6% y-o-y(20.7% q-o-q) in Q1 10
GEL 251 mln of net Borrowed funds repaid in 12 months period, resulting in 21.6% decrease y-o-y
GEL 100 mln y-o-y decline in Shareholders’equity due to 2009 loss associated with Ukraine, mark-downs of real estate and investment
Wealth Management deposits+93..7%
-21.6%+47.9%
363.6 403.4 326.0 319.0 280.4 285.0 331.2 376.1 414.7
652.7 681.5576.2 603.3 605.2 520.6
594.9 587.6656.1
76.581.6
70.4 96.7 93.3103.7
131.4 163.1180.7233.2
228.4
229.4 174.1 154.0116.0
125.0145.7
142.9
-100
600
1,300
2,000
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
RB Client Deposits CB Client Deposits WM Client Deposits Other
1,326 1,3951,202 1,193 1,133
1,0251,183
1,2721,394
May 2010
0
2
4
6
8
10
12
14
1-Ja
n-09
1-Fe
b-09
1-M
ar-0
9
1-A
pr-0
9
1-M
ay-0
9
1-Ju
n-09
1-Ju
l-09
1-A
ug-0
9
1-Se
p-09
1-O
ct-09
1-N
ov-0
9
1-D
ec-0
9
1-Ja
n-10
1-Fe
b-10
1-M
ar-1
0
1-A
pr-1
0
1-M
ay-1
0
US$
Page 31
Equity & Capital adequacy
BIS capital adequacy ratios, BoG Consolidated
NBG capital adequacy ratios, BoG StandaloneTotal Shareholder’s equity
Share price performance 31 March 2010 BV/shareUS$11.1
Risk weighting of FX denominated assets at 150% according to the National Bank of Georgia standards
746.7783.0
739.3 718.8 711.8 709.9 718.5
598.4611.7
500.0
750.0
1000.0
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2100
GEL mln
25.2% 25.0% 23.9%22.4% 22.1%
25.4%
22.2%22.5%24.7%
34.6%34.2%31.7%
27.3%25.3%
25.8%25.8%
33.8% 32.3%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio
18.3%
15.8%
18.2%16.6% 16.4%
17.8%
20.4% 19.7%17.7%
16.3% 16.8% 15.9%15.1% 15.5% 13.5% 17.4% 18.4% 21.2%
0%
5%
10%
15%
20%
25%
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio
May 2010
38.866.7
130.2
220.8196.8
24.7
45.3
89.2
118.7122.1
-
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
2005 2006 2007 2008 2009
Net Interest Income Net Non Interest Income
63.4
319.0339.5
219.5
112.0
Page 32
Georgia accounts for 92.2% of total consolidated revenues, BG Bank 4.0% and BNB 3.8%
Page 32
Revenue Revenue by segments Q1 2010Revenue
Revenue, quarterly Composition of revenue Q1 2010
+76.6%
-7.1%
+95.9%
+54.7%
-6.0%
Net interest income 59.6%,GEL 45.3 mln (-1.7% q-o-q)
Net income from documentary
operations 2.9%,GEL 2.2 mln
(-5.5% q-o-q)
Net fore ign currency re lated
income 9.7%,GEL 7.3 mln
+29.5% q-o-q)Net fee and commision
income13.6%,GEL 10.3 mln
(-18.2% q-o-q)
Net other non-interest income
14.2%,GEL 10.8 mln(+0.6% q-o-q)
Other5.6%,
GEL4.2 mln(+179.1% y-o-
y )
Aldagi BCI 6.0%,
GEL4.5 mln(+32.5% y-o-y)
Belarus 3.8%,
GEL2.9 mln(+20.0% y-o-y)
Ukraine 4.0%,
GEL3.1 mln(-44.0% y-o-y) BoG
Standalone 80.6%,
GEL61.2 mln(-11.2% y-o-y)
49.855.8 58.9 56.4 52.4 49.5 48.9 46.0 45.3
31.330.3 27.1 30.2
29.3 31.1 30.4 31.3 30.6
0
10
20
30
40
50
60
70
80
90
100
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
Net Interest Income Net Non-Interest Income
81.177.479.380.681.7
86.685.986.1
75.9
May 2010 Page 33
Revenue cont’d
Income from documentary operations
Net foreign currency related incomeNet fee & commission income
Other non-interest income
• Net Other Non- Interest Income increased by 51.2% y-o-y in Q1 10, mostly due to the increases in brokerage and insurance income
1.4
1.9
1.7
1.4
2.3
1.8
2.3 2.3 2.2
0
1
1
2
2
3
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
7.3
5.76.57.1
8.8
14.9
9.410.4
13.2
0
2
4
6
8
10
12
14
16
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
12.612.0
11.611.110.9
12.9
10.210.2 10.3
0
2
4
6
8
10
12
14
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL m ln
1.7 2.5 3.2 3.05.1 4.9 5.0
0.4
1.3 1.9
1.8
-0.4 -1.10.0 -0.5
0.5
4.7
1.4
1.03.6
3.7 3.03.8
1.6
1.3 1.6
1.9
0.10.30.20.6
0.20.2
0.10.2
0.3
-0.4
-3.4
0.33.3
-6
-4
-2
0
2
4
6
8
10
12
14
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009
GEL mln
Net Insurance Income Brokerage Income Asset Management Income Realized Net Investment Gains Other
May 2010 Page 34Page 34
CostsRecurring operating costs
Net non-recurring costs
Employees
Recurring operating costs
Total Recurring Operating costs decreased by 0.7% q-o-qin Q1 10
8.53.2
(30.0)
(0.2) (0.3)
(106.8)
(2.6) (1.9) (3.3)
(120.0)
(100.0)
(80.0)
(60.0)
(40.0)
(20.0)
0.0
20.0
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
2,692
3,056
3,619
3,853
2,741
2,692
2,665
2,669
2,674
2,825
821
824
836
842
786
757
707
617
621
3925,048
4,781
4,798
4,914
4,964
4,977
6,196
5,911
4,926
4,459
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Group Consolidated BoG Standalone BG Bank
25.7 27.3 28.423.1 22.0 23.2 22.3 22.5 23.4
18.721.6 21.3
24.922.7 23.1 22.6 24.1 22.9
0
10
20
30
40
50
60
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
Personnel Costs Other Recurring Operating Costs
44.5
48.9 49.6 47.944.6 46.3 45.0 46.6 46.3
33.3
75.6104.4
90.0
41.8
86.592.5
23.2
15.330.2
0
50
100
150
200
250
2005 2006 2007 2008 2009
GEL mln
Personel costs Other Recurring Operating Costs
190.9
117.4
63.5
38.5
182.5
Includes Goodwill impairment of GEL 68 mln
associated with BG Bank and Real estates mark down
May 2010
30.330.040.7
32.1
10.9
103.2
7.27.5 7.4
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
Page 35
Operating profit, Provision expense
Net provision expense BoG Standalone
Net provision expense BoG ConsolidatedNormalized net operating income
Net provision expense BG Bank Standalone
Consolidated Net provision expenses improved by 75.7% q-o-q
Bank of Georgia Standalone Net provision expenses declined by 32.6% q-o-q
Net Income for Q1 2010 was GEL 16.8 mln.
Related to the armed conflict in August 2008
18.217.729.624.0
(4.5)
103.9
8.66.712.3
-40
-20
0
20
40
60
80
100
120
140
160
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
34.3
30.8 29.6
37.138.7
36.337.336.634.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
0.4 (1.3) 0.5
18.2
9.311.0
12.9
8.5
(1.6)
(5.0)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
GEL mln
May 2010 Page 36
Profitability & selected ratiosNet loans/Client deposits
Cost Income Ratio*
*Normalized for Total Non- recurring costs
Net interest margin (annualized)
Net Income (Loss)
9.1%
8.0%8.5%
9.1%
9.0% 9.1%9.3%
10.1%9.8%8.9%
8.1% 8.1%
9.6%10.0% 9.3%
9.9%9.8%
9.0%8.6%
7.5%
0%
2%
4%
6%
8%
10%
12%
Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
Net Interest Margin, Group Consolidated Net Interest Margin, BoG Standalone
31.9 28.3
(59.0)
5.1 2.6
(102.3)
16.8
(4.3)(1.1)
(120.0)
(100.0)
(80.0)
(60.0)
(40.0)
(20.0)
0.0
20.0
40.0
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010136.9%
147.8%160.6%
168.7%
140.3%131.9% 127.5%
170.6%174.4%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
200.0%
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
54.8% 56.9% 57.8% 58.8%55.4% 52.7% 61.0%57.5% 56.7%
44.5% 44.7% 47.3% 43.1% 41.4%
51.8%47.7% 48.9%
54.0%46.5%48.9%
44.8% 47.3% 46.5%
48.1%
49.3%49.5%50%
0%
40%
80%
120%
160%
200%
240%
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
Cost/Income Ratio, ConsolidatedCost/Income Ratio, Bank of Georgia StandaloneCash Cost/Income Ratio, Consolidated
May 2010 Page 37
Operating environment in Georgia is improving and 2010 looks promising for Bank of Georgia:
Consumer confidence and economic activity is increasing with a 11.1% q-o-qincrease in client deposits in Q1 2010 and 27.8% y-o-y increase in client deposits in Q1 2010
National Bank of Georgia has highest FX reserves in Georgia’s history – US$2+ bn, a 56% increase in FX reserves YTD
A 15% y-o-y growth of VAT, a highly correlated measure to GDP, in January, suggests a healthy economic growth trend, that may result in higher than estimated 2% growth of 2010 GDP
We came out strong from the downturn and are well positioned to take advantage of our high liquidity and strong capital to achieve growth at the right price….
…..by implementing our strategy to become more efficient, deposit funded lending machine
Page 37
Summary
May 2010 Page 38Page 38
This presentation contains statements that constitute “forward-looking statements”, including, but not limited to, statements relating to the implementation of strategic initiatives and other statements relating to our business development and financial performance.
While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other factors could cause actual developments and results to differ materially from our expectations.
These factors include, but are not limited to, (1) general market, macroeconomic, governmental, legislative and regulatory trends, (2) movements in local and international currency exchange rates, interest rates and securities markets, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties and developments in the markets in which they operate, (6) management changes and changes to our group structure and (7) other key factors that we have indicated could adversely affect our business and financial performance, which are contained elsewhere in this presentation and in our past and future filings and reports, including those filed with the NSCG.
We are under no obligation (and expressly disclaim any such obligations) to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise.
Caution Regarding Forward-Looking Statements
May 2010 Page 39
Contact
Irakli GilauriChief Executive Officer+995 32 444 [email protected]
Macca EkizashviliHead of Investor Relations+995 32 444 [email protected]