1st Quarter Results

Released : 13 May 2013 07:00

RNS Number : 5005E
Bank of Georgia Holdings PLC
13 May 2013
 

                                       

Bank of Georgia Announces Q1 2013 Results

 

Bank of Georgia Holdings plc (LSE: BGEO LN) (the "Bank"), the holding company of JSC Bank of Georgia and its subsidiaries, Georgia's leading bank, announces today its consolidated results for Q1 2013 (IFRS based, derived from management accounts). The Bank reported Q1 2013 profit of GEL 42.0 million (US$25.3 million/GBP16.7 million), or GEL 1.19 per share (US$0.72 per share/GBP0.47 per share). Unless otherwise mentioned, all comparisons refer to Q1 2012 results.

 

·  Positive operating leverage

o Net interest margin of 7.6%, compared to 7.3% in Q1 2012

o Revenue increased by GEL 13.1 million, or 12.0%, y-o-y, to GEL 123.0 million

o Positive operating leverage maintained, as operating expenses increased at a lower rate than revenue, up 7.1% y-o-y to GEL 53.9 million, translating into operating leverage of 4.9 percentage points

o Cost to Income ratio improved to 43.8% from 45.8%

o Profit before tax of GEL 50.5 million, up 5.7%

o Profit for the period increased to GEL 42.0 million, up 5.6%

o Return on Average Assets (ROAA) was 3.1% (3.5%  in Q1 2012) and Return on Average Equity (ROAE) stood at 15.9% (19.0% in Q1 2012)

·  Strong balance sheet and capital position maintained as cost of funds continue to decline

o Cost of Client Deposits declined to 6.4% compared to 8.1% in Q1 2012

o Cost of Funds declined to 6.7% compared to 8.3% in Q1 2012

o Net loan book increased by 8.9% y-o-y, while client deposits increased 14.9% y-o-y

§ In US$ terms the net loan book increased by 9.0% reflecting the stable currency position

§ Retail Banking client deposits grew 21.3%, Asset and Wealth Management client deposits grew 25.2%, Corporate Banking deposits increased by a modest 2.2%, reflecting the targeted outflow of high-interest paying deposits

o Cost of Risk improved quarter on quarter, declining to 1.4% from 1.8%, in Q4 2012, up from 1.0% in Q1 2012. Strong funding and liquidity position with a Net Loans to Customer Funds ratio of 104.9%.  Net Loans to Customer Funds and Long-Term DFI* Funding ratio was 85.2%. The National Bank of Georgia (NBG) liquidity ratio of 44.1%, compared to 36.0% a year ago and to a 30% minimum requirement by the NBG

o BIS Tier 1 capital adequacy ratio unchanged at 23.2%

o Book Value per Share increased by 15.9% y-o-y to GEL 31.04 (US$18.72/GBP12.32)

o Balance sheet leverage remained low at 4.0 times at 31 March 2013, compared to 3.7 times a year ago and 4.3 times in the previous quarter

·  Business highlights

o Retail Banking continues to deliver strong franchise growth, supported by the successful roll-out of the Express Banking strategy in 2012, adding 655 new Express Pay terminals and 244,360 Express cards

o Corporate Banking reduced its cost of deposit to a record low of 5.7%

o Asset and Wealth Management continued to expand its franchise with Assets under Management increasing by 25.2% to GEL 613.8 million in Q1 2013. Since the launch of the Certificate of Deposit (CD) programme in January 2013, the amount of CDs issued to AWM clients reached GEL 41.6 million as of 31 March 2013

o Aldagi BCI, our Insurance and Healthcare business, reported a Q1 2013 profit of GEL 5.2 million, up from GEL 2.7 million in Q1 2012. Affordable Housing pre-sold approximately 50% of the apartments of its second housing project, currently in the construction process

 

*Developmental Financial Institutions

 

"Our Q1 2013 results demonstrate the resilience of the Bank's business strategy and benefited from the strength of our retail banking business, good performances from our non-banking subsidiaries and strong cost management throughout the business. As expected, since the change of Government last October, corporate activity remained subdued as businesses await finalisation of changes in legislation such as amendments in the labour code and the introduction of a new competition law. While year-on-year loan growth remains robust at 8.9%, the loan book declined by 4.4% in the seasonally quiet first quarter, predominantly reflecting subdued corporate loan book growth and the prepayment of a single large corporate loan. During the quarter, retail banking and SME lending increased by 1.8%.  Client deposits continued to grow strongly and increased 7.0% during the first three months of the year.   

The core fundamentals of our business remain strong.  Improving economies of scale, supported by the roll-out of our Express banking strategy over the last few quarters, give us increasing flexibility in the recent slower economic environment as reflected in our continued positive operating leverage. We are very pleased with the successful development of our Express strategy, which is aimed at increasing our fee income generating capabilities, further improving our cost base and attracting the still significant non-banked population. During the quarter we added 538 Express Pay terminals bringing the total to 759 and issued 51,000 new contactless Express cards to our customers, which now amount to more than 244,000. Asset quality during the quarter remained robust with a reduction in the impairment charge on loans to customers compared to the fourth quarter of last year.  However, this was offset by an additional charge of GEL 3.3 million relating to the off-balance sheet exposures of a single corporate customer in the infrastructure sector.

In Q1 2013, we successfully continued our strategy to reduce the cost of client deposits as further strong deposit inflows and the strength of our franchise allowed us to continue reducing interest rates on client deposits, in particular on US$ denominated deposits. We now offer our lowest ever contractual rates on deposits, having gradually decreased the US$ one year rate offered from 8.0% at the end of last year to 6.5%, which is the lowest deposit rate among the leading banks in Georgia. Despite the sharp decrease in the cost of deposits, retail banking deposit balances continued to grow at a healthy rate, up 5.9% since the beginning of the year. As a result, the cost of client deposits declined to 6.4% in the quarter, compared to 6.6% in Q4 2012 and 8.1% in Q1 2012. The rate cuts, which took place towards the end of the quarter has not yet been fully reflected in cost of funds in Q1 2013. Our Net Loan to Customer Funds ratio improved to 104.9% and our liquidity ratio increased further to 44.1%, substantially exceeding the regulatory minimum requirement of 30%. Our Tier I Capital (BIS) ratio of 23.2% reflects the continued strong internal capital generation capability of the Group and, combined with a high return on assets and shareholders' equity, demonstrates the strength of our balance sheet.

This balance sheet strength will be further enhanced as we seek to capitalise on the de-dollarization process underway within Georgia, which is expected to be boosted by the recently introduced Lari lending support program by the NBG. The National Bank intends to engage in loan repo transactions with commercial banks at a 20% haircut from the nominal value of Lari denominated mortgages as well as Lari denominated micro and SME loans. NBG will lend to the Bank at a floating rate equal to the NBG regular refinancing market rate.  This programme will be beneficial from a regulatory capital perspective, since Lari denominated loans require lower regulatory capital.  Furthermore, a lower US$ nominal rate on deposits will make Lari denominated deposits more attractive for our customers given the current high differential between Lari and USD denominated deposits. This will facilitate de-dollarisation of liabilities as well.  

From a political perspective, the transition to the new Government over the last few quarters has continued to progress smoothly with, notably, significantly improved diplomatic and trade relations with Russia starting to be evident.  After the expected slowdown in economic growth over the past few quarters, we are beginning to see signs of improved confidence in the economy. GDP growth in the first quarter of the year was estimated at an annualised rate of 1.7%, a lower level than in recent years but not yet reflecting an anticipated pick up in economic activity in the second half of 2013 to support the Government's budgeted GDP growth for the year.  During the first quarter, Georgia experienced a 5.4% increase in exports and further strong growth in tourist numbers, up 37% compared to the first quarter of last year, to underpin this important driver of economic growth.

Q1 2013 was also an eventful quarter with regard to our shareholder base and governance. In March, East Capital, our long-term shareholder, successfully placed more than 10% of our outstanding shares overnight, as a result of the forthcoming closure of their Financials Fund. This has resulted in many new high quality institutional investors becoming shareholders, supporting our desire to widen our institutional shareholder base, increase our stock liquidity and improve the level of free float on our shareholder register. We are pleased with the markedly improved liquidity of the stock, which was the main rationale behind the London Stock Exchange premium listing in 2012. In 2013, to the date of this report, average daily trading volume reached 190,000 shares (GBP 2.7 million).

With all the core fundamentals in place, together with an increasing corporate lending pipeline, substantially increasing money transmission flows and continued consumer confidence, we are well positioned to continue delivering on our proven business strategy as we start to see positive signs of a return to more historic levels of economic growth in the country", commented Irakli Gilauri, Chief Executive Officer of Bank of Georgia Holdings PLC and JSC Bank of Georgia.

 

1.6577 GEL/US$ 31March 2013

1.6600 GEL/US$ 31March 2012       

1.6567 GEL/US$ 31December 2012

2.5189 GEL/GBP 31March 2013

2.6578 GEL/GBP 31March 2012

2.6653 GEL/GBP 31December 2012

 

FINANCIAL SUMMARY

 

 

                

BGH (Consolidated, Unaudited, IFRS-based)






 

Income Statement Summary



Change 


Change

 

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q

 







 

Revenue1

122,976

109,844

12.0%

128,288

-4.1%

 

Operating expenses

(53,880)

(50,318)

7.1%

(53,966)

-0.2%

 

Operating income before cost of credit risk

69,096

59,526

16.1%

74,322

-7.0%

 

Cost of credit risk2

(17,278)

(7,380)

134.1%

(16,124)

7.2%

 

Net operating income

51,818

52,146

-0.6%

58,198

-11.0%

 

Net non-operating expense

(1,365)

(4,400)

-69.0%

(4,189)

-67.4%

 

Profit

41,997

39,758

5.6%

46,875

-10.4%

 

Earning per share (basic)

1.19

1.21

-1.7%

1.33

-10.5%

 







 

BGH (Consolidated, Unaudited, IFRS-based)



Change


Change

Statement of Financial Position

Q1 2013

Q1 2012

Y-O-Y 

Q4 2012

YTD







Total assets

5,533,858

4,490,157

23.2%

5,655,595

-2.2%

Net loans3

2,954,724

2,713,752

8.9%

3,092,320

-4.4%

Customer funds4

2,817,677

2,625,228

7.3%

2,693,025

4.6%

Tier I Capital Adequacy Ratio (BIS)5

23.2%

23.2%


22.0%


Total Capital Adequacy Ratio (BIS)5

28.2%

29.7%


27.0%


NBG Tier I Capital Adequacy Ratio6

16.8%

15.2%


13.8%


NBG Total Capital Adequacy Ratio6

17.1%

18.2%


16.2%


Leverage (times)7

4.0

3.7


4.3


       

 

      

 These management accounts are neither audited nor reviewed by auditors.

 

1Revenue includes net interest income, net fee and commission income, net insurance revenue, net healthcare revenue and other operating non-interest income

2 Cost of credit risk includes impairment charge (reversal of impairment) on: loans to customers, finance lease receivables and other assets and provisions

3 Net loans equal to net loans to customers and finance lease receivables

4 Customer funds equal amounts due to customers

5 BIS Tier I Capital Adequacy Ratio equals consolidated Tier I regulatory capital as of the period end divided by total consolidated risk weighted assets as of the same date. BIS Total Capital Adequacy Ratio equals total consolidated regulatory capital as of the period end divided by total consolidated risk weighted assets. Both ratios are calculated in accordance with the requirements of Basel Accord I

6NBG Tier I Capital and Total Capital Adequacy Ratios are calculated in accordance with the requirements of the National Bank of Georgia (NBG)

7  Leverage (times) equals Total Liabilities divided by Total Equity

 

DISCUSSION OF RESULTS

 

 

Comparisons refer to the prior-year quarter, unless noted otherwise.

 

Revenue

 




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Loans to customers

129,458

118,425

9.3%

134,451

-3.7%

Investment securities8

8,007

9,824

-18.5%

8,018

-0.1%

Amounts due from credit institutions

2,615

4,212

-37.9%

2,141

22.1%

Finance lease receivables

1,500

2,012

-25.4%

2,327

-35.5%

Interest income

141,580

134,473

5.3%

146,937

-3.6%

Amounts due to customers

(43,918)

(53,834)

-18.4%

(46,284)

-5.1%

Amounts due to credit institutions

(24,990)

(18,709)

33.6%

(23,943)

4.4%

Interest expense

(68,908)

(72,543)

-5.0%

(70,227)

-1.9%

Net interest income before interest rate swaps

72,672

61,930

17.3%

76,710

-5.3%

Net loss from interest rate swaps

(76)

(768)

-90.1%

(171)

-55.6%

Net interest income

72,596

61,162

18.7%

76,539

-5.2%

Fee and commission income

26,562

24,122

10.1%

28,028

-5.2%

Fee and commission expense

(6,066)

(4,406)

37.7%

(6,906)

-12.2%

Net fee and commission income

20,496

19,716

4.0%

21,122

-3.0%

Net insurance premiums earned

31,744

12,487

154.2%

32,956

-3.7%

Net insurance claims incurred

(20,018)

(7,813)

156.2%

(20,698)

-3.3%

Net insurance revenue

11,726

4,674

150.9%

12,258

-4.3%

Healthcare revenue

13,070

10,260

27.4%

15,751

-17.0%

Cost of healthcare services

(9,179)

(5,483)

67.4%

(8,626)

6.4%

Net healthcare revenue9

3,891

4,777

-18.5%

7,125

-45.4%

Net gain from investment securities

1,284

796

61.3%

73

NMF10

Net gain from foreign currencies

9,452

14,358

-34.2%

10,878

-13.1%

Other operating income

3,531

4,361

-19.0%

293

NMF

Other operating non-interest income

14,267

19,515

-26.9%

11,244

26.9%

Revenue

122,976

109,844

12.0%

128,288

-4.1%

8 Investment securities primarily consist of Georgian government treasury bills and bonds and National Bank of Georgia's Certificates of Deposits (NBG CDs)

9 For the Net healthcare revenue disclosures please see the Insurance and Healthcare segment discussion

10 Not meaningful

 

The Bank reported Q1 2013 revenue growth of 12.0% y-o-y to GEL 123.0 million. Net interest income continued to be the main driver of growth, which increased by 18.7% y-o-y to GEL 72.6 million. Our Insurance and Healthcare businesses contributed GEL 15.6 million to the consolidated revenue, increasing their combined contribution from 8.6% in Q1 2012 to 12.7% in Q1 2013.

 

Interest income from loans to customers increased by 9.3% y-o-y driven by year-on-year growth in loans to customers on the back of loan yield declining by 70 basis points (bps) to 16.9%. The decline in interest income from investment securities and amounts due from credit institutions was largely a result of lower yields on government treasury bills and NBG CDs held by the Bank, reflecting the NBG's rate reductions as a measure against the deflationary pressures of the past several months.   

 

As a result of active liability management, interest expense on amounts due to customers decreased 18.4% as annualised cost of client deposits decreased by 165 bps y-o-y to a record low of 6.4%, leading to a 5.0% decline in interest expense on the back of an 18.5% increase in average interest bearing liabilities. Despite the significant deposit rate cuts throughout the twelve month period, client deposits grew by 14.9% y-o-y to GEL 2,807.1 million. Similarly, the cost of amounts due to credit institutions was reduced to 7.1% from 9.0% in Q1 2012, as the Bank replaced its higher cost funding base with less expensive funding. On a quarter-on-quarter basis, the cost of amounts due to credit institutions increased to 7.1% compared to the exceptionally low cost of amounts due to credit institutions of 6.3% during the prior quarter, reflecting a one-off adjustment of the amortised cost of three outstanding loan facilities in Q4 2012 and a reduction of lower-yielding interbank deposit balances, which amounted to GEL 153.4 million at 31 March 2013 compared to GEL 431.4 in Q4 2012. The increase more than offset the declining cost of client deposits, resulting in the quarter-on-quarter increase in the cost of funds to 6.7% compared to 6.6% in Q4 2012.

 

On a quarterly basis, the 4.1% revenue decrease largely reflected a decline in net interest income as a result of subdued corporate lending demand and a decreased loan yield reflecting the excess liquidity in the banking sector in general and intensified competition during the quarter.

 

Net Interest Margin




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Net interest income

72,596

61,162

18.7%

76,539

-5.2%

Net Interest Margin

7.6%

7.3%


7.8%


Average interest earning assets11

3,873,126

3,354,916

15.4%

3,891,637

-0.5%

Average interest bearing liabilities11

4,203,717

3,547,834

18.5%

4,264,983

-1.4%

Excess liquidity12

475,708

186,293

155.4%

352,675

34.9%

 

 

11Monthly averages are used for calculation of average interest earning assets and average interest bearing liabilities

12Excess liquidity is the excess amount of the liquid assets, as defined per NBG, which exceeds the minimal amount of the same liquid assets for the purposes of the minimal 30% liquidity ratio per NBG definitions. 

 

The Net Interest Margin (NIM) in Q1 2013 increased from 7.3% to 7.6% y-o-y despite higher excess liquidity.

While cost of funds plummeted 160 bps, and loan yields declined by 70 bps, the NIM increased just 30 bps on the back of higher liquidity. Adjusting the Q1 2013 NIM to the same liquidity level of Q1 2012 would result in the NIM of 8.1%13. On a q-o-q basis however, the NIM decreased 30 basis points as a result of a 5.2% decline in net interest income, and lower yields on loans and liquid assets. The q-o-q decline in the NIM was also a result of further increase in excess liquidity during the quarter from GEL 352.7 million at the end of Q4 2012 to GEL 475.7 million at the end of Q1 2013.

 

 

Net fee and commission income




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Fee and commission income

26,562

24,122

10.1%

28,028

-5.2%

Fee and commission expense

(6,066)

(4,406)

37.7%

(6,906)

-12.2%

Net fee and commission income

20,496

19,716

4.0%

21,122

-3.0%

 

 

Fee and commission income increased 10.1% y-o-y to GEL 26.6 million with the growth mostly attributable to the expansion of Express banking, through which the Bank delivers cost-effective self-service transactional and remote banking facilities that support strong growth of the overall banking operations.

 

 

 

 

13 Q1 2013 daily average excess liquidity amount was assumed to be equal to Q1 2012 daily average excess liquidity amount. Entire surplus amount over that level was assumed to be used for repayment of foreign currency denominated funding.

 

 

Net insurance revenue and net healthcare revenue




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Net insurance premiums earned

31,744

12,487

154.2%

32,956

-3.7%

Net insurance claims incurred

(20,018)

(7,813)

156.2%

(20,698)

-3.3%

Net insurance revenue

11,726

4,674

150.9%

12,258

-4.3%

Healthcare revenue

13,070

10,260

27.4%

15,751

-17.0%

Cost of healthcare services, of which:

(9,179)

(5,483)

67.4%

(8,626)

6.4%

    Salaries and other employee benefits

(5,052)

(3,855)

31.1%

(5,793)

-12.8%

    Depreciation expenses

(1,163)

-

-

-

-

    Other operating expenses

(2,964)

(1,628)

82.1%

(2,833)

4.6%

Net healthcare revenue14

3,891

4,777

-18.5%

7,125

-45.4%

 

14For the Net healthcare revenue disclosures please see the Insurance and Healthcare segment discussion

 

The Bank's insurance and healthcare business, Aldagi BCI, continued its strong performance in Q1 2013 after delivering a record earnings in 2012 and becoming the undisputed leader in the Georgian insurance market. In Q1 2013, net insurance revenue grew by 150.9% y-o-y to GEL 11.7 million and its contribution to the group's total revenue more than doubled compared to the same period last year (from 4.3% to 9.5%).

 

The growth of the healthcare business, following the expansion of healthcare operations by Aldagi BCI, led to a 27.4% y-o-y increase in healthcare revenue. Cost of healthcare services increased 67.4% y-o-y, mainly as a result of accounting reclassification of the additional depreciation and utility expenses included in this item in Q1 2013, which were presented in operating expenses in 2012. In line with the Bank' strategy of the expansion of its healthcare business and its aim to increase the concentration of its claims expenditures within the group, Aldagi BCI increased its spending on its healthcare facilities. Aldagi BCI has almost doubled claims directed to its healthcare business subsidiary, generating increasing revenue for its own healthcare business. As a result, healthcare operations that accounted for 25.3% of insurance claims of Aldagi BCI in Q1 2012 and 19.4% of insurance claims of Aldagi BCI in Q4 2012, now account for 36.2% in Q1 2013.

 

 

Other operating non-interest income




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Net gain from investment securities

1,284

796

61.3%

73

NMF

Net gain from foreign currencies, adjusted for one-off foreign currency gain15

9,452

11,409

-17.2%

10,878

-13.1%

Other operating income16

3,531

4,361

-19.0%

293

NMF

Other operating non-interest income, adjusted for one off foreign currency gain

14,267

16,566

-13.9%

11,244

26.9%

One-off foreign currency gain

-

2,949

-

-

-

Other operating non-interest income

14,267

19,515

-26.9%

11,244

26.9%

 

15 One-off foreign currency (FX) gain by BNB 

16 Other operating income includes net revenue from the sale of goods of the Bank's non-banking subsidiaries

 

Other operating non-interest income, adjusted for last year's one-off foreign currency gain, decreased 13.9% y-o-y to GEL 14.3 million, mainly as a result of a 17.2% decline in net gain from foreign currencies, adjusted for the one off gain, due to slower levels of economic activity in Q1 2013. However, on q-o-q basis, other operating non-interest income increased 26.9%, largely reflecting a strong performance of the non-core businesses of the Bank during the quarter.

 

 

Net operating income, cost of credit risk, profit for the period




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Y-O-Y

Q-O-Q







Salaries and other employee benefits

(32,501)

(25,833)

25.8%

(32,383)

0.4%

General and administrative expenses

(14,057)

(15,764)

-10.8%

(15,278)

-8.0%

Depreciation and amortization expenses

(6,593)

(6,764)

-2.5%

(7,303)

-9.7%

Other operating expenses

(729)

(1,957)

-62.7%

998

NMF

Operating expenses

(53,880)

(50,318)

7.1%

(53,966)

-0.2%

Operating income before cost of credit risk

69,096

59,526

16.1%

74,322

-7.0%

Cost of credit risk

(17,278)

(7,380)

134.1%

(16,124)

7.2%

Net operating income

51,818

52,146

-0.6%

58,198

-11.0%

Net non-operating expense

(1,365)

(4,400)

-69.0%

(4,189)

-67.4%

Profit before income tax expense

50,453

47,746

5.7%

54,009

-6.6%

Income tax expense

(8,456)

(8,042)

5.1%

(7,134)

18.5%

Profit from continuing operations

41,997

39,704

5.8%

46,875

-10.4%

Net gain from discontinued operations

-

54

-100.0%

-

-

Profit

41,997

39,758

5.6%

46,875

-10.4%

 

Operating expenses grew 7.1% to GEL 53.9 million, lagging behind the 12.0% growth in revenue. As a result, the Bank's y-o-y operating leverage stood at 4.9 percentage points during the quarter.

 

The year-on-year increase in expenses primarily reflected a 25.8% growth in salaries and other employee benefits, on the back of 55.8% increase in headcount over last year due to acquisitions and to service the group's growing revenue base. The Cost to Income ratio improved to 43.8% from 45.8% in Q1 2012, benefiting from ongoing cost measures undertaken by the Bank and the expansion of the cost effective Express banking. 

 

Operating expenses decreased by 0.2% compared to Q4 2012 with further progress made on cost initiatives across the business, with particular emphasis on reducing general and administrative expenses, which declined 8.0% q-o-q.

 

The Bank's operating income before the cost of credit risk increased by 16.1% y-o-y to GEL 69.1 million.

 

The cost of credit risk increased to GEL 17.3 million from GEL 16.1 million in Q4 2012 and GEL 7.4 million in Q1 2012. The increase in cost of credit risk compared to prior quarter largely reflected an impairment in the amount of GEL 3.3 million of an off-balance sheet guarantee of a corporate client in the infrastructure sector, a material portion of whose total exposure the Bank provisioned in Q4 2012. In Q4 2012, the Bank already recognised an impairment charge for this borrower and initiated bankruptcy procedures. The Bank will continue to assess objective evidence of further impairment into 2013 as bankruptcy procedures continue.

 

As a result of this additional provisioning, the cost of risk increased from 1.0% to 1.4% y-o-y, but improved considerably q-o-q from 1.8%. The allowance loan impairment stood at GEL 113.9 million in Q1 2013 or 3.7% of total gross loans as of 31 March 2013 compared to 4.2% as of 31 March 2012 and 3.5% as of 31 December 2012. 

 

The Bank's non-performing loans (NPLs) increased to GEL 131.6 million as of 31 March 2013 from GEL 94.5 million a year earlier and from GEL 126.3 million in the beginning of the year. NPLs are defined as the principal and interest on loans overdue for more than 90 days and any additional losses estimated by management. The Bank's NPLs to total gross loans ratio stood at 4.3% as of 31 March 2013, 3.9% as of 31 December 2012 and 3.3% a year ago, an increase mostly attributed to the decline in the loan balances in Q1 2013. NPL coverage ratio was 86.5%, while the NPL coverage ratio adjusted for the discounted value of collateral was 111.1% as of 31 March 2013.

 

The Bank's net operating income totalled GEL 51.8 million, down 0.6% year-on-year. Net non-operating expense declined by 69.0% to GEL 1.4 million, reflecting the absence of last year's costs associated with the tender offer and premium listing.

 

As a result of the foregoing, profit before income tax in Q1 2013 totalled GEL 50.5 million, an increase of 5.7% y-o-y. The Bank posted profit of GEL 42.0 million for the period, up 5.6% year-on-year.

 

Balance Sheet highlights

 

As of 31 March 2013, the Bank's total assets stood at GEL 5,533.9 million, an increase of 23.2% y-o-y. The growth in total assets was primarily driven by a 51.7% increase in liquid assets to GEL 1,558.7 million, which comprise NBG CDs, Georgian government treasury bills and bonds and interbank deposits and cash and cash equivalents.

 

Net loan book increased by GEL 241.0 million or 8.9% y-o-y to GEL 2,954.7 million. The loan book grew 9.0% in US dollar terms, which is the issuing currency of the majority of loans. The growth of the loan portfolio over the last twelve months was driven by a 12.0% increase in Retail Banking lending to GEL 1,371.9 million and a 9.4% increase in Corporate Banking lending to GEL 1,591.1 million. Loans denominated in foreign currencies (primarily in US$) accounted for 65.5% of the Bank's net loan book as of 31 March 2013, compared to 68.3% as of 31 December 2012 and 67.4% as of 31 March 2012.

 

Total liabilities amounted to GEL 4,424.0 million, up 24.9% y-o-y, driven by the growth in amounts due to credit institutions, up 79.8% to GEL 1,355.0 million as a result of the Eurobond issued last year. The Bank's customer funds grew 7.3% to GEL 2,817.7 million y-o-y and 4.6% year-to-date, while the Cost of Client Deposits reached record low levels at 6.4% in Q1 2013, compared to 6.6% in Q4 2012 and 8.1% in Q1 2012. Notably, the contractual rates on US$ denominated one year deposits reached the historical low of 6.5%, a decrease from 8.0% at the end of 2012. Reflecting the de-dollarisation trend in the country, client deposits denominated in foreign currency decreased to 65.4% from 68.7% in the beginning of the year.

 

Total equity attributable to shareholders of the group totalled GEL 1,057.3 million, a 19.0% y-o-y and 4.6% year-to-date increase.

 

The Bank's Book Value per share on 31 March 2012 stood at GEL 31.04 (US$18.72/GBP12.32) compared to GEL 30.33 (US$18.31/GBP11.38) on 31 December 2012 and GEL 26.78 (US$16.13/GBP10.08) as of 31 March 2012.

 

Liquidity, Funding and Capital Management




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Amounts due to credit institutions, of which:

1,355,027

753,821

79.8%

1,657,162

-18.2%

Borrowed funds, of which  from

1,201,582

671,795

78.9%

1,225,793

-2.0%

     Developmental Financial Institutions

649,183

542,718

19.6%

672,977

-3.5%

Inter-bank loans and deposits

153,445

82,026

87.1%

431,369

-64.4%

Customer Funds

2,817,677

2,625,228

7.3%

2,693,025

4.6%

Client deposits, of which

2,807,064

2,442,007

14.9%

2,622,911

7.0%

     CDs

47,806

-

NMF

-

NMF

Promissory notes

10,613

183,221

-94.2%

70,114

-84.9%

Net Loans / Customer Funds

104.9%

103.4%


114.8%


Liquid assets

1,558,685

1,027,553

51.7%

1,624,317

-4.0%

Liquid assets as percent of total assets

28.2%

22.9%


28.7%


Liquid assets as percent of total liabilities

35.2%

29.0%


35.3%


NBG liquidity ratio

44.1%

36.0%


41.1%


Excess liquidity

475,708

186,293

155.4%

352,675

34.9%

 

The Bank continues to take a conservative approach to managing the balance sheet, maintaining a strong liquidity position, considerably in excess of conservative regulatory requirements. The liquidity ratio, as per requirements of the National Bank of Georgia, stood at 44.1% against the required minimum of 30%, while liquid assets, comprised of cash and cash equivalents, investment securities consisting of National Bank of Georgia CDs, government treasury bills and bonds and interbank deposits accounted for 28.2% of total assets and 35.2% of total liabilities as of 31 March 2013.

 

The 78.9% year-on-year increase in borrowed funds was largely attributed to the Eurobond placed by the Bank in July 2012. The cost of amounts due to credit institutions declined from 9.0% to 7.1% y-o-y, as the Bank increased its amounts due to credit institutions by 79.8%, as the Bank succeeded in replacing costly borrowings with lower rate international funding throughout the year. Slower growth of the loan book resulted in a stable Net Loans to Customer Funds ratio of 104.9% compared to 103.4% last year.  Net Loans to Customer Funds and DFI ratio was 85.2%, compared to 85.7% in Q1 2012.

 

The Bank ended the year with an extremely strong capital position with a Tier I Capital ratio (BIS) of 23.2% a further improvement from 22.0% at the end of 2012.

 

The composition of the balance sheet in Q1 2013 reflected the Bank's successful efforts in 2012 to optimise funding costs. Client deposits grew 14.9% y-o-y and 7.0% q-o-q on the back of declining contractual deposit rates, which were reduced from 8.0% on US$ 12 month deposit in Q4 2012 and 8.5% in Q1 2012 to 6.5% by the end of Q1 2013. This led to reduction of foreign currency cost of deposits for the Bank from 7.1% in Q1 2012 to 6.6% in Q4 2012. Further rate cuts on US$ deposits in March 2013 have not yet been reflected in the 6.6% foreign currency deposit cost of Q1 2013, which remained flat at 6.6% compared to the prior quarter. Deposit costs in GEL amounted to 6.2% in Q1 2013 compared to 6.6% in Q4 2012 and 9.2% in Q1 2012.

 

 

Currency denomination of selected balance sheet items


GEL

Foreign Currency (FC)

GEL thousands, unless otherwise noted 

Q1 2013

Q1 2012

Change

Q4 2012

Change

Q1 2013

Q1 2012

Change

Q4 2012

Change




Y-O-Y


Q-O-Q



Y-O-Y


Q-O-Q












Loans to customers and finance lease receivables, net

1,019,355

883,601

15.4%

978,773

4.1%

1,935,369

1,830,151

5.7%

2,113,547

-8.4%

Amounts due to customers, of which:

970,735

881,796

10.1%

822,248

18.1%

1,846,942

1,743,432

5.9%

1,870,777

-1.3%

Client deposits

969,877

878,192

10.4%

821,404

18.1%

1,837,187

1,563,815

17.5%

1,801,507

2.0%

Promissory notes

858

3,604

-76.2%

844

1.7%

9,755

179,617

-94.6%

69,270

-85.9%

Amounts due to credit institutions

47,900

24,953

92.0%

40,142

19.3%

1,307,127

728,868

79.3%

1,617,020

-19.2%

 

 

The 31 March 2013 balance sheet also demonstrates the positive trend of de-dollarisation, as reflected in the 10.1% y-o-y increase in Lari denominated customer funds compared to the 5.9% increase in US$ denominated customer funds. Similarly, Lari denominated loans grew 15.4% y-o-y compared the 5.7% increase of the US$ denominated loans on the balance sheet. Lari denominated loans accounted for 34.8% of total loans as of 31 March 2013, 31.7% as of 31 December 2012, and 32.6% as of 31 March 2012, while Lari denominated customer funds accounted for 34.5% of total client funds, compared to 30.5% and 33.6% as of 31 December 2012 and 31 March 2012, respectively.

 

 

 

 

 

SEGMENT RESULTS

 

 

Strategic Businesses Segment Result Discussion

 

Segment result discussion is presented for the Bank of Georgia's Retail Banking (RB), Corporate Banking (CB) and asset and wealth management (AWM), insurance and healthcare (Aldagi BCI), Affordable Housing (M2 RE) in Georgia and BNB in Belarus, excluding inter-company eliminations.

 

Retail Banking

 




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Net interest income

42,989

38,968

10.3%

48,049

-10.5%

Net fee and commission income

12,516

11,705

6.9%

13,773

-9.1%

Net gain from foreign currencies

3,423

2,958

15.7%

4,031

-15.1%

Other operating non-interest income

1,110

1,255

-11.6%

(710)

NMF

Revenue

60,038

54,886

9.4%

65,143

-7.8%

Operating expenses

(28,244)

(26,353)

7.2%

(27,013)

4.6%

Operating income before cost of credit risk

31,794

28,533

11.4%

38,130

-16.6%

Cost of credit risk

(9,589)

(4,698)

104.1%

10,61917

NMF

Net non-operating expense

(264)

(1,709)

-84.6%

(1,708)

-84.5%

Profit before income tax expense

21,941

22,126

-0.8%

47,041

-53.4%

Income tax expense

(3,341)

(3,398)

-1.7%

(5,492)

-39.2%

Profit from continuing operations

18,600

18,728

-0.7%

41,549

-55.2%

Net gain from discontinued  operations

-

25

-100.0%

-

-

Profit

18,600

18,753

-0.8%

41,549

-55.2%

Net loans, standalone

1,371,948

1,225,012

12.0%

1,348,331

1.8%

Client deposits, standalone

865,226

713,337

21.3%

816,709

5.9%

Loan yield

20.3%

20.5%


21.3%


Cost of deposits

6.1%

6.5%


5.8%


Cost / income ratio

47.0%

48.0%


41.5%


 

17For collective impairment assessment, history of losses was changed from seven year approach to three year approach in Retail Banking in 2012.

 

Retail Banking provides consumer loans, mortgage loans, overdrafts, credit card facilities and other credit facilities as well as funds transfer and settlement services and handling customer deposits for both individuals and legal entities, encompassing the mass affluent segment, retail mass markets, SME and micro businesses.

 

In Q1 2013, the 9.4% y-o-y growth in Retail Banking revenue was driven by the healthy 10.3% increase in net interest income.  This resulted from the strong year-on-year growth of the retail net loan book (up 12.0% to GEL 1,371.9 million) as a result of the strong demand and successful marketing efforts reflected under "Highlights" below.  Loan yields have stayed largely flat, decreasing by 20 bps to 20.3%. The 6.9% increase in net fees and commission income resulted primarily from growth of the Bank's card operations, boosted by the launch of the Express banking franchise.

 

In Q1 2013, Retail Banking reported its tenth successive quarter of positive operating leverage, with expenses growing by 7.2% compared to revenue growth rate of 9.4%. As a result, operating income before cost of credit risk grew by 11.4% to GEL 31.8 million.

 

The Retail Banking cost of credit risk increased by GEL 4.9 million to GEL 9.6 million, a result of low cost of risk in Q1 2012 due to strong recoveries as well as weakening of the consumer and credit card portfolio in Q1 2013. Retail Banking profit before income tax expense amounted to GEL 21.9 million. After income tax of GEL 3.3 million, profit stood at GEL 18.6 million.

 

Deposits from retail clients increased by 21.3% to GEL 865.2 million as of 31 March 2013 despite interest rate reductions that led to a decrease in the cost of retail deposits from 6.5% in Q1 2012 to its record low of 6.1% in Q1 2013. Particularly strong growth was achieved in current account balances as a result of our strategy to grow our Express banking service aimed at attracting emerging mass market customers and the unbanked population.

 

Highlights

 

§ Increased number of Express Pay terminals to 759 from 104 in Q1 2012. Express Pay terminals are used for bank transactions such as credit card and consumer loan payments, utility bill payments and mobile telephone top-ups.

§ Stepped up the issuance of Express cards, first contactless cards in Georgia, which also serve as a metro and bus transport payment card and offer loyalty programmes to clients. Since the launch on 5 September 2012, 244,360 Express cards have been issued as of the date of this report.

§ Issued 76,075 debit cards, including Express cards, in Q1 2013 bringing the total debit cards outstanding to 727,019 up 27.9% y-o-y.

§ Issued 18,097 credit cards of which 15,110 were American Express cards in Q1 2013. A total of 171,495 American Express cards have been issued since the launch in November 2009. The total number of outstanding credit cards amounted to 111,591 (of which 85,573 were American Express Cards).

§ Outstanding number of Retail Banking clients totalled 1,102,341 up 18.9% y-o-y.

§ Acquired 448 new clients in the Solo business line, the Bank's mass affluent sub-brand in Q1 2013. As of 31 March 2013, the number of Solo clients reached 5,713.

§ Increased Point of Sales (POS) footprint: as of 31 March 2013, 231 desks at 522 contracted merchants, up from 186 desks and 390 merchants as of 31 March 2012. GEL 12.4 million POS loans were issued in Q1 2013, compared to GEL 10.8 million during the same period last year. POS loans outstanding amounted to GEL 27.8 million, up 15.8% over the one year period.

§ POS terminals outstanding reached 3,899, up 32.6% y-o-y. The volume of transactions through the Bank's POS terminals grew 34.7% y-o-y to GEL 88.5 million, while number of POS transactions increased by 0.4 million y-o-y from 0.9 million in Q1 2012 to 1.3 million in Q1 2013.

§ Consumer loan originations of GEL 126.6 million resulted in consumer loans outstanding totalling of GEL 363.4 million as of 31 March 201, up 22.5% y-o-y and up 3.7% year-to-date.  

§ Micro loan originations of GEL 91.5 million resulted in micro loans outstanding totalling GEL 271.8 million as of 31 March 2013, up 10.9% y-o-y and up 5.4% year-to-date.

§ SME loan originations of GEL 36.0 million resulted in SME loans outstanding totalling GEL 112.0 million as of 31 March 2013, up 42.7% y-o-y and up 5.1% year-to-date.

§ Mortgage loans originations of GEL 28.1 million resulted in mortgage loans outstanding of GEL 385.1 million as of 31 March 2012, up 5.8% y-o-y and down 0.9% year-to-date.

§ RB loan yield amounted to 20.3% in Q1 2013 (20.5% in Q1 2012) and RB deposit cost declined to 6.1% in Q1 2013 (6.5% in Q1 2012).

 

 

 

 

 

 

 

 

 

Corporate Banking

 




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Net interest income

25,177

18,867

33.4%

25,197

-0.1%

Net fee and commission income

6,436

7,082

-9.1%

6,014

7.0%

Net gain from foreign currencies

5,518

8,341

-33.8%

6,354

-13.2%

Other operating non-interest income

1,479

1,349

9.6%

175

NMF

Revenue

38,610

35,639

8.3%

37,740

2.3%

Operating expenses

(12,366)

(11,179)

10.6%

(12,391)

-0.2%

Operating income before cost of credit risk

26,244

24,460

7.3%

25,349

3.5%

Cost of credit risk

(6,916)

(1,256)

NMF

(26,455)

-73.9%

Net non-operating expense

(253)

(1,913)

-86.8%

(2,218)

-88.6%

Profit (loss) before income tax (expense) benefit  

19,075

21,291

-10.4%

(3,324)

NMF

Income tax (expense) benefit

(3,292)

(3,778)

-12.9%

1,327

NMF

Profit (loss) from continuing operations

15,783

17,513

-9.9%

(1,997)

NMF

Net gain from discontinued operations

-

28

-100.0%

-

-

Profit (loss)

15,783

17,541

-10.0%

(1,997)

NMF

Net loans, standalone

1,591,087

1,454,937

9.4%

1,696,325

-6.2%

Client deposits, standalone

1,274,621

1,246,995

2.2%

1,148,913

10.9%

Loan yield

13.5%

14.5%


12.9%


Cost of deposits

5.7%

8.3%


6.2%


Cost / income ratio

32.0%

31.4%


32.8%


 

 

Corporate Banking business in Georgia comprises of loans and other credit facilities to the country's large corporate clients as well as other legal entities, excluding SME and micro businesses. The services include fund transfers and settlements services, currency conversion operations, trade finance services and documentary operations as well as handling savings and term deposits for corporate and institutional customers. Corporate Banking business also includes finance lease facility provided by the Bank's leasing operations (Georgian Leasing Company).

 

The 33.4% net interest income growth for Corporate Banking business was partially offset by a decline in net fee and commission and net gains from foreign currencies, translating into revenue growth of 8.3% y-o-y. Cost of credit risk declined significantly to GEL 6.9 million, down 73.9% q-o-q. As a result, the Corporate Banking segment returned to profitability this quarter after a loss in Q4 2012, to post a GEL 15.8 million profit.

 

Corporate Banking net loans increased by 9.4% y-o-y to GEL 1,591.1 million, but declined 6.2% q-o-q, reflecting the slow-down of the corporate activity in the post-election period as well as the one-off prepayment of a corporate loan totalling GEL 80.5 million at the end of March 2013. As a result, the Bank's corporate loan portfolio concentration improved from top 10 corporate loans accounting for 17.0% of the Bank's total loan book as of 31 December 2012 to 15.3% as of 31 March 2013, in line with the Bank's intention to focus on rapidly growing mid size corporate borrowers. Corporate Banking client deposits increased by 2.2% to GEL 1,274.6 million. Aggressive corporate deposit pricing led to the reduction of cost of corporate deposits to 5.7% in Q1 2013 from 6.2% in Q4 2012 and 8.3% in Q1 2012.

 

Highlights

 

§ Increased the number of corporate clients using the Bank's payroll services from 2,603 as of 31 March 2012 to 3,528 as of 31 March 2013. As of 31 March 2013, the number of individual clients serviced through the corporate payroll programmes administered by the Bank amounted to 206,980, compared to 185,811 as of 31 March 2012.

§ Since its launch in June 2012, Bank of Georgia Research has initiated research coverage of Georgian Electricity Sector, Georgian Oil and Gas Corporation, Georgian Railway, and issued notes on Georgian State Budget and the Tourism Sector as of the date of this report. The Bank of Georgia research platform is aimed at supporting the growth of CB's fee generating business.

§ Substantially increased the aggregate trade finance limits from international partner credit institutions from US$186.9 million equivalent in Q1 2012 to US$320.9 million in Q1 2013 diversified across different currencies (US$, EUR, CHF). The bank has trade finance lines open with 14 partner credit institutions.

 

 

Asset and Wealth Management (AWM)

 




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Net interest income

2,221

2,940

-24.5%

1,701

30.6%

Net fee and commission income

130

112

16.1%

161

-19.3%

Net gain from foreign currencies

383

154

148.7%

132

190.2%

Other operating non-interest income

17

20

-15.0%

6

183.3%

Revenue

2,751

3,226

-14.7%

2,000

37.6%

Operating expenses

(978)

(887)

10.3%

(1,080)

-9.4%

Operating income before cost of credit risk

1,773

2,339

-24.2%

920

92.7%

Cost of credit risk

122

32

NMF

981

-87.6%

Net non-operating expense

(4)

(53)

-92.5%

(132)

-97.0%

Profit before income tax expense

1,891

2,318

-18.4%

1,769

6.9%

Income tax expense

(283)

(358)

-20.9%

(124)

128.2%

Profit from continuing operations

1,608

1,960

-18.0%

1,645

-2.2%

Net gain from discontinued operations

-

1

-100.0%

-

-

Profit

1,608

1,961

-18.0%

1,645

-2.2%

Net loans, standalone

25,504

43,629

-41.5%

38,644

-34.0%

Client deposits, standalone

613,787

490,134

25.2%

605,183

1.4%

Cost of deposits

8.3%

9.2%


8.5%


 

 

The Bank's asset and wealth management business provides private banking services to resident and non-resident clients by ensuring an individual approach and exclusivity in providing banking services such as holding the clients' savings and term deposits, fund transfers, currency exchange and settlement operations. In addition, asset and wealth management involves providing services to its clients through a wide range investment opportunities and specifically designed investment products.

 

In Q1 2013, AWM client deposits increased 25.2% y-o-y to GEL 613.8 million, despite a 90 bps decline in cost of deposits. Net interest income declined 24.5% to GEL 2.2 million predominantly as a result of change in the internal transfer pricing rates within the segments (from AWM to RB and CB). As a result, profit of the segment declined 18.0% to GEL 1.6 million.

 

Highlights

 

§ The Asset and Wealth Management business currently serves over 1,400 clients from more than 60 countries. Client funds attracted by AWM have grown at a compound annual growth rate (CAGR) of 60.1% over the last four year period to GEL 613.8 million as of 31 March 2013.

§ Bank of Georgia started a Certificates of Deposit (CD) Programme in December 2012 (official launch January 2013). CDs are tradable securities offering attractive yields to investors in both local and foreign currencies. As of 31 March 2013, the amount of CDs issued to AWM clients reached GEL 41.6 million and GEL 56.2 million as of the date of this report.

 

 

 

 

Synergistic Businesses

 

 

Insurance and Healthcare (Aldagi BCI)  

 

 


Q1 2013

Q1 2012

Change, Y-O-Y

GEL thousands, unless otherwise noted

Insurance

Healthcare

Eliminations

Total

Insurance

Healthcare

Eliminations

Total

Insurance

Healthcare

Total

Gross premiums written

37,827

-

-

37,827

19,892

-

-

19,892

90.2%

-

90.2%

Net interest income (expense)

583

(2,802)

-

(2,219)

(204)

(1,052)

-

(1,256)

NMF

166.3%

76.7%

Net fee and commission income

28

-

-

28

-

-

-

-

-

-

-

Net insurance revenue, of which:

9,228

-

3,268

12,496

3,136

-

1,178

4,313

194.3%

-

189.7%

   Net premiums earned

32,642

-

(127)

32,515

13,012

-

-

13,012

150.9%


149.9%

   Net claims incurred

(23,414)

-

3,395

(20,019)

(9,876)

-

1,178

(8,698)

137.1%


130.2%

Net healthcare revenue (loss), of which:

-

7,286

(3,395)

3,891

-

5,955

(1,178)

4,778

-

22.4%

-18.5%

   Healthcare revenue


21,554

(8,484)

13,070

-

12,961

(2,701)

10,260

-

66.3%

27.4%

   Cost of healthcare services


(14,268)

5,089

(9,179)

-

(7,006)

1,523

(5,483)

-

103.7%

67.4%

Net loss from foreign currencies

(92)

(332)

-

(424)

(113)

(84)

-

(197)

-18.6%

NMF

115.2%

Other operating non-interest income

204

422

-

626

525

1,600

-

2,125

-61.1%

-73.6%

-70.5%

Revenue

9,951

4,574

(127)

14,398

3,344

6,419

-

9,763

197.6%

-28.7%

47.5%

Operating expenses

(4,237)

(3,274)

127

(7,384)

(2,841)

(5,141)

-

(7,982)

49.1%

-36.3%

-7.5%

Operating income before cost of credit risk

5,714

1,300

-

7,014

503

1,278

-

1,781

NMF

1.7%

NMF

Cost of credit risk

(565)

(294)

-

(859)

(45)

-

-

(45)

NMF

-

NMF

Net non-operating expenses

-

-

-

-

(71)

-

-

(71)

-100.0%

-

-100.0%

Profit before income tax (expense) benefit

5,149

1,006

-

6,155

387

1,278

-

1,665

NMF

-21.3%

NMF

Income tax (expense) benefit

(773)

(154)

-

(927)

160

(224)

-

(64)

NMF

-31.3%

NMF

Profit

4,376

852

-

5,228

547

1,054

-

1,601

NMF

-19.2%

NMF













 

 

Aldagi BCI, the Bank's wholly-owned subsidiary, provides life and non-life insurance and healthcare products and services in Georgia. A leader in the Georgian life and non-life insurance markets, with a market share of 31.8% as of 31 December 2012 based on gross insurance premium revenue, Aldagi BCI cross-sells its insurance products with the Bank's retail banking, corporate banking and asset and wealth management products. Aldagi BCI's healthcare business consists of My Family Clinic, Georgia's leading healthcare provider, operating a chain of healthcare centers in Georgia, in line with the Bank's strategy of vertically integrating its insurance and healthcare businesses.

 

In Q1 2013, insurance and healthcare revenue increased to GEL 14.4 million from GEL 9.8 million in Q1 2012, reflecting the growth of both the insurance and healthcare businesses through organic growth as well as acquisitions. The Bank's insurance business nearly doubled gross premiums written during the period. As a result, net insurance revenues almost tripled to GEL 9.2 million. On q-o-q basis, insurance revenue decreased 19.3% as a result of seasonality considerations characteristic of the insurance business. Operating expenses declined 7.5% y-o-y despite a 47.5% increase in revenue,  resulting in total operating income before the cost of credit risk increasing almost four times.

 

As a result, Insurance and Healthcare segment (Aldagi BCI) posted a profit before income tax expense of GEL 6.2 million up from GEL 1.7 million the year before.

 

 

 

The following income statements are presented on a standalone basis, before applying inter-company eliminations, for insurance segment and healthcare segment.

 

Insurance standalone income statement




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Gross premiums written

37,827

19,892

90.2%

22,753

66.3%

Net interest income

583

(204)

NMF

694

-16.0%

Net fee and commission income (expense)

28

-

NMF

(137)

NMF

Net insurance revenue, of which:

9,228

3,136

194.3%

10,909

-15.4%

   Net premiums earned

32,642

13,012

150.9%

33,257

-1.8%

   Net claims incurred

(23,414)

(9,876)

137.1%

(22,348)

4.8%

Net loss from foreign currencies

(92)

(113)

-18.6%

(112)

-17.9%

Other operating non-interest income

204

525

-61.1%

974

-79.1%

Revenue

9,951

3,344

197.6%

12,328

-19.3%

Operating expenses

(4,237)

(2,841)

49.1%

(5,200)

-18.5%

Operating income before cost of credit risk

5,714

503

NMF

7,128

-19.8%

Cost of credit risk

(569)

(45)

NMF

(406)

39.2%

Net non-operating income (expense) income

-

(71)

-100%

1

-100.0%

Profit before income tax (expense) benefit

5,149

387

NMF

6,723

-23.4%

Income tax (expense) benefit

(773)

160

NMF

(981)

-21.2%

Profit

4,376

547

NMF

5,742

-23.8%

 

 

Healthcare pro-forma18standalone income statement




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Net interest expense

(2,802)

(1,052)

166.3%

(2,126)

31.8%

Net healthcare revenue, of which:

8,781

5,955

47.5%

8,776

0.1%

   Healthcare revenue

21,554

12,961

66.3%

20,078

7.4%

   Cost of healthcare services

(12,773)

(7,006)

82.3%

(11,302)

13.0%

Net loss from foreign currencies

(332)

(84)

NMF

(112)

196.4%

Other operating non-interest income

422

1,600

-73.6%

146

189.0%

Revenue

6,069

6,419

-5.5%

6,684

-9.2%

Operating expenses

(4,769)

(5,141)

-7.2%

(5,619)

-15.1%

Operating income before cost of credit risk

1,300

1,278

1.7%

1,065

22.1%

Cost of credit risk

(294)

-

-

(802)

-63.3%

Net non-operating income

-

-

-

440

-100.0%

Profit (loss) before income tax (expense) benefit

1,006

1,278

-21.3%

703

43.1%

Income tax (expense) benefit

(154)

(224)

-31.3%

184

NMF

Profit

852

1,054

-19.2

887

-3.9%

 

18 In Q1 2013, compared to previous quarters, additional direct operating expenses of the Healthcare business (such as, direct depreciation and other administrative

 

expenses) were netted off against healthcare revenues. No similar reclassifications were applied to previous quarters. In the pro-forma version of the healthcare income statement, Q1 2013 has been normalised for these additional net-offs, by reversing them and making Q1 2013 more comparable to Q4 2012 and Q1 2012.

 

 

Highlights

 

§ As a result of organic growth and acquisitions in 2012, Aldagi BCI increased market share to 31.8% as of 31 December 2012 from 20.2% a year ago by gross insurance premium revenue as a result of acquisitions in 2012.

§ Nearly tripled number of insurance clients to 639,790 from 230,711 a year ago.

§ As of 31 March 2013, Aldagi BCI operated hospitals and clinics with a total of 1,231 beds.

 

Affordable Housing

 

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Change, Y-O-Y


m2

Mortgages

Total

m2

Mortgage

Total

m2

Mortgages

Total

Net interest income (expense)

367

187

554

(552)

32

(520)

NMF

NMF

NMF

Net fee and commission expense

(4)

-

(4)

-

-

-

-

-

-

Net loss from foreign currencies

(18)

-

(18)

(57)

-

(57)

-68.4%

-

-68.4%

Other operating non-interest income

418

-

418

555

-

555

-24.7%

-

-24.7%

Revenue

763

187

950

(54)

32

(22)

NMF

NMF

NMF

Operating expense

(654)

-

(654)

(800)

-

(800)

-18.3%

-

-18.3%

Operating income (loss) before cost of credit risk

109

187

296

(854)

32

(822)

NMF

NMF

NMF

Cost of credit risk

-

244

244

-

(32)

(32)

-

NMF

NMF

Net non-operating expense

(268)

-

(268)

-

-

-

-

-

-

Loss (profit) before income tax benefit

(159)

431

272

(854)

-

(854)

-81.4%

-

NMF

Income tax benefit

30

-

30

128

-

128

-76.6%

-

-76.6%

Loss (profit)

(129)

431

302

(726)

-

(726)

-82.2%

-

NMF

 

 

The Affordable Housing business consists of the Bank's wholly-owned subsidiary M2 RE, which holds investment properties repossessed by the Bank from defaulted borrowers. With the aim to improve liquidity of these repossessed real estate assets and stimulate the Bank's mortgage lending business capitalising on the market opportunity in the affordable housing segment in Georgia, the Bank develops and leases such real estate assets through M2 RE. M2 RE outsources the construction and architecture works and focuses on project management and sales of apartments and mortgages through its well-established branch network and sales force, thus representing a synergistic business for the Bank's mortgage business.

 

Highlights

 

§ Completed and sold all apartments of the pilot project of 123 apartment building with a total buildable area of 15,015 square meters; total sales from the pilot project amounted to US$9.3 million. IRR from the project amounted to 33.6%.

§ Total mortgage loans extended under pilot project of the Affordable Housing amounted to GEL equivalent of US$4.4 million. Number of mortgages sold 76.

§ Construction of a second project of 522 apartment building with a total buildable area of 63,247 square meters in progress. 261 already pre-sold as of 31 March 2013, of which 34 units were sold in Q1 2013, bringing the total to 50% of pre-sold apartments. During April 2013, an additional 21 apartments were pre-sold. The total sales from this project amounted to US$21.3 million as of 31 March 2013. Number of mortgages sold 129.

§ Total mortgage loans extended under the second Affordable Housing project amounted to US$7.8 million.

§ Cash balance (comprising cash and cash equivalents and amounts due from credit institutions) of M2 Real Estate as of 31 March 2013 amounted to GEL 22.5 million.

 

 

 

Non-Core Businesses

 

The Bank's non-core businesses that accounted for 3.5% of total assets and 5.8% of total revenue in Q1 2013, comprise BNB, our Belarusian banking operation, and Liberty Consumer, a Georgia focused investment company in which the Bank holds a 67% stake. In order for the Bank to focus on its strategic businesses, the Bank has announced its intention to exit from its non-core operations. In line with its intention of exiting from its non-core operations, the Bank continued to sell and/or liquidate non-performing assets held by Liberty Consumer. As of 31 March 2013, the Bank still held Teliani Valley, a Georgian wine producer, through Liberty Consumer. The Bank intends to sell this remaining asset in due course.

BNB




Change


Change

GEL thousands, unless otherwise noted

Q1 2013

Q1 2012

Y-O-Y

Q4 2012

Q-O-Q







Net interest income

4,102

2,295

78.7%

3,485

17.7%

Net fee and commission income

1,161

637

82.3%

1,208

-3.9%

Net gain from foreign currencies19

551

3,197

-82.8%

755

-27.0%

Other operating non-interest income

25

33

-24.2%

(47)

NMF

Revenue

5,839

6,162

-5.2%

5,401

8.1%

Operating expenses

(3,126)

(2,277)

37.3%

(2,897)

7.9%

Operating income before cost of credit risk

2,713

3,885

-30.2%

2,504

8.3%

Cost of credit risk

(439)

(1,071)

-59.0%

80

NMF

Net non-operating expense

(580)

(114)

NMF

(139)

NMF

Profit before income tax expense

1,694

2,700

-37.3%

2,445

-30.7%

Income tax expense

(612)

(658)

-7.0%

(637)

-3.9%

Profit

1,082

2,042

-47.0%

1,808

-40.2%

 

 

19Includes GEL 2.9 million one-off foreing currency gain in Q1 2012

 

Through BNB, the Bank provides retail banking and corporate banking services in Belarus. BNB reported solid net interest income and net fee and commission income, up 78.7% and 82.3% respectively. However, an 82.8% y-o-y decline in net gain from foreign currencies reflecting the one-off significant foreign currency gain in Q1 2012, translated into a 5.2% decrease in revenue. Net loan book doubled y-o-y to GEL 122.6 million, while client funds increased 2.5 times y-o-y. As of 31 March 2013, BNB's total assets stood at GEL 198.2 million, net loan book at GEL 122.6 million, client deposits at GEL 100.1 million and equity at GEL 47.8 million, representing 3.7%, 4.2%, 4.1% and 3.6% of the Bank's total assets, loan book, client deposits and equity, respectively.

    

    

Highlights

 

§ As of 31 March 2013, BNB was the 18th bank in Belarus by assets (31 March 2012: 23rd) and 15th by profit (31 March 2012: 14th).

§ Increased revenues from trade finance operations by 76.2% y-o-y to GEL 0.2 million

§ Added three new currency exchange offices and two ATMs, bringing the total to 7 and 16, respectively.

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

 

CONSOLIDATED INCOME STATEMENT

 


Q1  2013

Q1  2012

Change

Q4  2012

Change

GEL thousands, unless otherwise noted

Unaudited

Audited

Y-O-Y

Unaudited

Q-O-Q







Loans to customers

129,458

118,425

9.3%

134,451

-3.7%

Investment securities

8,007

9,824

-18.5%

8,018

-0.1%

Amounts due from credit institutions

2,615

4,212

-37.9%

2,141

22.1%

Finance lease receivables

1,500

2,012

-25.4%

2,327

-35.5%

Interest income

141,580

134,473

5.3%

146,937

-3.6%

Amounts due to customers

(43,918)

(53,834)

-18.4%

(46,284)

-5.1%

Amounts due to credit institutions

(24,990)

(18,709)

33.6%

(23,943)

4.4%

Interest expense

(68,908)

(72,543)

-5.0%

(70,227)

-1.9%

Net interest income before interest rate swaps

72,672

61,930

17.3%

76,710

-5.3%

Net loss from interest rate swaps

(76)

(768)

-90.1%

(171)

-55.6%

Net interest income

72,596

61,162

18.7%

76,539

-5.2%

Fee and commission income

26,562

24,122

10.1%

28,028

-5.2%

Fee and commission expense

(6,066)

(4,406)

37.7%

(6,906)

-12.2%

Net fee and commission income

20,496

19,716

4.0%

21,122

-3.0%

Net insurance premiums earned

31,744

12,487

154.2%

32,956

-3.7%

Net insurance claims incurred

(20,018)

(7,813)

156.2%

(20,698)

-3.3%

Net insurance revenue

11,726

4,674

150.9%

12,258

-4.3%

Healthcare revenue

13,070

10,260

27.4%

15,751

-17.0%

Cost of healthcare services

(9,179)

(5,483)

67.4%

(8,626)

6.4%

Net healthcare revenue

3,891

4,777

-18.5%

7,125

-45.4%

Net gain from trading and investment securities

1,284

796

61.3%

73

NMF

Net gain from foreign currencies

9,452

14,358

-34.2%

10,878

-13.1%

Other operating income

3,531

4,361

-19.0%

293

NMF

Other operating non-interest income

14,267

19,515

-26.9%

11,244

26.9%

Revenue

122,976

109,844

12.0%

128,288

-4.1%

Salaries and other employee benefits

(32,501)

(25,833)

25.8%

(32,383)

0.4%

General and administrative expenses

(14,057)

(15,764)

-10.8%

(15,278)

-8.0%

Depreciation and amortization expenses

(6,593)

(6,764)

-2.5%

(7,303)

-9.7%

Other operating expenses

(729)

(1,957)

-62.7%

998

NMF

Operating expenses

(53,880)

(50,318)

7.1%

(53,966)

-0.2%

Operating income before cost of credit risk

69,096

59,526

16.1%

74,322

-7.0%

Cost of credit risk

(17,278)

(7,380)

134.1%

(16,124)

7.2%

Net operating income

51,818

52,146

-0.6%

58,198

-11.0%

Net non-operating expense

(1,365)

(4,400)

-69.0%

(4,189)

-67.4%

Profit before Income tax expense

50,453

47,746

5.7%

54,009

-6.6%

Income tax expense

(8,456)

(8,042)

5.1%

(7,134)

18.5%

Profit from continuing operations

41,997

39,704

5.8%

46,875

-10.4%

Net gain from discontinued operations

-

54

-100.0%

-

-

Profit

41,997

39,758

5.6%

46,875

-10.4%

Attributable to:






- shareholders of the Group

40,597

39,143

3.7%

45,228

-10.2%

- non-controlling interests

1,400

615

127.6%

1,647

-15.0%







Earning per share (basic)

1.19

1.21

-1.7%

1.33

-10.5%

Earning per share (diluted)

1.19

1.17

1.7%

1.33

-10.5%







 

 

 

STATEMENT OF FINANCIAL POSITION

 

 


Mar-13

Mar-12

Change

Dec-12

Change

 GEL thousands, unless otherwise noted

Unaudited

Audited

Y-O-Y

Audited

Q-O-Q













Cash and cash equivalents

696,590

381,386

82.6%

762,827

-8.7%

Amounts due from credit institutions

349,196

287,915

21.3%

396,559

-11.9%

Investment securities

511,450

357,517

43.1%

463,960

10.2%

Loans to customers and finance lease receivables

2,954,724

2,713,752

8.9%

3,092,320

-4.4%

Investments in associates

2,441

3,032

-19.5%

2,441

0.0%

Investment property

163,458

125,104

30.7%

160,353

1.9%

Property and equipment

439,941

339,078

29.7%

430,877

2.1%

Goodwill

45,657

45,831

-0.4%

45,657

0.0%

Intangible assets

22,916

20,658

10.9%

23,078

-0.7%

Income tax assets

17,889

22,564

-20.7%

15,296

17.0%

Prepayments

32,219

33,819

-4.7%

41,147

-21.7%

Other assets

297,377

159,501

86.4%

221,080

34.5%

Total assets

5,533,858

4,490,157

23.2%

5,655,595

-2.2%







Amounts due to customers, of which:

2,817,677

2,625,228

7.3%

2,693,025

4.6%

   Client deposits

2,807,064

2,442,007

14.9%

2,622,911

7.0%

   Promissory notes

10,613

183,221

-94.2%

70,114

-84.9%

Amounts due to credit institutions

1,355,027

753,821

79.8%

1,657,162

-18.2%

Income tax liabilities

55,447

45,682

21.4%

60,002

-7.6%

Provisions

991

429

131.0%

683

45.1%

Other liabilities

194,901

116,461

67.4%

185,211

5.2%

Total liabilities

4,424,043

3,541,621

24.9%

4,596,083

-3.7%







Share capital

905

954

-5.1%

957

-5.4%

Additional paid-in capital

19,765

579,136

-96.6%

14,767

33.8%

Treasury shares

(47)

(72)

-34.7%

(69)

-31.9%

Other reserves

14,421

18,355

-21.4%

14,097

2.3%

Retained earnings

1,022,301

290,475

NMF

981,322

4.2%

Total equity attributable to shareholders of the Group

1,057,345

888,848

19.0%

1,011,074

4.6%

Non-controlling interests

52,470

59,688

-12.1%

48,438

8.3%

Total equity

1,109,815

948,536

17.0%

1,059,512

4.7%

Total liabilities and equity

5,533,858

4,490,157

23.2%

5,655,595

-2.2%







Book value per share

31.04

26.78

15.9%

30.33

2.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED INCOME STATEMENT

 




USD





GBP





Q1 2013

Q1  2012

Change

Q4 2012

Change


Q1 2013

Q1  2012

Change

Q4  2012

Change

Thousands, unless otherwise noted

Quarter

Quarter

Y-O-Y

Quarter

Q-O-Q


Quarter

Quarter

Y-O-Y

Quarter

Q-O-Q


Unaudited

Unaudited

%

Unaudited

%


Unaudited

Unaudited

%

Unaudited

%













Loans to customers

78,095

71,340

9.5%

81,156

-3.8%


51,395

44,558

15.3%

50,445

1.9%

Investment securities

4,830

5,918

-18.4%

4,840

-0.2%


3,179

3,696

-14.0%

3,008

5.7%

Amounts due from credit institutions

1,577

2,537

-37.8%

1,292

22.1%


1,038

1,585

-34.5%

803

29.3%

Finance lease receivables

905

1,213

-25.4%

1,405

-35.6%


595

757

-21.4%

874

-31.9%

Interest income

85,407

81,008

5.4%

88,693

-3.7%


56,207

50,596

11.1%

55,130

2.0%

Amounts due to customers

(26,493)

(32,430)

-18.3%

(27,937)

-5.2%


(17,435)

(20,255)

-13.9%

(17,365)

0.4%

Amounts due to credit institutions

(15,075)

(11,270)

33.8%

(14,452)

4.3%


(9,921)

(7,039)

40.9%

(8,983)

10.4%

Interest expense

(41,568)

(43,701)

-4.9%

(42,390)

-1.9%


(27,356)

(27,294)

0.2%

(26,349)

3.8%

Net interest income before interest rate swaps

43,839

37,307

17.5%

46,303

-5.3%


28,851

23,301

23.8%

28,781

0.2%

Net loss from interest rate swaps

(46)

(462)

-90.0%

(103)

-55.3%


(30)

(289)

-89.6%

(64)

-53.1%

Net interest income

43,793

36,845

18.9%

46,200

-5.2%


28,821

23,012

25.2%

28,717

0.4%

Fee and commission income

16,023

14,531

10.3%

16,918

-5.3%


10,545

9,076

16.2%

10,516

0.3%

Fee and commission expense

(3,659)

(2,654)

37.9%

(4,169)

-12.2%


(2,408)

(1,658)

45.2%

(2,591)

-7.1%

Net fee and commission income

12,364

11,877

4.1%

12,749

-3.0%


8,137

7,418

9.7%

7,925

2.7%

Net insurance premiums earned

19,149

7,522

154.6%

19,893

-3.7%


12,602

4,698

168.2%

12,365

1.9%

Net insurance claims incurred

(12,075)

(4,706)

156.6%

(12,494)

-3.4%


(7,947)

(2,939)

170.4%

(7,766)

2.3%

Net insurance revenue

7,074

2,816

151.2%

7,399

-4.4%


4,655

1,759

164.6%

4,599

1.2%

Healthcare revenue

7,884

6,181

27.6%

9,507

-17.1%


5,189

3,860

34.4%

5,910

-12.2%

Cost of healthcare services

(5,537)

(3,303)

67.6%

(5,206)

6.4%


(3,644)

(2,063)

76.6%

(3,237)

12.6%

Net healthcare revenue

2,347

2,878

-18.5%

4,301

-45.4%


1,545

1,797

-14.0%

2,673

-42.2%

Net gain from trading and investment securities

775

480

61.5%

44

NMF


510

299

70.6%

27

NMF

Net gain from foreign currencies

5,702

8,649

-34.1%

6,566

-13.2%


3,752

5,402

-30.5%

4,081

-8.1%

Other operating income

2,130

2,626

-18.9%

177

NMF


1,401

1,642

-14.7%

111

NMF

Other operating non-interest income

8,607

11,755

-26.8%

6,787

26.8%


5,663

7,343

-22.9%

4,219

34.2%

Revenue

74,185

66,171

12.1%

77,436

-4.2%


48,821

41,329

18.1%

48,133

Salaries and other employee benefits

(19,606)

(15,562)

26.0%

(19,547)

0.3%


(12,903)

(9,720)

32.7%

(12,150)

6.2%

General and administrative expenses

(8,480)

(9,496)

-10.7%

(9,222)

-8.0%


(5,581)

(5,931)

-5.9%

(5,732)

-2.6%

Depreciation and amortization expenses

(3,977)

(4,075)

-2.4%

(4,408)

-9.8%


(2,617)

(2,545)

2.8%

(2,740)

-4.5%

Other operating expenses

(440)

(1,179)

-62.7%

602

NMF


(289)

(736)

-60.7%

374

NMF

Operating expenses

(32,503)

(30,312)

7.2%

(32,575)

-0.2%


(21,390)

(18,932)

13.0%

(20,248)

5.6%

Operating income before cost of credit risk

41,682

35,859

16.2%

44,861

-7.1%


27,431

22,397

22.5%

27,885

-1.6%

Cost of credit risk

(10,423)

(4,446)

134.4%

(9,732)

7.1%


(6,859)

(2,777)

147.0%

(6,050)

13.4%

Net operating income

31,259

31,413

-0.5%

35,129

-11.0%


20,572

19,620

4.9%

21,835

-5.8%

Net non-operating expense

(823)

(2,650)

-68.9%

(2,529)

-67.5%


(542)

(1,656)

-67.3%

(1,571)

-65.5%

Profit before Income tax expense

30,436

28,763

5.8%

32,600

-6.6%


20,030

17,964

11.5%

20,264

-1.2%

Income tax expense

(5,102)

(4,845)

5.3%

(4,306)

18.5%


(3,357)

(3,025)

11.0%

(2,677)

25.4%

Profit from continuing operations

25,334

23,918

5.9%

28,294

-10.5%


16,673

14,939

11.6%

17,587

-5.2%

Net gain from discontinued operations

-

33

-100.0%

-

-


-

20

-100.0%

-

-

Profit

25,334

23,951

5.8%

28,294

-10.5%


16,673

14,959

11.5%

17,587

-5.2%

Attributable to:












- shareholders of the Group

24,489

23,581

3.9%

27,300

-10.3%


16,117

14,728

9.4%

16,969

-5.0%

- non-controlling interests

845

370

128.4%

994

-15.0%


556

231

140.7%

618

-10.0%













Earnings per share (basic)

0.72

0.73

-1.4%

0.80

-10.0%


0.47

0.46

2.2%

0.50

-6.0%

Earnings per share (diluted)

0.72

0.70

2.9%

0.80

-10.0%


0.47

0.44

6.8%

0.50

-6.0%

 

 

 

 

 

 

STATEMENT OF FINANCIAL POSITION

 


  USD



GBP



Mar-13

Mar-12

Change

Dec-12

Change

Mar-13

Mar-12

Change

Dec-12

Change

 Thousands, unless otherwise noted

Unaudited

Unaudited

Y-O-Y

Unaudited

Q-O-Q

Unaudited

Unaudited

Y-O-Y

Unaudited

Q-O-Q












Cash and cash equivalents

420,215

229,751

82.9%

460,450

-8.7%

276,545

143,497

92.7%

286,207

-3.4%

Amounts due from credit institutions

210,651

173,443

21.5%

239,367

-12.0%

138,630

108,328

28.0%

148,786

-6.8%

Investment securities

308,530

215,372

43.3%

280,051

10.2%

203,045

134,516

50.9%

174,074

16.6%

Loans to customers and finance lease receivables

1,782,424

1,634,790

9.0%

1,866,554

-4.5%

1,173,022

1,021,052

14.9%

1,160,215

1.1%

Investments in associates

1,473

1,827

-19.4%

1,473

0.0%

969

1,141

-15.1%

916

5.8%

Investment property

98,605

75,364

30.8%

96,791

1.9%

64,893

47,071

37.9%

60,163

7.9%

Property and equipment

265,392

204,264

29.9%

260,081

2.0%

174,656

127,578

36.9%

161,662

8.0%

Goodwill

27,542

27,609

-0.2%

27,559

-0.1%

18,126

17,244

5.1%

17,130

5.8%

Intangible assets

13,824

12,445

11.1%

13,930

-0.8%

9,098

7,773

17.0%

8,659

5.1%

Income tax assets

10,791

13,593

-20.6%

9,233

16.9%

7,102

8,490

-16.3%

5,739

23.7%

Prepayments

19,436

20,373

-4.6%

24,837

-21.7%

12,791

12,724

0.5%

15,438

-17.1%

Other assets

179,392

96,083

86.7%

133,445

34.4%

118,057

60,012

96.7%

82,947

42.3%

Total assets

3,338,275

2,704,914

23.4%

3,413,771

-2.2%

2,196,934

1,689,426

30.0%

2,121,936

3.5%












Amounts due to customers, of which:

1,699,751

1,581,463

7.5%

1,625,535

4.6%

1,118,614

987,745

13.2%

1,010,402

10.7%

   Client deposits

1,693,349

1,471,089

15.1%

1,583,214

7.0%

1,114,401

918,808

21.3%

984,096

13.2%

  Promissory notes

6,402

110,374

-94.2%

42,321

-84.9%

4,213

68,937

-93.9%

26,306

-84.0%

Amounts due to credit institutions

817,414

454,109

80.0%

1,000,279

-18.3%

537,944

283,626

89.7%

621,754

-13.5%

Income tax liabilities

33,448

27,519

21.5%

36,218

-7.6%

22,012

17,188

28.1%

22,512

-2.2%

Provisions

598

258

131.8%

412

45.1%

393

161

144.1%

256

53.5%

Other liabilities

117,573

70,158

67.6%

111,796

5.2%

77,376

43,819

76.6%

69,491

11.3%

Total liabilities

2,668,784

2,133,507

25.1%

2,774,240

-3.8%

1,756,339

1,332,539

31.8%

1,724,415

1.9%












Share capital

546

575

-5.0%

578

-5.5%

359

359

0.0%

359

0.0%

Additional paid-in capital

11,923

348,877

-96.6%

8,914

33.8%

7,847

217,901

-96.4%

5,540

41.6%

Treasury shares

(28)

(43)

-34.9%

(42)

-33.3%

(19)

(27)

-29.6%

(26)

-26.9%

Other reserves

8,700

11,057

-21.3%

8,509

2.2%

5,726

6,905

-17.1%

5,290

8.2%

Retained earnings

616,698

174,985

NMF

592,335

4.1%

405,852

109,292

NMF

368,184

10.2%

Total equity attributable to shareholders of the Group

637,839

535,451

19.1%

610,294

4.5%

419,765

334,430

25.5%

379,347

10.7%

Non-controlling interests

31,652

35,956

-12.0%

29,237

8.3%

20,830

22,457

-7.2%

18,174

14.6%

Total equity

669,491

571,407

17.2%

639,531

4.7%

440,595

356,887

23.5%

397,521

10.8%

Total liabilities and equity

3,338,275

2,704,914

23.4%

3,413,771

-2.2%

2,196,934

1,689,426

30.0%

2,121,936

3.5%












Book value per share

18.72

16.13

16.1%

18.31

2.2%

12.32

10.08

22.2%

11.38

8.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

ALDAGI BCI INCOME STATMENT


Q1 - 2013

Q1 - 2012

Change

Q4 - 2012

Change

 GEL thousands, unless otherwise noted

Unaudited

Unaudited

Y-O-Y

Unaudited

Q-O-Q

Gross premiums written (GPW)

               37,827

             19,892

90.2%

            22,753

66.3%

Gross premiums earned

               36,211

             16,435

120.3%

            37,219

-2.7%







Net insurance premiums earned

                32,514

               12,983

150.4%

              33,257

-2.2%

Net insurance claims incurred

               (20,018)

               (8,699)

130.1%

            (20,697)

-3.3%

Net insurance revenue

               12,496

               4,284

191.7%

            12,560

-0.5%

Healthcare revenue

                13,070

               10,260

27.4%

              15,751

-17.0%

Cost of healthcare services

                 (9,179)

               (5,483)

67.4%

              (8,626)

6.4%

Net healthcare revenue

                 3,891

               4,777

-18.5%

               7,125

-45.4%

Net interest income (expense) and other

               (1,989)

               2,302

NMF

             (1,098)

81.1%

Revenue

               14,398

             11,363

26.7%

            18,587

-22.5%

Operating expenses

                 (7,384)

               (7,982)

-7.5%

            (10,609)

-30.4%

Operating income before cost of credit risk

                 7,014

               3,381

107.5%

               7,978

-12.1%

Cost of credit risk

                    (859)

                    (45)

NMF

              (1,208)

-28.9%

Net non-operating income (expense)

                        -  

                    (71)

-100.0%

                   440

-100.0%

Profit before Income tax expense

                 6,155

               3,265

88.5%

               7,210

-14.6%

Income tax expense

                    (927)

                  (557)

66.4%

                 (796)

16.5%

Profit

                 5,228

               2,708

93.1%

               6,414

-18.5%

 

 

 

 

 

 

 

RATIOS

 

Key Ratios

Q1 - 2013

Q1 - 2012

Q4 - 2012





Profitability




ROAA, Annualised1

3.1%

3.5%

3.4%

ROAE, Annualised2

15.9%

19.0%

18.2%

Net Interest Margin, Annualised3

7.6%

7.3%

7.8%

Loan Yield, Annualised4

16.9%

17.6%

17.1%

Cost of Funds, Annualised5

6.7%

8.3%

6.6%

Cost of Client Deposits, Annualised

6.4%

8.1%

6.6%

Cost of Amounts Due to Credit Institutions, Annualised

7.1%

9.0%

6.3%

Operating Leverage, Y-O-Y6

4.9%

20.2%

10.9%

Efficiency




Cost / Income7

43.8%

45.8%

42.1%

Liquidity




NBG Liquidity Ratio8

44.1%

36.0%

41.1%

Liquid Assets To Total Liabilities9

35.2%

29.0%

35.3%

Net Loans To Customer Funds

104.9%

103.4%

114.8%

Net Loans To Customer Funds + DFIs

85.2%

85.7%

91.9%

Net Loans To Core Funding10

76.9%

90.0%

86.1%

Leverage (Times)11

4.0

3.7

4.3

Asset Quality:




NPLs (in GEL)

131,631

94,549

126,337

NPLs To Gross Loans To Clients

4.3%

3.3%

3.9%

NPL Coverage Ratio12

86.5%

126.6%

87.5%

NPL Coverage Ratio, excluding discounted value of collateral

111.1%

164.7%

112.7%

Cost of Risk, Annualised13

1.4%

1.0%

1.8%

Capital Adequacy:




BIS Tier I Capital Adequacy Ratio, Consolidated14

23.2%

23.2%

22.0%

BIS Total Capital Adequacy Ratio, Consolidated15

28.2%

29.7%

27.0%

NBG Tier I Capital Adequacy Ratio16

16.8%

15.2%

13.8%

NBG Total Capital Adequacy Ratio17

17.1%

18.2%

16.2%

Per Share Values:




Basic EPS (GEL)18

1.19

1.21

1.33

Diluted EPS (GEL)

1.19

1.17

1.33

Book Value Per Share (GEL)19

31.04

26.78

30.33

Ordinary Shares Outstanding - Weighted Average, Basic20

34,061,344

32,309,513

33,940,021

Ordinary Shares Outstanding - Weighted Average, Diluted21

34,061,344

34,426,605

33,940,021

Ordinary Shares Outstanding - Period End, Basic 22

35,909,383

35,909,383

35,909,383

Ordinary Shares Outstanding - Period End, Basic, Net of Treasury Shares23

34,061,344

33,184,801

33,332,636

Treasury Shares Outstanding - Period End

(1,848,039)

(2,724,582)

(2,576,747)

Selected Operating Data:




Full Time Employees, Group, Of Which:

11,515

7,393

11,095

 - Full Time Employees, BOG Stand-Alone

3,750

3,401

3,734

 - Full Time Employees, Aldagi BCI Insurance

625

317

515

 - Full Time Employees, Aldagi BCI Healthcare

6,013

2,664

5,749

 - Full Time Employees, BNB

332

274

323

 - Full Time Employees, Other

795

737

774

Total Assets Per FTE, BOG Stand-Alone (in GEL thousands)

1,476

1,320

1,515

Number Of Active Branches, Of Which:

194

164

194

 - Flagship Branches

34

34

34

 - Standard Branches

98

94

97

 - Express Branches (including Metro)

62

36

63

Number Of ATMs

 

 

479

431

478

Number of Express Pay Terminals

759

104

221

Number Of Cards Outstanding, Of Which:

838,610

703,959

825,500

 - Debit cards

727,019

568,209

718,239

 - Credit cards

111,591

135,750

107,261

Number Of POS Terminals

3,899

2,940

3,725

 


Q1 - 2013

Q1 - 2012

Q4 - 2012





Profitability Ratios:




ROE, Annualised,

15.6%

17.7%

17.8%

Interest Income / Average Int. Earning Assets, Annualised24

14.8%

16.1%

15.0%

Net F&C Inc. To Av. Int. Earn. Ass., Annualised

1.9%

2.1%

1.9%

Net Fee And Commission Income To Revenue

16.7%

17.9%

16.5%

Operating Leverage, Q-O-Q

-4.0%

1.7%

5.1%

Revenue to Total Assets, Annualised

9.0%

9.8%

9.0%

Recurring Earning Power, Annualised25

5.1%

5.2%

5.3%

Profit To Revenue

34.2%

36.2%

36.5%

Efficiency Ratios:




Operating Expenses to Av. Total Ass., Annualised

3.9%

4.4%

3.9%

Cost to Average Total Assets, Annualised

4.1%

4.8%

4.2%

Personnel Cost to Revenue

26.4%

23.5%

25.2%

Personnel Cost to Operating Cost

60.3%

51.3%

60.0%

Personnel Cost to Average Total Assets, Annualised

2.4%

2.3%

2.3%

Liquidity Ratios:




Liquid Assets To Total Assets

28.2%

22.9%

28.7%

Net Loans to Total Assets

53.4%

60.4%

54.7%

Average Net Loans to Average Total Assets

54.8%

57.2%

55.3%

Interest Earning Assets to Total Assets

77.6%

80.3%

77.9%

Aver rage Interest Earning Assets/Average Total Assets

78.2%

80.6%

77.7%

Net Loans to Client Deposits

105.3%

111.1%

117.9%

Average Net Loans to Av. Client Deposits

111.5%

104.3%

116.0%

Net Loans to Total Deposits

99.8%

107.5%

101.2%

Net Loans to (Total Deposits + Equity)

72.6%

78.1%

75.2%

Net Loans to Total Liabilities

66.8%

76.6%

67.3%

Total Deposits to Total Liabilities

66.9%

71.3%

66.5%

Client Deposits to Total Deposits

94.8%

96.8%

85.9%

Client Deposits to Total Liabilities

63.5%

69.0%

57.1%

Total Deposits to Total Assets

53.5%

56.2%

54.0%

Client Deposits to Total Assets

50.7%

54.4%

46.4%

Client Deposits to Total Equity (Times)

                      2.5

                     2.6

       2.5

Total Equity to Net Loans

37.6%

35.0%

34.3%

Asset Quality:




Reserve For Loan Losses to Gross Loans to Clients26

3.7%

4.2%

3.5%

% of Loans to Clients collateralised

87.8%

85.6%

87.1%

Equity to Average Net Loans to Clients

37.6%

35.0%

34.3%

 

 

Key Ratios Aldagi BCI

Q1 - 2013

Q1 - 2012

Q4 - 2012





ROAA, Annualised

6.4%

6.3%

7.6%

ROAE, Annualised

23.8%

30.4%

32.4%

Loss Ratio27

68.8%

66.1%

64.6%

Combined Ratio28

82.0%

84.4%

79.6%

 

 

 

 

 

 

NOTES TO RATIOS

1 Return On Average Total Assets (ROAA) equals Profit for the period divided by monthly Average Total Assets for the same period;

2 Return On Average Total Equity (ROAE) equals Profit for the period attributable to shareholders of the Bank divided by monthly Average Equity attributable to shareholders of the Bank for the same period;

3 Net Interest Margin equals Net Interest Income of the period (adjusted for the gains or losses from revaluation of interest rate swaps) divided by monthly Average Interest Earning Assets Excluding Cash for the same period; Interest Earning Assets Excluding Cash include: Amounts Due From Credit Institutions, Debt Investment and Trading Securities and Net Loans To Customers And Net Finance Lease Receivables;

4 Loan Yield equals Interest Income From Loans To Customers And Finance Lease Receivables divided by monthly Average Gross Loans To Customers And Finance Lease Receivables;

5 Cost Of Funds equals Interest Expense of the period (adjusted for the gains or losses from revaluation of interest rate swaps) divided by monthly Average Interest Bearing Liabilities; Interest Bearing Liabilities Include: Amounts Due To Credit Institutions and Amounts Due To Customers;

6 Operating Leverage equals percentage change in Revenue less percentage change in Operating expenses;

7 Cost / Income Ratio equals Operating expenses divided by Revenue;

8 Average liquid assets during the month (as defined by NBG) divided by selected average liabilities and selected average off-balance sheet commitments (both as defined by NBG);

9 Liquid Assets include: Cash And Cash Equivalents, Amounts Due From Credit Institutions, Investment Securities and Trading Securities;

10 Net Loans To Core Funding equals Net Loans To Customers and Finance Lease Reciavables divided by Client Deposits, CDs and Amounts owed to Credit Institutions with effective maturities of more than one year;

11 Leverage (Times) equals Total Liabilities divided by Total Equity;

12 NPL Coverage Ratio equals Allowance For Impairment Of Loans And Finance Lease Receivables divided by NPLs;

13 Cost Of Risk equals 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;

14 BIS Tier I Capital Adequacy Ratio equals Tier I Capital divided by Risk Weighted Assets, both calculated in accordance with the requirements of Basel Accord I;

15 BIS Total Capital Adequacy Ratio equals Total Capital divided by Risk Weighted Assets, both calculated in accordance with the requirements of Basel Accord I;

16 NBG Tier I Capital Adequacy Ratio equals Tier I Capital divided by Risk Weighted Assets, both calculated in accordance with the requirements the National Bank of Georgia;

17 NBG Total Capital Adequacy Ratio equals Total Capital divided by Risk Weighted Assets, both calculated in accordance with the requirements of the National Bank of Georgia;

18 Basic EPS equals Profit for the period attributable to shareholders of the Bank divided by the weighted average number of outstanding ordinary shares, net of treasury shares over the same period;

19 Book Value Per Share equals Total Equity attributable to shareholders of the Bank divided by Net Ordinary Shares Outstanding at period end; Net Ordinary Shares Outstanding equals total number of Ordinary Shares Outstanding at period end less number of Treasury Shares at period end;

20 Weighted average number of ordinary shares equal average of monthly outstanding number of shares less monthly outstanding number of treasury shares;

21 Weighted average number of diluted ordinary shares equals weighted average number of ordinary shares plus weighted average number of dilutive shares during the same period;

22 Number of outstanding ordinary shares at period end;

23 Number of outstanding ordinary shares at period end less number of treasury shares;

24 Average Interest Earning Assets are calculated on a monthly basis; Interest Earning Assets Excluding Cash include: Amounts Due From Credit Institutions, Debt Investment and Trading Securities and Net Loans To Customers And Net Finance Lease Receivables;

25 Recurring Earning Power equals Operating Income Before Cost of Credit Risk for the period divided by monthly average Total Assets of the same period;

26 Reserve For Loan Losses To Gross Loans equals Allowance For Impairment Of Loans To Customers And Finance Lease Receivables divided by Gross Loans And Finance Lease Receivables;

27 Loss ratio is defined as net insurance claims incurred divided by net insurance premiums earned;

28 Combined ratio is sum of net insurance claims incurred and operating expenses divided by net insurance premiums earned.

 

 

FORWARD LOOKING STATEMENTS

This document contains statements that constitute “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.

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 market 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 document and in our past and future filings and reports, including those filed with the respective authorities.

When relying on forward-looking statements, investors should carefully consider the foregoing factors and other uncertainties and events. Accordingly, we are under no obligations (and expressly disclaim and such obligations) to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise.

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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