Half Yearly Report

Released : 20 Aug 2015 07:00

RNS Number : 5639W
Bank of Georgia Holdings PLC
20 August 2015
 

 

 

 

 

 

BANK OF GEORGIA

HOLDINGS PLC

 

Click on, or paste the following link into your web browser, to view the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/5639W_-2015-8-20.pdf 

 

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 the following: (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 such obligations) to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise.

 

Bank of Georgia Holdings PLC (LSE: BGEO LN), the holding company of Georgia's leading bank JSC Bank of Georgia (the "Bank") and its subsidiaries (together, the "Group"), announces the Group's 2Q15 and 1H15 consolidated results. Unless otherwise mentioned, figures are for 2Q15 and comparisons are with 2Q14. The results are based on IFRS, are unaudited and derived from management accounts.

 

Bank of Georgia Holdings highlights

 

§ 2Q15 profit was GEL 72.0mln (US$ 32.0mln/GBP 20.4mln), up 23.5% y-o-y and up 15.5% q-o-q   

§ 2Q15 earnings per share ("EPS") were GEL 1.84 (US$ 0.82 per share/GBP 0.52 per share), up 12.2% y-o-y and up 12.9% q-o-q

§ 1H15 profit was GEL 134.4mln (US$ 59.8mln/GBP 38.1mln), up 20.0% y-o-y     

§ 1H15  EPS was GEL 3.47 (US$ 1.54 per share/GBP 0.98 per share), up 10.2% y-o-y

§ Book value per share was GEL 41.74, up 19.4% y-o-y, with total equity attributable to shareholders of GEL 1,597.0mln, up 32.9% y-o-y

§ Total assets increased to GEL 9,375.1mln, up 40.6% y-o-y and up 3.8% q-o-q

§ Leverage remained low at 4.7 times

§ In addition to the capital in the regulated Banking Business (JSC Bank of Georgia), GEL 114.4mln cash is held at the holding company level as of the date of this report

 

Banking Business highlights

 

2Q15 performance

§ Revenue was GEL 182.6mln (up 42.0% y-o-y and up 2.9% q-o-q)

§ Net Interest Margin ("NIM") was 7.6% (+20 basis points "bps" y-o-y and -20 bps q-o-q)

§ Loan Yield stood at 14.6% (+30 bps y-o-y and +10 bps q-o-q)

§ Cost of Customer Funds stood at 4.4% (up 20 bps y-o-y and flat q-o-q)

§ Cost to Income ratio improved to 35.7% (36.8% in 1Q15 and 42.2% in 2Q14)

§ Operating leverage was positive y-o-y and q-o-q, at 21.7% and 2.9%, respectively

§ Cost of credit risk stood at GEL 40.8mln (up 207.0% y-o-y and flat q-o-q)

§ Cost of Risk ratio was 2.7% (3.1% in 1Q15 and 0.9% in 2Q14)

§ Profit increased to GEL 61.5mln (up 14.6% y-o-y and up 4.5% q-o-q)

§ Return on Average Assets ("ROAA") was 2.9% (3.0% in 1Q15 and 3.5% in 2Q14)

§ Return on Average Equity ("ROAE") was 19.3% (19.2% in 1Q15 and 21.0% in 2Q14)

 

1H15 performance

§ Revenue was GEL 360.1mln (up 45.3% y-o-y)

§ NIM was 7.8%; (+30 bps y-o-y)

§ Loan Yield was 14.6% (+10 bps y-o-y)

§ Cost of Client Deposits was 4.4% (flat y-o-y)

§ Cost to Income ratio improved to 36.2% (41.9% in 1H14)

§ Operating leverage was positive at 19.5%

§ Cost of credit risk stood at GEL 81.5mln (up 212.6% y-o-y)

§ Cost of Risk ratio stood at 2.9% (0.9% in 1H14)

§ Profit increased to GEL 120.3mln (up 20.4% y-o-y)

§ ROAA was 2.9% (3.3% in 1H14)

§ ROAE was 19.3% (19.3% in 1H14)

 

Balance sheet strength supported by solid capital and liquidity positions

§ The net loan book reached a record GEL 5,142.2mln (up 38.4% y-o-y and down -2.0% q-o-q); without Privatbank effect ("ex-Privatbank") it was GEL 4,896.6mln; ex-Privatbank growth on constant currency basis was 11.2% y-o-y

§ Client deposits increased to GEL 4,212.8mln (up 33.8% y-o-y and down 1.4% q-o-q); ex-Privatbank it was GEL 3,946.0mln; ex-Privatbank growth on constant currency basis was 5.1% y-o-y

§ Net Loans to Customer Funds and DFI ratio stood at 102.4% (105.2% at 31 March 2015 and 100.0% at 30 June 2014)

§ Tier I and Total Capital Adequacy ratios (CAR) (Basel I) stood at 20.4% and 26.7%, respectively

§ NBG (Basel 2/3) Tier I and Total CAR stood at 10.4% and 15.9%, respectively

§ NBG Liquidity Ratio was 35.1%

Resilient growth momentum sustained across all major business lines

§ Retail Banking continues to deliver strong franchise growth, primarily supported by the Express Banking strategy and Privatbank acquisition. Retail Banking revenue reached GEL 103.4mln in 2Q15, up 44.9% y-o-y

§ Retail Banking net loan book reached a record GEL 2,623.6mln, up 49.6% y-o-y; ex-Privatbank it was GEL 2,378.0mln; ex-Privatbank growth on constant currency basis was 19.8% y-o-y

§ Retail Banking client deposits increased to GEL 1,736.5mln up 53.1% y-o-y; ex-Privatbank it was GEL 1,469.7mln; ex-Privatbank growth on constant currency basis was 9.0% y-o-y

§ The Privatbank acquisition has enhanced our position in the significantly more profitable retail banking franchise and posted revenue of GEL 38.9mln and profit of GEL 6.1mln in 1H15. Privatbank increased our market share in retail loans by 4.3 percentage points and in retail deposits by 2.5ppts (market data as of 31 March 2015). For more information on Privatbank acquisition see page 19

§ We launched Solo - a new strategy for our premium banking segment - a fundamentally different approach to premium banking. We have already opened five new Solo lounges and our goal is to significantly increase our market share in this segment, which now stands below 13%, over the next three to four years

§ Corporate Banking net loan book growth rate slowed down in the first half of 2015, as a result of slower economic activity in the country's corporate sector in 2015, and was GEL 2,174.1mln

§ Investment Management's Assets Under Management ("AUM")* increased to GEL 1,231.4mln, up 31.8% y-o-y, reflecting increased bond issuance activity

 

*Wealth Management client deposits, Galt & Taggart client assets, Aldagi Pension Fund and Wealth Management client assets at Bank of Georgia Custody

 

Investment Business Highlights

§ Our healthcare business, Georgia Healthcare Group ("GHG") reported standalone profit that almost tripled y-o-y, increasing to GEL 13.0mln in 1H15 (GEL 5.5mln in 1H14). As at 30 June 2015, the healthcare services business had a 22.1% market share, 5 times that of the Company's nearest competitor in Georgia, by number of beds (2,220 beds), which grew to 26.6% following High Technology Medical Center University Clinic ("HTMC") acquisition in July 2015 (450 beds). The market share is expected to grow up to c.30.0% as a result of the renovation of recently acquired hospital facilities, scheduled for completion in 2016 and 2017 (additional c.500 beds).

-       In 2015, GHG completed two major acquisitions, HTMC and Deka LLC ("Deka"), adding 530 beds and bringing market share in beds to 26.6% and 24.0% nationwide and in Tbilisi, respectively. However, our financial results do not yet include their results of operations, as Deka was consolidated as of 30 June 2015 with no effect on the income statement of GHG in 1H15 and HTMC will be consolidated in 3Q15. HTMC revenue was GEL 38.4mln in 2014, and GEL 21.7mln in 1H15

§ Our real estate business, m2 Real Estate ("m2 Real Estate") recognised revenue of GEL 1.1mln in 1H15, with US$ 58.9mln sales revenue yet to be recognised as revenue upon completion of the on-going projects in 2015-2016. Since its establishment in 2010, m2 Real Estate has generated total sales of US$ 115.8mln, of which US$ 56.9mln has already been recognised as revenue and the remaining will be recognized upon completion of the ongoing construction during 2015-2016

§ Profits in associates, which comprises profit from our water and utilities business - Georgian Global Utilities ("GGU") - recorded strong 2Q15 results, with GEL 2.0mln profit (reported in gain from associates). Strong 2Q15 performance drove 1H15 profit to GEL 0.7mln, recovering from 1Q15 loss of GEL 1.3mln that was primarily driven by the weaker Lari, which lost 21.3% of its value against the U.S. dollar since 30 June 2014 (the "GEL devaluation effect")

-       For the past several months we have focused on enhancing the management capabilities at GGU, and as a result we have  appointed a new CFO - a long-standing professional within the Group - and recruited senior management with substantial industry experience in charge of technical and commercial functions

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

"I am pleased to report another set of solid half year results that reflect the strong performance of our banking operations and the increasing impact from our diversified non-banking businesses in which we have made a number of opportunistic investments over the last few years. The Group posted 1H 2015 revenue of GEL 398.4 million and profit of GEL 134.4 million, up 37.5% and 20.0%, respectively. Earnings per share increased by 10.2% to GEL 3.47.  This performance was driven by strong levels of balance sheet growth, partly reflecting the acquisition and rapid integration of Privatbank Georgia and the devaluation of the Lari, particularly during the first quarter, as well as positive operating leverage of 19.5 percentage points in the Banking Business. Asset quality remained robust during the first six months of the year despite the impact of the Lari devaluation. We expect a lower cost of risk ratio in the second half of 2015 and the full year cost of risk ratio at c.2.5%.

Within our Banking Business, revenue growth was 42.0% year on year, and 2.9% quarter on quarter. This reflected strong growth in net interest income, up 50.9% y-o-y, as a result of a 38.4% increase in customer lending over the last 12 months, as well as the acquisition and full integration of Privatbank. In addition, net fee and commission income grew by 11.4%, driven by a 31.3% increase in Retail Banking net fee and commission income, which largely reflects the ongoing success of the Bank's Express strategy. The net interest margin at 7.6% was 20 basis points higher than last year, reflecting the impact of the acquisition of Privatbank and our efforts to focus on lower risk retail banking products in our lending activities.   

Excluding the impact of the Privatbank acquisition, customer lending increased by 31.8%, implying 11.2% growth on constant currency basis. Our client deposit balances increased by 33.8% despite the continuing reduction in deposit rates. We intend to further decrease interest rates on US dollar deposits from 5% to 4% in September. Excluding the impact of the Privatbank acquisition, client deposits increased by 25.3% and 5.1% on a constant currency basis.

Costs remained well controlled, and the Banking Business Cost/Income ratio improved further to 36.2% in the first half of 2015, compared to 41.9% in the first half of 2014. In the second quarter of 2015 the Banking Cost/Income ratio improved further to 35.7%.  Positive operating leverage at 19.5 percentage points reflected the impact of some targeted cost reduction initiatives in the first half of 2015.

Asset quality during the first half of the year has remained robust, with both retail arrears and the NPL ratio remaining low. This remains a good performance against the backdrop of the 17.1% Lari devaluation against the US dollar during the half year, and reflects our conservative lending policy that takes into account, at the time of the initial lending decision, any potential currency mismatch. During the first quarter we offered retail clients affected by the devaluation the opportunity to re-profile their borrowings, however the take-up of this offer has been limited with only 799 customers, with loans totaling US$ 28.2 million, taking advantage of the offer.  The currency devaluation itself created an increased provision of GEL 11.9 million during the first half of the year.  As a result of these effects, the cost of credit risk for the first six months of the year totalled GEL 81.5 million (Cost of Risk ratio 2.9%), compared to GEL 26.1 million in 1H 2014 (Cost of Risk ratio 0.9%). The cost of credit risk in the second quarter was the same as that in the first quarter, as the absence of a Lari devaluation impact was offset by provisions which came from a small number of Corporate Banking customers. Going forward we do not see the need for similar provisioning. We believe that the cost of risk has peaked in the second quarter and will reduce in the second half of 2015. We continue to expect our cost of risk ratio for the year to be c.2.5%.

During the first half of the year, we completed the acquisition and subsequent full integration of Privatbank. This has created significant franchise enhancement for our mass market retail business and has contributed GEL 6.1 million or 5.1% to our Banking Business profit in 1H15. The integration of Privatbank has already been completed, significantly ahead of schedule, and we are now 6 months ahead of capturing our previously announced pre-tax administrative and funding cost synergies of GEL 25 million.  Although Privatbank has nearly halved its operating expenses in 2Q15, the full effect of integration efficiencies have not been reflected in the quarterly results, as synergies only materialised in the last 50 days of the quarter. Additionally, Privatbank was focused on a mono-product of an all-in-one debit and credit card, which we further developed in-house by adding the contactless transport and payment capabilities of our Express Card. We are aiming to leverage the enhanced capabilities of Express Banking, to capture increased revenue from cross-selling banking products to the c.400,000 newly acquired customers. We now expect more synergies than we did at the time of the acquisition. You will find full details of the Privatbank integration and performance in the Retail Banking segment discussion of this announcement.

Within our Investment Businesses, GHG, our healthcare business, delivered another record half year results, with revenues totalling GEL 107.4 million, reflecting both good levels of organic growth and the impact of the benefits of last year's acquisitions starting to be captured. In addition, GHG has recently completed a number of further acquisitions in Tbilisi and now has a total of 41 healthcare facilities, 2,670 hospital beds and a 26.6% market share in terms of hospital beds, which is expected to grow up to c.30% as a result of the renovation of recently acquired hospital facilities, scheduled for completion in 2016 and 2017 (additional c.500 beds). Furthermore, GHG has a unique first mover advantage in the highly fragmented and underpenetrated outpatient segment, with an addressable market of GEL 0.9 billion in 2015, where GHG currently has under 1% market share. GHG has all the enablers - bed capacity, competitive advantages and a clear growth strategy - for strong medium-to-long term growth. GHG is now very well positioned for its planned international stock market listing in the next few months. Our real estate business, m2 Real Estate, continues to develop its apartment projects successfully, with apartments continuing to be pre-sold notwithstanding the Lari devaluation. In 2Q15, we posted strong results in our water and utilities business, GGU, with GEL 2.0 million in profit. We have continued to strengthen GGU's management and hired more professionals with substantial industry experience both in Georgia and the West.

The Group's capital position remains strong, with capital being held both in the regulated Banking Business (JSC Bank of Georgia) and at the holding company level (Bank of Georgia Holdings Plc). Within the bank, the BIS Tier 1 Capital Adequacy ratio was 20.4%, and the NBG (Basel 2/3) Tier 1 Capital Adequacy ratio was 10.4%

In August, we completed our corporate legal restructuring as announced in December 2014 and created a unique platform to extend our reach to different industries on the Georgian corporate market. The need for restructuring was created by our recently updated strategy as well as NBG's intention to regulate banks in Georgia on a standalone basis. The new structure is now clearly aligned to our strategy and will facilitate our continued commitment to growing Bank of Georgia's strong retail and corporate banking franchise and allows us to capture compelling investment opportunities in Georgia's corporate sector. 

From a macroeconomic perspective Georgia has continued to perform well in the light of the recent macroeconomic and currency pressures in many of Georgia's trading partners.  Much of the volatility of the first quarter was significantly reduced in the second quarter of the year, particularly in terms of the Lari/Dollar exchange rate, which has now seen a period of stability in the 2.2-2.3 range.  GDP growth in Georgia during the first half of 2015 remained relatively resilient with 2.6% y-o-y growth, and inflation remained well contained at 4.9% y-o-y in July 2015, partly as a result of the beneficial impact of lower oil prices on the Georgian economy. In addition, international arrivals (an important component of capital inflows for the country) continue to be strong, with a 9.5% year on year increase in July supporting overall growth of 4.9% in the first seven months of the year. The Lari has stayed competitive compared to our main trading partners' currencies. Exports are turning the corner with the signs that the negative growth is coming to a halt: Georgia originated exports increased 2.3% year on year in June (first time since August 2014), while re-exported commodities remain the major drag in total exports. The Lari's real depreciation of 8.1% since December 2014 has helped the imports adjustment, which decreased 9.6% year on year in 1H15.

Against the challenging regional macroeconomic backdrop, the Group has continued to perform well. We believe we remain well positioned to deliver a strong performance in the second half of 2015 and beyond, from both good levels of organic business growth in each of our Banking and Investment Businesses, and from the benefits of recent strategic initiatives and acquisitions.

 

Irakli Gilauri,

Chief Executive Officer of Bank of Georgia Holdings PLC

 

 

Re-profiling implies effectively increasing the tenor of the loan so that monthly payment in Lari stays at the same level it was prior to the recent devaluation of the Lari. When re-profiling, we do not change the interest rate of the loan. In Retail Banking, our clients with mortgage loans are most likely to apply for re-profiling, as in total we have 7,500 mortgage loans worth GEL 400mln which are US Dollar loans to Retail Banking clients with non-US Dollar income.

 

 


FINANCIAL SUMMARY


BGH Consolidated



Banking Business*


          Investment Business*


QUARTERLY INCOME STATEMENT



Change


Change




Change


Change




Change


Change

GEL thousands

2Q15

2Q14

Y-O-Y

1Q15

Q-O-Q


2Q15

2Q14

Y-O-Y

1Q15

Q-O-Q


2Q15

2Q14

Y-O-Y

1Q15

Q-O-Q



















 Net banking interest income 

122,789

82,513

48.8%

120,989

1.5%


126,403

83,779

50.9%

123,058

2.7%


-

-

-

-

-

 Net fee and commission income 

29,121

26,228

11.0%

26,854

8.4%


30,172

27,080

11.4%

28,090

7.4%


-

-

-

-

-

 Net banking foreign currency gain

19,765

11,395

73.5%

18,962

4.2%


19,765

11,395

73.5%

18,962

4.2%


-

-

-

-

-

 Net other banking income

2,481

2,241

10.7%

1,790

38.6%


2,810

2,433

15.5%

2,095

34.1%


-

-

-

-

-

 Gross insurance profit 

5,817

6,352

-8.4%

7,574

-23.2%


3,473

3,931

-11.7%

5,306

-34.5%


2,799

2,827

-1.0%

2,691

4.0%

 Gross healthcare profit 

18,099

13,627

32.8%

16,877

7.2%


-

-

-

-

-


18,099

13,627

32.8%

16,877

7.2%

 Gross real estate profit 

(41)

3,476

NMF

1,209

NMF


-

-

-

-

-


(41)

3,476

NMF

1,209

NMF

 Gross other investment profit 

4,734

3,498

35.3%

1,398

NMF


-

-

-

-

-


4,709

3,437

37.0%

1,543

NMF

 Revenue 

202,765

149,330

35.8%

195,653

3.6%


182,623

128,618

42.0%

177,511

2.9%


25,566

23,367

9.4%

22,320

14.5%

 Operating expenses 

(76,848)

(63,948)

20.2%

(76,058)

1.0%


(65,244)

(54,260)

20.2%

(65,277)

-0.1%


(12,381)

(10,333)

19.8%

(11,654)

6.2%

 Operating income before cost of credit risk / EBITDA

125,917

85,382

47.5%

119,595

5.3%


117,379

74,358

57.9%

112,234

4.6%


13,185

13,034

1.2%

10,666

23.6%

 Profit from associates

1,979

-

-

(1,310)

NMF


-

-

-

-

-


1,979

-

-

(1,310)

NMF

 Depreciation and amortization of investment business

(2,579)

(2,256)

14.3%

(2,688)

-4.1%


-

-

-

-

-


(2,579)

(2,256)

14.3%

(2,688)

-4.1%

 Net foreign currency gain (loss) from investment business

2,689

(1,433)

NMF

3,690

-27.1%


-

-

-

-

-


2,689

(1,433)

NMF

3,690

-27.1%

 Interest income from investment business 

622

(71)

NMF

617

0.8%


-

-

-

-

-


844

195

NMF

818

3.2%

 Interest expense from investment business

(2,632)

(1,718)

53.2%

(2,463)

6.9%


-

-

-

-

-


(7,501)

(3,994)

87.8%

(5,969)

25.7%

 Cost of credit risk 

(41,867)

(13,846)

NMF

(41,841)

0.1%


(40,764)

(13,279)

NMF

(40,771)

0.0%


(1,103)

(567)

94.5%

(1,070)

3.1%

 Profit  **

72,030

58,317

23.5%

62,339

15.5%


61,453

53,617

14.6%

58,810

4.5%


10,577

4,700

125.0%

3,529

199.7%

Earnings per share (basic, diluted)

1.84

1.64

12.2%

1.63

12.9%













 

 

 

 

 

HALF-YEAR INCOME STATEMENT

BGH Consolidated


Banking Business*


Investment Business*




Change




Change




Change

GEL thousands

1H15

1H14

Y-O-Y


1H15

1H14

Y-O-Y


1H15

1H14

Y-O-Y













 Net banking interest income 

243,778

163,448

49.1%


249,461

166,231

50.1%


-

-

-

 Net fee and commission income 

55,975

46,062

21.5%


58,262

47,292

23.2%


-

-

-

 Net banking foreign currency gain

38,727

22,700

70.6%


38,727

22,700

70.6%


-

-

-

 Net other banking income

4,272

3,107

37.5%


4,906

3,420

43.5%


-

-

-

 Gross insurance profit 

13,391

16,058

-16.6%


8,777

8,190

7.2%


5,492

8,727

-37.1%

 Gross healthcare profit 

34,975

22,938

52.5%


-

-

-


34,975

22,938

52.5%

 Gross real estate profit 

1,168

9,579

-87.8%


-

-

-


1,168

9,659

-87.9%

 Gross other investment profit 

6,133

5,861

4.6%


-

-

-


6,253

5,741

8.9%

 Revenue 

398,419

289,753

37.5%


360,133

247,833

45.3%


47,888

47,065

1.7%

 Operating expenses 

(152,908)

(122,203)

25.1%


(130,520)

(103,775)

25.8%


(24,038)

(19,735)

21.8%

 Operating income before cost of credit risk / EBITDA

245,511

167,550

46.5%


229,613

144,058

59.4%


23,850

27,330

-12.7%

 Profit from associates

668

-

-


-

-

-


668

-

-

 Depreciation and amortization of investment business

(5,266)

(4,485)

17.4%


-

-

-


(5,266)

(4,485)

17.4%

 Net foreign currency gain (loss) from investment business

6,379

(1,849)

NMF


-

-

-


6,379

(1,849)

NMF

 Interest income from investment business 

1,239

732

69.3%


-

-

-


1,662

980

69.6%

 Interest expense from investment business

(5,094)

(3,749)

35.9%


-

-

-


(13,469)

(7,835)

71.9%

 Cost of credit risk 

(83,708)

(27,163)

NMF


(81,536)

(26,080)

NMF


(2,172)

(1,083)

100.6%

 Profit  **

134,369

111,982

20.0%


120,264

99,893

20.4%


14,105

12,089

16.7%

Earnings per share (basic)

3.47

3.15

10.2%









 

 

* Banking Business and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes.

** As of 30 June 2015, Privatbank integration costs totaled GEL 2.6mln and are recorded in non-recurring expenses

 

 

 

 


Bank of Georgia Holdings PLC


Banking Business


Investment Business

Balance Sheet

Jun-15

Jun-14

Change

Mar-15

Change


Jun-15

Jun-14

Change

Mar-15

Change


Jun-15

Jun-14

Change

Mar-15

Change




Y-O-Y


Q-O-Q




Y-O-Y


Q-O-Q




Y-O-Y


Q-O-Q



















Cash and cash equivalents

1,261,805

903,734

39.6%

1,000,713

26.1%


1,252,758

895,287

39.9%

997,547

25.6%


107,511

73,488

46.3%

110,578

-2.8%

Amounts due from credit institutions

583,888

363,468

60.6%

545,714

7.0%


575,534

353,559

62.8%

523,663

9.9%


18,844

17,964

4.9%

87,478

-78.5%

Investment securities

895,840

569,937

57.2%

880,799

1.7%


898,457

568,784

58.0%

881,098

2.0%


1,153

1,153

0.0%

1,153

0.0%

Loans to customers and finance lease receivables

5,052,752

3,650,791

38.4%

5,156,386

-2.0%


5,142,221

3,714,213

38.4%

5,248,559

-2.0%


-

-

-

-

-

Accounts receivable and other loans

77,866

60,677

28.3%

73,315

6.2%


15,474

9,622

60.8%

13,063

18.5%


70,343

51,903

35.5%

64,947

8.3%

Insurance premiums receivable

58,142

52,043

11.7%

58,816

-1.1%


26,519

14,728

80.1%

22,337

18.7%


32,023

37,436

-14.5%

37,205

-13.9%

Prepayments

52,145

28,188

85.0%

42,748

22.0%


30,779

18,417

67.1%

24,969

23.3%


21,366

9,771

118.7%

17,779

20.2%

Inventories

131,534

90,489

45.4%

113,322

16.1%


10,379

6,689

55.2%

7,697

34.8%


121,155

83,800

44.6%

105,625

14.7%

Investment property

221,506

152,292

45.4%

194,623

13.8%


143,873

127,374

13.0%

128,376

12.1%


77,633

24,918

211.6%

66,247

17.2%

Property and equipment

669,153

534,289

25.2%

618,474

8.2%


338,858

293,626

15.4%

334,516

1.3%


330,295

240,663

37.2%

283,958

16.3%

Goodwill

60,056

48,721

23.3%

51,745

16.1%


48,092

38,538

24.8%

39,781

20.9%


11,964

10,183

17.5%

11,964

0.0%

Intangible assets

36,894

28,490

29.5%

33,443

10.3%


33,260

26,596

25.1%

31,761

4.7%


3,634

1,894

91.9%

1,682

116.1%

Income tax assets

29,080

32,204

-9.7%

24,943

16.6%


21,686

24,835

-12.7%

17,602

23.2%


7,394

7,369

0.3%

7,341

0.7%

Other assets

244,398

152,360

60.4%

235,012

4.0%


174,820

140,452

24.5%

176,982

-1.2%


80,058

12,784

526.2%

68,096

17.6%

Total assets

9,375,059

6,667,683

40.6%

9,030,053

3.8%


8,712,710

6,232,720

39.8%

8,447,951

3.1%


883,373

573,326

54.1%

864,053

2.2%

Client deposits and notes

4,104,417

3,074,710

33.5%

4,099,029

0.1%


4,212,822

3,148,729

33.8%

4,271,854

-1.4%


-

-

-

-

-

Amounts due to credit institutions

2,139,517

1,240,128

72.5%

1,780,636

20.2%


2,045,093

1,145,875

78.5%

1,694,668

20.7%


189,124

156,753

20.7%

181,773

4.0%

Debt securities issued

1,063,123

786,432

35.2%

1,026,689

3.5%


990,257

760,144

30.3%

962,587

2.9%


79,894

26,690

199.3%

66,964

19.3%

Accruals and deferred income

132,832

83,784

58.5%

124,344

6.8%


14,369

9,917

44.9%

20,949

-31.4%


118,463

73,867

60.4%

103,395

14.6%

Insurance contracts liabilities

73,001

60,537

20.6%

70,156

4.1%


42,910

25,890

65.7%

34,685

23.7%


30,091

34,647

-13.1%

35,471

-15.2%

Income tax liabilities

111,387

92,617

20.3%

96,761

15.1%


87,392

77,942

12.1%

79,343

10.1%


23,995

14,675

63.5%

17,418

37.8%

Other liabilities

94,839

72,599

30.6%

132,290

-28.3%


71,126

44,634

59.4%

99,677

-28.6%


34,604

29,407

17.7%

43,072

-19.7%

Total liabilities

7,719,116

5,410,807

42.7%

7,329,905

5.3%


7,463,969

5,213,131

43.2%

7,163,763

4.2%


476,171

336,039

41.7%

448,093

6.3%



















Total equity

1,655,943

1,256,876

31.8%

1,700,148

-2.6%


1,248,741

1,019,589

22.5%

1,284,188

-2.8%


407,202

237,287

71.6%

415,960

-2.1%

Book value per share

41.74

34.95

19.4%

42.71

-2.3%













 








Banking Business Ratios

2Q15

1Q15

2Q14


1H15

1H14

Profitability







ROAA

2.9%

3.0%

3.5%


2.9%

3.3%

ROAE

19.3%

19.2%

21.0%


19.3%

19.3%

Net Interest Margin

7.6%

7.8%

7.4%


7.8%

7.5%

Loan Yield

14.6%

14.5%

14.3%


14.6%

14.5%

Cost of Funds

5.0%

5.0%

4.7%


5.0%

4.9%

Cost of Customer Funds

4.4%

4.4%

4.2%


4.4%

4.4%

Cost of Amounts Due to Credit Institutions

5.3%

5.2%

4.7%


5.3%

4.8%

Cost / Income

35.7%

36.8%

42.2%


36.2%

41.9%

NPLs To Gross Loans To Clients

4.1%

3.5%

3.8%


4.1%

3.8%

NPL Coverage Ratio

82.2%

74.2%

73.8%


82.2%

73.8%

NPL Coverage Ratio, Adjusted for discounted value of collateral

115.1%

118.0%

116.1%


115.1%

116.1%

Cost of Risk

2.7%

3.1%

0.9%


2.9%

0.9%

Tier I capital adequacy ratio (BIS)

20.4%

19.9%

22.5%


20.4%

22.5%

Total capital adequacy ratio (BIS)

26.7%

23.9%

26.3%


26.7%

26.3%

Tier I capital adequacy ratio (New NBG, Basel II)

10.4%

9.8%

10.8%


10.4%

10.8%

Total capital adequacy ratio (New NBG, Basel II)

15.9%

12.9%

14.0%


15.9%

14.0%

 

 

* Note: Banking Business and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes.


DISCUSSION OF RESULTS

Discussion of Banking Business Quarterly Results

 

The following discussion refers to the Banking Business only

 

Revenue

GEL thousands, unless otherwise noted

2Q15

2Q14

Change,

Y-o-Y

1Q15

Change,

Q-o-Q

Banking interest income 

215,313

143,025

50.5%

202,353

6.4%

 Banking interest expense 

(88,910)

(59,246)

50.1%

(79,295)

12.1%

 Net banking interest income 

126,403

83,779

50.9%

123,058

2.7%

 Fee and commission income 

40,160

35,581

12.9%

37,343

7.5%

 Fee and commission expense 

(9,988)

(8,501)

17.5%

(9,253)

7.9%

 Net fee and commission income 

30,172

27,080

11.4%

28,090

7.4%

 Net banking foreign currency gain

19,765

11,395

73.5%

18,962

4.2%

 Net other banking income

2,810

2,433

15.5%

2,095

34.1%

 Gross insurance profit 

3,473

3,931

-11.7%

5,306

-34.5%

 Revenue 

182,623

128,618

42.0%

177,511

2.9%







Net Interest Margin

7.6%

7.4%

+20 bps

7.8%

-20 bps

Average interest earning assets

6,638,429

4,517,479

46.9%

6,370,469

4.2%

Average interest bearing liabilities

7,128,014

5,005,868

42.4 %

6,441,353

10.7%

Average net loans, currency blended

5,225,895

3,584,404

45.8%

5,056,404

3.4%

   Average net loans, GEL

1,564,867

1,122,031

39.5%

1,490,531

3.0%

   Average net loans, FC

3,661,028

2,462,373

48.7%

3,565,873

2.7%

Average client deposits, currency blended

4,313,076

3,139,182

37.4%

4,034,063

6.9%

  Average client deposits, GEL

       1,216,653

          885,205

37.4%

        1,199,627

1.4%

  Average client deposits, FC

       3,096,423

       2,253,977

37.4%

        2,834,435

9.2%

Average liquid assets, currency blended

       2,588,219

       1,903,216

36.0%

        2,111,126

21.8 %

Average liquid assets, GEL

       1,173,577

          813,289

44.3%

        1,110,790

5.7%

Average liquid assets, FC

       1,414,642

       1,089,927

29.8%

1,000,336

41.4%

Excess liquidity (NBG)

219,562

255,123

-13.9%

199,690

10.0%

Liquid assets yield, currency blended

3.1%

2.3%


3.2%


  Liquid assets yield, GEL

6.1%

5.0%


5.6%


  Liquid assets yield, FC

0.5%

0.4%


0.5%


Loan yield, total

14.6%

14.3%


14.5%


  Loan yield, GEL

21.6%

20.0%


21.4%


  Loan yield, FC

11.4%

11.6%


11.6%


Cost of funding, total

5.0%

4.7%


5.0%


  Cost of funding, GEL

4.8%

3.9%


4.8%


  Cost of funding, FC

5.0%

5.0%


5.1%


 

§ Our Banking Business delivered record quarterly revenue of GEL 182.6mln, up 42.0% y-o-y and up 2.9% q-o-q. The y-o-y revenue growth was driven by:

-       An increase of our net banking interest income to GEL 126.4mln, up 50.9%, driven by GEL 72.3mln or a 50.5% increase in Banking interest income, outpacing the growth of GEL 29.7mln or 50.1% in Banking interest expense

-       The Privatbank acquisition, which added GEL 19.5mln to our Banking Business revenues, most of it (over 85% of the total in 2Q15) to net banking interest income on the back of adding GEL 245.6mln or 4.8% to the net loan book

-       Strong y-o-y growth of the net loan book to GEL 5,142.2mln, up 38.4%; ex-Privatbank net loan book increased to GEL 4,896.6mln, up 31.8% y-o-y

-       Our Cost of Funds was 5.0%, up 30 bps y-o-y and Cost of Customer Funds was 4.4%, up 20 bps y-o-y. The increase in liability costs was largely due to the Privatbank acquisition. Standalone Privatbank Cost of Funds and Cost of Client Deposits stood at 5.3% and 5.8% respectively in 2Q15

-       Our average interest bearing liabilities increased to GEL 7,128.0mln, up 42.4% y-o-y

-       Increased Cost of Funding was offset by Privatbank's high yielding loan portfolio. Standalone Privatbank Loan Yield stood at 29.6% in 2Q15. As a result, Banking Business loan yield was 14.6% in 2Q15, up 30 bps y-o-y

-       Our net fee and commission income was GEL 30.2mln, up 11.4% y-o-y and 7.4% q-o-q; despite a high base in 2Q14 as a result of Investment Management's M&A deal

-       Robust growth of our net fee and commission income reflects the ongoing success of our Express Banking service, which has expanded substantially in 1H15 as a result of the rebranding of Privatbank branches as Express branches. This resulted in the addition of 81,338 Express Banking customers y-o-y and triggered a significant increase in the volume of banking transactions - the growth of transactions was achieved largely through cost-effective remote channels.

-       Net gain from foreign currencies increased to GEL 19.8mln, up 73.5% from GEL 11.4mln a year ago reflecting increased client activity as a result of the increased GEL volatility

-       Our P&C insurance business was a small negative to overall revenue. Gross insurance profit was GEL 3.5mln which for the Banking Business comprises revenue from the Bank's Property & Casualty subsidiary Aldagi was down 11.7% y-o-y. Although Aldagi posted strong growth in net insurance premiums earned both on y-o-y and q-o-q basis, corresponding claims up by 115.5% y-o-y, more than offset the growth. This was largely due to an increase in claims related to floods in Tbilisi in 2Q15, which resulted in approximately GEL 1.5mln claims and higher motor vehicle insurance claims following an overall decrease in the amount of insurance deductible on the market. For P&C insurance segment financials please see page 35

 

§ Our NIM stood at 7.6% up 20 bps y-o-y and down 20 bps q-o-q, reflecting:

-       The addition of Privatbank's high yielding loan portfolio, with a Loan Yield of 29.6% and comparatively low Cost of Funds of 5.3% in 2Q15 down from 7.5% in 1Q15, which is a result of our active liability optimization measures. Privatbank's high margin is primarily driven by its mono-product of an all-in-one debit and credit card. Additionally, we have realized cost synergies and are working to further reduce Privatbank's Cost of Funds

-       The ex-Privatbank Loan Yield of 13.7%, which was down 60 bps, driven by a 35.0% increase in banking interest income that lagged behind a 40.4% growth in average interest earning assets; the downward trend also reflects our efforts to focus on lower risk retail banking products in our lending activities. Loan Yield including Privatbank was 14.6%

-       This was partially offset by Liquid Assets Yield of 3.1%, which was up 80 bps y-o-y, largely reflecting higher yield on the Government issued securities

-       Our liquidity levels as a percentage of total assets increased both y-o-y and q-o-q basis in 2Q15 as a result of slower growth of the loan book and an increased liquidity pool

 

 

Operating income before non-recurring items; cost of credit risk; profit for the period



Change


Change

GEL thousands, unless otherwise noted

2Q15

2Q14

y-o-y

1Q15

q-o-q







Salaries and other employee benefits

(38,066)

(31,347)

21.4%

(38,606)

-1.4%

 Administrative expenses

(17,899)

(15,746)

13.7%

(17,506)

2.2%

Banking depreciation and amortisation

(8,338)

(6,364)

31.0%

(8,373)

-0.4%

 Other operating expenses 

(941)

(803)

17.2%

(792)

18.8%

 Operating expenses 

(65,244)

(54,260)

20.2%

(65,277)

-0.1%

 Operating income before cost of credit risk 

117,379

74,358

57.9%

112,234

4.6%

 Impairment charge on loans to customers 

(35,105)

(7,816)

NMF

(38,928)

-9.8%

 Impairment charge on finance lease receivables

(1,779)

(387)

NMF

(119)

NMF

 Impairment charge on other assets and provisions

(3,880)

(5,076)

-23.6%

(1,724)

125.1%

 Cost of credit risk 

(40,764)

(13,279)

NMF

(40,771)

0.0%

 Net operating income before non-recurring items 

76,615

61,079

25.4%

71,463

7.2%

 Net non-recurring items 

(3,409)

(7,951)

-57.1%

(2,167)

57.3%

 Profit before income tax 

73,206

53,128

37.8%

69,296

5.6%

 Income tax (expense) benefit

(11,753)

489

NMF

(10,486)

12.1%

 Profit 

61,453

53,617

14.6%

58,810

4.5%

 

§ Our efficiency further improved in 2Q15, with operating leverage at 21.7% y-o-y and cost/income at 35.7% in 2Q15 compared to 42.2% in 2Q14; ex-Privatbank, operating leverage stood at 16.7% and Cost/Income ratio stood at 36.6%. Improved efficiency was a result of:

-       Our ongoing efforts to keep a tight grip on costs

-       The integration of Privatbank and the respective synergies realised in 2Q15

 

§ Operating expenses increased to GEL 65.2mln in 2Q15, up 20.2% y-o-y and flat q-o-q; ex-Privatbank it was GEL 59.8mln, up by GEL 5.5mln or 10.2% y-o-y, reflecting:

-       The Privatbank acquisition that added GEL 5.5mln to our operating expenses in 2Q15

-       Salaries and employee benefits that increased to GEL 38.1mln, up GEL 6.7mln or 21.4%, reflecting the increased revenue base

-       Administrative expenses increased to GEL 17.9mln, up GEL 2.2mln or 13.7%, largely driven by expenses on rent, predominantly due to the appreciation of the US$, the listing currency of rentals in Georgia, in addition to an increase in the number of leased branches

 

§ On a q-o-q basis, our operating expenses decreased 0.1%, which was predominantly due to synergies extracted from Privatbank's integration. Privatbank's operating expenses nearly halved on a q-o-q basis to GEL 5.5mln despite synergies taking effect only in the last 50 days of 2Q15

 

§ The Banking Business like-for-like Cost of Risk ratio was 2.2% in 2Q15 (1.6% in 1Q15 and 0.9% in 2Q14) and cost of credit risk was GEL 33.7mln in 2Q15 (GEL 20.7mln in 1Q15 and GEL 13.3mln in 2Q14). Overall, Cost of Risk ratio was 2.7% and cost of credit risk was GEL 40.8mln (GEL 40.8mln and 3.1% in 1Q15). The Privatbank acquisition added GEL 7.1mln and 50 bps to the cost of credit risk and Cost of Risk ratio, respectively. We also increased our provisioning levels generally on both corporate and retail books to account mainly for the increased post-devaluation risk.

 

§ NPLs to gross loans increased by 30 bps to 4.1%, compared to 3.5% as of 31 March 2015 and 3.8% as of 30 June 2015

§ NPLs increased to GEL 219.2mln, up 50.6% y-o-y , reflecting the first time inclusion of Privatbank's NPLs

§ NPL coverage ratio adjusted for the discounted value of collateral stood at 115.1% compared to 118.0% as of 31 March 2015 and 116.1% as of 30 June 2014

§ The NPL coverage ratio improved to 82.2% compared to 74.2% as of 31 March 2015 and 73.8% as of 30 June 2014

§ Our 15 days past due rate for retail loans stood at 1.4% as of 30 June 2015 compared to 1.0% as of 31 March 2015 and 1.6% as of 30 June 2014

 

§ Non-recurring items decreased to GEL 8.0mln from GEL 3.4mln, as a result of high base due to provisioning of legacy investment in Ukrainian subsidiary BG bank in 2Q14. The Banking Business 2Q15 profit was GEL 61.5mln, up 14.6% y-o-y and up 4.5% q-o-q; Privatbank contributed GEL 5.0mln to this profit

 

§ The Banking Business profit was supported by its banking subsidiary in Belarus - BNB, which added GEL 1.7mln profit in 2Q15. Strong growth was supported by a 40.7% growth of the BNB loan book to GEL 305.8mln, mostly consisting of SME loans. BNB client deposits increased 52.5% to GEL 242.2mln, reflecting BNB's strong franchise. BNB is well capitalised, with Capital Adequacy Ratios well above the requirements of its regulating Central Bank. For BNB standalone financials please see page 35

 

 

 

 

 

 

Banking Business Balance Sheet highlights



Change


Change

GEL thousands, unless otherwise noted 

30 June 2015

30 June 2014

y-o-y

30 March 2015

q-o-q







Liquid assets

2,726,749

1,817,630

50.0%

2,402,308

13.5%

Liquid assets, GEL

1,257,220

753,416

66.9%

1,154,634

8.9%

Liquid assets, FC

1,469,529

1,064,214

38.1%

1,247,674

17.8%

Net loans

5,142,221

3,714,213

38.4%

5,248,559

-2.0%

Net loans, GEL

1,546,104

1,167,711

32.4%

1,523,976

1.5%

Net loans, FC

3,596,117

2,546,502

41.2%

3,724,583

-3.4%







Client deposits and notes

4,212,822

3,148,729

33.8%

4,271,854

-1.4%

Amounts due to credit institutions, of which:

2,045,093

1,145,875

78.5%

1,694,668

20.7%

 Borrowings from DFIs

807,809

565,829

42.8%

718,540

12.4%

 Short-term loans from central banks

674,701

317,031

112.8%

518,400

30.2%

 Loans and deposits from commercial banks

562,583

263,015

113.9%

457,728

22.9%

 Debt securities issued 

990,257

760,144

30.3%

962,587

2.9%







Liquidity & CAR Ratios






Net Loans / Customer Funds

122.1%

118.0%


122.9%


Net Loans / Customer Funds + DFIs

102.4%

100.0%


105.2%


Liquid assets as percent of total assets

31.3%

29.2%


28.4%


Liquid assets as percent of total liabilities

36.5%

34.9%


33.5%


NBG liquidity ratio

35.1%

38.1%


34.7%


Excess liquidity (NBG)

219,562

255,123

-13.9%

199,690


Tier I Capital Adequacy Ratio (BIS)

20.4%

22.5%


19.9%


Total Capital Adequacy Ratio (BIS)

26.7%

26.3%


23.9%


Tier I Capital Adequacy Ratio (NBG Basel 2/3)

10.4%

10.8%


9.8%


Total Capital Adequacy Ratio (NBG Basel 2/3 )

15.9%

14.0%


12.9%


 

Our Banking Business balance sheet remained very liquid (NBG Liquidity ratio of 35.1%1) and well-capitalised (BIS Tier I of 20.4%1) with a well-diversified funding base (Client Deposits to Liabilities of 56.4%).

§ Liquid assets increased to GEL 2,726.7mln, up 50.0%, reflecting the GEL devaluation as nearly half of liquid assets is held in US$

§ Additionally, liquid assets as a percentage of total assets increased q-o-q to 31.3%, up from 28.4% and liquid assets as a percentage of total liabilities also increased q-o-q to 36.5%, up from 33.5%

§ The NBG liquidity ratio stood at 35.1% as of 30 June 2015 compared to 34.7% as of 31 March 2015, against a regulatory requirement of 30.0%

§ As we further diversified our funding base, our share of amounts due to credit institutions to total liabilities increased q-o-q from 23.7% to 27.4%, with the share of client deposits and notes to total liabilities declining q-o-q from 59.6% to 56.4%. Net Loans to Customer Funds and DFIs ratio, a ratio closely observed by management, stood at 102.4%, up slightly from 100.0% a year ago

§ Improvement in our total capital adequacy ratios reflects a US$ 90mln subordinated loan raised from IFC at the end of 2Q 2015, which qualifies as Tier II capital under the Basel 2 framework and will allow us to support further growth without compromising capital ratios

 

 

 

 

 

Discussion of Banking Business 1H15 Results

 

 

The following discussion refers to the Banking Business only

 

Revenue

GEL thousands, unless otherwise noted

1H15

1H14

Change,

Y-o-Y

 Banking interest income 

417,666

287,011

45.5%

 Banking interest expense 

(168,205)

(120,780)

39.3%

 Net banking interest income 

249,461

166,231

50.1%

 Fee and commission income 

77,503

64,045

21.0%

 Fee and commission expense 

(19,241)

(16,753)

14.9%

 Net fee and commission income 

58,262

47,292

23.2%

 Net banking foreign currency gain

38,727

22,700

70.6%

 Net other banking income

4,906

3,420

43.5%

 Gross insurance profit 

8,777

8,190

7.2%

 Revenue 

360,133

247,833

45.3%

 Salaries and other employee benefits

(76,672)

(61,681)

24.3%

 Administrative expenses

(35,404)

(27,947)

26.7%

 Banking depreciation and amortisation

(16,711)

(12,523)

33.4%

 Other operating expenses 

(1,733)

(1,624)

6.7%

 Operating expenses 

(130,520)

(103,775)

25.8%

 Operating income before cost of credit risk 

229,613

144,058

59.4%

 Impairment charge on loans to customers 

(74,033)

(16,927)

NMF

 Impairment charge on finance lease receivables

(1,899)

(358)

NMF

 Impairment charge on other assets and provisions

(5,604)

(8,795)

-36.3%

 Cost of credit risk 

(81,536)

(26,080)

NMF

 Net operating income before non-recurring items 

148,077

117,978

25.5%

 Net non-recurring items 

(5,575)

(9,601)

-41.9%

 Profit before income tax 

142,502

108,377

31.5%

 Income tax expense

(22,238)

(8,484)

162.1%

 Profit 

120,264

99,893

20.4%





Ratios




GEL thousands, unless otherwise noted

1H15

1H14

Change,

Y-o-Y

Net Interest Margin

7.8%

7.5%


Liquid assets yield, currency blended

3.2%

2.3%


  Liquid assets yield, GEL

5.9%

4.9%


  Liquid assets yield, FC

0.6%

0.4%


Loan yield, total

14.6%

14.5%


  Loan yield, GEL

21.5%

20.1%


  Loan yield, FC

11.5%

11.8%


Cost of funding, total

5.0%

4.9%


  Cost of funding, GEL

4.8%

4.0%


  Cost of funding, FC

5.0%

5.1%


 

§ Our Banking Business delivered another record half year revenue of GEL 360.1mln, up 45.3%y-o-y. The revenue growth was diversified across all the revenue items:

-       Net banking interest income was GEL 249.5mln, up 50.1% y-o-y

-       Our net fee and commission income was GEL 58.3mln, up 23.2% The Privatbank acquisition added GEL 38.9mln to our Banking Business revenues

-       Net banking foreign currency gain was GEL 38.7mln, up 70.6%

-       Gross insurance profit was GEL 8.8mln, up 7.2% y-o-y

 

§ Our NIM stood at 7.8%, increased 30 bps y-o-y, reflecting:

-       Privatbank NIM of 20.5%, a result of Privatbank's high yielding loan portfolio with a Loan Yield of 29.3% vs a comparatively low Cost of Funds of 6.5%. Privatbank Cost of Funds declined from 7.5% in 1Q15 to 5.3% in 2Q15, which is a result of our active liability optimization measures.

-       Loan Yield of 14.6%, up 10 bps y-o-y, offset by 10 bps increase in Cost of Funds to 5.0%

-       Liquid Assets Yield of 3.2%, up 90 bps y-o-y

 

§ Our efficiency improved in 1H15, with operating leverage at 19.5% y-o-y and Cost to Income at 36.2% in 1H15 

§ Operating expenses increased to GEL 130.5mln, up GEL 26.7mln or 25.8%, compared to 45.3% increase in revenues, reflecting:

-       The Privatbank acquisition, which added GEL 15.4mln to our operating expenses in 1H15

-       Ex-Privatbank salaries and employee benefits increased by GEL 7.4mln or 12.0%

-       Administrative expenses increased by GEL 2.2mln or 7.9%

 

§ The Banking Business like-for-like Cost of Risk ratio was 2.0% in 1H15 (0.9% in 1H14) and cost of credit risk was GEL 54.4mln (GEL 26.1mln in 1H14). Overall, Banking Business Cost of Risk ratio and cost of credit risk was 2.9% and GEL 81.5mln, respectively in 1H15, which was driven by:

-       GEL devaluation, which contributed GEL 11.9mln to the cost of credit risk and 40bps to Cost of Risk

-       The Privatbank acquisition, which added GEL 15.2mln to the cost of credit risk and 50 bps to Cost of Risk

-       Like-for-like cost of credit risk increase by GEL 28.3mln or by 110 bps

 

§ As a result of the foregoing, Banking Business 1H15 profit was GEL 120.3mln, up 20.4% y-o-y; Privatbank contributed GEL 6.1mln to this profit, of which GEL 5.0 million was achieved in 2Q15 despite the synergies taking effect only in the last 50 days of 2Q15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discussion of Segment Results

 

The segment results discussion is presented for Retail Banking (RB), Corporate Banking (CB), Investment Management, Healthcare Business (GHG), Real Estate Business (m2 Real Estate)

 

Banking Business Segment Result Discussion

 

Retail Banking (RB)

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

 

GEL thousands, unless otherwise noted

2Q15

2Q14

Change

y-o-y

1Q15

Change

q-o-q

1H15

1H14

Change

y-o-y










INCOME STATEMENT HIGHLIGHTS


















Net banking interest income 

79,269

51,742

53.2%

75,150

5.5%

154,419

100,945

53.0%

Net fee and commission income 

18,406

14,021

31.3%

18,566

-0.9%

36,971

26,009

42.1%

Net banking foreign currency gain

4,305

4,207

2.3%

3,905

10.2%

8,209

8,240

-0.4%

Net other banking income

1,384

1,371

0.9%

963

43.7%

2,348

1,828

28.5%

Revenue 

103,364

71,341

44.9%

98,584

4.8%

201,947

137,022

47.4%

Salaries and other employee benefits

(22,416)

(17,045)

31.5%

(23,596)

-5.0%

(46,012)

(33,493)

37.4%

 Administrative expenses

(11,632)

(8,754)

32.9%

(12,240)

-5.0%

(23,872)

(17,102)

39.6%

 Banking depreciation and amortisation

(6,818)

(4,847)

40.7%

(6,831)

-0.2%

(13,649)

(9,424)

44.8%

 Other operating expenses 

(496)

(411)

20.7%

(462)

7.4%

(956)

(739)

29.8%

Operating expenses 

(41,362)

(31,057)

33.2%

(43,129)

-4.1%

(84,489)

(60,758)

39.1%

Operating income before cost of credit risk

62,002

40,284

53.9%

55,455

11.8%

117,458

76,264

54.0%

Cost of credit risk

(20,662)

(2,296)

NMF

(16,660)

24.0%

(37,323)

(372)

NMF

Net non-recurring items 

(2,875)

(4,375)

-34.3%

(449)

NMF

(3,323)

(4,766)

-30.3%

Profit before income tax 

38,465

33,613

14.4%

38,346

0.3%

76,812

71,126

8.0%

Income tax expense

(5,900)

(630)

NMF

(5,738)

2.8%

(11,639)

(6,258)

86.0%

Profit 

32,565

32,983

-1.3%

32,608

-0.1%

65,173

64,866

0.5%



















BALANCE SHEET HIGHLIGHTS









Net loans, standalone, Currency Blended

2,623,615

1,754,248

49.6%

2,639,808

-0.6%

2,623,615

1,754,248

49.6%

Net loans, standalone, GEL

1,285,013

941,327

36.5%

1,290,587

-0.4%

1,285,013

941,327

36.5%

Net loans, standalone, FC

1,338,602

812,921

64.7%

1,349,221

-0.8%

1,338,602

812,921

64.7%

Client deposits, standalone, Currency Blended

1,736,508

1,134,186

53.1%

1,874,262

-7.3%

1,736,508

1,134,186

53.1%

Client deposits, standalone, GEL

491,104

372,846

31.7%

618,118

-20.5%

491,104

372,846

31.7%

Client deposits, standalone, FC

1,245,404

761,340

63.6%

1,256,144

-0.9%

1,245,404

761,340

63.6%

Time deposits, standalone, Currency Blended

1,067,316

689,776

54.7%

1,182,396

-9.7%

1,067,316

689,776

54.7%

Time deposits, standalone, GEL

209,735

169,414

23.8%

296,790

-29.3%

209,735

169,414

23.8%

Time deposits, standalone, FC

857,581

520,362

64.8%

885,606

-3.2%

857,581

520,362

64.8%

Current accounts and demand deposits, standalone, Currency Blended

669,192

444,410

50.6%

691,866

-3.3%

669,192

444,410

50.6%

Current accounts and demand deposits, standalone, GEL

281,369

203,432

38.3%

321,328

-12.4%

281,369

203,432

38.3%

Current accounts and demand deposits, standalone, FC

387,823

240,978

60.9%

370,538

4.7%

387,823

240,978

60.9%










KEY RATIOS









Net interest margin, currency blended

9.5%

9.8%


9.7%


9.6%

9.9%


Loan yield, currency blended

17.3%

17.7%


17.3%


17.3%

17.8%


Loan yield, GEL

23.6%

21.8%


23.0%


23.3%

21.5%


Loan yield, FC

11.2%

12.6%


11.4%


10.0%

12.9%


Cost of deposits, currency blended

3.9%

3.9%


4.4%


4.2%

4.0%


Cost of deposits, GEL

4.6%

4.4%


5.5%


5.1%

4.5%


Cost of deposits, FC

3.6%

3.7%


3.8%


3.7%

3.8%


Cost of time deposits, currency blended

5.7%

5.7%


5.3%


5.8%

5.9%


Cost of time deposits, GEL

7.9%

8.2%


7.2%


8.7%

8.5%


Cost of time deposits, FC

5.0%

4.9%


4.6%


4.9%

5.1%


Current accounts and demand deposits, currency blended

1.2%

1.0%


2.8%


1.4%

1.0%


Current accounts and demand deposits, GEL

1.4%

1.1%


4.0%


2.0%

1.0%


Current accounts and demand deposits, FC

1.1%

1.0%


1.8%


1.0%

1.0%


Cost / income ratio

40.0%

43.5%


43.7%


41.7%

44.3%


 

 

 

Performance highlights

 

§ Our Retail Banking revenue increased to GEL 103.4mln in 2Q15, up 44.9% y-o-y from GEL 71.3mln a year ago. The revenue growth reflected strong performance of Retail Banking segment:

-       Net banking interest income was GEL 79.3mln, up 53.2%, mostly a result of the significant growth of the Retail Banking loan book, particularly the mortgage, micro & SME loan portfolios

-       The Retail Banking net loan book reached a record GEL 2,623.6mln up 49.6% y-o-y; ex-Privatbank it was GEL 2,378.0mln; ex-Privatbank growth on constant currency basis was 19.8% y-o-y. The growth was a result of strong loan origination performance delivered across all segments in 2Q5:

-       Consumer loan originations of GEL 163.2mln resulted in consumer loans outstanding totalling GEL 597.0mln as of 30 June 2015, up 33.9% y-o-y

-       Micro loan originations of GEL 144.1mln resulted in micro loans outstanding totalling GEL 525.3mln as of 30 June 2015, up 39.9% y-o-y

-       SME loan originations of GEL 76.2mln resulted in SME loans outstanding totalling GEL 301.9mln as of 30 June 2015, up 59.0% y-o-y

-       Mortgage loans originations of GEL 53.9mln resulted in mortgage loans outstanding of GEL 732.0mln as of 30 June 2015, 49.5% y-o-y

-       Privatbank added GEL 245.6mln to the net loan book, mostly credit card and consumer loans

-       Retail Banking client deposits increased to GEL 1,736.5mln, up 53.1% y-o-y; ex-Privatbank it was GEL 1,469.7mln; ex-Privatbank growth on constant currency basis was 9.0% y-o-y. Growth of Client Deposits on a y-o-y basis was due to increasing number of Express Banking clients, who bring with them the cheapest source of deposits for the bank - current accounts and demand deposits

-       The Privatbank acquisition, which added GEL 19.5mln to our Retail Banking Business revenues in 2Q15, including GEL 16.8mln net banking interest income, on the back of adding GEL 245.6mln or 4.8% to retail banking net loan book

-       Our Retail Banking net fee and commission income increased to GEL 18.4mln up 31.3%; ex-Privatbank it was GEL 15.7mln, up 12.1% from GEL 14.0mln a year ago. Net fee and commission income reflects our continued Express Banking franchise growth. Our Express Banking franchise attracted 401,753 previously unbanked emerging mass market customers since its launch 3 years ago as well as another c.400,000 as a result of Privatbank acquisition. This has driven the number of client related foreign currency and other banking transactions substantially higher

§ The NIM was 9.5% in 2Q15. Ex-Privatbank it was 8.2%, down 160 bps y-o-y. NIM reflected:

-       The Privatbank NIM of 22.9% in 2Q15 driven by a high Privatbank Loan Yield at 29.6% and a relatively low Cost of Funds at 5.3% in 2Q15. Privatbank contributed 130 bps to RB NIM

-       The Loan Yield at 17.3%; ex-Privatbank it was 15.7%, which declined 200 bps y-o-y, largely as a result of a higher share of lower yielding consumer loans in our portfolio, which is a result of our focus on low risk retail products in our lending activities

-       Cost of Client Deposits at 3.9%; ex-Privatbank it was 3.6%, which was down 30 bps y-o-y, largely as a result of GEL devaluation against the USD, which increased the share of  low cost USD deposits in the loan book

§ Operating expenses increased to GEL 41.4mln, up 33.2% y-o-y, resulting in Cost to Income ratio of 40.0% and y-o-y operating leverage of 11.7 percentage points, which reflects:

-       The acquisition of Privatbank, which added GEL 5.5mln in operating expenses to the retail banking segment in 2Q15 with a Privatbank Cost to Income ratio of 28.1%. Privatbank 2Q15 operating expenses on a pro-forma bases (assuming that synergies took effect in the beginning of the quarter instead of actual last 50 days) would have been GEL 3.4mln

-       Ex-Privatbank, salaries and other employee benefits of GEL 19.7mln, up GEL 2.7mln or 15.6% y-o-y, which was principally driven by the growing revenue base on y-o-y basis, reflecting the growth in headcount and associated payroll

§ Cost of credit risk was GEL 20.7mln in 2Q15 which is a result of:

-       Privatbank adding GEL 7.1mln

-       GEL devaluation against the US Dollar, which resulted in an increase of loan loss provisions in Lari terms on US Dollar loan provisions, adding GEL 1.8mln

-       The impact of the retail banking loan book growth of 49.6%

§ As a result, Retail Banking profit reached GEL 32.6mln, down 1.3% y-o-y

§ Our Express Banking continues to deliver strong growth as we follow our mass retail banking strategy:

-       928,999 Express Cards have been issued since their launch on 5 September 2012, in essence replacing pre-paid metro cards in circulation since July 2009

-       Increased number of Express Pay terminals to 2,284 from 2,038 a year ago. Express Pay terminals are an alternative to tellers, placed at bank branches as well as various other venues (groceries, shopping malls, bus stops, etc.), and are used for bank transactions such as credit card and consumer loan payments, utility bill payments and mobile telephone top-ups

-       In 2Q15, utilisation of Express Pay terminals increased significantly, with the number of transactions growing to 28.3mln, up 13.4% y-o-y

-       Increased Point of Sales (POS) footprint to 320 desks and 3,418 contracted merchants as of 30 June 2015, up from 309 desks and 891 merchants as of 30 June 2014

-       POS terminals outstanding reached 7,668 up 34.8% y-o-y, including Privatbank's 1,016 POS terminals

-       The volume of transactions through the Bank's POS terminals grew to GEL 176.4mln, up 21.1% y-o-y, while the number of POS transactions increased to 5.1mln in 2Q15, up 25.5%

-       POS loans outstanding reached GEL 83.2mln as of 30 June 2015, up 37.2% y-o-y

 

§ In April 2015, we launched Solo Lifestyle - a fundamentally different approach to premium banking. Through Solo Lifestyle, our Solo clients are given access to exclusive products and the finest lounge-style environment at our newly designed Solo lounges and are provided with new lifestyle opportunities, such as exclusive events and handpicked lifestyle products. In our Solo lounges, Solo clients are offered, at cost, a selection of luxury products and accessories that are currently not available in the country. Solo clients enjoy tailor-made solutions including new financial products such as bonds, which pay a significantly higher yield compared to deposits, and other securities developed by Galt & Taggart, the Bank's Investment Banking arm.

With Solo we are targeting the mass affluent retail segment and aim to build brand loyalty through exclusive experiences offered through the new Solo Lifestyle. New-clients-attracted-per-banker ratio was three-times higher for Solo Lifestyle, compared to regular Solo for the same period last year. As of 30 June 2015, the number of Solo clients reached 9,244, up 30.4% from 7,089 a year ago.

 

§ The number of Retail Banking clients totalled 1,933,360, up 44.6% y-o-y and up 29.7% q-o-q. This includes Privatbank's c.400,000 clients

§ The total number of cards reached 1,964,374, up 82.7% y-o-y

§ The total number of debit cards outstanding increased to 1,207,573, up 26.1% y-o-y as a result of issuing 126,684 debit cards, including Express cards in 2Q15

§ We issued 27,546 credit cards of which 4,858 were American Express cards in 2Q15. A total of 241,046 American Express cards have been issued since the launch in November 2009. The total number of outstanding credit cards amounted to 756,801 (of which 109,132 were American Express Cards)

§ Additionally, total number of Privatbank's all-in-one debit and credit cards totalled 694,000

§ We have now added 2,284 Express Pay Terminals and 928,999 Express Cards since the launch of the Express Banking service in 2012

 

 

 

 

Privatbank story: strategic acquisition and flawless integration execution

December 2014 - the Board made the decision to acquire Privatbank as it represented a strong strategic fit with our target to increase our share of retail loans. Privatbank was essentially a credit card business with retail loans making up 85% of its loan book. In addition, Privatbank with its vast branch network (43% of the Bank's network at that time) represented a particularly strong fit for the Bank's Express branch (self-service) format. This was also complemented with Privatbank's strong payment platform.

 

January 2015 - we completed the acquisition of Privatbank for c.GEL92mln cash consideration for 100% of Privatbank (1.11x P/BV), of which 10% or GEL 9.2mln will be paid on the first anniversary of the closing (January 2016), subject to representations and warranties / holdback provisions. During five months following the acquisition, our integration team focused on IT integration, optimisation of costs and number of branches, Privatbank product development and relevant trainings. Our IT integration team spent two months in Dnepropetrovsk, Ukraine at Privatbank headquarters to migrate Privatbank's information systems into our banking software, which we completed with just 24 hours of downtime for Privatbank clients. This represents an exceptionally short period of time for full IT integration in the banking industry. All of the data associated with the customers and transaction histories, including the data of c.800,000 customers (of which c.400,000 are active customers), over 1.1 million cards with respective transaction histories, c.150,000 loans and c.75,000 deposits, have been successfully migrated onto our banking software. 

 

During this period, we rebranded 35 Privatbank branches into our self-service format Express Banking branches; and completed the in-house development of Privatbank's trademark mono-product of an all-in-one debit and credit card to add the transport and payment capabilities of our Express card. Privatbank customers continue to use  Privatbank cards, which are now serviced by our card processing platform, without the need to change them into Bank of Georgia cards. In order to optimise Pirvatbank's branch network, we pilot tested utilisation of our Express Pay terminals by Privatbank's clients. The results showed that the terminals, which act as self-service substitute to branches, had proved very popular with Privatbank clients. Consequently, we closed more branches than initially expected - 58 out of 93 - and reduced Privatbank employee numbers by c.50%, which contributed to a significant reduction in Privatbank operating costs, down 44.6% q-o-q in 2Q15 despite only having effect for last 50 days in 2Q15. Active liability optimisation measures resulted in a significantly reduced Cost of Funding to 5.3% in 2Q15 (7.5% in 1Q15).

 

May 2015 - we announced the completion of the full integration of Privatbank, in under five months compared to our initial integration estimate of 9-12 months. Integration costs totalled GEL 2.6mln as of 30 June 2015, less compared to our expectation of up to GEL 3mln. We anticipate annualised pre-tax administrative and funding cost synergies to reach c.GEL 29mln - above our pre-announced GEL 25mln - as a result of GEL 18.5mln synergy in operating expenses compared to pre-announced GEL 15mln and GEL 10.5mln synergy in cost of funds, slightly above the pre-announced GEL 10mln. Privatbank, which at the time of acquisition was the 9th largest bank in Georgia by assets, increased our market share in retail loans by 4.3 percentage points and in retail deposits by 2.5ppts (Market data as of 31 March 2015). The acquisition added circa 400,000, predominantly emerging mass market, customers. We plan to leverage the enhanced capabilities of our Express Banking franchise to capture increased revenue from cross-selling banking products to these newly acquired customers, who currently have very low product to client ratios.

 

Privatbank Income Statement Summary

Actual

 

Actual


Q1 2015

Q2  2015

1H15

Net banking interest income 

14,924

16,840

31,764

Net fee and commission income 

3,072

2,683

5,755

Net banking foreign currency gain (loss)

900

627

1,527

Net other banking income

499

(668)

-169

Revenue 

19,395

19,482

38,877

Operating expenses 

9,888

5,474

15,362

Operating income before cost of credit risk 

9,507

14,008

23,515

Cost of credit risk 

8,165

5,556

13,721

Net operating income before non-recurring items 

1,341

8,452

9,793

Net non-recurring items 

-

2,621

2,621

Profit before income tax 

1,341

5,831

7,172

Income tax (expense) benefit 

201

875

1,076

 Profit 

1,140

4,956

6,096

 

 

 


Actual

 Privatbank Balance Sheet Summary

Q1 2015

Q2  2015




Liquid assets

204,462

147,392

Loans to customers and finance lease receivables

289,965

245,604

Other assets

22,249

23,181

Total assets

516,676

416,177

Client deposits and notes

371,454

266,779

Amounts due to credit institutions

48,809

49,438

Other liabilities

3,921

4,905

Total liabilities

424,185

321,121

Total equity

92,491

95,056

Total liabilities and equity

516,676

416,178

 


Actual

Actual

Privatbank Selected Ratios

Q1 2015

Q2 2015

1H15

Loan Yield

29.0%

29.6%

29.3%

Cost of funds

7.5%

5.3%

6.5%

Cost of client deposits and notes

7.4%

5.8%

6.7%

NIM

17.8%

22.9%

20.5%

Cost of risk

10.0%

8.6%

9.3%

Cost / Income

51.0%

28.1%

39.5%

Operating leverage, Q-O-Q

-

45.1%

-

 

 

 

Privatbank 1H15 Highlights:

§ GEL 245.6mln of high yielding loan book and GEL 266.8mln client deposits, comprising 4.8% and 6.3% of our loan book and client deposits, respectively

§ Privatbank contributed GEL 38.9mln or 10.8% to the Banking Business revenue

§ GEL 31.8mln net interest income, which was driven by Privatbank's Loan Yield of 29.3% on the back of 6.5% Cost of Funding

§ Net fee & commission income was GEL5.8mln, and mostly comprised of fees related to credit card transactions

§ As a result NIM stood at 20.5%

§ GEL 15.4mln to operating expenses. Privatbank brought in inefficiencies in 1Q15, which temporarily worsened efficiency ratios in 1Q15. However, successful integration and extensive cost-cutting measures reversed this trend in 2Q15, which resulted in Privatbank's Cost/Income ratio of 28.1% in 2Q15

§ Privatbank's cost of credit risk was GEL 15.2mln in 1H15

§ Privatbank posted GEL 6.1mln profit or 5.1% of total Banking Business profit

§ Privatbank added circa 400,000 clients, 700,000 cards, 36 branches, 371ATMs and more than 1,000 POS terminals

 

 

 

 

 

Corporate Banking (CB)

 

The Corporate Banking business in Georgia comprises 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. The Corporate Banking Business also includes finance lease facilities provided by the Bank's leasing operations (Georgian Leasing Company).

 

GEL thousands, unless otherwise noted

 

2Q15

 

2Q14

Change y-o-y

1Q15

 

Change y-o-y

1H15

1H14

Change

y-o-y










INCOME STATEMENT HIGHLIGHTS









Net banking interest income 

33,949

22,866

48.5%

35,418

-4.1%

69,368

47,487

46.1%

Net fee and commission income 

8,316

6,292

32.2%

6,001

38.6%

14,317

12,014

19.2%

Net banking foreign currency gain

9,769

4,976

96.3%

7,835

24.7%

17,604

11,011

59.9%

Net other banking income

1,819

1,208

50.6%

1,070

70.0%

2,888

1,693

70.6%

Revenue 

53,853

35,342

52.4%

50,324

7.0%

104,177

72,205

44.3%

Salaries and other employee benefits

(8,853)

(7,993)

10.8%

(8,488)

4.3%

(17,341)

(15,696)

10.5%

Administrative expenses

(3,773)

(3,390)

11.3%

(2,507)

50.5%

(6,280)

(5,761)

9.0%

Banking depreciation and amortisation

(957)

(964)

-0.7%

(990)

-3.3%

(1,947)

(1,889)

3.1%

Other operating expenses 

(188)

(235)

-20.0%

(212)

-11.3%

(400)

(572)

-30.1%

Operating expenses 

(13,771)

(12,582)

9.5%

(12,197)

12.9%

(25,968)

(23,918)

8.6%

Operating income before cost of credit risk

40,082

22,760

76.1%

38,127

5.1%

78,209

48,287

62.0%

Cost of credit risk 

(14,146)

(10,195)

38.8%

(19,381)

-27.0%

(33,527)

(23,874)

40.4%

Net non-recurring items 

(199)

(2,229)

-91.1%

(598)

-66.7%

(797)

(2,453)

-67.5%

Profit before income tax 

25,737

10,336

149.0%

18,148

41.8%

43,885

21,960

99.8%

Income tax expense

(4,119)

(436)

NMF

(3,346)

23.1%

(7,465)

(2,353)

NMF

Profit 

21,618

9,900

118.4%

14,802

46.0%

36,420

19,607

85.7%










BALANCE SHEET HIGHLIGHTS









Letters of credit and guarantees, standalone1

542,463

499,362

8.6%

525,409

3.2%

542,463

499,362

8.6%

Net loans, standalone, currency blended

2,174,111

1,802,752

20.6%

2,381,348

-8.7%

2,174,111

1,802,752

20.6%

Net loans, standalone, GEL

254,234

268,270

-5.2%

319,760

-20.5%

254,234

268,270

-5.2%

Net loans, standalone, FC

1,919,877

1,534,482

25.1%

2,061,588

-6.9%

1,919,877

1,534,482

25.1%

Client deposits, standalone, currency blended

1,371,927

1,118,359

22.7%

1,341,794

2.2%

1,371,927

1,118,359

22.7%

Client deposits, standalone, GEL

699,262

465,636

50.2%

575,468

21.5%

699,262

465,636

50.2%

Client deposits, standalone, FC

672,665

652,723

3.1%

766,326

-12.2%

672,665

652,723

3.1%

Time deposits, standalone, currency blended

521,031

264,479

97.0%

502,835

3.6%

521,031

264,479

97.0%

Time deposits, standalone, GEL

309,891

105,742

193.1%

222,459

39.3%

309,891

105,742

193.1%

Time deposits, standalone, FC

211,140

158,737

33.0%

280,376

-24.7%

211,140

158,737

33.0%

Current accounts and demand deposits, standalone, currency blended

850,896

853,880

-0.3%

838,959

1.4%

850,896

853,880

-0.3%

Current accounts and demand deposits, standalone, GEL

389,371

359,894

8.2%

353,009

10.3%

389,371

359,894

8.2%

Current accounts and demand deposits, standalone, FC

461,525

493,986

-6.6%

485,950

-5.0%

461,525

493,986

-6.6%










RATIOS









Net interest margin, currency blended

4.5%

4.4%


4.9%


4.7%

4.3%


Loan yield, currency blended

10.7%

10.8%


10.7%


10.8%

10.8%


Loan yield, GEL

12.9%

10.6%


10.9%


12.2%

10.8%


Loan yield, FC

10.4%

10.8%


10.6%


10.6%

10.8%


Cost of deposits, currency blended

3.0%

2.8%


2.8%


2.9%

3.0%


Cost of deposits, GEL

4.4%

3.3%


3.9%


4.1%

3.2%


Cost of deposits, FC

1.7%

2.4%


1.8%


1.8%

2.8%


Cost of time deposits, currency blended

5.8%

6.4%


6.1%


6.0%

6.5%


Cost of time deposits, GEL

8.0%

7.9%


7.5%


7.2%

8.1%


Cost of time deposits, FC

3.9%

5.7%


4.8%


4.6%

6.0%


Current accounts and demand deposits, currency blended

1.2%

1.4%


0.9%


1.1%

1.7%


Current accounts and demand deposits, GEL

2.4%

2.2%


1.8%


2.1%

2.3%


Current accounts and demand deposits, FC

0.3%

0.7%


0.2%


0.3%

1.0%


Cost / income ratio

25.6%

35.6%


24.2%


24.9%

33.1%


 

1Off-balance sheet items

 

 

Performance highlights

§ Revenue for the Corporate Banking segment increased by 52.4% y-o-y  to GEL 53.9mln as a result of:

§ A 20.6% y-o-y increase of the Corporate Loan book to GEL 2,174.1mln. On a constant currency basis, the Corporate Banking loan book decreased 2.1% y-o-y

§ The NIM increased to 4.5%, up 10 bps y-o-y, as a result of resilient Loan Yield

§ Loan yield stood at 10.7%, down 10 bps y-o-y on the back of slower loan issuance activity. Cost of Customer Funds increased marginally to 3.0%, up 20 bps y-o-y

§ Net fee and commission income increased 32.2% to GEL 8.3mln

§ Corporate Banking cost of credit risk rose to GEL 14.1mln, up 38.8% y-o-y

 

 

Investment Management

 

Investment Management consists of Bank of Georgia Wealth Management and the brokerage arm of the Bank, Galt & Taggart. Bank of Georgia Wealth Management provides private banking services to high-net-worth individuals and offers investment management products internationally through representative offices in London, Budapest, Istanbul and Tel Aviv. Galt & Taggart brings under one brand corporate advisory, private equity and brokerage services.

 

Investment Management financial highlights (includes Galt&Taggart)

 

INCOME STATEMENT



Change


Change


Change

 


2Q15

2Q14

Y-O-Y

1Q15

Q-O-Q

1H15

1H14

Y-O-Y










 Net banking interest income 

5,252

3,129

67.8%

4,082

28.7%

9,334

6,052

54.2%

 Net fee and commission income 

834

4,192

-80.1%

1,341

-37.8%

2,175

4,663

-53.4%

 Net banking foreign currency gain

335

287

16.7%

1,667

-79.9%

2,002

467

NMF

 Net other banking income

73

76

-3.9%

530

-86.2%

604

222

172.1%

 Revenue 

6,494

7,684

-15.5%

7,620

-14.8%

14,115

11,404

23.8%

Salaries and other employee benefits

(2,296)

(2,021)

13.6%

(1,573)

46.0%

(3,868)

(3,998)

-3.3%

Administrative expenses

(584)

(353)

65.4%

(380)

53.7%

(963)

(746)

29.1%

Banking depreciation and amortisation

(112)

(87)

28.7%

(117)

-4.3%

(229)

(177)

29.4%

Other operating expenses 

(39)

(18)

116.7%

(33)

18.2%

(75)

(38)

97.4%

Operating expenses 

(3,031)

(2,479)

22.3%

(2,103)

44.1%

(5,135)

(4,959)

3.5%

Operating income before cost of credit risk

3,463

5,205

-33.5%

5,517

-37.2%

8,980

6,445

39.3%

 Cost of credit risk 

(101)

29

NMF

10

NMF

(91)

94

NMF

 Net operating income before non-recurring items 

3,362

5,234

-35.8%

5,527

-39.2%

8,889

6,539

35.9%

 Net non-recurring items 

(17)

(245)

-93.1%

(22)

-22.7%

(39)

(267)

-85.4%

 Profit before income tax 

3,345

4,989

-33.0%

5,505

-39.2%

8,850

6,272

41.1%

 Income tax expense

(365)

(629)

-42.0%

(849)

-57.0%

(1,214)

(856)

41.8%

 Profit 

2,980

4,360

-31.7%

4,656

-36.0%

7,636

5,416

41.0%

 

Wealth Management financial highlights (excludes Galt&Taggart)

GEL thousands, unless otherwise noted

2Q15

2Q14

Change

Y-O-Y

1Q15

Change

Q-O-Q

1H15

1H14

Change

y-o-y

BALANCE SHEET HIGHLIGHTS









Client deposits, standalone, currency blended

904,775

736,074

22.9%

913,344

-0.9%

904,775

736,074

22.9%

Client deposits, standalone, GEL

22,704

23,879

-4.9%

19,971

13.7%

22,704

23,879

-4.9%

Client deposits, standalone, FC

882,071

712,195

23.9%

893,373

-1.3%

882,071

712,195

23.9%

Time deposits, standalone, currency blended

623,353

496,253

25.6%

660,970

-5.7%

623,353

496,253

25.6%

Time deposits, standalone, GEL

12,046

14,102

-14.6%

12,960

-7.1%

12,046

14,102

-14.6%

Time deposits, standalone, FC

611,307

482,151

26.8%

648,010

-5.7%

611,307

482,151

26.8%

Current accounts& demand deposits, standalone, currency blended

281,422

239,821

17.3%

252,374

11.5%

281,422

239,821

17.3%

Current accounts and demand deposits, standalone, GEL

10,658

9,777

9.0%

7,011

52.0%

10,658

9,777

9.0%

Current accounts and demand deposits, standalone, FC

270,764

230,044

17.7%

245,363

10.4%

270,764

230,044

17.7%

Assets under management

1,231,406

 

934,472

 

31.8%

1,213,828

1.4%

1,231,406

 

934,472

 

31.8%










RATIOS









Cost of deposits, currency blended

5.3%

6.4%


5.6%


5.5%

6.5%


Cost of deposits, GEL

5.5%

6.5%


5.9%


5.6%

6.7%


Cost of deposits, FC

5.3%

6.4%


5.6%


5.4%

6.5%


Cost of time deposits, currency blended

6.5%

8.0%


6.7%


6.6%

8.0%


Cost of time deposits, GEL

8.0%

9.5%


8.6%


8.4%

9.3%


Cost of time deposits, FC

6.4%

7.9%


6.6%


6.6%

8.0%


Current accounts and demand deposits, currency blended

2.5%

2.6%


2.6%


2.5%

2.4%


Current accounts and demand deposits, GEL

1.5%

1.4%


1.4%


1.4%

1.4%


Current accounts and demand deposits, FC

2.5%

2.7%


2.6%


2.6%

2.4%


 

 

 

Performance highlights

§ The AUM of the Investment Management segment increased 31.8% y-o-y to GEL 1,231.4mln, which includes Wealth Management clients' deposits and assets held at Bank of Georgia Custody, Galt & Taggart brokerage client assets and Aldagi pension scheme assets

§ Investment Management posted GEL 3.0mln profit, which was largely driven by net interest income, which increased 67.8% y-o-y to GEL 5.3mln. Net fee and commission income decreased on y-o-y basis to GEL 0.8mln from GEL 4.2mln in 2Q14. Galt & Taggart executed a sizable M&A deal in 1H14, which resulted in a high base last year

§ Wealth Management deposits increased 22.9% y-o-y to GEL 904.8mln, but declined by 2.6% on constant currency basis on the back of a 110 bps decline in Cost of Client deposits to 5.3% in 2Q15. The decrease was partially due to a number of bond issuances by Galt & Taggart, offered to Wealth Management clients, yielding higher rates than deposits

§ We served over 1,400 wealth management clients from 70 countries as of 30 June 2015. Client deposits have grown at a compound annual growth rate (CAGR) of 33.8% over the last five year period, to GEL 904.8mln as of 30 June 2015

§ As of 30 June 2015, the amount of the Bank's Certificates of Deposits issued to Investment Management clients increased by 50.5% to GEL 472.6mln

§ Galt & Taggart is succeeding in developing local capital markets, and acted as a placement agent for:

§ GEL 25mln floating rate notes issued by the European Bank for Reconstruction and Development (EBRD) and GEL 30mln bonds issued by IFC. Both transactions were completed in February 2015

§ US$ 20mln 2-year bonds for m2 Real Estate, the largest non-IFI issue to date. The transaction was met with considerable interest particularly from Wealth Management clients. The transaction was completed in March 2015

§ US$ 15mln 2-year bonds for the Bank's wholly-owned subsidiary Evex, the healthcare services company of BGH's healthcare business GHG. This was the first bond placement by our healthcare subsidiary. The proceeds from the transaction are intended to be used by the healthcare subsidiary to invest in organic growth opportunities. The transaction was completed in May 2015

§ Since its launch in June 2012, Galt & Taggart Research has initiated research coverage of the Georgian and Azeri economies, including a report analysing the impact of Russia-Ukraine standoff on the Georgian economy, the Georgian Retail Real Estate Market, the Georgian Wine Sector, Georgian Agricultural Sector, Georgian Electricity Sector, Georgian Oil and Gas Corporation, Georgian Railway, and has issued notes on the Georgian State Budget and the Tourism Sector

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Business Segment Result Discussion

 

Healthcare business (Georgia Healthcare Group - GHG)

 

Standalone results

 

For the purposes of the results discussion below, healthcare business refers to the Group's pure-play healthcare businesses, Georgia Healthcare Group (GHG), which includes healthcare services (Evex) and medical insurance (Imedi L). The results are based on management accounts and refer to standalone numbers.

 

 

Income Statement


Healthcare Services


Medical Insurance


Eliminations


Total





GEL thousands, unless otherwise noted

1H15

1H14

Change, Y-o-Y


1H15

1H14

Change, Y-o-Y


1H15

1H14


1H15

1H14

Change, Y-o-Y

Revenue

85,258

65,728

29.7%


26,355

42,539

-38.0%


4,188

13,402


107,425

94,865

13.2%

COGS, insurance claims expense

48,167

38,610

24.8%


21,872

37,637

-41.9%


4,024

13,291


66,015

62,956

4.9%

Direct salary

31,022

25,047

23.9%


-

-



1,800

5,714


29,222

19,333

51.2%

Materials, including medicines and medical disposables

12,379

7,804

58.6%


-

-



718

1,780


11,661

6,023

93.6%

Direct healthcare provider expenses

1,032

2,362

-56.3%


-

-



60

539


972

1,823

-46.7%

Utilities and other expenses

3,734

3,397

9.9%


-

-



217

775


3,518

2,622

34.1%

Medical insurance claims expense

-

-



21,872

37,637

-41.9%


1,229

4,483


20,642

33,154

-37.7%

Gross profit

37,090

27,118

36.8%


4,483

4,902

-8.5%


163

111


41,410

31,909

29.8%

Salaries and other employee benefits

10,578

7,320

44.5%


2,082

2,692

-22.6%


163

111


12,497

9,901

26.2%

General and Administrative expenses

3,790

2,961

28.0%


1,232

1,251

-1.6%


-

-


5,022

4,212

19.2%

Impairment Charge

1,737

833

108.5%


204

262

-22.1%


-

-


1,941

1,095

77.3%

Other operating income

1,120

(602)

-


51

86

-40.9%


-

-


1,171

(517)

-

EBITDA

22,106

15,402

43.5%


1,015

782

29.8%


-

-


23,121

16,184

42.9%

EBITDA margin*

25.4%

23.1%



3.9%

1.8%









Depreciation

(4,550)

(3,397)

33.9%


(289)

(310)

-6.7%


-

-


(4,839)

(3,707)

30.5%

Net interest income (expense)

(10,049)

(6,157)

63.2%


(34)

295

-


-

-


(10,083)

(5,862)

72.0%

(Losses) gains on currency exchange

4,880

(2,017)

-


569

234

143.0%


-

-


5,449

(1,783)

-

Net non-recurring items

(402)

1,333

-


-

-

-


-

-


(402)

1,333

-

Profit before income tax

11,985

5,165

132.1%


1,261

1,001

26.0%


-

-


13,246

6,166

114.8%

Income tax expense

(79)

(465)

-83.0%


(185)

(230)

-19.7%


-

-


(264)

(695)

-62.0%

Profit

11,906

4,699

153.3%


1,077

771

39.6%


-

-


12,982

5,471

137.3%
















Attributable to:















  - shareholders of the Company

10,444

3,706

181.8%


1,077

771

39.6%


-

-


11,520

4,478

157.3%

  - minority interest

1,462

993

47.2%


-

-

-


-

-


1,462

993

-

 

Note: the table above does not include intercompany eliminations on the Group consolidated level.

*EBITDA margin is calculated on gross revenue (excluding corrections & rebates)

 

GHG is the largest, integrated healthcare and medical insurance provider in Georgia and is rapidly growing, with double digit revenue and EBITDA growth for the past 3 years. Our healthcare business, a wholly owned subsidiary Georgia Healthcare Group (GHG), is the single large scale player in the fast-growing, predominantly privately-owned, Georgian healthcare services market. GHG primarily focuses on the mass market segment through a network of 41 healthcare facilities (35 hospitals and six ambulatory clinics). Organised in geographic clusters with ambulatory clinics, community hospitals and referral hospitals, GHG's network of healthcare facilities (under the "Evex" brand) captures patients along the treatment pathway and offers services ranging from basic outpatient and inpatient care to complex specialist services, positioned to complement each other and GHG's medical insurance business (under the "Imedi L" brand). As at 30 June 2015, the healthcare services business had a 22.1% market share, 5 times that of the Company's nearest competitor in Georgia, by number of beds as at 30 June 2015 (2,220 beds), which grew to 26.6% following the HTMC acquisition in July 2015 (450 beds) and is expected to grow up to c.30% as a result of the renovation of recently acquired hospital facilities, scheduled for completion in 2016 and 2017 (an additional c.500 beds). We also have the widest geographic coverage network relative to our competitors, with facilities currently located in six regions covering two thirds of the 4.5 million population of Georgia. We are also the largest provider of medical insurance in Georgia with c.250,000 persons insured and a 38.3% market share based on gross premiums revenue, as at 31 March 2015.

 

Our integrated network of referral hospitals, community hospitals and ambulatory clinics provides substantial benefits derived from economies of scale. We have centralised certain functions across our healthcare services facilities and our medical insurance business, and have focussed on implementing other efficient cost management practices.

GHG also stands out as a leader in the industry for its strong business management team and corporate governance, exceptional in Georgia's healthcare sector. Our senior management team is comprised of individuals recruited from leading healthcare facilities and medical insurance providers in Georgia and internationally. They have been instrumental in delivering our organic growth strategy and identifying stategic acquisitions to grow the business and create its current market leadership position.

Our healthcare business operates in a fast-growing predominantly privately-owned, Georgian healthcare market which is characterised by low utilisation and high fragmentation, leaving significant room for medium to long term growth. In terms of spending on healthcare, pricing and incidence levels Georgia lags significantly behind its emerging market ("EM") peers, with a medium term (5-10 year horizon) target to catch up with Turkey, which according to the World Bank spent US$ 608 on health per capita in 2013, compared to US$ 350 spent by Georgia in the same year and a longer-term target of catching up with more developed EMs (Estonia, Czech Republic, Croatia, Hungary, Lithuania, Latvia, Poland, Russian Federation, Chile, Costa Rica, Slovak Republic), whose average spend was US$ 1,076 in 2013. The historically high growth of 15% CAGR between 2011 and 2014 of the healthcare services market is expected to continue at 13% CAGR between 2014 and 2018, supported by both the hospital and the ambulatory clinics segments, which are expected to total GEL 1.2bln and GEL 0.9bln in 2015, respectively.

Supportive government reforms and the engagement of private players in the sector has resulted in a significant improvement in the overall standard of infrastructure and boosted demand for quality healthcare services. 150 new, primarily private hospitals opened between 2007 and 2013 that replaced soviet-era run-down facilities. Since 1992 and as a result of the infrastructure reforms, Georgia has reached UK and United States capacity levels: 2.6 beds per 1,000 people, reduced by c.70% from soviet-era cold war legacy overcapacity. Continued investments, mainly by private healthcare providers, to address the growing demand and to improve access to healthcare facilities are also favourable for the development of health tourism. Increasing government financing of healthcare services (State Health Insurance programs - "SIP" and Universal Healthcare Reform - "UHC") allowed a wider population to access quality healthcare and is expected to help increase demand for medical care. Recent amendments to pharmaceuticals regulations (the introduction of prescriptions) are also supportive for the healthcare services market.

In 1H15, GHG reported strongest results yet, despite not yet including the results of operations of our recent acquisitions of HTMC and Deka:

§ Our healthcare business delivered record half year revenue of GEL 107.4mln in 1H15, which was primarily driven by 29.7% growth of our healthcare services revenue, of which 21.9%was organic and 7.8%through acquisitions and other. Our 1H15 healthcare business performance is a result of our strategy, and reinforced by external factors as described below:

§ Favorable government policy that increased spending on healthcare and improved access to the healthcare services in Georgia. Following the introduction of the UHC by the government, all Georgian citizens are eligible for the new Government-funded basic health coverage, with co-payment elements required for certain services. Since the full introduction of the UHC in mid-2014, government expenditures on healthcare have increased over 65% from GEL 414.5mln in 2012 to GEL 692.9mln in 2014 and are expected to be further increased to GEL 768.3mln in 2015 according to the government budget for 2015 announced by the Ministry of Finance of Georgia, although it is still modest in terms of percentage to  the total budget expenditures (7.9% in 2014), and in terms of expenditures as a percentage of GDP (2.0%), which remains low compared to Emerging Market and European peers that on average exceed 5% of GDP.

 

Revenue from healthcare services by sources of payment

(GEL thousands, unless otherwise noted)

1H15

1H14

Change,

Y-o-Y

Government-funded healthcare programs

62,496

27,371

128.3%

Out-of-pocket payments by patients

17,195

16,819

2.2%

Private medical insurance companies, of which:

5,566

21,538

-74.2%

   Imedi L medical insurance

4,024

13,291

-69.7%

Total

85,258

65,728

29.7%

 

-       The growth in revenue from government-funded healthcare programs to GEL 62.5mln, up 128.3%, was primarily driven by the UHC and was partially offset by an anticipated decline in revenues from private medical insurance companies, resulting in a 74.2% decrease in these revenues to GEL 5.6mln in 1H15. Our organic revenue growth of 21.9% was largely sourced from government-funded healthcare programs

-       Notably, out-of-pocket payments by patients increased 2.2% to GEL 17.2mln. The UHC places coverage limits on medical treatments, co-payments and has certain exclusions. Any charges in excess of the limit and co-payments are covered by patients on an out-of-pocket basis

-       As a result, c.70% of our healthcare services revenue was sourced from the government (up from c.40% a year ago), c.20% was sourced from out-of-pocket payments (largely flat y-o-y) and slightly over 6% was sourced from private medical insurance companies (down from c.33% a year ago)

§ Increasing number of hospital beds, primarily in Tbilisi, the capital city of Georgia, where revenue per bed is significantly higher. The implementation of the expansion strategy that resulted in the acquisition of nine hospitals with the total of 1,380 beds since the end of 2013 has brought the number of total healthcare facilities to 41 and hospital beds to 2,670 as of the date of this report, up from 36 and 1,892, respectively in the previous year

-       Our footprint increased in Tbilisi, where our market share in beds grew from 13.6% as of 30 June 2014 to 24.0% as of the date of this report. Although our two recent acquisitions, HTMC and Deka, added 530 in beds, our financial results do not yet include their results of operations, as Deka was consolidated as of 30 June 2015 with no effect on the income statement of GHG in 1H15 and HTMC will be consolidated in 3Q15. HTMC revenue was GEL 38.4mln in 2014, and GEL 21.7mln in 1H15

-       Together with acquiring operating beds, we acquired  additional development capacities of c.500 beds, that will become operational following renovations that are planned in 2016 and 2017, increasing our national and Tbilisi market share in beds up to c.30%

-       Although our market share by number of beds is close to our target of 1/3, we have significant room to catch up in terms of market share by hospital revenue, which currently stands at c.14%, and is expected to grow to 21% following abovementioned renovations, still leaving room for further growth

§ Launch of ambulatory clinics, with plans to open 20-30 ambulatory clinics within 2-3 years. Currently we are predominantly a hospital provider, with under 3% of our healthcare services revenue coming from ambulatory clinics. We aim to tap the highly fragmented and under-penetrated outpatient segment that represents c.40% of national spending on healthcare services, where no single player has more than 3% of the market. There is currently very low utilisation of outpatient services in the country (Georgia has the lowest average number of outpatient encounters per capita in the region - Georgia: 2.7, CIS: 8.9, EU: 7.7) and this, combined with higher margins make this sector even more attractive

-       We have already launched one cluster of ambulatory clinics in Tbilisi's central neighbourhood, Saburtalo, and two additional  clusters are under renovation and will be opened during the second half of 2015

-       We believe that our medical insurance business will play a feeder role for newly launched ambulatory clinics, guaranteeing stable stream of revenue and increasing the number of ambulatory clinic claims retained within GHG (only 33.6% of Imedi L's outpatient claims were retained within GHG for 1H15)

-       In addition, a recent initiative of the Ministry of Health, Labour and Social Affairs ("MoLHSA") extended the prescription requirement to over 50% of all medicines registered in Georgia with effect from 1 September 2014 (whereas no more than 2% of all medicines registered in Georgia required a prescription before this date). We believe this initiative will have a favourable impact on revenues in 2015 and beyond as outpatient visits to clinics increase

§ We invest in medical technology, on the back of renovated infrastructure, enhancing our service mix and catering to unfulfilled demand, as indicated by low incidence levels that lag far behind peer benchmarks. We have completed a number of such projects in 2014 and 2015, including liver transplantation service in Batumi referral hospital; launching a catheterisation laboratory and an emergency department in Zugdidi referral hospital; opening neonatology intensive care departments in Telavi and Zugdidi referral hospitals; and an oncology centre in Kutaisi, which is equipped with the most up-to-date technology including the only linear accelerator in west Georgia. Yet, there are still significant shortages in equipment supply (MRIs, oncology diagnostics and treatment, cardiology diagnostics and treatment, etc.) and service gaps (no pathology laboratory (samples are sent abroad for testing), very limited pediatric oncology services, very limited rehabilitation services, no proper IVF center, no bone marrow transplant, no molecular laboratory, no proper genetic laboratory), which leaves significant room for further growth

§ Healthcare services revenue, which includes revenue from hospitals and ambulatory clinics, increased to GEL 85.3mln, up 29.7% driven primarily by referral hospitals, that grew 36.7% y-o-y and represent c.85% of healthcare services revenue:

 

Revenue from healthcare services by business lines

(GEL thousands, unless otherwise noted)

1H15

1H14

Change,

Y-o-Y

Referral and specialty hospitals

           74,262

        54,343

36.7%

Community hospitals

             8,518

          6,177

37.9%

Ambulatory clinics

             2,478

          2,345

5.7%

Ambulance and rural primary care

                   -  

          2,862

-100.0%

Total

85,258

65,728

29.7%

 

-       Revenue from referral hospitals grew to GEL 74.3mln, up 36.7% y-o-y, driven by strong organic growth and acquisitions. We expect a significant portion of the growth of our hospital revenue to come from referral hospitals, in line with our strategy to increase our market share to 1/3 across Georgia through further investments. Our organic revenue growth of 21.9% was largely sourced from referral hospitals

-       37.9% y-o-y growth of revenue from the community hospitals was the result of organic growth alone and was driven by the introduction of UHC, which made healthcare services, both outpatient and inpatient, more accessible and affordable for the population of Georgia

-       5.7% y-o-y growth of revenue from ambulatory clinics was the result of organic growth alone and was mainly driven by our ambulatory clinics in Tbilisi. We expect ambulatory clinics revenue to grow faster, in line with our strategy of launching additional outpatient clinics in the next 2-3 years

 

§ Our private medical insurance has shown resilience and revenue from private medical insurance products grew by 29.9%, with approximately 250,000 people holding our medical insurance policies as at 30 June 2015. The growth is a result of improved pricing, as well as an increase in the number of people insured:

Revenue from medical insurance by sources of payment

(GEL thousands, unless otherwise noted)

1H15

1H14

Change,

Y-o-Y

government funded medical insurance products

                     -

        22,252

-100.0%

Private medical insurance products

           26,355

        20,287

29.9%

Total

           26,355

        42,539

-38.0%

 

-       High double-digit growth in our healthcare service revenues was partially offset by the anticipated decline in medical insurance revenues. As government spending on healthcare was consolidated under the UHC (the UHC involves direct payments to healthcare facilities by the government, compared to the previous programmes under which the government bought private medical insurance for targeted groups of the population) our revenue from our medical insurance business decreased to GEL 26.4mln, down 38.0%

-       Within the changed private insurance landscape that resulted from the introduction of the UHC, our medical insurance business strengthened its market share and now accounts for 38.3% of the total medical insurance sector of Georgia based on gross premiums revenue as of 31 March 2015, up from 37.6% as of 31 March 2014

 

§ We have improving margins with the increasing scale of our healthcare business as a result of our continuous focus on efficiency. Margins improved, as a result of increasing utilisation and scale of our healthcare services business, as well as the on-going integration of recently acquired healthcare facilities, with the 24.8% increase in COGS lagging behind 29.7% revenue growth

 

-       In 1H15, gross profit of our healthcare services business increased to GEL 37.1mln, up 36.8% y-o-y and supported by the 24.8% growth in COGS on the back of 29.7% increase in revenue during the same period

-       The headcount of our healthcare services business reached c.8,300 full-time employees, up 22.9% y-o-y, as a result of new acquisitions in 1H15

 

§ As a result, our healthcare business EBITDA reached GEL 23.1mln in 1H15, mostly driven by healthcare services EBITDA, which was up 43.5% y-o-y. Our EBITDA margin for healthcare services in 1H15 was 25.4%, up 2.3% toward our longer-term target of at least 30%. The improvement is mostly a result of extracting inefficiencies brought in through acquisition of the new hospitals in 2014, notwithstanding the costs of the new governance structure that was put in place in the end of 2014 in preparation for the planned stock exchange listing in 2015.

 

§ We expect significant improvement in our EBIDTA margin, as a result of:

-       The integration of the acquired healthcare facilities which is ongoing, including centralisation of some of the back-office functions and we expect significant further synergy gains in 2015 as management shifts its focus from acquisition to integration mode. Further cost synergies are expected mainly as a result of reducing inefficiencies in the acquired hospitals, as benchmarked against the previously managed healthcare facilities in the areas of procurement, process standardisation and payroll

-       The increased contribution from ambulatory clinics to our revenues, which have EBITDA margin above 30% and now represent only 3% of our healthcare services revenues

-       Consolidation of HTMC results starting in 3Q15, which is a strong margin business, posting 36.4% EBITDA in 2014

-       Our recently launched services, listed above, picking-up and reaching the annual run-rates

 

§ Net interest expense of the healthcare services business grew by 63.2% y-o-y as a result of a 51.5% increase in borrowed funds raised for acquisitions as well as new project financing

§ The increase in depreciation costs by 33.9% was primarily driven by the acquisitions completed during the past year

§ As a result, net income of our healthcare services business increased to GEL 11.9mln, up 153.3% y-o-y

 

§ Our healthcare business balance sheet increased substantially over the last year with assets growing to GEL 501.6mln, up 45.8% The growth of total assets (up GEL 157.7mln y-o-y) was largely driven by a GEL 91.0mln, or a 40.1%, increase in the premises and equipment of our healthcare business, reflecting the acquisition of new hospitals during 2014

 

 

 

 

Healthcare business selected balance sheet items

(GEL thousands, unless otherwise noted)

1H15

1H14

Change,

Y-o-Y

 Total assets, of which:

501,583

343,905

45.8%

 Premises and equipment, net

317,701

226,731

40.1%

 Total liabilities, of which:

288,419

208,947

38.0%

 Borrowed Funds

195,519

129,038

51.5%

 Total shareholders' equity

213,164

134,958

57.9%

 

Project and development highlights:

 

§ GHG acquired a 95% equity interest in Deka. Deka owns an 80 bed hospital located on 2.4 hectares of land in a prime location in Tbilisi, with an estimated additional development capacity of 270 beds that we aim to develop within 2016-2017

§ GHG also acquired a 50.0% equity interest in GNCo, with effective control over the company. GNCo is a holding company that owns 100% of HTMC, a 450-bed major and well-established referral hospital in Tbilisi, which is also the single largest hospital in Georgia, providing a wide-range of in-patient and out-patient services, including the largest department of oncology radiotherapy in Georgia

§ GHG launched a new Training Centre in Batumi to continue to support internal skills development and human resource capacity at our healthcare facilities. In total we operate three training centres, of which two were opened in 2014 and are located in Tbilisi and Kutaisi. Through these centres we provide regular training and education for all our medical personnel. We established our own nursing training curriculum and we guarantee employment at our facilities to successful candidates

§ GHG continue to actively work on adopting Joint Commission International (JCI) standards

§ GHG launched a new ambulatory clinic in Tbilisi as part of our strategy to increase our share in highly fragmented and under-penetrated outpatient market in capital city

§ GHG completed a paediatric cardiology department at children's referral hospital in Tbilisi, which will become the second healthcare facility in Georgia to provide full scale cardiac services, including cardiac surgeries for children in Georgia

§ GHG launched West-Georgia Oncology Center, which is equipped with the most up-to-date technology including the only linear accelerator in west Georgia

§ Evex successfully completed a US$15 million 2-year bond placement. The bond was issued at par and carries a coupon rate of 9.5% payable semi-annually. The proceeds from the transaction are intended to be used by the healthcare subsidiary to invest in organic growth opportunities, primarily to accelerate the launch of ambulatory clinics, thus increasing our market share in the fast-growing, highly-fragmented and under-penetrated outpatient market through rapid launch of 20-30 ambulatory clinics, within the next 2-3 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate business (m2 Real Estate)

 

Our Real Estate business is operated through the Bank's wholly-owned subsidiary m2 Real Estate, which develops residential property in Georgia. m2 Real Estate outsources the construction and architecture works while itself focusing on project management and sales. The Bank's Real Estate business is in place to meet the unsatisfied demand for housing through its well-established branch network and sales force, while stimulating our mortgage lending business.

 

 

GEL thousands, unless otherwise noted

2Q15

2Q14

Change y-o-y

1Q15

 

Change q-o-q

1H15

1H14

Change,

y-o-y










Real estate revenue

1,595

11,128

-85.7%

3,938

-59.5%

5,533

33,123

-83.3%

Cost of real estate

(1,757)

(7,657)

-77.1%

(2,865)

-38.7%

(4,622)

(23,465)

-80.3%

Gross real estate profit 

(162)

3,471

NMF

1,073

NMF

911

9,658

-90.6%

Gross other investment profit 

(57)

16

NMF

219

NMF

162

54

200.0%

Revenue 

(219)

3,487

NMF

1,292

NMF

1,073

9,712

-89.0%

Salaries and other employee benefits

(269)

(407)

-33.9%

(321)

-16.2%

(590)

(612)

-3.6%

Administrative expenses

(1,275)

(824)

54.7%

(1,041)

22.5%

(2,316)

(1,936)

19.6%

Operating expenses 

(1,544)

(1,231)

25.4%

(1,362)

13.4%

(2,906)

(2,548)

14.1%

EBITDA

(1,763)

2,256

NMF

(70)

NMF

(1,833)

7,164

NMF

Depreciation and amortization of investment business

(43)

(42)

2.4%

(42)

2.4%

(85)

(226)

-62.4%

Net foreign currency gain from investment business

903

173

NMF

(371)

NMF

532

72

NMF

Interest income from investment business 

221

8

NMF

171

29.2%

392

8

NMF

Interest expense from investment business

(227)

(486)

-53.3%

(1,011)

-77.5%

(1,238)

(546)

126.7%

Net operating income before non-recurring items 

(909)

1,909

NMF

(1,323)

-31.3%

(2,232)

6,472

NMF

Net non-recurring items 

(67)

15

NMF

(73)

-8.2%

(140)

18

NMF

Profit before income tax 

(976)

1,924

NMF

(1,396)

-30.1%

(2,372)

6,490

NMF

Income tax (expense) benefit

147

(296)

NMF

209

-29.7%

356

(974)

NMF

Profit 

(829)

1,628

NMF

(1,187)

-30.2%

(2,016)

5,516

NMF

 

Performance highlights

§ m2 Real Estate has enjoyed strong demand of its apartments since its establishment in 2010 and has sold a total of 1,376 apartments to date, generating total sales of US$ 115.8mln, of which US$ 56.9mln has already been recognised as revenue and US$ 58.9mln will be recognised upon completion of the on-going projects

§ The decline in revenues from 2014 is due to revenue recognition policy adopted by m2 Real Estate, pursuant to which revenue is recognised at the full completion of the project instead of in line with the percentage of the construction that has been completed

§ Interest expense, decreased significantly q-o-q to GEL 0.2mln as the 1Q15 interest expense of GEL 1.0mln comprised transaction costs associated with the US$ 20mln bond issuance in March 2015 which was fully expensed in 1Q15. The bond proceeds will be used for funding future projects

Project performance highlights

§ Project 1, "Chubinashvili street", construction completed - 123 (100%) of 123 apartments sold by the end of 2Q15, with total sales of US$ 9.9mln, which is fully recognized as revenue. The project was started in September 2010 and completed in August 2012. We unlocked the land value of US$ 0.9mln and realized Internal Rate of Return ("IRR") of 47% from this project

§ Project 2, "Tamarashvili street", construction completed - 517 (99%) of 522 apartments sold by end of 2Q15, with total sales of US$ 46.8mln, of which US$ 45.9mln was recognized as revenue. The project was started in May 2012 and completed in June 2014, four months ahead of completion deadline. We unlocked the land value of US$ 5.4mln and realized IRR of 46% from this project

§ Project 3, "Kazbegi Street", construction on-going - 259 (88%) of 295 apartments sold by end of 2Q15, with total sales of US$ 23.5mln, which is not yet recognized as revenue. The project was started in December 2013, construction is 75% completed as of the date of this release and is expected to be fully completed in December 2015. Upon the completion of the construction of this project, we expect to unlock the land value of US$ 3.6mln and realize IRR of 165% from this project

§ Project 4, "Nutsubidze Street", construction on-going - 186 (84%) of 221 apartments sold by end of 2Q15, with total sales of US$ 14.9mln, which is not yet recognized as revenue. The project was started in December 2013, construction is 82% completed as of the date of this release and is expected to be fully completed in October 2015. Upon the completion of the construction of this project, we expect to unlock the land value of US$ 2.2mln and realize IRR of 58% from this project

§ Project 5, "Tamarashvili Street II", construction on-going - 168 (62%) of 270 apartments sold by end of 2Q15, with total sales of US$ 15.6mln, which is not yet recognized as revenue. The project was started in July 2014, construction is 47% completed as of the date of this release and is expected to be fully completed in April 2016. Upon the completion of the construction of this project, we expect to unlock the land value of US$ 2.7mln and realize IRR of 71% from this project

§ Project 6, "Moscow avenue", construction on-going - 123 (52%) of 238 apartments sold by end of 2Q15, with total sales of US$ 4.6mln, which is not yet recognized as revenue. This project was launched within m2 Real Estate's new low-cost apartment initiative and offers unprecedented affordable price of as low as US$ 29,000 for refurbished 1 bedroom apartments. The project was started in September 2014, construction is 61% completed as of the date of this release and is expected to be fully completed in March 2016. Upon the completion of the construction of this project, we expect to unlock the land value of US$ 1.6mln and realize IRR of 31% from this project

§ In summary, m2 Real Estate has started 6 projects since its establishment in 2010, of which two have been completed and construction on four is on-going. Since establishment, total sales have been US$ 115.8mln, of which US$ 58.9mln will be recognized as revenue upon completion of the on-going four projects, two of which expected to be completed in 2015 and the other two expected to be completed in 2016. Currently, only 293 out of total 1,669 apartments are available for sale. We have unlocked total land value of US$ 6.3mln from the two completed projects and additional US$ 10.1mln in land value is expected to be unlocked from the four on-going projects

§ The number of apartments financed with our mortgages in all m2 Real Estate projects as of the date of this announcement totalled 653, with an aggregate amount of GEL 66.3mln

 

 

 

 

 

 

 

 

 

 


SELECTED FINANCIAL INFORMATION

 


Bank of Georgia Holdings PLC


Banking Business




Investment Business


Eliminations

INCOME STATEMENT QUARTERLY

Q2 2015

Q2 2014

Change

Q1 2015

Change


Q2 2015

Q2 2014

Change

Q1 2015

Change


Q2 2015

Q2 2014

Change

Q1 2015

Change


Q2 2015

Q2 2014

Q1 2015




Y-O-Y


Q-O-Q




Y-O-Y


Q-O-Q




Y-O-Y


Q-O-Q



























Banking interest income 

211,869

141,483

49.7%

199,698

6.1%


215,313

143,025

50.5%

202,353

6.4%


-

-

-

-

-


(3,444)

(1,542)

(2,655)

 Banking interest expense 

(89,080)

(58,970)

51.1%

(78,709)

13.2%


(88,910)

(59,246)

50.1%

(79,295)

12.1%


-

-

-

-

-


(170)

276

586

 Net banking interest income 

122,789

82,513

48.8%

120,989

1.5%


126,403

83,779

50.9%

123,058

2.7%


-

-

-

-

-


(3,614)

(1,266)

(2,069)

 Fee and commission income 

38,944

34,729

12.1%

35,991

8.2%


40,160

35,581

12.9%

37,343

7.5%


-

-

-

-

-


(1,216)

(852)

(1,352)

 Fee and commission expense 

(9,823)

(8,501)

15.6%

(9,137)

7.5%


(9,988)

(8,501)

17.5%

(9,253)

7.9%


-

-

-

-

-


165

-

116

 Net fee and commission income 

29,121

26,228

11.0%

26,854

8.4%


30,172

27,080

11.4%

28,090

7.4%


-

-

-

-

-


(1,051)

(852)

(1,236)

 Net banking foreign currency gain

19,765

11,395

73.5%

18,962

4.2%


19,765

11,395

73.5%

18,962

4.2%


-

-

-

-

-


-

-

-

 Net other banking income

2,481

2,241

10.7%

1,790

38.6%


2,810

2,433

15.5%

2,095

34.1%


-

-

-

-

-


(329)

(192)

(305)

 Net insurance premiums earned

22,566

25,228

-10.6%

21,709

3.9%


9,777

6,856

42.6%

9,242

5.8%


13,244

18,778

-29.5%

12,890

2.7%


(455)

(406)

(423)

 Net insurance claims incurred

(16,749)

(18,876)

-11.3%

(14,135)

18.5%


(6,304)

(2,925)

115.5%

(3,936)

60.2%


(10,445)

(15,951)

-34.5%

(10,199)

2.4%


-

-

-

 Gross insurance profit 

5,817

6,352

-8.4%

7,574

-23.2%


3,473

3,931

-11.7%

5,306

-34.5%


2,799

2,827

-1.0%

2,691

4.0%


(455)

(406)

(423)

 Healthcare revenue

41,217

29,843

38.1%

40,017

3.0%


-

-

-

-

-


41,217

29,843

38.1%

40,017

3.0%


-

-

-

 Cost of healthcare services

(23,118)

(16,216)

42.6%

(23,140)

-0.1%


-

-

-

-

-


(23,118)

(16,216)

42.6%

(23,140)

-0.1%


-

-

-

 Gross healthcare profit 

18,099

13,627

32.8%

16,877

7.2%


-

-

-

-

-


18,099

13,627

32.8%

16,877

7.2%


-

-

-

 Real estate revenue

1,716

11,133

-84.6%

4,074

-57.9%


-

-

-

-

-


1,716

11,133

-84.6%

4,074

-57.9%


-

-

-

 Cost of real estate

(1,757)

(7,657)

-77.1%

(2,865)

-38.7%


-

-

-

-

-


(1,757)

(7,657)

-77.1%

(2,865)

-38.7%


-

-

-

 Gross real estate profit 

(41)

3,476

NMF

1,209

NMF


-

-

-

-

-


(41)

3,476

NMF

1,209

NMF


-

-

-

 Gross other investment profit 

4,734

3,498

35.3%

1,398

NMF


-

-

-

-

-


4,709

3,437

37.0%

1,543

NMF


25

61

(145)

 Revenue 

202,765

149,330

35.8%

195,653

3.6%


182,623

128,618

42.0%

177,511

2.9%


25,566

23,367

9.4%

22,320

14.5%


(5,424)

(2,655)

(4,178)

 Salaries and other employee benefits

(45,044)

(37,462)

20.2%

(45,742)

-1.5%


(38,066)

(31,347)

21.4%

(38,606)

-1.4%


(7,460)

(6,282)

18.8%

(7,531)

-0.9%


482

167

395

 Administrative expenses

(22,102)

(19,235)

14.9%

(21,056)

5.0%


(17,899)

(15,746)

13.7%

(17,506)

2.2%


(4,498)

(3,967)

13.4%

(4,028)

11.7%


295

478

478

 Banking depreciation and amortisation

(8,338)

(6,364)

31.0%

(8,373)

-0.4%


(8,338)

(6,364)

31.0%

(8,373)

-0.4%


-

-

-

-

-


-

-

-

 Other operating expenses 

(1,364)

(887)

53.8%

(887)

53.8%


(941)

(803)

17.2%

(792)

18.8%


(423)

(84)

NMF

(95)

NMF


-

-

-

 Operating expenses 

(76,848)

(63,948)

20.2%

(76,058)

1.0%


(65,244)

(54,260)

20.2%

(65,277)

-0.1%


(12,381)

(10,333)

19.8%

(11,654)

6.2%


777

645

873

 Operating income before cost of credit risk / EBITDA

125,917

85,382

47.5%

119,595

5.3%


117,379

74,358

57.9%

112,234

4.6%


13,185

13,034

1.2%

10,666

23.6%


(4,647)

(2,010)

(3,305)

 Profit from associates

1,979

-

-

(1,310)

NMF


-

-

-

-

-


1,979

-

-

(1,310)

NMF


-

-

-

 Depreciation and amortization of investment business

(2,579)

(2,256)

14.3%

(2,688)

-4.1%


-

-

-

-

-


(2,579)

(2,256)

14.3%

(2,688)

-4.1%


-

-

-

 Net foreign currency gain from investment business

2,689

(1,433)

NMF

3,690

-27.1%


-

-

-

-

-


2,689

(1,433)

NMF

3,690

-27.1%


-

-

-

 Interest income from investment business 

622

(71)

NMF

617

0.8%


-

-

-

-

-


844

195

NMF

818

3.2%


(222)

(266)

(201)

 Interest expense from investment business

(2,632)

(1,718)

53.2%

(2,463)

6.9%


-

-

-

-

-


(7,501)

(3,994)

87.8%

(5,969)

25.7%


4,869

2,276

3,506

 Operating income before cost of credit risk 

125,996

79,904

57.7%

117,441

7.3%


117,379

74,358

57.9%

112,234

4.6%


8,617

5,546

55.4%

5,207

65.5%


-

-

-

Impairment charge on loans to customers 

(35,105)

(7,816)

NMF

(38,928)

-9.8%


(35,105)

(7,816)

NMF

(38,928)

-9.8%


-

-

-

-

-


-

-

-

Impairment charge on finance lease receivables

(1,779)

(387)

NMF

(119)

NMF


(1,779)

(387)

NMF

(119)

NMF


-

-

-

-

-


-

-

-

Impairment charge on other assets and provisions

(4,983)

(5,643)

-11.7%

(2,794)

78.3%


(3,880)

(5,076)

-23.6%

(1,724)

125.1%


(1,103)

(567)

94.5%

(1,070)

3.1%


-

-

-

 Cost of credit risk 

(41,867)

(13,846)

NMF

(41,841)

0.1%


(40,764)

(13,279)

NMF

(40,771)

0.0%


(1,103)

(567)

94.5%

(1,070)

3.1%


-

-

-

 Net operating income before non-recurring items 

84,129

66,058

27.4%

75,600

11.3%


76,615

61,079

25.4%

71,463

7.2%


7,514

4,979

50.9%

4,137

81.6%


-

-

-

 Net non-recurring items 

(413)

(7,078)

-94.2%

(2,447)

-83.1%


(3,409)

(7,951)

-57.1%

(2,167)

57.3%


2,996

873

NMF

(280)

NMF


-

-

-

 Profit before income tax 

83,716

58,980

41.9%

73,153

14.4%


73,206

53,128

37.8%

69,296

5.6%


10,510

5,852

79.6%

3,857

172.5%


-

-

-

 Income tax expense

(11,686)

(663)

NMF

(10,814)

8.1%


(11,753)

489

NMF

(10,486)

12.1%


67

(1,152)

NMF

(328)

NMF


-

-

-

 Profit 

72,030

58,317

23.5%

62,339

15.5%


61,453

53,617

14.6%

58,810

4.5%


10,577

4,700

125.0%

3,529

199.7%


-

-

-

Attributable to:






















- shareholders of the Group

70,601

56,421

25.1%

62,640

12.7%


60,963

52,702

15.7%

58,247

4.7%


9,638

3,719

159.2%

4,393

119.4%


-

-

-

- non-controlling interests

1,429

1,896

-24.6%

(301)

NMF


490

915

-46.4%

563

-13.0%


939

981

-4.3%

(864)

NMF


-

-

-























Earnings per share (basic)

1.84

1.64

12.2%

1.63

12.9%

















 

 


Bank of Georgia Holdings PLC


Banking Business


Investment Business


           Eliminations


 

 

INCOME STATEMENT HALF YEAR

Jun-15

Jun-14

Change


Jun-15

Jun-14

Change


Jun-15

Jun-14

Change


Jun-15

Jun-14

Change

 

 




Y-O-Y




Y-O-Y




Y-O-Y




Y-O-Y

 

 

















 

 

 Banking interest income 

411,567

283,913

45.0%


417,666

287,011

45.5%


-

-

-


(6,099)

(3,098)

96.9%

 

 

Banking interest expense 

(167,789)

(120,465)

39.3%


(168,205)

(120,780)

39.3%


-

-

-


416

315

32.1%

 

 

 Net banking interest income 

243,778

163,448

49.1%


249,461

166,231

50.1%


-

-

-


(5,683)

(2,783)

104.2%

 

 

Fee and commission income 

74,935

62,815

19.3%


77,503

64,045

21.0%


-

-

-


(2,568)

(1,230)

108.8%

 

 

Fee and commission expense 

(18,960)

(16,753)

13.2%


(19,241)

(16,753)

14.9%


-

-

-


281

-

-

 

 

 Net fee and commission income 

55,975

46,062

21.5%


58,262

47,292

23.2%


-

-

-


(2,287)

(1,230)

85.9%

 

 

Net banking foreign currency gain

38,727

22,700

70.6%


38,727

22,700

70.6%


-

-

-


-

-

-

 

 

Net other banking income

4,272

3,107

37.5%


4,906

3,420

43.5%


-

-

-


(634)

(313)

102.6%

 

 

Net insurance premiums earned

44,275

54,618

-18.9%


19,019

13,034

45.9%


26,134

42,443

-38.4%


(878)

(859)

2.2%

 

 

Net insurance claims incurred

(30,884)

(38,560)

-19.9%


(10,242)

(4,844)

111.4%


(20,642)

(33,716)

-38.8%


-

-

-

 

 

 Gross insurance profit 

13,391

16,058

-16.6%


8,777

8,190

7.2%


5,492

8,727

-37.1%


(878)

(859)

2.2%

 

 

 Healthcare revenue

81,234

52,591

54.5%


-

-

-


81,234

52,591

54.5%


-

-

-

 

 

 Cost of healthcare services

(46,259)

(29,653)

56.0%


-

-

-


(46,259)

(29,653)

56.0%


-

-

-

 

 

 Gross healthcare profit 

34,975

22,938

52.5%


-

-

-


34,975

22,938

52.5%


-

-

-

 

 

 Real estate revenue

5,790

33,044

-82.5%


-

-

-


5,790

33,124

-82.5%


-

(80)

-100.0%

 

 

 Cost of real estate

(4,622)

(23,465)

-80.3%


-

-

-


(4,622)

(23,465)

-80.3%


-

-

-

 

 

 Gross real estate profit 

1,168

9,579

-87.8%


-

-

-


1,168

9,659

-87.9%


-

(80)

-100.0%

 

 

 Gross other investment profit 

6,133

5,861

4.6%


-

-

-


6,253

5,741

8.9%


(120)

120

NMF

 

 

 Revenue 

398,419

289,753

37.5%


360,133

247,833

45.3%


47,888

47,065

1.7%


(9,602)

(5,145)

86.6%

 

 

 Salaries and other employee benefits

(90,786)

(73,146)

24.1%


(76,672)

(61,681)

24.3%


(14,991)

(12,084)

24.1%


877

619

41.7%

 

 

 Administrative expenses

(43,158)

(34,773)

24.1%


(35,404)

(27,947)

26.7%


(8,527)

(7,514)

13.5%


773

688

12.4%

 

 

 Banking depreciation and amortisation

(16,711)

(12,523)

33.4%


(16,711)

(12,523)

33.4%


-

-

-


-

-

-

 

 

 Other operating expenses 

(2,253)

(1,761)

27.9%


(1,733)

(1,624)

6.7%


(520)

(137)

NMF


-

-

-

 

 

 Operating expenses 

(152,908)

(122,203)

25.1%


(130,520)

(103,775)

25.8%


(24,038)

(19,735)

21.8%


1,650

1,307

26.2%

 

 

















 

 

 Operating income before cost of credit risk / EBITDA

245,511

167,550

46.5%


229,613

144,058

59.4%


23,850

27,330

-12.7%


(7,952)

(3,838)

107.2%

 

 

















 

 

 Profit from associates

668

-

-


-

-

-


668

-

-


-

-

-

 

 

 Depreciation and amortization of investment business

(5,266)

(4,485)

17.4%


-

-

-


(5,266)

(4,485)

17.4%


-

-

-

 

 

 Net foreign currency gain from investment business

6,379

(1,849)

NMF


-

-

-


6,379

(1,849)

NMF


-

-

-

 

 

 Interest income from investment business 

1,239

732

69.3%


-

-

-


1,662

980

69.6%


(423)

(248)

70.6%

 

 

 Interest expense from investment business

(5,094)

(3,749)

35.9%


-

-

-


(13,469)

(7,835)

71.9%


8,375

4,086

105.0%

 

 

 Operating income before cost of credit risk 

243,437

158,199

53.9%


229,613

144,058

59.4%


13,824

14,141

-2.2%


-

-

-

 

 

















 

 

 Impairment charge on loans to customers 

(74,033)

(16,927)

NMF


(74,033)

(16,927)

NMF


-

-

-


-

-

-

 

 

 Impairment charge on finance lease receivables

(1,899)

(358)

NMF


(1,899)

(358)

NMF


-

-

-


-

-

-

 

 

 Impairment charge on other assets and provisions

(7,776)

(9,878)

-21.3%


(5,604)

(8,795)

-36.3%


(2,172)

(1,083)

100.6%


-

-

-

 

 

 Cost of credit risk 

(83,708)

(27,163)

NMF


(81,536)

(26,080)

NMF


(2,172)

(1,083)

100.6%


-

-

-

 

 

















 

 

 Net operating income before non-recurring items 

159,729

131,036

21.9%


148,077

117,978

25.5%


11,652

13,058

-10.8%


-

-

-

 

 

















 

 

 Net non-recurring items 

(2,860)

(8,197)

-65.1%


(5,575)

(9,601)

-41.9%


2,715

1,404

93.4%


-

-

-

 

 

















 

 

 Profit before income tax 

156,869

122,839

27.7%


142,502

108,377

31.5%


14,367

14,462

-0.7%


-

-

-

 

 

 Income tax expense

(22,500)

(10,857)

107.2%


(22,238)

(8,484)

162.1%


(262)

(2,373)

-89.0%


-

-

-

 

 

 Profit 

134,369

111,982

20.0%


120,264

99,893

20.4%


14,105

12,089

16.7%


-

-

-

 

 

Attributable to:
















 

 

- shareholders of the Group

133,241

108,347

23.0%


119,211

98,102

21.5%


14,030

10,245

36.9%


-

-

-

 

 

- non-controlling interests

1,128

3,635

-69.0%


1,053

1,791

-41.2%


75

1,844

-95.9%


-

-

-

 

 

















 

 

Earnings per share (basic)

3.47

3.15

10.2%













 

 

















 

 


 

 















 

 

















 

 

















 

 

















 


Bank of Georgia Holdings PLC


Banking Business


Investment Business


            Eliminations


Balance Sheet

Jun-15

Jun-14

Change

Mar-15

Change


Jun-15

Jun-14

Change

Mar-15

Change


Jun-15

Jun-14

Change

Mar-15

Change


Jun-15

Jun-14

Mar-15




Y-O-Y


Q-O-Q




Y-O-Y


Q-O-Q




Y-O-Y


Q-O-Q



























Cash and cash equivalents

1,261,805

903,734

39.6%

1,000,713

26.1%


1,252,758

895,287

39.9%

997,547

25.6%


107,511

73,488

46.3%

110,578

-2.8%


(98,464)

(65,041)

(107,412)

Amounts due from credit institutions

583,888

363,468

60.6%

545,714

7.0%


575,534

353,559

62.8%

523,663

9.9%


18,844

17,964

4.9%

87,478

-78.5%


(10,490)

(8,055)

(65,427)

Investment securities

895,840

569,937

57.2%

880,799

1.7%


898,457

568,784

58.0%

881,098

2.0%


1,153

1,153

0.0%

1,153

0.0%


(3,770)

-

(1,452)

Loans to customers and finance lease receivables

5,052,752

3,650,791

38.4%

5,156,386

-2.0%


5,142,221

3,714,213

38.4%

5,248,559

-2.0%


-

-

-

-

-


(89,469)

(63,422)

(92,173)

Accounts receivable and other loans

77,866

60,677

28.3%

73,315

6.2%


15,474

9,622

60.8%

13,063

18.5%


70,343

51,903

35.5%

64,947

8.3%


(7,951)

(848)

(4,695)

Insurance premiums receivable

58,142

52,043

11.7%

58,816

-1.1%


26,519

14,728

80.1%

22,337

18.7%


32,023

37,436

-14.5%

37,205

-13.9%


(400)

(121)

(726)

Prepayments

52,145

28,188

85.0%

42,748

22.0%


30,779

18,417

67.1%

24,969

23.3%


21,366

9,771

118.7%

17,779

20.2%


-

-

-

Inventories

131,534

90,489

45.4%

113,322

16.1%


10,379

6,689

55.2%

7,697

34.8%


121,155

83,800

44.6%

105,625

14.7%


-

-

-

Investment property

221,506

152,292

45.4%

194,623

13.8%


143,873

127,374

13.0%

128,376

12.1%


77,633

24,918

211.6%

66,247

17.2%


-

-

-

Property and equipment

669,153

534,289

25.2%

618,474

8.2%


338,858

293,626

15.4%

334,516

1.3%


330,295

240,663

37.2%

283,958

16.3%


-

-

-

Goodwill

60,056

48,721

23.3%

51,745

16.1%


48,092

38,538

24.8%

39,781

20.9%


11,964

10,183

17.5%

11,964

0.0%


-

-

-

Intangible assets

36,894

28,490

29.5%

33,443

10.3%


33,260

26,596

25.1%

31,761

4.7%


3,634

1,894

91.9%

1,682

116.1%


-

-

-

Income tax assets

29,080

32,204

-9.7%

24,943

16.6%


21,686

24,835

-12.7%

17,602

23.2%


7,394

7,369

0.3%

7,341

0.7%


-

-

-

Other assets

244,398

152,360

60.4%

235,012

4.0%


174,820

140,452

24.5%

176,982

-1.2%


80,058

12,784

526.2%

68,096

17.6%


(10,480)

(876)

(10,066)

Total assets

9,375,059

6,667,683

40.6%

9,030,053

3.8%


8,712,710