1st Quarter Results

Released : 24 May 2016 07:00

RNS Number : 0740Z
Bgeo Group PLC
24 May 2016
 

 

 

BGEO Group PLC

1st quarter 2016 results

 

 

 

 

 

 

 

 

 

 

www.BGEO.com

 

TABLE OF CONTENTS

 

 

1Q16 Results Highlights                                                                                                                    3

 

Chief Executive Officer's Statement                                                                                        5

 

Financial Summary of BGEO                                                                                                  7

 

Discussion  of Banking Business Results                                                                                  9                                                     

 

Discussion of Segment Results                                                                                               14

 

Selected Financial Information                                                                                                26

 

Company Information                                                                                                            32

 

 

 

 

 

 

 

 

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.

 

 

BGEO Group PLC ("BGEO" or the "Group" - LSE: BGEO LN), the holding company of JSC Bank of Georgia ("BOG" or the "Bank") announces the Group's first quarter 2016 consolidated results. Unless otherwise mentioned, figures are for the first quarter 2016 and comparisons are with the first quarter 2015. The results are based on IFRS as adopted by EU, are unaudited and are derived from management accounts

 

BGEO highlights

 

§ 1Q16 profit was GEL 87.0mln (US$ 36.8mln/GBP 25.5mln), up 39.6% y-o-y       

§ 1Q16 earnings per share ("EPS") were GEL 2.10 (US$ 0.89 per share/GBP 0.62 per share), up 28.8% y-o-y

§ Book value per share was GEL 50.29, up 17.7% y-o-y, with total equity attributable to shareholders of GEL 1,934.3mln, up 17.7% y-o-y

§ Total assets increased to GEL 10,077.6mln, up 11.6% y-o-y and down 0.4% q-o-q

§ As of 6 May 2016, GEL 210.4mln1 cash was held at the holding company level, which includes GEL 92.9mln that is expected to be paid out as the Group's 2015 regular dividend, as at the 2016 AGM the Board intends to recommend an annual dividend of GEL 2.4 per share payable in British Pound Sterling at the prevailing rate       

 

Banking Business highlights

 

1Q16 performance

§ Revenue was GEL 184.1mln (up 3.7% y-o-y and down 8.5% q-o-q)

§ Net Interest Margin ("NIM") was 7.5% (-30 bps y-o-y and -10 bps q-o-q)

§ Pro-forma NIM, adjusted for excess liquidity level2 was 8.2%

§ Loan Yield stood at 14.4% (-20 bps y-o-y and -40 bps q-o-q)

§ Cost of Funds stood at 5.0% (flat y-o-y and -10 bps q-o-q)

§ Cost to Income ratio was 37.9% (36.8% in 1Q15 and 35.4% in 4Q15)

§ Operating leverage was negative at 3.3 percentage points y-o-y

§ Cost of credit risk stood at GEL 35.0mln (down 14.1% y-o-y and down 0.6% q-o-q)

§ Cost of Risk ratio was 2.3% (3.1% in 1Q15 and 2.4% in 4Q15)

§ Profit increased to GEL 69.7mln (up 18.5% y-o-y and down 13.6% q-o-q)

§ Return on Average Assets ("ROAA") was 3.0% (3.0% in 1Q15 and 3.5% in 4Q15)

§ Return on Average Equity ("ROAE") was 21.2% (19.1% in 1Q15 and 25.1% in 4Q15)

 

Balance sheet strength supported by solid capital and liquidity positions

§ The net loan book reached a record GEL 5,394.6mln, up 2.8% y-o-y and up 0.5% q-o-q

§ Customer funds increased to GEL 4,962.4mln, up 16.2% y-o-y and down 0.6% q-o-q 

§ Net Loans to Customer Funds and DFI ratio stood at 91.6% (105.2% at 31 March 2015 and 90.8% at 31 December 2015)

§ Leverage stood at 6.1 times in 1Q16 compared to 5.6 times a year ago 

§ NBG (Basel 2/3) Tier I and Total CAR stood at 10.1% and 15.8%, respectively

§ NBG Liquidity Ratio was 47.3%

 

Resilient growth momentum sustained across all major business lines

§ Retail Banking continues to deliver strong franchise growth, primarily supported by the Express Banking strategy as well as a growing number of Solo clients. Retail Banking revenue reached GEL 106.4mln in 1Q16, up 7.9% y-o-y

§ Retail Banking net loan book reached GEL 2,901.2mln, up 9.9% y-o-y

§ Retail Banking client deposits increased to GEL 1,902.0mln, up 1.5% y-o-y

§ The number of Retail Banking clients reached 2,022,202 by the end of 1Q16, up 5.6% from 1,914,247 a year ago

§ Solo - our premium banking - is proving very successful. Solo is a fundamentally different approach to premium banking, launched in April 2015. As of 31 March 2016, the number of Solo clients reached 13,284, up 60.4% from 8,282 a year ago and our goal for the next three to four years is to significantly increase our market share in this segment, which stood below 13% at the beginning of 2015

 

1Of which, GEL 20.3mln is held at the Group Employee Benefits Trust for the purchase of shares in the market, as per the Group's instruction to the administrators of the 

Group Employee Benefits Trust

2ProForma NIM is a hypothetical Net Interest Margin that would have been achieved, had liquidity amounts of GEL and FC balances in excess of 35% minimum been used to 

repay respective funding sources at respective costs and giving up respective liquid asset yields in the process

 

 

§ Corporate Investment Banking net loan book totalled GEL 2,144.3mln, down 10.5% y-o-y. As a result of the GEL devaluation during 2015, our CIB clients were less willing to take new loans

§ In February 2016, we announced the combination of our Corporate Banking and Investment Management businesses into a Corporate Investment Banking business ("CIB"). As a result, we expect to grow our fee income, further improve the Bank's ROAE and reduce concentration risk in the corporate lending portfolio.

§ The concentration of the top 10 corporate banking clients1 was reduced to 12.1% by the end of 1Q16, down from 13.4% a year ago. The Corporate Investment Banking ROAE grew to 17.6% in 1Q16, up from 15.1% in 1Q15

§ Investment Management's Assets Under Management ("AUM")2 increased to GEL 1,343.8mln, up 10.7% y-o-y, reflecting 
increased bond issuance activity as our clients accessed this new products

 

Investment Business Highlights

 

§ Total profit from investment businesses reached GEL 17.4mln, growing at c.4 times y-o-y and reaching 20% of the Group's profits in 1Q16, up from 6% in 1Q15

§ Our healthcare business, Georgia Healthcare Group PLC ("GHG") posted record quarterly revenue of GEL 71.7 million3, up 33.1% y-o-y and up 4.3% q-o-q. GHG's healthcare services revenue grew to GEL 60.5mln, up 41.4% y-o-y which includes 14.6% organic growth

§ GHG also delivered an outstanding EBITDA margin performance in its healthcare services business. EBITDA margin reached 29.5% in 1Q16. As a result, this strong margin performance translated into GHG EBITDA of GEL 17.1mln in 1Q16, up 69.4% y-o-y. Consequently, GHG reported net profit of GEL 12.0mln in 1Q16, up 91.6% y-o-y

§ GHG also expanded into the Pharmaceutical retail and wholesale business by acquiring a 100% equity stake in JSC GPC ("GPC") - the third largest retail and wholesale pharmacy chain in Georgia. The acquisition of GPC supports GHG's expansion strategy and its aim to be the leading integrated player in the GEL 3.4 billion Georgian healthcare ecosystem. It positions GHG as the major purchaser of pharmaceutical products in Georgia, and provides a platform which offers significant synergy potential. The acquisition was completed in May 2016

§ Our real estate business, m2 Real Estate ("m2") continued its strong project execution and sales performance in 1Q16, recognising revenue of GEL 7.7mln and net profit of GEL 5.4mln. In 1Q16, m2 Real Estate completed three projects and achieved sales of US$ 5.5mln, selling a total of 53 apartments, compared with US$ 4.8mln sales and 49 apartments sold in 1Q15. As m2 Real Estate recognises revenue upon completion of the projects, it had accumulated US$ 46.1mln sales, which will be recognised as revenue upon completion of the remaining on-going projects in 2016-2018 (of which c. US$ 29.7mln is expected to be recognised in 2016)

§ Our water and utilities business, Georgian Global Utilities ("GGU"), recorded GEL 7.5mln profit in 1Q16, compared to GEL 5.2mln loss in 1Q15, which was negative primarily due to last year's GEL devaluation, affected by GGU's US$ denominated borrowing. To mitigate its foreign exchange risk, GGU converted most of its foreign currency loans to local currency denominated loans during 2015. As BGEO owns 25% of GGU, we report our share of GGU's profits as profit from associates, which amounted to GEL 1.9mln in 1Q16, compared to a loss of GEL -1.3mln in 1Q15. The outstanding performance is primarily driven by the efficiency improvements achieved since the new management team was put in place in the middle of 2015

 

1Top 10 Corporate Investment Banking loans as % of total gross Banking Business loans

2Wealth Management client deposits, Galt & Taggart client assets, Aldagi Pension Fund and Wealth Management client assets at Bank of Georgia Custody

3Georgia Healthcare Group financials are on standalone basis

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

I am pleased with the Group's earnings momentum in the first quarter of 2016, and its ability to deliver strong performances in each business in the seasonally quiet first quarter of the year.  Our profit of GEL 87.0 million in the first quarter of 2016 increased by 39.6% year on year.  Earnings per share increased by 28.8% to GEL 2.10. In the Banking business profits grew by 18.5% year-on-year, supported by excellent franchise growth in the retail bank, where we now have over 2 million customers, resilient margins despite the impact of high levels of excess liquidity, and a reduction in the cost of risk. There was an even stronger performance in the Group's investment businesses which delivered an almost four-fold growth in profits year-on-year.

 

At the BGEO Group level, revenue growth was 12.1% year-on-year. Retail banking net interest income grew by 10.2%, offsetting a decline in corporate banking net interest income as we rebalance the retail/corporate business mix, and revenues from the investment businesses increased by 69.0% as a result of outstanding performances from the healthcare and real estate businesses.  Operating expenses continue to be well controlled, with 9.5% growth year-on-year, despite the impact of a number of acquisitions in the healthcare business.  As a result, the Group delivered positive operating leverage of 2.6 percentage points. 

 

In addition to a strong earnings performance, returns have also continued to be high.  In the banking business, despite now carrying over GEL 800 million of excess liquidity, the return on average equity was 21.2%, compared to 19.1% in the first quarter of 2015, and in the healthcare services business the EBITDA margin was 29.5%, compared to 22.6% in the first quarter of last year. The Group continues to demonstrate its high growth and high return characteristics.

 

Despite the slowdown in the Georgian economy in 2015, asset quality during the first quarter of the year has remained robust, with the annualised cost of risk ratio at 2.3% in 2016Q1, compared to 3.1% in 2015Q1, and 2.4% in 2015Q4.  This is a strong performance against the backdrop of last year's Lari devaluation against the US dollar, and continues to reflect our conservative lending policy that always takes into account, at the time of the initial lending decision, any potential currency mismatch.    

 

Within our Investment Businesses, Georgia Healthcare Group (GHG) delivered record quarterly revenues of GEL 71.7 million, reflecting both good levels of organic growth (14.6% year-on-year) and the impact of the benefits of last year's acquisitions starting to be captured.  The healthcare services EBITDA margin continues to improve, and at 29.5% in the first quarter is now very close to its medium-term target of 30%.  GHG has also recently completed the acquisition of the third largest retail and wholesale pharmacy chain in Georgia making GHG the largest purchaser of pharmaceutical products on Georgia, and creating significant cost and revenue synergy opportunities to be captured.  GHG remains clearly on track to continue to deliver strong earnings progress, together with its target to more than double 2015 healthcare services revenues by 2018.  Our real estate business, m2 Real Estate, continues to develop its apartment projects very successfully, with its strong project execution and sales performance delivering a net profit of GEL 5.4 million in the first quarter.  In our water and utilities business, GGU, the new management team is focused on improving efficiency and delivered a net profit of GEL 7.5 million, compared to a loss in the first quarter of 2015.  BGEO Group owns 25% of GGU and, as a result, recognised GEL 1.9 million profit in 2016Q1.   

 

The Group's capital position remains strong, with capital being held both in the regulated banking business and at the holding company level.  Within the bank, the NBG (Basel 2/3) Tier 1 Capital Adequacy ratio was 10.1%, comfortably ahead of the Bank's minimum capital requirement.  In addition, as of the date of this report, GEL 210 million was held at the Group level, which includes the Group's 2015 regular dividend of GEL 92.9 million that is intended to be paid out in June 2016. 

 

From a macroeconomic perspective Georgia has continued to deliver a remarkably resilient performance.  GDP growth expectations for Georgia are now starting to increase and in March 2016 real GDP growth was 3.4% year-on-year, with inflation remaining well contained at 3.2% in April.  In addition, the Lari has recently strengthened against the US Dollar by over 10%, Foreign Direct Investment continues to be very strong, and tourist numbers - a significant driver of US$ inflows for the country - continue to rise significantly.  The National Bank of Georgia has recently been buying US Dollars on a regular basis, to mitigate the further appreciation of the Lari, and we now expect the country's US Dollar reserves to increase by more than $300 million in 2016.

 

A recent development in the Georgian Government's tax policy is currently going through Parliament and is expected to significantly benefit Georgian companies.  The Government is in the process of introducing a tax code amendment that will apply Profits tax (currently 15%) only to distributed profits.  Undistributed profits will no longer be subject to Profits tax.  This amendment is expected to take effect for most companies on 1 January 2017, and for financial companies (including banks and insurance companies) from 1 January 2019.  This will reduce the effective tax rate of the Group's non-banking and insurance businesses in 2017, and the entire Group in 2019.  In addition, the Bank expects to benefit from the general improved creditworthiness of its entire corporate portfolio. 

 

With a rapidly improving macroeconomic environment and strong tailwinds, we remain well positioned to deliver good levels of earnings momentum from both the organic business growth in each of our banking and investment businesses, and from the benefits of recent strategic initiatives and acquisitions.

 

 

Irakli Gilauri,

Group CEO of BGEO Group PLC

 

 

FINANCIAL SUMMARY

 

 

 

 

 

 

 

 

BGEO Consolidated

 

Banking Business*

 

Investment Business*

QUARTERLY INCOME STATEMENT

1Q 2016

1Q 2015

Change

4Q 2015

Change

 

1Q 2016

1Q 2015

Change

4Q 2015

Change

 

1Q 2016

1Q 2015

Change

4Q 2015

Change

GEL thousands unless otherwise noted

 

 

Y-O-Y

 

Q-O-Q

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net banking interest income 

128,852

120,989

6.5%

131,434

-2.0%

 

130,219

123,058

5.8%

134,217

-3.0%

 

-

-

-

-

-

 Net fee and commission income 

27,814

26,854

3.6%

31,639

-12.1%

 

28,015

28,090

-0.3%

32,266

-13.2%

 

-

-

-

-

-

 Net banking foreign currency gain

17,390

18,962

-8.3%

19,525

-10.9%

 

17,390

18,962

-8.3%

19,525

-10.9%

 

-

-

-

-

-

 Net other banking income

2,867

1,790

60.2%

9,318

-69.2%

 

3,168

2,095

51.2%

9,699

-67.3%

 

-

-

-

-

-

 Gross insurance profit 

6,416

7,574

-15.3%

6,733

-4.7%

 

5,343

5,306

0.7%

5,441

-1.8%

 

1,723

2,691

-36.0%

2,126

-19.0%

 Gross healthcare profit 

26,291

16,877

55.8%

23,845

10.3%

 

-

-

-

-

-

 

26,291

16,877

55.8%

23,845

10.3%

 Gross real estate profit 

6,024

1,209

398.3%

12,769

-52.8%

 

-

-

-

-

-

 

6,024

1,209

398.3%

12,769

-52.8%

 Gross other investment profit 

3,606

1,398

157.9%

11,271

-68.0%

 

-

-

-

-

-

 

3,675

1,543

138.2%

11,157

-67.1%

 Revenue 

219,260

195,653

12.1%

246,534

-11.1%

 

184,135

177,511

3.7%

201,148

-8.5%

 

37,713

22,320

69.0%

49,897

-24.4%

 Operating expenses 

(83,288)

(76,058)

9.5%

(84,262)

-1.2%

 

(69,863)

(65,277)

7.0%

(71,172)

-1.8%

 

(14,456)

(11,654)

24.0%

(14,580)

-0.9%

 Operating income before cost of credit risk / EBITDA

135,972

119,595

13.7%

162,272

-16.2%

 

114,272

112,234

1.8%

129,976

-12.1%

 

23,257

10,666

118.0%

35,317

-34.1%

 Profit (loss) from associates

1,866

(1,310)

NMF

1,938

-3.7%

 

-

-

-

-

-

 

1,866

(1,310)

NMF

1,938

-3.7%

 Depreciation and amortization of investment business

(4,910)

(2,688)

82.7%

(4,731)

3.8%

 

-

-

-

-

-

 

(4,910)

(2,688)

82.7%

(4,731)

3.8%

 Net foreign currency gain (loss) from investment business

(766)

3,690

NMF

(3,416)

-77.6%

 

-

-

-

-

-

 

(766)

3,690

NMF

(3,416)

-77.6%

 Interest income from investment business 

956

617

54.9%

602

58.8%

 

-

-

-

-

-

 

964

818

17.8%

957

0.7%

 Interest expense from investment business

(1,382)

(2,463)

-43.9%

(3,166)

-56.3%

 

-

-

-

-

-

 

(2,947)

(5,969)

-50.6%

(6,542)

-55.0%

 Operating income before cost of credit risk 

131,736

117,441

12.2%

153,499

-14.2%

 

-

-

-

-

-

 

17,464

5,207

235.4%

23,523

-25.8%

 Cost of credit risk 

(36,143)

(41,841)

-13.6%

(36,022)

0.3%

 

(35,012)

(40,771)

-14.1%

(35,230)

-0.6%

 

(1,131)

(1,070)

5.7%

(792)

42.8%

 Profit 

87,047

62,339

39.6%

95,672

-9.0%

 

69,663

58,810

18.5%

80,591

-13.6%

 

17,384

3,529

392.6%

15,081

15.3%

Earnings per share (basic and diluted)

2.10

1.63

28.8%

2.42

-13.2%

 

-

-

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

BGEO Consolidated

 

Banking Business*

 

Investment Business*

BALANCE SHEET

 

Mar-16

Mar-15

Change

Dec-15

Change

 

Mar-16

Mar-15

Change

Dec-15

Change

 

Mar-16

Mar-15

Change

Dec-15

Change

 GEL thousands unless otherwise noted

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liquid assets

 

2,948,699

2,427,226

21.5%

3,068,166

-3.9%

 

2,876,357

2,402,308

19.7%

3,006,991

-4.3%

 

337,602

199,209

69.5%

307,459

9.8%

Loans to customers and finance lease receivables

 

5,359,718

5,156,386

3.9%

5,322,117

0.7%

 

5,394,565

5,248,559

2.8%

5,366,764

0.5%

 

-

-

0.0%

-

0.0%

Total assets

 

10,077,589

9,030,053

11.6%

10,115,739

-0.4%

 

9,030,055

8,447,951

6.9%

9,171,437

-1.5%

 

1,353,961

864,053

56.7%

1,247,960

8.5%

Client deposits and notes

 

4,698,558

4,099,029

14.6%

4,751,387

-1.1%

 

4,962,432

4,271,854

16.2%

4,993,681

-0.6%

 

-

-

0.0%

-

0.0%

Amounts due to credit institutions

 

1,719,920

1,780,636

-3.4%

1,789,062

-3.9%

 

1,630,299

1,694,668

-3.8%

1,692,557

-3.7%

 

124,468

181,773

-31.5%

144,534

-13.9%

Debt securities issued

 

1,033,758

1,026,689

0.7%

1,039,804

-0.6%

 

957,474

962,587

-0.5%

961,944

-0.5%

 

81,116

66,964

21.1%

84,474

-4.0%

Total liabilities

 

7,926,740

7,329,905

8.1%

8,042,101

-1.4%

 

7,751,805

7,163,763

8.2%

7,856,146

-1.3%

 

481,362

448,093

7.4%

489,613

-1.7%

Total equity

 

2,150,849

1,700,148

26.5%

2,073,638

3.7%

 

1,278,250

1,284,188

-0.5%

1,315,291

-2.8%

 

872,599

415,960

109.8%

758,347

15.1%

 

 

 

 

Banking Business Ratios

1Q16

1Q15

4Q15

 

 

 

 

ROAA

3.0%

3.0%

3.5%

ROAE

21.2%

19.1%

25.1%

Net Interest Margin

7.5%

7.8%

7.6%

Loan Yield

14.4%

14.6%

14.8%

Liquid assets yield

3.1%

3.2%

3.3%

Cost of Funds

5.0%

5.0%

5.1%

Cost of Client Deposits and Notes

4.3%

4.4%

4.4%

Cost of Amounts Due to Credit Institutions

6.0%

5.2%

5.9%

Cost of Debt Securities Issued

7.2%

7.1%

6.8%

Cost / Income

37.9%

36.8%

35.4%

NPLs To Gross Loans To Clients

4.5%

3.5%

4.3%

NPL Coverage Ratio

86.0%

73.2%

83.4%

NPL Coverage Ratio, Adjusted for discounted value of collateral

122.6%

112.2%

120.6%

Cost of Risk

2.3%

3.1%

2.4%

Tier I capital adequacy ratio (New NBG, Basel 2/3)

10.1%

9.8%

10.9%

Total capital adequacy ratio (New NBG, Basel 2/3)

15.8%

12.9%

16.7%

 

 

 

 

 

 

* 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 Results

 

The Group's Banking Business comprises Retail Banking (excluding Retail Banking of BNB): Principally providing consumer loans, mortgage loans, overdrafts, credit cards and other credit facilities, funds transfer and settlement services, and handling customers' deposits for both individuals as well as legal entities. The business targets the mass affluent segment, retail mass markets, small and medium enterprises and micro businesses. Corporate Investment Banking (excluding Corporate Banking of BNB): Corporate Investment Banking consists of Corporate Banking and Investment Management operations. Corporate Banking principally provides loans and other credit facilities to high net worth individuals and entities and provides funds transfers and settlement services. It also provides trade finance services, documentary operations support and handles saving and term deposits for corporate and institutional customers. The Investment Management business principally provides private banking services to wealthy clients. P&C: Property and Casualty Insurance: Principally providing property and casualty insurance services to corporate clients and insured individuals. BNB, comprising JSC Belarusky Narodny Bank: Principally providing retail and corporate banking services in Belarus.

 

The following discussion refers to the Banking Business only

 

Revenue

GEL thousands, unless otherwise noted

1Q16

1Q15

Change,

Y-o-Y

4Q15

Change,

Q-o-Q

 Banking interest income 

226,217

202,353

11.8%

230,833

-2.0%

 Banking interest expense 

(95,998)

(79,295)

21.1%

(96,616)

-0.6%

 Net banking interest income 

130,219

123,058

5.8%

134,217

-3.0%

 Fee and commission income 

38,484

37,343

3.1%

42,856

-10.2%

 Fee and commission expense 

(10,469)

(9,253)

13.1%

(10,590)

-1.1%

 Net fee and commission income 

28,015

28,090

-0.3%

32,266

-13.2%

 Net banking foreign currency gain

17,390

18,962

-8.3%

19,525

-10.9%

 Net other banking income

3,168

2,095

51.2%

9,699

-67.3%

     Net insurance premiums earned

9,550

9,242

3.3%

10,810

-11.7%

     Net insurance claims incurred

(4,207)

(3,936)

6.9%

(5,369)

-21.6%

 Gross insurance profit 

5,343

5,306

0.7%

5,441

-1.8%

 Revenue 

184,135

177,511

3.7%

201,148

-8.5%

 

 

 

 

 

 

Net Interest Margin

7.5%

7.8%

 

7.6%

 

Average interest earning assets

7,013,413

6,370,469

10.1%

7,014,711

0.0%

Average interest bearing liabilities

7,681,953

6,441,353

19.3%

7,575,074

1.4%

Average net loans, currency blended

5,458,637

5,047,770

8.1%

5,401,904

1.1%

   Average net loans, GEL

1,489,518

1,523,976

-2.3%

1,536,973

-3.1%

   Average net loans, FC

3,969,119

3,523,794

12.6%

3,864,931

2.7%

Average client deposits, currency blended

5,018,669

4,044,314

24.1%

4,807,651

4.4%

  Average client deposits, GEL

1,195,744

1,199,627

-0.3%

1,258,566

-5.0%

  Average client deposits, FC

3,822,925

2,844,687

34.4%

3,549,085

7.7%

Average liquid assets, currency blended

2,950,858

2,124,110

38.9%

2,842,715

3.8%

  Average liquid assets, GEL

1,127,353

1,154,634

-2.4%

1,194,534

-5.6%

  Average liquid assets, FC

1,823,505

969,476

88.1%

1,648,181

10.6%

Excess liquidity (NBG)

836,569

199,690

318.9%

789,311

6.0%

Liquid assets yield, currency blended

3.1%

3.2%

 

3.3%

 

  Liquid assets yield, GEL

7.7%

5.6%

 

7.2%

 

  Liquid assets yield, FC

0.3%

0.5%

 

0.5%

 

Loan yield, total

14.4%

14.6%

 

14.8%

 

  Loan yield, GEL

22.5%

21.4%

 

23.4%

 

  Loan yield, FC

11.0%

11.6%

 

11.3%

 

Cost of funding, total

5.0%

5.0%

 

5.1%

 

  Cost of funding, GEL

6.8%

4.8%

 

6.8%

 

  Cost of funding, FC

4.4%

5.1%

 

4.6%

 

 

 

§ Our Banking Business recorded quarterly revenue of GEL 184.1mln (up 3.7% y-o-y and down 8.5% q-o-q). The y-o-y revenue growth was primarily driven by strong growth in net banking interest income and net other banking income partially offset by the decline in net banking foreign currency gain

§ Our net banking interest income increased to GEL 130.2mln in 1Q16, up 5.8% y-o-y but down 3.0% q-o-q. The y-o-y performance was driven by a GEL 23.9mln increase in banking interest income which was partially offset by growth in banking interest expense, which grew by GEL 16.7mln

§ Our banking interest income performance was mainly a result of 10.1% y-o-y growth in our average interest earning assets on the back of a broadly stable total loan yield. The y-o-y growth in interest earning assets was driven by the weakening GEL during 2015, which increased the GEL value of our foreign currency denominated interest earning assets, as well as organic growth in average interest earning assets

§ Our average net loans increased to GEL 5,458.6mln, up 8.1% y-o-y, primarily driven by the strong performance of our Retail Banking operation which grew its loan book by 9.9% y-o-y, offsetting the y-o-y decline in our Corporate Investment Banking loan book (down 10.5% y-o-y)

§ The increase in our interest expense was driven by sizeable growth (up 19.3% y-o-y) in our average interest bearing liabilities in 1Q16 while Cost of Funding remained flat. This reflects 24.1% growth in average client deposits for 1Q16, driven primarily by the growth in foreign currency deposits of 34.4% y-o-y, which again reflected in part the weakening of the GEL in 2015

§ Our express banking franchise, the major driver of fee and commission income, posted 2.8% organic growth in new client acquisition, adding 12,059 Express Banking customers during the first quarter in 2016. The growth in client base has triggered a significant increase in the volume of banking transactions, up 35.8% y-o-y. The growth of transactions was achieved largely through the more cost-effective remote channels. While the strong client growth supported organic increase in our fee and commission income, net fee and commission income was down 0.3% y-o-y, to GEL 28.0mln primarily due to three main reasons: high F&C income base in 1Q15 due to c.GEL 0.8mln fee and commission income generated by G&T brokerage operations in 1Q15 (these operations generate revenue when a transaction is completed and thus cause fluctuations in our fee and commission income); the launch of G&T's trader platform in 4Q15 which increased F&C expenses by c.GEL 0.4mln in 1Q16; and the exchange rate increase, which had proportionally larger effect on F&C expenses than F&C income, since majority of expenses are FX denominated, such as Visa fees and the majority of income is GEL denominated

§ While the net gain from foreign currency declined in 1Q16 compared to a year ago, this was mainly driven by the high base in 1Q15 due to two main reasons: larger exchange rate spreads that we kept in response to high fluctuation in GEL exchange rate, which increased our banking foreign currency gain. Additionally, the GEL devaluation in 1Q15 favorably affected our foreign currency gain, as we held long position in foreign currency in 1Q15

§ Our P&C insurance business, Aldagi, posted gross insurance profit of GEL 5.3mln in 1Q16, up 0.7% y-o-y but down 1.8% q-o-q. This increase was mainly driven by growth in Motor insurance and Life & Disability insurance. For P&C insurance segment financials please see page 29

§ Our NIM stood at 7.5% in 1Q16 (down 30 bps y-o-y and down 10 bps q-o-q). NIM was adversely affected primarily by very high excess liquidity levels of GEL 836.6mln, which we purposefully built up during 2015 to ensure strong liquid position for the Bank during the devaluation of GEL. Pro-forma NIM1, adjusted for excess liquidity levels, was 8.2% in 1Q16. In addition to high levels of excess liquidity, NIM also reflected:

-       Loan Yield which stood at 14.4% for 1Q16 (down 20 bps y-o-y and down 40 bps q-o-q). This reflected an 110bps increase in local currency loan yield to 22.5%, which was partially offset by a 60bps decrease in foreign currency denominated loan yield. Consequently, the effect of decrease in foreign currency denominated loan yields outweighed an increase in local currency denominated loan yields, as the share of foreign currency denominated loans remained high at 73% in 1Q16, up from 70% a year ago

1ProForma NIM is a hypothetical Net Interest Margin that would have been achieved, had liquidity amounts of GEL and FC balances in excess of 35% minimum been used to repay respective funding sources at respective costs and giving up respective liquid asset yields in the process

-       Liquid Assets Yield at 3.1% in 1Q16, down 10 bps y-o-y and down 20 bps q-o-q. This primarily is a change of mix in local and foreign currency liquid asset yields and a significant shift in the currency mix of our liquid assets. The GEL denominated liquid asset yield increased by 210bps to 7.7% in 1Q16 from 5.6% a year ago, largely reflecting higher yield on Government issued securities, however the share of our liquid asset holdings in local currency decreased to 38% in 1Q16, down from 54% a year ago

-       The Cost of Funds stood at 5.0% for 1Q16 (flat y-o-y and down 10bps q-o-q). The higher cost of funding of local currency deposits broadly offset to lower cost of funding in foreign currency deposits

-       During 2015, the National Bank of Georgia gradually increased the local currency policy rate , reaching 8.0% by the end of 2015, up from 4.0% in 2014. Upward trend was reversed in the beginning of 2016, when NBG decreased the policy rate to 7.5% on 27 April, 2016. Consequently, as of 1 September 2015, we increased the interest rates on our one-year local currency deposits from 9% to 11% in the retail segment, which ultimately affected our local currency denominated cost of funds q-o-q. Also, as of 1 September 2015, we decreased the interest rates on our one-year dollar deposits from 5% to 4% in the retail segment, which, as expected drove our foreign currency denominated Cost of Funds slightly down

-     Our liquidity levels as a percentage of total assets increased to 31.9% by the end of 1Q16, compared to 28.4% a year ago and 32.8% as at 31 December 2015 as a result of 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

1Q16

1Q15

y-o-y

4Q15

q-o-q

 

 

 

 

 

 

Salaries and other employee benefits

(39,806)

(38,606)

3.1%

(39,304)

1.3%

Administrative expenses

(20,058)

(17,506)

14.6%

(21,657)

-7.4%

Banking depreciation and amortisation

(9,138)

(8,373)

9.1%

(8,982)

1.7%

 Other operating expenses 

(861)

(792)

8.7%

(1,229)

-29.9%

 Operating expenses 

(69,863)

(65,277)

7.0%

(71,172)

-1.8%

 Operating income before cost of credit risk 

114,272

112,234

1.8%

129,976

-12.1%

 Impairment charge on loans to customers 

(32,218)

(38,928)

-17.2%

(33,929)

-5.0%

 Impairment charge on finance lease receivables

(513)

(119)

NMF

(215)

138.6%

 Impairment charge on other assets and provisions

(2,281)

(1,724)

32.3%

(1,086)

110.0%

 Cost of credit risk 

(35,012)

(40,771)

-14.1%

(35,230)

-0.6%

 Net operating income before non-recurring items 

79,260

71,463

10.9%

94,746

-16.3%

 Net non-recurring items 

(1,419)

(2,167)

-34.5%

(2,502)

-43.3%

 Profit before income tax 

77,841

69,296

12.3%

92,244

-15.6%

 Income tax expense

(8,178)

(10,486)

-22.0%

(11,653)

-29.8%

 Profit 

69,663

58,810

18.5%

80,591

-13.6%

 

§ While underlying performance of our operating expenses remains strong, we incurred a number of one-off operating expenses during the first quarter of 2016. As a result, operating leverage was negative at 3.3% y-o-y in 1Q16, while the Cost/Income ratio stood at 37.9% compared to 36.8% in 1Q15 and 35.4% in 4Q15

§ Operating expenses increased to GEL 69.9mln in 1Q16 (up 7.0% y-o-y and down 1.8% q-o-q) driven by: 

-       Salaries and employee benefits that increased by GEL 1.2mln or 3.1% y-o-y and GEL 0.5mln or 1.3% q-o-q

-       Administrative expenses increased to GEL 20.1mln, up GEL 2.6mln or 14.6% y-o-y, mainly reflecting increased marketing activities to attract Solo clients, while 1Q15 did not include Solo marketing expenses as it was launched in April 2015. On q-o-q basis, administrative expenses have decreased by GEL 1.6mln or 7.4%. Depreciation and amortisation expenses have also increased to GEL 9.1mln, up 9.1% y-o-y, mainly reflecting an increased number of leased branches and investments in Solo Lounges compared to last year

§ For 1Q16, the Banking Business Cost of Risk ratio stood at 2.3%, down 80bps y-o-y and down 10bps q-o-q. The cost of credit risk was GEL 35.0mln, down 14.1% y-o-y and down 0.6% q-o-q. The significant improvement compared to last year is driven by an improved performance in our Corporate Investment Banking Cost of Risk (1Q16 of 2.1% compared to 1Q15 of 3.4%), which offset the slight y-o-y increase in Retail Banking Cost of Risk (1Q16 of 2.5% compared to 1Q15 of 2.4%)

§ NPLs to gross loans increased by 20 bps to 4.5% as of 31 March 2016, compared to 4.3% as of 31 December 2015. The increase reflected slight increases in the Retail Banking portfolio and in BNB, whilst the NPL ratio in the corporate portfolio was broadly stable

§ NPLs increased to GEL 252.0mln, up 34.6% y-o-y, reflecting local currency volatility against the US Dollar and the growth in net loan book. NPLs increased 4.5% on q-o-q basis

§ The NPL coverage ratio improved to 86.0% as of 31 March 2016, compared to 83.4% as of 31 December 2015 and 73.2% as of 31 March 2015. Our NPL coverage ratio adjusted for the discounted value of collateral also improved to 122.6% as of 31 March 2016, compared to 120.6% as of 31 December 2015 and 112.2% as of 31 March 2015

§ Our 15 days past due rate for retail loans stood at 1.1% as of 31 March 2016 compared to 0.9% as of 31 December 2015 and 1.0% as of 31 March 2015. 15 days past due rate for our mortgage loans stood at 0.6% as of 31 March 2016 compared to 0.4% as of 31 December 2015 and 0.5% as of 31 March 2015

§ As a result of the foregoing, the Banking Business reported profit of GEL 69.7mln in 1Q16 (up 18.5% y-o-y and down 13.6% q-o-q), resulting in ROAE of 21.2%, up 210bps y-o-y

§ The Banking Business profit was supported by its banking subsidiary in Belarus - BNB, which added GEL 4.3mln profit in 1Q16 (up 27.7% y-o-y). The BNB loan book stood at GEL 319.7mln, up 7.4% y-o-y, mostly consisting of an increase in SME loans. BNB client deposits decreased to GEL 230.8mln, broadly flat y-o-y. BNB is well capitalised, with Capital Adequacy Ratios well above the requirements of its regulating Central Bank. For 1Q16, Total CAR was 15.9%, above 10% minimum requirement by the National Bank of the Republic of Belarus ("NBRB") and Tier I CAR was 10.2%, above the 6% minimum requirement by NBRB. Return on Average Equity ("ROAE") for BNB was 22.9% (19.1% in 1Q15 and 24.2% in 4Q15).  For BNB standalone financials please see page 29

 

Banking Business Balance Sheet highlights

 

 

Change

 

Change

GEL thousands, unless otherwise noted 

31 Mar 2016

31 Mar 2015

y-o-y

31 Dec 2015

q-o-q

 

 

 

 

 

 

Liquid assets

2,876,357

2,402,308

19.7%

3,006,991

-4.3%

Liquid assets, GEL

1,050,741

1,115,034

-5.8%

1,191,353

-11.8%

Liquid assets, FC

1,825,616

1,287,274

41.8%

1,815,638

0.5%

Net loans

5,394,565

5,248,559

2.8%

5,366,764

0.5%

Net loans, GEL

1,488,050

1,575,157

-5.5%

1,502,888

-1.0%

Net loans, FC

3,906,515

3,673,402

6.3%

3,863,876

1.1%

Client deposits and notes

4,962,432

4,271,854

16.2%

4,993,681

-0.6%

Amounts due to credit institutions, of which:

1,630,299

1,694,668

-3.8%

1,692,557

-3.7%

 Borrowings from DFIs

926,210

718,540

28.9%

917,087

1.0%

 Short-term loans from central banks

368,000

518,732

-29.1%

307,200

19.8%

 Loans and deposits from commercial banks

336,089

457,396

-26.5%

468,270

-28.2%

 Debt securities issued 

957,474

962,587

-0.5%

961,944

-0.5%

Liquidity and CAR Ratios

 

 

 

 

 

Net Loans / Customer Funds

108.7%

122.9%

 

107.5%

 

Net Loans / Customer Funds + DFIs

91.6%

105.2%

 

90.8%

 

Liquid assets as percent of total assets

31.9%

28.4%

 

32.8%

 

Liquid assets as percent of total liabilities

37.1%

33.5%

 

38.3%

 

NBG liquidity ratio

47.3%

34.7%

 

46.2%

 

Excess liquidity (NBG)

836,569

199,690

318.9%

789,311

6.0%

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

10.1%

9.8%

 

10.9%

 

Total Capital Adequacy Ratio (NBG Basel 2/3)

15.8%

12.9%

 

16.7%

 

             

 

Our Banking Business balance sheet remained very liquid (NBG Liquidity ratio of 47.3%) and well-capitalised (Tier I Capital Adequacy Ratio, NBG Basel 2/3 of 10.1%) with a well-diversified funding base (Client Deposits and notes to Total Liabilities of 64.0%)

§ The NBG liquidity ratio stood at 47.3% as of 31 March 2016 compared to 46.2% as of 31 December 2015, against a regulatory minimum requirement of 30.0%

§ Liquid assets increased to GEL2,876.4mln, up 19.7% y-o-y

§ Additionally, liquid assets as a percentage of total assets increased to 31.9%, up from 28.4% a year ago and liquid assets as a percentage of total liabilities also increased to 37.1%, up from 33.5% a year ago

§ Our share of amounts due to credit institutions to total liabilities decreased slightly y-o-y from 23.7% to 21.0%, with the share of client deposits and notes to total liabilities increasing y-o-y from 59.6% to 64.0%

§ Net Loans to Customer Funds and DFIs ratio, a ratio closely observed by management, stood at 91.6%, up from 90.8% as of 31 December 2015 and down from 105.2% as of 31 March 2015. The decrease was mainly due to the slower growth in net loans and a relatively higher growth in deposits

§ The National Bank of Georgia has changed its minimum reserve requirements, with the goal to incentivise local currency lending. The minimum reserve requirement for local currency has reduced from 10% to 7% and the minimum reserve requirement for foreign currency has increased from 15% to 20%. This change became effective on May 17, 2016. The impact of this change is not expected to have a material impact on the Group's earnings.  Profit will increase slightly and there will be a small reduction in the banking net interest margin

 

 

Discussion of Segment Results

 

The segment results discussion is presented for Retail Banking (RB), Corporate Investment Banking (CIB), Healthcare Business (GHG) and 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 the handling of customer deposits for both individuals and legal entities, encompassing the emerging mass retail segment (through our Express brand), retail mass market segment and SME and micro businesses (through our Bank of Georgia brand), and the mass affluent segment (through our Solo brand).

 

GEL thousands, unless otherwise noted

1Q16

1Q15

Change

y-o-y

4Q15

Change

q-o-q

 

 

 

 

 

 

INCOME STATEMENT HIGHLIGHTS

 

 

 

 

 

 

 

 

 

 

 

Net banking interest income 

82,832

75,150

10.2%

85,318

-2.9%

Net fee and commission income 

19,239

18,566

3.6%

21,264

-9.5%

Net banking foreign currency gain

3,590

3,905

-8.1%

3,697

-2.9%

Net other banking income

711

963

-26.2%

3,950

-82.0%

Revenue 

106,372

98,584

7.9%

114,229

-6.9%

Salaries and other employee benefits

(23,607)

(23,596)

0.0%

(23,613)

0.0%

Administrative expenses

(14,521)

(12,240)

18.6%

(14,445)

0.5%

Banking depreciation and amortisation

(7,383)

(6,831)

8.1%

(7,259)

1.7%

Other operating expenses 

(496)

(462)

7.4%

(782)

-36.6%

Operating expenses 

(46,007)

(43,129)

6.7%

(46,099)

-0.2%

Operating income before cost of credit risk

60,365

55,455

8.9%

68,130

-11.4%

Cost of credit risk

(18,184)

(16,660)

9.1%

(15,371)

18.3%

Net non-recurring items 

(561)

(449)

24.9%

(2,494)

-77.5%

Profit before income tax 

41,620

38,346

8.5%

50,265

-17.2%

Income tax expense

(3,844)

(5,738)

-33.0%

(7,608)

-49.5%

Profit 

37,776

32,608

15.8%

42,657

-11.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET HIGHLIGHTS

 

 

 

 

 

 

Net loans, standalone, Currency Blended

2,901,189

2,639,808

9.9%

2,796,479

3.7%

Net loans, standalone, GEL

1,266,966

1,290,587

-1.8%

1,279,286

-1.0%

Net loans, standalone, FC

1,634,223

1,349,221

21.1%

1,517,193

7.7%

Client deposits, standalone, Currency Blended

1,902,042

1,874,262

1.5%

1,880,018

1.2%

Client deposits, standalone, GEL

447,620

618,118

-27.6%

486,806

-8.0%

Client deposits, standalone, FC

1,454,422

1,256,144

15.8%

1,393,212

4.4%

Time deposits, standalone, Currency Blended

1,205,935

1,182,396

2.0%

1,156,382

4.3%

Time deposits, standalone, GEL

196,668

296,790

-33.7%

192,178

2.3%

Time deposits, standalone, FC

1,009,267

885,606

14.0%

964,204

4.7%

Current accounts and demand deposits, standalone, Currency Blended

696,107

691,866

0.6%

723,636

-3.8%

Current accounts and demand deposits, standalone, GEL

250,952

321,328

-21.9%

294,628

-14.8%

Current accounts and demand deposits, standalone, FC

445,155

370,538

20.1%

429,008

3.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KEY RATIOS

 

 

 

 

 

 

ROAE Retail Banking

24.3%

21.7%

 

27.9%

 

Net interest margin, currency blended

9.2%

9.7%

 

9.6%

 

Cost of risk

2.5%

2.4%

 

2.1%

 

Cost of funds, currency blended

6.5%

4.9%

 

5.6%

 

Loan yield, currency blended

17.4%

17.3%

 

17.9%

 

Loan yield, GEL

25.4%

23.0%

 

25.4%

 

Loan yield, FC

10.9%

11.4%

 

11.2%

 

Cost of deposits, currency blended

3.5%

4.4%

 

3.5%

 

Cost of deposits, GEL

4.8%

5.5%

 

4.4%

 

Cost of deposits, FC

3.2%

3.8%

 

3.2%

 

Cost of time deposits, currency blended

5.1%

5.3%

 

5.2%

 

Cost of time deposits, GEL

9.7%

7.2%

 

9.3%

 

Cost of time deposits, FC

4.3%

4.6%

 

4.4%

 

Current accounts and demand deposits, currency blended

0.9%

2.8%

 

0.9%

 

Current accounts and demand deposits, GEL

1.1%

4.0%

 

1.0%

 

Current accounts and demand deposits, FC

0.7%

1.8%

 

0.8%

 

Cost / income ratio

 

 

43.3%

43.7%

 

40.4%

 

                     

 

Performance highlights

 

§ Retail Banking revenue increased to GEL 106.4mln in 1Q16, up 7.9% y-o-y. The revenue growth reflected 10.2% growth in net banking interest income and 3.6% growth in net fee and commission income, which were partially offset by a decline in net banking foreign currency gain and net other banking income

§ Growth in our Retail Banking net banking interest income was primarily a result of the growth of the Retail Banking loan book, particularly the mortgage, micro & SME loan portfolios, on the back of broadly stable loan yields

§ The Retail Banking net loan book reached a record level of GEL 2,901.2mln, up 9.9% y-o-y

§ We observed a shift in the currency mix in our Retail Banking loan book, with foreign currency denominated loans increasing to 56% of the total retail banking portfolio, from 51% a year ago. Foreign currency denominated loans grew at 21.1% y-o-y to GEL 1,634.2mln compared to local currency loans that decreased at 1.8% y-o-y to GEL 1,267.0mln. The trend was also aligned to the changes in our loan yields, which stood at 10.9% for foreign currency loans (down 50bps y-o-y) and 25.4% for local currency loans (up 240bps y-o-y)

§ The growth was a result of strong loan origination delivered across all Retail Banking segments:

-       Consumer loan originations of GEL 201.8mln in 1Q16 resulted in consumer loans outstanding totaling GEL 652.2mln as of 31 March 2016, up 15.3% y-o-y

-       Micro loan originations of GEL 149.4mln in 1Q16 resulted in micro loans outstanding totaling GEL 562.7mln as of 31 March 2016, up 12.6% y-o-y

-       SME loan originations of GEL 101.5mln in 1Q16 resulted in SME loans outstanding totaling GEL 358.6mln as of 31 March 2016, up 22.9% y-o-y

-       Mortgage loans originations of GEL 161.7mln in 1Q16 resulted in mortgage loans outstanding of GEL 884.0mln as of 31 March 2016, up 22.4% y-o-y

-       Originations of loans disbursed at merchant locations of GEL 43.2mln in 1Q16 resulted in POS loans outstanding of GEL 109.8mln as of 31 March 2016, up 29.7% y-o-y

§ Retail Banking client deposits increased to GEL 1,902.0mln, up 1.5% y-o-y, notwithstanding a 90bps decrease in the cost of deposits. The share of foreign currency denominated deposits increased to 76% up from 67% a year ago, while cost of deposits decreased on both local and foreign currency denominated deposits. We purposefully decreased our deposit rates in 2015, to manage the liquidity levels at the Bank

§ Our Retail Banking net fee and commission income increased to GEL 19.2mln, up 3.6% y-o-y. Net fee and commission income reflects continued growth of our Express Banking franchise, which has attracted 437,409 previously unbanked emerging mass market customers since its launch 3 years ago. The number of Express banking clients grew by 12,049 q-o-q in 1Q16

§ Our Express Banking continues to deliver strong growth as we continue to develop our mass market Retail Banking strategy:

-       In order to better serve the different needs of our Express Banking customers, we have expanded our payment services through various distance channels including ATMs, Express Pay Terminals, internet and mobile banking and the provision of simple and clear products and services to our existing customers as well as the emerging bankable population

-       1,304,734 Express Cards have been issued since their launch in September 2012, in essence replacing the pre-paid metro cards which were previously used. Of this, 112,906 Express Cards were issued in 1Q16, up 2.8% y-o-y. As of 31 March 2016, 1,113,745 Express Cards were outstanding, compared to 798,637 cards outstanding as of the same date last year

-       We have increased number of Express Pay terminals to 2,627, from 2,245 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 1Q16, the utilisation of Express Pay terminals increased significantly, with the number of transactions growing to 28.8mln, up 11.2% y-o-y and volume of transactions reaching GEL 662.7mln during 1Q16, up 58.4% y-o-y

-       Increased Point of Sales ("POS") footprint to 288 desks and 3,356 contracted merchants as of 31 March 2016, up from 276 desks and 2,763 contracted  merchants as of 31 March 2015

-       The number of POS terminals outstanding reached 8,175, up 20.0% y-o-y

-       The volume of transactions through the Bank's POS terminals grew to GEL 176.3mln, up 24.0% y-o-y. This represents 6.0mln POS transactions in 1Q16, an increase of 1.8mln or 42.7% transactions over 4.2mln in 1Q15

-       Loans outstanding disbursed at merchant locations reached GEL 109.8mln as of 31 March 2016, up 29.7% y-o-y

-       The number of transactions via Internet banking has increased to 1.3mln, up from 1.1mln a year ago, with volume reaching GEL 216.8mln in 1Q16, up 37.6% y-o-y

-       The number of transactions via mobile banking has increased to 0.5mln, up from 0.3mln a year ago, with volume reaching GEL 35.9mln in 1Q16, up 55.5% y-o-y

§ Retail Banking recorded NIM of 9.2% in 1Q16, down 50bps y-o-y and down 40 bps q-o-q. NIM was a combination of:

-       On a y-o-y basis, Retail Banking total loan yield was fairly stable, balancing increase in yields on local currency loans (25.4% in 1Q16, compared to 23.0% in 1Q15) with lower yields on foreign currency loans (10.9% in 1Q16, compared to 11.4% in 1Q15)

-       On a y-o-y basis, higher cost of local currency funding, which was a combination of two factors: 1). Higher local currency policy rate of the National Bank of Georgia that increased gradually to 8.0% at the year end, up from 4.0% at the end of 2014 2). More expensive local currency funding sourced by the Corporate Investment Banking operations to support the local currency lending of Retail Banking, on the back of 33.7% decrease in local currency time deposits of the Retail Banking

-       On a q-o-q basis, Retail Banking total loan yield decreased by 50bps, reflecting flat yield on local currency loans (25.4% in 1Q16) with lower yields on foreign currency loan, which stood at 10.9% in 1Q16 compared to 11.2% in 4Q15 (-30bps q-o-q). This was also reflected in flat q-o-q local currency denominated net loans and 7.7% q-o-q increase in foreign currency denominated net loans  

-       On a q-o-q basis, higher Cost of Funding, which stood at 6.5% in 1Q16 compared to 5.6% in 4Q15, largely as a result of more expensive funding sourced by the Corporate Investment Banking as described above

§ For 1Q16, operating expenses increased to GEL 46.0mln, up 6.7% y-o-y, resulting in a Cost to Income ratio of 43.3% and a positive y-o-y operating leverage of 1.2 percentage points, which reflects:

-       Salaries and other employee benefits remaining flat y-o-y and q-o-q

-       The increase in administrative expenses by 18.6% y-o-y, which was largely driven by an increase in the marketing expenses related to the launch of Solo since April 2015

§ Since we launched Solo Lifestyle in April 2015, the number of Solo clients has reached 13,284, up 60.4% y-o-y from 8,282 a year ago. We have launched 8 Solo lounges, of which 5 are located in Tbilisi, the capital city and 3 in major regional cities in Georgia. We had profit of GEL 268 per Solo client in 1Q16, compared to a profit of GEL 22 and GEL 15 per Express and mass retail clients, respectively, for the same period. Product to client ratio for Solo segment was 7.4, compared to 3.4 and 1.6 for Express and mass retail clients. While Solo clients currently represented c.1% of our total retail client base in 1Q16, they contributed 19% to our retail loan book, 33% to our retail deposits, 10% to our net interest income and 10% to our net fee and commission income

§ With Solo we target the mass affluent retail segment and aim to build brand loyalty through exclusive experiences offered through the new Solo Lifestyle. 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 Group's Investment Banking arm. Through Solo Lifestyle, our Solo clients are given access to exclusive products and the finest lounge-style environment at our Solo lounges and are provided with new lifestyle opportunities, such as exclusive events, offering live concerts with the world known artists and other entertainments exclusively for just solo clientele, as well as handpicked lifestyle products. In 1Q16, two Sting concerts organised by Solo in Tbilisi were the highlight of our exclusive events, where over 4,500 Solo clients had exclusive access to the event, at cost. The event was met with strong demand and was regarded highly by the Solo clients - essentially differentiating Solo from other premium banking brands offered on the market and further building the brand loyalty

§ The cost of credit risk was GEL 18.2mln in 1Q16, up 9.1% y-o-y compared to GEL 16.7mln in 1Q15. The increase was primarily a result of 9.9% growth of the Retail Banking loan book. Respectively, Retail Banking Cost of Risk ratio was 2.5% in 1Q16 compared to 2.4% in 1Q15 and 2.1% in 4Q15

§ As a result, Retail Banking profit reached GEL 37.8mln in 1Q16, up 15.8% y-o-y. Retail Banking continued to deliver a strong ROAE of 24.3% in 1Q16 compared to 21.7% in 1Q15 and 27.9% in 4Q15

§ The number of Retail Banking clients totalled 2,022,202, up 5.6% y-o-y and up 1.1% (22,333 clients) q-o-q

§ The total number of cards increased significantly to 1,943,175, up 61.3% y-o-y

§ The total number of debit cards outstanding increased to 1,171,454, up 7.6% y-o-y. In 1Q16 Retail Banking issued 59,403 debit cards

§ The total number of outstanding credit cards amounted to 771,721, up 5.8% y-o-y. Of this, 92,551 were American Express Cards, down 15.9% y-o-y. A total of 269,585 American Express cards have been issued since the launch in November 2009

 

 

Corporate Investment Banking (CIB)

 

In February 2016, we announced the combination of our Corporate Banking and Investment Management businesses into a Corporate Investment Banking business (CIB). The merged Corporate Banking and Investment Management business aims to leverage our superior knowledge and capital markets capabilities in the Georgian and neighbouring markets both in terms of reach and the expertise that we have accumulated during the past several years through our corporate advisory, research and brokerage practices united under Galt & Taggart - a wholly owned subsidiary of the Group, which is at the forefront of capital markets development in the country

 

CIB comprises 1) 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 (the Georgian Leasing Company). 2). 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

 

A key focus of our reorganized Corporate Investment Banking business is to increase ROAE and we plan to do this by deconcentrating our loan book and decreasing the cost of risk, while focusing on further building our fee business through the investment management and the trade finance franchise, which we believe is the strongest in the region

 

GEL thousands, unless otherwise noted

 

1Q16

 

1Q15

Change y-o-y

 

4Q15

Change q-o-q

 

 

 

 

 

 

INCOME STATEMENT HIGHLIGHTS

 

 

 

 

 

 Net banking interest income 

38,250

39,592

-3.4%

39,381

-2.9%

 Net fee and commission income 

7,020

7,342

-4.4%

8,781

-20.1%

 Net banking foreign currency gain

11,368

9,502

19.6%

13,942

-18.5%

 Net other banking income

2,587

1,508

71.6%

4,328

-40.2%

 Revenue 

59,225

57,944

2.2%

66,432

-10.8%

 Salaries and other employee benefits

(11,155)

(10,061)

10.9%

(9,982)

11.8%

 Administrative expenses

(3,355)

(2,886)

16.3%

(4,231)

-20.7%

 Banking depreciation and amortisation

(1,272)

(1,107)

14.9%

(1,242)

2.4%

 Other operating expenses 

(231)

(246)

-6.1%

(242)

-4.5%

 Operating expenses 

(16,013)

(14,300)

12.0%

(15,697)

2.0%

 Operating income before cost of credit risk

43,212

43,644

-1.0%

50,735

-14.8%

 Cost of credit risk 

(14,138)

(19,371)

-27.0%

(11,991)

17.9%

 Net non-recurring items 

(856)

(621)

37.8%

(2,524)

-66.1%

 Profit before income tax 

28,218

23,652

19.3%

36,220

-22.1%

 Income tax expense

(2,687)

(4,194)

-35.9%

(5,416)

-50.4%

 Profit 

25,531

19,458

31.2%

30,804

-17.1%

 

 

 

 

 

 

BALANCE SHEET HIGHLIGHTS

 

 

 

 

 

Letters of credit and guarantees, standalone1

541,567

525,409

3.1%

511,399

5.9%

Net loans, standalone, currency blended

2,144,299

2,394,657

-10.5%

2,210,964

-3.0%

Net loans, standalone, GEL

220,295

318,510

-30.8%

220,306

0.0%

Net loans, standalone, FC

1,924,004

2,076,147

-7.3%

1,990,658

-3.3%

Client deposits, standalone, currency blended

2,868,846

2,255,138

27.2%

2,871,323

-0.1%

Client deposits, standalone, GEL

797,875

595,439

34.0%

797,238

0.1%

Client deposits, standalone, FC

2,070,971

1,659,699

24.8%

2,074,085

-0.2%

Time deposits, standalone, currency blended

1,200,565

1,163,805

3.2%

1,248,720

-3.9%

Time deposits, standalone, GEL

165,311

235,419

-29.8%

187,437

-11.8%

Time deposits, standalone, FC

1,035,254

928,386

11.5%

1,061,283

-2.5%

Current accounts and demand deposits, standalone, currency blended

1,668,281

1,091,333

52.9%

1,622,603

2.8%

Current accounts and demand deposits, standalone, GEL

632,564

360,020

75.7%

609,801

3.7%

Current accounts and demand deposits, standalone, FC

1,035,717

731,313

41.6%

1,012,802

2.3%

Assets under management

1,343,821

1,213,828

10.7%

1,373,112

-2.1%

 

 

 

 

 

 

 

 

RATIOS

 

 

 

 

 

ROAE, Corporate Investment Banking

17.6%

15.1%

 

21.3%

 

Net interest margin, currency blended

3.7%

4.2%

 

3.8%

 

Cost of risk

2.1%

3.4%

 

1.8%

 

Cost of funds, currency blended

4.4%

5.1%

 

5.5%

 

Loan yield, currency blended

10.3%

11.8%

 

12.6%

 

Loan yield, GEL

13.1%

10.9%

 

13.3%

 

Loan yield, FC

10.2%

10.6%

 

10.6%

 

Cost of deposits, currency blended

4.5%

3.9%

 

4.6%

 

Cost of deposits, GEL

8.0%

3.9%

 

7.5%

 

Cost of deposits, FC

3.1%

3.9%

 

3.3%

 

Cost of time deposits, currency blended

6.0%

6.4%

 

6.1%

 

Cost of time deposits, GEL

9.6%

7.5%

 

9.1%

 

Cost of time deposits, FC

5.3%

6.2%

 

5.5%

 

Current accounts and demand deposits, currency blended

3.4%

1.3%

 

3.4%

 

Current accounts and demand deposits, GEL

7.5%

1.8%

 

7.3%

 

Current accounts and demand deposits, FC

0.8%

1.1%

 

0.9%

 

Cost / income ratio

27.0%

24.7%

 

23.6%

 

 

1Off-balance sheet item

 

Performance highlights

 

§ Corporate Investment Banking revenue increased to GEL 59.2mln in 1Q16, up 2.2% y-o-y and down 10.8% q-o-q. Revenue from Corporate Banking operations grew at 3.2% y-o-y, partially offset by 4.5% decline in revenue from Investment Management operations

-       Net banking interest income for 1Q16 was GEL 38.3mln, down 3.4% y-o-y. This reduction reflected a combination of lower net loan book (down 10.5% y-o-y to GEL 2,144.3mln) and lower net interest margins which was down 50bps y-o-y. While share of foreign currency denominated loans increased to 90%, up from 87% a year ago, we observed overall decline across both, local and foreign currency denominated loans

-       Our CIB client deposit balances increased 27.2% y-o-y, driven by increase in both local and foreign currency denominated deposits. Growth in local currency deposits was notably stronger, at 34.0% y-o-y on the back of increase in local currency deposit rates to 8.0% in 1Q16, up from 3.9% a year ago. This was done intentionally to source local currency funding from our CIB clients to support local currency lending

-       Our current account balances have increased significantly during 1Q16, reflecting our focused efforts on maintaining high liquidity levels, particularly in local currency, increasing the share of current accounts and demand deposits in total CIB client deposits to 58%, up from 48% a year ago. This is also reflected in an increased cost of current accounts and demand deposits to 3.4% in 1Q16, up from 1.3% a year ago. The increase was predominantly driven by the increase in cost of local currency denominated current accounts and demand deposits to 7.5% in 1Q16, up from 1.8% a year ago, while cost on foreign currency denominated current accounts and demand deposits decreased somewhat by 30 bps y-o-y. As a result, at the end of this quarter, total current accounts and demand deposits reached GEL 1,668.3mln, up 52.9% y-o-y, of which local currency denominated current accounts and demand deposits were GEL 632.6mln, up 75.7% y-o-y and foreign currency denominated, mostly US$, current accounts and demand deposits were GEL 1,035.7mln, up 41.6% y-o-y

-       CIB net fee and commission income, which represented 12% of total CIB revenue, was down 4.4% y-o-y to GEL 7.0mln. This is primarily due to higher base in 1Q15 resulting from c.GEL 0.8mln fee and commission income generated by G&T brokerage operations in 1Q15 (these operations generate revenue when the transaction is completed and thus cause fluctuations in our fee and commission income) and GEL 0.4mln increase in fee & commission expense due to launch of the G&T trader platform, discussed above. Net fee and commission income from our Corporate Banking operations (excluding G&T) increased by 14.6% y-o-y to GEL 6.9mln

-     Our net banking foreign currency gain increased significantly in 1Q16, mainly reflecting lower base in 1Q15. As a result, we recorded net banking foreign currency gain of GEL 11.4mln, up 19.6% y-o-y.

-     Net other banking income also increased to GEL 2.6mln, up 71.6% y-o-y from GEL 1.5mln in 1Q15. The increase was mainly due to a gain from the sale of real property

§ Corporate Investment banking recorded a NIM of 3.7% in 1Q16, down 50 bps y-o-y and down 10 bps q-o-q. The NIM reflected: 1) decreasing Loan Yield, which was down 150 bps y-o-y to 10.3% in 1Q16, 2) decreasing loan yield was partially offset by lower Cost of funding, which stood at 4.4% in 1Q16, down 70 bps y-o-y 3) the higher local currency policy rate of the National Bank of Georgia that increased gradually to 8.0% at the year end, up from 4.0% at the end of 2014. On q-o-q basis, NIM was broadly stable, despite the decrease in Loan Yield (10.3% in 1Q16 compared to 12.6% in 1Q15) which was somewhat offset by lower cost of funding of 4.4% in 1Q16 compared to 5.5% in 1Q15

§ Corporate Investment Banking operating expenses increased to GEL 16.0mln in 1Q16, up 12.0% y-o-y, resulting in a Cost to Income ratio of 27.0% and negative y-o-y operating leverage of 9.8 percentage points. The increase in operating expenses is due to 1) an increase in salaries and other employee benefits to GEL 11.2mln in 1Q16, up GEL 1.1mln or 10.9% y-o-y; 2) an increase in administrative expenses to GEL 3.4mln in 1Q16, up GEL 0.5mln or 16.3%, largely reflecting an increase in rent expenses, driven by US$ appreciation against the local currency

§ Cost of credit risk was GEL 14.1mln in 1Q16, down 27.0% from GEL 19.4mln in 1Q15, primarily due to the improved economic environment, compared to 1Q15

§ The Corporate Investment Banking Cost of Risk was 2.1% in 1Q16 compared to 3.4% in 1Q15 and 1.8% in 4Q15

§ As a result, Corporate Investment Banking profit reached GEL 25.5mln in 1Q16, up 31.2% y-o-y from GEL 19.5mln in 1Q15, resulting in Corporate Investment Banking ROAE of 17.6% as of 31 March 2016, significant improvement compared to 15.1% a year ago

§ Our strategic goal for Corporate Investment Banking continues to be the reduction of concentration risk in the corporate lending, improvement of ROAE and building our fee business. As a result of this strategy, the concentration of our top 10 Corporate Investment Banking clients was reduced to 12.1% by the end of 1Q16, down from 13.4% a year ago

 

Performance highlights of wealth management operations

§ The AUM of the Investment Management segment increased to GEL 1,343.8mln, up 10.7% y-o-y. This includes Wealth Management clients' deposits and assets held at Bank of Georgia Custody, Galt & Taggart brokerage client assets and Aldagi pension scheme assets

§ Wealth Management deposits increased to GEL 1,048.0mln, up 14.7% y-o-y, growing at a compound annual growth rate (CAGR) of 29.2% over the last five year period. The growth was achieved despite a 90 bps decline in the Cost of Client deposits to 4.7% in 1Q16 and impact of Wealth Management clients switching from deposits to bonds, as a number of bond issuances, yielding higher rates than deposits by Galt & Taggart were offered to Wealth Management clients

§ Of total AUM, the amount of the Bank's Certificates of Deposits issued to Investment Management clients increased to GEL 589.7mln, up 16.5% compared to 31 March 2015

§ We served over 1,399 wealth management clients from 68 countries as of 31 March 2016

§ Galt & Taggart is successfully developing local capital markets:

-       Galt & Taggart served as the placement agent for the US$5 million bond offering, for Nikora Trade LLC, a leading Georgian FMCG (Fast Moving Consumer Goods) company, which successfully completed its first ever bond offering on March 18, 2016. It is planned that the bonds will be listed on, and admitted to, the trading system of the Georgian Stock Exchange in the near future

-     In February 2016, Galt & Taggart Research issued a comprehensive report on the Georgian healthcare sector and continues to provide weekly economic (including economies of Georgia and Azerbaijan) and sectoral coverage. Since its launch in June 2012, Galt & Taggart Research has initiated research coverage of the Georgian and Azeri economies, the Georgian retail real estate market, the Georgian wine sector, Georgian agricultural sector, Georgian electricity sector, Georgian healthcare sector, and fixed income coverage, including Georgian Oil and Gas Corporation, Georgian Railway, and has issued notes on the Georgian State Budget and the Tourism Sector. Galt & Taggart reports are available at  www.galtandtaggart.com

 

 

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 and medical insurance. BGEO Group owns 65% of GHG, with the balance of the shares being held by the public (largely institutional investors). GHG's results are fully consolidated in BGEO Group's results. GHG's shares are listed on the London Stock Exchange and it reports results independently in more details. See http://ghg.com.ge. The results are based on management accounts and refer to standalone numbers

 

Income Statement

 

 

 

 

 

GEL thousands unless otherwise noted

1Q16

1Q15

Change,

Y-o-Y

4Q15

Change,

Q-o-Q

Revenue, gross

71,682

53,875

33.1%

68,720

4.3%

Corrections & rebates

-410

-957

-57.2%

-1,086

-62.2%

Revenue, net

71,272

52,918

34.7%

67,634

5.4%

Cost of services

-43,257

-33,339

29.7%

-41,618

3.9%

Gross profit

28,015

19,579

43.1%

26,016

7.7%

Total operating expenses

-11,105

-9,592

15.8%

-10,480

6.0%

Other operating income/(expenses)

220

125

76.0%

986

-77.7%

EBITDA

17,129

10,112

69.4%

16,522

3.7%

EBITDA margin

23.9%

18.8%

 

24.0%

 

Depreciation and amortisation

-4,465

-2,322

92.3%

-4,295

4.0%

Net interest (expense) /  income

-1,656

-4,101

-59.6%

-5,377

-69.2%

Net (losses) /  gains from foreign currencies

-260

3,404

NMF

-1,592

-83.7%

Net non-recurring (expense) /  income

1,968

-211

NMF

-192

NMF

Profit before income tax expense

12,716

6,882

84.8%

5,066

151.0%

Income tax (expense) /  benefit

-693

-607

14.2%

-14

NMF

Profit for the period

12,023

6,275

91.6%

5,052

138.0%

Attributable to:

 

 

 

 

 

  - shareholders of GHG PLC

9,921

5,732

73.1%

3,823

159.5%

  - non-controlling interests

2,102

543

287.1%

1,229

71.0%

 

For detailed income statement by healthcare services and medical insurance business, please see page 28

 

Performance Highlights

GHG delivered record quarterly revenue of GEL 71.7 million, up 33.1% y-o-y and up 4.3% q-o-q. This growth was primarily driven by healthcare services gross revenue, which grew 41.4% y-o-y, with strong organic growth of 14.6% as well as 26.8% growth coming from recent acquisitions. Healthcare services revenue increased 9.0% on a q-o-q basis, which is fully attributable to organic growth

§ Healthcare services revenue growth of 41.4% was primarily driven by referral hospitals as well as the roll out of ambulatory clinics, in line with GHG's announced strategy. Referral and specialty hospitals posted GEL 52.0 million of revenue in 1Q16, up 43.5% y-o-y driven by strong organic growth as well as acquisitions. 14.6% organic growth of revenue from our healthcare services business was largely sourced from referral hospitals, while the major portion of the acquisition related growth came solely from referral hospitals, driven by the HTMC and Deka acquisitions completed during 2015. HTMC contributed GEL 10.8 million to gross revenues

 

§ The medical insurance business contributed GEL 12.9 million to total revenue, largely flat y-o-y. Sales to retail clients posted strong 38.1% growth y-o-y, but this was offset by a decline in sales to corporate clients, which was a result of not renewing the contract with one of the largest corporate clients at the end of 2015. In 1Q16, GHG's medical insurance claims expense was GEL 12.0 million, of which GEL 2.6 million (22%) was inpatient, GEL 6.3 million (53%) was outpatient and GEL 3.1 million (25%) was accounted for by drugs. Only GEL 1.7 million, or 14.2%, of the total medical insurance claims were retained within GHG

 

§ GHG's margins improved as a result of the increasing utilisation and scale of the business, as well as continued focus on improving efficiency and the on-going integration of recently acquired healthcare facilities. Costs continued to be well contained in 1Q16, with a 29.7% y-o-y growth in the cost of services favorably lagging behind a 33.1% growth in revenues. The cost of services grew in both businesses, but was primarily driven by the healthcare services business

 

§ Primarily driven by recent acquisitions, operating expenses increased by 15.8% in 1Q16, compared to the same period last year and increased by 6.0% over 4Q15, with positive operating leverage of 27.3 percentage points. The growth of salaries and other employee benefits as well as general and administrative expenses, is primarily due to the acquisition and integration of newly acquired hospitals

§ GHG reported record quarterly EBITDA of GEL 17.1 million, a solid growth of 69.4% y-o-y. This increase was primarily driven by the healthcare services business. The healthcare services business recorded outstanding EBITDA growth of 84.4% y-o-y and 7.8% q-o-q, reaching GEL 17.8 million in 1Q16 while achieving an EBITDA margin of 29.5%, close to target of c.30%. The medical insurance business recorded a negative EBITDA of GEL 0.7 million, caused by the loss of the large corporate client referred to above and an increase in medical insurance claims. Some of this increase was related to the outbreak of a flu epidemic in 1Q16, and GHG is making changes to its policies that will address the rest

§ GHG's strong EBITDA performance in 1Q16 was further translated into a strong profit for the period of GEL 12.0 million, which grew 91.6% y-o-y. This was primarily driven by the profit of the healthcare services business that more than doubled for the same period reaching GEL 12.2 million

 

Operating highlights

§ At the beginning of 2016, GHG acquired a 100% equity stake in JSC GPC, one of the top three pharmaceutical retailers and wholesalers in Georgia. This move fits clearly into GHG's strategy to be the leading integrated player in the Georgian healthcare ecosystem which amounts to GEL 3.4 billion aggregate value, and enables GHG to become the largest drug purchaser in the country. The pharmacy business is expected to be highly synergistic both to reduce the cost of drugs for GHG's hospitals as well as to cross-sell through GPC's loyalty programme, to ambulatory clinics. GPC has c. 12 million customer interactions per annum. It is expected GHG will open pharmacies on the premises of approximately 40 hospitals and large ambulatory clinics owned by GHG to boost the revenue of GPC. The acquisition price of GPC implies 5.7 times EV/EBITDA before eliminating unnecessary costs and capturing further cost and revenue synergies. The post-synergy multiple is 3.3. The transaction was completed in May 2016 and GHG will start GPC's financial consolidation accordingly

§ GHG bought-out the remaining 33.3% minority shareholding of our largest pediatric hospital, Iashvili Referral Hospital ("Iashvili"). Iashvili operates 266 beds and recorded GEL 25.2 million in gross revenue in 2015, of which GEL 8.4 million was attributable to the minority shareholder bought out as a result of this transaction

§ GHG also expanded its senior management team with the appointment of George Arveladze as a Deputy CEO, in charge of ambulatory and pharmaceutical Businesses. He brings strong knowledge of, and experience in, the Georgian retail sector, and has an excellent operational track record which will be invaluable to Georgia Healthcare Group

§ GHG operated 2,686 hospital beds in 46 facilities by the end of 31 March 2016, up from 2,140 beds in 39 facilities a year ago, a net increase of 546 beds, resulting in a year-end market share of 26.7%

§ GHG is currently in the process of developing a further four ambulatory clusters, to be launched over the next few months.  Three of these clusters will be in Tbilisi, and one will be in Zugdidi, a city in West Georgia. A further two clusters will be developed in the second half of the year

 

Real estate business (m2 Real Estate)

 

Our Real Estate business is operated through the Group's wholly-owned subsidiary m2 Real Estate, which develops residential property in Georgia. m2 Real Estate outsources the construction and architecture works whilst itself focusing on project management and sales. The Bank's Real Estate business serves to meet the unsatisfied demand in Tbilisi for housing through its well-established branch network and sales force, while stimulating the Bank's mortgage lending business. The business is also planning to begin hotel development in the under-developed mid-price sector in the coming months

 

Income statement

GEL thousands, unless otherwise noted

 

1Q16

 

1Q15

Change y-o-y

 

4Q15

Change q-o-q

 

 

 

 

 

 

Real estate revenue

28,592

3,938

NMF

47,465

-39.8%

Cost of real estate

(22,740)

(2,865)

NMF

(34,869)

-34.8%

Gross real estate profit 

5,852

1,073

NMF

12,596

-53.5%

Gross other investment profit 

1,816

219

NMF

7,277

-75.0%

Revenue 

7,668

1,292

NMF

19,873

-61.4%

Salaries and other employee benefits

(320)

(321)

-0.3%

(356)

-10.1%

Administrative expenses

(1,135)

(1,041)

9.0%

(1,515)

-25.1%

Operating expenses 

(1,455)

(1,362)

6.8%

(1,871)

-22.2%

EBITDA

6,213

(70)

NMF

18,002

-65.5%

Depreciation and amortization of investment business

(53)

(42)

26.2%

(55)

-3.6%

Net foreign currency loss from investment business

386

(371)

NMF

(836)

NMF

Interest income from investment business 

-

171

-100.0%

-

-

Interest expense from investment business

(125)

(1,011)

-87.6%

(173)

-27.7%

Net operating income before non-recurring items 

6,421

(1,323)

NMF

16,938

-62.1%

Net non-recurring items 

(23)

(73)

-68.5%

(7)

NMF

Profit before income tax 

6,398

(1,396)

NMF

16,931

-62.2%

Income tax (expense) benefit

(960)

209

NMF

(2,604)

-63.1%

Profit 

5,438

(1,187)

NMF

14,327

-62.0%

 

Performance highlights

§ m2 Real Estate recorded strong revenue growth in 1Q16, increasing to GEL 7.7mln in 1Q16, up c.5 times y-o-y, driven by strong project execution and sales performance. Gross real estate profit, which reflects residential property development and sales operations of m2 Real Estate, increased to GEL 5.9mln, up c.4 times y-o-y

§ m2 Real Estate sold a total of 53 apartments with a sales value of US$ 5.5mln in 1Q16, compared to 49 apartments sold with a sales value of US$ 4.8mln in 1Q15. At its six projects which have already been completed with a total of 1,669 apartments, m2 Real Estate currently has a stock of only 214 apartments unsold. At its two on-going  projects (begun in 2015) with a total capacity of 838 apartments, 240 apartments or 29% are already sold

§ Pursuant to m2 Real Estate's current revenue recognition policy (in line with IAS 18), revenue is recognised at the full completion of the project. Because of its revenue recognition policy, m2 Real Estate had accumulated US$ 46.1mln sales, which will be recognised as revenue upon completion of the on-going projects in 2016-2018 (of which c. US$ 29.7mln is expected to be recognised in 2016)

§ m2 Real Estate has completed all of its projects on or ahead of time and within budget. Of the two m2 Real Estate projects started in 2015 referred above, one is the largest ever carried out by m2 Real Estate, with a total of 818 apartments in a central location in Tbilisi. The second is a new type of project for m2 Real Estate, representing a luxury residential building in Old Tbilisi neighbourhood with few apartments (19 in total) and a relatively high price

§ In summary, m2 Real Estate has started eight projects since its establishment in 2010, of which six have already been completed, and construction of two is on-going. One of these is expected to be completed in 2016 and the other in 2018. Currently, only 812 units are available for sale out of total of 2,507 apartments developed or under development. We have unlocked total land value of US$ 16.4mln from the six completed projects and an additional US$ 8.9mln in land value is expected to be unlocked from the two on-going projects

§ The number of apartments financed with BOG mortgages in all m2 Real Estate projects as of the date of this announcement totalled 827, with an aggregate amount of GEL 92.5mln

§ Y-o-y growth in revenue largely outpaced growth in operating expenses, resulting in EBITDA of GEL 6.2mln in 1Q16 compared to GEL -0.1mln a year ago, which eventually translated into GEL 5.4mln profit, up from GEL 1.2mln loss a year ago

 

Project performance highlights

Ongoing projects (2 projects):

§ "Kartozia Street", construction on-going - 231 (28%) of 819 apartments sold by the end of 1Q16, with total sales of US$ 16.4mln, which is not yet recognized as revenue. The pre-sales started in July 2015 and construction phase of the project started in November 2015. Construction is 9% completed as of the date of this report and it is expected to be fully completed in September 2018. Upon the completion of this project, m2 Real Estate expects to unlock the land value of US$ 5.8mln and realize IRR of 31% from this project

§ "Skyline" (the first premium apartments offered by m2 Real Estate), construction on-going - 9 (47%) of 19 apartments sold by the end of 1Q16, with total sales of US$ 3.7mln, which is not yet recognized as revenue. The pre-sales started and the construction phase of the project started in December 2015 and it is expected to be fully completed in December 2016. Upon the completion of this project, m2 Real Estate expects to unlock the land value of US$ 3.1mln and realize IRR of 329% from this project

 

Completed projects (6 projects):

§ "Chubinashvili street" - 123 (100%) of 123 apartments sold by the end of 3Q15, with total sales of US$ 9.9mln, which is fully recognised as revenue. The project was started in September 2010 and completed in August 2012. We unlocked the land value of US$ 0.9mln and realised Internal Rate of Return ("IRR") of 47% from this project

§ "Tamarashvili street" - 522 (100%) of 522 apartments sold by the end of 1Q16, with total sales of US$ 48.0mln, which is fully recognised as revenue. The project was started in May 2012 and completed in June 2014, four months ahead of schedule. We unlocked the land value of US$ 5.4mln and realized IRR of 46% from this project

§ "Nutsubidze Street" - 203 (92%) of 221 apartments sold by the end of 1Q16, with total sales of US$ 16.2mln, of which US$ 15.9mln was recognized as revenue. The project was started in December 2013 and completed in September 2015, one month ahead of completion deadline. m2 Real Estate is unlocking the land value of US$ 2.2mln and realizing IRR of 58% from this project

§ "Kazbegi Street" - 266 (90%) of 295 apartments sold by the end of 1Q16, with total sales of US$ 24.4mln, of which US$ 23.6mln was recognized as revenue. The project was started in December 2013, and completed in March 2016. m2 Real Estate is unlocking the land value of US$ 3.6mln and realizing IRR of 165% from this project

§ "Tamarashvili Street II" - 194 (72%) of 270 apartments sold by the end of 1Q16, with total sales of US$ 18.0mln, which is not yet recognized as revenue. Revenue is expected to be recognised following the completion of apartment handover process to its owners. The project was started in July 2014, construction is 96% completed as of the date of this release and is expected to be fully completed by the end of the second quarter 2016. m2 Real Estate is unlocking the land value of US$ 2.7mln and realizing IRR of 71% from this project

§ "Moscow avenue" - 147 (62%) of 238 apartments sold by the end of 1Q16, with total sales of US$ 6.9mln, which is not yet recognized as revenue. Revenue is expected to be recognised following the completion of apartment handover process to its owners.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 91% completed as of the date of this release and is expected to be fully completed by the end of the second quarter 2016. m2 Real Estate is unlocking the land value of US$ 1.6mln and realizing IRR of 31% from this project

 

SELECTED FINANCIAL INFORMATION

 

 

BGEO Consolidated

 

Banking Business

 

 

Investment Business

 

Eliminations

INCOME STATEMENT QUARTERLY

1Q16

1Q15

Change

4Q15

Change

 

1Q16

1Q15

Change

4Q15

Change

 

1Q16

1Q15

Change

4Q15

Change

 

1Q16

1Q15

4Q15

GEL thousands, unless otherwise noted

 

 

Y-O-Y

 

Q-O-Q

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Banking interest income 

224,810

199,698

12.6%

228,212

-1.5%

 

226,217

202,353

11.8%

230,833

-2.0%

 

-

-

-

-

-

 

(1,407)

(2,655)

(2,621)

 Banking interest expense 

(95,958)

(78,709)

21.9%

(96,778)

-0.8%

 

(95,998)

(79,295)

21.1%

(96,616)

-0.6%

 

-

-

-

-

-

 

40

586

(162)

 Net banking interest income 

128,852

120,989

6.5%

131,434

-2.0%

 

130,219

123,058

5.8%

134,217

-3.0%

 

-

-

-

-

-

 

(1,367)

(2,069)

(2,783)

 Fee and commission income 

38,149

35,991

6.0%

42,110

-9.4%

 

38,484

37,343

3.1%

42,856

-10.2%

 

-

-

-

-

-

 

(335)

(1,352)

(746)

 Fee and commission expense 

(10,335)

(9,137)

13.1%

(10,471)

-1.3%

 

(10,469)

(9,253)

13.1%

(10,590)

-1.1%

 

-

-

-

-

-

 

134

116

119

 Net fee and commission income 

27,814

26,854

3.6%

31,639

-12.1%

 

28,015

28,090

-0.3%

32,266

-13.2%

 

-

-

-

-

-

 

(201)

(1,236)

(627)

 Net banking foreign currency gain

17,390

18,962

-8.3%

19,525

-10.9%

 

17,390

18,962

-8.3%

19,525

-10.9%

 

-

-

-

-

-

 

-

-

-

 Net other banking income

2,867

1,790

60.2%

9,318

-69.2%

 

3,168

2,095

51.2%

9,699

-67.3%

 

-

-

-

-

-

 

(301)

(305)

(381)

 Net insurance premiums earned

21,824

21,709

0.5%

24,476

-10.8%

 

9,550

9,242

3.3%

10,810

-11.7%

 

12,924

12,890

0.3%

14,500

-10.9%

 

(650)

(423)

(834)

 Net insurance claims incurred

(15,408)

(14,135)

9.0%

(17,743)

-13.2%

 

(4,207)

(3,936)

6.9%

(5,369)

-21.6%

 

(11,201)

(10,199)

9.8%

(12,374)

-9.5%

 

-

-

-

 Gross insurance profit 

6,416

7,574

-15.3%

6,733

-4.7%

 

5,343

5,306

0.7%

5,441

-1.8%

 

1,723

2,691

-36.0%

2,126

-19.0%

 

(650)

(423)

(834)

 Healthcare revenue

58,348

40,017

45.8%

53,089

9.9%

 

-

-

-

-

-

 

58,348

40,017

45.8%

53,089

9.9%

 

-

-

-

 Cost of healthcare services

(32,057)

(23,140)

38.5%

(29,244)

9.6%

 

-

-

-

-

-

 

(32,057)

(23,140)

38.5%

(29,244)

9.6%

 

-

-

-

 Gross healthcare profit 

26,291

16,877

55.8%

23,845

10.3%

 

-

-

-

-

-

 

26,291

16,877

55.8%

23,845

10.3%

 

-

-

-

 Real estate revenue

28,764

4,074

606.0%

47,638

-39.6%

 

-

-

-

-

-

 

28,764

4,074

606.0%

47,638

-39.6%

 

-

-

-

 Cost of real estate

(22,740)

(2,865)

NMF

(34,869)

-34.8%

 

-

-

-

-

-

 

(22,740)

(2,865)

NMF

(34,869)

-34.8%

 

-

-

-

 Gross real estate profit 

6,024

1,209

398.3%

12,769

-52.8%

 

-

-

-

-

-

 

6,024

1,209

398.3%

12,769

-52.8%

 

-

-

-

 Gross other investment profit 

3,606

1,398

157.9%

11,271

-68.0%

 

-

-

-

-

-

 

3,675

1,543

138.2%

11,157

-67.1%

 

(69)

(145)

114

 Revenue 

219,260

195,653

12.1%

246,534

-11.1%

 

184,135

177,511

3.7%

201,148

-8.5%

 

37,713

22,320

69.0%

49,897

-24.4%

 

(2,588)

(4,178)

(4,511)

 Salaries and other employee benefits

(47,413)

(45,742)

3.7%

(47,158)

0.5%

 

(39,806)

(38,606)

3.1%

(39,304)

1.3%

 

(8,250)

(7,531)

9.5%

(8,487)

-2.8%

 

643

395

633

 Administrative expenses

(25,062)

(21,056)

19.0%

(26,716)

-6.2%

 

(20,058)

(17,506)

14.6%

(21,657)

-7.4%

 

(5,392)

(4,028)

33.9%

(5,916)

-8.9%

 

388

478

857

 Banking depreciation and amortisation

(9,138)

(8,373)

9.1%

(8,982)

1.7%

 

(9,138)

(8,373)

9.1%

(8,982)

1.7%

 

-

-

-

-

-

 

-

-

-

 Other operating expenses 

(1,675)

(887)

88.8%

(1,406)

19.1%

 

(861)

(792)

8.7%

(1,229)

-29.9%

 

(814)

(95)

NMF

(177)

NMF

 

-

-

-

 Operating expenses 

(83,288)

(76,058)

9.5%

(84,262)

-1.2%

 

(69,863)

(65,277)

7.0%

(71,172)

-1.8%

 

(14,456)

(11,654)

24.0%

(14,580)

-0.9%

 

1,031

873

1,490

Operating income before cost of credit risk /              EBITDA

135,972

119,595

13.7%

162,272

-16.2%

 

114,272

112,234

1.8%

129,976

-12.1%

 

23,257

10,666

118.0%

35,317

-34.1%

 

(1,557)

(3,305)

(3,021)

 Profit from associates

1,866

(1,310)

NMF

1,938

-3.7%

 

-

-

-

-

-

 

1,866

(1,310)

NMF

1,938

-3.7%

 

-

-

-

Depreciation and amortization of investment business

(4,910)

(2,688)

82.7%

(4,731)

3.8%

 

-

-

-

-

-

 

(4,910)

(2,688)

82.7%

(4,731)

3.8%

 

-

-

-

 Net foreign currency gain from investment business

(766)

3,690

NMF

(3,416)

-77.6%

 

-

-

-

-

-

 

(766)

3,690

NMF

(3,416)

-77.6%

 

-

-

-

 Interest income from investment business 

956

617

54.9%

602

58.8%

 

-

-

-

-

-

 

964

818

17.8%

957

0.7%

 

(8)

(201)

(355)

 Interest expense from investment business

(1,382)

(2,463)

-43.9%

(3,166)

-56.3%

 

-

-

-

-

-

 

(2,947)

(5,969)

-50.6%

(6,542)

-55.0%

 

1,565

3,506

3,376

 Operating income before cost of credit risk 

131,736

117,441

12.2%

153,499

-14.2%

 

114,272

112,234

1.8%

129,976

-12.1%

 

17,464

5,207

235.4%

23,523

-25.8%

 

-

-

-

Impairment charge on loans to customers 

(32,218)

(38,928)

-17.2%

(33,929)

-5.0%

 

(32,218)

(38,928)

-17.2%

(33,929)

-5.0%

 

-

-

-

-

-

 

-

-

-

Impairment charge on finance lease receivables

(513)

(119)

NMF

(215)

138.6%

 

(513)

(119)

NMF

(215)

138.6%

 

-

-

-

-

-

 

-

-

-

Impairment charge on other assets and provisions

(3,412)

(2,794)

22.1%

(1,878)

81.7%

 

(2,281)

(1,724)

32.3%

(1,086)

110.0%

 

(1,131)

(1,070)

5.7%

(792)

42.8%

 

-

-

-

 Cost of credit risk 

(36,143)

(41,841)

-13.6%

(36,022)

0.3%

 

(35,012)

(40,771)

-14.1%

(35,230)

-0.6%

 

(1,131)

(1,070)

5.7%

(792)

42.8%

 

-

-

-

 Net operating income before non-recurring items 

95,593

75,600

26.4%

117,477

-18.6%

 

79,260

71,463

10.9%

94,746

-16.3%

 

16,333

4,137

294.8%

22,731

-28.1%

 

-

-

-

 Net non-recurring items 

1,366

(2,447)

NMF

(6,227)

NMF

 

(1,419)

(2,167)

-34.5%

(2,502)

-43.3%

 

2,785

(280)

NMF

(3,725)

NMF

 

-

-

-

 Profit before income tax 

96,959

73,153

32.5%

111,250

-12.8%

 

77,841

69,296

12.3%

92,244

-15.6%

 

19,118

3,857

395.7%

19,006

0.6%

 

-

-

-

 Income tax expense

(9,912)

(10,814)

-8.3%

(15,578)

-36.4%

 

(8,178)

(10,486)

-22.0%

(11,653)

-29.8%

 

(1,734)

(328)

NMF

(3,925)

-55.8%

 

-

-

-

 Profit 

87,047

62,339

39.6%

95,672

-9.0%

 

69,663

58,810

18.5%

80,591

-13.6%

 

17,384

3,529

392.6%

15,081

15.3%

 

-

-

-

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- shareholders of BGEO

80,836

62,640

29.0%

92,287

-12.4%

 

68,620

58,247

17.8%

79,425

-13.6%

 

12,216

4,393

178.1%

12,862

-5.0%

 

-

-

-

- non-controlling interests

6,211

(301)

NMF

3,385

83.5%

 

1,043

563

85.3%

1,166

-10.5%

 

5,168

(864)

NMF

2,219

132.9%

 

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share basic and diluted

2.10

1.63

28.8%

2.42

-13.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BGEO Consolidated

 

Banking Business

 

Investment Business

 

            Eliminations

 

BALANCE SHEET

Mar-16

Mar-15

Change

Dec-15

Change

 

Mar-16

Mar-15

Change

Dec-15

Change

 

Mar-16

Mar-15

Change

Dec-15

Change

 

Mar-16

Mar-15

Dec-15

GEL thousands, unless otherwise noted

 

 

Y-O-Y

 

Q-O-Q

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

1,359,219

1,000,713

35.8%

1,432,934

-5.1%

 

1,330,094

997,547

33.3%

1,378,459

-3.5%

 

288,512

110,578

160.9%

290,576

-0.7%

 

(259,387)

(107,412)

(236,101)

Amounts due from credit institutions

764,435

545,714

40.1%

731,365

4.5%

 

720,442

523,663

37.6%

721,802

-0.2%

 

47,936

87,478

-45.2%

15,730

204.7%

 

(3,943)

(65,427)

(6,167)

Investment securities

825,045

880,799

-6.3%

903,867

-8.7%

 

825,821

881,098

-6.3%

906,730

-8.9%

 

1,154

1,153

0.1%

1,153

0.1%

 

(1,930)

(1,452)

(4,016)

Loans to customers and finance lease receivables

5,359,718

5,156,386

3.9%

5,322,117

0.7%

 

5,394,565

5,248,559

2.8%

5,366,764

0.5%

 

-

-

-

-

-

 

(34,847)

(92,173)

(44,647)

Accounts receivable and other loans

84,715

73,315

15.5%

87,972

-3.7%

 

5,144

13,063

-60.6%

10,376

-50.4%

 

81,955

64,947

26.2%

82,354

-0.5%

 

(2,384)

(4,695)

(4,758)

Insurance premiums receivable

54,879

58,816

-6.7%

39,226

39.9%

 

16,567

22,337

-25.8%

19,829

-16.5%

 

39,347

37,205

5.8%

20,929

88.0%

 

(1,035)

(726)

(1,532)

Prepayments

67,633

42,748

58.2%

58,328

16.0%

 

24,649

24,969

-1.3%

21,033

17.2%

 

42,984

17,779

141.8%

37,295

15.3%

 

-

-

-

Inventories

125,466

113,322

10.7%

127,027

-1.2%

 

9,686

7,697

25.8%

9,439

2.6%

 

115,780

105,625

9.6%

117,588

-1.5%

 

-

-

-

Investment property

254,224

194,623

30.6%

246,398

3.2%

 

134,310

128,376

4.6%

135,453

-0.8%

 

119,914

66,247

81.0%

110,945

8.1%

 

-

-

-

Property and equipment

835,651

618,474

35.1%

794,682

5.2%

 

333,243

334,516

-0.4%

337,064

-1.1%

 

502,408

283,958

76.9%

457,618

9.8%

 

-

-

-

Goodwill

73,192

51,745

41.4%

72,984

0.3%

 

49,592

39,781

24.7%

49,592

0.0%

 

23,600

11,964

97.3%

23,392

0.9%

 

-

-

-

Intangible assets

43,074

33,443

28.8%

40,516

6.3%

 

37,609

31,761

18.4%

35,162

7.0%

 

5,465

1,682

224.9%

5,354

2.1%

 

-

-

-

Income tax assets

36,712

24,943

47.2%

21,550

70.4%

 

27,321

17,602

55.2%

16,003

70.7%

 

9,391

7,341

27.9%

5,547

69.3%

 

-

-

-

Other assets

193,626

235,012

-17.6%

236,773

-18.2%

 

121,012

176,982

-31.6%

163,731

-26.1%

 

75,515

68,096

10.9%

79,479

-5.0%

 

(2,901)

(10,066)

(6,437)

Total assets

10,077,589

9,030,053

11.6%

10,115,739

-0.4%

 

9,030,055

8,447,951

6.9%

9,171,437

-1.5%

 

1,353,961

864,053

56.7%

1,247,960

8.5%

 

(306,427)

(281,951)

(303,658)

Client deposits and notes

4,698,558

4,099,029

14.6%

4,751,387

-1.1%

 

4,962,432

4,271,854

16.2%

4,993,681

-0.6%

 

-

-

-

-

-

 

(263,874)

(172,825)

(242,294)

Amounts due to credit institutions

1,719,920

1,780,636

-3.4%

1,789,062

-3.9%

 

1,630,299

1,694,668

-3.8%

1,692,557

-3.7%

 

124,468

181,773

-31.5%

144,534

-13.9%

 

(34,847)

(95,805)

(48,029)

Debt securities issued

1,033,758

1,026,689

0.7%

1,039,804

-0.6%

 

957,474

962,587

-0.5%

961,944

-0.5%

 

81,116

66,964

21.1%

84,474

-4.0%

 

(4,832)

(2,862)

(6,614)

Accruals and deferred income

142,766

124,344

14.8%

146,852

-2.8%

 

25,685

20,949

22.6%

20,364

26.1%

 

117,081

103,395

13.2%

126,488

-7.4%

 

-

-

-

Insurance contracts liabilities

71,565

70,156

2.0%

55,845

28.1%

 

34,630

34,685

-0.2%

34,547

0.2%

 

36,935

35,471

4.1%

21,298

73.4%

 

-

-

-

Income tax liabilities

128,667

96,761

33.0%

124,395

3.4%

 

93,765

79,343

18.2%

89,980

4.2%

 

34,902

17,418

100.4%

34,415

1.4%

 

-

-

-

Other liabilities

131,506

132,290

-0.6%

134,756

-2.4%

 

47,520

99,677

-52.3%

63,073

-24.7%

 

86,860

43,072

101.7%

78,404

10.8%

 

(2,874)

(10,459)

(6,721)

Total liabilities

7,926,740

7,329,905

8.1%

8,042,101

-1.4%

 

7,751,805

7,163,763

8.2%

7,856,146

-1.3%

 

481,362

448,093

7.4%

489,613

-1.7%

 

(306,427)

(281,951)

(303,658)

Share capital

1,154

1,154

0.0%

1,154

0.0%

 

1,154

1,154

0.0%

1,154

0.0%

 

-

-

-

-

-

 

-

-

-

Additional paid-in capital

240,962

252,568

-4.6%

240,593

0.2%

 

101,467

94,886

6.9%

101,793

-0.3%

 

139,495

157,682

-11.5%

138,800

0.5%

 

-

-

-

Treasury shares

(29)

(34)

-14.7%

(44)

-34.1%

 

(29)

(34)

-14.7%

(44)

-34.1%

 

-

-

-

-

-

 

-

-

-

Other reserves

42,101

(30,568)

NMF

32,844

28.2%

 

(55,166)

(20,977)

163.0%

(63,958)

-13.7%

 

97,267

(9,591)

NMF

96,802

0.5%

 

-

-

-

Retained earnings

1,650,094

1,420,513

16.2%

1,577,050

4.6%

 

1,212,492

1,189,365

1.9%

1,257,415

-3.6%

 

437,602

231,148

89.3%

319,635

36.9%

 

-

-

-

Total equity attributable to shareholders of the Group

1,934,282

1,643,633

17.7%

1,851,597

4.5%

 

1,259,918

1,264,394

-0.4%

1,296,360

-2.8%

 

674,364

379,239

77.8%

555,237

21.5%

 

-

-

-

Non-controlling interests

216,567

56,515

283.2%

222,041

-2.5%

 

18,332

19,794

-7.4%

18,931

-3.2%

 

198,235

36,721

439.8%

203,110

-2.4%

 

-

-

-

Total equity

2,150,849

1,700,148

26.5%

2,073,638

3.7%

 

1,278,250

1,284,188

-0.5%

1,315,291

-2.8%

 

872,599

415,960

109.8%

758,347

15.1%

 

-

-

-

Total liabilities and equity

10,077,589

9,030,053

11.6%

10,115,739

-0.4%

 

9,030,055

8,447,951

6.9%

9,171,437

-1.5%

 

1,353,961

864,053

56.7%

1,247,960

8.5%

 

(306,427)

(281,951)

(303,658)

Book value per share

50.29

42.71

17.7%

48.75

3.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                   

 

Georgia Healthcare Group

 

 

 

Income Statement

Healthcare services

Medical insurance

Eliminations

Total

GEL thousands; unless otherwise noted

1Q16

1Q15

Change, Y-o-Y

4Q15

Change, Q-o-Q

1Q16

1Q15

Change, Y-o-Y

4Q15

Change, Q-o-Q

1Q16

1Q15

4Q15

1Q16

1Q15

Change, Y-o-Y

4Q15

Change, Q-o-Q

Revenue, gross

60,451

42,745

41.4%

55,481

9.0%

12,936

12,992

-0.4%

14,532

-11.0%

(1,705)

(1,862)

(1,293)

71,682

53,875

33.1%

68,720

4.3%

Corrections & rebates

(410)

(957)

-57.2%

(1,086)

-62.2%

-

-

-

-

-

-

-

-

(410)

(957)

-57.2%

(1,086)

-62.2%

Revenue, net

60,041

41,788

43.7%

54,395

10.4%

12,936

12,992

-0.4%

14,532

-11.0%

(1,705)

(1,862)

(1,293)

71,272

52,918

34.7%

67,634

5.4%

Cost of services

(32,998)

(24,273)

35.9%

(30,007)

10.0%

(11,953)

(10,837)

10.3%

(12,917)

-7.5%

1,694

1,771

1,306

(43,257)

(33,339)

29.7%

(41,618)

3.9%

Cost of salaries and other employee benefits

(19,752)

(15,092)

30.9%

(18,256)

8.2%

-

-

-

-

-

565

675

449

(19,187)

(14,417)

33.1%

(17,807)

7.7%

Cost of materials and supplies

(9,613)

(6,482)

48.3%

(8,871)

8.4%

-

-

-

-

-

275

290

240

(9,338)

(6,192)

50.8%

(8,631)

8.2%

Cost of medical service providers

(428)

(468)

-8.5%

(593)

-27.9%

-

-

-

-

-

12

21

13

(416)

(447)

-6.9%

(580)

-28.3%

Cost of utilities and other

(3,205)

(2,231)

43.7%

(2,287)

40.1%

-

-

-

-

-

92

100

60

(3,113)

(2,131)

46.1%

(2,227)

39.8%

Net insurance claims incurred

-

-

-

-

-

(11,953)

(10,837)

10.3%

(12,917)

-7.5%

750

685

544

(11,203)

(10,152)

10.4%

(12,373)

-9.5%

Gross profit

27,043

17,515

54.4%

24,388

10.9%

983

2,155

-54.4%

1,615

-39.1%

(11)

(91)

13

28,015

19,579

43.1%

26,016

7.7%

Salaries and other employee benefits

(6,115)

(5,314)

15.1%

(6,178)

-1.0%

(819)

(1,036)

-20.9%

(636)

28.8%

11

91

4

(6,923)

(6,259)

10.6%

(6,810)

1.7%

General and administrative expenses

(2,483)

(1,778)

39.7%

(2,219)

11.9%

(719)

(621)

15.8%

(839)

-14.3%

-

-

-

(3,202)

(2,399)

33.5%

(3,058)

4.7%

Impairment of healthcare services, insurance premiums and other receivables

(858)

(831)

3.2%

(460)

86.5%

(122)

(103)

18.4%

(152)

-19.7%

-

-

-

(980)

(934)

4.9%

(612)

60.1%

Other operating income

241

78

209.0%

1,008

-76.1%

(21)

47

NMF

(5)

320.0%

-

-

(17)

220

125

76.0%

986

-77.7%

EBITDA

17,828

9,670

84.4%

16,539

7.8%

(699)

442

NMF

(17)

NMF

-

-

-

17,129

10,112

69.4%

16,522

3.7%

EBITDA margin

29.5%

22.6%

 

29.8%

 

-5.4%

3.4%

 

-0.1%

 

-

-

 

23.9%

18.8%

 

24.0%

 

Depreciation and amortisation

(4,261)

(2,186)

94.9%

(4,046)

5.3%

(204)

(136)

50.0%

(249)

-18.0%

-

-

-

(4,465)

(2,322)

92.3%

(4,295)

4.0%

Net interest (expense) / income

(2,259)

(4,073)

-44.5%

(5,535)

-59.2%

603

(28)

NMF

158

282.4%

-

-

-

(1,656)

(4,101)

-59.6%

(5,377)

-69.2%

Net (losses) / gains from foreign currencies

(411)

2,907

NMF

(1,586)

-74.1%

151

497

-69.6%

(6)

NMF

-

-

-

(260)

3,404

NMF

(1,592)

-83.7%

Net non-recurring (expense) / income

1,968

(211)

NMF

484

306.3%

-

-

-

(676)

NMF

-

-

-

1,968

(211)

NMF

(192)

NMF

Profit before income tax expense

12,865

6,107

110.7%

5,856

119.7%

(149)

775

NMF

(790)

-81.1%

-

-

-

12,716

6,882

84.8%

5,066

151.0%

Income tax (expense) / benefit

(712)

(491)

45.0%

(206)

245.1%

19

(116)

NMF

192

-90.1%

-

-

-

(693)

(607)

14.2%

(14)

NMF

Profit for the period

12,153

5,616

116.4%

5,650

115.1%

(130)

659

NMF

(598)

-78.3%

-

-

-

12,023

6,275

91.6%

5,052

138.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  - shareholders of the Company

10,051

5,073

98.1%

4,421

127.3%

(130)

659

NMF

(598)

-78.3%

-

-

-

9,921

5,732

73.1%

3,823

159.5%

  - non-controlling interests

2,102

543

287.1%

1,229

71.0%

-

-

-

-

-

-

-

-

2,102

543

287.1%

1,229

71.0%

 

 

P&C Insurance (Aldagi)

 

INCOME STATEMENT HIGHLIGHTS

GEL thousands, unless otherwise stated

 

1Q16

1Q15

Change

4Q15

Change

 

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

 

 

 

 

 Net banking interest income 

 

725

546

32.8%

590

22.9%

 Net fee and commission income 

 

100

71

40.8%

87

14.9%

 Net banking foreign currency gain

 

(47)

528

NMF

(126)

-62.7%

 Net other banking income

 

131

297

-55.9%

351

-62.7%

 Gross insurance profit 

 

5,665

5,607

1.0%

5,423

4.5%

 Revenue 

 

6,574

7,049

-6.7%

6,325

3.9%

 Operating expenses 

 

(2,767)

(2,970)

-6.8%

(2,746)

0.8%

 Operating income before cost of credit risk and non-recurring items

 

3,807

4,079

-6.7%

3,579

6.4%

 Cost of credit risk 

 

(173)

(95)

82.1%

(244)

-29.1%

 Net non-recurring items

 

-

-

-

(701)

-100.0%

 Profit before income tax 

 

3,634

3,984

-8.8%

2,634

38.0%

 Income tax (expense) benefit

 

(545)

388

NMF

(467)

16.7%

 Profit 

 

3,089

4,372

-29.3%

2,167

42.5%

 

 

 

 

 

Belarusky Narodny Bank (BNB)

 

INCOME STATEMENT, HIGHLIGHTS

GEL thousands, unless otherwise stated

1Q16

1Q15

Change

4Q15

Change

 

 

 

Y-O-Y

 

Q-O-Q

 

 

 

 

 

 

 Net banking interest income 

7,903

7,429

6.4%

7,590

4.1%

 Net fee and commission income 

1,862

2,217

-16.0%

2,133

-12.7%

 Net banking foreign currency gain

2,481

5,017

-50.5%

2,011

23.4%

 Net other banking income

167

97

72.2%

1,776

-90.6%

 Revenue 

12,413

14,760

-15.9%

13,510

-8.1%

 Operating expenses 

(4,490)

(4,254)

5.5%

(6,068)

-26.0%

 Operating income before cost of credit risk

7,923

10,506

-24.6%

7,442

6.5%

 Cost of credit risk 

(2,516)

(4,645)

-45.8%

(7,651)

-67.1%

 Net non-recurring items 

(3)

(1,098)

-99.7%

3,217

NMF

 Profit before income tax 

5,404

4,763

13.5%

3,008

79.7%

 Income tax (expense) benefit

(1,144)

(1,427)

-19.8%

1,801

NMF

 Profit 

4,260

3,336

27.7%

4,809

-11.4%

 

 

 

 

 

BALANCE SHEET, HIGHLIGHTS

GEL thousands, unless otherwise stated

31-Mar-16

31-Mar-15

Change Y-O-Y

30-Dec-15

Change Q-O-Q

Cash and cash equivalents

93,904

64,043

46.6%

109,758

-14.4%

Amounts due from credit institutions

3,986

3,575

11.5%

3,906

2.0%

Loans to customers and finance lease receivables

319,740

297,803

7.4%

320,114

-0.1%

Other assets

49,825

68,017

-26.7%

41,705

19.5%

Total assets

467,455

433,438

7.8%

475,483

-1.7%

Client deposits and notes

230,848

233,658

-1.2%

277,642

-16.9%

Amounts due to credit institutions

139,801

110,730

26.3%

115,643

20.9%

Debt securities issued

15,906

-

-

-

-

Other liabilities

5,409

7,816

-30.8%

4,685

15.5%

Total liabilities

391,964

352,204

11.3%

397,970

-1.5%

Total equity attributable to shareholders of the Group

62,908

67,452

-6.7%

64,505

-2.5%

Non-controlling interests

12,583

13,782

-8.7%

13,008

-3.3%

Total equity

75,491

81,234

-7.1%

77,513

-2.6%

Total liabilities and equity

467,455

433,438

7.8%

475,483

-1.7%

 

 

 

 

 

 

 

 

 

 

Banking Business Key Ratios

 

 

 

 

 

1Q16

1Q15

4Q15

Profitability

 

 

 

ROAA, Annualised

3.0%

3.0%

3.5%

ROAE, Annualised

21.2%

19.1%

25.1%

RB ROAE

24.3%

21.7%

27.9%

CIB ROAE

17.6%

15.1%

21.3%

Net Interest Margin, Annualised

7.5%

7.8%

7.6%

RB NIM

9.2%

9.7%

9.6%

CIB NIM

3.7%

4.2%

3.8%

Loan Yield, Annualised

14.4%

14.6%

14.8%

RB Loan Yield

17.4%

17.3%

17.9%

CIB Loan Yield

10.3%

11.8%

12.6%

Liquid assets yield, Annualised

3.1%

3.2%

3.3%

Cost of Funds, Annualised

5.0%

5.0%

5.1%

Cost of Client Deposits and Notes, annualised

4.3%

4.4%

4.4%

RB Cost of Client Deposits and Notes

3.5%

4.4%

3.5%

CIB Cost of Client Deposits and Notes

4.5%

3.9%

4.6%

Cost of Amounts Due to Credit Institutions, annualised

6.0%

5.2%

5.9%

Cost of Debt Securities Issued

7.2%

7.1%

6.8%

Operating Leverage, Y-O-Y

-3.3%

17.1%

10.4%

Operating Leverage, Q-O-Q

-6.6%

5.0%

-1.7%

Efficiency

 

 

 

Cost / Income

37.9%

36.8%

35.4%

RB Cost / Income

43.3%

43.7%

40.4%

CIB Cost / Income

27.0%

24.7%

23.6%

Liquidity

 

 

 

NBG Liquidity Ratio

47.3%

34.7%

46.2%

Liquid Assets To Total Liabilities

37.1%

33.5%

38.3%

Net Loans To Client Deposits and Notes

108.7%

122.9%

107.5%

Net Loans To Client Deposits and Notes + DFIs

91.6%

105.2%

90.8%

Leverage (Times)

6.1

5.6

6.0

Asset Quality:

 

 

 

NPLs (in GEL)

251,959

187,129

241,142

NPLs To Gross Loans To Clients

4.5%

3.5%

4.3%

NPL Coverage Ratio

86.0%

73.2%

83.4%

NPL Coverage Ratio, Adjusted for discounted value of collateral

122.6%

112.2%

120.6%

Cost of Risk, Annualised

2.3%

3.1%

2.4%

 

RB Cost of Risk

2.5%

2.4%

2.1%

 

CIB Cost of Risk

2.1%

3.4%

1.8%

Capital Adequacy:

 

 

 

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

10.1%

9.8%

10.9%

New NBG (Basel 2/3) Total Capital Adequacy Ratio

15.8%

12.9%

16.7%

Old NBG Tier I Capital Adequacy Ratio

10.7%

14.2%

9.3%

Old NBG Total Capital Adequacy Ratio

16.3%

12.9%

16.9%

Selected Operating Data:

 

 

 

Total Assets Per FTE, BOG Standalone

1,972

2,224

2,028

Number Of Active Branches, Of Which:

266

219

266

 - Express Branches (including Metro)

114

84

114

 - Bank of Georgia Branches

144

135

144

 - Solo Lounges

8

-

8

Number Of ATMs

753

554

746

Number Of Cards Outstanding, Of Which:

1,943,175

1,204,662

1,958,377

 - Debit cards

1,171,454

1,088,878

1,204,103

 - Credit cards

771,721

115,784

754,274

Number Of POS Terminals

8,175

6,537

8,102

         

 

Group Employee Data

1Q16

1Q15

4Q15

   Full Time Employees, Group, Of Which:

16,086

14,737

15,955

        - Full Time Employees, BOG Standalone

4,580

3,799

4,523

        - Full Time Employees, Georgia Healthcare Group

9,675

8,177

9,649

        - Full Time Employees, m2

59

57

58

        - Full Time Employees, Aldagi

259

262

251

    - Full Time Employees, BNB

562

480

540

        - Full Time Employees, Other

951

1,962

934

 

 

 

 

 

 

 

Operating Data, GEL mln

Q1 2016

% of clients

2015

2014

2013

Number of total Retail clients, of which:

2,022,202

 

1,999,869

1,451,777

1,245,048

Number of Solo clients ("Premier Banking")

13,284

0.7%

11,869

7,971

6,810

Consumer loans & other outstanding, volume 

851.6

 

835.6

691.8

560.2

Consumer loans & other outstanding, number 

621,376

30.7%

625,458

526,683

455,557

Mortgage loans outstanding, volume 

884.0

 

809.0

600.9

441.4

Mortgage loans outstanding, number 

13,594

0.7%

12,857

11,902

10,212

Micro & SME loans outstanding, volume 

921.4

 

903.9

666.0

497.0

Micro & SME loans outstanding, number 

20,655

1.0%

19,045

16,246

13,317

Credit cards and overdrafts outstanding, volume 

302.7

 

305.7

135.0

142.4

Credit cards and overdrafts outstanding, number 

438,271

21.7%

435,010

199,543

174,570

Credit cards outstanding, number, of which: 

771,721

38.2%

754,274

116,615

117,913

American Express cards

92,551

4.6%

100,515

110,362

108,608

Shares Outstanding

1Q16

1Q15

4Q15

 

        Ordinary Shares Outstanding

38,523,409

38,479,900

37,978,568

 

        Treasury Shares Outstanding

976,911

1,020,420

1,521,752

 

                   

 

 

 

Glossary

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

2.     Return on average total equity (ROAE) equals Profit for the period attributable to shareholders of BGEO divided by monthly average equity attributable to shareholders of BGEO for the same period;

3.     Net Interest Margin equals Net Banking Interest Income of the period divided by monthly Average Interest Earning Assets Excluding Cash for the same period; Interest Earning Assets Excluding Cash comprise: Amounts Due From Credit Institutions, Investment Securities (but excluding corporate shares) and net Loans To Customers And Finance Lease Receivables;

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

5.     Cost of Funds equals banking interest expense of the period divided by monthly average interest bearing liabilities; interest bearing liabilities include: amounts due to credit institutions, client deposits and notes, and debt securities issued;

6.     Operating Leverage equals percentage change in revenue less percentage change in operating expenses;

7.     Cost / Income Ratio equals operating expenses divided by revenue;

8.     Daily average liquid assets (as defined by NBG) during the month  divided by daily average liabilities (as defined by NBG) during the month;

9.     Liquid assets include: cash and cash equivalents, amounts due from credit institutions and investment securities;

10.   Leverage (Times) equals total liabilities divided by total equity;

11.   NPL Coverage Ratio equals allowance for impairment of loans and finance lease receivables divided by NPLs;

12.   NPL Coverage Ratio adjusted for discounted value of collateral equals allowance for impairment of loans and finance lease receivables divided by NPLs (discounted value of collateral is added back to allowance for impairment)

13.   Cost of Risk equals impairment charge for loans to customers and finance lease receivables for the period divided by monthly average gross loans to customers and finance lease receivables over the same period;

14.   New NBG (Basel 2/3) Tier I Capital Adequacy ratio equals Tier I Capital divided by total risk weighted assets, both calculated in accordance with the requirements the National Bank of Georgia instructions;

15.   New NBG (Basel 2/3) Total Capital Adequacy ratio equals total capital divided by total risk weighted assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions;

16.   Old NBG Tier I Capital Adequacy ratio equals Tier I Capital divided by total risk weighted assets, both calculated in accordance with the requirements the National Bank of Georgia instructions;

17.   Old NBG Total Capital Adequacy ratio equals total capital divided by total risk weighted Assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions;

18.   NMF - Not meaningful

 

 

 

 

 

COMPANY INFORMATION

 

BGEO Group PLC

 

Registered Address

84 Brook Street

London W1K 5EH

United Kingdom

www.BGEO.com

Registered under number 7811410 in England and Wales

Incorporation date: 14 October 2011

 

Stock Listing

London Stock Exchange PLC's Main Market for listed securities

Ticker: "BGEO.LN"

 

Contact Information

BGEO Group PLC Investor Relations

Telephone: +44 (0) 20 3178 4052; +995 322 444 205

E-mail: ir@bog.ge

www.BGEO.com

 

Auditors

Ernst & Young LLP

25 Churchill Place

Canary Wharf

London E14 5EY

United Kingdom

 

Registrar

Computershare Investor Services PLC

The Pavilions

Bridgewater Road

Bristol BS13 8AE

United Kingdom

 

Please note that Investor Centre is a free, secure online service run by our Registrar, Computershare, giving you convenient access to information on your shareholdings.

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

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

 

Share price information

BGEO shareholders can access both the latest and historical prices via our website, www.BGEO.com

 


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