TIDMBGEO
RNS Number : 6669E
Bgeo Group PLC
10 May 2017
BGEO Group PLC
1(st) quarter 2017 results
www.BGEO.com
Name of authorised official of issuer responsible for making
notification:
Giorgi Alpaidze, Head of Finance, Funding and Investor
Relations
BGEO Group PLC 1Q 2017 Results Earnings call
BGEO Group PLC ("BGEO" or the "Group") will publish its
financial results for the 1(st) quarter 2017 at 07:00 London time
on Wednesday, 10 May 2017. The results announcement will be
available on the Group's website at www.bgeo.com. An
investor/analyst conference call, organised by BGEO, will be held
on, 10 May 2017, at 14:00 UK / 15:00 CET / 9:00 U.S Eastern Time.
The duration of the call will be 60 minutes and will consist of a
15-minute update and a 45-minute Q&A session.
Dial-in numbers: 30-Day replay:
Pass code for replays/Conference Pass code for replays
ID: 19245138 / Conference ID: 19245138
International Dial-in: International Dial in:
+44 (0) 1452 555566 +44 (0)1452550000
UK: 08444933800 UK National Dial In: 08717000145
US: 16315107498 UK Local Dial In: 08443386600
Austria: 019286568 USA Free Call Dial In:
Belgium: 081700061 1 (866) 247-4222
Czech Republic: 228880460
Denmark: 32727625
Finland: 0923195187
France: 0176742428
Germany: 06922224918
Hungary: 0618088303
Ireland: 014319648
Italy: 0236008146
Luxembourg: 20880695
Netherlands: 0207176886
Norway: 21563013
Spain: 914143669
Sweden: 0850336434
Switzerland: 0565800007
FORWARD LOOKING STATEMENTS
This announcement contains forward-looking statements,
including, but not limited to, statements concerning expectations,
projections, objectives, targets, goals, strategies, future events,
future revenues or performance, capital expenditures, financing
needs, plans or intentions relating to acquisitions, competitive
strengths and weaknesses, plans or goals relating to financial
position and future operations and development. Although BGEO Group
PLC believes that the expectations and opinions reflected in such
forward-looking statements are reasonable, no assurance can be
given that such expectations and opinions will prove to have been
correct. By their nature, these forward-looking statements are
subject to a number of known and unknown risks, uncertainties and
contingencies, and actual results and events could differ
materially from those currently being anticipated as reflected in
such statements. Important factors that could cause actual results
to differ materially from those expressed or implied in
forward-looking statements, certain of which are beyond our
control, include, among other things: currency fluctuations,
including depreciation of the Georgian Lari, and macroeconomic
risk; corporate loan portfolio exposure risk; regional tensions;
regulatory risk; cyber security, information systems and financial
crime risk; investment business strategy risk; and 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
the 'Principal Risks and Uncertainties' included in BGEO Group
PLC's Annual Report and Accounts 2016. No part of these results
constitutes, or shall be taken to constitute, an invitation or
inducement to invest in BGEO Group PLC or any other entity, and
must not be relied upon in any way in connection with any
investment decision. BGEO Group PLC undertakes no obligation to
update any forward-looking statements, whether as a result of new
information, future events or otherwise, except to the extent
legally required. Nothing in this document should be construed as a
profit forecast.
TABLE OF CONTENTS
1Q17 Results Highlights 4
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Chief Executive Officer's Statement 7
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Financial Summary 9
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Discussion of Results 11
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Discussion of Banking Business Results 11
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Discussion of Segment Results 15
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* Retail Banking 15
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* Corporate Investment Banking 18
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* Utility & Energy Business 21
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* Healthcare Business 25
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* Real Estate Business 28
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Selected Financial and Operating Information 31
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Company Information 37
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About BGEO Group
The Group: BGEO Group PLC ("BGEO"- LSE: BGEO LN) is a UK
incorporated holding company of a Georgia-focused investment
platform. BGEO invests, via its subsidiaries, in the banking and
non-banking sectors in Georgia (BGEO and its subsidiaries, the
"Group"). BGEO aims to deliver on a 4x20 strategy: (1) at least 20%
ROAE; (2) at least 20% growth of our Banking Business retail loan
book; (3) at least 20% IRR; and (4) up to 20% of the Group's profit
from its Investment Business.
Banking Business: Our Banking Business comprises at least 80% of
the Group's profit. JSC Bank of Georgia ("BOG" or the "Bank") is
the main entity in the Group's Banking Business. The Banking
Business consists of Retail Banking, Corporate Banking and
Investment Management businesses at its core and other banking
businesses such as P&C Insurance ("Aldagi"), leasing, payment
services and banking operations in Belarus ("BNB"). The Group
strives to benefit from the underpenetrated banking sector in
Georgia especially through its Retail Banking services.
Investment Business: Our Investment Business comprises up to 20%
of the Group's profit and consists of Georgia Healthcare Group
("Healthcare Business" or "GHG") - an LSE (London Stock Exchange
PLC) premium listed company, m(2) Real Estate ("Real Estate
Business" or "m(2) "), Georgia Global Utilities ("Utility and
Energy Business" or "GGU") and Teliani Valley ("Beverage Business"
or "Teliani"). Georgia's fast-growing economy provides
opportunities in a number of underdeveloped markets and the Group
is well positioned to capture growth opportunities in the Georgian
corporate sector.
BGEO Group PLC announces the Group's first quarter 2017
consolidated results. Unless otherwise indicated, numbers are for
the first quarter 2017 and comparisons are with the first quarter
2016. The results are based on International Financial Reporting
Standards ("IFRS") as adopted by the European Union, are unaudited
and derived from management accounts.
BGEO highlights
-- 1Q17 profit was GEL 108.2mln (US$ 44.2mln/GBP 35.6mln), up
24.3% y-o-y
-- 1Q17 basic earnings per share ("EPS") was GEL 2.64 (US$ 1.08
per share/GBP 0.87 per share), up 25.7% y-o-y
-- Book value per share was GEL 58.0, up 15.5% y-o-y
-- Total equity attributable to shareholders was GEL 2,208.9mln,
up 14.2% y-o-y
-- Total assets increased to GEL 12,606.5mln, up 25.1% y-o-y
-- As of 5 May 2017, GEL 321.1mln(1) liquid assets were held at
the holding company level, of which, GEL 173.7mln was
unallocated
-- 1Q17 GDP growth was 5.0%, while inflation was 4.2% and the
Lari appreciated by 7.6% against the US Dollar
(1) Of GEL 321.1mln at 5 May 2017, GEL 99.5mln is earmarked for
regular dividends in respect of 2016 financial year, while GEL
47.9mln is pledged as collateral for borrowings from Georgian
commercial banks
Banking Business highlights
1Q17 performance
-- Revenue was GEL 221.4mln (up 20.2% y-o-y and down 4.8%
q-o-q)
-- Net Interest Margin ("NIM") was 7.4% (down 10 bps y-o-y and
down 20 bps q-o-q)
-- Loan Yield stood at 14.0% (down 40 bps y-o-y and down 40 bps
q-o-q)
-- Cost of Funds stood at 4.6% (down 40 bps y-o-y and flat
q-o-q)
-- Cost to Income ratio was 36.1% (37.9% in 1Q16 and 37.5% in
4Q16)
-- Cost of credit risk stood at GEL 48.3mln (up 37.8% y-o-y and
down 31.9% q-o-q)
-- Cost of Risk ratio was 2.4% (2.3% in 1Q16 and 4.2% in
4Q16)
-- Profit was GEL 86.9mln (up 24.7% y-o-y and up 15.4%
q-o-q)
-- Return on Average Assets ("ROAA") was 3.2% (3.0% in 1Q16 and
2.9% in 4Q16)
-- Return on Average Equity ("ROAE") was 23.5% (21.2% in 1Q16
and 20.1% in 4Q16)
Balance sheet strength supported by solid capital and liquidity
positions
-- The net loan book reached GEL 6,470.8mln, up 19.9% y-o-y and
down 3.2% q-o-q. The growth on a constant-currency basis was 17.4%
y-o-y and 2.1% q-o-q
-- Customer funds increased to GEL 5,591.7mln, up 12.7% y-o-y
and down 2.4% q-o-q. The growth on a constant-currency basis was
10.1% y-o-y and 3.5% q-o-q
-- Net Loans to Customer Funds and DFI ratio stood at 96.1%
(91.6% at 31 March 2016 and 95.3% at 31 December 2016)
-- Leverage was at 6.4-times as at 31 March 2017, compared to
6.1-times at 31 March 2016
-- NBG (Basel 2/3) Tier I and Total CAR stood at 11.2%(2) and
16.3%, respectively, at 31 March 2017
-- NBG Liquidity Ratio was 37.4% at 31 March 2017, compared to
47.3% at 31 March 2016
(2) Capital adequacy ratios include GEL 99.5mln distributed as
dividend from the Bank to the holding level on 29 December 2016.
These funds are earmarked for regular dividends in respect of the
2016 financial year and will be paid on 7 July 2017, subject to
approval by the shareholders at BGEO's AGM on 1 June 2017.
Excluding this amount, NBG (Basel 2/3) Tier I and Total CAR would
be 10.1% and 15.2%, respectively
Resilient growth momentum sustained across major business
lines
-- Retail Banking ("RB") continues to deliver strong franchise
growth. Retail Banking revenue reached GEL 141.2mln in 1Q17, up
32.8% y-o-y and down 4.4% q-o-q
-- The Retail Banking net loan book reached GEL 3,891.1mln as of
31 March 2017, up 34.1% y-o-y and down 0.3% q-o-q. The growth on a
constant-currency basis was 31.8% y-o-y, well above our strategic
target of 20%+, and 4.2% q-o-q. As a result, retail loan book's
share accounted for 62.6% of Bank's gross loan book of at 31 March
2017 (56.5% as of 31 March 2016)
-- Retail Banking client deposits increased to GEL 2,393.8mln as
of 31 March 2017, up 25.9% y-o-y and down 0.8% q-o-q. The growth on
a constant-currency basis was 22.9% y-o-y and 5.3% q-o-q
-- The number of Retail Banking clients reached 2.2mln at the
end of 1Q17, up 8.2% from 2.0mln at the end of 1Q16
-- Solo - our premium banking brand - continues its strong
growth. Solo, which offers a fundamentally different approach to
premium banking and targets the mass affluent client segment, more
than doubled its client base since April 2015, when we launched
Solo in its current format. As of 31 March 2017, the number of Solo
clients reached 21,657. Our goal is to significantly increase our
market share in the mass affluent segment, which stood below 13% at
the beginning of 2015, when we launched Solo in its current
format
-- Our Retail Banking product to client ratio remained at 2.0 in
1Q17, flat y-o-y and q-o-q. As we complete the transformation of
our retail banking operations from the product-based model into the
client-centric model we expect that it will have a positive impact
on the Retail Banking's product to client ratio in the future. We
completed the implementation of the client-centric model in 28
branches as of 31 March 2017 and are currently in process of
converting eight additional branches. We have seen outstanding
sales growth in transformed branches, with the number of products
sold to our clients increasing by over 100% compared to the
base-line figures
-- Corporate Investment Banking ("CIB") is successfully
delivering its risk deconcentration strategy, having reduced the
concentration of our top 10 CIB clients to 11.3% at the end of
1Q17, down from 12.1% a year ago. The CIB's net loan book amounted
to GEL 2,226.9mln at 31 March 2017, up 3.9% y-o-y, and down 7.0%
q-o-q. On a constant-currency basis, the loan portfolio was largely
flat y-o-y and q-o-q. The CIB's net fee and commission income was
GEL 5.7mln or 9.9% of the total CIB revenue in 1Q17 compared to GEL
7.0mln or 11.9% a year ago. The decline was mainly driven by the
decrease in fee and commission income from guarantees and letters
of credit as we reduced our large guarantee and letters of credit
exposures (refer to the Banking Business discussion below for more
detailed discussion). CIB's ROAE increased to 18.3% in 1Q17 from
17.6% in 1Q16, primarily as a result of improved cost of risk. We
continue to target a) further reductions in the CIB's loan
portfolio concentration, b) growth of our fee income business, and
c) improvements of CIB ROAE
-- Investment Management's Assets Under Management ("AUM")
increased to GEL 1,568.6mln(3) , up 16.7% y-o-y, reflecting higher
bond issuance activity by our brokerage arm Galt & Taggart, as
our clients increasingly access these new products
(3) Wealth Management client deposits, Galt & Taggart client
assets, Aldagi Pension Fund and Wealth Management client assets
under Bank of Georgia's custody
Investment Business Highlights
-- Our Investment Business contributed GEL 21.3mln or 19.7% to
the Group's profits in 1Q17, up from GEL 17.4mln a year ago and GEL
13.4mln a quarter ago. GEL 14.0mln from the 1Q17 Investment
Business profit was attributable to shareholders of the Group,
while the rest primarily related to non-controlling shareholders of
GHG
-- During March 2017, we sold 1,013,317 GHG shares (the
"Disposal"), representing approximately 0.8% of GHG's issued share
capital. The Disposal was achieved through private sales
transactions conducted on an arms-length and commercial basis.
Following the Disposal, we continue to hold 84,618,503 shares of
GHG, or 64.3% of GHG's issued share capital. As a result of the
Disposal, the Group received total gross proceeds of GEL 11.3mln
(US$ 4.5mln/GBP 3.7mln) and realized a gain of GEL 7.4mln (US$
3.0mln), which was recorded through an increase in shareholders'
equity in 1Q17
-- Our healthcare business, Georgia Healthcare Group PLC ("GHG")
continued to deliver strong revenue performance across all business
lines. GHG recorded net revenue of GEL 186.0mln (up 157.7% y-o-y
and up 37.5% q-o-q). During 1Q17, GHG achieved further
diversification of its revenues. GHG's total net revenue mix was
34.1%, 58.4% and 7.5% from the healthcare services business, the
pharma business and the medical insurance business, respectively.
GHG delivered quarterly EBITDA of GEL 25.1mln, up 46.3% y-o-y. This
growth was primarily driven by GHG's expansion into the
Pharmaceutical business by acquiring controlling equity stakes in
JSC GPC ("GPC"), Georgia's third-largest chain of pharmacies, in
May 2016 and JSC ABC Pharmacia ("ABC" or "Pharmadepot"), Georgia's
fourth largest chain of pharmacies, in January 2017. These
acquisitions resulted in GHG becoming the number one player in the
pharma market, similar to GHG's positions in the healthcare
services and the medical insurance markets. Consequently, GHG
reported net profit of GEL 13.0mln in 1Q17 (up 8.4% y-o-y)
-- Our real estate business, m(2) Real Estate ("m(2) ")
continued its strong project execution and sales momentum in 1Q17.
In 1Q17, m(2) achieved sales of US$ 10.1mln, selling a total of 143
apartments, compared to US$ 5.5mln sales and 53 apartments sold in
1Q16. In 1Q17, m(2) recognised revenue of GEL 2.6mln and delivered
a net profit of GEL 0.6mln
-- Effective 1 January 2017, the Group, inclusive of m(2) ,
early adopted the new revenue recognition standard, IFRS 15, which
requires revenue recognition according to the percentage of
completion method. Prior to 1 January 2017, m(2) recognized
revenues under IAS 18 upon completion and handover of the units to
customers. As a result, comparison of 1Q17 figures to those in 2016
needs to take into consideration the material impact of the
adoption of the new revenue recognition standard
-- Our utility and energy business, Georgia Global Utilities
("GGU"), delivered stable revenue and cost performance in 1Q17 and
achieved revenue of GEL 28.6mln (up 0.1% y-o-y), EBITDA of GEL
14.8mln (up 1.8% y-o-y) and profit of GEL 7.7mln (up 39.4% y-o-y).
The significant y-o-y increase in GGU's profit was primarily driven
by the absence of GEL 1.2mln income tax expense resulting from the
change in corporate tax legislation in Georgia (please see BGEO's
4Q16 and full year 2016 preliminary results announcement available
on our web-site, www.BGEO.com, for more details regarding the
change in corporate tax legislation). Since BGEO owned 25% of GGU's
equity stake until July 2016, we reported our share of GGU's
profits under "profit from associates" in our income statement
during this period. We started consolidating GGU's financial
results from 21 July 2016, when we completed the acquisition of the
remaining 75% equity stake in GGU, as part of our Investment
Business and included it in the segment results discussion as a
separate business
-- Our beverages business, Teliani, is on track to launch beer
production in 2Q17 on the back of completion of the beer brewery
construction in 2016. Teliani will brew Heineken under a ten-year
exclusive licence agreement to sell Heineken brands in Georgia,
Armenia and Azerbaijan
CHIEF EXECUTIVE OFFICER'S STATEMENT
I am pleased to report that each of the Group's businesses has
made good progress in implementing key strategic priorities during
the first quarter of 2017, and that the Group maintained its
earnings momentum in the seasonally quiet start of the year. Our
profit of GEL 108.2 million in the quarter increased by 24.3%,
compared to the first quarter of 2016, whilst basic earnings per
share increased by 25.7% to GEL 2.64 over the same period. Banking
business profits grew by 24.7% year-on-year, supported by excellent
franchise growth in the retail bank, where we now have 2.2 million
customers, resilient margins and a strong cost performance. There
was a similarly strong performance in the Group's investment
businesses, which delivered a 22.5% increase in profits
year-on-year.
At the BGEO Group level, revenue growth was 36.6% year-on-year.
Retail banking net interest income grew by 34.6%, offsetting a
slight decline in corporate investment banking net interest income
as we continue to rebalance the retail/corporate business mix. The
net loan book increased by 19.9%, over the last twelve months, and
by 17.4% on a constant-currency basis, and the retail bank now
represents 62.6% of the Bank's gross loan book. We also continued
to reposition the corporate bank to reduce concentration risk.
Costs continue to be well managed, and the banking business cost to
income ratio improved to 36.1%, from 37.9% a year ago and 37.5% in
the fourth quarter of last year. Revenues from the investment
businesses more than doubled as a result of strong business growth,
both organic and via acquisitions, in the healthcare business and
the consolidation of Georgia Global Utilities.
Overall banking business asset quality during the first quarter
of the year remained robust, with the annualised cost of risk ratio
at 2.4% in the quarter, compared to 2.3% in 1Q16, and 4.2% in 4Q16.
This is a solid performance, against the backdrop of the recent
Lari volatility, at a time when we are also gradually improving our
non-performing loans coverage ratio.
In addition to the Group's strong earnings performance, returns
have also continued to be high. In the banking business, the return
on average equity was 23.5%, compared to 21.2% in the first quarter
of 2016, largely reflecting the continued shift towards the higher
return retail banking business. In the healthcare services business
the EBITDA margin remained at 25.3%, notwithstanding the impact of
the ongoing rapid roll-out of a number of hospital and outpatient
clinic services. The Group continues to demonstrate its high growth
and high return characteristics.
Within our investment businesses, Georgia Healthcare Group (GHG)
again delivered a strong revenue performance, reflecting both good
levels of organic growth (10.1% year-on-year) and the impact of the
benefits of recent acquisitions, particularly in the pharmaceutical
business, starting to be captured. This has led to the further
diversification of GHG's revenues - an important objective for GHG.
In January 2017, GHG completed the acquisition of the Pharmadepot
chain of pharmacies to create, together with the GPC chain we
acquired in mid-2016, the largest chain of pharmacies in Georgia
with a market share by revenues of 29%. GHG is now also the largest
purchaser of pharmaceutical products in Georgia, which creates
significant cost and revenue synergy opportunities to be captured.
GHG delivered quarterly EBITDA of GEL 25.1 million, and the
business remains on track to deliver continued strong earnings
progress and, achieve its target to more than double 2015
healthcare services revenues by 2018.
Our real estate business, m(2) Real Estate, continues to develop
its apartment projects very successfully, with its strong project
execution and sales performance delivering total sales in the first
quarter of US$10.1 million, compared to US$5.5 million in the first
quarter of 2016. In our water utility and energy business, GGU, the
management team continues to focus on improving energy efficiency
and reducing water loss rates and delivered a net profit of GEL 7.7
million, a year-on-year increase of 39.4%.
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 11.2%(4) , and the Total Capital Adequacy ratio
was 16.3%, both comfortably ahead of the Bank's minimum capital
requirements. In addition, as of 5 May 2017, over GEL 300 million
liquid assets were held at the Group level, which includes the
Group's 2016 regular dividend of GEL c.99.5 million that is
intended to be paid out in July 2017. From a funding perspective,
the Bank's NBG Liquidity ratio was 37.4%, and the Liquidity
Coverage ratio was 178.1%, both of which reflect the Bank's
continuing strong liquidity position. Balance sheet leverage
remained low at 6.4 times.
During the quarter the Group began to implement its recently
approved two year US$50 million share buyback and cancellation
programme. At the end of the first quarter, US$1.2 million of this
programme had been completed.
From a macroeconomic perspective Georgia continues to deliver a
strong performance. GDP growth expectations for Georgia in 2017 are
now generally around 4-5%, significantly higher than the 2.7%
growth delivered in 2016. In March 2017, real GDP growth was 5.3%
year-on-year based on estimates of National Statistics Office of
Georgia. Core inflation remains well contained at 3.3% in April,
while headline inflation rose to 6.1% in April due to one-offs.
Overall, in the first quarter of the year, GDP growth was 5.0%,
compared with 3.3% growth in the first quarter of 2016. In
addition, the Lari has recently strengthened against the US Dollar,
after a period of volatility at the end of 2016 and the beginning
of 2017. Growth in exports and remittances as well as continued
growth in tourist arrivals, supported the Lari's strengthening,
encouraging the National Bank of Georgia to purchase US$20 million
in April, to mitigate the further appreciation of the Lari.
Supported by the improving macroeconomic performance in Georgia
and the Group's continued focus on implementing its key strategic
priorities, 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
(4) See the footnote 2 in Banking Business Highlights section on
page 4
FINANCIAL SUMMARY
INCOME
STATEMENT BGEO Consolidated Banking Business(5) Investment Business
GEL thousands
unless
otherwise Change Change Change Change Change Change
noted 1Q17 1Q16 y-o-y 4Q16 q-o-q 1Q17 1Q16 y-o-y 4Q16 q-o-q 1Q17 1Q16 y-o-y 4Q16 q-o-q
Net banking
interest
income 160,666 128,852 24.7% 155,403 3.4% 161,647 130,219 24.1% 158,371 2.1% - - - - -
Net fee and
commission
income 29,885 27,814 7.4% 35,325 -15.4% 30,135 28,015 7.6% 36,645 -17.8% - - - - -
Net banking
foreign
currency
gain 19,274 17,390 10.8% 28,516 -32.4% 19,274 17,390 10.8% 28,516 -32.4% - - - - -
Net other
banking
income 3,006 2,867 4.8% 2,199 36.7% 3,095 3,168 -2.3% 2,506 23.5% - - - - -
Gross
insurance
profit 10,223 6,416 59.3% 9,171 11.5% 7,210 5,343 34.9% 6,445 11.9% 3,937 1,723 128.5% 3,557 10.7%
Gross
healthcare
and pharma
profit 52,342 26,291 99.1% 42,221 24.0% - - - - - 52,342 26,291 99.1% 42,221 24.0%
Gross real
estate
profit 2,701 5,978 -54.8% 1,339 101.7% - - - - - 3,010 5,978 -49.6% 2,033 48.1%
Gross utility
and energy
profit 17,444 - - 21,600 -19.2% - - - - - 17,527 - - 21,671 -19.1%
Gross other
investment
profit 3,993 3,606 10.7% 9,697 -58.8% - - - - - 3,981 3,675 8.3% 9,391 -57.6%
Revenue 299,534 219,214 36.6% 305,471 -1.9% 221,361 184,135 20.2% 232,483 -4.8% 80,797 37,667 114.5% 78,873 2.4%
Operating
expenses (120,974) (83,242) 45.3% (117,358) 3.1% (79,996) (69,863) 14.5% (87,069) -8.1% (42,392) (14,410) 194.2% (32,163) 31.8%
Operating
income
before cost
of credit
risk /
EBITDA 178,560 135,972 31.3% 188,113 -5.1% 141,365 114,272 24.2% 145,414 -2.4% 38,405 23,257 65.1% 46,710 -17.8%
Profit from
associates 514 1,866 -72.5% 254 102.4% 514 - - - - - 1,866 -100.0% 254 -100.0%
Depreciation
and
amortisation
of
investment
business (11,236) (4,910) 128.8% (9,615) 16.9% - - - - - (11,236) (4,910) 128.8% (9,615) 16.9%
Net foreign
currency
gain (loss)
from
investment
business 6,955 (766) NMF (6,065) NMF - - - - - 6,955 (766) NMF (6,065) NMF
Interest
income from
investment
business 1,420 956 48.5% 1,551 -8.4% - - - - - 2,298 964 138.4% 540 NMF
Interest
expense from
investment
business (10,309) (1,382) NMF (8,673) 18.9% - - - - - (12,397) (2,947) NMF (11,673) 6.2%
Operating
income
before cost
of credit
risk 165,904 131,736 25.9% 165,565 0.2% 141,879 114,272 24.2% 145,414 -2.4% 24,025 17,464 37.6% 20,151 19.2%
Cost of
credit risk (49,245) (36,143) 36.3% (69,967) -29.6% (48,262) (35,012) 37.8% (70,873) -31.9% (983) (1,131) -13.1% 906 NMF
Net
non-recurring
items (3,371) 1,366 NMF 698 NMF (1,695) (1,419) 19.5% (1,056) 60.5% (1,676) 2,785 NMF 1,754 NMF
Profit before
income tax
expense 113,288 96,959 16.8% 96,296 17.6% 91,922 77,841 18.1% 73,485 25.1% 21,366 19,118 11.8% 22,811 -6.3%
Income tax
(expense)
benefit (5,115) (9,912) -48.4% (7,553) -32.3% (5,045) (8,178) -38.3% 1,830 NMF (70) (1,734) -96.0% (9,383) -99.3%
Profit 108,173 87,047 24.3% 88,743 21.9% 86,877 69,663 24.7% 75,315 15.4% 21,296 17,384 22.5% 13,428 58.6%
Earnings per
share (basic) 2.64 2.10 25.7% 2.29 15.3% 2.27 1.78 27.4% 1.99 13.9% 0.37 0.32 16.3% 0.30 24.7%
Earnings per
share
(diluted) 2.55 2.10 21.4% 2.21 15.4% 2.19 1.78 23.0% 1.92 14.0% 0.36 0.32 12.3% 0.29 24.8%
BALANCE SHEET BGEO Consolidated Banking Business Investment Business
GEL thousands
unless otherwise Change Change Change Change Change Change
noted Mar-17 Mar-16 y-o-y Dec-16 q-o-q Mar-17 Mar-16 y-o-y Dec-16 q-o-q Mar-17 Mar-16 y-o-y Dec-16 q-o-q
Liquid assets 3,606,926 2,948,699 22.3% 3,914,596 -7.9% 3,404,237 2,876,357 18.4% 3,712,489 -8.3% 503,589 337,602 49.2% 554,192 -9.1%
Cash and cash
equivalents 1,285,483 1,359,219 -5.4% 1,573,610 -18.3% 1,198,457 1,330,094 -9.9% 1,482,106 -19.1% 353,485 288,512 22.5% 397,620 -11.1%
Amounts due
from credit
institutions 1,090,111 764,435 42.6% 1,054,983 3.3% 973,787 720,442 35.2% 943,091 3.3% 146,798 47,936 206.2% 153,497 -4.4%
Investment
securities 1,231,332 825,045 49.2% 1,286,003 -4.3% 1,231,993 825,821 49.2% 1,287,292 -4.3% 3,306 1,154 186.5% 3,075 7.5%
Loans to customers
and finance lease
receivables 6,408,711 5,359,718 19.6% 6,648,482 -3.6% 6,470,771 5,394,565 19.9% 6,681,672 -3.2% - - - - -
Property and
equipment 1,388,938 835,651 66.2% 1,323,870 4.9% 342,495 333,243 2.8% 339,442 0.9% 1,046,443 502,408 108.3% 984,428 6.3%
Total assets 12,606,524 10,077,589 25.1% 12,989,453 -2.9% 10,678,758 9,030,055 18.3% 11,248,226 -5.1% 2,297,291 1,353,961 69.7% 2,194,926 4.7%
Client deposits
and notes 5,294,462 4,698,558 12.7% 5,382,698 -1.6% 5,591,720 4,962,432 12.7% 5,730,419 -2.4% - - - - -
Amounts due to
credit
institutions 3,133,422 1,719,920 82.2% 3,470,091 -9.7% 2,662,909 1,630,299 63.3% 3,067,651 -13.2% 532,573 124,468 327.9% 435,630 22.3%
Borrowings
from
DFI 1,376,864 960,575 43.3% 1,403,120 -1.9% 1,143,408 926,210 23.5% 1,281,798 -10.8% 233,456 34,366 579.3% 121,323 92.4%
Short-term
loans
from NBG 1,005,404 368,000 173.2% 1,085,640 -7.4% 1,005,404 368,000 173.2% 1,085,640 -7.4% - - - - -
Loans and
deposits
from
commercial
banks 751,154 391,345 91.9% 981,331 -23.5% 514,097 336,089 53.0% 700,213 -26.6% 299,117 90,102 232.0% 314,307 -4.8%
Debt securities
issued 1,157,082 1,033,758 11.9% 1,255,643 -7.8% 827,024 957,474 -13.6% 858,037 -3.6% 338,292 81,116 317.0% 407,242 -16.9%
Total liabilities 10,153,771 7,926,740 28.1% 10,566,035 -3.9% 9,243,177 7,751,805 19.2% 9,819,375 -5.9% 1,280,119 481,362 165.9% 1,200,359 6.6%
Total equity 2,452,753 2,150,849 14.0% 2,423,418 1.2% 1,435,581 1,278,250 12.3% 1,428,851 0.5% 1,017,172 872,599 16.6% 994,567 2.3%
(5) Banking Business and Investment Business financials do not
include inter-business eliminations. Detailed financials, including
inter-business eliminations are provided on pages 31and 32
BANKING BUSINESS RATIOS 1Q17 1Q16 4Q16
ROAA 3.2% 3.0% 2.9%
ROAE 23.5% 21.2% 20.1%
Net Interest Margin 7.4% 7.5% 7.6%
Loan Yield 14.0% 14.4% 14.4%
Liquid assets yield 3.4% 3.1% 3.3%
Cost of Funds 4.6% 5.0% 4.6%
Cost of Client Deposits
and Notes 3.5% 4.3% 3.5%
Cost of Amounts Due to Credit
Institutions 6.3% 6.0% 6.4%
Cost of Debt Securities
Issued 6.0% 7.2% 6.1%
Cost / Income 36.1% 37.9% 37.5%
NPLs To Gross Loans To Clients 4.6% 4.5% 4.2%
NPL Coverage Ratio 87.1% 86.0% 86.7%
NPL Coverage Ratio, Adjusted
for discounted value of
collateral 126.9% 122.6% 132.1%
Cost of Risk 2.4% 2.3% 4.2%
New NBG (Basel II) Tier
I Capital Adequacy Ratio(6) 11.2% 10.1% 10.1%
New NBG (Basel II) Total
Capital Adequacy Ratio(6) 16.3% 15.8% 15.4%
(6) Capital adequacy ratios include GEL 99.5mln distributed as
dividend from the Bank to the holding level on 29 December 2016.
These funds are earmarked for regular dividends in respect of the
2016 financial year and will be paid on 7 July 2017, subject to
approval by the shareholders at BGEO's AGM on 1 June 2017.
Excluding this amount, NBG (Basel 2/3) Tier I and Total CAR would
be 10.1% and 15.2%, respectively, at 31 March 2017 and 9.1% and
14.4%, respectively, at 31 December 2016
DISCUSSION OF RESULTS
Discussion of Banking Business Results
The Group's Banking Business is comprised of several components.
Retail Banking operations in Georgia principally provides consumer
loans, mortgage loans, overdrafts, credit cards and other credit
facilities, funds transfer and settlement services, and handling
customers' deposits for both individuals as well as legal entities.
The business targets the emerging retail, mass retail and mass
affluent segments, together with small and medium enterprises and
micro businesses. Corporate Investment Banking comprises Corporate
Banking and Investment Management operations in Georgia. Corporate
Banking principally provides loans and other credit facilities,
funds transfers and settlement services, trade finance services,
documentary operations support and handles saving and term deposits
for corporate and institutional customers. The Investment
Management business principally provides private banking services
to high net worth clients. Property and Casualty ("P&C")
principally provides property and casualty insurance services to
corporate clients and insured individuals in Georgia. BNB,
comprising JSC Belarusky Narodny Bank, principally provides retail
and corporate banking services in Belarus. The following discussion
refers to the Banking Business only.
REVENUE
GEL thousands, unless Change Change
otherwise noted 1Q17 1Q16 y-o-y 4Q16 q-o-q
Banking interest income 267,521 226,217 18.3% 258,414 3.5%
Banking interest expense (105,874) (95,998) 10.3% (100,043) 5.8%
Net banking interest
income 161,647 130,219 24.1% 158,371 2.1%
Fee and commission
income 43,663 38,484 13.5% 50,135 -12.9%
Fee and commission
expense (13,528) (10,469) 29.2% (13,490) 0.3%
Net fee and commission
income 30,135 28,015 7.6% 36,645 -17.8%
Net banking foreign
currency gain 19,274 17,390 10.8% 28,516 -32.4%
Net other banking
income 3,095 3,168 -2.3% 2,506 23.5%
Net insurance premiums
earned 12,847 9,550 34.5% 11,559 11.1%
Net insurance claims
incurred (5,637) (4,207) 34.0% (5,114) 10.2%
Gross insurance profit 7,210 5,343 34.9% 6,445 11.9%
Revenue 221,361 184,135 20.2% 232,483 -4.8%
Net Interest Margin 7.4% 7.5% 7.6%
Average interest earning
assets 8,866,822 7,013,413 26.4% 8,240,676 7.6%
Average interest bearing
liabilities 9,383,683 7,681,953 22.2% 8,609,618 9.0%
Average net loans and
finance lease receivables,
currency blended 6,638,473 5,458,637 21.6% 6,134,296 8.2%
Average net loans
and finance lease receivables,
GEL 2,035,225 1,489,518 36.6% 1,780,650 14.3%
Average net loans
and finance lease receivables,
FC 4,603,248 3,969,119 16.0% 4,353,646 5.7%
Average client deposits
and notes, currency
blended 5,701,921 5,018,669 13.6% 5,236,265 8.9%
Average client deposits
and notes, GEL 1,382,631 1,195,744 15.6% 1,221,435 13.2%
Average client deposits
and notes, FC 4,319,290 3,822,925 13.0% 4,014,830 7.6%
Average liquid assets,
currency blended 3,520,859 2,950,858 19.3% 3,307,646 6.4%
Average liquid assets,
GEL 1,374,729 1,127,353 21.9% 1,325,275 3.7%
Average liquid assets,
FC 2,146,130 1,823,505 17.7% 1,982,371 8.3%
Excess liquidity (NBG) 406,213 836,569 -51.4% 418,016 -2.8%
Liquid assets yield,
currency blended 3.4% 3.1% 3.3%
Liquid assets yield,
GEL 7.3% 7.7% 7.3%
Liquid assets yield,
FC 0.9% 0.3% 0.6%
Loan yield, currency
blended 14.0% 14.4% 14.4%
Loan yield, GEL 22.5% 22.5% 22.9%
Loan yield, FC 10.3% 11.0% 10.9%
Cost of Funds, currency
blended 4.6% 5.0% 4.6%
Cost of Funds, GEL 6.7% 6.8% 6.0%
Cost of Funds, FC 3.8% 4.4% 4.1%
-- Banking Business revenue. We recorded strong quarterly
revenue of GEL 221.4mln (up 20.2% y-o-y). Y-o-y revenue growth was
primarily driven by the increase in net banking interest income
resulting from the growth in our loan book, net banking foreign
currency gain and the outstanding performance of our P&C
insurance business
-- Net banking interest income. Our net banking interest income
was up 24.1% in 1Q17 y-o-y. Net banking interest income was
primarily driven by strong performance in our Retail Banking
operations, which was slightly offset by the decline in CIB's net
banking interest income
-- Our NIM was 7.4% in 1Q17, within our target range of 7.25% -
7.75%. 1Q17 loan yield and cost of funds were each down by 40bps
y-o-y, while liquid assets yield increased by 30bps. However, 1Q17
NIM was lower by 10 bps y-o-y as a result of the NBG's decision in
2Q16 mandating an increase in minimum reserve requirements leading
to an increased portion of liquid assets in total interest-earning
assets. On a q-o-q basis, NIM was down by 20bps driven by 40bps
decrease in loan yield, while cost of funds remained flat and
liquid asset yield was up by 10bps
-- Loan yields. Loan yield stood at 14.0% for 1Q17 (down 40bps
y-o-y and down 40bps q-o-q). This reflected 70bps decrease in the
foreign currency denominated loan yield y-o-y, while the local
currency denominated loan yield remained flat for the same period.
As the share of local currency denominated loans in the total loan
portfolio increased y-o-y, the effect of 70bps y-o-y decrease in
foreign currency denominated loan yield was partially offset. The
40 bps decrease in loan yield q-o-q reflected the 60bps decrease in
foreign currency denominated loan yield and 40 bps decrease in
local currency denominated loan yield
-- Liquid assets yield. Our liquid asset yield increased to 3.4%
(up 30bps y-o-y and up 10bps q-o-q). The foreign currency
denominated liquid assets yield increased by 60pbs y-o-y as a
result of the US Federal Reserve's decisions in December 2016 and
March 2017 to raise interest rates by 50bps in aggregate, which
triggered similar increases on interest rates paid by a) The
National Bank of Georgia (the "NBG") on the Bank's obligatory
reserves (foreign currency only) and b) correspondent banks on
deposits placed by the Bank. However, this increase was partially
offset by a decrease of the local currency denominated liquid
assets yield by 40bps y-o-y and 0.8ppts y-o-y increase of the share
of local currency denominated average liquid assets in 1Q17
-- Dollarisation. Dollarisation of our loan book decreased since
last year as the demand for local currency denominated loans
outpaced the demand for foreign currency denominated loans. The
trend was supported by the Georgian government's "de-dollarisation"
initiatives: a) a one-off program, effective from 15 January 2017
until 25 March 2017, allowing qualified borrowers to convert
eligible US dollar denominated loans into GEL, at a discount
compensated by the government, at the client's election and b) a
new regulation, effective from 15 January 2017, restricting
issuance of new loans in foreign currency with amounts less than
GEL 100 thousand (equivalent) and representing approximately GEL
415mln (equivalent) of the Bank's loans based on 31 December 2016
data. At 31 March 2017, 33.5% of our net loans were denominated in
GEL as compared to 27.6% at 31 March 2016 and 28.7% at 31 December
2016. The dollarisation of our average liquid assets decreased
slightly to 61.0% in 1Q17, from 61.8% in 1Q16 - primarily due to a
higher level of US Dollar liquidity accumulated at the beginning of
the 2016 in connection with the liability management exercise of
the Bank's outstanding Eurobonds, which was completed during the
3(rd) quarter 2016
-- Net Loans to Customer Funds and DFI ratio. Customer funds
(client deposits and notes) increased by 12.7% y-o-y to GEL
5,591.7mln primarily driven by strong deposit generation in our
Retail Banking operations where client deposits and notes grew by
25.9% y-o-y to GEL 2,393.8mln. We also increased our borrowings
from DFIs by 23.5% y-o-y to GEL 1,143.4mln, in order to support
growth in local currency lending. As a result, our Net Loans to
Customer Funds and DFI ratio, which is closely monitored by
management, stood at 96.1% (91.6% at 31 March 2016 and 95.3% at 31
December 2016)
-- Net fee and commission income. Net fee and commission income
performance is mainly driven by the strong performance in our
settlement operations supported by the success of our Express
banking franchise. This was partially offset by a decline in the
CIB's fees from guarantees and letters of credit, driven by the
deconcentration efforts in the CIB segment. Excluding the income
from guarantees and letters of credit, net fee and commission
income was GEL 26.9mln for 1Q17, up 16.2% y-o-y
-- Net banking foreign currency gain. In line with the continued
volatility of the GEL exchange rate, net banking foreign currency
gain was up 10.8% y-o-y for 1Q17 and down 32.4% q-o-q. Volatility
was more elevated in 4Q16 compared to 1Q16 and 1Q17. Retail Banking
and the CIB businesses contributed 93.0% to the total 1Q17 net
banking foreign currency gain
-- Net other banking income. The 23.5% q-o-q increase in net
other banking income in 1Q17 was largely driven by the absence of
losses on derivative financial instruments recorded in 4Q16
-- Gross insurance profit. Our P&C franchise, Aldagi,
delivered record quarterly gross insurance profit in 1Q17. Net
insurance premiums earned increased by 34.5% y-o-y and net
insurance claims incurred increased by 34.0% y-o-y, driving y-o-y
growth in gross insurance profit by 34.9%. The strong performance
was mainly attributable to the improved quality of the insurance
portfolio, which benefited from the termination of relationships
with loss making clients
OPERATING INCOME BEFORE NON-RECURRING ITEMS;
COST OF CREDIT RISK; PROFIT FOR THE PERIOD
GEL thousands,
unless otherwise Change Change
noted 1Q17 1Q16 y-o-y 4Q16 q-o-q
Salaries and other
employee benefits (46,257) (39,806) 16.2% (50,052) -7.6%
Administrative
expenses (23,219) (20,058) 15.8% (25,714) -9.7%
Banking depreciation
and amortisation (9,759) (9,138) 6.8% (9,841) -0.8%
Other operating
expenses (761) (861) -11.6% (1,462) -47.9%
Operating expenses (79,996) (69,863) 14.5% (87,069) -8.1%
Profit from associate 514 - NMF - NMF
Operating income
before cost of
credit risk 141,879 114,272 24.2% 145,414 -2.4%
Impairment charge
on loans to customers (41,341) (32,218) 28.3% (69,920) -40.9%
Impairment charge
on finance lease
receivables (139) (513) -72.9% 3,124 NMF
Impairment charge
on other assets
and provisions (6,782) (2,281) 197.3% (4,077) 66.3%
Cost of credit
risk (48,262) (35,012) 37.8% (70,873) -31.9%
Net operating
income before non-recurring
items 93,617 79,260 18.1% 74,541 25.6%
Net non-recurring
items (1,695) (1,419) 19.5% (1,056) 60.5%
Profit before
income tax 91,922 77,841 18.1% 73,485 25.1%
Income tax (expense)
benefit (5,045) (8,178) -38.3% 1,830 NMF
Profit 86,877 69,663 24.7% 75,315 15.4%
-- Operating expenses increased to GEL 80.0mln in 1Q17 (up 14.5%
y-o-y and down 8.1% q-o-q). Growth in revenues outpaced growth in
operating expenses leading to y-o-y positive operating leverage of
5.7% in 1Q17. This represents an improvement compared to y-o-y
negative operating leverages of 3.3% and 6.8% in 1Q16 and 4Q16,
respectively. 1Q17 operating expenses y-o-y and q-o-q changes were
driven by:
- Increase in y-o-y salaries and employee benefits by 16.2%
mainly reflects organic growth of our Retail Banking Business,
while q-o-q decrease of 7.6% was attributable to seasonally slower
activity of Retail Banking Business in 1Q17 compared to 4Q16
- Administrative expenses increased y-o-y by 15.8%, primarily
driven by rent and repair and maintenance costs as compared with
the same period last year. The increase was attributable to the
combined effect of the larger branch network and the higher average
quarterly exchange rate during 1Q17 as the vast majority of branch
rental agreements are denominated in US Dollar. The decrease in
q-o-q administrative expenses by 9.7% reflects higher seasonal
marketing activities in 4Q16
-- Cost of Risk ratio. Banking Business Cost of Risk ratio was
2.4% in 1Q17, up 10bps y-o-y and down 180bps q-o-q. Cost of Risk
was positively impacted by the GEL's appreciation against major
foreign currencies during 1Q17. CIB Cost of Risk ratio was down
180bps y-o-y and 630bps q-o-q, while RB Cost of Risk ratio was up
90bps y-o-y and 140bps q-o-q, largely driven by headwinds from
GEL's depreciation in 4Q16
-- Quality of the Banking Business loan book remained resilient
in 1Q17 as evidenced by following closely monitored metrics:
- NPLs. NPLs were GEL 311.9mln, up 23.8% y-o-y and up 5.8%
q-o-q. The q-o-q increase reflects increase in BNB's NPLs, as a
result of the difficult economic environment in Belarus, and RB's
NPLs
- NPLs to gross loans. NPLs to gross loans were 4.6% as of 31
March 2017, up 10 bps y-o-y and 40bps q-o-q. Our Retail Banking
NPLs to gross loans stood flat at 1.7% as of 31 March 2017 and 31
March 2016, up from 1.4% as of 31 December 2016. The CIB NPLs to
gross loans was 8.2%, compared to 7.4% as of 31 March 2016 and 8.0%
as of 31 December 2016
- The NPL coverage ratio. The NPL coverage ratio stood at 87.1%
as of 31 March 2017, compared to 86.0% as of 31 March 2016 and
86.7% as of 31 December 2016. Our NPL coverage ratio adjusted for
the discounted value of collateral was 126.9% as of 31 March 2017,
compared to 122.6% as of 31 March 2016 and compared to 132.1% as of
31 December 2016
- Past due rates. Our 15 days past due rate for retail loans
stood at 1.4% as of 31 March 2017 compared to 1.1% as of 31 March
2016 and 1.2% as of 31 December 2016. 15 days past due rate for our
mortgage loans stood at 0.9% as of 31 March 2017 compared to 0.6%
as of 31 March 2016 and 0.6% as of 31 December 2016
-- The 197.3% y-o-y and 66.3% q-o-q increase in impairment
charges on other assets and provisions reflects the impairment of a
repossessed asset
-- Income tax (expense) benefit. The y-o-y and q-o-q movements
in income taxes reflect the impacts of changes in corporate
taxation model, approved by the Parliament of Georgia in May 2016,
on our Banking Business deferred tax assets and liabilities
-- As a result of the foregoing, the 1Q17 Banking Business
profit was GEL 86.9mln (up 24.7% y-o-y and up 15.4% q-o-q), while
ROAE increased to 23.5% in 1Q17 (up 230bps y-o-y and up 340bps
q-o-q)
-- BNB - the Group's banking subsidiary in Belarus - generated a
profit of GEL 0.7mln in 1Q17 (down 84.3% y-o-y and up GEL 4.8mln
q-o-q); BNB's earnings were negatively impacted by increased levels
of cost of risk due to the weak macro-economic conditions in
Belarus. BNB's loan book reached GEL 335.5mln at 31 March 2017, up
4.9% y-o-y, mostly reflecting an increase in corporate and consumer
loans. Client deposits were GEL 235.9mln, up 2.2% y-o-y at 31 March
2017. The significant improvement in BNB's performance on a q-o-q
basis was driven by the absence of one-off costs recorded in 4Q16
related to higher cost of risk, PPE impairment charges and losses
from investment property revaluation. However, BNB continued to
remain well-capitalised, with Capital Adequacy Ratios well above
the requirements of its regulating Central Bank. As at 31 March
2017, total CAR was 15.8%, comfortably above 10% minimum
requirement of the National Bank of the Republic of Belarus
("NBRB"), while Tier I CAR was 9.9%, above NBRB's 6% minimum
requirement. Return on Average Equity ("ROAE") for BNB was 3.2% in
1Q17 (22.9% in 1Q16 and negative 21.9% in 4Q16)
-- In 1Q17, the Group's ownership in BNB increased from 80.0% to
95.0% following the exercise by the International Finance
Corporation ("IFC") of the put option which was granted to IFC in
July 2010 as part of its purchase of a 19.99% equity stake in BNB.
The price paid by the Group for BNB's 15.0% equity stake amounted
to USD c.6mln (GEL 16mln). Following the transaction, IFC continues
to hold 4.99% of BNB's equity
BANKING BUSINESS BALANCE SHEET HIGHLIGHTS
GEL thousands, unless otherwise Change Change
noted Mar-17 Mar-16 y-o-y Dec-16 q-o-q
Liquid assets 3,404,237 2,876,357 18.4% 3,712,489 -8.3%
Liquid assets, GEL 1,312,152 1,050,741 24.9% 1,455,296 -9.8%
Liquid assets, FC 2,092,085 1,825,616 14.6% 2,257,193 -7.3%
Net loans and finance lease
receivables 6,470,771 5,394,565 19.9% 6,681,672 -3.2%
Net loans and finance lease
receivables, GEL 2,170,530 1,488,050 45.9% 1,920,422 13.0%
Net loans and finance lease
receivables, FC 4,300,241 3,906,515 10.1% 4,761,250 -9.7%
Client deposits and notes 5,591,720 4,962,432 12.7% 5,730,419 -2.4%
Client deposits and notes,
GEL 1,472,494 1,113,787 32.2% 1,331,918 10.6%
Client deposits and notes,
FC 4,119,226 3,848,645 7.0% 4,398,501 -6.3%
Amounts due to credit institutions 2,662,909 1,630,299 63.3% 3,067,651 -13.2%
Borrowings from DFIs 1,143,408 926,210 23.5% 1,281,798 -10.8%
Short-term loans from central
banks 1,005,404 368,000 173.2% 1,085,640 -7.4%
Loans and deposits from commercial
banks 514,097 336,089 53.0% 700,213 -26.6%
Debt securities issued 827,024 957,474 -13.6% 858,037 -3.6%
Liquidity and CAR ratios
Net loans / client deposits
and notes 115.7% 108.7% 116.6%
Net loans / client deposits
and notes + DFIs 96.1% 91.6% 95.3%
Liquid assets as percent of
total assets 31.9% 31.9% 33.0%
Liquid assets as percent of
total liabilities 36.8% 37.1% 37.8%
NBG liquidity ratio 37.4% 47.3% 37.7%
Excess liquidity (NBG) 406,213 836,569 -51.4% 418,016 -2.8%
New NBG (Basel II) Tier I
Capital Adequacy Ratio(7) 11.2% 10.1% 10.1%
New NBG (Basel II) Total Capital
Adequacy Ratio(7) 16.3% 15.8% 15.4%
Our Banking Business balance sheet remained highly liquid (NBG
Liquidity ratio of 37.4%) and well-capitalised (Tier I ratio, NBG
Basel 2/3 of 11.2%(7) ) with a well-diversified funding base
(Client Deposits and notes to Total Liabilities of 60.5%).
-- Liquidity. The NBG liquidity ratio stood at 37.4% at 31 March
2017 compared to 47.3% a year ago, and against a regulatory minimum
requirement of 30.0%. Liquid assets increased to GEL 3,404.2mln at
31 March 2017, up 18.4% y-o-y, largely driven by a) the increase in
obligatory reserves as a result of the change in respective NBG
regulation in 2Q16 and b) increase in local currency corporate
bonds, which are used by the Bank as collateral for short-term
borrowings from the NBG
-- Diversified funding base. Short-term borrowings from the NBG
grew by 173.2% y-o-y due to the increase in local currency sourcing
from International Financial Institutions whose GEL-denominated
bonds were pledged as collateral against NBG loans
-- Loan book. Our net loan book and financial lease receivables
stood at GEL 6,470.8mln, up 19.9% y-o-y and down 3.2% q-o-q, with
retail representing 62.6% of the total loan portfolio at 31 March
2017 (56.5% at 31 March 2016 and 60.9% at 31 December 2016), in
line with our target to increase RB's share in total loan book to
65%. The growth on a constant-currency basis was 17.4% y-o-y and
2.1% q-o-q. While both local and foreign currency portfolios
experienced strong y-o-y growth, local currency loan portfolio
demonstrated outstanding y-o-y increase of 45.9%, which was
partially driven by the Georgian government's "de-dollarisation"
initiatives and our goal to increase the share of local currency
loans in our portfolio
(7) Capital adequacy ratios include GEL 99.5mln distributed as
dividend from the Bank to the holding level on 29 December 2016.
These funds are earmarked for regular dividends in respect of the
2016 financial year and will be paid on 7 July 2017, subject to
approval by the shareholders at BGEO's AGM on 1 June 2017.
Excluding this amount, NBG (Basel 2/3) Tier I and Total CAR would
be 10.1% and 15.2%, respectively, at 31 March 2017 and 9.1% and
14.4%, respectively, at 31 December 2016
Discussion of Segment Results
The segment results discussion is presented for Retail Banking
(RB), Corporate Investment Banking (CIB), Utility & Energy
Business (GGU), Healthcare Business (GHG) and Real Estate Business
(m(2) 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 Change Change
otherwise noted 1Q17 1Q16 y-o-y 4Q16 q-o-q
INCOME STATEMENT
HIGHLIGHTS
Net banking interest
income 111,511 82,832 34.6% 111,109 0.4%
Net fee and commission
income 22,245 19,239 15.6% 26,810 -17.0%
Net banking foreign
currency gain 6,492 3,590 80.8% 8,825 -26.4%
Net other banking
income 982 711 38.1% 989 -0.7%
Revenue 141,230 106,372 32.8% 147,733 -4.4%
Salaries and other
employee benefits (27,865) (23,607) 18.0% (31,149) -10.5%
Administrative expenses (16,835) (14,521) 15.9% (17,287) -2.6%
Banking depreciation
and amortisation (7,991) (7,383) 8.2% (8,052) -0.8%
Other operating expenses (475) (496) -4.2% (818) -41.9%
Operating expenses (53,166) (46,007) 15.6% (57,306) -7.2%
Profit from associate 514 - NMF - NMF
Operating income
before cost of credit
risk 88,578 60,365 46.7% 90,427 -2.0%
Cost of credit risk (33,687) (18,184) 85.3% (19,272) 74.8%
Net non-recurring
items (482) (561) -14.1% (1,921) -74.9%
Profit before income
tax 54,409 41,620 30.7% 69,234 -21.4%
Income tax (expense) (3,592) (3,844) -6.6% (1,235) 190.9%
Profit 50,817 37,776 34.5% 67,999 -25.3%
BALANCE SHEET HIGHLIGHTS
Net loans, Currency
Blended 3,891,063 2,901,189 34.1% 3,902,306 -0.3%
Net loans, GEL 1,783,345 1,266,966 40.8% 1,530,661 16.5%
Net loans, FC 2,107,718 1,634,223 29.0% 2,371,645 -11.1%
Client deposits,
Currency Blended 2,393,754 1,902,042 25.9% 2,413,569 -0.8%
Client deposits,
GEL 616,383 447,620 37.7% 603,149 2.2%
Client deposits,
FC 1,777,371 1,454,422 22.2% 1,810,420 -1.8%
of which:
Time deposits, Currency
Blended 1,426,012 1,205,935 18.2% 1,437,644 -0.8%
Time deposits, GEL 255,955 196,668 30.1% 228,047 12.2%
Time deposits, FC 1,170,057 1,009,267 15.9% 1,209,597 -3.3%
Current accounts
and demand deposits,
Currency Blended 967,742 696,107 39.0% 975,925 -0.8%
Current accounts
and demand deposits,
GEL 360,428 250,952 43.6% 375,102 -3.9%
Current accounts
and demand deposits,
FC 607,314 445,155 36.4% 600,823 1.1%
KEY RATIOS
ROAE Retail Banking 27.2% 24.3% 35.8%
Net interest margin,
currency blended 8.8% 9.2% 9.3%
Cost of risk 3.4% 2.5% 2.0%
Cost of funds, currency
blended 5.3% 6.5% 5.1%
Loan yield, currency
blended 15.9% 17.4% 16.4%
Loan yield, GEL 24.9% 25.4% 25.4%
Loan yield, FC 9.4% 10.9% 10.1%
Cost of deposits,
currency blended 3.0% 3.5% 3.1%
Cost of deposits,
GEL 4.4% 4.8% 4.0%
Cost of deposits,
FC 2.6% 3.2% 2.7%
Cost of time deposits,
currency blended 4.4% 5.1% 4.5%
Cost of time deposits,
GEL 8.7% 9.7% 8.6%
Cost of time deposits,
FC 3.6% 4.3% 3.7%
Current accounts
and demand deposits,
currency blended 0.9% 0.9% 0.8%
Current accounts
and demand deposits,
GEL 1.4% 1.1% 1.1%
Current accounts
and demand deposits,
FC 0.6% 0.7% 0.6%
Cost / income ratio 37.6% 43.3% 38.8%
Performance highlights
-- Retail Banking continued its strong performance across all
major business lines and recorded a total revenue of GEL 141.2mln
in 1Q17 (up 32.8% y-o-y)
-- Net banking interest income experienced a 34.6% y-o-y growth
on the back of the strong growth in the Retail Banking loan book,
while q-o-q growth was modest at 0.4% due to seasonal factors.
Record quarterly net banking interest income was supported by the
increase in the local currency loan portfolio, which generated
15.5ppts higher yield than foreign currency loan portfolio during
1Q17
-- The Retail Banking net loan book reached GEL 3,891.1mln, up
34.1% y-o-y. Our local currency denominated loan book grew at a
faster pace (up 40.8% y-o-y) than the foreign currency denominated
loan book (up 29.0% y-o-y). As a result, loan book dollarisation
decreased to 54.2% at 31 March 2017 from 56.3% at 31 March 2016 and
60.8% at 31 December 2016
-- The loan book growth was a product of continued strong loan
origination levels delivered across all Retail Banking
segments:
- Consumer loan originations amounted to GEL 302.4mln in 1Q17,
leading to an outstanding consumer loans balance of GEL 944.0mln at
31 March 2017, up 44.8% y-o-y
- Micro loan originations totalled GEL 236.5mln in 1Q17,
resulting in an outstanding micro loans balance of GEL 872.8mln at
31 March 2017, up 55.1% y-o-y
- SME loan originations amounted to GEL 118.9mln in 1Q17,
leading to an outstanding SME loans balance of GEL 463.4mln at 31
March 2017, up 29.2% y-o-y
- Mortgage loan originations totalled GEL 213.0mln in 1Q17,
resulting in an outstanding mortgage loans balance of GEL
1,187.0mln at 31 March 2017, up 34.3% y-o-y
- Originations of loans disbursed at merchant locations amounted
to GEL 42.7mln in 1Q17, resulting in outstanding loans disbursed at
merchant locations of GEL 108.3mln at 31 March 2017, down 1.4%
y-o-y (the lack of growth in the outstanding balance in this
product reflects increased client conversions to consumer loans and
credit cards)
-- Retail Banking client deposits increased to GEL 2,393.8mln,
up 25.9% y-o-y, notwithstanding a decrease in the cost of deposits
of 50bps y-o-y. The dollarisation level of our deposits decreased
to 74.3% from 76.5% at 31 March 2016 and from 75.0% at 31 December
2016. This is in line with the current decreasing trend of cost on
foreign currency denominated deposits (down 60 bps y-o-y and down
10 bps q-o-q). The spread between the cost of RB's client deposits
widened to 1.8ppts during 1Q17 (GEL: 4.4%; FC: 2.6%) compared to
1.6ppts in 1Q16 (GEL: 4.8%; FC: 3.2%) and 1.3ppts in 4Q16 (GEL:
4.0%; FC: 2.7%). Local currency denominated deposits increased at a
faster pace to GEL 616.4mln (up 37.7% y-o-y and 2.2% q-o-q), as
compared to foreign currency denominated deposits that grew to GEL
1,777.4 mln (up 22.2% y-o-y and down 1.8% q-o-q)
-- Retail Banking NIM was 8.8% in 1Q17, down 40bps y-o-y and
down 50bps q-o-q. The lower NIM y-o-y was attributable to 150bps
decrease in loan yield, while cost of funds decreased by only
120bps. On a q-o-q basis, loan yield was down by 50bps and cost of
funds was up by 20bps, thus, leading to 50bps decrease in NIM
-- The number of Retail Banking clients reached 2.2mln, up 8.2%
y-o-y and up 2.2% q-o-q, while the number of total cards
outstanding amounted to 2,099,488, up 8.0% y-o-y and up 2.1%
q-o-q
-- Our express banking franchise, the major driver of Retail
Banking's fee and commission income, added 16,645 Express Banking
customers during 1Q17 and 51,203 clients since 1Q16, accumulating a
total of 488,612 clients at 31 March 2017. The growth in the client
base was achieved largely by the increased offering of
cost-effective remote channels. The strong client growth supported
an organic increase in our Retail Banking net fee and commission
income to GEL 22.2mln in 1Q17, up 15.6% y-o-y
-- Our Express Banking business continues to deliver strong
growth as we further 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
- As of 31 March 2017, 1,315,489 Express Cards were outstanding,
compared to 1,113,745 cards outstanding as of 31 March 2016 and
1,279,113 cards as of 31 December 2016. 129,128 Express Cards were
issued in 1Q17, up 14.4% y-o-y and down 30.3% q-o-q
- The number of Express Pay terminals stood at 2,723 at 31 March
2017, compared to 2,627 terminals at 31 March 2016 and 2,729 at 31
December 2016. Express Pay terminals are an alternative to tellers,
placed at bank branches as well as various other venues (groceries,
shopping centres, 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
- The utilisation of Express Pay terminals continued to grow in
1Q17. The volume of transactions reached GEL 968.8mln, up 46.2%
y-o-y and up 3.5% q-o-q, while the number of transactions was
25.2mln, down 12.7% y-o-y and down 7.4% q-o-q. This decrease
resulted from management's decision to introduce transaction fees
on non-banking transactions processed through Express Pay
terminals. However, while this introduction negatively affected the
number of transactions, the decrease was more than offset by the
total fees charged to the clients leading to 92.3% y-o-y increase
in fee income from express pay terminals
- Increased Point of Sales ("POS") footprint to 8,814 desks and
4,740 contracted merchants as of 31 March 2017, up from 6,690 desks
and 3,356 contracted merchants as of 31 March 2016 and up from
8,516 desks and 4,514 contracted merchants as of 31 December
2016
- The number of POS terminals reached 10,774, up 31.9% from
8,168 as of 31 March 2016 and up 4.0% from 10,357 as of 31 December
2016
- The volume of transactions through the Bank's POS terminals
grew to GEL 266.1mln in 1Q17, up 50.9% y-o-y and down 8.3% q-o-q,
reflecting the seasonality trend in 4Q16 given the clients'
increased spending during the holidays
- The number of transactions via Internet banking increased to
1.7mln in 1Q17, up from 1.3mln in 1Q16 and flat compared to 1.7 mln
in 4Q16, with transaction volume reaching GEL 437.4mln, up 101.7%
y-o-y and flat q-o-q
- The number of transactions via mobile banking application
reached 1.0mln in 1Q17, doubling from 0.5mln in 1Q16 and up from
0.9mln in 4Q16, with volume of transactions reaching GEL 94.4mln,
up 162.6% y-o-y and up 5.3% q-o-q
-- The number of Solo clients reached 21,657 at the end of 1Q17,
up 161.5% since its re-launch in April 2015. We have now launched
11 Solo lounges, of which 8 are located in Tbilisi, the capital
city, and 3 in major regional cities of Georgia. In 1Q17,
annualised profit per Solo client was GEL 1,865 compared to a
profit of GEL 75 and GEL 59 per Express and mass retail clients,
respectively. Product to client ratio for Solo segment was 6.8,
compared to 3.2 and 1.7 for Express and mass retail clients,
respectively. While Solo clients currently represent c.1.0% of our
total retail client base, they contributed 22.1% to our retail loan
book, 38.2% to our retail deposits, 12.7% to our net interest
income and 13.5% to our net fee and commission income. Our goal is
to significantly increase our market share in this segment, which
stood below 13% at the beginning of 2015 when we launched Solo in
its current format
-- RB cost to income ratio remained well-controlled and improved
to 37.6% in 1Q17, down by 570 bps y-o-y and down 120bps q-o-q. The
significant improvement resulted from the increasing utilisation of
our Solo lounges coupled with the growth of Express Banking
franchise, which has the most cost-efficient model among our three
Retail Banking segments
-- RB cost of risk remains contained despite headwinds - RB cost
of credit risk was GEL 33.7mln in 1Q17 (up 85.3% y-o-y and up 74.8%
q-o-q). As a result, Cost of Risk ratio was 3.4% in 1Q17, up from
2.5% in 1Q16 and 2.0% in 4Q16. The increase in cost of risk mainly
reflected the following two factors: a) increased pace of loan
growth in express and micro express loan portfolio during 1Q17,
which are characterized with the highest cost of risk ratios in the
RB's loan portfolio and the highest loan yields and b) impact from
a major fire at one of the largest shopping centres located in
downtown Tbilisi, which destroyed the inventory of some of RB's
Micro and SME clients and negatively affected their
creditworthiness
-- As a result of the above described factors, Retail Banking
profit totaled GEL 50.8mln in 1Q17 (up 34.5% y-o-y and down 25.3%
q-o-q). Retail Banking continued to deliver an outstanding ROAE,
which stood at 27.2% in 1Q17, compared to 24.3% in 1Q16 and 35.8%
in 4Q16
Corporate Investment Banking (CIB)
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) and (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. In its brokerage business, Galt & Taggart serves
regional and international markets, including hard-to-reach
frontier economies.
GEL thousands, unless Change Change
otherwise noted 1Q17 1Q16 y-o-y 4Q16 q-o-q
INCOME STATEMENT HIGHLIGHTS
Net banking interest
income 37,949 38,250 -0.8% 39,168 -3.1%
Net fee and commission
income 5,666 7,020 -19.3% 8,133 -30.3%
Net banking foreign
currency gain 11,429 11,368 0.5% 16,158 -29.3%
Net other banking
income 2,259 2,587 -12.7% 2,518 -10.3%
Revenue 57,303 59,225 -3.2% 65,977 -13.1%
Salaries and other
employee benefits (12,346) (11,155) 10.7% (12,368) -0.2%
Administrative expenses (3,535) (3,355) 5.4% (4,943) -28.5%
Banking depreciation
and amortisation (1,217) (1,272) -4.3% (1,262) -3.6%
Other operating expenses (157) (231) -32.0% (330) -52.4%
Operating expenses (17,255) (16,013) 7.8% (18,903) -8.7%
Operating income before
cost of credit risk 40,048 43,212 -7.3% 47,074 -14.9%
Cost of credit risk (8,699) (14,138) -38.5% (42,172) -79.4%
Net non-recurring
items (1,155) (856) 34.9% 2,267 NMF
Profit before income
tax 30,194 28,218 7.0% 7,169 321.2%
Income tax (expense)
benefit (1,912) (2,687) -28.8% 2,885 NMF
Profit 28,282 25,531 10.8% 10,054 181.3%
BALANCE SHEET HIGHLIGHTS
Letters of credit and
guarantees, standalone* 506,433 541,567 -6.5% 511,615 -1.0%
Net loans and finance
lease receivables,
Currency Blended 2,226,884 2,144,299 3.9% 2,394,876 -7.0%
Net loans and finance
lease receivables,
GEL 398,105 220,295 80.7% 400,395 -0.6%
Net loans and finance
lease receivables,
FC 1,828,779 1,924,004 -4.9% 1,994,481 -8.3%
Client deposits, Currency
Blended 2,929,377 2,868,846 2.1% 3,059,150 -4.2%
Client deposits, GEL 897,239 797,875 12.5% 772,253 16.2%
Client deposits, FC 2,032,138 2,070,971 -1.9% 2,286,897 -11.1%
Time deposits, Currency
Blended 1,136,852 1,200,565 -5.3% 1,230,627 -7.6%
Time deposits, GEL 138,404 165,311 -16.3% 135,002 2.5%
Time deposits, FC 998,448 1,035,254 -3.6% 1,095,625 -8.9%
Current accounts and
demand deposits, Currency
Blended 1,792,525 1,668,281 7.4% 1,828,523 -2.0%
Current accounts and
demand deposits, GEL 758,835 632,564 20.0% 637,251 19.1%
Current accounts and
demand deposits, FC 1,033,690 1,035,717 -0.2% 1,191,272 -13.2%
Assets under management 1,568,550 1,343,821 16.7% 1,591,963 -1.5%
RATIOS
ROAE, Corporate Investment
Banking 18.3% 17.6% 6.1%
Net interest margin,
currency blended 3.4% 3.7% 3.6%
Cost of risk 0.3% 2.1% 6.6%
Cost of funds, currency
blended 5.0% 4.4% 5.1%
Loan yield, currency
blended 10.7% 10.3% 11.1%
Loan yield, GEL 12.5% 13.1% 13.0%
Loan yield, FC 10.3% 10.2% 10.8%
Cost of deposits, currency
blended 3.9% 4.5% 3.6%
Cost of deposits, GEL 6.6% 8.0% 5.0%
Cost of deposits, FC 2.9% 3.1% 3.2%
Cost of time deposits,
currency blended 5.6% 6.0% 5.8%
Cost of time deposits,
GEL 9.6% 9.6% 9.2%
Cost of time deposits,
FC 5.1% 5.3% 5.4%
Current accounts and
demand deposits, currency
blended 2.8% 3.4% 2.0%
Current accounts and
demand deposits, GEL 6.0% 7.5% 3.9%
Current accounts and
demand deposits, FC 0.9% 0.8% 1.0%
Cost / income ratio 30.1% 27.0% 28.7%
Concentration of top
ten clients 11.3% 12.1% 11.8%
*Off-balance sheet item
Performance highlights
-- CIB's key focus is to increase its ROAE and we are doing this
by deconcentrating our corporate loan book and decreasing credit
losses, while focusing on further growing our fee generating
business through the investment management and trade finance
franchises, which we believe are the strongest in the region
- CIB is successfully following its loan portfolio
deconcentration strategy. The concentration of our top 10 Corporate
Investment Banking clients reduced to 11.3% at the end of 1Q17,
down from 12.1% a year ago and 11.8% at the end of 4Q16
- CIB revenue reflects our continuous efforts towards the
de-concentration strategy. Net banking interest income was down by
0.8% y-o-y and down by 3.1% q-o-q. The y-o-y decline in net banking
interest income reflects the y-o-y increase in the currency blended
cost of funds, only partially offset by the increase in loan book
size and loan yields during the same period. The q-o-q decline is
in line with the decrease in loan book size, also affected by
declining loan yields
- The CIB net fee and commission income represented GEL 5.7mln
or 9.9% of total CIB revenue in 1Q17 compared to GEL 7.0mln or
11.9% a year ago and GEL 8.1mln or 12.3% in 4Q16. The decline was
mainly driven by the decrease in fee and commission income from
guarantees and letters of credit (net income from guarantees and
letters of credit was down by GEL1.6mln or 33.9% y-o-y and down by
GEL 0.4mln or 11.7% q-o-q), reflecting our ongoing risk
de-concentration efforts
- The CIB cost of credit risk significantly improved to GEL
8.7mln for 1Q17 (down 38.5% y-o-y and down 79.4% q-o-q), which
largely benefited from GEL's 7.6% appreciation against USD during
1Q17 resulting in decreased GEL values of allowances for foreign
currency denominated loans
- As a result of the foregoing, the CIB ROAE increased to 18.3%
in 1Q17, compared to 17.6% a year ago and 6.1% in 4Q16
-- CIB's loan book de-dollarisation continued in 1Q17 as the
share of foreign currency denominated loans declined to 82.1%,
compared to 89.7% a year ago. This trend reflects the increased
volatility of the local currency against the US Dollar, as
corporate clients have increasingly started to prefer local
currency borrowing. The loan book de-dollarisation was also
supported by decreasing loan yields for GEL denominated loans
(12.5% for 1Q17, down 60bps y-o-y and 50bps q-o-q)
-- In 1Q17, dollarisation of our CIB deposits decreased to 69.4%
from 72.2% a year ago and 74.8% in 4Q16 as a result of the
increased deposit rates in local currency and decreased deposit
rates in foreign currency. In 1Q17, the cost of deposits in local
currency stood at 6.6%, up 160 bps q-o-q, while the cost of
deposits in foreign currency decreased by 20 bps y-o-y and 30bps
q-o-q to 2.9%. As a result, total deposits reached GEL 2,929.4, up
2.1% y-o-y and down 4.2% q-o-q. On a constant currency basis, total
deposits stayed flat y-o-y and were up 1.2% q-o-q
-- CIB recorded a NIM of 3.4% in 1Q17, down 30bps y-o-y and down
20bps q-o-q. The y-o-y decrease in the CIB's NIM resulted from
40bps increase in loan yield, which was more than offset by 60bps
increase in cost of funds. The q-o-q decrease in NIM reflected
40bps decrease in loan yield, the impact of which was slightly
offset by 10bps decline in cost of funds
-- In line with continued volatility the GEL exchange rate, our
net banking foreign currency gain reached GEL 11.4mln in 1Q17 (up
0.5% y-o-y and down 29.3% q-o-q)
-- CIB's cost to income ratio increased to 30.1% from 27.0% in
1Q16 and from 28.7% in4Q16. The increase resulted from the
intensified de-concentration efforts, which led to a higher
reduction in revenues with less impact on the operating costs.
CIB's operating expenses were up 7.8% on y-o-y driven by 10.7%
increase in salaries and other employee benefits as a result of
CIB's investments in attracting the talent to accelerate the
de-concentration efforts and restructuring of its corporate
recovery team. However, the benefits of these undertakings are
positively reflected in CIB's lower cost of risk ratio, which stood
at 0.3% in 1Q17 (down from 2.1% in 1Q16 and 6.6% in 4Q16)
-- As a result, Corporate Investment Banking profit reached GEL
28.3mln in 1Q17, up 10.8% y-o-y and 181.3% q-o-q
Performance highlights of wealth management operations
-- The AUM of the Investment Management segment increased to GEL
1,568.6mln 1Q17, up 16.7% y-o-y and down 1.5% q-o-q. This includes
a) deposits of Wealth Management franchise clients and b) assets
held at Bank of Georgia Custody, c) Galt & Taggart brokerage
client assets and d) Aldagi pension scheme assets
-- Wealth Management deposits were GEL 1,061.4mln, up 1.3%
y-o-y, growing at a compound annual growth rate (CAGR) of 16.7%
over the last five-year period. Q-o-q, Wealth Management deposits
were down 3.7%. The cost of deposits stood at 4.1% in 1Q17, down
60bps y-o-y and down 40bps q-o-q. The decline in cost of deposits
and the impact of Wealth Management clients switching from deposits
to local bonds, as Galt & Taggart has offered a number of local
bond issuances - yielding higher rates than deposits - to Wealth
Management clients, were reflected in the Wealth Management deposit
balances
-- We served 1,385 wealth management clients from 68 countries
as of 31 March 2017
-- Galt & Taggart continues to develop local capital
markets.
- Regional Fixed Income Market Watch. The report is released
monthly and covers the debt markets of Georgia, Armenia,
Azerbaijan, Belarus, Kazakhstan, and Ukraine. Regional Fixed Income
Market Watch provides market data for both locally and
internationally listed debt issuances from these countries.
Furthermore, the report includes country-level macro indicators,
such as sovereign ratings, monetary policy rates, economic growth,
fiscal and current account balances
- Galt & Taggart Research continues to provide weekly
economic (including economies of Georgia and Azerbaijan) and
sectoral coverage. Galt & Taggart reports are available at
www.galtandtaggart.com. Other research since Galt & Taggart's
launch in 2012 included coverage of/notes on the Georgian retail
and office real estate market; the Georgian wine, agricultural,
electricity, healthcare and tourism sectors; fixed income
issuances, including Georgian Oil and Gas Corporation and Georgian
Railway; and the Georgian State Budget
Investment Business Segment Result Discussion
Utility & Energy Business (Georgia Global Utilities -
GGU)
About GGU
Natural monopoly in the water business, with upside in
electricity generation. Our utility and energy business is operated
through the Group's wholly-owned subsidiary Georgia Global
Utilities (GGU). GGU has two main business lines - a water utility
and electric power generation. In its water utility business, GGU
is a natural monopoly that supplies water and provides a wastewater
service to 1.4mln people (more than one-third of Georgia's
population) in three cities: Tbilisi, Mtskheta and Rustavi
GGU is self-sufficient in power for water transportation and it
benefits from additional revenue from third-party electricity
sales. GGU owns and operates three hydropower generation facilities
(and manages an additional facility) with a total capacity of
149.1MW. It is also investing in additional capacity for
electricity generation through the development of hydro power
plants, as well as solar and wind power sources. Average annual
production varies between 380GWh and 560GWh, depending on the level
of rainfall during the year. GGU's average annual electricity
consumption for its own account varies between 270GWh and 300GWh,
which means GGU has self-sufficient power for water transportation
and it benefits from additional revenue from third-party
electricity sales. During the last few years the company has
achieved efficiencies in terms of its own energy consumption. The
involvement in hydro power production also provides revenue
diversification
Room for efficiencies in water business from improving the
worn-out infrastructure. Poor condition of pipeline infrastructure
is the main reason for leaks and accidents, causing on average 70%
water loss annually, out of which 50% is attributable to technical
losses and 20% - to commercial losses. The current high level of
water losses is significantly worse than the peer average and
represents a strong efficiency upside for the business. GGU owns
and operates a water supply network of around 2,700km and about
1,700km of wastewater pipelines. It also has 45 pumping stations,
84 service reservoirs with a total capacity of 320,000 m(3) and one
water treatment plant. Around 520,000,000 m(3) of potable water is
supplied from water production/treatment facilities annually. By
improving the pipeline infrastructure and as a result of reducing
the water supplied to its utility customers, GGU expects to free-up
water supply for additional electricity generation, which in turn
can be sold to third parties
Water tariff & regulation. The current water and wastewater
tariff for residential customers stands at GEL 3.15 (per month, per
capita) for non-metered customers and at GEL 0.27 per m(3) for
metered customers. All of GGU's commercial customers are metered
and the tariff stands at GEL 4.42 per m(3) . The tariff is set per
cubic meter of water consumed by customers. GNERC (Georgian
National Energy and Water Supply Regulatory Commission) regulates
GGU's water tariffs. GNERC is an independent regulatory body, not
subject to direct supervision from any other state authority, but
accountable to parliament. It is funded predominantly from the fees
paid by market participants (0.2% of total revenues)
Strong cash flow generation is expected to enable GGU to sponsor
stable dividend payouts to shareholders starting from 2018. GWP, a
wholly owned subsidiary of GGU, which operates the water business,
has a credit rating of BB- with stable outlook from Fitch
Standalone results
We acquired the 75% of GGU's equity interests that we did not
previously own on 21 July 2016 and have consolidated its results
since then. Prior to this, the net income from the Group's 25%
stake in GGU was reported under "profit from associates". The
results below refer to GGU's standalone numbers. GGU's stand-alone
results, including the related comparative information, reflect the
energy & utility business performance.
INCOME STATEMENT
GEL thousands;
unless otherwise Change Change
noted 1Q17 1Q16 y-o-y 4Q16 q-o-q
Revenue from water
supply to legal
entities 18,336 16,986 7.9% 19,598 -6.4%
Revenue from water
supply to individuals 7,911 7,597 4.1% 8,636 -8.4%
Revenue from electric
power sales 1,191 3,267 -63.5% 3,641 -67.3%
Revenue from technical
support 673 742 -9.3% 2,056 -67.3%
Other income 491 (29) NMF 2,312 -78.8%
Revenue 28,602 28,563 0.1% 36,243 -21.1%
Provisions for doubtful
trade receivables 274 (746) NMF 687 -60.1%
Salaries and benefits (4,121) (3,784) 8.9% (4,010) 2.8%
Electricity and
transmission costs (4,972) (4,721) 5.3% (3,748) 32.7%
Raw materials, fuel
and other consumables (791) (893) -11.4% 85 NMF
Infrastructure assets
maintenance expenditure (301) (666) -54.8% (402) -25.1%
General and administrative
expenses (787) (710) 10.8% (751) 4.8%
Operating taxes (1,032) (604) 70.9% (1,155) -10.6%
Professional fees (430) (612) -29.7% (819) -47.5%
Insurance expense (285) (67) NMF (269) 5.9%
Other operating
expenses (1,370) (1,236) 10.8% (2,085) -34.3%
Operating expenses (13,815) (14,039) -1.6% (12,467) 10.8%
EBITDA 14,787 14,524 1.8% 23,776 -37.8%
EBITDA Margin 52% 51% 66%
Depreciation and
amortization (4,803) (5,390) -10.9% (3,753) 28.0%
EBIT 9,984 9,134 9.3% 20,023 -50.1%
EBIT Margin 35% 32% 55%
Net interest expense (2,189) (2,368) -7.6% (3,049) -28.2%
Foreign exchange
(losses) gains (101) (49) 106.1% 190 NMF
EBT 7,694 6,717 14.5% 17,164 -55.2%
Income tax expense - (1,199) -100.0% (1,659) -100.0%
Profit 7,694 5,518 39.4% 15,505 -50.4%
Performance highlights
-- GGU recorded total revenue of GEL 28.6mln (flat y-o-y and
down 21.1% q-o-q)
- Revenue from the water supply to legal entities and
individuals reached GEL 26.2mln in 1Q17 (up 6.8% y-o-y and down
7.0% q-o-q), representing 91.8% of the total revenue in 1Q17 (86.1%
in 1Q16 and 77.9% in 4Q16). Water consumption is characterised by
seasonality, whereby sales in the 4(th) quarter normally exceed
sales during the first quarter. Revenue from legal entities is
generally the largest element of GGU's total revenue and their
water consumption pattern is reflected in GGU's quarterly revenues.
The y-o-y increase in revenue from water supply to both legal
entities and individuals reflects the increased number of billed
individual customers since 4Q16 and increased consumption in 1Q17
as compared to 1Q16 as a result of reconciliation of customer
database with that of civil registry and replacement of outdated
water consumption meters for legal entities, which now reflects
more accurate consumption volume and decreases water losses
- Revenue from electricity power sales was GEL 1.2 million in
1Q17 (down 63.5% y-o-y and down 67.3% q-o-q), which was affected by
reduced internal power generation in the first quarter 2017 from
GGU's hydro power plants. This was a result of the unfavourable
weather conditions during 1Q17 in eastern Georgia, where the delay
in snow melting reduced water levels in the reservoir and therefore
led to less power generation
- The 67.3% q-o-q decrease in the technical support revenue in
1Q17 was due to the elevated number of new connections executed on
behalf of the clients in 4Q16. Furthermore, the company early
adopted the new revenue recognition standard, IFRS 15, which led to
the y-o-y and q-o-q decrease in technical support revenue. Prior to
1 January 2017, GGU recognised the revenue upon connection of the
customer to the water supply network. Effective 1 January 2017, the
technical support fee is recognised into revenues gradually over
the period of the useful life of the capitalised asset. The GEL
16.9 million impact was recorded through equity on 1 January
2017
- Unregistered customers are one of the major reasons for unrecovered revenue. GGU regularly under-recovers its water revenue from residential consumers due to discrepancies between customers formally registered with the provider and actual customers. Currently there are 1.4mln people living in Tbilisi, Rustavi and Mtskheta regions, while only 1.2mln residents are registered with GGU. Some water is also being supplied, but is not billed for, resulting from the challenges associated with accurate accounting for water consumption. GGU is dealing with these issues by aligning its own customer databases with the state registry to identify the unregistered customers and improving metering. The company also created a monitoring group that identifies unregistered customers per household. The exercise is expected to increase the number of customer billed for water consumption and recover some of the past due revenues.
-- GGU's operating expenses dropped slightly 1.6% y-o-y and were
up 10.8% q-o-q:
- The most material cost efficiency measure that GGU management
focuses on is the infrastructure asset maintenance expenditure,
which was down 54.8% y-o-y and down 25.1% q-o-q reflecting prudent
rehabilitation works. The number of accidents on the infrastructure
also declined by 298 during 1Q17 as compared to 1Q16. GGU actively
invests in the rehabilitation of its infrastructure with a focus on
improving efficiency in the medium to long-term
- Starting from 1Q17, as part of an on-going process of
reviewing receivable provisioning methodology, GGU revised certain
estimates to enhance the method of provision estimation. Under the
enhanced method GGU was able to identify the customers who were
able to pay all their monthly bills on time, i.e. have no overdue
bill balance. This change in accounting estimate had a positive
impact on provision of doubtful receivables in the amount of GEL
2.9 million in 1Q17
- Due to reduced power generation during 1Q17 discussed above,
in order to support the day-to-day operations of the company, GGU
acquired electricity from the open market for its own consumption.
As a result, the electricity and transmission costs were up 5.3%
y-o-y and up 32.7% q-o-q
- Operating taxes were up 70.9% y-o-y, reflecting increase in
GGU's property tax base due to the company's investments in its
supply network
- Professional fees decreased by 29.7% y-o-y and by 47.5% q-o-q.
In 2016, the company was intensively spending on research on its
existing infrastructure to identify further efficiency
opportunities as well as areas for additional hydro power station
development. In 1Q17, such spending was modest as GGU focused on
addressing the identified efficiency opportunities
- The y-o-y and q-o-q movements in income taxes reflect the
impact of changes in corporate taxation model, approved by the
Parliament of Georgia in May 2016
-- Consequently, GGU reported EBITDA of GEL 14.8mln in 1Q17 (up
1.8% y-o-y and down 37.8% q-o-q) and a profit of GEL 7.7mln in 1Q17
(up 39.4% y-o-y and down 50.4% q-o-q)
STATEMENT OF CASH
FLOW
GEL thousands; unless Change Change
otherwise noted 1Q17 1Q16 y-o-y 4Q16 q-o-q
Cash receipt from
customers 30,582 29,254 4.5% 41,042 -25.5%
Cash paid to suppliers (10,765) (10,047) 7.1% (8,066) 33.5%
Cash paid to employees (3,758) (2,801) 34.2% (6,640) -43.4%
Interest received 419 105 NMF 30 NMF
Interest paid (2,356) (2,510) -6.1% (2,653) -11.2%
Taxes paid (1,724) (2,877) -40.1% (2,202) -21.7%
Restricted cash
in Bank 945 (624) NMF (2,729) NMF
Cash flow from operating
activities 13,343 10,500 27.1% 18,782 -29.0%
Maintenance capex (8,835) (3,874) 128.1% (8,801) 0.4%
Operating cash flow
after maintenance
capex 4,508 6,626 -32.0% 9,981 -54.8%
Purchase of PPE
and intangible assets (13,486) (5,917) 127.9% (9,572) 40.9%
Total cash used
in investing activities (13,486) (5,917) 127.9% (9,572) 40.9%
Proceeds from borrowings - 380 -100.0% 27,562 -100.0%
Repayment of borrowings (4,328) (2,501) 73.1% (6,565) -34.1%
Dividends paid out - (54) -100.0% 151 -100.0%
Total cash used
in financing activities (4,328) (2,175) 99.0% 21,148 NMF
Exchange (losses)/gains
on cash equivalents (295) (50) NMF 556 NMF
Total cash (outflow)/inflow (13,601) (1,516) NMF 22,113 NMF
Cash balance
Cash, beginning
balance 27,511 11,633 136.5% 5,398 409.7%
Cash, ending balance 13,910 10,117 37.5% 27,511 -49.4%
-- GGU has good receivables collection rates within the 95-98%
range from water supply. During the first quarter of 2017, the
collection rate for legal entities and households was 98% and 94%,
respectively. As a result, GGU had GEL 3.2mln overdue receivables
outstanding at 31 March 2017. The Georgian water utility sector
historically had a low receivables collection rates. The latest
available countrywide data relates to 2005 and indicated an average
collection rate of 65% in major cities. This is because electricity
supply to residential customers was not allowed to be cut as a
result of delays of water supply payments. GGU's collection rate
began to improve significantly beginning in 2011, when a new
arrangement with electricity suppliers was set up based on the
amendment to Georgian Law on Electricity and Natural Gas. Since
then, Tbilisi's electricity suppliers have assisted in improving
GGU's receivables collection rates by disconnecting non-paying
water customers from the electricity network. In return,
electricity suppliers receive flat monetary compensation from GGU
(c.GEL 1.3mln p.a. since 2015). As a result, GGU's collection rates
for water supply receivables improved very quickly and have
remained at around 96%
-- The electricity purchased by the company due to the seasonal
reduction in power generation in 1Q17 was the trigger for the 7.1%
y-o-y and 33.5% q-o-q increase in the cash paid to suppliers
-- GGU spent GEL 8.8mln on maintenance capex in 1Q17, which is
significantly higher than it spent for the same period last year,
reflecting the acceleration of the infrastructure maintenance
program to improve the operational efficiencies. Consequently, the
operating cash flow, after deducting maintenance capex, was GEL
4.5mln in 1Q17
BALANCE SHEET
GEL thousands;
unless otherwise Change Change
noted Mar-17 Mar-16 y-o-y Dec-16 q-o-q
Cash and cash
equivalents 13,910 10,117 37.5% 27,511 -49.4%
Trade and other
receivables 30,944 26,710 15.9% 29,499 4.9%
Inventories 3,108 3,635 -14.5% 3,048 2.0%
Current income
tax prepayments 998 920 8.5% 735 35.8%
Total current
assets 48,960 41,382 18.3% 60,793 -19.5%
Property, plant
and equipment 346,048 294,419 17.5% 329,997 4.9%
Investment Property 18,922 19,484 -2.9% 18,728 1.0%
Intangible assets 1,207 1,143 5.6% 1,186 1.8%
Restructured
trade receivables 178 23 NMF 307 -42.0%
Restricted Cash 4,008 3,141 27.6% 5,094 -21.3%
Deferred income
tax - 280 -100.0% - -
Other non-current
assets 993 1,188 -16.4% 1,246 -20.3%
Total non-current
assets 371,356 319,678 16.2% 356,558 4.2%
Total assets 420,316 361,060 16.4% 417,351 0.7%
Current borrowings 22,566 21,921 2.9% 22,617 -0.2%
Trade and other
payables 28,172 22,461 25.4% 24,997 12.7%
Provisions for
liabilities and
charges 743 1,359 -45.3% 706 5.2%
Other taxes payable 2,718 1,684 61.4% 7,135 -61.9%
Total current
liabilities 54,199 47,425 14.3% 55,455 -2.3%
Long term borrowings 79,242 49,907 58.8% 83,651 -5.3%
Deferred income
tax liability - 28,681 -100.0% - -
Deferred income 17,817 - - - -
Total non-current
liabilities 97,059 78,588 23.5% 83,651 -100.0%
Total liabilities 151,258 126,013 20.0% 139,106 8.7%
Share capital 2 2 0.0% 2 0.0%
Retained earnings 87,595 80,293 9.1% 96,782 -9.5%
Revaluation reserve 181,461 154,752 17.3% 181,461 0.0%
Total equity 269,058 235,047 14.5% 278,245 -3.3%
Total liabilities
and equity 420,316 361,060 16.4% 417,351 0.7%
-- During 2016, GGU made significant progress towards reducing
its foreign-exchange exposure. In particular, the company
refinanced a large part of its US dollar-denominated debt with
Lari-denominated debt. Currently 99.7% of GGU's borrowings are
denominated in local currency.
-- The increase in property, plant and equipment is primarily
due to additional investments into the company's infrastructure
carried out during 2016 and 1Q17 in order to upgrade the network
and further reduce water losses and achieve cost efficiencies
-- The revaluation reserve balance increased y-o-y primarily due
to the deferred tax adjustment resulting from the change in the
corporate income tax legislation in Georgia enacted in May 2016
Healthcare business (Georgia Healthcare Group - GHG)
Standalone results
The Georgia Healthcare Group PLC (GHG) is the leading integrated
player in the Georgian healthcare ecosystem. GHG includes three
different business lines: healthcare services business (consisting
of hospital business and ambulatory business), pharma business and
medical insurance. BGEO Group owned 64.3% of GHG at 31 March 2017,
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. The results below refer to GHG standalone numbers and are
based on GHG's reported results, which are published independently
and available on GHG's web-site: www.ghg.com.ge
INCOME STATEMENT
GEL thousands; unless Change Change
otherwise noted 1Q17 1Q16 y-o-y 4Q16 q-o-q
Revenue, gross 186,627 72,576 157.1% 136,031 37.2%
Corrections & rebates (623) (410) 52.0% (790) -21.1%
Revenue, net 186,004 72,166 157.7% 135,241 37.5%
Revenue from healthcare
services 65,905 60,041 9.8% 66,814 -1.4%
Revenue from pharma 111,399 - - 56,586 96.9%
Net insurance premiums
earned 13,965 13,830 1.0% 16,312 -14.4%
Eliminations (5,265) (1,705) 208.8% (4,471) 17.8%
Costs of services (129,926) (44,151) 194.3% (89,626) 45.0%
Cost of healthcare services (37,957) (32,998) 15.0% (34,802) 9.1%
Cost of pharma (84,408) - - (44,498) 89.7%
Cost of insurance services (12,734) (12,847) -0.9% (14,997) -15.1%
Eliminations 5,173 1,694 205.4% 4,671 10.7%
Gross profit 56,078 28,015 100.2% 45,615 22.9%
Salaries and other employee
benefits (17,728) (6,923) 156.1% (12,757) 39.0%
General and administrative
expenses (13,352) (3,202) 317.0% (9,470) 41.0%
Impairment of healthcare
services, insurance
premiums and other receivables (1,121) (980) 14.4% 56 NMF
Other operating income 1,182 220 437.3% 845 39.9%
EBITDA 25,059 17,129 46.3% 24,289 3.2%
Depreciation and amortisation (5,872) (4,465) 31.5% (5,316) 10.5%
Net interest expense (7,119) (1,656) 329.9% (4,773) 49.2%
Net gain/(loss) from
foreign currencies 2,778 (260) NMF (3,170) NMF
Net non-recurring income/(expense) (1,792) 1,968 NMF 1,982 NMF
Profit before income
tax expense 13,054 12,716 2.7% 13,012 0.3%
Income tax benefit (19) (693) NMF (6,682) NMF
of which: Deferred tax
adjustments - - (5,319)
Profit for the period 13,035 12,023 8.4% 6,330 105.9%
Attributable to:
- shareholders of the
Company 8,832 9,921 -11.0% 5,401 63.5%
- non-controlling interests 4,203 2,102 100.0% 929 352.4%
of which: Deferred tax
adjustments - - (516)
For detailed income statement by healthcare services, medical
insurance and pharma business, please see page 33
Performance highlights
-- GHG delivered record quarterly revenue of GEL 186.6mln (up
157.1% y-o-y and up 37.2% q-o-q). The y-o-y growth was driven by
all business lines. GHG's 1Q17 results now fully reflect the pharma
business performance GPC and Pharmadepot acquired in and
consolidated from May 2016 and January 2017, respectively). The
healthcare services business was the second biggest contributor to
the y-o-y revenue growth, with strong organic growth of 10.1% in
1Q17. While y-o-y growth of net insurance premiums earned only
contributed slightly to the company's revenue growth, the retention
of medical insurance claims within GHG increased significantly to
35.6% from 14.2% a year ago. Q-o-q revenue growth was driven by the
consolidation of the pharma business
-- In 1Q17, GHG achieved a well-diversified revenue mix, spread
across all three segments of the Georgian healthcare ecosystem. 35%
of its revenues came from healthcare services business, 58% from
pharma business and the remaining 7% from medical insurance
business. This level of diversification was achieved through the
GHG's entrance and further expansion into the pharma business,
which is funded largely out-of-pocket and therefore, has helped GHG
to further diversify its revenue by payment sources
-- In 1Q17, GHG continued to focus on extracting operating
efficiencies and synergies across the business lines. As
anticipated, healthcare services business margins are temporarily
reduced due to the launches of new healthcare facilities and
services, which are currently in their rapid build-out phase and
the impact of higher utilities costs. GHG achieved growing gross
profit margins in its pharma business and an improved loss ratio in
its medical insurance business. The recent launches of two large
hospitals in Tbilisi and a number of new services have reduced the
healthcare services business gross margin, as expected. GHG expects
the rapid build-out phase to last for 12-18 months. Meanwhile, GHG
continues working towards increasing the utilisation of healthcare
facilities particularly through elective care services, and
realising further cost synergies in medical disposables procurement
as a result of consolidating the procurement with the pharma
business. This process is ongoing and the costs savings are
expected to be reflected throughout the year. Since the acquisition
of pharma business, GHG has focused on implementing initiatives
toward improving margins, which is reflected in the strong
improvement in the pharma business gross margin, up 280bps q-o-q.
Initiatives include improving pricing from pharmaceuticals
manufacturers, improving the mix of products and offerings to
increase the mix of higher margin products and the introduction of
higher-margin generic and contract manufactured products in its
pharmacies. GHG's medical insurance business has also improved its
margins by focusing on higher margin revenues and optimising its
cost base, which has resulted in an improved loss ratio of 84.6%,
down from 86.4% a year ago. GHG remains on track to improve the
loss ratio to the targeted level of less than 80%
-- GHG reported record EBITDA of GEL 25.1mln in 1Q17 (up 46.3%
y-o-y and up 3.2% q-o-q). The EBITDA margin for healthcare services
business was 25.3% in 1Q17, compared to 29.5% in 1Q16 and 31.9% in
4Q16. Temporary reduction in EBITDA margin was due to the roll-outs
explained above, as well as increase in tariffs of utilities on the
back of winter season. We expect the healthcare services business
margins to rebound gradually, and we continue to expect c.30%
EBITDA margin in 2018. The healthcare services business was the
main contributor to GHG's 1Q17 EBITDA, contributing 67.1% in total.
The pharma business reported GEL 8.7 million EBITDA in 1Q17,
improving the pharma business EBITDA margin to 7.8%, from 6.0% in
4Q16 and we are on track to deliver our goal of more than 8% EBITDA
margin in the pharma business
-- GHG's profit totaled GEL 13.0mln in 1Q17 (up 8.4% y-o-y and
up 105.9% q-o-q; up 11.9% q-o-q on a normalised basis). The
healthcare services was main driver contributing GEL 7.2mln,
followed by the pharma business, which contributed GEL 7.0mln.
GHG's profit was partially offset by the loss of GEL 1.1mln
reported by the medical insurance business
-- GHG continued sizeable development projects by actively
invested in healthcare facilities as well as consolidating the
pharma business entities was reflected in the y-o-y growth of
depreciation and amortisation, which were up 31.5%. The q-o-q
increase is fully attributable to consolidating Pharmadepot's
results since January 2017
-- The increase in interest expense is due to three main
factors: 1) Lower base in 2016. At the end of 2015 and the
beginning of 2016, GHG prepaid local bank debt to utilise the
available cash post-IPO, subsequently realising significant savings
in interest expense throughout 2016. From the second quarter of
2016 and in the first quarter of 2017, GHG sourced longer-term and
less expensive funding from both local commercial banks and DFIs
and utilised funds on the development of healthcare facilities; 2)
At the beginning of 2017, GHG raised GEL 33.0mln from a local
commercial bank to pay the first tranche of consideration payable
for the Pharmadepot acquisition. The increased debt balance in
1Q17, has resulted in increased interest expense; and 3) Recognised
interest expense of GEL 0.4mln, due to unwinding of a discount
resulting from remaining consideration payable, in the amount of
US$13.0mln to Pharmadepot's former selling shareholders as part of
the total purchase price, payment of which will be carried out over
the next five years. Discounted present value accounting is an IFRS
requirement and does not result in actual cash outflow on
interest
-- The foreign currency gains are mainly attributable to the
pharma business, and resulted from a decrease in foreign currency
denominated payables to suppliers as a result of the appreciation
of GEL by the end of 1Q17. Additionally, GHG recorded a gain on the
revaluation of the remaining consideration payable to ABC's former
selling shareholders, in the amount of US$13.0mln described
above
-- GHG's balance sheet increased substantially over the last
twelve months, reaching GEL 1,109.5mln as at 31 March 2017. The
growth of total assets by 50.4% y-o-y was largely driven by a 24.8%
increase in property and equipment, reflecting investments in the
renovation of hospitals, the roll-out of ambulatory clinics and the
consolidation of the pharma business, as a result of the two
acquisitions completed in May 2016 and in January 2017. The high
level of cash and bank deposits at the end of 1Q17 reflects the
receipt of DFI funding of GEL 61.0mln, which will be utilised in
the upcoming period for the capex pipeline. The pharma business
consolidation primarily affected inventories and goodwill. Out of
the GEL 96.8mln inventory balance at the end of 1Q17, GEL 82.3mln
was attributable to the pharma business. The y-o-y increase in
accounts payable is also attributable to consolidating the pharma
business. Out of the GEL 94.1mln accounts payable balance, GEL
63.4mln relates to the pharma business
-- As part of the Pharmadepot acquisition contract, the selling
shareholders have a put option to sell their remaining 33% stake in
the combined pharma business to GHG during the period from 1
January 2023 to 31 December 2023. In accordance with IFRS
requirements, GHG recognised GEL 55.0mln (present value) liability
to purchase the remaining 33% shares - included in other
liabilities account, resulting in an increase in the balance as at
31 March 2017. Non-controlling interest arising from consolidated
pharma business, GEL 22.0mln, was fully de-recognised in-line with
IFRS requirements. The difference between the redemption liability
of GEL 55.0mln and the non-controlling interest of GEL 22.0mln was
recorded to equity, resulting in a reduction of equity through
other reserves account by GEL 33.0mln
-- During 1Q17, GHG continued to invest in the development of
its healthcare facilities. GHG spent a total of GEL 20.5mln on
capital expenditures, primarily on the extensive renovations of the
Deka and Sunstone hospitals, as well as enhancing its service mix
and introducing new services to cater to previously unmet patient
needs. Of this, maintenance capex was GEL 2.6mln
- The renovation of the first phase of Sunstone (c.332 beds) was
completed two months ahead of the initial schedule, within budget
and in April 2017, GHG opened the hospital with 220 newly renovated
beds
- The renovation and full launch of Deka (c.320 beds) is on
budget and on target for completion by year-end according to the
revised (slightly delayed) schedule announced in February. In
August 2016, GHG opened Deka's diagnostic centre, which is one of
the largest in Tbilisi. The opening of the diagnostic centre was
the first step toward developing Deka into a flagship multi-profile
hospital in Georgia
-- As of 31 March 2017, GHG operates ten ambulatory clusters
consisting of 13 district ambulatory clinics and 28 express
ambulatory clinics that provide outpatient diagnostic and treatment
services
-- As of 31 March 2017, GHG operates 35 hospitals with a total
of 2,557 beds, including 15 referral hospitals with a total of
2,092 beds, which provide secondary or tertiary level healthcare
services and 20 community hospitals with a total of 465 beds, which
provide basic outpatient and inpatient healthcare services
-- GHG's healthcare services market share by number of beds was
23.4% as 31 March 2017. The market share increased further in April
2017 up to 24.6% as a result of the launching the first phase of
Sunstone hospital
-- GHG's hospital bed occupancy rate was 610.5% in 1Q17 (60.4% %
in 1Q16, 57.6% in 4Q16)
- GHG's referral hospital bed occupancy rate was 68.1% in 1Q17 (66.7% in 1Q16, 65.3% in 4Q16)
-- The average length of stay was 5.3 days in 1Q17 (4.9 in 1Q16,
5.0 in 4Q16)
- The average length of stay at referral hospitals was 5.6 days
in 1Q17 (5.2 days in 1Q16, 5.2 days in 4Q16)
-- In 1Q17 GHG's pharma business had:
- c.2.0mln retail customer interactions per month
- c.0.5mln loyalty card members
- Average transaction size of GEL 13.6
- c.29% market share measured by sales
- Total number of bills issued 6.4mln
-- In GHG's medical insurance business:
- The number of insured clients was 135,000 as of 31 March 2017
- Medical insurance market share was 35.3% based on net
insurance premium revenue as of 31 December 2016
- Insurance renewal rate was 77.3% in 1Q17
Real estate business (m(2) Real Estate or m(2) )
Standalone results(8)
Our Real Estate business is operated through the Group's
wholly-owned subsidiary m(2) Real Estate, which develops
residential property in Georgia. m(2) Real Estate outsources the
construction and architecture works, whilst itself focusing on
project management and sales. The Group'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 has
also recently begun hotel development in the under-developed
mid-price sector.
The net revenue trend between the first quarter of 2017 and both
the first and fourth quarters of 2016 is not comparable given the
early adoption of IFRS 15 from 1 January 2017. Prior to 1 January
2017, m(2) recognised revenues from sales of residential units upon
completion and handover of the units to customers in line with IAS
18, while under IFRS 15 revenue is recognized according to the
percentage of completion method.
(8) Prior to 1Q17, m(2) Real Estate results presented were
segment results, i.e. including Group elimination and consolidation
adjustments. Effective 1Q17, and similar to GGU and GHG, we will
report stand-alone results for m(2) Real Estate
INCOME STATEMENT
GEL thousands, unless Change Change
otherwise noted 1Q17 1Q16 y-o-y 4Q16 q-o-q
Revenue from apartment
sales 18,399 27,992 -34.3% 9,356 96.7%
Cost of apartment
sale (17,109) (22,099) -22.6% (7,811) 119.0%
Net revenue from apartment
sales 1,290 5,893 -78.1% 1,545 -16.5%
Revenue from operating
leases 899 589 52.6% 859 4.7%
Cost of operating
leases (83) (47) 76.6% (44) 88.6%
Net revenue from operating
leases 816 542 50.6% 815 0.1%
Revaluation of commercial
property 479 - NMF 1,430 -66.5%
Gross real estate
profit 2,585 6,435 -59.8% 3,790 -31.8%
Gross other investment
profit 11 88 -87.5% 48 -77.1%
Revenue 2,596 6,523 -60.2% 3,838 -32.4%
Salaries and other
employee benefits (407) (297) 37.0% (374) 8.8%
Administrative expenses (1,427) (1,027) 38.9% (1,202) 18.7%
Operating expenses (1,834) (1,324) 38.5% (1,576) 16.4%
EBITDA 762 5,199 -85.3% 2,262 -66.3%
Depreciation and amortisation (66) (53) 24.5% (65) 1.5%
Net foreign currency
(loss) gain (194) 386 NMF (58) NMF
Interest income 189 - NMF 410 -53.9%
Interest expense (48) (74) -35.1% (30) 60.0%
Net operating income
before non-recurring
items 643 5,458 -88.2% 2,519 -74.5%
Net non-recurring
items (76) (23) NMF (96) -20.8%
Profit before income
tax 567 5,435 -89.6% 2,423 -76.6%
Income tax (expense) - (815) -100.0% (2,949) -100.0%
Profit (loss) 567 4,620 -87.7% (526) NMF
Performance highlights
-- m(2) Real Estate started 2017 strongly as the number of
apartments sold almost tripled, and its portfolio of yielding
assets increased by 22.9% in 1Q17, compared to 1Q16
-- Net revenue from the sale of apartments in 1Q17 was GEL
1.3mln (down 78.1% y-o-y and down 16.5% q-o-q). In 1Q16, m(2) Real
Estate completed three projects and reported revenue for all sold
residential units handed over to customers in these projects within
1Q16. As a result, 1Q17 revenues reflect a y-o-y decline
-- Net revenue from operating leases increased 50.6% y-o-y and
0.1% q-o-q supported by the growth in commercial real estate
portfolio which reached GEL 42.0mln at 31 March 2017 (up 22.9%
y-o-y and up 1.1% q-o-q). As a result, the portfolio of yielding
assets represented 14.2% of m(2) Real Estate's total assets at 31
March 2017, compared to 11.4% a year ago and 11.2% at 31 December
2016
-- Revaluation of commercial property was down in 1Q17 as
compared to 4Q16 due to relatively higher amount of gains from
investment property revaluation recorded as a result of completion
of large yielding asset construction in 4Q16
-- Consequently, m(2) recognised a total revenue of GEL 2.6mln
(down 60.2% y-o-y and down 32.4% q-o-q) and net profit of GEL
0.6mln (down 87.7% y-o-y and up GEL 1.1mln q-o-q) in 1Q17
-- In 1Q17, m(2) sold a total of 143 apartments with the total
sales value of US$ 10.1mln, compared to 53 apartments sold with the
total sales value of US$ 5.5mln during 1Q16 and 112 apartments with
a sales value of US$ 8.3mln in 4Q16
-- m(2) has started ten projects since its establishment in
2010, of which, six projects have already been completed, while the
construction of four projects is ongoing. m(2) completed all of its
projects on or ahead of scheduled time and within the budget. The
four ongoing projects carry the following characteristics:
1. Kartozia Street project: the largest ever project carried out
by m(2) , with a total of 819 apartments in a central location in
Tbilisi, out of which, 383 units are already sold
2. Skyline project - a luxury residential apartment building in
the Old Tbilisi neighbourhood with few apartments (19 in total, out
of which, 9 are already sold), with prices amounting to twice of
m(2) Real Estate's average prices charged on other projects.
3. Kazbegi Street II project - a mixed-use development with 302
residential apartments and a hotel (m2 Real Estate has the
exclusive right to develop Wyndham Ramada Anchor hotels in Georgia)
with a capacity of 152 rooms. The construction started in June
2016, with sales of 127 apartments to date
4. 50 Chavchavadze Avenue project - the project is located in
the central part of Tbilisi with a total of 82 apartments, out of
which, 31 are sold
m(2) expects that Skyline project will be completed in 2Q17,
while the completion of the remaining three projects will fall into
2018. Currently, a total of 704 units are available for sale, out
of the total of 2,894 apartments either already developed or under
development phase
-- m(2) has a very good track record of selling apartments. Out
of the 1,672 apartments completed to date since inception, only 32
or 1.9% remain in stock as available for sale. The four on-going
projects, described above, have a total capacity of 1,222
apartments, of which, 550 apartments or 45.0% are sold
OPERATING DATA
Completed and on-going projects, as of 31 March 2017
----------------------------------------------------------------------------------------------------------------------------------------------------
Number
of Number
apartments of
Number sold apartments Planned Actual
Number of as available Start Completion Completion Construction
Project of apartments % of for date date date completed
name apartments sold total sale (construction) (construction) (construction) %
---- -------------- ----------- ----------- ------------- ------------- ----------------- ----------------- ----------------- ---------------
Completed
projects 1,672 1,640 98.1% 32 100%
-------------------- ----------- ----------- ----------- ------------- ----------------- ----------------- ----------------- ---------------
Chubinashvili
1 Street 123 123 100.0% 0 Sep-10 - Aug-12 100%
Tamarashvili
2 Street 525 523 99.6% 2 May-12 - Jun-14 100%
Kazbegi
3 Street 295 295 100.0% 0 Dec-13 - Feb-16 100%
Nutsubidze
4 Street 221 221 100.0% 0 Dec-13 - Sep-15 100%
Tamarashvili
Street
5 II 270 266 98.5% 4 Jul-14 - Jun-16 100%
Moscow
6 Avenue 238 212 89.1% 26 Sep-14 - Jun-16 100%
On-going
projects 1,222 550 45.0% 672
-------------------- ----------- ----------- ----------- ------------- ----------------- ----------------- ----------------- ---------------
Kartozia
7 Street 819 383 46.8% 436 Nov-15 Oct-18 - 45%
8 Skyline 19 9 47.4% 10 Dec-15 May-17 - 85%
Kazbegi
Street
9 II 302 127 42.1% 175 Jun-16 Nov-18 - 18%
50
Chavchavadze
10 Ave. 82 31 37.8% 51 Oct-16 Feb-18 - 13%
Total 2,894 2,190 75.7% 704
---- -------------- ----------- ----------- ----------- ------------- ----------------- ----------------- ----------------- ---------------
-- Since its inception, m(2) Real Estate unlocked US$ 16.4mln in
total land value from the six completed projects, while an
additional US$ 16.5mln in land value is expected to be unlocked
from the four on-going projects
FINANCIAL DATA
for completed and on-going projects, as of 31 March
2017
---------------------------------------------------------------------------------------------------------------------------------
Deferred
revenue
expected
to be
Recognised Deferred recognised
Total as revenue revenue as revenue Realised
Sales (US$ mln (US$ mln in 2017 Land value &
Project (US$ including including including unlocked Expected
# name mln) VAT) VAT) VAT) (US$) IRR
--- -------------- ------ ----------------------------------- ---------- ----------- -------------------------- ----------
Completed
projects 138.1 138.1 16.4
------------------- ------ ----------------------------------- ---------- ----------- -------------------------- ----------
Chubinashvili
1 street 9.9 9.9 - - 0.9 47%
Tamarashvili
2 street 48.5 48.5 - - 5.4 46%
Kazbegi
3 Street 27.3 27.2 - - 3.6 165%
Nutsubidze
4 Street 17.4 17.4 - - 2.2 58%
Tamarashvili
Street
5 II 24.3 24.3 - - 2.7 71%
Moscow
6 avenue 10.7 10.7 - - 1.6 31%
On-going
projects 46.8 22.5 24.3 19.8 16.5
------------------- ------ ----------------------------------- ---------- ----------- -------------------------- ----------
Kartozia
7 Street 28.4 12.7 15.7 13.4 5.8 60%
8 Skyline 4.1 3.7 0.4 0.4 3.1 329%
Kazbegi
Street
9 II 10.7 4.3 6.4 4.4 4.3 51%
50
Chavchavadze
10 ave. 3.6 1.8 1.8 1.6 3.3 75%
--- -------------- ------ ----------------------------------- ---------- ----------- -------------------------- ----------
Total 184.8 160.5 24.3 19.8 32.9
--- -------------- ------ ----------------------------------- ---------- ----------- -------------------------- ----------
-- The number of apartments financed with BOG mortgages in all
m(2) Real Estate projects was 1,000, with an aggregate amount of
GEL 118.5mln
BALANCE SHEET
GEL thousands, unless Change Change
otherwise noted Mar-17 Mar-16 y-o-y Dec-16 q-o-q
Cash and cash equivalents 48,636 49,003 -0.7% 93,210 -47.8%
Amounts due from 179 - - - -
credit institutions
Investment securities 1,515 2,001 -24.3% 2,842 -46.7%
Accounts receivable 6,130 981 524.9% 703 772.0%
Prepayments 17,842 23,449 -23.9% 20,746 -14.0%
Inventories 83,922 94,881 -11.6% 113,009 -25.7%
Investment property,
of which: 110,831 118,187 -6.2% 113,829 -2.6%
Land bank 68,789 83,967 -18.1% 72,251 -4.8%
Commercial real
estate 42,042 34,220 22.9% 41,578 1.1%
Property and equipment 9,110 1,528 496.2% 7,050 29.2%
Other assets 17,557 10,147 73.0% 20,839 -15.7%
Total assets 295,722 300,177 -1.5% 372,228 -20.6%
Amounts due to credit
institutions 38,912 37,118 4.8% 42,818 -9.1%
Debt securities
issued 62,278 46,771 33.2% 103,077 -39.6%
Deferred income 53,670 87,465 -38.6% 77,925 -31.1%
Other liabilities 7,657 18,817 -59.3% 14,725 -48.0%
Total liabilities 162,517 190,171 -14.5% 238,545 -31.9%
Share capital 4,180 4,180 0.0% 4,180 0.0%
Additional paid-in
capital 86,227 83,612 3.1% 85,467 0.9%
Other reserves 13,469 - 100% 15,538 -13.3%
Retained earnings 29,329 22,214 32.0% 28,498 2.9%
Total equity 133,205 110,006 21.1% 133,683 -0.4%
Total liabilities
and equity 295,722 300,177 -1.5% 372,228 -20.6%
-- m(2) Real Estate has a solid and well managed balance sheet.
As of 31 March 2017, total assets were GEL 295.7mln (down 1.5%
y-o-y and down 20.6% q-o-q), constituting 16.4% cash, 6.0%
prepayments, 28.4% inventories (apartments in development), 37.5%
investment property (land bank and commercial real estate), and
11.7% all other assets. Borrowings, which consist of debt raised
from Development Financial Institutions ("DFIs") and debt
securities issued in the local market, represent 34.2% of the total
balance sheet.
-- m(2) Real Estate currently has a land bank on its balance
sheet with a total value of GEL 68.8mln. We do not expect the land
bank to grow, as m(2) Real Estate's strategy is to utilise its
existing land plots within 3-4 years and, in parallel, start
development of third-party land
SELECTED FINANCIAL INFORMATION
INCOME STATEMENT BGEO Consolidated Banking Business Investment Business Eliminations
GEL thousands,
unless otherwise Change Change Change Change Change Change
noted 1Q17 1Q16 y-o-y 4Q16 q-o-q 1Q17 1Q16 y-o-y 4Q16 q-o-q 1Q17 1Q16 y-o-y 4Q16 q-o-q 1Q17 1Q16 4Q16
Banking interest
income 265,662 224,810 18.2% 256,457 3.6% 267,521 226,217 18.3% 258,414 3.5% - - - - - (1,859) (1,407) (1,957)
Banking interest
expense (104,996) (95,958) 9.4% (101,054) 3.9% (105,874) (95,998) 10.3% (100,043) 5.8% - - - - - 878 40 (1,011)
Net banking
interest
income 160,666 128,852 24.7% 155,403 3.4% 161,647 130,219 24.1% 158,371 2.1% - - - - - (981) (1,367) (2,968)
Fee and
commission
income 43,267 38,149 13.4% 48,588 -11.0% 43,663 38,484 13.5% 50,135 -12.9% - - - - - (396) (335) (1,547)
Fee and
commission
expense (13,382) (10,335) 29.5% (13,263) 0.9% (13,528) (10,469) 29.2% (13,490) 0.3% - - - - - 146 134 227
Net fee and
commission
income 29,885 27,814 7.4% 35,325 -15.4% 30,135 28,015 7.6% 36,645 -17.8% - - - - - (250) (201) (1,320)
Net banking
foreign
currency gain 19,274 17,390 10.8% 28,516 -32.4% 19,274 17,390 10.8% 28,516 -32.4% - - - - - - - -
Net other banking
income 3,006 2,867 4.8% 2,199 36.7% 3,095 3,168 -2.3% 2,506 23.5% - - - - - (89) (301) (307)
Net insurance
premiums earned 25,795 21,824 18.2% 26,046 -1.0% 12,847 9,550 34.5% 11,559 11.1% 13,872 12,924 7.3% 15,318 -9.4% (924) (650) (831)
Net insurance
claims incurred (15,572) (15,408) 1.1% (16,875) -7.7% (5,637) (4,207) 34.0% (5,114) 10.2% (9,935) (11,201) -11.3% (11,761) -15.5% - - -
Gross insurance
profit 10,223 6,416 59.3% 9,171 11.5% 7,210 5,343 34.9% 6,445 11.9% 3,937 1,723 128.5% 3,557 10.7% (924) (650) (831)
Healthcare and
pharma revenue 172,131 58,348 195.0% 118,799 44.9% - - - - - 172,131 58,348 195.0% 118,799 44.9% - - -
Cost of
healthcare
and pharma
services (119,789) (32,057) NMF (76,578) 56.4% - - - - - (119,789) (32,057) NMF (76,578) 56.4% - - -
Gross healthcare
and pharma
profit 52,342 26,291 99.1% 42,221 24.0% - - - - - 52,342 26,291 99.1% 42,221 24.0% - - -
Real estate
revenue 19,893 28,764 -30.8% 9,813 102.7% - - - - - 20,202 28,764 -29.8% 10,507 92.3% (309) - (694)
Cost of real
estate (17,192) (22,786) -24.6% (8,474) 102.9% - - - - - (17,192) (22,786) -24.6% (8,474) 102.9% - - -
Gross real estate
profit 2,701 5,978 -54.8% 1,339 101.7% - - - - - 3,010 5,978 -49.6% 2,033 48.1% (309) - (694)
Utility revenue 27,153 - NMF 31,608 -14.1% - - - - - 27,236 - NMF 31,679 -14.0% (83) - (71)
Cost of utility (9,709) - NMF (10,008) -3.0% - - - - - (9,709) - NMF (10,008) -3.0% - - -
Gross utility
profit 17,444 - NMF 21,600 -19.2% - - - - - 17,527 - NMF 21,671 -19.1% (83) - (71)
Gross other
investment
profit 3,993 3,606 10.7% 9,697 -58.8% - - - - - 3,981 3,675 8.3% 9,391 -57.6% 12 (69) 306
Revenue 299,534 219,214 36.6% 305,471 -1.9% 221,361 184,135 20.2% 232,483 -4.8% 80,797 37,667 114.5% 78,873 2.4% (2,624) (2,588) (5,885)
Salaries and
other employee
benefits (67,531) (47,413) 42.4% (64,754) 4.3% (46,257) (39,806) 16.2% (50,052) -7.6% (22,051) (8,250) 167.3% (15,459) 42.6% 777 643 757
Administrative
expenses (42,733) (25,016) 70.8% (40,729) 4.9% (23,219) (20,058) 15.8% (25,714) -9.7% (20,151) (5,346) NMF (16,132) 24.9% 637 388 1,117
Banking
depreciation
and amortisation (9,759) (9,138) 6.8% (9,841) -0.8% (9,759) (9,138) 6.8% (9,841) -0.8% - - - - - - - -
Other operating
expenses (951) (1,675) -43.2% (2,034) -53.2% (761) (861) -11.6% (1,462) -47.9% (190) (814) -76.7% (572) -66.8% - - -
Operating
expenses (120,974) (83,242) 45.3% (117,358) 3.1% (79,996) (69,863) 14.5% (87,069) -8.1% (42,392) (14,410) 194.2% (32,163) 31.8% 1,414 1,031 1,874
Operating income
before cost of
credit risk /
EBITDA 178,560 135,972 31.3% 188,113 -5.1% 141,365 114,272 23.7% 145,414 -2.8% 38,405 23,257 65.1% 46,710 -17.8% (1,210) (1,557) (4,011)
Profit from
associates 514 1,866 -72.5% 254 102.4% 514 - NMF - NMF - 1,866 -100.0% 254 -100.0% - - -
Depreciation and
amortisation of
investment
business (11,236) (4,910) 128.8% (9,615) 16.9% - - - - - (11,236) (4,910) 128.8% (9,615) 16.9% - - -
Net foreign
currency
gain from
investment
business 6,955 (766) NMF (6,065) NMF - - - - - 6,955 (766) NMF (6,065) NMF - - -
Interest income
from investment
business 1,420 956 48.5% 1,551 -8.4% - - - - - 2,298 964 138.4% 540 NMF (878) (8) 1,011
Interest expense
from investment
business (10,309) (1,382) NMF (8,673) 18.9% - - - - - (12,397) (2,947) NMF (11,673) 6.2% 2,088 1,565 3,000
Operating income
before cost of
credit risk 165,904 131,736 25.9% 165,565 0.2% 141,879 114,272 24.2% 145,414 -2.4% 24,025 17,464 37.6% 20,151 19.2% - - -
Impairment charge
on loans to
customers (41,341) (32,218) 28.3% (69,920) -40.9% (41,341) (32,218) 28.3% (69,920) -40.9% - - - - - - - -
Impairment charge
on finance lease
receivables (139) (513) -72.9% 3,124 NMF (139) (513) -72.9% 3,124 NMF - - - - - - - -
Impairment charge
on other assets
and provisions (7,765) (3,412) 127.6% (3,171) 144.9% (6,782) (2,281) 197.3% (4,077) 66.3% (983) (1,131) -13.1% 906 NMF - - -
Cost of credit
risk (49,245) (36,143) 36.3% (69,967) -29.6% (48,262) (35,012) 37.8% (70,873) -31.9% (983) (1,131) -13.1% 906 NMF - - -
Net operating
income before
non-recurring
items 116,659 95,593 22.0% 95,598 22.0% 93,617 79,260 18.1% 74,541 25.6% 23,042 16,333 41.1% 21,057 9.4% - - -
Net non-recurring
items (3,371) 1,366 NMF 698 NMF (1,695) (1,419) 19.5% (1,056) 60.5% (1,676) 2,785 NMF 1,754 NMF - - -
Profit before
income tax 113,288 96,959 16.8% 96,296 17.6% 91,922 77,841 18.1% 73,485 25.1% 21,366 19,118 11.8% 22,811 -6.3% - - -
Income tax
(expense)
benefit (5,115) (9,912) -48.4% (7,553) -32.3% (5,045) (8,178) -38.3% 1,830 NMF (70) (1,734) -96.0% (9,383) -99.3% - - -
Profit 108,173 87,047 24.3% 88,743 21.9% 86,877 69,663 24.7% 75,315 15.4% 21,296 17,384 22.5% 13,428 58.6% - - -
Attributable
to:
- shareholders
of BGEO 100,431 80,836 24.2% 87,136 15.3% 86,390 68,620 25.9% 75,871 13.9% 14,041 12,216 14.9% 11,265 24.6% - - -
-
non-controlling
interests 7,742 6,211 24.6% 1,607 381.8% 487 1,043 -53.3% (556) NMF 7,255 5,168 40.4% 2,163 235.4% - - -
Earnings per share
basic 2.64 2.10 25.7% 2.29 15.3%
Earnings per share
diluted 2.55 2.10 21.4% 2.21 15.4%
BALANCE SHEET BGEO Consolidated Banking Business Investment Business Eliminations
GEL thousands,
unless otherwise Change Change Change Change Change Change Change
noted Mar-17 Mar-16 y-o-y Dec-16 q-o-q Mar-17 Mar-16 y-o-y Dec-16 q-o-q Mar-17 Mar-16 y-o-y Dec-16 q-o-q Mar-17 Mar-16 y-o-y
Cash and cash
equivalents 1,285,483 1,359,219 -5.4% 1,573,610 -18.3% 1,198,457 1,330,094 -9.9% 1,482,106 -19.1% 353,485 288,512 22.5% 397,620 -11.1% (266,459) (259,387) (306,116)
Amounts due
from credit
institutions 1,090,111 764,435 42.6% 1,054,983 3.3% 973,787 720,442 35.2% 943,091 3.3% 146,798 47,936 206.2% 153,497 -4.4% (30,474) (3,943) (41,605)
Investment
securities 1,231,332 825,045 49.2% 1,286,003 -4.3% 1,231,993 825,821 49.2% 1,287,292 -4.3% 3,306 1,154 186.5% 3,075 7.5% (3,967) (1,930) (4,364)
Loans to
customers
and finance
lease
receivables 6,408,711 5,359,718 19.6% 6,648,482 -3.6% 6,470,771 5,394,565 19.9% 6,681,672 -3.2% - - - - - (62,060) (34,847) (33,190)
Accounts
receivable
and other
loans 143,417 84,715 69.3% 128,506 11.6% 4,081 5,144 -20.7% 56,495 -92.8% 139,787 81,955 70.6% 125,964 11.0% (451) (2,384) (53,953)
Insurance
premiums
receivable 51,595 54,879 -6.0% 46,423 11.1% 22,751 16,567 37.3% 24,152 -5.8% 29,773 39,347 -24.3% 24,284 22.6% (929) (1,035) (2,013)
Prepayments 101,297 67,633 49.8% 76,277 32.8% 28,468 24,649 15.5% 19,607 45.2% 73,055 42,984 70.0% 57,270 27.6% (226) - (600)
Inventories 205,132 125,466 63.5% 188,344 8.9% 9,395 9,686 -3.0% 9,009 4.3% 195,737 115,780 69.1% 179,335 9.1% - - -
Investment
property 285,996 254,224 12.5% 288,227 -0.8% 155,463 134,310 15.7% 153,442 1.3% 130,533 119,914 8.9% 134,785 -3.2% - - -
Property and
equipment 1,388,938 835,651 66.2% 1,323,870 4.9% 342,495 333,243 2.8% 339,442 0.9% 1,046,443 502,408 108.3% 984,428 6.3% - - -
Goodwill 157,824 73,192 115.6% 106,986 47.5% 49,592 49,592 0.0% 49,592 0.0% 108,232 23,600 358.6% 57,394 88.6% - - -
Intangible
assets 63,121 43,074 46.5% 58,907 7.2% 43,851 37,609 16.6% 41,350 6.0% 19,270 5,465 252.6% 17,557 9.8% - - -
Income tax
assets 11,277 36,712 -69.3% 24,043 -53.1% 8,214 27,321 -69.9% 20,638 -60.2% 3,063 9,391 -67.4% 3,405 -10.0% - - -
Other assets 182,290 193,626 -5.9% 184,792 -1.4% 139,440 121,012 15.2% 140,338 -0.6% 47,809 75,515 -36.7% 56,312 -15.1% (4,959) (2,901) (11,858)
Total assets 12,606,524 10,077,589 25.1% 12,989,453 -2.9% 10,678,758 9,030,055 18.3% 11,248,226 -5.1% 2,297,291 1,353,961 69.7% 2,194,926 4.7% (369,525) (306,427) (453,699)
Client deposits
and notes 5,294,462 4,698,558 12.7% 5,382,698 -1.6% 5,591,720 4,962,432 12.7% 5,730,419 -2.4% - - - - - (297,258) (263,874) (347,721)
Amounts due
to credit
institutions 3,133,422 1,719,920 82.2% 3,470,091 -9.7% 2,662,909 1,630,299 63.3% 3,067,651 -13.2% 532,573 124,468 327.9% 435,630 22.3% (62,060) (34,847) (33,190)
Debt securities
issued 1,157,082 1,033,758 11.9% 1,255,643 -7.8% 827,024 957,474 -13.6% 858,037 -3.6% 338,292 81,116 317.0% 407,242 -16.9% (8,234) (4,832) (9,636)
Accruals and
deferred income 131,372 142,766 -8.0% 130,319 0.8% 30,307 25,685 18.0% 25,242 20.1% 101,065 117,081 -13.7% 158,387 -36.2% - - (53,310)
Insurance
contracts
liabilities 71,620 71,565 0.1% 67,871 5.5% 43,607 34,630 25.9% 41,542 5.0% 28,013 36,935 -24.2% 26,329 6.4% - - -
Income tax
liabilities 17,228 128,667 -86.6% 27,791 -38.0% 16,219 93,765 -82.7% 23,937 -32.2% 1,009 34,902 -97.1% 3,854 -73.8% - - -
Other
liabilities 348,585 131,506 165.1% 231,622 50.5% 71,391 47,520 50.2% 72,547 -1.6% 279,167 86,860 221.4% 168,917 65.3% (1,973) (2,874) (9,842)
Total
liabilities 10,153,771 7,926,740 28.1% 10,566,035 -3.9% 9,243,177 7,751,805 19.2% 9,819,375 -5.9% 1,280,119 481,362 165.9% 1,200,359 6.6% (369,525) (306,427) (453,699)
Share capital 1,153 1,154 -0.1% 1,154 -0.1% 1,153 1,154 -0.1% 1,154 -0.1% - - - - - - - -
Additional
paid-in capital 177,793 240,962 -26.2% 183,872 -3.3% 38,474 101,467 -62.1% 45,072 -14.6% 139,319 139,495 -0.1% 138,800 0.4% - - -
Treasury shares (40) (29) 37.9% (54) -25.9% (40) (29) 37.9% (54) -25.9% - - - - - - - -
Other reserves 84,162 42,101 99.9% 102,269 -17.7% (27,031) (55,166) -51.0% (31,116) -13.1% 111,193 97,267 14.3% 133,385 -16.6% - - -
Retained
earnings 1,945,830 1,650,094 17.9% 1,878,945 3.6% 1,416,885 1,212,492 16.9% 1,393,117 1.7% 528,945 437,602 20.9% 485,828 8.9% - - -
Total equity
attributable
to shareholders
of the Group 2,208,898 1,934,282 14.2% 2,166,186 2.0% 1,429,441 1,259,918 13.5% 1,408,173 1.5% 779,457 674,364 15.6% 758,013 2.8% - - -
Non-controlling
interests 243,855 216,567 12.6% 257,232 -5.2% 6,140 18,332 -66.5% 20,678 -70.3% 237,715 198,235 19.9% 236,554 0.5% - - -
Total equity 2,452,753 2,150,849 14.0% 2,423,418 1.2% 1,435,581 1,278,250 12.3% 1,428,851 0.5% 1,017,172 872,599 16.6% 994,567 2.3% - - -
Total
liabilities
and equity 12,606,524 10,077,589 25.1% 12,989,453 -2.9% 10,678,758 9,030,055 18.3% 11,248,226 -5.1% 2,297,291 1,353,961 69.7% 2,194,926 4.7% (369,525) (306,427) (453,699)
Book value
per share 58.00 50.21 15.5% 57.52 0.8%
GEORGIA HEALTHCARE GROUP
INCOME STATEMENT Healthcare services Medical insurance Pharma Eliminations GHG
GEL thousands;
unless otherwise Change Change Change Change Change Change Change
noted 1Q17 1Q16 y-o-y 4Q16 q-o-q 1Q17 1Q16 y-o-y 4Q16 q-o-q 1Q17 4Q16 q-o-q 1Q17 1Q16 4Q16 1Q17 1Q16 y-o-y 4Q16 q-o-q
Revenue, gross 66,528 60,451 10.1% 67,604 -1.6% 13,965 13,830 1.0% 16,312 -14.4% 111,399 56,586 96.9% (5,265) (1,705) (4,471) 186,627 72,576 157.1% 136,031 37.2%
Corrections
& rebates (623) (410) 52.0% (790) -21.1% - - - - - - - - - - - (623) (410) 52.0% (790) -21.1%
Revenue, net 65,905 60,041 9.8% 66,814 -1.4% 13,965 13,830 1.0% 16,312 -14.4% 111,399 56,586 96.9% (5,265) (1,705) (4,471) 186,004 72,166 157.7% 135,241 37.5%
Costs of services (37,957) (32,998) 15.0% (34,802) 9.1% (12,734) (12,847) -0.9% (14,997) -15.1% (84,408) (44,498) 89.7% 5,173 1,694 4,671 (129,926) (44,151) 194.3% (89,626) 45.0%
Cost of salaries
and other
employee
benefits (23,095) (19,752) 16.9% (21,042) 9.8% - - - - - - - - 855 565 1,534 (22,240) (19,187) 15.9% (19,508) 14.0%
Cost of materials
and supplies (10,647) (9,613) 10.8% (10,616) 0.3% - - - - - - - - 1,363 275 761 (9,284) (9,338) -0.6% (9,855) -5.8%
Cost of medical
service
providers (372) (428) -13.1% (550) -32.4% - - - - - - - - 14 12 39 (358) (416) -13.9% (511) -29.9%
Cost of utilities
and other (3,843) (3,205) 19.9% (2,594) 48.1% - - - - - - - - 142 92 189 (3,701) (3,113) 18.9% (2,405) 53.9%
Net insurance
claims incurred - - - - - (11,812) (11,953) -1.2% (13,911) -15.1% - - - 2,799 750 2,148 (9,013) (11,203) -19.5% (11,763) -23.4%
Agents, brokers
and employee
commissions - - - - - (922) (894) 3.1% (1,086) -15.1% - - - - - - (922) (894) 3.1% (1,086) -15.1%
Cost of pharma
- wholesale - - - - - - - - - - (22,496) (13,700) 64.2% - - - (22,496) - - (13,700) 64.2%
Cost of pharma
- retail - - - - - - - - - - (61,912) (30,797) 101.0% - - - (61,912) - - (30,797) 101.0%
Gross profit 27,948 27,043 3.3% 32,012 -12.7% 1,231 983 25.2% 1,315 -6.4% 26,991 12,088 123.3% (92) (11) 200 56,078 28,015 100.2% 45,615 22.9%
Salaries and
other employee
benefits (7,179) (6,115) 17.4% (6,676) 7.5% (1,048) (819) 28.0% (1,320) -20.6% (9,616) (4,561) 110.8% 116 11 (200) (17,728) (6,923) 156.1% (12,757) 39.0%
General and
administrative
expenses (4,082) (2,483) 64.4% (4,212) -3.1% (507) (719) -29.5% (580) -12.6% (8,762) (4,678) 87.3% - - - (13,352) (3,202) 317.0% (9,470) 41.0%
Impairment
of healthcare
services,
insurance
premiums and
other
receivables (980) (858) 14.2% 145 NMF (113) (122) -7.4% (89) 27.0% (28) - - - - - (1,121) (980) 14.4% 56 NMF
Other operating
income 1,112 241 361.4% 269 313.4% (7) (21) -66.7% 31 NMF 101 545 -81.5% (24) - - 1,182 220 437.3% 845 39.9%
EBITDA 16,819 17,828 -5.7% 21,538 -21.9% (444) (698) -36.4% (643) -30.9% 8,686 3,394 155.9% - - - 25,059 17,129 46.3% 24,289 3.2%
EBITDA margin 25.3% 29.5% 31.9% -3.2% -5.0% -3.9% 7.8% 6.0% - - - - 13.4% 23.6% 17.9%
Depreciation
and amortisation (4,939) (4,261) 15.9% (5,292) -6.7% (222) (204) 8.8% (226) -1.8% (711) 202 NMF - - - (5,872) (4,465) 31.5% (5,316) 10.5%
Net interest
(expense) income (4,116) (2,259) 82.2% (3,815) 7.9% (210) 603 NMF (242) -13.2% (2,793) (548) 409.7% - - (168) (7,119) (1,656) 329.9% (4,773) 49.2%
Net gain (loss)
from foreign -
currencies 695 (411) NMF (2,053) NMF (12) 151 NMF (189) -93.7% 2,095 (928) NMF - - - 2,778 (260) NMF (3,170) NMF
Net non-recurring
(expense) income (1,276) 1,968 NMF 2,704 NMF (200) - - (704) -71.6% (316) (17) NMF - - - (1,792) 1,968 NMF 1,982 NMF
Profit before
income tax
expense 7,183 12,865 -44.2% 13,082 -45.1% (1,088) (149) NMF (2,004) -45.7% 6,961 2,103 231.0% - - (168) 13,054 12,716 2.7% 13,012 0.3%
Income tax
(expense)
benefit (11) (712) NMF (5,439) NMF - 19 NMF (845) NMF (8) (398) NMF - - - (19) (693) NMF (6,682) NMF
of which:
Deferred
tax adjustments - - - (4,321) - - - - (798) - (200) - - - - - - - (5,319) -
Profit for
the period 7,172 12,153 -41.0% 7,643 -6.2% (1,088) (130) NMF (2,849) -61.8% 6,953 1,705 307.8% - - (168) 13,035 12,023 8.4% 6,330 105.9%
Attributable
to:
- shareholders
of the Company 5,764 10,051 -42.7% 6,714 -14.1% (1,088) (130) NMF (2,849) -61.8% 4,157 1,705 143.8% - - (168) 8,832 9,921 -11.0% 5,401 63.5%
-
non-controlling
interests 1,408 2,102 -33.0% 929 51.6% - - - - - 2,796 - - - - - 4,203 2,102 100.0% 929 352.4%
of which:
Deferred
tax adjustments - - - (516) - - - - - - - - - - - - - - (516) -
P&C INSURANCE (ALDAGI)
INCOME STATEMENT, Change Change
HIGHLIGHTS 1Q17 1Q16 y-o-y 4Q16 q-o-q
GEL thousands, unless
otherwise stated
Net banking interest
income 767 725 5.8% 761 0.8%
Net fee and commission
income 99 100 -1.0% 128 -22.7%
Net banking foreign
currency (loss)
gain (425) (47) NMF 809 NMF
Net other banking
income 223 131 70.2% 495 -54.9%
Gross insurance
profit 7,122 5,665 25.7% 6,477 10.0%
Revenue 7,786 6,574 18.4% 8,670 -10.2%
Operating expenses (3,157) (2,767) 14.1% (3,641) -13.3%
Operating income
before cost of credit
risk and non-recurring
items 4,629 3,807 21.6% 5,029 -8.0%
Cost of credit
risk (242) (173) 39.9% (265) -8.7%
Profit before income
tax 4,387 3,634 20.7% 4,764 -7.9%
Income tax (expense) (637) (545) 16.9% (953) -33.2%
Profit 3,750 3,089 21.4% 3,811 -1.6%
BELARUSKY NARODNY BANK (BNB)
INCOME STATEMENT, Change Change
HIGHLIGHTS 1Q17 1Q16 y-o-y 4Q16 q-o-q
GEL thousands, unless
otherwise stated
Net banking interest
income 8,702 7,903 10.1% 8,043 8.2%
Net fee and commission
income 2,350 1,862 26.2% 1,993 17.9%
Net banking foreign
currency gain 1,798 2,481 -27.5% 2,696 -33.3%
Net other banking
income (loss) 109 167 -34.7% (1,064) NMF
Revenue 12,959 12,413 4.4% 11,668 11.1%
Operating expenses (6,400) (4,490) 42.5% (6,483) -1.3%
Operating income
before cost of credit
risk 6,559 7,923 -17.2% 5,185 26.5%
Cost of credit risk (5,634) (2,516) 123.9% (9,163) -38.5%
Net non-recurring
items (57) (3) NMF (1,402) -95.9%
Profit (loss) before
income tax 868 5,404 -83.9% (5,380) NMF
Income tax (expense)
benefit (199) (1,144) -82.6% 1,289 NMF
Profit (loss) 669 4,260 -84.3% (4,091) NMF
BALANCE SHEET, HIGHLIGHTS Mar-17 Mar-16 Change Dec-16 Change
y-o-y q-o-q
GEL thousands, unless
otherwise stated
Cash and cash equivalents 66,619 93,904 -29.1% 70,211 -5.1%
Amounts due from credit
institutions 3,981 3,986 -0.1% 3,560 11.8%
Loans to customers
and finance lease
receivables 335,538 319,740 4.9% 362,100 -7.3%
Other assets 126,727 49,825 154.3% 113,261 11.9%
Total assets 532,865 467,455 14.0% 549,132 -3.0%
Client deposits and
notes 235,877 230,848 2.2% 233,501 1.0%
Amounts due to credit
institutions 193,494 139,801 38.4% 212,495 -8.9%
Debt securities issued 25,512 15,906 60.4% 24,126 5.7%
Other liabilities 5,254 5,409 -2.9% 5,202 1.0%
Total liabilities 460,137 391,964 17.4% 475,324 -3.2%
Total equity attributable
to shareholders of
the Group 72,728 62,908 15.6% 59,205 22.8%
Non-controlling interests - 12,583 -100.0% 14,603 -100.0%
Total equity 72,728 75,491 -3.7% 73,808 -1.5%
Total liabilities
and equity 532,865 467,455 14.0% 549,132 -3.0%
BANKING BUSINESS KEY
RATIOS 1Q17 1Q16 4Q16
Profitability
ROAA, Annualised 3.2% 3.0% 2.9%
ROAE, Annualised 23.5% 21.2% 20.1%
RB ROAE 27.2% 24.3% 35.8%
CIB ROAE 18.3% 17.6% 6.1%
Net Interest Margin,
Annualised 7.4% 7.5% 7.6%
RB NIM 8.8% 9.2% 9.3%
CIB NIM 3.4% 3.7% 3.6%
Loan Yield, Annualised 14.0% 14.4% 14.4%
RB Loan Yield 15.9% 17.4% 16.4%
CIB Loan Yield 10.7% 10.3% 11.1%
Liquid Assets Yield,
Annualised 3.4% 3.1% 3.3%
Cost of Funds, Annualised 4.6% 5.0% 4.6%
Cost of Client Deposits
and Notes, Annualised 3.5% 4.3% 3.5%
RB Cost of Client
Deposits
and Notes 3.0% 3.5% 3.1%
CIB Cost of Client
Deposits
and Notes 3.9% 4.5% 3.6%
Cost of Amounts Due
to Credit Institutions,
Annualised 6.3% 6.0% 6.4%
Cost of Debt Securities
Issued 6.0% 7.2% 6.1%
Operating Leverage,
Y-O-Y 5.7% -3.3% -6.8%
Operating Leverage,
Q-O-Q 3.3% -6.6% -0.3%
Efficiency
Cost / Income 36.1% 37.9% 37.5%
RB Cost / Income 37.6% 43.3% 38.8%
CIB Cost / Income 30.1% 27.0% 28.7%
Liquidity
NBG Liquidity Ratio 37.4% 47.3% 37.7%
Liquid Assets To Total
Liabilities 36.8% 37.1% 37.8%
Net Loans To Client
Deposits and Notes 115.7% 108.7% 116.6%
Net Loans To Client
Deposits and Notes +
DFIs 96.1% 91.6% 95.3%
Leverage (Times) 6.4 6.1 6.9
Asset Quality:
NPLs (in GEL) 311,940 251,959 294,787
NPLs To Gross Loans
To Clients 4.6% 4.5% 4.2%
NPL Coverage Ratio 87.1% 86.0% 86.7%
NPL Coverage Ratio,
Adjusted for discounted
value of collateral 126.9% 122.6% 132.1%
Cost of Risk, Annualised 2.4% 2.3% 4.2%
RB Cost of Risk 3.4% 2.5% 2.0%
CIB Cost of Risk 0.3% 2.1% 6.6%
Capital Adequacy:
New NBG (Basel 2/3)
Tier I Capital Adequacy
Ratio(9) 11.2% 10.1% 10.1%
New NBG (Basel 2/3)
Total Capital Adequacy
Ratio(9) 16.3% 15.8% 15.4%
Selected Operating Data:
Total Assets Per FTE,
BOG Standalone 2,060 1,972 2,242
Number Of Active Branches,
Of Which: 279 266 278
- Express Branches
(including Metro) 130 114 128
- Bank of Georgia Branches 138 144 139
- Solo Lounges 11 8 11
Number Of ATMs 813 753 801
Number Of Cards Outstanding,
Of Which: 2,099,488 1,943,175 2,056,258
- Debit cards 1,307,135 1,171,454 1,255,637
- Credit cards 792,353 771,721 800,621
Number Of POS Terminals 10,774 8,175 10,357
FX Rates:
GEL/US$ exchange rate
(period-end) 2.4452 2.3679 2.6468
GEL/GBP exchange rate
(period-end) 3.0418 3.4110 3.2579
Mar-17 Mar-16 Dec-16
Full Time Employees,
Group, Of Which: 24,091 16,086 22,080
Total Banking Business
Companies, of which: 6,898 6,183 6,720
- Full Time Employees,
BOG Standalone 5,183 4,580 5,016
- Full Time Employees,
BNB 622 562 611
- Full Time Employees,
Aldagi 293 259 289
- Full Time Employees,
BB other 800 782 804
Total Investment Business
Companies, of which: 17,193 9,903 15,360
- Full Time Employees,
Georgia Healthcare Group 14,510 9,675 12,720
- Full Time Employees,
GGU 2,373 - 2,379
- Full Time Employees,
m(2) 84 59 80
- Full Time Employees,
IB Other 226 169 181
Shares Outstanding Mar-17 Mar-16 Dec-16
Ordinary Shares Outstanding 38,085,220 38,523,409 37,657,229
Treasury Shares Outstanding 1,384,100 976,911 1,843,091
Total Shares Issued 39,469,320 39,500,320 39,500,320
(9) Capital adequacy ratios include GEL 99.5mln distributed as
dividend from the Bank to the holding level on 29 December 2016.
These funds are earmarked for regular dividends in respect of the
2016 financial year and will be paid on 7 July 2017, subject to
approval by the shareholders at BGEO's AGM on 1 June 2017.
Excluding this amount, NBG (Basel 2/3) Tier I and Total CAR would
be 10.1% and 15.2%, respectively, at 31 March 2017 and 9.1% and
14.4%, respectively, at 31 December 2016
Annex:
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 (NIM) 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. NBG Liquidity Ratio equals 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. NMF - Not meaningful
------------------------------------------------------------------
-------------------------------------------------------------------------------
COMPANY INFORMATION
BGEO Group PLC
Registered Address
84 Brook Street
London W1K5EH
United Kingdom
www.BGEO.com
Registered under number 7811410 in England and Wales
Incorporation date: 14 October2011
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)2031784052; +995322444444 (ext. 3979)
E-mail: ir@BGEO.com
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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May 10, 2017 02:00 ET (06:00 GMT)
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