TIDMBGEO
RNS Number : 4972F
Bank of Georgia Group PLC
17 November 2020
Bank of Georgia
Group PLC
3(rd) quarter and first nine months 2020 results
Name of authorised official of issuer responsible for making
notification:
Natia Kalandarishvili, Head of Investor Relations and
Funding
www.bankofgeorgiagroup.com
ABOUT BANK OF GEORGIA GROUP PLC
The Group: Bank of Georgia Group PLC ("Bank of Georgia Group" or
the "Group" - LSE: BGEO LN) is a UK incorporated holding company,
which comprises: a) retail banking and payment services; and b)
corporate and investment banking and wealth management operations
in Georgia; and c) banking operations in Belarus ("BNB"). JSC Bank
of Georgia ("Bank of Georgia", "BOG" or the "Bank"), the leading
universal bank in Georgia, is the core entity of the Group. In the
medium to long-term, the Group targets to benefit from superior
growth of the Georgian economy through both its retail banking and
corporate and investment banking services and aims to deliver on
its strategy, which is based on at least 20% ROAE and c.15% growth
of its loan book.
3Q20 AND 9M20 RESULTS
Bank of Georgia Group PLC announces the Group's consolidated
financial results for the third quarter and the first nine months
of 2020. Unless otherwise noted, numbers in this announcement are
for 3Q20 and comparisons are with 3Q19. The results are based on
International Financial Reporting Standards ("IFRS") as adopted by
the European Union, are unaudited and derived from management
accounts. This results announcement is also available on the
Group's website at www.bankofgeorgiagroup.com .
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 Bank of
Georgia 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: macroeconomic risk, including
currency fluctuations and depreciation of the Georgian Lari;
regional instability; loan portfolio quality; regulatory risk;
liquidity and funding risk; capital risk; operational risk, cyber
security, information systems and financial crime risk; COVID-19
pandemic impact risk; climate change risk; and other key factors
that 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 of the Group, including the
'Principal risks and uncertainties' included in Bank of Georgia
Group PLC's Annual Report and Accounts 2019 and in 2Q20 and 1H20
results announcement. No part of this document constitutes, or
shall be taken to constitute, an invitation or inducement to invest
in Bank of Georgia Group PLC or any other entity within the Group,
and must not be relied upon in any way in connection with any
investment decision. Bank of Georgia Group PLC and other entities
within the Group undertake 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.
CONTENTS
4 Impact of COVID-19 global pandemic
5 3Q20 and 9M20 results highlights
7 Chief Executive Officer's statement
8 Discussion of results
12 Discussion of segment results
12 Retail Banking
16 Corporate and Investment Banking
19 Selected financial and operating information
23 Glossary
24 Company information
IMPACT OF COVID-19 GLOBAL PANDEMIC
The impact of the COVID-19 global pandemic has tested the
resilience and character of Bank of Georgia, together with that of
all of our colleagues and customers. Our performance during the
first nine months of 2020 was, therefore, significantly impacted by
a number of factors:
-- Measures implemented by the Georgian Government to address
the COVID-19 crisis, including economic lockdown
-- Measures introduced by the National Bank of Georgia (the
"NBG") as a response to the COVID-19 crisis
-- Actions implemented by the Group to address the COVID-19
crisis
Early in the evolution of the global pandemic, the Georgian
Government took significant actions to successfully reduce the
spread of the virus, which included flight bans, and school and
business closures - essentially shutting down many areas of the
economy. The lockdown restrictions resulted in a sharp reduction of
economic activity in April and May, however, the Government's
immediate response to the evolving COVID-19 pandemic enabled the
domestic economy to reopen much faster than any other economy in
the region and also resume domestic tourism in June. This was
supported by an anti-crisis stimulus plan, which included a social
assistance package for individuals, as well as tax exemptions and
various funding mechanisms for businesses, and stimulus plans for
various sectors of economy.
Local currency funding has experienced a significant pressure,
resulting in an increase in interest rates in April and May,
however, this impact was subsequently stabilised to more normal
levels as a result of new local currency funding instruments
introduced by the National Bank of Georgia in order to support the
GEL liquidity.
In order to respond to the pandemic outbreak, the Group
introduced a number of resilience protocols and a comprehensive
Business Continuity Plan aimed at curbing the spread of COVID-19 in
Georgia and mitigating the negative impact on our business and the
community. We have put in place a number of initiatives to reduce
physical interactions and prevent the spread of coronavirus, whilst
maintaining the full banking capability required to support and
assist our customers. This included fully moving back office staff
to working from home, significantly enhancing the capacity of our
call centre, temporarily closing the customer service support areas
of express branches (mostly re-opened in June), with only the
self-service terminals and ATM areas remaining open, implementing a
three-month grace period on principal and interest payments on all
retail loans to significantly reduce the requirement for customers
to physically visit branches, applying more stringent risk
assessment procedures during the lending process, incentivising the
offloading of customer activity to digital channels through
temporary removal of fees on transactions executed through our
mobile and internet banking platforms, among others.
Over the last few weeks, Georgia has experienced the emergence
of a second wave of infections, and the Bank has adjusted
accordingly, moving large part of its back office staff to working
from home, and reintroducing two-week shifts for certain
departments and front office. We however do not expect a full-scale
lockdown of economy despite the new wave of infections, based on
the official statements of the Government. Targeted restrictions to
contain the virus spread are expected, with some measures already
in place since the beginning of November.
From a macroeconomic perspective, Georgia has experienced a
better than expected recovery in business activity with GDP
contracting by just 0.7% y-o-y in September and by 3.8% y-o-y in
3Q20, following a 12.3% y-o-y contraction in 2Q20. This recovery
has been supported by fiscal stimulus, banking sector lending and a
significant increase in remittances (up by 25.5% y-o-y in the third
quarter). Notably, exports also increased by 8.6% y-o-y in
September, and price pressures eased, with annual inflation
retreating to 3.8% in September. The Georgian Lari weakened in
September and depreciated by 7.0% against the US Dollar during the
month, before regaining some of its lost value, partly as a result
of the NBG's interventions. There has been some careful reopening
of international borders, but we do not expect to see any
significant levels of international tourism during the remainder of
2020. As a result, we currently expect the Georgian economy to
contract by 5.1% in 2020, which is consistent with both the IMF and
the Government forecasts, followed by real GDP growth of c.5% in
2021, based on the estimates of our brokerage and investment arm,
Galt and Taggart.
Whilst our second quarter results were significantly impacted by
the environment and the measures we have put in place to manage the
crisis, we have seen significant recovery in economic activity
since June 2020, which have been reflected in our third quarter
results: lending activity has picked up and we saw a 60bps q-o-q
increase in our net interest margin; net fee and commission income
increased by 38.4% q-o-q, on the back of improved remittances,
increased consumer demand as measured by banking card payment
activities, and the recovery in VAT turnover of local businesses
during the third quarter of 2020; our loan book has been performing
better than expected in terms of portfolio quality, and client
deposits increased by 7.1% q-o-q on a constant-currency basis. As a
result, we delivered a return on equity of 26.0% in the third
quarter of 2020.
We next outline the Group's third quarter and the first nine
months of 2020 results highlights, a summary of those highlights,
and the Chief Executive Officer's letter, before going into further
detail.
3Q20 AND 9M20 RESULTS HIGHLIGHTS
Change Change Change
GEL thousands 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
INCOME STATEMENT HIGHLIGHTS(1)
Net interest income 204,030 200,992 1.5% 174,936 16.6% 576,047 582,327 -1.1%
Net fee and commission
income 45,532 48,009 -5.2% 32,901 38.4% 118,545 133,456 -11.2%
Net foreign currency gain 19,179 32,233 -40.5% 22,743 -15.7% 72,583 82,186 -11.7%
Net other income 7,750 3,728 107.9% 9,081 -14.7% 23,457 3,035 NMF
Operating income 276,491 284,962 -3.0% 239,661 15.4% 790,632 801,004 -1.3%
Operating expenses (102,612) (107,917) -4.9% (105,158) -2.4% (313,778) (298,401) 5.2%
Profit from associates 214 194 10.3% 113 89.4% 628 636 -1.3%
Operating income before
cost of risk 174,093 177,239 -1.8% 134,616 29.3% 477,482 503,239 -5.1%
Cost of risk (10,942) (15,223) -28.1% (10,221) 7.1% (262,566) (93,351) NMF
Net operating income before
non-recurring items 163,151 162,016 0.7% 124,395 31.2% 214,916 409,888 -47.6%
Net non-recurring items 254 (5,019) NMF (1,241) NMF (41,332) (9,132) NMF
Profit before income tax
and one-off costs 163,405 156,997 4.1% 123,154 32.7% 173,584 400,756 -56.7%
Income tax expense (15,051) (22,697) -33.7% (8,470) 77.7% (10,491) (43,104) -75.7%
Profit adjusted for one-off
costs 148,354 134,300 10.5% 114,684 29.4% 163,093 357,652 -54.4%
One-off termination costs - - - - - - (14,236) NMF
of former CEO and executive
management (after tax)
Profit 148,354 134,300 10.5% 114,684 29.4% 163,093 343,416 -52.5%
GEL thousands Sep-20 Sep-19 Change Jun-20 Change
y-o-y q-o-q
BALANCE SHEET HIGHLIGHTS
Liquid assets 6,339,663 5,099,111 24.3% 5,447,730 16.4%
Cash and cash equivalents 2,154,224 1,369,169 57.3% 1,633,755 31.9%
Amounts due from credit
institutions 1,980,195 1,834,220 8.0% 1,700,075 16.5%
Investment securities 2,205,244 1,895,722 16.3% 2,113,900 4.3%
Loans to customers and
finance lease receivables(2) 13,627,144 11,339,745 20.2% 12,599,092 8.2%
Property and equipment 390,401 364,405 7.1% 396,272 -1.5%
Total assets 21,166,953 17,540,692 20.7% 19,183,966 10.3%
Client deposits and notes 12,985,039 9,613,718 35.1% 11,583,139 12.1%
Amounts owed to credit
institutions 3,757,646 3,437,718 9.3% 3,521,860 6.7%
Borrowings from DFIs 1,807,472 1,355,426 33.4% 1,755,656 3.0%
Short-term loans from
central banks 874,153 1,271,027 -31.2% 847,213 3.2%
Loans and deposits from
commercial banks 1,076,021 811,265 32.6% 918,991 17.1%
Debt securities issued 1,628,188 2,175,820 -25.2% 1,561,933 4.2%
Total liabilities 18,795,816 15,500,833 21.3% 16,984,167 10.7%
Total equity 2,371,137 2,039,859 16.2% 2,199,799 7.8%
KEY RATIOS 3Q20 3Q19 2Q20 9M20 9M19
ROAA(1) 3.0% 3.2% 2.4% 1.1% 3.0%
ROAE(1) 26.0% 26.8% 21.8% 9.9% 24.7%
Net interest margin 4.8% 5.4% 4.2% 4.7% 5.7%
Liquid assets yield 3.3% 3.2% 3.4% 3.5% 3.4%
Loan yield 10.7% 11.5% 10.2% 10.6% 11.8%
Cost of funds 4.7% 4.5% 4.8% 4.8% 4.5%
Cost / income(3) 37.1% 37.9% 43.9% 39.7% 37.3%
NPLs to Gross loans to
clients 3.8% 2.9% 2.7% 3.8% 2.9%
NPL coverage ratio 76.8% 85.3% 115.7% 76.8% 85.3%
NPL coverage ratio, adjusted
for discounted value of
collateral 131.4% 129.3% 166.3% 131.4% 129.3%
Cost of credit risk ratio 0.2% 0.5% -0.2% 2.4% 1.1%
NBG (Basel III) CET1 capital
adequacy ratio 9.9% 11.1% 9.9% 9.9% 11.1%
NBG (Basel III) Tier I
capital adequacy ratio 12.0% 13.3% 12.0% 12.0% 13.3%
NBG (Basel III) Total capital
adequacy ratio 17.3% 16.8% 17.4% 17.3% 16.8%
(1) The income statement adjusted profit in 9M19 excludes GEL
14.2mln one-off employee costs (net of income tax) related to
former CEO and executive management termination benefits. The
amount is comprised of GEL 12.4mln (gross of income tax) excluded
from salaries and other employee benefits, GEL 4.0mln (gross of
income tax) excluded from non-recurring items and GEL 2.2mln tax
benefit excluded from income tax expense. 9M19 ROAE and ROAA have
been adjusted accordingly
(2) Throughout this announcement, the gross loans to customers
and respective allowance for impairment are presented net of
expected credit loss (ECL) on contractually accrued interest
income. These do not have an effect on the net loans to customers
balance. Management believes that netted-off balances provide the
best representation of the loan portfolio position
(3) Cost/income ratio in 9M19 is adjusted for GEL 12.4mln
one-off employee costs (gross of income tax) related to termination
benefits of former executive management
KEY RESULTS HIGHLIGHTS
-- Strong quarterly performance partially reflecting increased
economic activity following the 2Q20 COVID-19 pandemic impact. The
Group generated profit of GEL 148.4mln in 3Q20 (up 10.5% y-o-y and
up 29.4% q-o-q), mostly driven by improved net interest income and
net fee and commission income, with profitability reaching 26.0%
ROAE in 3Q20
-- Net interest margin . Our NIM was 4.8% in 3Q20. Having
reduced significantly in April and May, as a result of a reduction
in retail lending activity, NIM was up 60bps q-o-q in the third
quarter of 2020, mostly reflecting a strong rebound in customer
activity since June 2020, while still maintaining high levels of
liquidity in terms of 147.0% liquidity coverage ratio
-- Net fee and commission income generation was strong in the
third quarter of 2020 (up 38.4% q-o-q and down only 5.2% y-o-y).
Since June 2020, we have seen strong recovery dynamics, as
remittances has grown significantly and consumer demand, as
measured by banking card payment activities, has improved. VAT
turnover statistics have also demonstrated a recovery in business
activity
-- Operating expenses decreased by 4.9% y-o-y and by 2.4% q-o-q
in 3Q20, mostly as a result of a number of cost optimisation
initiatives in the second quarter of 2020. That said, the Group
continues its investment in IT-related resources, digitalisation
and marketing, as part of its key strategic priorities, and at the
same time maintains its focus on efficiency and cost control
-- Loan book increased by 20.2% y-o-y and by 8.2% q-o-q at 30
September 2020. Growth on a constant-currency basis was 12.8% y-o-y
and 3.5% q-o-q. The y-o-y loan book growth reflected continued
strong loan origination levels in Corporate, MSME and the mortgage
segments during the pre-COVID-19 period, while the q-o-q increase
reflected recovery in economic activity since June 2020
-- Client deposits and notes increased by 35.1% y-o-y and by
12.1% q-o-q at 30 September 2020. On a constant-currency basis,
client deposits and notes grew by 26.4% y-o-y and by 7.1% q-o-q.
This strong deposit franchise growth reflects a consistent increase
in monthly deposit balances of both our individual and business
customers since May 2020
-- Asset quality. The cost of credit risk ratio was 0.2% in 3Q20
(compared to 0.5% in 3Q19 and a net gain of 0.2% in 2Q20) and was
2.4% in the first nine months of 2020 (compared to 1.1% in 9M19).
The y-o-y increase in cost of credit risk ratio during the first
nine months of 2020 was primary driven by significant ECL
provisions on loans to customers and finance lease receivables
created for the full economic cycle during the first quarter of
2020, related to adverse macro-economic environment and expected
negative impact on the creditworthiness of borrowers as a result of
the COVID-19 pandemic. These assumptions were revisited to reflect
the macro-economic forecast scenarios published by the NBG in May
2020 in the second quarter, and better visibility of the portfolio
and the detailed review of creditworthiness of the borrowers in the
third quarter. As a result of these analysis, the provisions
recorded in 1Q20, proved overall to be sufficient. See details on
page 10. In 3Q20, the cost of credit risk reflects a normalisation
of the retail cost of credit risk, offset by a better than
anticipated performance of the corporate lending portfolio
-- NPLs to gross loans increased to 3.8% at 30 September 2020
(2.9% at 30 September 2019 and 2.7% at 30 June 2020) , following a
full portfolio review of corporate and SME customers, and
significant portion of retail and micro segment borrowers in the
third quarter, which is in line with the upfront ECL provision
recorded for the full economic cycle in the first quarter of 2020 .
The NPL coverage ratio was 76.8% at 30 September 2020 (85.3% at 30
September 2019 and 115.7% at 30 June 2020). That said, the NPL
coverage ratio adjusted for a discounted value of collateral was up
y-o-y to 131.4% at 30 September 2020 (129.3% at 30 September 2019
and 166.3% at 30 June 2020). The y-o-y decline in NPL coverage
ratio reflects the shift of the portfolio mix from high-yielding
unsecured to more secured consumer lending since 2019 on the back
of the consumer lending regulation, and is supported by the high
level of collateralisation of our loan book
-- Solid capital adequacy position. The Bank's capital adequacy
ratios have remained robust, and comfortably above the minimum
regulatory requirements. The Bank's Basel III Common Equity Tier 1,
Tier 1 and Total capital adequacy ratios stood at 9.9%, 12.0% and
17.3%, respectively, all well above the minimum required levels of
6.9%, 8.7% and 13.3%, respectively, at 30 September 2020. A y-o-y
decline in capital ratios was primarily due to a c.GEL 400mln
general provision created in March 2020 under the local regulatory
accounting basis in agreement with the NBG (and consistent with the
NBG's guidance for the Georgian banking sector in general) that
covers its current expectations of estimated credit losses on the
Bank's lending book for the whole economic cycle. Capital ratios
were largely flat q-o-q, as strong internal capital generation was
offset by loan book growth and the local currency depreciation
during the third quarter of 2020. See details of capital adequacy
ratios movement during the third quarter on page 11
-- Strong liquidity and funding position. The Bank's liquidity
and funding positions have remained strong. As at 30 September
2020, the Bank's liquidity coverage ratio stood at 147.0% and net
stable funding ratio at 137.5%, compared to the 100% minimum
required level. The Bank maintained substantial excess liquidity in
the second and third quarters of 2020, primarily for 1) risk
mitigation purposes on the back of the ongoing COVID-19 crisis, as
outflow of customer funds was expected at early stage of the
pandemic outbreak, which however did not materialise. Client
deposit balances continue to grow to date; and 2) the repayment of
local currency bonds in June 2020
CHIEF EXECUTIVE OFFICER'S STATEMENT
The Group has delivered a very strong performance in the third
quarter of 2020, against the backdrop of continuing challenge of
the COVID-19 pandemic impact on the Georgian economy. I am
particularly pleased that this has translated into strong operating
income increase quarter-on-quarter, driven by both net interest
income and net fee and commission income. Having taken a
significant up-front credit loss provision for the full economic
cycle in the first quarter of the year, the quality of our loan
book has been very robust as the economy has started to recover
from the pandemic-related lockdown in April and May, and our
customers have substantially reduced their reliance on payment
holidays on loans. Less than 1.5% of our lending portfolio is now
using these payment holidays. Profit for the third quarter of 2020
totalled GEL 148.4 million, up 29.4% quarter-on-quarter and up
10.5% year-on-year. The annualised return on average equity in the
third quarter was 26.0%.
From a macro-economic perspective, we have seen continued
economic recovery since June with GDP contracting by just 0.7%
y-o-y in September, significantly exceeding expectations. Whilst
there has been some careful re-opening of international borders,
international tourism has been minimal, with the Georgian
hospitality sector having to rely on domestic tourism where
possible. This significantly reduced foreign currency inflows
during the usually very busy summer season, which was reflected in
a 7.6% depreciation of the Georgian Lari against the US Dollar in
3Q20. However, the absence of international tourism has been
mitigated by strong remittance flows, up more than 20% in each
month of 3Q20, reduced goods trade deficit, and external funding
support. We expect the Georgian economy to contract by 5.1% in
2020, which is close to both IMF and the Government forecasts,
followed by the real GDP growth of c.5% in 2021, based on the
estimates of our brokerage and investment arm.
Bank of Georgia's performance has been very strong in the third
quarter:
-- The balance sheet has remained strong with better than
expected levels of growth. On a constant currency basis, our
customer lending increased by 3.5%, and client deposits and notes
increased significantly by 7.1% quarter-on-quarter at 30 September
2020, demonstrating Bank of Georgia's clear market leadership in
deposits of individuals
-- Revenue growth has been excellent . Net fee and commission
income increased by 38.4% quarter-on-quarter, with net interest
income growing at 16.6% in the third quarter of 2020, while still
maintaining high levels of liquidity (LCR - 147.0%)
-- Net interest margin increased by 60 basis points, to 4.8%, in
3Q20. Having reduced significantly during the second quarter, our
net interest margin increased substantially in the third quarter,
largely reflecting the increase in economic activity. We expect the
net interest margin to remain broadly stable going forward
-- Our lending portfolio has performed better than expected.
Asset quality has remained robust. Following the economic downturn
and subsequent re-opening, we have now individually reviewed all of
our SME and corporate borrowers, and the provision estimated in the
first quarter is proving to be sufficient. Our corporate, SME, and
SOLO segment portfolios all continue to perform better than
initially expected, with some specific recoveries in the corporate
portfolio
-- Costs have been well-managed with a 2.4% quarter-on-quarter
reduction in operating expenses, following a review of our variable
cost base. This is consistent with our expectation for broadly flat
year-on-year operating costs during 2020, whilst ensuring that we
continue to invest in building our core franchise capabilities
-- Our capital ratios have remained robust and comfortably above
our minimum regulatory requirements. The high level of internal
capital generation has supported the strong loan growth in 3Q20,
whilst offsetting the currency depreciation impact
-- Delivering superior levels of profitability. In the third
quarter of 2020, our annualised return on average equity was
26.0%.
We have continued the further development of our
fully-integrated digital strategy, an important focus for us as we
seek to digitalise our full banking platforms. We are leaders in
the payments business in Georgia, with a 45% market share in
volume, and a 48% share in the number of transactions in POS
terminals. The use of our mobile and other digital platforms has
substantially increased throughout the period of the economic
lockdown; number of active users of our digital service channels
continues to increase rapidly, and I was delighted with the 29.0%
quarter-on-quarter growth in the number of mobile banking
transactions, to 17.2 million, in the third quarter of 2020.
Our two clear strategic targets remain unchanged: to achieve at
least 20% return on average equity and to deliver c.15% growth of
the loan book, over time. These results are consistent with those
targets, in what remain challenging times. After very low levels of
COVID-19 cases, Georgia has recently experienced the emergence of
some further waves of infection, although the Government expects
the economy to remain open despite these new waves. Our ongoing
performance, of course, continues to be affected by the COVID-19
economic impact, but our balance sheet is demonstrating robustness,
asset quality is resilient, and the Group is very well-positioned
for the future, with strong liquidity and funding, and capital
resources.
I am delighted and proud of the way the management team and all
of our colleagues have responded to recent challenges. Bank of
Georgia continues to play a fundamentally important role in
supporting our customers, the communities in which we live, and the
Georgian economy. With our market leading payments franchise and
mobile app popularity, combined with our clear focus on customer
satisfaction and employee empowerment, we have laid the groundwork
for the bank of the future.
Archil Gachechiladze,
CEO, Bank of Georgia Group PLC
16 November 2020
DISCUSSION OF RESULTS
The Group's business is composed of three segments. (1) 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.
Retail Banking targets the emerging and mass retail and mass
affluent segments, together with small and medium enterprises and
micro businesses. (2) Corporate and 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. (3) BNB, comprising JSC
Belarusky Narodny Bank, principally provides retail and corporate
banking services to clients in Belarus.
OPERATING INCOME
GEL thousands, unless
otherwise Change Change Change
noted 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
Interest income 407,666 366,721 11.2% 379,038 7.6% 1,175,029 1,043,680 12.6%
Interest expense (203,636) (165,729) 22.9% (204,102) -0.2% (598,982) (461,353) 29.8%
Net interest income 204,030 200,992 1.5% 174,936 16.6% 576,047 582,327 -1.1%
Fee and commission
income 71,793 76,166 -5.7% 54,389 32.0% 197,076 206,721 -4.7%
Fee and commission
expense (26,261) (28,157) -6.7% (21,488) 22.2% (78,531) (73,265) 7.2%
Net fee and commission
income 45,532 48,009 -5.2% 32,901 38.4% 118,545 133,456 -11.2%
Net foreign currency
gain 19,179 32,233 -40.5% 22,743 -15.7% 72,583 82,186 -11.7%
Net other income 7,750 3,728 107.9% 9,081 -14.7% 23,457 3,035 NMF
Operating income 276,491 284,962 -3.0% 239,661 15.4% 790,632 801,004 -1.3%
Net interest margin 4.8% 5.4% 4.2% 4.7% 5.7%
Average interest
earning
assets 16,928,476 14,643,462 15.6% 16,668,289 1.6% 16,427,415 13,651,149 20.3%
Average interest
bearing
liabilities 17,323,145 14,704,688 17.8% 16,957,795 2.2% 16,833,871 13,643,188 23.4%
Average net loans and
finance
lease receivables,
currency
blended 12,997,553 10,984,723 18.3% 12,862,536 1.0% 12,679,609 10,162,048 24.8%
Average net loans
and finance
lease
receivables, GEL 5,141,167 4,425,551 16.2% 4,984,078 3.2% 5,047,531 4,026,375 25.4%
Average net loans
and finance
lease
receivables, FC 7,856,386 6,559,172 19.8% 7,878,458 -0.3% 7,632,078 6,135,673 24.4%
Average client
deposits and
notes, currency
blended 12,252,445 9,276,227 32.1% 11,115,351 10.2% 11,294,784 8,766,483 28.8%
Average client
deposits
and notes, GEL 4,506,618 2,891,726 55.8% 3,602,387 25.1% 3,834,714 2,833,929 35.3%
Average client
deposits
and notes, FC 7,745,827 6,384,501 21.3% 7,512,964 3.1% 7,460,070 5,932,554 25.7%
Average liquid assets,
currency
blended 5,708,834 4,808,233 18.7% 5,297,130 7.8% 5,448,671 4,592,799 18.6%
Average liquid
assets, GEL 2,409,989 2,081,990 15.8% 2,341,763 2.9% 2,314,102 2,069,463 11.8%
Average liquid
assets, FC 3,298,845 2,726,243 21.0% 2,955,367 11.6% 3,134,569 2,523,336 24.2%
Liquid assets yield,
currency
blended 3.3% 3.2% 3.4% 3.5% 3.4%
Liquid assets
yield, GEL 7.7% 6.4% 7.5% 7.8% 6.4%
Liquid assets
yield, FC 0.1% 0.8% 0.1% 0.4% 1.0%
Loan yield, currency
blended 10.7% 11.5% 10.2% 10.6% 11.8%
Loan yield, GEL 15.6% 16.5% 14.7% 15.3% 17.3%
Loan yield, FC 7.5% 8.2% 7.3% 7.5% 8.2%
Cost of funds,
currency blended 4.7% 4.5% 4.8% 4.8% 4.5%
Cost of funds, GEL 7.8% 6.7% 8.3% 8.0% 6.8%
Cost of funds, FC 3.0% 3.2% 3.0% 2.9% 3.2%
Cost / income (4) 37.1% 37.9% 43.9% 39.7% 37.3%
(4) The cost/income ratio in 9M19 is adjusted for GEL 12.4mln
one-off employee costs (gross of income tax) related to termination
benefits of former executive management
Performance highlights
-- The Group generated strong operating income of GEL 276.5mln
in 3Q20 (down 3.0% y-o-y and up 15.4% q-o-q), ending nine months of
2020 with operating income of GEL 790.6mln (slightly down by 1.3%
y-o-y). The y-o-y decrease in operating income in 3Q20 and 9M20 was
primarily driven by the decline in net fee and commission income
and net foreign currency gains on the back of slow-down of economic
activity due to COVID-19 pandemic outbreak in March 2020. Strong
q-o-q growth in operating income in 3Q20 was mainly due to increase
in net interest income (up 16.6% q-o-q) and net fee and commission
income (up 38.4% q-o-q), as a result of recovery in customer
activity since June 2020
-- Our NIM was 4.8% in 3Q20 and 4.7% in 9M20. NIM was down 60bps
y-o-y and 100bps y-o-y in 3Q20 and 9M20, respectively, primarily
due to the decline in currency blended loan yields (down 80bps
y-o-y in 3Q20 and down 120bps y-o-y in 9M20), on the back of the
slower lending activity due to the COVID-19 pandemic, and the
effect of change in portfolio mix resulting from the consumer
lending regulation introduced since 2019. This was coupled with
higher levels of liquidity and an increase in the cost of funds (up
20bps y-o-y in 3Q20 and up 30bps y-o-y 9M20). NIM, on the other
hand, improved by 60bps on a q-o-q basis, as the reopening of the
economy and recovery dynamic in the client activity since June 2020
led to a 50bps increase in loan yields, coupled with a 10bps
decline in the cost of funds in the third quarter of 2020
-- Liquid assets yield. Currency blended liquid assets yield was
3.3% in 3Q20 (up 10bps y-o-y and down 10bps q-o-q) and 3.5% in 9M20
(up 10bps y-o-y). The local currency denominated liquid assets
yield movement (up 130bps y-o-y and up 20bps q-o-q in 3Q20, and up
140bps y-o-y in 9M20) directly reflected the NBG's monetary policy
rate changes ( NBG increased monetary policy rate by cumulative of
250bps since September 2019, although reduced the policy rate three
times by a cumulative 100bps in the second and third quarters of
2020). As for the foreign currency denominated liquid assets yield
(down 70bps y-o-y and flat q-o-q in 3Q20, and down 60bps y-o-y in
9M20), it largely reflected the cut in US Fed rate in March 2020
(NBG accrues interest rate on US Dollar obligatory reserves of the
banks at US Fed rate upper bound minus 50bps)
-- Cost of funds. Cost of funds was 4.7% in 3Q20 (up 20bps y-o-y
and down 10bps q-o-q) and 4.8% in 9M20 (up 30bps y-o-y). These
changes were primarily driven by the movement of local currency
denominated cost of funds (up 110bps y-o-y and down 50bps q-o-q in
3Q20, and up 120bps y-o-y in 9M20), which reflected the NBG's
monetary policy rate changes ( NBG increased monetary policy rate
by cumulative of 250bps since September 2019, although reduced the
policy rate three times by a cumulative 100bps in 2Q20 and 3Q20),
partially offset by the impact of repayment of the GEL 500 million
local currency bonds due at the beginning of June 2020
-- Net fee and commission income. Net fee and commission income
was GEL 45.5mln in 3Q20 (down 5.2% y-o-y and up 38.4% q-o-q) and
GEL 118.5mln in the first nine months of 2020 (down 11.2% y-o-y).
The y-o-y decline in 3Q20 was primarily due to the slower customer
activity on the back of COVID-19 pandemic. However, economic
activity has recovered significantly since June 2020, which is also
reflected in the q-o-q increase in our net fee and commission
income in 3Q20, primarily driven by increase in income from
settlement and cash operations. On a nine-month basis, y-o-y
decline in net fee and commission income in 9M20 was mainly driven
by decrease in income from settlement and cash operations, as a
result of slower customer activity due to COVID-19 pandemic in 2Q20
and temporary removal of fees on transactions executed through our
mobile and internet banking platforms since mid-March 2020, for a
two-month period, in order to decrease the customer visits to
branches and incentivise the transfer of customers' activity to
digital channels. This decline was partially offset by the strong
net fees and commission income generation from guarantees and
letters of credit issued by our Corporate and Investment Banking
business
-- Net foreign currency gain. Net foreign currency gain was down
by 40.5% y-o-y and by 15.7% q-o-q in 3Q20, primarily due to lower
currency volatility and client-driven flows during most of the
third quarter of 2020. Lower net foreign currency gains from our
subsidiary in Belarus also contributed to the decline
-- Net other income. Significant y-o-y increase in net other
income in the first nine months of 2020, was primarily driven by
higher income from operating leases in 2020 and a GEL 2.4mln gain
from revaluation of investment property (impact of changes in fair
value on certain investment properties due to the lapse of the
repurchase option granted to the former borrower) recorded in 2Q20.
Furthermore, net losses from derivative financial instruments
(interest rate swap hedges) incurred during 2019, also contributed
to the y-o-y increase of net other income in 3Q20 and 9M20
NET OPERATING INCOME BEFORE NON-RECURRING ITEMS; COST OF RISK; PROFIT
GEL thousands, unless Change Change Change
otherwise noted (5) 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
Salaries and other employee
benefits (58,171) (59,539) -2.3% (60,656) -4.1% (175,365) (169,938) 3.2%
Administrative expenses (24,443) (26,251) -6.9% (22,450) 8.9% (73,914) (71,025) 4.1%
Depreciation, amortisation
and impairment (19,125) (21,320) -10.3% (21,139) -9.5% (61,654) (54,303) 13.5%
Other operating expenses (873) (807) 8.2% (913) -4.4% (2,845) (3,135) -9.3%
Operating expenses (102,612) (107,917) -4.9% (105,158) -2.4% (313,778) (298,401) 5.2%
Profit from associate 214 194 10.3% 113 89.4% 628 636 -1.3%
Operating income before
cost of risk 174,093 177,239 -1.8% 134,616 29.3% 477,482 503,239 -5.1%
Expected credit loss
on loans to customers (5,836) (13,617) -57.1% 11,621 NMF (222,404) (86,170) 158.1%
Expected credit loss
on finance lease
receivables (2,371) (333) NMF (3,387) -30.0% (7,644) (1,336) NMF
Other expected credit
loss on other assets
and provisions (2,735) (1,273) 114.8% (18,455) -85.2% (32,518) (5,845) NMF
Cost of risk (10,942) (15,223) -28.1% (10,221) 7.1% (262,566) (93,351) NMF
Net operating income
before non-recurring
items 163,151 162,016 0.7% 124,395 31.2% 214,916 409,888 -47.6%
Net non-recurring items 254 (5,019) NMF (1,241) NMF (41,332) (9,132) NMF
Profit before income
tax and one-off costs 163,405 156,997 4.1% 123,154 32.7% 173,584 400,756 -56.7%
Income tax expense (15,051) (22,697) -33.7% (8,470) 77.7% (10,491) (43,104) -75.7%
Profit adjusted for one-off
costs 148,354 134,300 10.5% 114,684 29.4% 163,093 357,652 -54.4%
One-off termination costs - - - - - - (14,236) NMF
of former CEO and executive
management (after tax)
Profit 148,354 134,300 10.5% 114,684 29.4% 163,093 343,416 -52.5%
(5) The adjusted profit in the table in 9M19 excludes GEL
14.2mln one-off employee costs (gross of income tax) related to the
former CEO and executive management termination benefits. The
amount is comprised of GEL 12.4mln (gross of income tax) excluded
from salaries and other employee benefits, GEL 4.0mln (gross of
income tax) excluded from non-recurring items and GEL 2.2mln tax
benefit excluded from income tax expense
-- Operating expenses amounted to GEL 102.6mln in 3Q20, down
4.9% y-o-y and down 2.4% q-o-q, and GEL 313.8mln in 9M20, up by
5.2% y-o-y. The y-o-y increase in the first nine months of 2020 was
primarily driven by the increased investments in IT related
resources as part of the Agile transformation process, focus on
digitalisation and investments in marketing. In addition, we
incurred extraordinary expenses during the first half of 2020 in
relation to the safety measures implemented as a response to the
COVID-19 outbreak. In the second quarter of 2020, we have initiated
cost optimisation measures, the impact of which is already
partially reflected in the third quarter of 2020 results, and we
expect further improvements in the fourth quarter of this year
-- Asset quality. The cost of credit risk ratio was 0.2% in 3Q20
(compared to 0.5% in 3Q19 and net gain of 0.2% in 2Q20) and was
2.4% in the first nine months of 2020 (compared to 1.1% in 9M19).
The significant increase in cost of credit risk ratio in 9M20 was
driven by the 1Q20 reserve builds, created for the full economic
cycle, primarily related to the deterioration in the macro-economic
environment and expected creditworthiness of borrowers due to the
COVID-19 pandemic impact. As a result of these assumptions, we
created additional reserves of GEL 220.2mln in the first quarter of
2020. In the second quarter, management revisited the assumptions
used to estimate the amount of ECL provision to reflect the better
visibility and the macro-economic forecast scenarios published by
the NBG in May 2020 (see Group's 2Q20 and 1H20 results announcement
for details of assumptions used).
In the third quarter of 2020, the Group has completed an
in-depth analysis of financial standing and creditworthiness of all
corporate and SME borrowers, and a significant portion of retail
and micro segment customers. As a result, additional ECL provisions
on loans to customers and finance lease receivables in the amount
of GEL 15.8mln were recorded for Retail Banking business, and a net
ECL reversal of GEL 9.1mln in CIB segment. Based on the analysis,
the Group concluded that overall, additional reserve of GEL
220.2mln, already created in the first quarter of 2020, was
sufficient.
Given that we are operating in a rapidly changing environment
with a high level of uncertainty with regard to both the length and
the severity of the COVID-19 impact, we are monitoring new facts
and circumstances on a continuous basis
-- Quality of our loan book is closely monitored by the below
metrics. The y-o-y and q-o-q rise in non-performing borrowers in
3Q20 was primarily driven by the COVID-19 pandemic impact,
resulting in increase of NPLs to gross loans to 3.8% at 30
September 2020 , which is in line with the upfront ECL provision
recorded for the full economic cycle in the first quarter of 2020 .
The y-o-y decline in NPL coverage ratio reflects the shift of
portfolio mix from high-yielding unsecured to more secured consumer
lending since 2019 on the back of the consumer lending regulation,
and is supported by the high level of collateralisation of our loan
book. That said, the NPL coverage ratio adjusted for discounted
value of collateral increased y-o-y to 131.4% at 30 September 2020
:
GEL thousands, unless otherwise Sep-20 Sep-19 Change Jun-20 Change
noted y-o-y q-o-q
NON-PERFORMING LOANS
NPLs 530,631 339,118 56.5% 355,260 49.4%
NPLs to gross loans 3.8% 2.9% 2.7%
NPLs to gross loans, RB 2.8% 1.8% 1.9%
NPLs to gross loans, CIB 5.7% 5.0% 4.1%
NPL coverage ratio 76.8% 85.3% 115.7%
NPL coverage ratio adjusted for
the discounted value of collateral 131.4% 129.3% 166.3%
-- BNB - the Group's banking subsidiary in Belarus - continues
to remain strongly capitalised , with capital adequacy ratios well
above the requirements of the National Bank of the Republic of
Belarus ("NBRB"). At 30 September 2020, total capital adequacy
ratio was 14.1%, well above the 12.5% minimum requirement, while
Tier I capital adequacy ratio was 9.4%, again above the NBRB's 7.0%
minimum requirement. ROAE was 2.2% in 3Q20 (18.1% in 3Q19 and 12.2%
in 2Q20) and 4.7% in 9M20 (13.6% in 9M19), reflecting the COVID-19
pandemic impact in the first nine months of 2020. For financial
results highlights of BNB, see page 21. We note the political
unrest that is currently occurring in Belarus. There has so far
been no material impact on the performance of our business in
Belarus, but we continue to monitor the situation closely
-- Net non-recurring items. Significant y-o-y increase in net
non-recurring items during the first nine months of 2020 was
primarily attributable to GEL 38.7mln and GEL 1.0mln one-off net
loss on modification of financial assets in March and April of
2020, respectively, in relation to the three-month payment holidays
on principal and interest offered to our retail banking clients, in
order to reduce the requirement for customers to physically visit
Bank branches and reduce the risk of COVID-19 virus spread. See
Group's 2Q20 and 1H20 results announcement for details. In
addition, in 1Q20, the Bank incurred GEL 1.2mln one-off costs to
finance and donate 20,000 COVID-19 laboratory tests, 10
respirators, 50,000 face masks and 60,000 gloves to the Ministry of
Health of Georgia, to support the battle to prevent the virus
spread. These costs are also classified as non-recurring items
-- Income tax expense. Relatively high income tax rate in 3Q19
and 9M19 was primarily driven by a one-off GEL 8.5mln additional
tax expense recorded in the third quarter of 2019 as a result of
reassessment of deferred tax balances. See Group's 3Q19 and 9M19
results announcement for details
-- Overall, the Group recorded profit of GEL 148.4mln in 3Q20
(GEL 134.3mln in 3Q19 and GEL 114.7mln in 2Q20) and GEL 163.1mln in
the first nine months of 2020 (compared to profit adjusted for
one-off costs of GEL 357.7mln(6) in 9M19). The Group's ROAE was
26.0% in 3Q20 (26.8% in 3Q19 and 21.8% in 2Q20) and 9.9% in 9M20
(24.7%(6) in 9M19)
(6) Profit and ROAE in 9M19 exclude GEL 14.2mln one-off employee
costs (gross of income tax) related to the former CEO and executive
management termination benefits
BALANCE SHEET HIGHLIGHTS
GEL thousands, unless otherwise Sep-20 Sep-19 Change Jun-20 Change
noted y-o-y q-o-q
Liquid assets 6,339,663 5,099,111 24.3% 5,447,730 16.4%
Liquid assets, GEL 2,567,410 2,136,320 20.2% 2,461,639 4.3%
Liquid assets, FC 3,772,253 2,962,791 27.3% 2,986,091 26.3%
Net loans and finance lease receivables 13,627,144 11,339,745 20.2% 12,599,092 8.2%
Net loans and finance lease receivables,
GEL 5,368,636 4,655,533 15.3% 5,001,418 7.3%
Net loans and finance lease receivables,
FC 8,258,508 6,684,212 23.6% 7,597,674 8.7%
Client deposits and notes 12,985,039 9,613,718 35.1% 11,583,139 12.1%
Amounts owed to credit institutions 3,757,646 3,437,718 9.3% 3,521,860 6.7%
Borrowings from DFIs 1,807,472 1,355,426 33.4% 1,755,656 3.0%
Short-term loans from central banks 874,153 1,271,027 -31.2% 847,213 3.2%
Loans and deposits from commercial
banks 1,076,021 811,265 32.6% 918,991 17.1%
Debt securities issued 1,628,188 2,175,820 -25.2% 1,561,933 4.2%
LIQUIDITY AND CAPITAL ADEQUACY RATIOS
Net loans / client deposits and
notes 104.9% 118.0% 108.8%
Net loans / client deposits and
notes + DFIs 92.1% 103.4% 94.5%
Liquid assets / total assets 30.0% 29.1% 28.4%
Liquid assets / total liabilities 33.7% 32.9% 32.1%
NBG liquidity coverage ratio 147.0% 118.5% 135.4%
NBG (Basel III) CET1 capital adequacy
ratio 9.9% 10.6% 9.9%
NBG (Basel III) Tier I capital adequacy
ratio 12.0% 13.3% 12.0%
NBG (Basel III) Total capital adequacy
ratio 17.3% 16.8% 17.4%
Our balance sheet remains highly liquid (NBG liquidity coverage
ratio of 147.0%) and strongly capitalised (NBG Basel III Tier I
capital adequacy ratio of 12.0%) with a well-diversified funding
base (client deposits and notes to total liabilities of 69.1%) at
30 September 2020.
-- Liquidity. Liquid assets reached GEL 6,339.7mln at 30
September 2020, up 24.3% y-o-y and up 16.4% q-o-q. The notable
increase over the year was in cash on hand, combined with excess
liquidity deployed with credit institutions and in investment
securities. The Bank maintained excess liquidity since the second
quarter of 2020 primarily for 1) risk mitigation purposes on the
back of the current COVID-19 crisis, as outflow of customer funds
was expected at early stage of the pandemic outbreak, which however
did not materialise. Client deposit balances continue to grow to
date, and 2) the repayment of local currency bonds in June 2020.
The NBG Liquidity coverage ratio was 147.0% at 30 September 2020
(118.5% at 30 September 2019 and 135.4% at 30 June 2020), well
above the 100% minimum requirement level
-- Loan book . Our net loan book and finance lease receivables
amounted to GEL 13,627.1mln at 30 September 2020 ( up 20.2% y-o-y
and up 8.2% q-o-q ) . As of 30 September 2020, the retail loan book
represented 6 5 .7% of the total loan portfolio (65.8% at 30
September 2019 and 30 June 2020). Both local and foreign currency
portfolios experienced solid y-o-y growth of 15.3% and 23.6%,
respectively. Furthermore, local currency portfolio increased by
7.3% and foreign currency denominated loan portfolio grew by 8.7%
q-o-q. The local currency loan portfolio growth was partially
driven by the Government's de-dollarisation initiatives and our
goal to increase the share of local currency loans in our
portfolio
-- Dollarisation of our loan book and client deposits. The
retail client loan book in foreign currency accounted for 45.9% of
the total RB loan book at 30 September 2020 (43.9% at 30 September
2019 and 45.6% at 30 June 2020), while retail client foreign
currency deposits comprised 69.1% of total RB deposits at 30
September 2020 (69.2% at 30 September 2019 and 67.8% at 30 June
2020). At 30 September 2020, 82.7% of CIB's loan book was
denominated in foreign currency (82.1% at 30 September 2019 and
82.6% at 30 June 2020), while 53.0% of CIB deposits were
denominated in foreign currency (64.1% at 30 September 2019 and
51.9% at 30 June 2020)
-- Net loans to customer funds and DFI ratio . Our net loans to
customer funds and DFI ratio, which is closely monitored by
management, stood at 92.1% at 30 September 2020 (103.4% at 30
September 2019 and 94.5% at 30 June 2020)
-- Diversified funding base . Debt securities issued decreased
by 25.2% y-o-y and increased by 4.2% q-o-q at 30 September 2020.
The y-o-y decrease was attributable to the repayment of GEL 500mln
local currency bonds at the beginning of June 2020, while the q-o-q
increase in debt securities was mainly due to the local currency
depreciation in the 3Q20
-- Solid capital position. At 30 September 2020, following the
measures put in place by the NBG as part of the COVID-19
supervisory plan in March 2020 (see details in the Group's 1Q20
results announcement), the Bank's Basel III Common Equity Tier 1,
Tier 1 and Total capital adequacy ratios stood at 9.9%, 12.0% and
17.3%, respectively, all comfortably above the minimum required
levels of 6.9%, 8.7% and 13.3%, respectively. Below is presented
the movement in capital adequacy ratios in 3Q20, as well as the
potential impact of an additional 10% devaluation of GEL on
different levels of capital:
Potential
impact of
30 June Business 3Q20 30 September additional
2020 growth profit GEL devaluation 2020 10% GEL devaluation
------- -------- ------- --------------- ------------ --------------------
CET1 capital adequacy
ratio 9.9% -0.3% 0.8% -0.5% 9.9% -0.7%
Tier I capital
adequacy ratio 12.0% -0.4% 0.8% -0.4% 12.0% -0.6%
Total capital adequacy
ratio 17.4% -0.6% 0.8% -0.3% 17.3% -0.5%
DISCUSSION OF SEGMENT RESULTS
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 (SME and
micro businesses only). RB is represented by the following
sub-segments: (1) the emerging and mass retail segment (through our
Express and Bank of Georgia brands), (2) SME and micro businesses -
MSME (through our Bank of Georgia brand), and (3) the mass affluent
segment (through our SOLO brand).
GEL thousands, unless
otherwise Change Change Change
noted 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
INCOME STATEMENT
HIGHLIGHTS(7)
Net interest income 126,837 142,202 -10.8% 102,667 23.5% 347,771 410,861 -15.4%
Net fee and commission
income 34,744 36,696 -5.3% 22,184 56.6% 86,325 103,735 -16.8%
Net foreign currency gain 14,245 14,410 -1.1% 7,525 89.3% 43,404 36,214 19.9%
Net other income / (expense) 3,477 581 NMF 4,085 -14.9% 9,467 (1,002) NMF
Operating income 179,303 193,889 -7.5% 136,461 31.4% 486,967 549,808 -11.4%
Salaries and other employee
benefits (40,481) (37,732) 7.3% (41,826) -3.2% (122,876) (108,296) 13.5%
Administrative expenses (18,199) (17,585) 3.5% (16,898) 7.7% (55,829) (48,374) 15.4%
Depreciation, amortisation
and impairment (15,704) (17,973) -12.6% (17,610) -10.8% (51,203) (45,753) 11.9%
Other operating expenses (510) (379) 34.6% (550) -7.3% (1,608) (1,666) -3.5%
Operating expenses (74,894) (73,669) 1.7% (76,884) -2.6% (231,516) (204,089) 13.4%
Profit from associate 214 194 10.3% 113 89.4% 628 636 -1.3%
Operating income before
cost of risk 104,623 120,414 -13.1% 59,690 75.3% 256,079 346,355 -26.1%
Cost of risk (16,238) (16,831) -3.5% (5,757) NMF (164,076) (82,760) 98.3%
Net operating income before
non-recurring items 88,385 103,583 -14.7% 53,933 63.9% 92,003 263,595 -65.1%
Net non-recurring items 219 (575) NMF (1,249) NMF (39,959) (915) NMF
Profit before income tax
and one-off costs 88,604 103,008 -14.0% 52,684 68.2% 52,044 262,680 -80.2%
Income tax (expense) /
benefit (7,508) (14,060) -46.6% (3,214) 133.6% 493 (26,484) NMF
Profit adjusted for one-off
costs 81,096 88,948 -8.8% 49,470 63.9% 52,537 236,196 -77.8%
One-off termination costs - - - - - - (10,142) NMF
of former CEO and executive
management (after tax)
Profit 81,096 88,948 -8.8% 49,470 63.9% 52,537 226,054 -76.8%
BALANCE SHEET HIGHLIGHTS
Net loans, currency blended 8,416,503 7,083,432 18.8% 7,797,191 7.9% 8,416,503 7,083,432 18.8%
Net loans, GEL 4,551,436 3,974,913 14.5% 4,241,765 7.3% 4,551,436 3,974,913 14.5%
Net loans, FC 3,865,067 3,108,519 24.3% 3,555,426 8.7% 3,865,067 3,108,519 24.3%
Client deposits, currency
blended 6,699,215 5,384,371 24.4% 5,962,044 12.4% 6,699,215 5,384,371 24.4%
Client deposits, GEL 2,068,516 1,657,025 24.8% 1,921,108 7.7% 2,068,516 1,657,025 24.8%
Client deposits, FC 4,630,699 3,727,346 24.2% 4,040,936 14.6% 4,630,699 3,727,346 24.2%
of which:
Time deposits, currency
blended 4,077,658 3,074,292 32.6% 3,574,598 14.1% 4,077,658 3,074,292 32.6%
Time deposits, GEL 1,034,423 753,198 37.3% 973,050 6.3% 1,034,423 753,198 37.3%
Time deposits, FC 3,043,235 2,321,094 31.1% 2,601,548 17.0% 3,043,235 2,321,094 31.1%
Current accounts and demand
deposits, currency blended 2,621,557 2,310,079 13.5% 2,387,446 9.8% 2,621,557 2,310,079 13.5%
Current accounts and demand
deposits, GEL 1,034,093 903,827 14.4% 948,058 9.1% 1,034,093 903,827 14.4%
Current accounts and demand
deposits, FC 1,587,464 1,406,252 12.9% 1,439,388 10.3% 1,587,464 1,406,252 12.9%
KEY RATIOS
ROAE (7) 25.0% 30.7% 16.4% 5.6% 27.6%
Net interest margin,
currency
blended 4.8% 6.1% 4.0% 4.6% 6.3%
Cost of credit risk ratio 0.8% 0.9% 0.2% 2.7% 1.6%
Cost of funds, currency
blended 5.7% 4.9% 5.9% 5.8% 5.1%
Loan yield, currency blended 11.7% 12.8% 11.1% 11.5% 13.1%
Loan yield, GEL 15.8% 17.0% 14.9% 15.5% 17.9%
Loan yield, FC 6.7% 7.5% 6.6% 6.7% 7.5%
Cost of deposits, currency
blended 3.1% 2.6% 2.9% 2.9% 2.7%
Cost of deposits, GEL 6.3% 5.0% 6.4% 6.1% 5.1%
Cost of deposits, FC 1.5% 1.5% 1.4% 1.4% 1.6%
Cost of time deposits,
currency blended 4.3% 3.8% 4.3% 4.2% 3.9%
Cost of time deposits,
GEL 10.1% 8.4% 10.3% 9.9% 8.6%
Cost of time deposits,
FC 2.2% 2.3% 2.2% 2.2% 2.4%
Current accounts and demand
deposits, currency blended 1.1% 1.0% 0.9% 1.0% 1.0%
Current accounts and demand
deposits, GEL 2.4% 2.2% 2.3% 2.3% 2.2%
Current accounts and demand
deposits, FC 0.2% 0.1% 0.1% 0.1% 0.2%
Cost / income ratio (8) 41.8% 38.0% 56.3% 47.5% 37.1%
(7) The income statement adjusted profit in 9M19 excludes GEL
10.1mln one-off employee costs (net-off income tax) related to the
former CEO and executive management termination benefits. The
amount is comprised of GEL 8.6mln (gross of income tax) excluded
from salaries and other employee benefits, GEL 2.9mln (gross of
income tax) excluded from non-recurring items and GEL 1.4mln tax
benefit excluded from income tax expense. 9M19 ROAE has been
adjusted accordingly
(8) The cost/income ratio in 9M19 is adjusted for GEL 8.6mln
one-off employee costs (gross of income tax) related to termination
benefits of former executive management
Performance highlights
-- Retail Banking generated operating income of GEL 179.3mln in
3Q20 (down 7.5% y-o-y and up 31.4% q-o-q) and GEL 487.0mln in 9M20
(down 11.4% y-o-y) , mostly reflecting the COVID-19 pandemic impact
since March and improving trends in key economic indicators and
rebound in customer activity since June 2020
-- RB's net interest income was down 10.8% y-o-y in 3Q20 and
down 15.4% y-o-y in 9M20, primarily reflecting the slow-down of
economic activity on the back of COVID-19 pandemic outbreak in
March 2020, as well as the effect of change in portfolio mix
resulting from the consumer lending regulation introduced since
2019. On a q-o-q basis, following the recovery of customer activity
and rebound of economic dynamics, net interest income grew
significantly by 23.5% q-o-q in 3Q20. Net interest income still
benefited from the growth of the local currency loan portfolio,
which generated 9.1ppts and 8.8ppts higher yields than the foreign
currency loan portfolio in 3Q20 and in 9M20, respectively
-- Retail Banking net loan book reached GEL 8,416.5mln at 30
September 2020, up 18.8% y-o-y and up 7.9% q-o-q. On a constant
currency basis, retail loan book increased by 13.3% y-o-y and by
4.4% q-o-q in 3Q20. Local currency denominated loan book increased
by 14.5% y-o-y and by 7.3% q-o-q, while the foreign currency
denominated loan book grew by 24.3% y-o-y and by 8.7% q-o-q. As a
result, the local currency denominated loan book accounted for
54.1% of the Retail Banking loan book at 30 September 2020 (56.1%
at 30 September 2019 and 54.4% at 30 June 2020). Currently, the
consumer loan portfolio which is potentially most sensitive to
foreign currency risk is largely de-dollarised, while share of
retail mortgage loans in local currency accounted 43% at 30
September 2020
-- The y-o-y loan book growth primarily reflected continued
strong loan origination levels in MSME and mortgage segments, as
well as secured consumer lending during the pre-COVID-19 period.
The q-o-q increase in the loan originations is reflective of the
recovery dynamics of the customer activity since June 2020:
RETAIL BANKING LOAN BOOK BY PRODUCTS
GEL million, unless
otherwise Change Change Change
noted 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
Loan originations
Consumer loans 448,172 417,315 7.4% 143,060 213.3% 955,075 1,164,248 -18.0%
Mortgage loans 459,596 365,047 25.9% 63,195 627.3% 782,102 1,027,324 -23.9%
Micro loans 301,439 281,879 6.9% 75,397 299.8% 654,078 892,362 -26.7%
SME loans 353,294 273,884 29.0% 104,893 236.8% 755,701 727,822 3.8%
Outstanding balance
Consumer loans 1,737,043 1,542,093 12.6% 1,652,327 5.1% 1,737,043 1,542,093 12.6%
Mortgage loans 3,550,606 2,948,476 20.4% 3,237,302 9.7% 3,550,606 2,948,476 20.4%
Micro loans 1,687,567 1,427,126 18.2% 1,586,847 6.3% 1,687,567 1,427,126 18.2%
SME loans 1,308,007 899,122 45.5% 1,166,933 12.1% 1,308,007 899,122 45.5%
-- Retail Banking client deposits increased to GEL 6,699.2mln at
30 September 2020, up 24.4% y-o-y and up 12.4% q-o-q. The
dollarisation level of deposits remained largely flat at 69.1% at
30 September 2020, compared to 69.2% at 30 September 2019 and 67.8%
at 30 June 2020. The cost of foreign currency denominated deposits
stood at 1.5% in 3Q20 (flat y-o-y and up 10bps q-o-q) and 1.4% in
9M20 (down 20bps y-o-y), while the cost of local currency
denominated deposits increased by 130bps y-o-y and went down by
10bps q-o-q in 3Q20, and increased by 100bps y-o-y during first
nine months of 2020. The spread between the cost of RB's client
deposits in GEL and foreign currency was 4.8ppts during 3Q20 (GEL:
6.3%; FC: 1.5%), compared to 3.5ppts in 3Q19 (GEL: 5.0%; FC: 1.5%)
and 5.0ppts in 2Q20 (GEL: 6.4%; FC: 1.4%). On the nine months
basis, spread widened to 4.7ppts in 9M20 (GEL: 6.1%; FC: 1.4%),
compared to 3.5ppts in 9M19 (GEL: 5.1%; FC: 1.6%)
-- Retail Banking NIM was 4.8% in 3Q20 (down 130bps y-o-y and up
80bps q-o-q) and 4.6% in 9M20 (down 170bps y-o-y). The y-o-y
decline in NIM in 3Q20 and 9M20 was mostly attributable to lower
loan yields (down 110bps y-o-y in 3Q20 and down 160bps y-o-y in
9M20). In addition, cost of funds increased by 80bps y-o-y in 3Q20
and by 70bps y-o-y in 9M20, primarily on the back of increased NBG
monetary policy rate (NBG increased monetary policy rate by
cumulative of 250bps since September 2019, although NBG reduced the
policy rate thrice by cumulative of 100bps in the second and third
quarters of 2020). On a q-o-q basis, 60bps growth in loan yields
coupled with 20bps decrease in cost funds, resulted in 80bps q-o-q
increase in NIM in 3Q20
-- Retail Banking net fee and commission income . Net fee and
commission income generation decreased y-o-y both during the third
quarter and the first nine months of 2020. The y-o-y decrease was
primarily driven by slower customer activity due to COVID-19
pandemic and temporary removal of fees on transactions executed
through our mobile and internet banking platforms since mid-March
2020, for a two-month period, in order to decrease customer visits
to branches and incentivise the transfer of customers' activity to
digital channels. Furthermore, lack of external tourism, as well as
no Georgian's travelling abroad, resulted in significant decline in
net fees charged on currency conversion operations. On a q-o-q
basis, net fee and commission income increased by 56.6% in 3Q20,
reflecting strong recovery dynamics in customer activity since June
2020
-- RB's asset quality. Cost of credit risk ratio was 0.8% in
3Q20 (down from 0.9% in 3Q19 and up from 0.2% in 2Q20) and 2.7% in
9M20 (up from 1.6% 9M19). The increase in cost of credit risk ratio
in the first nine months of 2020 was due to the IFRS 9 reserve
builds, created for the full economic cycle in 1Q20, primarily
related to deterioration of the macro-economic environment and
expected creditworthiness of borrowers as a result of the COVID-19
impact. These assumptions were further revisited to reflect the
better visibility and the macro-economic forecast scenarios
published by the NBG in May, and an in-depth review of significant
portion of borrowers, resulting in additional ECL reserves for the
RB segment in 2Q20 and 3Q20
-- Our Retail Banking business continued to further execute on
our strategy towards continuous digitalisation, as demonstrated by
the following performance indicators:
RETAIL BANKING PERFORMANCE INDICATORS
Volume information in Change Change Change
GEL thousands 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
Retail Banking
customers
Number of new customers 56,074 42,534 31.8% 27,214 106.0% 115,084 123,554 -6.9%
Number of customers 2,587,177 2,500,826 3.5% 2,540,721 1.8% 2,587,177 2,500,826 3.5%
Cards
Number of cards issued 213,686 176,922 20.8% 92,315 131.5% 458,939 536,113 -14.4%
Number of cards
outstanding 2,184,591 2,121,830 3.0% 2,178,053 0.3% 2,184,591 2,121,830 3.0%
Express Pay terminals
Number of Express Pay
terminals 3,130 3,231 -3.1% 3,118 0.4% 3,130 3,231 -3.1%
Number of transactions
via Express Pay
terminals 22,508,942 26,644,743 -15.5% 13,849,756 62.5% 59,292,767 80,895,309 -26.7%
Volume of transactions
via Express Pay
terminals 2,380,932 2,193,261 8.6% 1,550,286 53.6% 5,958,065 5,910,238 0.8%
POS terminals
Number of desks 20,465 15,185 34.8% 17,248 18.7% 20,465 15,185 34.8%
Number of contracted
merchants 9,829 7,545 30.3% 8,513 15.5% 9,829 7,545 30.3%
Number of POS terminals 25,706 21,088 21.9% 23,788 8.1% 25,706 21,088 21.9%
Number of transactions
via POS terminals 28,790,910 21,646,160 33.0% 21,114,390 36.4% 72,517,194 58,980,841 23.0%
Volume of transactions
via POS terminals 746,195 707,049 5.5% 532,544 40.1% 1,929,034 1,813,010 6.4%
Internet banking
Number of active users
(9) 140,592 268,053 -47.6% 247,342 -43.2% 140,592 268,053 -47.6%
Number of transactions
via internet bank 1,080,287 1,273,318 -15.2% 973,336 11.0% 3,160,696 4,033,394 -21.6%
Volume of transactions
via internet bank 543,202 579,426 -6.3% 583,328 -6.9% 1,780,752 1,627,543 9.4%
Mobile banking
Number of active users
(9) 671,959 448,176 49.9% 619,519 8.5% 671,959 448,176 49.9%
Number of transactions
via mobile bank 17,197,028 9,516,173 80.7% 13,335,918 29.0% 42,986,783 24,396,405 76.2%
Volume of transactions
via mobile bank 2,463,558 1,265,778 94.6% 1,766,710 39.4% 5,893,395 3,081,276 91.3%
(9) The users that log-in in internet and mobile bank at least once in three months
-- Y-o-y and q-o-q growth in client base to 2,587,177 customers
at 30 September 2020 was due to the increased offering of
cost-effective remote channels and substantially improving our
positioning in many key areas. Based on the latest research, Bank
of Georgia is regarded as the most trusted financial institution in
Georgia
-- The number of outstanding cards increased by 3.0% y-o-y and
by 0.3% q-o-q at 30 September 2020. The number of Loyalty programme
Plus+ cards, reached 1,059,785 at 30 September 2020, up 33.8% y-o-y
and up 10.8% q-o-q
-- Digital channels . We have actively continued the further
development of our digital strategy and therefore, more than 95% of
the total daily transactions of individuals were executed through
digital channels during the first nine months of 2020
- mBank and iBank digital penetration. The Bank continued
introducing new features to mobile banking application and internet
bank and introducing dedicated digital spaces in our branches to
incentivise transferring client activity to digital channels. The
focus in this direction further increased after the COVID-19
pandemic outbreak, which the Bank responded to with various
activities, such as instructive videos, incentives and call centre
support for customers educating them how to use these digital
channels. As a result of increased investments and efforts in this
direction, the number of active users, as well as the number and
volume of transactions through these channels, mostly mobile bank,
continued to expand
- The utilisation of Express Pay terminals . The Bank has a
large network of self-service terminals throughout Georgia, which
are used extensively by its customers. The decline in number of
transactions y-o-y both in 3Q20 and in 9M20 was primarily due to
the continuous migration of customers to the mobile banking
platform, as well as slow-down in economic activity on the back of
COVID-19 pandemic since March. On the other hand, number of
transactions significantly increased on a q-o-q basis in 3Q20,
mostly due to the rebound in customer activity since June 2020
-- Business iBank. In 2019, the Bank released a new business
internet banking platform for MSME and corporate clients, with
features designed to make its use an intuitive and smooth
experience. Since then, we have focused our efforts on making the
Business iBank even more useful for business transactions to
further incentivise transfer of client activity to digital
channels. In the third quarter of 2020, the number (up 4.1% y-o-y
and up 18.4% q-o-q) and volume (up 10.4% y-o-y and up 23.6% q-o-q)
of Business iBank transactions increased, primarily reflecting the
acceleration in business activities during the third quarter of
2020. On a nine months basis, both the number and volume of
transactions through Business iBank grew by 4.9% and 6.1% y-o-y,
respectively, and c.96% of daily transactions of legal entities
were executed through the internet bank in 9M20
-- In August 2020, Global Finance Magazine named Bank of Georgia
Best Consumer Digital Bank in Georgia in 2020, including regional
awards in sub-categories such as Best Online Product Offering, Best
Online Investment Management Services, Best Digital Bank in Lending
and Best Trade Finance Services in Central and Eastern Europe for
2020
-- SOLO, our premium banking brand, was the least impacted
business from our Retail Banking segments, and continued its growth
and investment in its lifestyle brand. We have 11 SOLO lounges, of
which 9 are located in Tbilisi, the capital of Georgia, and 2 in
major regional cities of Georgia. The number of SOLO clients
reached 58,351 at 30 September 2020 (51,692 at 30 September 2019
and 56,207 at 30 June 2020). At 30 September 2020, the product to
client ratio for the SOLO segment was 4.9, compared to 2.1 for our
retail franchise. While SOLO clients currently represent 2.3% of
our total retail client base, they contributed 30.3% to our retail
loan book, 39.2% to our retail deposits, 23.9% and 28.7% to our net
retail interest income and to our net retail fee and commission
income in 3Q20, respectively. The fee and commission income from
the SOLO segment was GEL 7.9mln in 3Q20 (GEL 6.7mln in 3Q19 and GEL
5.5mln in 2Q20) and GEL 19.6mln in first nine months of 2020 (GEL
19.1mln in 9M19). SOLO Club, a membership group within SOLO, which
offers exclusive access to SOLO products and offers ahead of other
SOLO clients at a higher fee, continued to increase its client
base. At 30 September 2020, SOLO Club had 5,555 members, up 7.8%
y-o-y and largely flat q-o-q
-- MSME banking. The number of MSME segment clients reached
228,349 at 30 September 2020, up 4.0% y-o-y and up 1.3% q-o-q.
MSME's gross loan portfolio reached GEL 3,190.1mln (up 27.7% y-o-y
and up 8.9% q-o-q) and client deposits and notes amounted to GEL
877.0mln (up 15.6% y-o-y and up 10.8% q-o-q) at 30 September 2020.
The MSME segment generated operating income of GEL 49.2mln in 3Q20
(down 13.9% y-o-y and up 19.8% q-o-q) and GEL 140.8mln in the first
nine months of 2020 (down 7.7% y-o-y), with the decline primarily
driven by the slow-down in business activity on the back of
COVID-19 pandemic outbreak and the temporary lockdown of the
economy during April-May period
-- Digital ecosystem development . Currently, our digital
ecosystem covers ten verticals: fintech, real estate and housing,
e-commerce, logistics, healthcare, lifestyle, loyalty, accounting
services, auto and transportation and HR services. In 2019 and
2020, we launched three platforms - real estate platform area.ge,
online marketplace platform extra.ge and an inventory management
and point-of-sale solution for MSME customers Optimo. Key
developments during 2020 are described below:
- In 1Q20, the Group in response to COVID-19 outbreak accepted
the social and commercial challenge to play a vital role in
addressing accelerated digital service demand. Due to social
distancing and restrictions imposed on commercial activities, the
Group's digital ecosystem arm proactively restructured its
operations and commercial offerings to adapt to the changing
environment. Core focus fell on extra.ge, which after its
acquisition in 2Q19, has been transformed into a vibrant and
dynamic platform, one of the largest full-scale digital
marketplaces in Georgia, and the full-scale re-launch was completed
as planned in 1Q20. In 2Q20 and 3Q20, extra.ge mainly focused on
acquisition of market share (supply and demand creation). Through
different active campaigns and initiatives, the platform doubled
the network of merchants operating in the country to 400+ vendors
and 7,000+ private sellers, selling 110,000+ products and services,
as well as significantly increased the number of registered users,
delivering a 50% increase in cashless payments. extra.ge has also
launched mobile application in private beta format. The commercial
release of the application is planned in 4Q20
- Following the COVID-19 outbreak, during the first quarter, the
Group structured a unique digital solution for merchants who were
faced by customer scarcity and a heavy burden of restrictions. With
the packaged solution, branded as Adapter, the Group is offering a
best-in-class solution to merchants, who can now undergo fast and
efficient transformation to digital sales with just a simple
plug-in. Adapter combines an integration of Optimo, an effective
inventory and order management platform, with extra.ge, a digital
marketplace, through which merchants can sell their products
directly to customers remotely. Adapter quickly gained interest and
popularity amongst market players, small merchants, as well as
large physical marketplaces, which is evident through active
negotiations and already onboarded partners. Adapter was highly
accepted by hundreds of retailers and producers, exceeding
initially planned targets. In 3Q20, the Group launched Optimo RECA,
beta version of tailored solution for restaurants, cafes and
hotels, which had a steady uptake
- The COVID-19 outbreak significantly decreased activity in the
real estate sector, therefore, directly impacting area.ge's
operations and performance. As such, in the second quarter of 2020,
area.ge refocused its strategy towards facilitating and
accelerating real estate sales, developing multiple solutions for
real estate developer companies, which connect them closely with
brokers and other market players, such as banks and financial
institutions that provide mortgage loans as part of their product
offering. In 3Q20, in response to the Government's new subsidised
mortgage loan programme, the Group launched a new solution,
subsidireba.ge
- At the beginning of 2020, the Group reassessed its strategy,
and in order to be able to meet wide range of customer needs, we
decided to partner with others. With this aim, in 2Q 20, the Group
partnered with 500 Startups and the Georgia's Innovation and
Technology Agency, and launched 500 Georgia Acceleration programme.
The programme focuses on accelerating the development of Georgian
and international early stage startups operating in the region. In
3Q20, 1 5 companies from 10 different business verticals completed
the programme and joined our Digital Area ecosystem. Since the
launch, most of the startups have raise d more than US$ 4.9 million
from external international investors and venture funds. Currently,
15 additional companies are in the acceleration process, and with
the Group's participation, total of c.US$ 1.4mln will be invested
in the programme by the end of 2020
-- As a result, Retail Banking recorded a profit in the amount
of GEL 81.1mln in 3Q20 (GEL 88.9mln in 3Q19 and GEL 49.5mln in
2Q20), and GEL 52.5mln in the first nine months of 2020 (compared
to profit adjusted for one-off costs of GEL 2 3 6.2mln(10) in
9M19). Retail Banking ROAE was 25.0% in 3Q20 (30.7% in 3Q19 and
16.4% in 2Q20) and 5.6% in 9M20 (27.6%(10) in 9M19). Low
profitability in 9M20, resulted primarily from the increased cost
of risk and non-recurring costs associated with the COVID-19
pandemic impact recorded in the first quarter of 2020
(10) Profit and ROAE in 9M19 exclude GEL 10.1mln one-off
employee costs (net of income tax) related to termination benefits
of the former CEO and executive management
CORPORATE AND INVESTMENT BANKING (CIB)
CIB provides (1) loans and other credit facilities to Georgia's
large corporate clients and other legal entities, excluding SME and
micro businesses; (2) services such as fund transfers and
settlements services, currency conversion operations, trade finance
services and documentary operations as well as handling savings and
term deposits; (3) finance lease facilities through the Bank's
leasing operations arm, the Georgian Leasing Company; (4) brokerage
services through Galt & Taggart; and (5) Wealth Management
private banking services to high-net-worth individuals and offers
investment management products in Georgia and internationally
through representative offices and subsidiaries in Tbilisi, London,
Budapest, Istanbul and Tel Aviv.
GEL thousands, unless
otherwise Change Change Change
noted 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
INCOME STATEMENT
HIGHLIGHTS(12)
Net interest income 68,454 51,827 32.1% 63,110 8.5% 200,905 152,232 32.0%
Net fee and commission
income 9,500 9,826 -3.3% 9,197 3.3% 27,652 25,090 10.2%
Net foreign currency gain 4,976 13,510 -63.2% 11,431 -56.5% 24,941 35,014 -28.8%
Net other income 4,653 3,300 41.0% 4,825 -3.6% 14,160 4,294 NMF
Operating income 87,583 78,463 11.6% 88,563 -1.1% 267,658 216,630 23.6%
Salaries and other employee
benefits (13,034) (15,304) -14.8% (14,170) -8.0% (37,764) (42,481) -11.1%
Administrative expenses (4,483) (5,866) -23.6% (3,488) 28.5% (12,437) (13,897) -10.5%
Depreciation, amortisation
and impairment (2,352) (2,416) -2.6% (2,434) -3.4% (7,259) (6,050) 20.0%
Other operating expenses (235) (241) -2.5% (227) 3.5% (761) (746) 2.0%
Operating expenses (20,104) (23,827) -15.6% (20,319) -1.1% (58,221) (63,174) -7.8%
Operating income before cost
of risk 67,479 54,636 23.5% 68,244 -1.1% 209,437 153,456 36.5%
Cost of risk 6,745 1,239 NMF (2,536) NMF (91,691) (7,159) NMF
Net operating income before
non-recurring items 74,224 55,875 32.8% 65,708 13.0% 117,746 146,297 -19.5%
Net non-recurring items (1) (3) -66.7% 32 NMF (1,375) (75) NMF
Profit before income tax
and one-off costs 74,223 55,872 32.8% 65,740 12.9% 116,371 146,222 -20.4%
Income tax expense (7,619) (7,444) 2.4% (4,246) 79.4% (10,018) (14,477) -30.8%
Profit adjusted for one-off
costs 66,604 48,428 37.5% 61,494 8.3% 106,353 131,745 -19.3%
One-off termination costs - - - - - - (4,094) NMF
of former CEO and executive
management (after tax)
Profit 66,604 48,428 37.5% 61,494 8.3% 106,353 127,651 -16.7%
BALANCE SHEET HIGHLIGHTS
Net loans and finance lease
receivables, currency
blended 4,389,114 3,588,099 22.3% 4,046,063 8.5% 4,389,114 3,588,099 22.3%
Net loans and finance
lease
receivables, GEL 759,898 640,555 18.6% 705,502 7.7% 759,898 640,555 18.6%
Net loans and finance
lease
receivables, FC 3,629,216 2,947,544 23.1% 3,340,561 8.6% 3,629,216 2,947,544 23.1%
Client deposits, currency
blended 5,797,522 3,720,322 55.8% 5,042,772 15.0% 5,797,522 3,720,322 55.8%
Client deposits, GEL 2,724,735 1,337,082 103.8% 2,423,448 12.4% 2,724,735 1,337,082 103.8%
Client deposits, FC 3,072,787 2,383,240 28.9% 2,619,324 17.3% 3,072,787 2,383,240 28.9%
Time deposits, currency
blended 2,814,979 1,321,057 113.1% 2,552,135 10.3% 2,814,979 1,321,057 113.1%
Time deposits, GEL 1,651,521 411,438 NMF 1,468,397 12.5% 1,651,521 411,438 NMF
Time deposits, FC 1,163,458 909,619 27.9% 1,083,738 7.4% 1,163,458 909,619 27.9%
Current accounts and demand
deposits, currency blended 2,982,543 2,399,265 24.3% 2,490,637 19.8% 2,982,543 2,399,265 24.3%
Current accounts and
demand
deposits, GEL 1,073,214 925,644 15.9% 955,051 12.4% 1,073,214 925,644 15.9%
Current accounts and
demand
deposits, FC 1,909,329 1,473,621 29.6% 1,535,586 24.3% 1,909,329 1,473,621 29.6%
Letters of credit and
guarantees,
standalone (off-balance
sheet
item) 1,520,262 1,282,865 18.5% 1,455,700 4.4% 1,520,262 1,282,865 18.5%
Assets under management(11) 2,739,991 2,478,506 10.6% 2,534,113 8.1% 2,739,991 2,478,506 10.6%
RATIOS
ROAE (12) 30.7% 24.6% 31.5% 17.1% 24.5%
Net interest margin,
currency
blended 3.6% 3.2% 3.4% 3.7% 3.5%
Cost of credit risk ratio -1.1% -0.2% -1.7% 1.7% 0.2%
Cost of funds, currency
blended 3.4% 4.4% 3.7% 3.6% 4.1%
Loan yield, currency blended 8.6% 8.9% 8.3% 8.6% 9.1%
Loan yield, GEL 13.0% 11.5% 12.4% 13.0% 11.8%
Loan yield, FC 7.7% 8.4% 7.5% 7.7% 8.6%
Cost of deposits, currency
blended 4.6% 3.2% 4.2% 4.2% 3.4%
Cost of deposits, GEL 7.8% 5.6% 8.1% 7.7% 5.7%
Cost of deposits, FC 1.8% 1.8% 1.7% 1.7% 1.9%
Cost of time deposits,
currency
blended 6.7% 5.3% 6.4% 6.4% 5.4%
Cost of time deposits,
GEL 8.7% 7.1% 9.5% 9.0% 7.3%
Cost of time deposits, FC 3.8% 4.4% 3.6% 3.7% 4.3%
Current accounts and demand
deposits, currency blended 2.7% 1.9% 2.4% 2.4% 2.1%
Current accounts and
demand
deposits, GEL 6.4% 4.7% 6.4% 6.1% 4.8%
Current accounts and
demand
deposits, FC 0.6% 0.3% 0.4% 0.4% 0.3%
Cost / income ratio (13) 23.0% 30.4% 22.9% 21.8% 29.2%
Concentration of top ten
clients 9.5% 9.4% 7.3% 9.5% 9.4%
(11) We have amended the Assets under management definition in
the third quarter of 2020 to exclude certain illiquid assets that
we hold in custody, and include only the most liquid assets that
are being traded on an ongoing basis, and where we earn material
fees on holding or trading such assets. The previous period
balances have been restated accordingly
(12) The income statement adjusted profit in 9M19 excludes GEL
4.1mln one-off employee costs (net-off income tax) related to the
former CEO and executive management termination benefits. The
amount is comprised of GEL 3.8mln (gross of income tax) excluded
from salaries and other employee benefits, GEL 1.1mln (gross of
income tax) excluded from non-recurring items and GEL 0.8mln tax
benefit excluded from income tax expense. The 9M19 ROAE has been
adjusted accordingly
(13) The cost/income ratio in 9M19 is adjusted for GEL 3.8mln
one-off employee costs (gross of income tax) related to termination
benefits of the former executive management
Performance highlights
-- Corporate and Investment Banking delivered strong results.
CIB was least a ffected by the COVID-19 pandemic outbreak in terms
of operating activity in the first nine months of 2020 and
generated solid net interest income and net fee and commission
income during the period, coupled with efficient cost discipline.
This resulted in significant y-o-y increase in operating income
before cost of risk, which was up 23.5% y-o-y in 3Q20 and up 36.5%
y-o-y in 9M20
-- CIB's net interest income demonstrated outstanding growth of
32.1% y-o-y and 8.5% q-o-q during the third quarter of 2020, and
was up by 32.0% y-o-y in the first nine months of 2020. CIB NIM was
3.6% in 3Q20 (up 40bps y-o-y and up 20bps q-o-q) and 3.7% in the
first nine months of 2020 (up 20bps y-o-y) . In 3Q20, 40bps y-o-y
increase in NIM was primarily driven by 100bps y-o-y decrease in
cost of funds, partially offset by 30bps y-o-y decline in currency
blended loan yields, while 20bps q-o-q increase in NIM was the
result of 30bps q-o-q increase in currency blended loan yields,
coupled with 30bps q-o-q decline in cost of funds. On a nine months
basis, cost of funds were down 50bps y-o-y, which was partially
offset by 50bps y-o-y decline in currency blended loan yields,
resulting in 20bps y-o-y increase in NIM in 9M20
-- CIB's net fee and commission income was GEL 9.5mln in 3Q20,
down by 3.3% y-o-y and up 3.3% q-o-q, ending the first nine months
of 2020 with GEL 27.7mln net fee and commission income, up 10.2%
y-o-y. The q-o-q and y-o-y growth in net fee and commission income
in 3Q20 and 9M20, respectively, was largely driven by increased
fees from guarantees and letters of credit issued
-- CIB's loan book and dollarisation . CIB loan portfolio
reached GEL 4,389.1mln at 30 September 2020, up 22.3% y-o-y and up
8.5% q-o-q. On a constant currency basis, CIB loan book was up
12.1% y-o-y and up 2.1% q-o-q. The concentration of the top 10 CIB
clients was 9.5% at 30 September 2020 (9.4% at 30 September 2019
and 7.3% at 30 June 2020). Foreign currency denominated net loans
represented 82.7% of CIB's loan portfolio at 30 September 2020,
compared to 82.1% a year ago and 82.6% at 30 June 2020. At 30
September 2020, 40.9% of total gross CIB loans were issued in
foreign currency with exposure to foreign currency risk in regards
of income, while 42.0% of total gross CIB loans were issued in
foreign currency with no or minimal exposure to foreign currency
risk
-- Dollarisation of CIB deposits decreased to 53.0% at 30
September 2020 from 64.1% a year ago and went slightly up from
51.9% at 30 June 2020. De-dollarisation of CIB's deposit portfolio
was primarily supported by notable, 103.8% y-o-y increase in local
currency denominated deposits and only 28.9% y-o-y growth in
foreign currency denominated deposits in the third quarter of 2020,
as a result of significant y-o-y increase in interest rates offered
on local currency funds. The interest rates on local currency
deposits increased significantly (up 220bps y-o-y and slightly down
by 30bps q-o-q in 3Q20, and up 200bps y-o-y in 9M20), while
interest rates on foreign currency deposits were largely stable
(flat y-o-y and up 10bps q-o-q in 3Q20, and down 20bps y-o-y in
9M20), and the cost of deposits in local currency remained well
above the cost of foreign currency deposits during 2020. The q-o-q
decline in cost of deposits in local currency in 3Q20 was primarily
driven by the deposits of Ministry of Finance of Georgia placed
with the Bank starting from the end of second quarter of 2020.
These represent lower yielding funds provided to the Banking system
in order to support the local currency liquidity on the market. The
increase in interest rates on local currency deposits during the
first nine months of 2020 was mainly driven by the pressure on
local currency funding during the first half of the year, however,
this impact was subsequently stabilised to more normal levels as a
result of the new local currency funding instruments introduced by
the NBG to the market in order to support the GEL liquidity
-- Net other income. Significant y-o-y increase in net other
income during the first nine months of 2020 was largely driven by a
gain on revaluation of investment property (impact of changes in
fair value on certain investment properties due to the lapse of the
repurchase option granted to the former borrower) recorded in the
second quarter of 2020. Furthermore, the Group recorded net losses
from derivative financial instruments (interest rate swap hedges)
during 2019
-- Cost of credit risk. CIB's cost of credit risk ratio stood at
net gain of 1.1% in 3Q20 (compared to net gain 0.2% in 3Q19 and net
gain of 1.7% in 2Q20) and was 1.7% in the first nine months of 2020
(compared to 0.2% in 9M19). The significant increase in cost of
credit risk ratio in the first nine months of 2020 was driven by
the IFRS 9 ECL reserve builds, created for the full economic cycle
in the first quarter of 2020, primarily related to deterioration of
the macro-economic environment and expected creditworthiness of
borrowers as a result of the COVID-19 pandemic impact. This
reflected additional reserves for borrowers operating across
multiple sectors of the Georgian economy, with the largest impacts
in tourism, trade, transportation, construction and real estate
industries. These assumptions were further revisited during the
second quarter to reflect the better visibility and the
macro-economic forecast scenarios published by the NBG in May 2020.
Furthermore, in the third quarter, the Group has completed an
in-depth analysis of financial standing and creditworthiness of all
corporate borrowers. Based on the analysis, the additional reserves
booked in the first quarter proved largely sufficient. In 3Q20,
revisited assumptions and amortisation of the loan portfolio
resulted in a GEL 9.1mln net reversal of ECL on loans to customers
and finance lease receivables, leading to a net gain of 1.1% in
3Q20 in terms of cost of credit risk ratio
-- As a result, CIB recorded a profit of GEL 66.6mln in the
third quarter of 2020 (GEL 48.4mln in 3Q19 and GEL 61.5mln in
2Q20), and GEL 106.4mln in the first nine months of 2020 (compared
to profit adjusted for one-off costs of GEL 131.7mln(14) in 9M19).
CIB's ROAE was 30.7% in 3Q20 (24.6% in 3Q19 and 31.5% in 2Q20) and
17.1% in 9M20 (24.5%(14) in 9M19)
Performance highlights of investment management operations
-- The Investment Management's AUM increased to GEL 2,740.0mln
as at 30 September 2020, up 10.6% y-o-y and up 8.1% q-o-q. This
includes a) deposits of Wealth Management franchise clients, b)
assets held at Bank of Georgia Custody, c) Galt & Taggart
brokerage client assets, and d) Global certificates of deposit held
by Wealth Management clients. The y-o-y and q-o-q increase in AUM
mostly reflected increase in client deposits of Wealth Management
franchise clients and client assets at Galt & Taggart, as well
as depreciation of the local currency during 2020
-- Wealth Management deposits reached GEL 1,584.8mln as at 30
September 2020, up 14.6 % y-o-y and up 7.9% q-o-q, growing at a
compound annual growth rate (CAGR) of 9.3% over the last five-year
period . The cost of deposits stood at 3.2% in 3Q20 (flat y-o-y and
up 20bps q-o-q) and at 3.1% in the first nine months of 2020 (down
10bps y-o-y)
-- We served 1,554 wealth management clients from 78 countries
as at 30 September 2020 , compared to 1,537 clients as at 30
September 2019 and 1,553 clients as at 30 June 2020
-- Galt & Taggart, which brings under one brand corporate
advisory, debt and equity capital markets research and brokerage
services, continues to develop local capital markets in Georgia
-- During the first nine months of 2020 , Galt & Taggart
acted as:
- a lead manager for International Finance Corporation,
facilitating a public placement of GEL 100mln local bond issuance
in April 2020
- a rating advisor for two microfinance organisations, assisting
in obtaining credit rating from Scope Ratings
- a lead placement agent for the Georgian Leasing Company,
facilitating a public placement of US$ 10mln local bond issuance in
August 2020
- an advisor of one of the Georgian corporate companies during
admission of its shares to trading on the Georgian Stock Exchange
in August 2020
-- In February 2020, Global Finance Magazine named Galt &
Taggart Best Investment Bank in Georgia for the sixth consecutive
year
-- Galt and Taggart Research - recent activities:
- In June 2020, Galt & Taggart published its view on
Georgia's growth model in the context of global change triggered by
COVID-19 pandemic
- In July 2020, Galt & Taggart hosted a web-conference on
Georgia's new growth model to discuss the findings with IFIs and
other policy makers. The presentation was followed by panel
discussion with the participation of high-level representatives
from the International Monetary Fund, the World Bank, European Bank
for Reconstruction and Development, the Government of Georgia and
Bank of Georgia Group
- In July 2020, Galt & Taggart published initiation coverage on Georgia's education sector
- In July 2020, Galt & Taggart organised online meeting with
JSC Bank of Georgia's clients to discuss macroeconomic development
in Georgia
(14) Profit and ROAE in 9M19 are adjusted for GEL 4.1mln one-off
employee costs (net of income tax) related to termination benefits
of the former CEO and executive management
SELECTED FINANCIAL AND OPERATING INFORMATION
INCOME STATEMENT BANK OF GEORGIA GROUP CONSOLIDATED
GEL thousands, unless otherwise Change Change Change
noted 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
Interest income 407,666 366,721 11.2% 379,038 7.6% 1,175,029 1,043,680 12.6%
Interest expense (203,636) (165,729) 22.9% (204,102) -0.2% (598,982) (461,353) 29.8%
Net interest income 204,030 200,992 1.5% 174,936 16.6% 576,047 582,327 -1.1%
Fee and commission income 71,793 76,166 -5.7% 54,389 32.0% 197,076 206,721 -4.7%
Fee and commission expense (26,261) (28,157) -6.7% (21,488) 22.2% (78,531) (73,265) 7.2%
Net fee and commission income 45,532 48,009 -5.2% 32,901 38.4% 118,545 133,456 -11.2%
Net foreign currency gain 19,179 32,233 -40.5% 22,743 -15.7% 72,583 82,186 -11.7%
Net other income 7,750 3,728 107.9% 9,081 -14.7% 23,457 3,035 NMF
Operating income 276,491 284,962 -3.0% 239,661 15.4% 790,632 801,004 -1.3%
Salaries and other employee
benefits (excluding one-offs) (58,171) (59,539) -2.3% (60,656) -4.1% (175,365) (169,938) 3.2%
One-off termination costs - - - - - - (12,412) NMF
of former executive management
(1)
Salaries and other employee
benefits (58,171) (59,539) -2.3% (60,656) -4.1% (175,365) (182,350) -3.8%
Administrative expenses (24,443) (26,251) -6.9% (22,450) 8.9% (73,914) (71,025) 4.1%
Depreciation, amortisation
and impairment (19,125) (21,320) -10.3% (21,139) -9.5% (61,654) (54,303) 13.5%
Other operating expenses (873) (807) 8.2% (913) -4.4% (2,845) (3,135) -9.3%
Operating expenses (102,612) (107,917) -4.9% (105,158) -2.4% (313,778) (310,813) 1.0%
Profit from associates 214 194 10.3% 113 89.4% 628 636 -1.3%
Operating income before cost
of risk 174,093 177,239 -1.8% 134,616 29.3% 477,482 490,827 -2.7%
Expected credit loss on loans
to customers (5,836) (13,617) -57.1% 11,621 NMF (222,404) (86,170) 158.1%
Expected credit loss on finance
lease receivables (2,371) (333) NMF (3,387) -30.0% (7,644) (1,336) NMF
Other expected credit loss
on other assets and provisions (2,735) (1,273) 114.8% (18,455) -85.2% (32,518) (5,845) NMF
Cost of risk (10,942) (15,223) -28.1% (10,221) 7.1% (262,566) (93,351) NMF
Net operating income before
non-recurring items 163,151 162,016 0.7% 124,395 31.2% 214,916 397,476 -45.9%
Net non-recurring items (excluding
one-offs) 254 (5,019) NMF (1,241) NMF (41,332) (9,132) NMF
One-off termination costs - - - - - - (3,985) NMF
of former CEO (2)
Net non-recurring items 254 (5,019) NMF (1,241) NMF (41,332) (13,117) NMF
Profit before income tax expense 163,405 156,997 4.1% 123,154 32.7% 173,584 384,359 -54.8%
Income tax expense (excluding
one-offs) (15,051) (22,697) -33.7% (8,470) 77.7% (10,491) (43,104) -75.7%
Income tax benefit related - - - - - - 2,161 NMF
to one-off termination costs
of former CEO and executive
management (3)
Income tax expense (15,051) (22,697) -33.7% (8,470) 77.7% (10,491) (40,943) -74.4%
Profit 148,354 134,300 10.5% 114,684 29.4% 163,093 343,416 -52.5%
One-off items (1)+(2)+(3) - - - - - - (14,236) NMF
Profit attributable to: 147,704 133,687 10.5% 114,174 29.4% 162,363 341,841 -52.5%
- shareholders of the Group 650 613 6.0% 510 27.5% 730 1,575 -53.7%
- non-controlling interests
Earnings per share (basic) 3.11 2.81 10.7% 2.40 29.6% 3.41 7.16 -52.4%
Earnings per share (diluted) 3.11 2.81 10.7% 2.40 29.6% 3.41 7.14 -52.2%
BALANCE SHEET BANK OF GEORGIA GROUP CONSOLIDATED
GEL thousands, unless otherwise Sep-20 Sep-19 Change Jun-20 Change
noted y-o-y q-o-q
Cash and cash equivalents 2,154,224 1,369,169 57.3% 1,633,755 31.9%
Amounts due from credit institutions 1,980,195 1,834,220 8.0% 1,700,075 16.5%
Investment securities 2,205,244 1,895,722 16.3% 2,113,900 4.3%
Loans to customers and finance
lease receivables 13,627,144 11,339,745 20.2% 12,599,092 8.2%
Accounts receivable and other loans 4,935 4,475 10.3% 4,060 21.6%
Prepayments 32,021 43,795 -26.9% 31,513 1.6%
Inventories 11,406 11,257 1.3% 13,901 -17.9%
Right-of-use assets 85,859 106,130 -19.1% 89,758 -4.3%
Investment property 221,517 193,499 14.5% 212,182 4.4%
Property and equipment 390,401 364,405 7.1% 396,272 -1.5%
Goodwill 33,351 33,351 0.0% 33,351 0.0%
Intangible assets 117,941 95,829 23.1% 116,355 1.4%
Income tax assets 40,484 7,682 NMF 54,595 -25.8%
Other assets 216,159 202,426 6.8% 139,945 54.5%
Assets held for sale 46,072 38,987 18.2% 45,212 1.9%
Total assets 21,166,953 17,540,692 20.7% 19,183,966 10.3%
Client deposits and notes 12,985,039 9,613,718 35.1% 11,583,139 12.1%
Amounts owed to credit institutions 3,757,646 3,437,718 9.3% 3,521,860 6.7%
Debt securities issued 1,628,188 2,175,820 -25.2% 1,561,933 4.2%
Lease liabilities 98,522 105,285 -6.4% 96,878 1.7%
Accruals and deferred income 43,474 41,521 4.7% 37,257 16.7%
Income tax liabilities 70,854 39,251 80.5% 70,171 1.0%
Other liabilities 212,093 87,520 142.3% 112,929 87.8%
Total liabilities 18,795,816 15,500,833 21.3% 16,984,167 10.7%
Share capital 1,618 1,618 0.0% 1,618 0.0%
Additional paid-in capital 513,407 498,593 3.0% 500,887 2.5%
Treasury shares (54) (53) 1.9% (54) 0.0%
Other reserves 38,201 28,472 34.2% 25,417 50.3%
Retained earnings 1,807,432 1,502,248 20.3% 1,662,164 8.7%
Total equity attributable to shareholders
of the Group 2,360,604 2,030,878 16.2% 2,190,032 7.8%
Non-controlling interests 10,533 8,981 17.3% 9,767 7.8%
Total equity 2,371,137 2,039,859 16.2% 2,199,799 7.8%
Total liabilities and equity 21,166,953 17,540,692 20.7% 19,183,966 10.3%
Book value per share 49.67 42.69 16.4% 46.07 7.8%
BELARUSKY NARODNY BANK (BNB)
Change Change Change
INCOME STATEMENT HIGHLIGHTS 3Q20 3Q19 y-o-y 2Q20 q-o-q 9M20 9M19 y-o-y
GEL thousands, unless
otherwise stated
Net interest income 8,735 7,447 17.3% 9,157 -4.6% 27,361 20,392 34.2%
Net fee and commission
income 1,220 1,956 -37.6% 1,486 -17.9% 4,410 5,567 -20.8%
Net foreign currency
(loss) / gain (42) 5,405 NMF 3,787 NMF 4,238 14,140 -70.0%
Net other (expense)
/ income (110) 57 NMF 350 NMF 573 371 54.4%
Operating income 9,803 14,865 -34.1% 14,780 -33.7% 36,582 40,470 -9.6%
Operating expenses (7,812) (9,135) -14.5% (8,098) -3.5% (24,616) (25,873) -4.9%
Operating income before
cost of risk 1,991 5,730 -65.3% 6,682 -70.2% 11,966 14,597 -18.0%
Cost of risk (1,449) 293 NMF (1,928) -24.8% (6,799) (2,684) 153.3%
Net non-recurring items 36 (1) NMF (24) NMF 2 (64) NMF
Profit before income
tax 578 6,022 -90.4% 4,730 -87.8% 5,169 11,849 -56.4%
Income tax benefit /
(expense) 76 (1,193) NMF (1,010) NMF (966) (2,143) -54.9%
Profit 654 4,829 -86.5% 3,720 -82.4% 4,203 9,706 -56.7%
BALANCE SHEET HIGHLIGHTS Sep-20 Sep-19 Change Jun-20 Change
y-o-y q-o-q
GEL thousands, unless
otherwise stated
Cash and cash equivalents 155,782 170,787 -8.8% 187,920 -17.1%
Amounts due from credit
institutions 14,614 22,534 -35.1% 13,605 7.4%
Investment securities 74,936 101,511 -26.2% 93,549 -19.9%
Loans to customers and
finance lease receivables 702,231 556,541 26.2% 638,713 9.9%
Other assets 47,394 59,397 -20.2% 50,667 -6.5%
Total assets 994,957 910,770 9.2% 984,454 1.1%
Client deposits and notes 596,360 588,647 1.3% 647,977 -8.0%
Amounts owed to credit
institutions 209,535 132,648 58.0% 144,815 44.7%
Debt securities issued 49,214 72,931 -32.5% 57,289 -14.1%
Other liabilities 22,188 8,239 169.3% 12,873 72.4%
Total liabilities 877,297 802,465 9.3% 862,954 1.7%
Total equity 117,660 108,305 8.6% 121,500 -3.2%
Total liabilities and
equity 994,957 910,770 9.2% 984,454 1.1%
KEY RATIOS 3Q20 3Q19 2Q20 9M20 9M19
Profitability
ROAA, annualised(15) 3.0% 3.2% 2.4% 1.1% 3.0%
ROAA, annualised (unadjusted) 3.0% 3.2% 2.4% 1.1% 2.9%
ROAE, annualised(15) 26.0% 26.8% 21.8% 9.9% 24.7%
RB ROAE (15) 25.0% 30.7% 16.4% 5.6% 27.6%
CIB ROAE (15) 30.7% 24.6% 31.5% 17.1% 24.5%
ROAE, annualised (unadjusted) 26.0% 26.8% 21.8% 9.9% 23.7%
Net interest margin, annualised 4.8% 5.4% 4.2% 4.7% 5.7%
RB NIM 4.8% 6.1% 4.0% 4.6% 6.3%
CIB NIM 3.6% 3.2% 3.4% 3.7% 3.5%
Loan yield, annualised 10.7% 11.5% 10.2% 10.6% 11.8%
RB Loan yield 11.7% 12.8% 11.1% 11.5% 13.1%
CIB Loan yield 8.6% 8.9% 8.3% 8.6% 9.1%
Liquid assets yield, annualised 3.3% 3.2% 3.4% 3.5% 3.4%
Cost of funds, annualised 4.7% 4.5% 4.8% 4.8% 4.5%
Cost of client deposits and
notes, annualised 3.8% 2.9% 3.5% 3.5% 3.0%
RB Cost of client deposits
and notes 3.1% 2.6% 2.9% 2.9% 2.7%
CIB Cost of client deposits
and notes 4.6% 3.2% 4.2% 4.2% 3.4%
Cost of amounts owed to credit
institutions, annualised 6.9% 6.8% 7.3% 7.3% 7.0%
Cost of debt securities issued 7.0% 7.7% 7.7% 7.5% 7.6%
Operating leverage, y-o-y(16) 1.9% -5.2% -13.6% -6.4% -1.7%
Operating leverage, q-o-q(16) 17.8% 1.2% -11.9% 0.0% 0.0%
Efficiency
Cost / Income(16) 37.1% 37.9% 43.9% 39.7% 37.3%
RB Cost / Income (16) 41.8% 38.0% 56.3% 47.5% 37.1%
CIB Cost /Income (16) 23.0% 30.4% 22.9% 21.8% 29.2%
Cost / Income (unadjusted) 37.1% 37.9% 43.9% 39.7% 38.8%
Liquidity (17)
NBG liquidity coverage ratio
(minimum requirement 100%) 147.0% 118.5% 135.4% 147.0% 118.5%
Liquid assets to total liabilities 33.7% 32.9% 32.1% 33.7% 32.9%
Net loans to client deposits
and notes 104.9% 118.0% 108.8% 104.9% 118.0%
Net loans to client deposits
and notes + DFIs 92.1% 103.4% 94.5% 92.1% 103.4%
Leverage (times) 7.9 7.6 7.7 7.9 7.6
Asset quality:
NPLs (in GEL) 530,631 339,118 355,260 530,631 339,118
NPLs to gross loans to clients 3.8% 2.9% 2.7% 3.8% 2.9%
NPL coverage ratio 76.8% 85.3% 115.7% 76.8% 85.3%
NPL coverage ratio, adjusted
for discounted value of collateral 131.4% 129.3% 166.3% 131.4% 129.3%
Cost of credit risk, annualised 0.2% 0.5% -0.2% 2.4% 1.1%
RB Cost of credit risk 0.8% 0.9% 0.2% 2.7% 1.6%
CIB Cost of credit risk -1.1% -0.2% -1.7% 1.7% 0.2%
Capital adequacy:
NBG (Basel III) CET1 capital
adequacy ratio 9.9% 11.1% 9.9% 9.9% 11.1%
Minimum regulatory requirement 6.9% 9.5% 6.9% 6.9% 9.5%
NBG (Basel III) Tier I capital
adequacy ratio 12.0% 13.3% 12.0% 12.0% 13.3%
Minimum regulatory requirement 8.7% 11.6% 8.7% 8.7% 11.6%
NBG (Basel III) Total capital
adequacy ratio 17.3% 16.8% 17.4% 17.3% 16.8%
Minimum regulatory requirement 13.3% 16.1% 13.3% 13.3% 16.1%
Selected operating data:
Total assets per FTE 2,976 2,402 2,671 2,976 2,402
Number of active branches,
of which: 211 276 229 211 276
- Express branches (including
Metro) 105 167 121 105 167
- Bank of Georgia branches 95 97 97 95 97
- SOLO lounges 11 12 11 11 12
Number of ATMs 947 911 940 947 911
Number of cards outstanding,
of which: 2,184,591 2,121,830 2,178,053 2,184,591 2,121,830
- Debit cards 1,879,970 1,674,105 1,828,691 1,879,970 1,674,105
- Credit cards 304,621 447,725 349,362 304,621 447,725
Number of POS terminals 25,706 21,088 23,787 25,706 21,088
Number of Express pay terminals 3,130 3,231 3,118 3,130 3,231
FX Rates:
GEL/US$ exchange rate (period-end) 3.2878 2.9552 3.0552
GEL/GBP exchange rate (period-end) 4.2255 3.6319 3.7671
Sep-20 Sep-19 Jun-20
Full time employees (FTE),
of which: 7,112 7,304 7,181
- Full time employees, BOG
standalone 5,598 5,706 5,693
- Full time employees, BNB 538 584 543
- Full time employees, other 976 1,014 945
Shares outstanding Sep-20 Sep-19 Jun-20
Ordinary shares 47,528,417 47,574,153 47,536,332
Treasury shares 1,641,011 1,595,275 1,633,096
Total shares outstanding 49,169,428 49,169,428 49,169,428
(15) The 9M19 ratios are adjusted for one-off employee costs
related to termination benefits of the former CEO and executive
management
(16) The 9M19 ratios are adjusted for one-off employee costs
related to termination benefits of former executive management
(17) We stopped reporting the NBG liquidity ratio since 1
January 2020 due to the phase-out of the requirement of this ratio
per NBG's regulations
GLOSSARY
-- Alternative performance measures (APMs) In this announcement
the management uses various APMs, which they believe provide
additional useful information for understanding the financial
performance of the Group. These APMs are not defined by
International Financial Reporting Standards, and also may not be
directly comparable with other companies who use similar measures.
We believe that these APMs provide the best representation of our
financial performance as these measures are used by management to
evaluate the Group's operating performance and make day-to-day
operating decisions
-- Cost of funds Interest expense of the period divided by
monthly average interest bearing liabilities
-- Cost of credit risk Expected loss on 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
-- Cost to income ratio Operating expenses divided by operating
income
-- Interest bearing liabilities Amounts owed to credit
institutions, client deposits and notes, and debt securities
issued
-- Interest earning assets (excluding cash) Amounts due from
credit institutions, investment securities (but excluding corporate
shares) and net loans to customers and finance lease
receivables
-- Leverage (times) Total liabilities divided by total
equity
-- Liquid assets Cash and cash equivalents, amounts due from
credit institutions and investment securities
-- Liquidity coverage ratio (LCR) High quality liquid assets (as
defined by NBG) divided by net cash outflows over the next 30 days
(as defined by NBG)
-- Loan yield Interest income from loans to customers and
finance lease receivables divided by monthly average gross loans to
customers and finance lease receivables
-- NBG (Basel III) Common Equity Tier I (CET1) capital adequacy
ratio Common Equity Tier I capital divided by total risk weighted
assets, both calculated in accordance with the requirements of the
National Bank of Georgia instructions
-- NBG (Basel III) Tier I capital adequacy ratio Tier I capital
divided by total risk weighted assets, both calculated in
accordance with the requirements of the National Bank of Georgia
instructions
-- NBG (Basel III) Total capital adequacy ratio Total regulatory
capital divided by total risk weighted assets, both calculated in
accordance with the requirements of the National Bank of Georgia
instructions
-- Net interest margin (NIM) Net interest income of the period
divided by monthly average interest earning assets excluding cash
for the same period
-- Net stable funding ratio (NSFR) available amount of stable
funding (as defined by NBG) divided by the required amount of
stable funding (as defined by NBG)
-- Non-performing loans (NPLs) The principal and interest on
loans overdue for more than 90 days and any additional potential
losses estimated by management
-- NPL coverage ratio Allowance for expected credit loss of
loans and finance lease receivables divided by NPLs
-- NPL coverage ratio adjusted for discounted value of
collateral Allowance for expected credit loss of loans and finance
lease receivables divided by NPLs (discounted value of collateral
is added back to allowance for expected credit loss)
-- Operating leverage Percentage change in operating income less
percentage change in operating expenses
-- Return on average total assets (ROAA) Profit for the period
divided by monthly average total assets for the same period
-- Return on average total equity (ROAE) Profit for the period
attributable to shareholders of the Group divided by monthly
average equity attributable to shareholders of the Group for the
same period
-- NMF Not meaningful
COMPANY INFORMATION
Bank of Georgia Group PLC
Registered Address
84 Brook Street
London W1K 5EH
United Kingdom
www.bankofgeorgiagroup.com
Registered under number 10917019 in England and Wales
Secretary
Link Company Matters Limited
65 Gresham Street
London EC2V 7NQ
United Kingdom
Stock Listing
London Stock Exchange PLC's Main Market for listed
securities
Ticker: "BGEO.LN"
Contact Information
Bank of Georgia Group PLC Investor Relations
Telephone: +44(0) 203 178 4052; +995 322 444444 (9282)
E-mail: ir@ bog.ge
Auditors
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater 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
Shareholders can access both the latest and historical prices
via the website
www.bankofgeorgiagroup.com
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END
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