Lion Finance Group Plc · LSE:BGEO
Lion Finance — Q2 2020 Earnings Presentation
87 slides from Lion Finance's earnings presentation, Aug 20, 2020
Slide 1: Investor Presentation: 2Q20 and 1H20 Financial Results
INVESTOR PRESENTATION 2Q20 and 1H20 Financial Results 20 August 2020 www.bankofgeorgiagroup.com
Slide 2: Disclaimer – Forward Looking Statements
DISCLAIMER – FORWARD LOOKING STATEMENTS 2 This presentation 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 need
Slide 3: Contents
CONTENTS 3 RESPONSE TO COVID-19 AND TRACKING THE RECOVERY GROUP OVERVIEW 2Q20 AND 1H20 RESULTS DISCUSSION GEORGIAN MACRO OVERVIEW APPENDICES
Slide 4: Georgia maintains position as stellar performer in COVID-19 response
GEORGIA MAINTAINS ITS POSITION AS A STELLAR PERFORMER GLOBALLY IN TERMS OF COVID-19 RESPONSE 4 GOVERNMENT SAFETY MEASURES COVID-19 STATISTICS IN GEORGIA Source: www.stopcov.ge — Since lifting quarantine restrictions, daily new cases have remained very low at 18:00, 17 August 2020 1,341 231 (unlike i
Slide 5: Georgia undertook pre-cautionary measures before pandemic was declared
GEORGIA UNDERTOOK PRE-CAUTIONARY MEASURES BEFORE PANDEMIC WAS DECLARED AND STRENGTHENED IT LATER 5 CHRONOLOGY OF PANDEMIC PREVENTIVE MEASURES IN GEORGIA Source: NCDC and various official information Opening of Borders closed State of Curfew became 1st part of State of Borders with Borders closed wit
Slide 6: Government's support measures - COVID-19
GOVERNMENT’S SUPPORT MEASURES - COVID 19 6 The Government announced a series of support measures designed to mitigate the negative economic impact of COVID-19. The Government’s revised 2020 budget document was approved by Parliament in June 2020. The revised budget incorporates the fiscal parameters
Slide 7: National Bank of Georgia Supervisory Plan - COVID-19
NATIONAL BANK OF GEORGIA SUPERVISORY PLAN – COVID-19 In March 2020, NBG introduced an updated Supervisory Plan for the banking sector with immediate effect, aimed at alleviating the negative 7 financial and economic challenges created by the global COVID-19 pandemic. The measures were mainly focused
Slide 8: Bank of Georgia's Business Contingency Plan - COVID-19
BANK OF GEORGIA’S BUSINESS CONTINGENCY PLAN – COVID-19 The Group has introduced a number of resilience protocols and a comprehensive Business Continuity Plan (“BCP”) aimed at curbing the spread of COVID-19 8 in Georgia and mitigating the negative impact on our business and the community. We started
Slide 9: Business Contingency Plan - Support to customers and community
BANK OF GEORGIA’S BUSINESS CONTINGENCY PLAN – COVID-19 9 SUPPORT TO CUSTOMERS AND COMMUNITY — All retail clients have been given the opportunity to defer loan principal — The Group’s digital ecosystem arm introduced a combined packed solution of and interest payments for three months Optimo and extr
Slide 10: Business Contingency Plan - Capital adequacy, liquidity and funding
BANK OF GEORGIA’S BUSINESS CONTINGENCY PLAN – COVID-19 10 CAPITAL ADEQUACY LIQUIDITY AND FUNDING — Robust capital position: — Strong liquidity and funding position: The Bank’s capital position remains robust, and comfortably above our The Bank’s liquidity and funding position has remained strong, an
Slide 11: Tracking Georgia's economic recovery
TRACKING GEORGIA’S ECONOMIC RECOVERY 11 KEY INDICATORS SHOW IMPROVING TREND, WHILE REMITTANCES REBOUNDED STRONGLY Source: Geostat, NBG Remittances Exports Imports VAT turnover GDP growth 30% -4.6% -15.9% -19.1% -6.9% -5.8% 0 20% 10% -50 0% -10% -100 -20% -30% -150 -40% -50% -200 Mar-20 Mar-20 Mar-20
Slide 12: Tracking Georgia's economic recovery
TRACKING GEORGIA’S ECONOMIC RECOVERY 12 GEL STRENGTHENED FROM MID-MAY… …IMPROVING DEPOSITORS MOOD … AND HELPING ANNUAL INFLATION TO TOWARD NATIONAL CURRENCY RETREAT GRADUALLY 30% National currency vs. US$ Deposit dollarisation Annual inflation 25% 6.9% 66.3% 65.7% 6.5% 6.4% 6.4% 20% RUB 64.1% 6.1% 6
Slide 13: Georgia's economic outlook in 2020
GEORGIA’S ECONOMIC OUTLOOK IN 2020 13 — With the COVID-19 pandemic, Georgia’s economic outlook has GEORGIA'S ECONOMIC GROWTH FORECAST significantly deteriorated. International Monetary Fund (IMF) expects Georgia’s real GDP to decline by 4% in 2020 (forecast as Source: Geostat, IMF of May 2020). Our
Slide 14: Contents
CONTENTS 14 RESPONSE TO COVID-19 AND TRACKING THE RECOVERY GROUP OVERVIEW 2Q20 AND 1H20 RESULTS DISCUSSION GEORGIAN MACRO OVERVIEW APPENDICES
Slide 15: Bank of Georgia Group at a glance
BANK OF GEORGIA GROUP AT A GLANCE 15 A LEADING BANKING GROUP IN GEORGIA — Top Systemically important financial institution in Georgia CORPORATE AND — A leading market position by assets, loans and deposits RETAIL BANKING INVESTMENT — Strong brand name recognition and retail banking BANKING franchise
Slide 16: Strong institutional investors support
STRONG INSTITUTIONAL INVESTORS SUPPORT 16 TOP SHAREHOLDERS As of 31 July 2020 SHAREHOLDER STRUCTURE As of 31 July 2020 Rank Shareholder name Ownership 1 JSC Georgia Capital* 19.90% Unvested and unawarded shares 2% for management and employees 2 Harding Loevner LP 4.68% 3% Vested shares held by manag
Slide 17: Track record of delivering strong results
TRACK RECORD OF DELIVERING STRONG RESULTS 17 Key medium to long-term targets remain unchanged Nominal Real 25.2% 26.4% 26.1% 27.0% 22.2% 24.5% 21.4% ROAE Loan book growth 20%+ c.15% 17.4% 22.0% 15.9% 19.0% 16.1% 2016 2017 2018* 2019** 2016 2017 2018 2019 ROBUST CAPITAL MANAGEMENT TRACK RECORD REGULA
Slide 18: Contents
CONTENTS 18 RESPONSE TO COVID-19 AND TRACKING THE RECOVERY GROUP OVERVIEW 2Q20 AND 1H20 RESULTS DISCUSSION GEORGIAN MACRO OVERVIEW APPENDICES
Slide 19: Resilient performance notwithstanding reduction in economic activity
RESILIENT PERFORMACE NOTWITHSTANDING THE SIGNIFICANT REDUCTION IN ECONOMIC ACTIVITY 19 TRACKING THE RECOVERY - KEY INDICATORS SHOW IMPROVING TREND 2Q20 AND 1H20 PERFORMANCE HIGHLIGHTS Bank of Georgia Group’s performance during the second quarter of 2020 was significantly impacted by a number of fact
Slide 20: 2Q20 and 1H20 results highlights - income statement
2Q20 AND 1H20 RESULTS HIGHLIGHTS 20 INCOME STATEMENT HIGHLIGHTS* Cost of risk: GEL thousands unless otherwise Change Change Change 2Q20 2Q19 1Q20 1H20 1H19 — The higher cost of risk in 1Q20 and 1H20 was noted y-o-y q-o-q y-o-y driven by GEL 220.2mln additional ECL Net interest income 174,936 191,354
Slide 21: 2Q20 and 1H20 results highlights - balance sheet and key ratios
2Q20 AND 1H20 RESULTS HIGHLIGHTS 21 BALANCE SHEET HIGHLIGHTS* KEY RATIOS* Change Change GEL thousands Jun-20 Jun-19 Mar-20 2Q20 2Q19 1Q20 1H20 1H19 y-o-y q-o-q Liquid assets 5,447,730 4,537,545 20.1% 5,379,132 1.3% ROAA** 2.4% 2.9% -2.1% 0.2% 3.0% Cash and cash equivalents 1,633,755 936,106 74.5% 1,
Slide 22: The competition
THE COMPETITION Leading market position in Georgia by assets (35.4%), loans (34.8%), client deposits (38.2%) and equity (30.6%) 22 MARKET SHARE IN TOTAL ASSETS MARKET SHARE IN GROSS LOANS 39.5% 34.8% 38.5% 35.4% 14.8% 14.2% 5.0% 3.6% 3.2% 4.0% 3.6% 3.4% BOG TBC LB VTB PCB Others BOG TBC LB VTB PCB O
Slide 23: Strong underlying performance amid COVID-19 impact - income
STRONG UNDERLYING PERFORMANCE AMID COVID-19 IMPACT 23 OPERATING INCOME | QUARTERLY OPERATING INCOME | HALF-YEAR -6.8% -0.4% -12.7% 516.0 514.1 257.3 274.5 239.7 134.7 26% 142.1 28% 65.9 26% 77.4 28% 64.8 27% 381.3 74% 372.0 72% 191.4 74% 197.1 72% 174.9 73% 2Q19 1Q20 2Q20 1H19 1H20 Net interest inco
Slide 24: Strong underlying performance amid COVID-19 impact - expenses
STRONG UNDERLYING PERFORMANCE AMID COVID-19 IMPACT 24 OPERATING EXPENSES * | QUARTERLY OPERATING EXPENSES * | HALF-YEAR +6.7% +10.9% -0.8% 98.6 106.0 105.2 190.5 211.2 1.3 1.1 0.9 2.3 2.0 21.4 21.1 33.0 42.5 17.3 44.8 49.5 22.0 27.0 22.5 58.0 56.5 60.7 110.4 117.2 2Q19 1Q20 2Q20 1H19 1H20 Other oper
Slide 25: Solid income notwithstanding pressure on yields
SOLID INCOME NOTWITHSTANDING PRESSURE ON YIELDS 25 LOAN YIELDS | QUARTERLY LOAN YIELDS | HALF-YEAR 11.8% 10.8% 14.2% 13.5% 11.7% 10.6% 10.2% 60.1% 62.1% 60.3% 61.7% 61.7% 58.5% 60.3% 39.9% 37.9% 39.7% 38.3% 38.3% 41.5% 39.7% 2Q19 1Q20 2Q20 2017 2018 2019 1H20 Net loans, FC Net loans, FC Net loans, G
Slide 26: Stable cost of funding
STABLE COST OF FUNDING 26 COST OF CUSTOMER FUNDS | QUARTERLY COST OF CUSTOMER FUNDS | HALF-YEAR 3.1% 3.1% 3.5% 3.5% 3.5% 3.0% 3.3% 68.6% 72.4% 62.9% 69.5% 67.5% 69.3% 62.9% 31.4% 27.6% 37.1% 30.5% 32.5% 30.7% 37.1% 2Q19 1Q20 2Q20 2017 2018 2019 1H20 Client deposits and notes, FC Client deposits and
Slide 27: Diversified asset structure and loan portfolio
DIVERSIFIED ASSET STRUCTURE AND LOAN PORTFOLIO 27 TOTAL ASSETS | 30 JUNE 2020 LIQUID ASSETS | 30 JUNE 2020 Total: GEL 19.2bln Total: GEL 5.4bln Other assets Other liquid 5.9% Liquid assets Cash and assets 17.8% equivalents 28.4% Government 30.0% Loans to bonds, Amounts customers, treasury due from n
Slide 28: Loan portfolio breakdown
LOAN PORTFOLIO BREAKDOWN 28 RETAIL BANKING | 30 JUNE 2020 CORPORATE INVESTMENT BANKING | 30 JUNE 2020 JSC Bank of Georgia standalone JSC Bank of Georgia standalone 3.0% 3.3% 8,041 244 4,182 136 1.6% 12 GEL millions GEL millions 3.8% 717 4,411 169 3,465 125 3.6% 3,630 2.1% 75 Loan portfolio Allowance
Slide 29: Resilient loan portfolio quality
RESILIENT LOAN PORTFOLIO QUALITY 29 EXPECTED CREDIT LOSS NPL COMPOSITION 3.5% NPL 92.7% 90.5% 80.9% 115.7% 3.0% 3.2% coverage 3.8% 3.3% 2.1% 2.7% 1.7% 301 318 355 27 253 21 411 49 18 178 279 288 159 121 204 185 133 114 157 68 31-Dec-2017 31-Dec-2018 31-Dec-2019 30-Jun-2020 31-Dec-2017 31-Dec-2018 31
Slide 30: Cost of credit risk - COVID-19 impact
COST OF CREDIT RISK – COVID-19 IMPACT 30 The Group created additional reserves for expected credit losses for the full economic cycle of GEL 220.2mln in the first quarter of 2020, primarily related to deterioration of macro-economic environment and expected creditworthiness of borrowers as a result
Slide 31: Strong liquidity
STRONG LIQUIDITY 31 LIQUID ASSETS TO TOTAL LIABILITIES LCR AND NSFR JSC Bank of Georgia standalone (Basel III Liquidity) 133.6% 136.7% 136.6% 38.3% 34.9% 33.9% 125.5% 132.5% 135.4% 32.1% 120.1% GEL millions 11,355 13,000 100.3% 16,419 16,984 4,540 5,560 5,448 4,347 31-Dec-17 31-Dec-18 31-Dec-19 30-J
Slide 32: Strong NBG (Basel III) capital adequacy position
STRONG NBG (BASEL III) CAPITAL ADEQUACY POSITION 32 NBG MEASURES AS A RESPONSE TO COVID-19 CAPITAL ADEQUACY RATIOS NBG’s COVID-19 Supervisory Plan impact on capital adequacy ratios, effective since March 2020: 16.7% 16.8% 18.1% 17.4% 15.3% — Combined buffer - the conservation buffer requirement of 2
Slide 33: Strong NBG (Basel III) capital adequacy position - capital management
STRONG NBG (BASEL III) CAPITAL ADEQUACY POSITION 33 CAPITAL MANAGEMENT BOG EQUITY VS. CET1 REG. CAPITAL | 30 JUN 2020 Capital Adequacy % of 9.9% 2.9% 0.9% 1.5% — Decline in capital ratios during 1H20 was primarily due to GEL 400 RWAs million general provision created for the full economic cycle in
Slide 34: Well-established funding structure
WELL-ESTABLISHED FUNDING STRUCTURE | 30 JUNE 2020 34 INTEREST BEARING LIABILITIES WELL DIVERSIFIED INTERNATIONAL BORROWINGS Interest Bearing Liabilities GEL 16.7bln Other debt Others Debt securities, borrowings, securities GEL GEL Borrowings 252mln, 425mln, issued Current 13.1% 9.4% 6.8% 11.3% DFIs,
Slide 35: Retail Banking highlights
RETAIL BANKING HIGHLIGHTS AT 30 JUNE 2020 FOR JSC BANK OF GEORGIA STANDALONE 35 1 2 3 Segments Emerging & Mass Retail Mass Affluent MSME Clients 2,259 k 56 k 225 k Loans GEL 2,690 mln GEL 2,422mln GEL 2,929 mln Deposits GEL 2,819mln GEL 2,352 mln GEL 791 mln 1H20 profit / GEL (22) mln GEL 11 mln GEL
Slide 36: Retail Banking highlights - income statement
RETAIL BANKING HIGHLIGHTS INCOME STATEMENT HIGHLIGHTS* Change Change Change 36 GEL thousands unless otherwise noted 2Q20 2Q19 1Q20 1H20 1H19 y-o-y q-o-q y-o-y Net interest income 102,667 133,494 -23.1% 118,266 -13.2% 220,934 268,659 -17.8% Net fee and commission income 22,184 34,605 -35.9% 29,398 -2
Slide 37: Retail Banking loans and deposits
RETAIL BANKING LOANS AND DEPOSITS 37 MARKET SHARE – LOANS TO INDIVIDUALS MARKET SHARE – DEPOSITS TO INDIVIDUALS 40.3% 40.6% 38.8% 38.5% 37.5% 36.9% 35.5% 34.6% 2017 2018 2019 2Q20 2017 2018 2019 2Q20 RETAIL BANKING LOANS RETAIL BANKING DEPOSITS +5.0% +4.4% 7,428 7,797 6,267 5,962 GEL millions GEL mi
Slide 38: Retail Banking loan yield, cost of deposits and NIM
RETAIL BANKING LOAN YIELD, COST OF DEPOSITS & NIM 38 RETAIL BANKING LOAN YIELD I QUARTERLY RETAIL BANKING LOAN YIELD I HALF-YEAR 17.7% 15.7% 14.9% 18.4% 15.3% 12.9% 11.8% 11.1% 13.2% 11.5% 7.3% 6.8% 6.6% 7.5% 6.8% Loan Yield Loan yield, GEL Loan yield, FC Loan Yield Loan yield, GEL Loan yield, FC 2Q
Slide 39: Retail Banking - leading retail bank in Georgia
RETAIL BANKING - LEADING RETAIL BANK IN GEORGIA 39 RETAIL BANKING CLIENT DATA MORTGAGE LOANS DOLLARISATION Operating Data, GEL mln 30-Jun-20 31-Dec-19 31-Dec-18 31-Dec-17 Number of total Retail clients, of which: 2,540,721 2,540,466 2,440,754 2,315,038 5% Number of Solo clients 23% 26% 56,207 54,542
Slide 40: Diversified retail portfolios and income streams
DIVERSIFIED RETAIL PORTFOLIOS AND INCOME STREAMS 40 BALANCE SHEET | 30 JUNE 2020 INCOME STATEMENT | 1H20 JSC Bank of Georgia Standalone Total Gross Loans JSC Bank of Georgia Standalone Net Interest Income GEL 8,041mln GEL 221mln Emerging/Mass Retail Emerging/Mass Retail 34% (GEL 2,690mln) 33% (GEL 9
Slide 41: Retail Banking digital penetration
RETAIL BANKING | DIGITAL PENETRATION 41 MBANK/IBANK STATISTICS Number of Active Users | ‘000 Number of transactions (millions) iBank mBank 620 665 14.3 569 12.8 13.6 481 506 10.8 9.5 11.5 12.5 13.3 8.2 9.5 1.3 1.3 1.3 1.1 1.0 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 DIGITAL VS NON-DIGITAL T
Slide 42: Retail Banking multichannel performance
RETAIL BANKING | MULTICHANNEL PERFORMANCE 42 NUMBER OF TRANSACTIONS ‘000 1H18 1H19 1H20 -31% +51% 54,251 53,314 43,726 X4.3 36,784 37,335 +7% 28,945 -34% 25,790 -29% 14,880 14,363 12,628 13,520 6,520 6,319 4,164 6,051 2,760 2,933 2,080 Tellers Mobile banking Internet banking POS terminals ATMs Expre
Slide 43: Corporate and Investment Banking highlights
CORPORATE AND INVESTMENT BANKING HIGHLIGHTS INCOME STATEMENT HIGHLIGHTS* 43 Change Change Change GEL thousands unless otherwise noted 2Q20 2Q19 1Q20 1H20 1H19 y-o-y q-o-q y-o-y Net interest income 63,110 51,864 21.7% 69,341 -9.0% 132,451 100,405 31.9% Net fee and commission income 9,197 7,113 29.3%
Slide 44: CIB loan book and deposits
CIB LOAN BOOK AND DEPOSITS 44 MARKET SHARE – LOANS TO LEGAL ENTITIES MARKET SHARE – DEPOSITS TO LEGAL ENTITIES 35.3% 33.1% 31.0% 31.0% 30.3% 30.9% 28.9% 28.8% 2017 2018 2019 2Q20 2017 2018 2019 2Q20 CIB NET LOANS CIB DEPOSITS +31.8% +6.4% 5,043 3,804 4,046 3,825 3,457 3,473 GEL millions GEL millions
Slide 45: CIB loan book and deposits - sector breakdown
CIB LOAN BOOK AND DEPOSITS 45 HIGHLIGHTS GROSS LOAN BOOK BY SECTOR | 30 JUNE 2020 Mining & quarrying Health & Top 10 CIB 2.8% social work borrowers — Leading corporate bank in Georgia - 28.7% of CIB Financial 3.5% Other intermediation 8.8% Manufacturing loan book — Integrated client coverage in key
Slide 46: CIB loan yield, cost of deposits and NIM
CIB LOAN YIELD, COST OF DEPOSITS & NIM 46 CIB LOAN YIELD I QUARTERLY CIB LOAN YIELD I HALF-YEAR 12.6% 13.7% 12.4% 12.0% 13.1% 9.5% 8.9% 8.3% 8.9% 7.8% 7.5% 9.2% 8.7% 8.7% 7.8% Loan Yield Loan yield, GEL Loan yield, FC Loan Yield Loan yield, GEL Loan yield, FC 2Q19 1Q20 2Q20 1H19 1H20 CIB COST OF DEP
Slide 47: Building blocks to become the financial services hub - Wealth Management
BUILDING BLOCKS TO BECOME THE FINANCIAL SERVICES HUB 47 WEALTH MANAGEMENT AIM - TO INCREASE AUM TO US$3.0BLN IN 5 YEARS TIME STRONG INTERNATIONAL PRESENCE STRONG INTERNATIONAL PRESENCE Israel (2008), UK (2010), Hungary (2012), Turkey (2013) Wealth Management Vision – Become the regional hub for
Slide 48: Building blocks - Galt and Taggart investment bank
BUILDING BLOCKS TO BECOME THE FINANCIAL SERVICES HUB 48 GALT AND TAGGART – LARGEST INVESTMENT BANK IN GEORGIA BROKERAGE DCM/ECM — The leading brokerage house in the region Galt & Taggart continues to develop local capital markets in — The only international sub-custodian in the region Georgia. Durin
Slide 49: Digital Area ecosystem overview
DIGITAL AREA ECOSYSTEM OVERVIEW 49
Slide 50: Digital Area ecosystem overview
DIGITAL AREA ECOSYSTEM OVERVIEW 50 Coming soon in 2020 EXTRA AREA Mobile Apps (iOS / Android) Launch of Digital Brokerage Services 3PL (third party logistics) and C2C Sales Management Solution for Real fulfillment) Estate Developers OPTIMO 500 Startups HORECA Solution Growth Intensive Acceleration s
Slide 51: Contents
CONTENTS 51 RESPONSE TO COVID-19 AND TRACKING THE RECOVERY GROUP OVERVIEW 2Q20 AND 1H20 RESULTS DISCUSSION GEORGIAN MACRO OVERVIEW APPENDICES
Slide 52: Georgia at a glance
GEORGIA AT A GLANCE 52 GENERAL FACTS — Area: 69,700 sq km — Population (2019): 3.7 mln — Life expectancy: 74 years — Official language: Georgian — Literacy: 100% — Capital: Tbilisi — Currency (code): Lari (GEL) ECONOMY SOVEREIGN CREDIT RATINGS — Nominal GDP (Geostat) 2019: GEL 50.0bln (US$17.7 bln)
Slide 53: Georgia's key economic drivers
GEORGIA’S KEY ECONOMIC DRIVERS 53 Top performer globally in WB Doing Business over the past 12 years Liberal Liberty Act ensures a credible fiscal and monetary framework economic policy Fiscal deficit/GDP capped at 3%; Government debt/GDP capped at 60% Business friendly environment and low tax
Slide 54: Growth oriented reforms
GROWTH ORIENTED REFORMS 54 EASE OF DOING BUSINESS | 2020 ECONOMIC FREEDOM INDEX | 2020 Source: WB-IFC Doing Business Report Source: Heritage Foundation New Zealand 1 UK 7 Singapore 2 Estonia 10 Denmark 4 Georgia 12 Top 6 in Europe region USA 6 #1 in Europe and Lithuania 16 out of 46 countries Georgi
Slide 55: Government's reforms
GOVERNMENT’S REFORMS 55 ONGOING STRUCTURAL REFORMS Tax reform Public investment management framework — Corporate income tax reform — Improved efficiency of state projects — Enhancing easiness of tax compliance — Favorable tax rates for SME development General education reform — Maximising qual
Slide 56: Diversified resilient economy
DIVERSIFIED RESILIENT ECONOMY 56 GROSS DOMESTIC PRODUCT DIVERSIFIED NOMINAL GDP STRUCTURE | 2019 Source: Geostat Source: Geostat Trade Real GDP growth was -5.8% in 1H20 Other 14.4% 20 12% 29.4% Real estate 15 7.4% 9% Financial & 6.4% 11.5% 4.8% 4.8% 5.1% insurance 10 4.4% 6% 3.6% 3.0% 5.4% 2.9% 5 3%
Slide 57: Capital and productivity main engines of growth since 2004
CAPITAL AND PRODUCTIVITY HAVE BEEN THE MAIN ENGINES OF GROWTH SINCE 2004 57 OVERALL CONTRIBUTION OF CAPITAL, LABOR, CONTRIBUTIONS OF CAPITAL, LABOR, AND TFP TO AND TOTAL FACTOR PRODUCTIVITY (TFP) TO GROWTH DURING PERIODS Source: Geostat, Galt &Taggart GROWTH, 2011-2019 Source: Geostat, Galt &Taggart
Slide 58: Further job creation is achievable
FURTHER JOB CREATION IS ACHIEVABLE 58 UNEMPLOYMENT RATE DOWN 1.1PPTS Y/Y TO HIRED WORKERS ON THE RISE 11.6% IN 2019 Source: Geostat Source: Geostat 1,800 17.4% 17.3% 17.2% 16.9% 20% 1,100 14.6% 14.1% 14.0% 13.9% 12.7% 1,000 1,600 11.6% 15% 900 849 1,400 1,734 1,717 1,707 1,694 1,690 10% 800 840 1,62
Slide 59: Low public debt
LOW PUBLIC DEBT 59 FISCAL DEFICIT Source: MoF, IMF BREAKDOWN OF PUBLIC DEBT Source: MoF, as of December 2019 0% -2% -4% -2.0% -1.7% -1.9% -2.6% -2.4% -2.8% -2.7% -2.3% -2.0% External public debt -6% portfolio -5.3% Multilateral -8% 57% weighted average Domestic External interest rate 2.1% -10% -8.5%
Slide 60: Investing in infrastructure and spending low on social
INVESTING IN INFRASTRUCTURE AND SPENDING LOW ON SOCIAL 60 BUDGET EXPENDITURES EXPENDITURE BREAKDOWN: CURRENT VS. CAPITAL Source: MoF, Geostat Source: MoF 20,000 50% 100% 81.7% 78.1% 80.0% 38.3% 76.0% 72.5% 73.4% 80.0% 74.2% 73.1% 72.2% 78.2% 32.3% 32.8% 40% 80% 15,000 29.4% 29.4% 27.6% 28.4% 28.6% 2
Slide 61: Diversified foreign trade
DIVERSIFIED FOREIGN TRADE 61 IMPORTS OF GOODS AND SERVICES EXPORTS OF GOODS AND SERVICES Source: NBG – BOP statistics Source: NBG – BOP statistics 12 10.8 11.1 10.1 10.0 8.9 9.5 10 9.2 9.3 8.7 8.5 9.4 1.0 1.7 2.2 2.4 7.6 0.8 7.5 8.0 1.6 7.2 7.0 8 1.4 1.7 2.0 6.1 6.2 0.5 1.3 1.7 6.0 1.1 0.9 3.9 1.2 6
Slide 62: Diversified sources of capital
DIVERSIFIED SOURCES OF CAPITAL 62 STRONG FOREIGN INVESTOR INTEREST Source: Geostat TOURIST ARRIVALS AND REVENUES ON THE RISE Source: NBG, Geostat 2.5 FDI down 45.2% y/y in 1Q20 25% 4.0 Tourism revenues down 68.6% y/y in 1H20 25% 18.3% 18.4% 2.0 20% 16.6% 20% 3.0 13.9% 1.5 12.2% 15% 12.5% 15% 10.4% 1
Slide 63: Current account deficit supported by FDI
CURRENT ACCOUNT DEFICIT SUPPORTED BY FDI 63 CURRENT ACCOUNT BALANCE (% OF NOMINAL GDP) Source: NBG, Geostat 30% Goods, net Services, net Income, net Transfers, net CA deficit net FDI 20% 10.4% 6.0% 6.5% 8.1% 9.5% 8.2% 5.6% 4.6% 5.3% 5.3% 10% 0% -10% -5.6% -6.8% -5.0% -9.8% -10.2% -8.1% -20% -12.2% -
Slide 64: Inflation targeting since 2009
5% 7% 9% 1% -1% 3% 40 60 80 120 100 20 Jan-14 Jan-14 Apr-14 Apr-14 Aug-14 Aug-14 Nov-14 Nov-14 Mar-15 Mar-15 Jun-15 Jun-15 Energy Oct-15 Oct-15 Headline inflation Jan-16 Jan-16 May-16 May-16 ANNUAL INFLATION Aug-16 Aug-16 Dec-16 Dec-16 Mar-17 Apr-17 Non-energy Jul-17 Jul-17 WORLD COMMODITY PRICES Oc
Slide 65: International reserves sufficient to finance imports
INTERNATIONAL RESERVES SUFFICIENT TO FINANCE MORE THAN 3 MONTHS OF IMPORTS 65 INTERNATIONAL RESERVES Source: NBG CENTRAL BANK’S INTERVENTIONS Source: NBG 4.0 300 220 NBG sold US$ c.285mn in March-July 2020 3.0 200 US$ sale 120 100 100 40 50 60 100 27 60 60 40 40 40 40 20 32.8 20 2.0 -85 20 -15 0 1.0
Slide 66: Floating exchange rate - policy priority
FLOATING EXCHANGE RATE - POLICY PRIORITY 66 FX RESERVES Source: NBG NOMINAL AND REAL EFFECTIVE EXCHANGE RATE 5.0 1.42 1.30 1.36 1.31 1.5 (JAN2014=100) Source: NBG 1.25 1.23 1.24 1.27 1.16 1.29 130 130 4.0 1.03 120 120 1.0 -4.3% y/y 3.0 3.6 110 110 3.5 3.3 100 100 2.8 2.9 2.8 3.0 2.0 2.7 2.5 2.8 90 9
Slide 67: Growing and well-capitalised banking sector
GROWING AND WELL-CAPITALISED BANKING SECTOR 67 SUMMARY BANKING SECTOR ASSETS, LOANS AND DEPOSITS Source: NBG — Prudent regulation and oversight ensuring financial stability 25.0% CAGR 47.2 — Demonstrated strong resilience towards both domestic and 50 external shocks without single bank going bankrup
Slide 68: Growing economy supports healthy credit growth
GROWING ECONOMY SUPPORTS HEALTHY CREDIT GROWTH 68 BANKING SECTOR CORPORATE & RETAIL LOANS MORTGAGE LOANS Source: NBG TO GDP Source: NBG, Geostat 7,048 7,403 106,370 108,110 92,980 6,031 70% 31,030 Retail loans to GDP 72,140 31,720 60% 4,315 5,062 35,990 Corporate loans to GDP 4,453 50% 34% 33% 4,604
Slide 69: Flexible FX regime supports macro stability
FLEXIBLE FX REGIME SUPPORTS TO MACRO STABILITY 69 CURRENCY WEAKENING VS. US$ Source: Bloomberg Note: US$ per unit of national currency, period 1-Aug-2014 –31-July-2020 69.4% 51.4% 53.9% 55.5% 56.7% 57.7% 43.6% 12.5% 16.1% 16.8% Russia Turkey Armenia Moldova Ukraine Georgia Euro Azerbaijan Belarus Ka
Slide 70: Exposure to partner countries well diversified
EXPOSURE TO PARTNER COUNTRIES WELL DIVERSIFIED 70 EXPORTS, TOURISM, FDI AND REMITTANCES, WELL DIVERSIFIED ECONOMIC LINKAGES, 2019 % OF GDP Source: Geostat, NBG, GNTA, Galt & Taggart (EXPORTS, TOURISM, FDI AND REMITTANCES), 50% 42.8% 50% SHARE IN TOTAL Source: Geostat, NBG, GNTA, Galt & Taggart Other
Slide 71: Tracking Georgia's economic recovery
TRACKING GEORGIA’S ECONOMIC RECOVERY 71 KEY INDICATORS SHOW IMPROVING TREND, WHILE REMITTANCES REBOUNDED STRONGLY Source: Geostat, NBG Remittances Exports Imports VAT turnover GDP growth 30% -4.6% -15.9% -19.1% -6.9% -5.8% 0 20% 10% -50 0% -10% -100 -20% -30% -150 -40% -50% -200 Mar-20 Apr-20 Mar-20
Slide 72: Tracking Georgia's economic recovery
TRACKING GEORGIA’S ECONOMIC RECOVERY 72 GEL STRENGTHENED FROM MID-MAY… …IMPROVING DEPOSITORS MOOD … AND HELPING ANNUAL INFLATION TO TOWARD NATIONAL CURRENCY RETREAT GRADUALLY 30% National currency vs. US$ Deposit dollarisation Annual inflation 25% 6.9% 66.3% 65.7% 6.5% 6.4% 6.4% 20% RUB 64.1% 6.1% 6
Slide 73: Contents
CONTENTS 73 RESPONSE TO COVID-19 AND TRACKING THE RECOVERY GROUP OVERVIEW 1Q20 RESULTS DISCUSSION GEORGIAN MACRO OVERVIEW APPENDICES
Slide 74: Board of Directors
BOARD OF DIRECTORS 74 ROBUST CORPORATE GOVERNANCE BASED ON UK CORPORATE GOVERNANCE CODE Neil Janin, Independent Non-Executive Chairman Archil Gachechiladze, Chief Executive Officer Experience: formerly Director at McKinsey & Company in Experience: with the Group since 2009; originally joined Paris;
Slide 75: Highly experienced management team
HIGHLY EXPERIENCED MANAGEMENT TEAM 75 SENIOR EXECUTIVE COMPENSATION POLICY APPLIES TO TOP EXECUTIVES AND ENVISAGES LONG-TERM DEFERRED AND DISCRETIONARY AWARDS OF SECURITIES AND NO CASH BONUSES TO BE PAID TO SUCH EXECUTIVES Archil Gachechiladze, Chief Executive Officer Sulkhan Gvalia, Chief Financial
Slide 76: Highly experienced management team
HIGHLY EXPERIENCED MANAGEMENT TEAM 76 Etuna Iremadze, Head of SOLO Business Banking Zurab Masurashvili, Head of SME Business Banking With the Group since 2006. More than 18 years of experience in financial With the Group since 2015. Extensive experience in financial services. services. Previously, H
Slide 77: Group income statement
GROUP INCOME STATEMENT GEL thousands, unless otherwise noted 2Q20 2Q19 Change 1Q19 Change 1H20 1H19 Change 77 y-o-y q-o-q y-o-y Interest income 379,038 342,224 10.8% 388,326 -2.4% 767,364 676,959 13.4% Interest expense (204,102) (150,870) 35.3% (191,246) 6.7% (395,347) (295,624) 33.7% Net interest i
Slide 78: Group balance sheet
GROUP BALANCE SHEET Change Change 78 GEL thousands, unless otherwise noted Jun-20 Jun-19 Mar-20 y-o-y q-o-q Cash and cash equivalents 1,633,755 936,106 74.5% 1,507,142 8.4% Amounts due from credit institutions 1,700,075 1,704,701 -0.3% 1,954,218 -13.0% Investment securities 2,113,900 1,896,738 11.4%
Slide 79: BNB financial highlights
BNB FINANCIAL HIGHLIGHTS 79 INCOME STATEMENT, HIGHLIGHTS Change Change Change 2Q20 2Q19 1Q20 1H20 1H19 GEL thousands, unless otherwise stated y-o-y q-o-q y-o-y Net interest income 9,157 6,360 44.0% 9,469 -3.3% 18,626 12,945 43.9% Net fee and commission income 1,486 1,798 -17.4% 1,703 -12.7% 3,190 3,
Slide 80: Key ratios
KEY RATIOS 80 2Q20 2Q19 1Q20 1H20 1H19 Profitability ROAA, annualised ** 2.4% 2.9% -2.1% 0.2% 3.0% ROAA, annualised (unadjusted) 2.4% 2.8% -2.1% 0.2% 2.8% ROAE, annualised ** 21.8% 22.9% -18.6% 1.4% 23.7% RB ROAE ** 16.4% 26.9% -25.5% -4.7% 26.2% CIB ROAE ** 31.5% 22.0% -10.6% 9.9% 24.5% ROAE, annua
Slide 81: Key ratios
KEY RATIOS 81 2Q20 2Q19 1Q20 1H20 1H19 Liquidity NBG liquidity coverage ratio (minimum requirement 100%) 135.4% 114.3% 121.2% 135.4% 114.3% Liquid assets to total liabilities 32.1% 31.9% 30.5% 32.1% 31.9% Net loans to client deposits and notes 108.8% 119.5% 121.3% 108.8% 119.5% Net loans to client d
Slide 82: Key operating data
KEY OPERATING DATA 82 Jun-20 Jun-19 Mar-20 Selected operating data: Total assets per FTE 2,671 2,184 2,676 Number of active branches, of which: 229 276 233 - Express branches (including Metro) 121 167 124 - Bank of Georgia branches 97 97 97 - Solo lounges 11 12 12 Number of ATMs 940 890 939 Number o
Slide 83: Solo - a fundamentally different approach to premium banking
SOLO – A FUNDAMENTALLY DIFFERENT APPROACH TO 83 PREMIUM BANKING At 30 June 2020, we were serving 56,207 Solo clients through 11 Solo lounges Solo offers: • Tailor made banking solutions • New financial products such as bonds • Concierge-style environment • Access to exclusive products and events • L
Slide 84: Solo - thinking ahead of customers needs
SOLO – THINKING AHEAD OF CUSTOMERS NEEDS 84 TOP AFFLUENT EDUCATION Banking Advisory services in banking and lifestyle solutions TRAVEL Customer-centric approach maximisation MASS AFFLUENT ENTERTAINMENT Personal banking Lifestyle and lifestyle offering HEALTH
Slide 85: Retail Banking - client-centric model
RETAIL BANKING – CLIENT-CENTRIC MODEL 85 At 30 June 2020, we have 76 branches operating on our client-centric model
Slide 86: Key ratio definitions
KEY RATIO DEFINITIONS 86 — 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 leas
Slide 87: Company information
COMPANY INFORMATION 87 Registered Address Auditors 84 Brook Street Ernst & Young LLP London W1K 5EH 25 Churchill Place United Kingdom Canary Wharf Registered under number 10917019 in England and Wales London E14 5EY United Kingdom Secretary Link Company Matters Limited Registrar 65 Gresham Street Co