Lion Finance Group Plc · LSE:BGEO
Lion Finance — Bank of Georgia Holdings — Q2 2012 Earnings Presentation
58 slides from Lion Finance's earnings presentation, October 2012
Slide 1: Bank of Georgia Q2 2012 and 1H 2012 Results Presentation
Bank of Georgia Q2 2012 and 1H 2012 Results Presentation June 2012 October 2012
Slide 2: Contents
Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 2012 and 1H 2012 Results Overview and Analyses Business Segment Discussion Appendices www.bogh.co.uk www.bankofgeorgia.ge/ir Page 2
Slide 3: The leading bank in Georgia
The leading bank in Georgia Leading market position: No. 1 bank in Georgia by assets (35.7%), loans (35.9%), client deposits (37.2%) and equity Sustainable growth combined with strong capital, (41.7%)1 liquidity and strong profitability Underpenetrated market with stable growth perspectives: Change
Slide 4: Shareholder structure and share price
Shareholder structure and share price Bank of Georgia Holdings plc. (BGH) (LSE: BGEO) a UK-incorporated holding company of JSC Bank of Georgia. As of 30 June 2012, BGH’s Share price performance shareholder structure was as follows: 2.7% Emerging market 4.7% GBP 2.3% institutional 14 investors Select
Slide 5: 3x20%: Growth story with dividends
3x20%: Growth story with dividends UK corporate governance FTSE 250 ROE c.20% TIER I c.20% Growth c.20% Dividends Revenue up 25.1% y-o-y to GEL Conservative National Bank of Strong growth across the board Declared an interim dividend of 433.8 mln in 2011 and up 23.6%* Georgia (NBG) regulation suppor
Slide 6: Leveraged play on the growing Georgian economy through an LSE premium listed company
Leveraged play on the growing Georgian economy through an LSE premium listed company With one third of the Georgian market by assets, loans and client deposits, Bank of Georgia is a uniquely placed growth bank in an underpenetrated, highly capitalised and profitable banking market that has been grow
Slide 7: Robust corporate governance compliant with UK Corporate Governance Code
7 7 Robust corporate governance compliant with UK Corporate Governance Code Members of management boards of JSC Bank of Georgia and Board of Directors of Bank of Georgia Holdings plc major subsidiaries 7 non-executive Supervisory Board members; 5 Independent members, including the Chairman and Vice
Slide 8: Competitive landscape
Competitive landscape Peer group’s market share in total assets Peer group’s market share in gross loans 40% 35.9% 35.9% 40% 36.2% 35.6% 34.5% 33.0% 35.7% 35% 31.8% 35% 26.4% 30% 30% 25.4% 26.1% 26.9% 25% 23.8% 25% 21.3% 21.6% 18.5% 20.8% 19.1% 18.7% 20% 16.6% 20% 17.3% 14.8% 16.0% 15% 9.8% 15% 10.2
Slide 9: Strategic goals/Going forward
Strategic goals/Going forward Affordable Targeted IRR of 30%+ Aiming to cash out in 2015 and discontinue business Housing Targeted capital formation of US$ 25 million from 2012-2015 Target ROAE of 25%+ Target net profit of GEL 16 mln for 2012 and GEL 24 mln for 2013 (GEL 6.5 Insurance & mln in 2011)
Slide 10: Strategic goals/Going forward
Strategic goals/Going forward Continued focus on the rapidly growing Georgian market Maintaining progressive dividend policy, aiming to increase dividend per share over time Continue “3x20” story to continue: prudent capital ROAE 20% management Loan and deposit growth of 20% Tier I of 20% Further ca
Slide 11: Strategic goals/Going forward
Strategic goals/Going forward Continue segment approach to further build customer driven franchise and boost revenue and product per client Introduce sophisticated CRM system to further increase currently low penetration and enhance product to client ratio Retail banking Through Express offering cre
Slide 12: Contents
Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 2012 and 1H 2012 Results Overview and Analyses Business Segment Discussion Appendices www.bogh.co.uk www.bankofgeorgia.ge/ir Page 12
Slide 13: Country overview
Country overview Area: 69,700 sq km Population (2011): 4.4 mln Life expectancy: 76 years Official language: Georgian Literacy: 100% Capital: Tbilisi Currency (code): Lari (GEL) GDP 2011 (E): GEL 24.2 bn (US$14.4 bn) Q1 2012 (E): 5.7 bn (US$ 3.4 bn) Q2 2012 (E): 6.4 bn (US$ 3.9 bn ) GDP real growth r
Slide 14: Georgia's key economic drivers
Georgia’s key economic drivers Liberty Act, enshrined in the constitution and effective starting 2014 ensures a credible fiscal and monetary framework: ― Government expenditure/GDP capped at 30% Liberal economic policy ― Budget deficit/GDP capped at 3% ― Government debt/GDP capped at 60% Proceed
Slide 15: Growth oriented reforms
Growth oriented reforms Ease of Doing Business, 2012 (WB-IFC Doing Business Report) Economic Freedom Index, 2010 (Heritage Foundation) Up from 112 USA 8 4 Norway 6 UK 11 in 2005 Estonia 16 7 GEORGIA 16 GEORGIA 26 24 Latvia 50 Kazakhstan 47 Hungary 51 55 Romania 63 Montenegro 56 France 64 59 Turkey 6
Slide 16: Positive economic outlook
Positive economic outlook Gross domestic product GDP composition, 31 December 2011 Education, Health, social and US$ billion 4% community work, 5% Agriculture, hunting GDP grew 23 12.3% 15% Public administration, and forestry, fishing, at 8.8% 11.1% 10% 8% 9.6% 9.4% 17.3 annual rate 18 6.3% 16.0 11%
Slide 17: Demonstrated fiscal discipline and low public debt
Demonstrated fiscal discipline and low public debt Fiscal deficit as % of GDP Breakdown of public debt 2004 2005 2006 2007 2008 2009 2010 2011E 2012F Affordable public debt stock and very low interest rate on external 0% public debt (US$mln) -0.3% -2% -2.6% Multilateral Portfolio -4% Weighted -3.4%
Slide 18: Revenues and expenditures dynamics
Revenues and expenditures dynamics Revenues to expenditures Expenditure as % of GDP GEL mln 8,000 125% 37% 39% 6,876 123% 40% 7,000 35% 34% 33% 120% 5,866 30% 31% 6,000 5,264 5,407 5,399 5,613 29% 115% 30% 26% 5,000 110% 4,000 109% 20% 105% 3,000 2,000 100% 97% 10% 1,000 95% 0 90% 0% 2009 2010 2011
Slide 19: Four main sources of capital inflow
Four main sources of capital inflow FDI inflows Number of tourists US$ mln 8M 2012 foreign visitors of US$ mln 2011: US$ 1,117 mln 3,000 2,789,080 up by 55% y-o-y 2,820 2010: US$815 mln 400 317 343 2,500 269 2,032 300 226 248 208 214 210 219 2,000 167 1,500 200 1,500 1,290 1,052 937 DISBURSED 100 1,
Slide 20: Controllable CAD and strong FDI & donor inflows
Controllable CAD and strong FDI & donor inflows High, but well capitalised CAD. Low domestic savings rate at 8.6% of GDP. Remittances and FDI cover CAD. FX reserves FX rate (US$/GEL) and CPI US$bn 12% 11.0% 11.2% 1.9500 1.7150 1.4 1.3 1.5 1.7728 3.5 1.3 10% 1.5916 1.6858 1.6703 1.2 1.6670 1.6499 1.4
Slide 21: Growing and well capitalised banking sector
Growing and well capitalised banking sector Summary Bank debt and deposits to GDP as of YE2011 Prudent regulation ensuring financial stability 120% Bank Loans to GDP Deposits to GDP − Sector total capital ratio (NBG standards) –20%, Basel 26% Gross Loans/GDP 31.9% 100% − High level of liquidity re
Slide 22: One of the highest level of capital and low debt level compared to other frontier markets
One of the highest level of capital and low debt level compared to other frontier markets Equity /Assets Dollarisation declining 50% 100% Increasing 73% 74% 69% comfort in 80% 68% 64% 67% 40% 59% saving in 30% 60% GEL 20% 16% 14% 13% 14% 40% 11% 9% 9% 11% 12% 10% 20% 0% 0% 2005 2006 2007 2008 2009 2
Slide 23: Contents
Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 2012 and 1H 2012 Results Overview and Analyses Business Segment Discussion Appendices www.bogh.co.uk www.bankofgeorgia.ge/ir Page 23
Slide 24: 1H 2012 P&L results highlights
1H 2012 P&L results highlights 1H 2012 1H 2011 Change Q2 2012 Q2 2011 Change Q1 2012 Change GEL thousands unless otherwise noted Unaudited Y-O-Y Unaudited Unaudited Y-O-Y Unaudited Q-O-Q Net interest income 137,662 115,858 18.8% 76,501 58,965 29.7% 61,162 25.1% Net fee and commission income 41,534 3
Slide 25: Balance Sheet results highlights
Balance Sheet results highlights Jun 2012 Jun 2011 Change Dec 2011 Change GEL thousands unless otherwise noted Unaudited Y-O-Y YTD Net loans to customers* 2,923,140 2,439,901 19.8% 2,616,361 11.7% Total assets 4,935,014 4,123,324 19.7% 4,665,261 5.8% Liquid assets 1,132,509 1,051,646 7.7% 1,338,952
Slide 26: Strong revenue growth
Strong revenue growth Revenue growth, half-year Revenue growth, quarterly +12.0% y-o-y GEL mln +17.6% q-o-q GEL mln 239.0 140 124.1 129.1 250 213.4 120 109.8 200 101.3 52.6 41% 42% 100 97.6 46% 65.1 48.7 44% 150 80 52% 100 60 58% 59% 115.9 137.7 40 56% 76.5 50 54% 59.0 48% 61.2 20 0 0 1H 2011 1H 201
Slide 27: Strengthening operating leverage as operating costs grow at half the rate of revenue
Strengthening operating leverage as operating costs grow at half the rate of revenue Operating costs, half-year +5.4% y-o-y Operating costs, quarterly + 7.7% y-o-y GEL mln GEL mln 103.5 109.1 58.8 60 54.6 3.8 3.6 50.3 1.6 100 13.9 50 3.0 7.2 12.9 6.8 2.0 6.8 30.6 33.8 40 18.0 15.0 15.8 50 30 20 56.2
Slide 28: Improving efficiency
Improving efficiency Cost / Income ratio, half-year Cost / Income ratio, quarterly 50% 50% 48.5% 45.8% 45.6% 45.5% 44.0% 45% 45% 40% 40% 1H 2011 1H 2012 Q2 2011 Q1 2012 Q2 2012 Cost/Income Ratio Cost/Income Ratio Operating leverage, half-year 20% 18.2% 15% 10% 8.4% 5% 0% -5% 1H 2011 1H 2012 Operatin
Slide 29: Diversified asset structure
Diversified asset structure Total asset structure, 30 June 2012 Liquid assets, 30 June 2012 Total assets: Liquid assets GEL 4,935 mln GEL 1,132.5 Cash and Amounts due mln, 22.9% of equivalents from credit total assets and Loans to 33.1% institutions 28.5% of total customers, 30.2% liabilites Liquid
Slide 30: Loan portfolio quality improving
Loan portfolio quality improving Consolidated NPLs Consolidated NPL composition & coverage ratio GEL mln GEL mln 9.3% 150 170% 150 8.8% 8.2% 10% 149.8% 117.6 7.8% 150% 140.0 28.6 115.2% 7.6% 100.3 100.1 8% 114.7% 130% 100 100 124.1% 36.3 4.6 4.0 110% 6% 90% 4.6% 75.8 54.2 70% 3.3% 4% 77.1 72.8 50 3.
Slide 31: Strong liquidity
Strong liquidity Liquid assets to total liabilities NBG liquidity ratio GEL mln 5,000 40% 34.8% Bank Standalone, GEL mln 30-Jun-12 31-Dec-11 31-Dec-10 30.9% 4,000 30.0% 3,853 3,978 3,312 30% NBG Liquidity Ratio 28.5% Liquid Assets (NBG) 1,159 1,242 790 3,000 2,315 20% Liabilities (NBG) 3,292 3,286 2
Slide 32: Strong liquidity
Strong liquidity Liquidity coverage ratio & net stable funding ratio Foreign currency monthly VaR analysis GEL mln 200% 186.0% 600 420.9 436.2 475.9 474.1474.5 160% 500 371.5 437.9 125.5% 351.2 358.8 113.9% 109.0% 109.8% 353.4 387.9 120% 97.1% 400 350.1 362.6 371.1 80% 300 247.1 40% 200 212.8 180.8
Slide 33: Funding structure is well-balanced
Funding structure is well-balanced Liability structure Well diversified international borrowings Total Liabilities GEL Borrowings, Other 3,977.6 mln GEL 667.7 liabilities, Other, GEL Other amounts mln, 16.8% GEL 255.4 208.2 mln, due to credit mln, 6.4% 23.8% institutions, GEL 208.2 mln, 5.2% IFIs, G
Slide 34: Yield dynamics
Yield dynamics Loan yields, annual Loan yields, quarterly 100% 20% 100% 19% 19.3% 19% 75% 75% 18.5% 66.5% 67.6% 18% 67.6% 71.6% 77.5% 81.2% 68.7% 17.8% 18% 18.0% 50% 50% 17.9% 17.6% 17.6% 17% 17% 25% 25% 31.3% 32.4% 16% 33.5% 32.4% 22.5% 28.4% 18.8% 0% 15% 0% 16% 2009 2010 2011 1H 2012 Q2 2011 Q1 20
Slide 35: Cost of funds and loans to deposits
Cost of funds and loans to deposits Cost of funds, annual Cost of funds, quarterly 9.0% 8.9% 9.0% 8.5% 8.3% 8.2% 7.9% 8.0% 8.0% 7.5% 8.0% 7.9% 7.5% 7.0% 6.5% 7.0% Q2 2011 Q1 2012 Q2 2012 2009 2010 2011 1H 2012 Cost of funds, consolidated Cost of funds, consolidated Cost of deposits, annual Cost of d
Slide 36: Excellent capital adequacy position
Excellent capital adequacy position BIS capital adequacy ratios, Consolidated NBG capital adequacy ratios, Standalone Tier I Ratio grew due to the conversion of EBRD & IFC Risk weighting of loans of US$50 mln in FX denominated 40% 35.0% February 2012 and loans at 175% 35% 25% inclusion of 2011 profi
Slide 37: Contents
Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 2012 and 1H 2012 Results Overview and Analyses Business Segment Discussion Appendices www.bogh.co.uk www.bankofgeorgia.ge/ir Page 37
Slide 38: Retail Banking (RB): Strong growth of revenue, loans and deposits, deposit rate cuts
Retail Banking (RB): Strong growth of revenue, loans and deposits, deposit rate cuts GEL thousands unless otherwise noted 1H 2012 1H 2011 Change Q2 2012 Q2 2011 Change Q1 2012 Change Y-O-Y Y-O-Y Q-O-Q Net interest income 83,155 68,474 21.4% 44,187 36,668 20.5% 38,969 13.4% Net fees and commission in
Slide 39: Retail Banking (RB) – No. 1 retail bank in Georgia
Retail Banking (RB) – No. 1 retail bank in Georgia Retail Bank loans originated Retail Bank gross loan portfolio, 30 June 2012 Total retail gross Automobile GEL mln loans: Pawn loans loans 400 GEL 1,309 mln 2.2% POS loans 335.0 6.4% 1.7% 313.3 287.1 300 259.4 219.7 Credit Cards Mortgage 196.4 and 20
Slide 40: Corporate Banking (CB): Improved efficiency and profitability
Corporate Banking (CB): Improved efficiency and profitability GEL thousands unless otherwise noted 1H 2012 1H 2011 Change Q2 2012 Q2 2011 Change Q1 2012 Change Y-O-Y Y-O-Y Q-O-Q Net interest income 43,179 39,069 10.5% 25,363 17,961 41.2% 17,817 42.4% Net fees and commission income 14,887 9,210 61.6%
Slide 41: Corporate Banking (CB): Strong growth of the diversified CB loan book
Corporate Banking (CB): Strong growth of the diversified CB loan book Integrated client Highlights Corporate loan portfolio (standalone), 30 June 2012 coverage in the following key sectors No.1 corporate bank in Georgia Trade Circa 41.4% market share based on customer deposits1 Others Energy Integra
Slide 42: Wealth Management (WM) results overview
Wealth Management (WM) results overview GEL thousands unless otherwise noted 1H 2012 1H 2011 Change Q2 2012 Q2 2011 Change Q1 2012 Change Y-O-Y Y-O-Y Q-O-Q Net interest income 6,550 3,049 114.8% 3,610 991 NMF 2,940 22.8% Net fees and commission income 230 305 -24.8% 117 173 -32.2% 112 4.4% Net gains
Slide 43: Insurance & healthcare
Insurance & healthcare Gross premiums written & net premiums earned Net premiums earned & net claims incurred GEL '000s +45.6% GEL '000s +40.0% 60,000 +40.0% +33.7% 35,000 32,383 48,829 50,000 30,000 40,000 36,525 25,000 23,123 32,383 20,426 30,000 23,123 20,000 14,027 20,000 15,000 10,000 10,000 5,
Slide 44: Insurance and Healthcare (ABCI), cont'd
Insurance and Healthcare (ABCI), cont’d Loss ratio & combined ratio ABCI Profits & ROAE GEL '000s 93.7% GEL '000s 100% 87.4% 87.7% 90.4% 7,000 28.0% 6,000 27.4% 6,518 6,532 27.5% 75% 63.4% 63.8% 27.0% 56.7% 56.9% 5,000 5,018 26.5% 4,000 50% 26.0% 26.0% 3,000 3,714 25.6% 25.5% 25.4% 25% 2,000 25.0% 1
Slide 45: ABCI market share & market Gross Premiums Written
ABCI market share & market Gross Premiums Written Market GPW to nominal GDP ABCI market share by insurance premium revenue GEL mln 3% 400 40% 34.7% 2.0% 300 345 30% 2% 1.9% 1.7% 310 310 1.3% 200 20.7% 20% 1% 17.5% 16.8% 167 100 10% 0% 2009 2010 2011 1H 2012 0 0% 2009 2010 2011 1H 2012 Market GPW to
Slide 46: Contents
Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 2012 and 1H 2012 Results Overview and Analyses Business Segment Discussion Appendices Analyst Coverage Aldagi BCI Acquisition of Imedi L Financial Statements www.bogh.co.uk www.bankofgeorgia.ge/ir Page 46
Slide 47: Analyst coverage of Bank of Georgia Holdings plc
Analyst coverage of Bank of Georgia Holdings plc Citi and Merrill Lynch initiated coverage in May 2012 and September 2012, respectively BGEO becomes first Georgia stock to be covered by “bulge bracket” investment banks Consensus Target Price: GBP 15.64 2012 Net Profit Consensus: GEL 178 mln GBP 15.3
Slide 48: Contents
Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 2012 and 1H 2012 Results Overview and Analyses Business Segment Discussion Appendices Analyst Coverage Aldagi BCI Acquisition of Imedi L Financial Statements www.bogh.co.uk www.bankofgeorgia.ge/ir Page 48
Slide 49: Aldagi BCI's acquisition of Imedi L – Strategic rationale
Aldagi BCI’s acquisition of Imedi L – Strategic rationale • Immediate doubling of Aldagi BCI’s share (by gross premium revenue) of the Georgian insurance market from c.20.0% to c.35% as of 30 June 2012 • Substantial increase in the number of retail clients, from 200,000 to 420,000 • Significant net
Slide 50: ABCI healthcare
ABCI healthcare www.bogh.co.uk www.bankofgeorgia.ge/ir Page 50
Slide 51: Contents
Contents Bank of Georgia Overview Georgian Macro Overview Bank of Georgia Q2 2012 and 1H 2012 Results Overview and Analyses Business Segment Discussion Appendices Analyst Coverage Aldagi BCI Acquisition of Imedi L Financial Statements www.bogh.co.uk www.bankofgeorgia.ge/ir Page 51
Slide 52: 1H 2012 - Income Statement
1H 2012 - Income Statement 1H 2012 1H 2011 Change GEL thousands, unless otherwise noted Unaudited Y-O-Y Loans to customers 244,966 211,466 15.8% Investment securities: available-for-sale 17,806 18,352 -3.0% Amounts due from credit institutions 9,623 7,669 25.5% Finance lease receivables 4,133 1,722
Slide 53: Q2 2012 Income Statement
Q2 2012 Income Statement Q2 2012 Q2 2011 Change Q1 2012 Change GEL thousands, unless otherwise noted Unaudited Unaudited Y-O-Y Unaudited Q-O-Q Loans to customers 126,541 106,454 18.9% 118,425 6.9% Investment securities: available-for-sale 7,983 9,512 -16.1% 9,824 -18.7% Amounts due from credit insti
Slide 54: 30 June 2012 – Balance Sheet
30 June 2012 – Balance Sheet Jun 12 Jun 11 Change Mar-12 Change GEL thousands, unless otherwise noted Unaudited Y-O-Y Unaudited Q-O-Q Cash and cash equivalents 374,995 338,408 10.8% 381,386 -1.7% Amounts due from credit institutions 342,145 308,067 11.1% 287,915 18.8% Investment securities 414,584 4
Slide 55: 1H 2012 - Key Ratios
1H 2012 - Key Ratios 1H 2012 1H 2011 Profitability ROAA, Annualised1 3.7% 3.2% ROAE, Annualised2 19.6% 18.3% Net Interest Margin, Annualised3 8.2% 7.9% Loan Yield, Annualised4 17.8% 17.7% Cost of Funds, Annualised5 7.9% 7.8% Cost of Client Deposits, Annualised 7.7% 7.3% Cost of Amounts Due to Credit
Slide 56: Q2 2012 - Key Ratios
Q2 2012 - Key Ratios KEY RATIOS Q2 2012 Q2 2011 Q1 2012 Profitability ROAA, Annualised1 4.0% 4.6% 3.5% ROAE, Annualised2 20.0% 25.9% 19.0% Net Interest Margin, Annualised3 9.0% 7.7% 7.3% Loan Yield, Annualised4 18.0% 17.9% 17.6% Cost of Funds, Annualised5 7.5% 7.9% 8.3% Cost of Client Deposits, Annu
Slide 57: Notes to Key Ratios
Notes to Key Ratios NOTES TO KEY RATIOS 1 Return On Average Total Assets (ROAA) equals Profit for the period from continuing operations divided by monthly Average Total Assets for the same period; 2 Return On Average Total Equity (ROAE) equals Profit for the period from continuing operations attribu
Slide 58: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements that are based on current beliefs or expectations, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts.
Bank of Georgia Holdings — Q2 2012 Earnings Presentation on 6ix