Lion Finance Group Plc · LSE:BGEO
Lion Finance — Bank of Georgia Holdings — FY2011 Earnings Presentation
58 slides from Lion Finance's earnings presentation, April 2012
Slide 1: Bank of Georgia Investor Presentation
Bank of Georgia Investor Presentation April 2012
Slide 2: Contents
Contents Bank of Georgia overview Georgian macro update 2011 results overview Business segment discussion Appendices I. Shareholding, share price and analyst coverage II. Competitors III. Regional local currency fixed income fund IV. Financial Results www.bogh.co.uk www.bankofgeorgia.ge/ir April 201
Slide 3: The leading universal bank in Georgia
The leading universal bank in Georgia Leading market position: No. 1 bank in Georgia by assets (36%) GEL 4.67bln, loans (34%), GEL 2.62 bln, deposits (36%) GEL 2.74 bln and equity (35%) GEL 0.81 bln* Underpenetrated market with significant growth potential: Average real GDP growth for 2003-2011 of 6
Slide 4: 3x20%: Growth story with dividends
3x20%: Growth story with dividends ROE c.20% TIER I c.20% Growth c.20% Dividends Revenue growth of 27% to Conservative National Strong growth across the Dividend of GEL 0.30 GEL 441 mln in 2011; Profit Bank of Georgia (NBG) board supported by (11p) per share paid for up 83% to GEL 151 mln; regulatio
Slide 5: Leveraged play on the growing Georgian economy through a LSE premium listed company
Leveraged play on the growing Georgian economy through a LSE premium listed company Bank of Georgia Holdings, plc. a UK-incorporated holding company holds 98.35% of JSC Bank of Georgia as a result of successful tender offer completed on 28 February 2012; intention to proceed with a squeeze out of th
Slide 6: Sound corporate governance compliant with UK Corporate Governance Code
6 6 Sound corporate governance compliant with UK Corporate Governance Code Directors of BGH/Supervisory Board of JSC Bank of Georgia Management Board of JSC Bank of Georgia • 8 Directors of BGH; 7 non-executive*; 5 Independent • Chief Executive Officer and Executive members of Directors, including t
Slide 7: Contents
Bank of Georgia overview Georgian macro update 2011 results overview Business segment discussion Appendices www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012 Page 7
Slide 8: 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): US$14.5 bln GDP real growth rate 2011 (E): 7.0% GDP CAGR ‘03-’11 (E): 6.0% GDP per capita 2011 (PPP): US$5,45
Slide 9: Regional hub
Regional hub Baku Tbilisi Ceyhan (BTC) oil export pipeline - operated by BP from Caspian Sea to Europe via the Turkish coast. 1.0 million bbl/day or circa 1.2% of the current World oil consumption (9% of the consumption by EU, 80% of aggregate consumption by Turkey, Romania, Bulgaria and Poland) is
Slide 10: Growth oriented reforms
Growth oriented reforms Ease of Doing Business, 2011 (WB-IFC Doing Business Report) Economic Freedom Index, 2010 (Heritage Foundation) UK 4 USA 8 USA 5 Up from 112 UK 11 Norway 8 in 2005 Estonia 16 GEORGIA 12 GEORGIA 26 Estonia 17 Latvia 50 Azerbaijan 54 Hungary 51 Armenia 48 Romania 63 Bulgaria 51
Slide 11: Georgia's key economic drivers
Georgia’s key economic drivers Liberty Act, enshrined in the constitution and effective starting 2014 ensures a credible fiscal and monetary framework: ― Government expenditure/GDP capped at 30% Liberal economic policy ― Budget deficit/GDP capped at 3% ― Government debt/GDP capped at 60% Proceed
Slide 12: Positive economic outlook
Positive economic outlook Gross domestic product GDP composition, 31 December 2011 USD billion Health, social and Agriculture, hunting GDP grew community work, 5% and forestry; fishing, 23 12.3% 15% Education, 4% 8% at 8.8% 11.1% 18.0 9.6% 9.4% 6.3%14.5 16.1 annual rate 18 11% Public administration,
Slide 13: Demonstrated fiscal discipline and low public debt
Demonstrated fiscal discipline and low public debt Fiscal deficit as % of GDP Breakdown of public debt 2004 2005 2006 2007 2008 2009 2010 2011E 2012F Affordable public debt stock and very low interest rate on external 0% public debt (US$mln) -1% -0.3% -2% -3% -2.6% Multilateral Portfolio -4% Average
Slide 14: Revenues and expenditures dynamics
Revenues and expenditures dynamics Revenues to expenditures Public debt / GDP, frontier markets GEL mln GEL mln 8,000 125% 70% 6,876 123% 60% 7,000 120% 60% 57% 5,866 5,613 49% 6,000 5,264 5,407 5,399 50% 115% 39% 41% 5,000 40% 37% 110% 31% 4,000 109% 30% 105% 3,000 20% 100% 10% 2,000 97% 1,000 95%
Slide 15: Four main sources of capital inflow
Four main sources of capital inflow FDI inflows Number of tourists US$ mln 3,500 19% 2,500 20% 2,889 3,000 15% 2,000 2,500 15% 2,032 1,500 14% 2,000 10% 1,500 1,000 7% 2,015 7% 1,500 DISBURSED 1,333 1,564 7% ~$2.5 Billion 1,052 937 1,190 6% 5% 780 500 815 984 1,000 659 658 600 476 450 368 384 447 0
Slide 16: Controllable CAD and strong FDI & donor inflows
Controllable CAD and strong FDI & donor inflows High, but well capitalised CAD. Low domestic savings rate at 8.6% of GDP. Remittances and FDI cover CAD. FX reserves FX rate (USD-GEL) US$bn Official reserve assets RA/M2 2.0 3.0 1.7 2.8 2.9 1.8 GEL/USD 1.5 1.6 1.9 2.5 1.3 2.3 1.3 2.1 1.4 1.77 1.1 1.81
Slide 17: Growing and well capitalised banking sector
Growing and well capitalised banking sector Summary Bank debt and deposits to GDP 120% Prudent Regulation Ensuring Financial Stability Bank Loans to GDP Deposits to GDP − Sector Total Capital Ratio (NBG standards) –20%, Basel 26% 100% Loans/GDP 30% − High level of liquidity requirements from NBG a
Slide 18: 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% Increasing 100% 85% comfort in 40% 75% 79% 70% 73% 71% 80% 65% saving in 30% 59% 16% 60% GEL and at 20% 11% 14% 13% 11% 12% 14% 9% 9% Bank of 10% 40% Georgia in 0% 20%
Slide 19: Contents
Bank of Georgia overview Georgian macro update 2011 results overview Business segment discussion Appendices www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012 Page 19
Slide 20: Q4 2011 & full year 2011 P&L results highlights
Q4 2011 & full year 2011 P&L results highlights Millions unless otherwise noted 2011 2010 Growth1 Growth 2 Bank of Georgia (Consolidated, IFRS Based) GEL US$ GBP GEL US$ GBP Y-O-Y US$ (Unaudited) Net interest income 3 239.3 143.3 92.8 208.5 117.6 76.1 14.8% 21.8% Net fee and commission income 75.3 4
Slide 21: 31 December 2011 Balance Sheet results highlights
31 December 2011 Balance Sheet results highlights Millions, unless otherwise noted 2011 2010 Bank of Georgia (Consolidated, IFRS, unless GEL US$ otherwise noted) GEL US$ GEL US$ Change1 Change1 (Unaudited) Y-O-Y Y-O-Y Net loans (Standalone3) 2,635.4 1,578.1 2,200.0 1,240.8 19.8% 27.2% Total assets 4
Slide 22: Analysis of revenue
Consolidated Analysis of revenue Revenue growth Net gains from foreign currencies +27.3% GEL mln 500 +126.5% GEL mln 441.2 90 400 80 76.4 346.6 201.9 70 300 294.9 60 138.1 110.6 50 200 40 33.7 29.1 30 Gain from 100 208.5 239.3 184.3 20 BYR of GEL 10 25 mln 0 0 2009 2010 2011 2009 2010 2011 Net Inter
Slide 23: Yield dynamics, NIM and Cost of funds
Yield dynamics, NIM and Cost of funds Loan yields Cost of funds, Cost of borrowed funds & NIM 10% 9.5% 9.1% 8.9% 150% 25.6% 30% 8.3% 8.2% 8.0% 23.3% 23.3% 8% 7.3% 8.0% 19.3% 18.6% 7.1% 100% 17.3% 20% 6% 17.4% 16.9% 4% 2011 deposit 15.0% yields 50% 69.0% 10% 78.8% 75.0% impacted by 2% the growth of 2
Slide 24: Analysis of costs and profits
Consolidated Analysis of costs and profits Operating costs +8.9% Net non-operating costs GEL mln 250 GEL mln 217.6 199.8 90 195.0 9.3 73.6 200 6.3 27.3 Full 11.7 28.0 70 impairment of 25.4 BG Bank 150 61.9 Ukraine of 57.3 61.0 50 GEL 68 mln. 100 76.3 29.3 30 119.1 5.9 50 100.5 104.6 Full 10 0.7 23.4
Slide 25: Improving efficiency
Consolidated Improving efficiency Cost / Income ratio Cost / Income ratio 100% Efficiency improvement 100% by the subsidiaries 80% 66.1% 80% 61.7% 64.7% 57.6% 60.2% 63.1% 60% 49.3% 54.6% 57.5% 56.7% 56.9% 54.2% 60% 47.5% 51.0% 45.2% 48.3% 53.2% 54.0% 53.2% 40% 48.9% 48.0% 40% 49.5% 51.5% 43.2% 48.9%
Slide 26: Loan portfolio quality improving
Loan portfolio quality improving Consolidated NPLs Consolidated loan loss reserve GEL mln GEL mln 7.6% 150 8% 200 10% 9.4% 7% 6.9% 125 7.0% 8% 4.6% 6% 150 6.5% 100 5% 6% 75 2.9% 3.6% 4% 100 4.2% 140 5.0% 174 176 4% 118 3% 50 97 115 2% 50 109 2.1% 61 2% 25 1% 0.9% 0 0% 0 0% 2008 2009 2010 2011 2008 2
Slide 27: International borrowings
International borrowings The only Georgian entity with credit ratings from three global rating agencies. S&P: 'BB-/B'; Stable; Moody's: 'B1/NP (FC)' & 'Ba3/NP (LC)', Stable; Fitch Ratings: 'BB-/B'; Stable. Principle Amount Outstanding Maturity Key Lenders as of 31 March 2011 International borrowings
Slide 28: Capital adequacy
Capital adequacy BIS capital adequacy ratios, Consolidated NBG capital adequacy ratios, Standalone Tier I Includes On a pro-forma 2011 year profit 40% Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio Risk weighting of 34.7% basis, including and 35% EBRD&IFC loans 25% FX denominated EBRD&IF
Slide 29: Contents
Bank of Georgia overview Georgian macro update 2011 results overview Business segment discussion Appendices www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012 Page 29
Slide 30: Retail Banking (RB) results overview
Retail Banking (RB) results overview Retail Banking (RB) GEL millions, unless otherwise noted Period end 2011 2010 Change Net interest income 141.5 116.4 21.6% Net fees and commission income 49.8 42.1 18.3% Net gains from foreign currencies 12.2 9.2 32.6% Other operating non-interest income 6.0 1.2
Slide 31: Retail Banking – No. 1 retail bank in Georgia
Retail Banking – No. 1 retail bank in Georgia Retail loans originated +46.7% RB gross loan portfolio, 31 December 2011 GEL mln SME, GEL 74 mln, 1200 1,104.0 6% Mortgage loans, Micro loans, GEL 1000 GEL 375 mln, 30% 245 mln, 19% 799.5 800 752.4 600 Credit Cards and 400 327.0 overdrafts, GEL 143 mln,
Slide 32: Corporate Banking (CB) results overview
Corporate Banking (CB) results overview Corporate Banking (CB) GEL millions, unless otherwise noted Period end 2011 2010 Change Net interest income 72.8 74.8 -2.7% Net fees and commission income 20.3 16.6 22.3% Net gains from foreign currencies 29.0 21.4 35.5% Other operating non-interest income 6.6
Slide 33: Corporate Banking
Corporate Banking Integrated client Highlights Corporate loan portfolio, 31 December 2011 coverage in the following key Other, GEL 194 mln, 13% sectors No.1 corporate bank in Georgia Construction & Circa 41% market share based on customer deposits(1) Real Estate Integrated client coverage in key sec
Slide 34: Wealth Management (WM) results overview
Wealth Management (WM) results overview Wealth Management (WM) GEL millions, unless otherwise noted Period end 2011 2010 Change Net interest income 5.9 3.1 90.3% Net fees and commission income 0.7 0.5 40.0% Net gains from foreign currencies 0.7 0.6 16.7% Other operating non-interest income 0.1 (0.1)
Slide 35: Insurance and Healthcare (ABCI)
Insurance and Healthcare (ABCI) Gross premiums written breakdown Gross premiums written & Net premiums earned GEL 000s GEL 000s GPW Summary By Products 2011 2010 2009 70,000 62,724 62,275 61,845 Health & Life Government 13,007 16,524 21,758 60,000 50,546 50,241 51,609 Health & Life Non-Government 18
Slide 36: Insurance and Healthcare (ABCI), cont'd
Insurance and Healthcare (ABCI), cont’d Loss ratio & combined ratio ABCI Profits & ROAE GEL mln GEL mln 100% 93.7% 89.5% 88.9% 8.0 7.3 28.0% 90% 27.4% 7.0 80% 6.0 5.6 70% 63.4% 26.1% 56.9% 57.0% 26.0% 60% 5.0 50% 4.0 40% 3.0 3.0 30% 24.3% 24.0% 2.0 20% 10% 1.0 0% 0.0 22.0% 2009 2010 2011 2009 2010 2
Slide 37: ABCI market share & market Gross Premiums Written
ABCI market share & market Gross Premiums Written ABCI share in non-Governmental sector ABCI share in total market (life & non-life) GEL mln 346.0 GEL mln 350 22% 316.8 310.5 190.0 185.1 185.4 28.0% 185.0 300 26.7% 180.0 26.6% 175.0 26.0% 250 20.1% 24.8% 20% 170.0 200 165.0 161.9 24.0% 19.7% 160.0 1
Slide 38: Contents
Bank of Georgia overview Georgian macro update 2011 results overview Business segment discussion Appendices Page 38 www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012
Slide 39: Appendix I: Shareholding structure; share price and analyst coverage
Appendix I: Shareholding structure; share price and analyst coverage www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012 Page 39
Slide 40: Analyst coverage of Bank of Georgia Holdings plc
Analyst coverage of Bank of Georgia Holdings plc Analyst Email Target price Analyst Email Target price Mike Trippitt Mike.Trippitt@orielsecurities.com 1500p Mikhail Shlemov mikhail.shlemov@vtbcapital.com US$21.80 Analyst Email Target price Analyst Email Target price Bruce Packard brucepackard@seymou
Slide 41: Ownership structure and share price performance
Ownership structure and share price performance 98.35% held by Bank of Georgia Holdings plc Share price performance Ownership of Bank of Georgia Holdings GBP plc as of 29 February 2012 16.0 IFC EBRD 5.5% 5.5% 14.0 Management & Employees* 3.5% 12.0 10.0 Institutional 8.0 Investors 85.5% 6.0 4.0 Broad
Slide 42: Appendix II: Competitors
Appendix II: Competitors www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012
Slide 43: Peer group's market share in total assets
Peer group’s market share in total assets YE 2008 YE 2009 YE 2010 YE 2011 40% 36.2% 35.6% 35% 33.0% 32.9% 30% 25.4% 25% 22.0% 19.2% 20.8% 21.3% 19.1% 20% 18.7% 16.6% 15% 8.6% 9.6% 9.8% 10% 5.9% 7.7% 8.2% 7.7% 7.3% 5.1% 4.8% 4.1% 4.6% 5% 5.4% 3.2% 3.7% 3.4% 0% Other Note: all data based on standalone
Slide 44: Peer group's market share in gross loans
Peer group’s market share in gross loans 40% YE 2008 YE 2009 YE 2010 YE 2011 35.9% 35% 34.5% 32.9% 30% 31.8% 26.1% 25% 23.7% 23.8% 21.6% 20% 18.5% 17.3% 16.3% 16.0% 15% 10.2% 10.1% 10.1% 10% 8.7% 9.4% 8.8% 6.8%6.1% 6.0% 4.6% 5.6% 5% 3.9% 3.7% 2.4% 2.0%3.0% 0% Other Note: all data based on standalone
Slide 45: Peer group's market share in deposits
Peer group’s market share in deposits 40% YE 2008 YE 2009 YE 2010 YE 2011 35.6% 35% 32.6% 30% 28.8% 28.3% 27.4% 25% 24.1% 22.5% 24.1% 20.0% 20% 16.9% 16.7% 15% 13.0% 10.8% 10% 9.1% 8.9% 8.4% 8.1% 8.1% 8.3% 6.5% 7.1% 6.4% 6.9% 5.5% 5.0% 5.3% 5% 3.1% 2.5% 0% Other Note: all data based on standalone ac
Slide 46: Appendix III: Regional Local Currency Fixed Income Fund
Appendix III: Bank of Georgia Regional Local Currency Fixed Income Fund www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012 Page 46
Slide 47: Fund Characteristics
Fund Characteristics Fund Objective and Characteristics • The objective of the fund is to achieve attractive returns through short duration high yielding bonds, deposits and other short term fixed income instruments • The portfolio will consist of 10 to 30 different instruments from Regional Issuers
Slide 48: Investment Philosophy and Rationale
Investment Philosophy and Rationale Investment Philosophy • We believe that due to relative “isolation” from global markets, fixed income instruments of some frontier markets offer very attractive risk/return profile. • We know the region and closely follow political, economic and social development
Slide 49: Investment Process - Top Down Approach
Investment Process - Top Down Approach Return Factors Risk Factors Short Term Yield Change Factors Ability/Willingness to Pay Country • CPI History • Reserves to M2 and months of imports • Access to Capital (Market Cap to GDP, Savings to GDP) • Government Debt Level & Debt Service Burden • “Cost of
Slide 50: Simplified Modelling of Portfolio Returns
Simplified Modelling of Portfolio Returns* 220 200 180 160 140 120 100 Passive Allocation to 1 month USD Deposits Active Allocation to 1 Month LC Deposits Passive Allocation to 1 Month LC Deposits 1 Month USD LIBOR Returns JPM ELMI+ Returns Annualised Volatility • For the sake of simplification (and
Slide 51: Appendix IV: Financial Performance 2011
Appendix IV: Financial Performance 2011 (per Preliminary Results published by JSC Bank of Georgia) www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012 Page 51
Slide 52: Consolidated Quarterly Income Statement
CONSOLIDATED QUARTERLY INCOME STATEMENT Q4 2011 Q4 2010 Q3 2011 Change Change Y-O-Y Q-O-Q GEL thousands, unless otherwise noted unaudited Loans to customers 115,816 104,668 111,707 10.70% 3.70% Investment securities – AFS & HTM 9,782 6,563 9,567 49.00% 2.20% Amounts due from credit institutions 4,71
Slide 53: Consolidated Quarterly Income Statement (cont'd)
CONSOLIDATED QUARTERLY INCOME STATEMENT (CONT’D) Q4 2011 Q4 2010 Q3 2011 Change Change Y-O-Y Q-O-Q GEL thousands, unless otherwise noted unaudited Revenue 119,127 95,609 106,263 24.60% 12.10% Salaries and other employee benefits -30,662 -24,875 -30,727 23.30% -0.20% General and administrative expens
Slide 54: Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT 2011 2010 Change GEL thousands, unless otherwise noted unaudited Y-O-Y Loans to customers 438,989 389,402 12.70% Investment securities – AFS & HTM 37,701 19,785 90.60% Amounts due from credit institutions 18,103 9,795 84.80% Finance lease receivables 6,565 4,159 57.90%
Slide 55: Consolidated Income Statement (cont'd)
CONSOLIDATED INCOME STATEMENT (CONT’D) 2011 2010 Change GEL thousands, unless otherwise noted unaudited Y-O-Y Revenue 441,219 346,633 27.30% Salaries and other employee benefits -119,111 -104,551 13.90% General and administrative expenses -61,942 -61,000 1.50% Depreciation and amortization -27,254 -
Slide 56: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET GEL thousands, unless otherwise noted 2011 2010 Change Y-O-Y unaudited Assets Cash and cash equivalents 628,731 611,584 2.8% Amounts due from credit institutions 289,530 116,469 148.6% Investment securities – AFS & HTM 419,576 294,961 42.2% Loans to customers and finance l
Slide 57: Forward-looking statements
Forward-looking statements The forward-looking statements contained in this presentation are based upon the current beliefs and expectations of JSC Bank of Georgia’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looki
Slide 58: Contacts
Contacts Irakli Gilauri Chief Executive Officer +995 32 444 109 igilauri@bog.ge Macca Ekizashvili Head of Investor Relations Head of Representative Office, London 84 Brook St, London, W1K 5EH +44 787 919 19 19 ir@bog.ge www.bogh.co.uk www.bankofgeorgia.ge/ir April 2012 Page 58
Bank of Georgia Holdings — FY2011 Earnings Presentation on 6ix