Bank of Georgia Holdings highlights
2Q15 profit was GEL 72.0mln (US$ 32.0mln/GBP 20.4mln), up 23.5% y-o-y and up 15.5% q-o-q
2Q15 earnings per share ("EPS") were GEL 1.84 (US$ 0.82 per share/GBP 0.52 per share), up 12.2% y-o-y and up 12.9% q-o-q
1H15 profit was GEL 134.4mln (US$ 59.8mln/GBP 38.1mln), up 20.0% y-o-y
1H15 EPS was GEL 3.47 (US$ 1.54 per share/GBP 0.98 per share), up 10.2% y-o-y
Book value per share was GEL 41.74, up 19.4% y-o-y, with total equity attributable to shareholders of GEL 1,597.0mln, up 32.9% y-o-y
Total assets increased to GEL 9,375.1mln, up 40.6% y-o-y and up 3.8% q-o-q
Leverage remained low at 4.7 times
In addition to the capital in the regulated Banking Business (JSC Bank of Georgia), GEL 114.4mln cash is held at the holding company level as of the date of this report
Banking Business highlights
2Q15 performance
Revenue was GEL 182.6mln (up 42.0% y-o-y and up 2.9% q-o-q)
Net Interest Margin ("NIM") was 7.6% (+20 basis points "bps" y-o-y and -20 bps q-o-q)
Loan Yield stood at 14.6% (+30 bps y-o-y and +10 bps q-o-q)
Cost of Customer Funds stood at 4.4% (up 20 bps y-o-y and flat q-o-q)
Cost to Income ratio improved to 35.7% (36.8% in 1Q15 and 42.2% in 2Q14)
Operating leverage was positive y-o-y and q-o-q, at 21.7% and 2.9%, respectively
Cost of credit risk stood at GEL 40.8mln (up 207.0% y-o-y and flat q-o-q)
Cost of Risk ratio was 2.7% (3.1% in 1Q15 and 0.9% in 2Q14)
Profit increased to GEL 61.5mln (up 14.6% y-o-y and up 4.5% q-o-q)
Return on Average Assets ("ROAA") was 2.9% (3.0% in 1Q15 and 3.5% in 2Q14)
Return on Average Equity ("ROAE") was 19.3% (19.2% in 1Q15 and 21.0% in 2Q14)
1H15 performance
Revenue was GEL 360.1mln (up 45.3% y-o-y)
NIM was 7.8%; (+30 bps y-o-y)
Loan Yield was 14.6% (+10 bps y-o-y)
Cost of Client Deposits was 4.4% (flat y-o-y)
Cost to Income ratio improved to 36.2% (41.9% in 1H14)
Operating leverage was positive at 19.5%
Cost of credit risk stood at GEL 81.5mln (up 212.6% y-o-y)
Cost of Risk ratio stood at 2.9% (0.9% in 1H14)
Profit increased to GEL 120.3mln (up 20.4% y-o-y)
ROAA was 2.9% (3.3% in 1H14)
ROAE was 19.3% (19.3% in 1H14)
Balance sheet strength supported by solid capital and liquidity positions
The net loan book reached a record GEL 5,142.2mln (up 38.4% y-o-y and down -2.0% q-o-q); without Privatbank effect ("ex-Privatbank") it was GEL 4,896.6mln; ex-Privatbank growth on constant currency basis was 11.2% y-o-y
Client deposits increased to GEL 4,212.8mln (up 33.8% y-o-y and down 1.4% q-o-q); ex-Privatbank it was GEL 3,946.0mln; ex-Privatbank growth on constant currency basis was 5.1% y-o-y
Net Loans to Customer Funds and DFI ratio stood at 102.4% (105.2% at 31 March 2015 and 100.0% at 30 June 2014)
Tier I and Total Capital Adequacy ratios (CAR) (Basel I) stood at 20.4% and 26.7%, respectively
NBG (Basel 2/3) Tier I and Total CAR stood at 10.4% and 15.9%, respectively
NBG Liquidity Ratio was 35.1%
Resilient growth momentum sustained across all major business lines
Retail Banking continues to deliver strong franchise growth, primarily supported by the Express Banking strategy and Privatbank acquisition. Retail Banking revenue reached GEL 103.4mln in 2Q15, up 44.9% y-o-y
Retail Banking net loan book reached a record GEL 2,623.6mln, up 49.6% y-o-y; ex-Privatbank it was GEL 2,378.0mln; ex-Privatbank growth on constant currency basis was 19.8% y-o-y
Retail Banking client deposits increased to GEL 1,736.5mln up 53.1% y-o-y; ex-Privatbank it was GEL 1,469.7mln; ex-Privatbank growth on constant currency basis was 9.0% y-o-y
The Privatbank acquisition has enhanced our position in the significantly more profitable retail banking franchise and posted revenue of GEL 38.9mln and profit of GEL 6.1mln in 1H15. Privatbank increased our market share in retail loans by 4.3 percentage points and in retail deposits by 2.5ppts (market data as of 31 March 2015). For more information on Privatbank acquisition see page 19
We launched Solo - a new strategy for our premium banking segment - a fundamentally different approach to premium banking. We have already opened five new Solo lounges and our goal is to significantly increase our market share in this segment, which now stands below 13%, over the next three to four years
Corporate Banking net loan book growth rate slowed down in the first half of 2015, as a result of slower economic activity in the country's corporate sector in 2015, and was GEL 2,174.1mln
Investment Management's Assets Under Management ("AUM")* increased to GEL 1,231.4mln, up 31.8% y-o-y, reflecting increased bond issuance activity
*Wealth Management client deposits, Galt & Taggart client assets, Aldagi Pension Fund and Wealth Management client assets at Bank of Georgia Custody
Investment Business Highlights
Our healthcare business, Georgia Healthcare Group ("GHG") reported standalone profit that almost tripled y-o-y, increasing to GEL 13.0mln in 1H15 (GEL 5.5mln in 1H14). As at 30 June 2015, the healthcare services business had a 22.1% market share, 5 times that of the Company's nearest competitor in Georgia, by number of beds (2,220 beds), which grew to 26.6% following High Technology Medical Center University Clinic ("HTMC") acquisition in July 2015 (450 beds). The market share is expected to grow up to c.30.0% as a result of the renovation of recently acquired hospital facilities, scheduled for completion in 2016 and 2017 (additional c.500 beds).
- In 2015, GHG completed two major acquisitions, HTMC and Deka LLC ("Deka"), adding 530 beds and bringing market share in beds to 26.6% and 24.0% nationwide and in Tbilisi, respectively. However, our financial results do not yet include their results of operations, as Deka was consolidated as of 30 June 2015 with no effect on the income statement of GHG in 1H15 and HTMC will be consolidated in 3Q15. HTMC revenue was GEL 38.4mln in 2014, and GEL 21.7mln in 1H15
Our real estate business, m2 Real Estate ("m2 Real Estate") recognised revenue of GEL 1.1mln in 1H15, with US$ 58.9mln sales revenue yet to be recognised as revenue upon completion of the on-going projects in 2015-2016. Since its establishment in 2010, m2 Real Estate has generated total sales of US$ 115.8mln, of which US$ 56.9mln has already been recognised as revenue and the remaining will be recognized upon completion of the ongoing construction during 2015-2016
Profits in associates, which comprises profit from our water and utilities business - Georgian Global Utilities ("GGU") - recorded strong 2Q15 results, with GEL 2.0mln profit (reported in gain from associates). Strong 2Q15 performance drove 1H15 profit to GEL 0.7mln, recovering from 1Q15 loss of GEL 1.3mln that was primarily driven by the weaker Lari, which lost 21.3% of its value against the U.S. dollar since 30 June 2014 (the "GEL devaluation effect")
- For the past several months we have focused on enhancing the management capabilities at GGU, and as a result we have appointed a new CFO - a long-standing professional within the Group - and recruited senior management with substantial industry experience in charge of technical and commercial functions
