Capturing Growth Opportunities. Investor Presentation: 1Q16 Results

Transcription

1 Capturing Growth Opportunities Investor Presentation: 1Q16 Results

2 Disclaimer 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. Forwardlooking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words similar meaning. Undue reliance should not be placed on any such statement because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and BGEO Group plc and its subsidiaries (the "BGEO Group") s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are various factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in the global, political, economic, legal, business and social environment. The forward-looking statements in this presentation speak only as of the date of this presentation. The BGEO Group undertakes no obligation to revise or update any forward-looking statement contained within this presentation, regardless of whether those statements are affected as a result of new information, future events or otherwise. page 2

3 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices page 3

4 BGEO Group structure Investors Regular dividends Capital Returns Banking Business Cash buffer Investment Business BGEO Group Retail Banking Corporate Banking Investment Management GGU Water utility and hydro GHG (Healthcare) M2 (Real Estate) GGU (Utilities) Aldagi (P&C Insurance) BNB (Bank in Belarus) GRE (Renewable Energy) Teliani Valley (Wine & Beer) page 4

5 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 GBP US$ US$ millions BGEO Shareholder structure and share price BGEO shareholder structure BGEO top shareholders As of 31 March 216 As of 31 March 216 9% 16% 32% 3% 2% 38% Unvested and unawarded shares for management and employees Vested shares held by management and employees UK/Ireland US/Canada Scandinavia Others BGEO has been included in the FTSE 25 and FTSE All-share Index Funds since 18 June 212 Rank Shareholder name Ownership % 1 Schroders Investment Management Harding Loevner Management LP Westwood International Advisors Artemis Investment Management Firebird Management LLC 2.85 BGEO share price performance X62 growth in market capitalisation 2 Up 193% since premium listing 1 Average daily trading volume Market Capitalisation ,, 8,, 6,, 4,, 2,, - 2,, 95, 5,3, 9,5, 5,, 4,, 1,6 1,4 1,2 1, ,385 3-Sep-4 2-May-16 BGEO LN GDR 1 Share price change calculated from the last price of BGEO LI on 27 February 212 to the price of BGEO LN on 1 th 2 Market capitalisation for BGEO Group PLC, the Bank s holding company, as of 1 th, GBP/USD exchange rate of page 5

6 4x2 strategy We are a Georgia Focused Banking Group with an Investment Arm Banking Business Investment Business 1 ROE c.2 ROAE of 21.2% in 1Q16 RB ROAE of 24.3% CIB ROAE of 17.6% 3 Min. IRR of 2 121% IRR from GHG IPO 65% IRR from m2 Real Estate projects 2 Retail loan book growth c.2 9.9% y-o-y growth in 1Q16 4 Profit up to 2 Profit of GEL 17.4mln or 2. in 1Q16 of BGEO Group Profit Ongoing Dividends Ordinary dividends: linked to recurring profit from banking business Aiming 25-4 dividend payout ratio Dividend growth CAGR 1-15 of 51.6% At the 216 AGM (on 26-), the board intends to recommend an annual dividend of GEL 2.4 per share payable in British Pound Sterling at the prevailing rate, a 14% y-o-y increase Capital Return: Aiming for at least 3 capital returns within 5 years ( period) Aiming for Capital Return to represent at least 5 of regular dividend paid from banking business within the same period Completed share buy-back of GEL 25.8mln in In 1Q16, instructed the administrators of the Group Employee Benefits Trust to purchase shares in the market totaling approximately US$ 1mln, of which US$ 7.6mln is the remaining amount to be repurchased page 6

7 GEL GEL Solid regular dividend payout from banking business Payout ratio 1 15% 3 36% 33% % 215 Dividend per share CAGR % * E *At the 216 AGM (on 26-), the board intends to recommend an annual dividend of GEL 2.4 per share payable in British Pound Sterling at the prevailing rate, a 14% y-o-y increase 12, 121,345 CAGR 1-15 Total dividends & capital return 1, 8, 6, 4, 2, - 28, ,93 76,466 4,519 4, , ,4 32,864 8,411 27,155 71,633 27,628 9,246 51,235 17,986 23,618 9, Additional US$ 7.4mln is remaining at trust for further purchases Dividend paid for the year BGEO share repurchase page 7

8 3 forms of Capital Returns Capital Return forms 3 forms of Capital Retuns Cash Dividends Stock dividends Share buy-back Capital Return Strategy Announced 3 capital returns during timeline 5 years 5 years 3 capital returns during page 8

9 BGEO Robust corporate governance compliant with UK Corporate Governance Code Board of Directors of BGEO Group PLC 8 non-executive Supervisory Board members; 8 Independent members, including the Chairman and Vice Chairman Neil Janin, Chairman of the Supervisory Board, Independent Director. experience: formerly director at McKinsey & Company in Paris; formerly co-chairman of the commission of the French Institute of Directors (IFA); formerly Chase Manhattan Bank (now JP Morgan Chase) in New York and Paris; Procter & Gamble in Toronto Irakli Gilauri, BGEO Group PLC and JSC BGEO Group CEO experience: formerly EBRD banker; MS in banking from CASS Business School, London; BBS from University of Limerick, Ireland Hanna Loikkanen, Independent Director experience: Currently advisor to East Capital Private Equity AB; previously: Senior executive at East Capital, FIM Group Russia, Nordea Finance, SEB Kaha Kiknavelidze, Independent Director experience: currently managing partner of Rioni Capital, London based investment fund; previously Executive Director of Oil and Gas research team for UBS David Morrison, Chairman of the Audit Committee, Vice Chairman of the Supervisory Board, Independent Director experience: senior partner at Sullivan & Cromwell LLP prior to retirement Tamaz Georgadze, Independent Director experience: Partner at McKinsey & Company in Berlin, Founded SavingGlobal GmbH, aide to President of Georgia Al Breach, Chairman of the Remuneration Committee, Independent Director experience: Head of Research, Strategist & Economist at UBS: Russia and CIS economist at Goldman Sachs Bozidar Djelic, Independent Director experience: EBRD s Transition to Transition senior advisory group, Deputy Prime Minister of Serbia, Governor of World Bank Group and Deputy Governor of EBRD, Director at Credit Agricole Kim Bradley, Chairman of Risk Committee, Independent Director experience: Goldman Sachs AM, SeniorExecutive at GE Capital, President of Societa Gestione Crediti, Board Chairman at Archon Capital Deutschland page 9

10 BGEO Management Structure 1 1 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 BGEO Group PLC Irakli Gilauri, Group CEO. With the Group since 24. Formerly EBRD banker; MS in banking from CASS Business School, London; BBS from University of Limerick, Ireland JSC Bank of Georgia Murtaz Kikoria, CEO of Bank of Georgia. With the Group since 28. Previously CEO of Group s healthcare business; c.2 years banking experience including various senior positions at Bank of Georgia Group, Senior Banker at EBRD and Head of Banking Supervision at the National Bank of Georgia Avto Namicheishvili, Group Legal Counsel. With the Group since 27. Previously partner at Begiashvili &Co, law firm in Georgia; LLM from CEU, Hungary Levan Kulijanishvili, Deputy CEO and CFO at BOG, Group CFO. With the Group since Formerly Head of Security and Internal Audit at Bank of Georgia; Holds MBA from Grenoble School of Business, in Grenoble, France Ekaterina Shavgulidze Head of Investor Relations and Funding at BGEO Group. With the Group since 211. Previously Supervisory Board Member and Chief Executive Officer of healthcare services business. Before joining the Group she was an Associate Finance Director at AstraZeneca, UK. Holds MBA from Wharton Business School Georgia Healthcare Group m2 Real Estate Teliani Valley Nikoloz Gamkrelidze, CEO, Georgia Healthcare Group. With the Group since 25. Previously Group CFO, CEO of Aldagi BCI and JSC My Family Clinic; World Bank Health Development Project; Masters degree in International Health Management from Imperial College London, Tanaka Business School Irakli Burdiladze, CEO, m2 Real Estate. With the Group since 26. Previously CFO at GMT Group, Georgian real estate developer; Masters degree from Johns Hopkins University Shota Kobelia, CEO of Teliani Valley. With the Group since 29. Previously Chief Commercial Officer in Pernod Ricard Georgia; Masters degree in international sales marketing from Bordeaux Business School, France. page 1

11 JSC Bank of Georgia Management Structure 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 Murtaz Kikoria, CEO of Bank of Georgia. With the Group since 28. Previously CEO of Group s healthcare business; c.2 years banking experience including various senior positions at Bank of Georgia Group, Senior Banker at EBRD and Head of Banking Supervision at the National Bank of Georgia George Chiladze, Deputy CEO, Chief Risk Officer. With the Group since 28. Formerly Deputy CEO in Finance, Deputy CEO at Partnership Fund, Programme trading desk at Bear Stearns NY, Ph.D. in physics from John Hopkins University in Baltimore Levan Kulijanishvili, Deputy CEO, CFO. With the Group since year of experience at BOG. Formerly Head of Security and Internal Audit at Bank of Georgia; Holds MBA from Grenoble School of Business, in Grenoble, France Tornike Gogichaishvili, Deputy CEO, Chief Operating Officer. With the Group since 26. Previously CEO of Aldagi and CFO of BG Bank, Ukraine; Prior to joining the bank, CFO of UEDC PA consulting; Holds Executive Diploma from Said Business School, Oxford Mikheil Gomarteli, Deputy CEO, Retail Banking. With the Group since years work experience at BOG, including co-head of retail banking, head of business development and head of strategy and planning; Undergraduate degree in economics from Tbilisi State University Alexander Katsman, Deputy CEO, HRM and Branding. With the Group since 21. Previously Head of Branding Department at the Bank. Before joining the bank he was a partner at Sarke, the largest communications group in Georgia. Holds EMBA from the Berlin School of Creative Leadership Archil Gachechiladze, Deputy CEO, Corporate Investment Banking. With the Group since 29. Formerly BGEO Group CFO, Deputy CEO of TBC Bank, Georgia; Lehman Brothers Private Equity, London; MBA from Cornell University page 11

12 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices page 12

13 BGEO P&L results highlights Quarterly P&L BGEO Consolidated Banking Business* Investment Business* INCOME STATEMENT 1Q16 1Q15 Change 4Q15 Change 1Q16 1Q15 Change 4Q15 Change 1Q16 1Q15 Change 4Q15 Change GEL thousands unless otherwise noted Y-O-Y Q-O-Q Y-O-Y Q-O-Q Y-O-Y Q-O-Q Net banking interest income 128,852 12, % 131, , ,58 5.8% 134, Net fee and commission income 27,814 26, % 31, % 28,15 28,9 -.3% 32, % Net banking foreign currency gain 17,39 18, % 19, % 17,39 18, % 19, % Net other banking income 2,867 1,79 6.2% 9, % 3,168 2, % 9, % Gross insurance profit 6,416 7, % 6, % 5,343 5,36.7% 5, % 1,723 2, , Gross healthcare profit 26,291 16, % 23, % ,291 16, % 23, % Gross real estate profit 6,24 1, % 12, % ,24 1, % 12, % Gross other investment profit 3,66 1, % 11, ,675 1, % 11, % Revenue 219,26 195, % 246, % 184, , % 21, % 37,713 22, , % Operating expenses (83,288) (76,58) 9.5% (84,262) -1.2% (69,863) (65,277) 7. (71,172) -1.8% (14,456) (11,654) 24. (14,58) -.9% Operating income before cost of credit risk / EBITDA 135, , % 162, % 114, , % 129, % 23,257 1, , % Profit (loss) from associates 1,866 (1,31) NMF 1, % ,866 (1,31) NMF 1, % Depreciation and amortization of investment business (4,91) (2,688) 82.7% (4,731) 3.8% (4,91) (2,688) 82.7% (4,731) 3.8% Net foreign currency gain (loss) from investment business (766) 3,69 NMF (3,416) -77.6% (766) 3,69 NMF (3,416) -77.6% Interest income from investment business % % % 957.7% Interest expense from investment business (1,382) (2,463) -43.9% (3,166) -56.3% (2,947) (5,969) -5.6% (6,542) -55. Operating income before cost of credit risk 131, , % 153, % ,464 5, % 23, % Cost of credit risk (36,143) (41,841) -13.6% (36,22).3% (35,12) (4,771) -14.1% (35,23) -.6% (1,131) (1,7) 5.7% (792) 42.8% Profit 87,47 62, % 95, ,663 58, % 8, % 17,384 3, % 15, % Earnings per share (basic and diluted) % % * Note: Banking Business and Investment Business financials do not include interbusiness eliminations. Detailed financials, including interbusiness eliminations are provided in annexes. page 13

14 BGEO Balance sheet highlights Balance Sheet BGEO Consolidated Banking Business* Investment Business* BALANCE SHEET Mar-16 Mar-15 Change Dec-15 Change Mar-16 Mar-15 Change Dec-15 Change Mar-16 Mar-15 Change Dec-15 Change GEL thousands unless otherwise noted Y-O-Y Q-O-Q Y-O-Y Q-O-Q Y-O-Y Q-O-Q Liquid assets 2,948,699 2,427, % 3,68, % 2,876,357 2,42, % 3,6, % 337,62 199, % 37, % Loans to customers and finance lease receivables 5,359,718 5,156, % 5,322,117.7% 5,394,565 5,248, % 5,366,764.5% Total assets 1,77,589 9,3, % 1,115, % 9,3,55 8,447, % 9,171, % 1,353, , % 1,247,96 8.5% Client deposits and notes 4,698,558 4,99, % 4,751, % 4,962,432 4,271, % 4,993, % Amounts due to credit institutions 1,719,92 1,78, % 1,789,62-3.9% 1,63,299 1,694, % 1,692, % 124, , % 144, % Debt securities issued 1,33,758 1,26,689.7% 1,39,84 -.6% 957, , % 961, % 81,116 66, % 84, Total liabilities 7,926,74 7,329,95 8.1% 8,42,11-1.4% 7,751,85 7,163, % 7,856, % 481, ,93 7.4% 489, % Total equity 2,15,849 1,7, % 2,73, % 1,278,25 1,284, % 1,315, % 872, , % 758, % Key Ratios Banking Business Ratios 1Q16 1Q15 4Q15 ROAE 21.2% 19.1% 25.1% ROAA % Net Interest Margin 7.5% 7.8% 7.6% Loan Yield 14.4% 14.6% 14.8% Liquid assets yield 3.1% 3.2% 3.3% Cost of Funds % Cost of Client Deposits and Notes 4.3% 4.4% 4.4% Cost of Amounts Due to Credit Institutions % 5.9% Cost of Debt Securities Issued 7.2% 7.1% 6.8% Cost / Income 37.9% 36.8% 35.4% NPLs To Gross Loans To Clients 4.5% 3.5% 4.3% NPL Coverage Ratio % 83.4% NPL Coverage Ratio, Adjusted for discounted value of collateral 122.6% 112.2% 12.6% Cost of Risk 2.3% 3.1% 2.4% Tier I capital adequacy ratio (New NBG, Basel 2/3) 1.1% 9.8% 1.9% Total capital adequacy ratio (New NBG, Basel 2/3) 15.8% 12.9% 16.7% page 14

15 Amount (GEL, mln) y-o-y change BGEO Profit contribution, 1Q 216 Data as of 31 Mar, 216 unless otherwise stated GEL 87.mln Banking Business Investment Business At a glance GEL 69.7mln GEL 17.4mln 15.8% 31.2% 27.7% -29.3% NMF NMF -76.4% NMF Profit breakdown by businesses (5.) (1.) RB CIB BNB P&C Other BB (5.) (.5) (1.4) GHG m2 GGU Teliani Valley Other IB page 15

16 Amount (GEL, mln) ROAE BGEO Capital allocation, 1Q 216 (Book value and GHG at market value) Data as of 31 Mar, 216 unless otherwise stated GEL 2,254mln ( Banking Business Investment Business Unallocated Cash At a glance 56% 35% 9% GEL 1,255mln GEL 778mln GEL 221mln 24.3% 17.6% 22.9% 32.9% % Capital allocation RB CIB BNB P&C Other BB (1.) 62.4* GHG m2 GGU Teliani Valley (2.4) Other IB BGEO unallocated Of which GEL 92.9mln is expected to be paid as regular dividends for 215 * BGEO Group share in GHG market value as of 2 page 16

17 Amount (GEL, mln) ROAE BGEO Capital allocation, 1Q 216 (Book) Data as of 31 Mar, 216 unless otherwise stated Banking Business GEL 1,934mln Investment Business Unallocated Cash At a glance 65% 24% 11% GEL 1,255mln GEL 459mln GEL 221mln 24.3% 17.6% 22.9% 32.9% % Capital allocation RB CIB BNB P&C Other BB (1.) GEL 62.4mln Market value* GHG m2 GGU Teliani Valley (2.4) Other IB BGEO unallocated Of which GEL 92.9mln is expected to be paid as regular dividends for 215 * BGEO Group share in GHG market value as of 2 page 17

18 GEL millions GEL millions GEL millions GEL millions BGEO Sound revenue growth, with positive operating leverage BGEO y-o-y change Revenues, full year 215 Revenues quarterly BGEO +38.7% y-o-y change +12.1% +39.6% +35.3% +3.7% , (2.) (11.9) (18.1) 214 Banking Business Investment 215 Business Investment business Banking business Eliminations. -5. (4.2) (2.6) 1Q15 Banking Business Investment 1Q16 Business Investment business Banking business Eliminations BGEO (5.) Operating expenses, full year 215 y-o-y change % +22.4% (2.9) (4.) 214 Banking Business Investment 215 Business Investment business Banking business Eliminations BGEO Operating expenses quarterly y-o-y change Investment business Banking business Eliminations % (.9) (1.) 1Q15 Banking Business Investment Business 1Q16 page 18

19 BGEO Balance Sheet, 31 March 216 BGEO Banking Business GHG M2 Real Estate +11.6% +6.9% Assets Gel Millions 12, 1, 8, 6, 4, 2, -2, 9, ,77.6 1,354. 8,448. 9,3.1 (282.) (36.4) 31-Mar Mar-16 Banking Business assets Investment Business assets Eliminations 13.4% 89.6% 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 8, , ,42.3 2, Mar-15 Liquid assets Net loans Other assets 9, , Mar % 59.7% 31.9% Mar-16 PPE Other assets 33.7% 66.3% Mar % % Other assets Investment properties Inventories BGEO Banking Business GHG M2 Real Estate Liabilities Gel Millions 1, 8, 6, 4, 2, 7, % 7, , , % 97.8% 8, 7, 6, 5, 4, 3, 2, 1, 7, , , % 7, ,63.3 4, % 12.4% % 38.1% % 44.4% -2, (282.) (36.4) 31-Mar Mar-16 Investment Business liabilities Eliminations 31-Mar Mar-16 Other liabilities Debt securities issued Amounts due from credit institutions Client Deposits and Notes 31-Mar-16 Borrowed funds Other liabilities. 31-Mar-16 Other liabilities Accruals and deferred income Borrowed funds * Note: Borrowed Funds include - Amounts due to credit institutions and debt securities issued page 19

20 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices page 2

21 GEL million GEL million BOG The leading bank in Georgia Leading market position: No. 1 bank in Georgia by assets (33.5%), loans (32.3%), client deposits (33.2%) and equity (29.8%) 1 Underpenetrated market with stable growth perspectives: Real GDP average growth rate of 5.1 % for % Real GDP growth in 215 from Geostat. Loans/GDP grew from 9% to 5 in the period of , still below regional average; Deposits/GDP grew from 8% to 4 over the period Strong brand name recognition and retail banking franchise: Offers the broadest range of financial products to the retail market through a network of 266 branches, 753 ATMs, 2,627 Express Pay Terminals and c.2. million customers as of 31 March 216 The only Georgian company with credit ratings from all three global rating agencies: S&P: BB-, Moody's: B1/Ba3 (foreign and local currency), Fitch Ratings: BB- ; outlooks are Stable High standards of transparency and governance: The only entity from Georgia to be listed on the premium segment of the Main Market of the London Stock Exchange (LSE:BGEO) since February 212. LSE listed through GDRs since 26 Only private entity to issue Eurobonds from the Caucasus: c.us$4 million Eurobonds outstanding including US$15 raised through a tap issue in November 213. The bonds are currently trading at a yield of c.3.8% 2 Sustainable growth combined with strong capital, liquidity and robust profitability Banking Business CAGR : 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Banking Business Change y-o-y: ,44 6,185 5, % +23.5% +19.7% +22.4% +39.6% ,171 9,3 751 Balance Sheet 5,367 4,441 5,395 4,994 4,962 3,567 3,482 3,7 3,127 3,141 1,94 2,876 2,724 1,596 1,875 Income Statement +24.4% Revenue Profit % +18.5% +13.4% 1,315 1,231 1,64 1, Total assets Liquid assets Net loans to customers Client deposits Total equity 31-Dec Dec Dec Dec-15 1Q Revenue Profit Q15 2Q15 3Q15 4Q15 1Q16 1 Market data based on standalone accounts as published by the National Bank of Georgia (NBG) as of 31 March as of 24 source: bloomberg.com page 21

22 Targets & priorities Banking Business 3-year Targets FY 215 1Q16 1 ROAE % 21.2% 2 Retail Banking Growth % 19. on constant currency basis 9.9% 3 Grow Retail share in loan book 65% % 4 Increase Product to Client Ratio De-concentrate CIB Loan Book Top 1 borrowers 1 Top 1 borrowers 12.7% Top 1 borrowers 12.1% 6 NIM 7.25% % 7.7% 7.5% 7 Cost / Income c. 35% 35.7% 37.9% 8 Cost of Risk 1.5-2% 2.7 % 2.3% page 22

23 BOG Leading the competition across the board Peer group s market share in total assets Peer group s market share in gross loans 4 35% 3 25% 2 15% 1 5% 33.5% 33.8% 33.4% 32.6% 26.7% 24.5% 25.7% 23.7% 7.8% % 6.1% 6.5% 6.7% 7.7% 6.3% 6.2% 4.9% 5.1% 4.7% 5.8% 4.8% 5.3% 4.8% #1 BOG 19.3% 17.8% 17.9% 17.5% 35% 3 25% 2 15% 1 5% 32.2% 32.5% 32.3% % % 25.3% 6.7% % 5.7% 6.7% 7.6% 5.8% 5.6% #1 BOG 19.1% 17.7% 16.9% 16.6% 5.8% 4.8% 4.8% 6.2% 4.4% 4.4% 4.8% 5.1% BOG TBC PCB BR LB VTB Others BOG TBC PCB BR LB VTB Others Q Q1 216 Foreign banks market share by assets 26 1Q16 Peer group s market share in client deposits #1 No state ownership of commercial banks since 1994 Local banks, 68. Foreign banks, 32. Local banks, 72.7% Foreign banks, 27.3% 35% 3 25% 2 15% 1 5% 33.2% % 28.6% 28.8% % 27.3% % 8.6% 5.8% 5.3% 8.6% 5.1% 4.6% 5.3% 5.1% 5.2% 4.4% 6.1% 5.4% 5.4% 4.7% BOG 15.2% 15.9% % BOG TBC PCB BR LB VTB Others Q1 216 Note: - All data based on standalone accounts as reported to the National Bank of Georgia and as published by the National Bank of Georgia page 23

24 Banking Business Diversified asset structure Total asset structure 31 March 216 Liquid assets 31 March 216 Banking Business Banking Business Total: GEL 9.bln Total: GEL 2.9bln Other assets 8.4% Liquid assets 31.9% Government bonds, treasury bills, NBG CDs 26. Other liquid assets 2.7% Cash and equivalents 46.2% Loans to customers, net 59.7% Amounts due from credit institutions 25. Banking Business Total Loans breakdown by segments Total: GEL 5.6bln Retail loans, GEL 3,23.1 mln, 57.1 % Corporate loans, GEL 2,48.mln, 42.9% 21.7% of total clients Loans breakdown 31 March 216 Automobile loans.9% Pawn loans 2.2% Credit cards and overdrafts 9.8% 3.7% of total clients Retail Banking Loans breakdown by product Total: GEL 2.9bln General consumer loans 21.6% POS loans 3.7% Mortgage loans 3.2% Micro- and agro-financing loans and SME loans 31.6%.7% of total clients 1. of total clients Construction 7.6% Electricity, gas and water supply 2.9% Mining and quarrying 4.8% Financial intermediation 2.6% Transport & Communication 5.5% Hospitality 5.8% Corporate Banking Loans breakdown by sectors Total: GEL 2.2bln Health and social work 2.6% Other 8.2% Service 8.4% Manufacturing 26.9% Real estate 9.8% Trade 15. *Retail loans include loans of Retail Banking segment, BNB retail loans, Investment Management and Affordable Housing Mortgages, Corporate loans include Corporate Banking Segment and BNB Corporate loans page 24

25 GEL millions GEL millions Banking Business US$ loan portfolio breakdown Highlights 43.6% of Retail Banking Loans were denominated in USD loans with non-usd income* We offered re-profiling in Feb-215. Since, 1,71 loans (out of 18,964) were re-profiled, with total value of US$34.1mln For RB: Loans 15 days past due were 1.1% at 31 March 216, compared to 1. a year ago and.9% as of 31 December % of Corporate Banking Loans denominated in USD loans with non-usd income Retail Banking and Wealth Management 31 Mar 216 Corporate Banking 31 Mar 216 Banking Business Banking Business 3,5 3, Other 2,5 GEL 2, USD 1,5 1, 5 3, ,311 1,637 Loan portfolio Provision amount 1.95% %.91% LLR rate Other GEL USD 2,5 2, 1,5 1, 5 2, ,85 Loan portfolio Provision amount 6.3% 1.31% 8.68% 5.31% LLR rate Amounts in GEL millions RB Loan portfolio % of total RB loan portfolio Mortgages Consumer loans* SME & Micro GEL and other currency loans* 1, % 71 1,21 31 USD loans with USD income % USD loans with non-usd income 1, % Total 3, , * includes credit cards % of total Amounts in GEL millions CB Loan portfolio CB loan portfolio GEL and other currency loans* % USD loans with USD income 1, % USD loans with non-usd income % Total 2, Note: standalone BOG figures from management accounts *Re-profiling implies effectively increasing the tenor of the loan so that monthly payment in Lari stays at the same level it was prior to the recent devaluation of the Lari. When re-profiling, we do not change the interest rate of the loan. We offered reprofiling in Feb 215 page 25

26 GEL thousand GEL thousand GEL thousand Banking Business Resilient loan portfolio quality (1/2) Banking Business NPLs and NIM Banking Business NPL composition % % 7.6% 7.7% 7.5% % % 4.5% Q1 216 NPLs NPLs to gross loans Net Interest Margin 9% 8% 7% 6% 5% 4% 3% 2% 1% Q1 216 NPLs RB & WM NPLs CB NPLs Other Banking Business Loan loss reserve Banking Business NPL coverage ratio % 3.3% % 2.3% % 4.3% 4.5% 3.9% Q1 216 Loan loss reserves (LLR) NPLs to gross loans LLR as % of gross loans 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 82.8% 83.4% % Q1 216 *Retail loans include loans of Retail Banking segment, BNB retail loans, Investment Management and Affordable Housing Mortgages, Corporate loans include Corporate Banking Segment and BNB Corporate loans page 26

27 GEL millions GEL millions Banking Business Resilient loan portfolio quality (2/2) Banking Business Banking Business Cost of Credit risk full-year % % 1..5% Devaluation effect Like-for-like 1.3% 1.3% 1.2% % % y-o-y Cost of Risk full-year bps +12 bps y-o-y 2.7%.3% 2.4% Cost of Credit risk quarterly Banking Business 5 -.6% Q15 2Q15 3Q15 4Q15 1Q16 Devaluation effect Like-for-like Privatbank Cost of Risk quarterly Banking Business 3.1-1bps 3% % 2.4% 2.3%.9%.4%.4% 2%.6% 2.3% 2.1% 1% 1.6% Q15 2Q15 3Q15 4Q15 1Q16 Devaluation effect Like-for-like Devaluation effect Like-for-like Privatbank page 27

28 GEL millions Bank Standalone, GEL millions Banking Business Strong liquidity (1/2) Banking Business 9, 8, 7, 6, 5, 4, 3, 2, 1, Liquid assets to total liabilities 37.4% 5, % 1,94 1,875 5, % 7,856 3,7 2, % 7, Q1 216 Liquid assets Total liabilities Liquid assets to total liabilities 4 35% 3 25% 2 15% 1 5% Banking Business NBG liquidity ratio 6, 45.7% 46.2% 47.3% 5 5, 4,871 4, , 3,415 3, , 2,251 2, , 1,562 1,245 1, Q1 216 Liquid assets (NBG) Liabilities (NBG) Excess liquidity Liquid assets / liabilities 3 NBG min requirement Banking Business Net loans to customer funds Net loans to customer funds & DFI Banking Business % 127.5% 17.5% 18.7% % 18.6% 9.8% 91.6% Q Q1 216 page 28

29 GEL thousands GEL thousands GEL million Banking Business Strong liquidity (2/2) Liquidity coverage ratio & net stable funding ratio JSC Bank of Georgia standalone JSC Bank of Georgia standalone Foreign currency VAR analysis* % 163.8% 14.5% 199.5% 219.4% 111.9% 111.3% Q1 216 Liquidity coverage ratio Net stable funding ratio Monthly VaR GEL (Average) VaR Limit Banking Business Cumulative maturity gap, 31 March 216 JSC Bank of Georgia standalone Open currency position 1,2, 1,, 8, 6, 4, 2, -2, -4, 1,16,67 787, , % 72, % 9.5% 1.4% -3.5% -3.7% On Demand -3 Months 3-6 Months 6-12 Months 1-3 Years >3 Years (266,19) (283,922) 25% 2 15% 1 5% -5% -1-2, -4, -6, -8, -1, -12, -14, Q ,394-12,578-34, % -1.4% -2.6% -129,74-9.3% -1% -2% -3% -4% -5% -6% -7% -8% -9% -1 Maturity gap Maturity gap, as % of total assets FC net position, on and off balance, total As % of NBG total regulatory capital (old) *Daily VaR time series averaged for each respective month page 29

30 USD millions Banking Business Funding structure is well established Banking Business Interest Bearing Liability structure 1Q16 Well diversified international borrowings 1Q16 Banking Business Debt securities issued, GEL mln, 12.4% Interest Bearing Liabilities GEL 7.8 bn Other liabilities, GEL 21.6 mln, 2.6% Other debt securities, GEL 79.6 mln, 4. Others borrowings, GEL 95.8 mln, 4.8% Borrowings, GEL 1,22. mln, 13.2% Other amounts due to credit institutions, GEL 68.3 mln, 7.8% Client deposits & notes, GEL 4,962.4 mln, 64. Current account & demand deposits 49.6% Time deposits 5.4% Eurobonds, GEL mln, 44.3% DFIs, GEL 926.2mln, 46.8% Banking Business Borrowed funds maturity breakdown* 1.5% Excl. c.us$4 mln Eurobonds maturing in % %.1%.1%.1% % % Senior Loans Subordinated Loans % of Total assets 4% 2% -2% -4% -6% -8% -1 Key takeaways Banking Business has a well-balanced funding structure with 64. of interest bearing liabilities coming from client deposits and notes, 11.9% from Developmental Financial Institutions (DFIs) and 11.3% from Eurobonds, as of 31 March 216 The Bank has also been able to secure favorable financing from reputable international commercial sources, as well as DFIs, such as EBRD, IFC, DEG, Asian Development Bank, etc. As of 31 March 216, US$ 13.1 million undrawn facilities from DFIs with up to seven year maturity * Consolidated, converted at GEL/US$ exchange rate of as of 31 March 216 ** Total Assets as of 31 March 216 page 3

31 GEL millions GEL millions GEL millions GEL millions Banking Business Revenue growth Revenue growth full-year 215 Revenue growth quarterly Banking Business % 66% +39.6% +31.8% +43.5% % 68% Banking Business % % -8.5% % 33% 67% Q1 215 Q4 215 Q % 71% Net interest income Net non-interest income Net interest income Net non-interest income Net non-interest income full-year 215 Net non-interest income quarterly Banking Business % Net fee and commission income Gross insurance profit Net banking foreign currency gain Net other banking income Banking Business Q1 215 Q4 215 Q1 216 Net fee and commission income Net banking foreign currency gain Gross insurance profit Net other banking income page 31

32 Banking Business Strong underlying performance Operating expenses full-year 215 Operating expenses quarterly Banking Business +23. Banking Business % GEL millions GEL millions Operating income before cost of credit risk full-year 215 Banking Business (67.6) (164.6) Cost of credit risk and net non-recurring itemss Operating income before cost of credit risk Salaries and other employee benefits Administrative expenses Banking depreciation and amortisation Other operating expenses GEL millions GEL millions Q1 215 Q4 215 Q1 216 Salaries and other employee benefits Administrative expenses Banking depreciation and amortisation Other operating expenses Operating income before cost of credit risk quarterly Banking Business (42.9) (37.7) (36.4) Q1 215 Q4 215 Q1 216 Cost of credit risk and net non-recurring itemss Operating income before cost of credit risk page 32

33 GEL millions GEL millions Banking Business Focus on efficiency Cost / Income full-year 215 Cost / Income quarterly Banking Business Banking Business 5 48% 46% 44% 42% 4 38% 36% 34% 32% % 39.8% 4.5% 35.7% % 4Q % 1Q % 2Q % 3Q % 4Q % 1Q % 2Q % 3Q % 4Q % 1Q 216 Revenue and operating expenses full-year 215 Banking Business Operating Leverage: +16.6% y-o-y Revenue Operating expenses Revenue and operating expenses quarterly Banking Business Operating Leverage: - 6.6% q-o-q - 3.3% y-o-y Q1 215 Q4 215 Q1 216 Revenue Operating expenses page 33

34 Banking Business Growing income notwithstanding the pressure on yields Loan Yields full-year 215 Loan Yields quarterly Banking Business Banking Business % 16.2% 14.3% 14.8% 2 16% % 14.8% 14.4% 2 15% % 72.8% % 8% % % 27.2% 28. 4% % 5% Net loans, GEL, consolidated Net loans, FC, consolidated Currency-blended loan yield Q1-215 Q4-215 Q1-216 Net loans, FC, consolidated Net loans, GEL, consolidated Currency-blended loan yield, annualised Loan Yields, GEL quarterly Loan Yields, Foreign currency quarterly Banking Business Banking Business 2 27% 25% 23% 21% 21.4% 23.4% 22.5% 15% % 11.3% % 17% 5% 15% Q1 215 Q4 215 Q1 216 Q1 215 Q4 215 Q1 216 Loan yields excluding provisions page 34

35 Banking Business Stable Cost of Funding Cost of Funds full-year 215 Cost of Funds quarterly Banking Business Banking Business 8% 7% 6% 5% 7.1% 5.9% 4.8% 5.1% 8% 7% 6% 5% % 5. 4% 4% 3% 3% 2% 2% 1% 1% Q1-215 Q4-215 Q1-216 Banking Business Cost of Customer Funds full-year 215 Banking Business Cost of Customer Funds quarterly % 5.5% 4.2% 4.3% 69.9% 68.2% 71.2% 74.9% 8% 7% 6% 5% 4% 3% % 4.4% 4.3% 72.6% 74.9% 77.6% 5% 4% 3% 2% 2 3.1% 31.8% 28.8% 25.1% 2% 1% % 25.1% 22.4% 1% Client deposits and notes, FC, consolidated Client deposits and notes, GEL, consolidated Currency-blended cost of client deposits and notes Q1-215 Q4-215 Q1-216 Client deposits, FC, consolidated Client deposits, GEL, consolidated Currency-blended cost of client deposits, annualised page 35

36 Banking Business Excellent capital adequacy position JSC Bank of Georgia consolidated Basel I capital adequacy ratios NBG (Basel 2/3), capital adequacy ratios JSC Bank of Georgia standalone 3 25% 2 15% 21.2% 26.1% % 22.1% 26.1% 17.9% 24.9% 18% 16% 14% 12% 1 8% 9.8% 12.9% 15.9% 15.8% 1.4% 1.2% 1.9% 16.7% 1.1% 15.8% 1.5% 8.5% 1 6% 5% Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio 4% 2% Q1 215 Q2 215 Q3 215 Q4 215 Q1 216 Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio NBG Tier I CAR min requirement NBG Total CAR min requirement standalone (BIS 2/3) Risk Weighted Assets NBG (Basel 2/3) NBG (Basel 2/3)Tier I Capital and Total Capital JSC Bank of Georgia standalone 9, 8, 7, 6, 5, 4, 3, 2, 1, 8,359 8,351 8,473 8,363 8,354 Q1 215 Q2 215 Q3 215 Q4 215 Q1 216 GEL Mar 216 Dec 215 Sep 215 Jun 215 Mar 215 Dec 214 Tier I Capital (Core) Tier 2 Capital (Supplementary) Total Capital 1,32.3 1,394. 1, , ,17.6 Risk weighted assets 8, , , ,35.5 7, ,24.1 Tier 1 Capital ratio 1.1% 1.9% 1.2% 1.4% 9.1% 11.1% Total Capital ratio 15.8% 16.7% 15.8% 15.9% 12.3% 14.1% reported to NBG are reported in the appendix page 36

37 Total No of Clients 2,22,22 Retail banking Client-Centric, Multi-brand strategy Client-Centric, Multi-brand strategy Brands & target segments Emerging Retail Mass Retail and MSME Mass Affluent 437,79 clients 1,571,29 clients 13,284 clients 22% 77% 1% Selected Operating Data (1Q16) P/C ratio: # of branches: Profit / client: GEL 22 GEL 15 GEL 268 Strategic Focus Double number of transactions Product/client ratio growth to 3. Client growth to 4, page 37

38 Retail Banking Financial Data Balance sheet data Income statement data 19% 4% Total Loans GEL 2,96mln 2 Net Interest Income GEL 83mln 1 77% Mass Retail & MSME - GEL 2,281.7mln Solo - GEL 563.7mln Express Bank - GEL 114.4mln 7 Mass Retail & MSME - GEL 59.3mln Solo - GEL 8.1mln Express Bank - GEL 15.7mln 3% Total Deposits GEL 1,92mln 12% Net Fee & Commission Income GEL 19mln 33% 1 64% Mass Retail & MSME - GEL 1,29.1mln Solo - GEL 629.7mln Express Bank - GEL 63.3mln 78% Mass Retail & MSME - GEL 15.2mln Solo - GEL 1.6mln Express Bank - GEL 1.9mln page 38

39 GEL millions Retail Banking (RB) No. 1 retail bank in Georgia RB standalone RB standalone Loans growth: 9.9% growth y-o-y Client Data Operating Data, GEL mln Q1 216 % of clients Number of total Retail clients, of which: 2,22,22 1,999,869 1,451,777 1,245,48 Number of Solo clients ( Premier Banking ) 13,284.7% 11,869 7,971 6,81 Consumer loans & other outstanding, volume Consumer loans & other outstanding, number 621, % 625, , ,557 Mortgage loans outstanding, volume Mortgage loans outstanding, number 13,594.7% 12,857 11,92 1,212 Micro & SME loans outstanding, volume Micro & SME loans outstanding, number 2, ,45 16,246 13,317 Credit cards and overdrafts outstanding, volume Active credit cards and overdrafts outstanding, number 438, % 435,1 199, ,57 Total credit cards outstanding, number, of which: 771, % 754, , ,913 American Express cards 92, % 1,515 11,362 18,68 3,5 3, 2,5 2, 1,5 1, 5 1,613 RB Loans 2,67 2,796 2, Q1 216 Retail net loans RB standalone 2, 1,8 1,6 1,4 1,2 1, ,87 RB Deposits 1,35 Deposits growth: 1.5% growth y-o-y 1,88 1, Q1 216 Retail client deposits RB standalone 21.7% of total clients Loans by products Total: GEL 2.9 bn Deposits by category Total: GEL 1.9 bn Deposits by currency Total: GEL 1.9 bn Portfolio breakdown 3.7% of total clients Pawn loans 2.2% Credit cards and overdrafts 9.8% General consumer loans 21.6% Current accounts and demand deposits 36.6% Automobile loans.9% Client deposits, GEL 23.5% POS loans 3.7% Micro- and agro-financing loans and SME loans 31.6% Mortgage loans 3.2% Time deposits 63.4% Client deposits, FC 76.5%.7% of total clients 1. of total clients page 39

40 Retail Banking (RB) Loan book growth RB Consolidated P&L Retail Banking Income Statement Highlights 1Q16 1Q15 Change 4Q15 Change GEL thousands, unless otherwise noted Y-O-Y Q-O-Q Net banking interest income 82,832 75,15 1.2% 85, % Net fee and commission income 19,239 18, % 21, % Net banking foreign currency gain 3,59 3,95-8.1% 3, % Net other banking income % 3, Revenue 16,372 98, % 114, % Salaries and other employee benefits (23,67) (23,596). (23,613). Administrative expenses (14,521) (12,24) 18.6% (14,445).5% Banking depreciation and amortisation (7,383) (6,831) 8.1% (7,259) 1.7% Other operating expenses (496) (462) 7.4% (782) -36.6% Operating expenses (46,7) (43,129) 6.7% (46,99) -.2% Operating income before cost of credit risk 6,365 55, % 68, % Cost of credit risk (18,184) (16,66) 9.1% (15,371) 18.3% Net non-recurring items (561) (449) 24.9% (2,494) -77.5% Profit before income tax 41,62 38, % 5, % Income tax expense (3,844) (5,738) -33. (7,68) -49.5% Profit 37,776 32, % 42, % Loan Yield Retail Banking Deposit Cost Retail Banking RB standalone RB standalone % 41.1% 58.9% 17.4% 17.6% 17.4% 5.5% 54.3% 56.3% 49.5% 45.7% 43.7% Q1 216 Net loans, RB, GEL Net loans, RB, FC Currency-blended loan yield, RB 25% 2 15% 1 5% % 63.6% 67.6% 36.4% 32.4% 3.8% 3.9% 3.5% 74.1% 76.5% 25.9% 23.5% Q1 216 Client deposits, RB, FC Client deposits, RB, GEL Currency-blended cost of client deposits, RB 6% 5% 4% 3% 2% 1% page 4

41 Retail Banking Loan book growth RB Loan Yield quarterly RB Cost of Deposit quarterly RB standalone RB standalone % 17.9% 17.4% 25.4% 25.4% % 11.2% 1.9% % 3.5% 3.5% 5.5% 4.4% 4.8% 3.8% 3.2% 3.2% Loan Yield Loan yield, GEL Loan yield, FC. Cost of deposits Cost of deposits, GEL Cost of deposits, FC 1Q15 4Q15 1Q16 1Q15 4Q15 1Q16 RB NIM quarterly RB standalone % 9.6% 9.2% Q15 4Q15 1Q16 page 41

42 Corporate Investment Banking (CIB) P&L Corporate Investment Banking CIB Consolidated Income Statement Highlights 1Q16 1Q15 Change 4Q15 Change Gel thousands, unless otherwise notes Y-O-Y Q-O-Q Net banking interest income 38,25 39, % 39, % Net fee and commission income 7,2 7, % 8, % Net banking foreign currency gain 11,368 9, % 13, % Net other banking income 2,587 1, % 4, % Revenue 59,225 57, % 66, % Salaries and other employee benefits (11,155) (1,61) 1.9% (9,982) 11.8% Administrative expenses (3,355) (2,886) 16.3% (4,231) -2.7% Banking depreciation and amortisation (1,272) (1,17) 14.9% (1,242) 2.4% Other operating expenses (231) (246) -6.1% (242) -4.5% Operating expenses (16,13) (14,3) 12. (15,697) 2. Operating income before cost of credit risk 43,212 43, , % Cost of credit risk (14,138) (19,371) -27. (11,991) 17.9% Net non-recurring items (856) (621) 37.8% (2,524) -66.1% Profit before income tax 28,218 23, % 36, % Income tax expense (2,687) (4,194) -35.9% (5,416) -5.4% Profit 25,531 19, % 3, % Loan Yield Corporate Banking, standalone Deposit Cost Corporate Banking, standalone CB standalone CB standalone % 1.6% 1.7% 1.5% 83.2% 86.8% 89.7% 89.4% 16.8% 13.2% 1.3% 1.6% Q1 216 Net loans, CB, GEL Net loans, CB, FC Currency-blended loan yield, CB 14% 12% 1 8% 6% 4% 2% % 5.9% 2.9% 49.1% 48.6% 3.4% 51.4% 57.9% 4.3% 57.2% 42.1% 42.8% Q1 216 Client deposits, CB, FC Client deposits, CB, GEL Currency-blended cost of client deposits, CB 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% page 42

43 GEL millions Corporate Investment Banking (CIB) Highlights Portfolio breakdown, 31 March 216 No.1 corporate bank in Georgia Integrated client coverage in key sectors c.5, clients served by dedicated relationship bankers CB standalone Loans & Deposits CB standalone Mining and quarrying 4.8% Financial intermediation 2.6% Construction 7.6% Electricity, gas and water supply 2.9% Transport & Communicatio n 5.5% Hospitality 5.8% Health and social work 2.6% Other 8.2% Service 8.4% Loans by sectors Manufacturing 26.9% Trade 15. Real estate 9.8% Deposits by category Top 1 CB borrowers represent 3 of total CB loan book Top 2 CB borrowers represent 44% of total CB loan book 2,5 2, 1,819 2,161 2,13 2,65 1,848 1,821 CB standalone CIB standalone 1,5 1, 5 1,221 1, Q1 216 Corporate net loans Corporate client deposits Time Deposits, 22.7% FC, 57.2% GEL, 42.8% Current Accounts & Demand Deposits, 77.3% Time Deposits, 41.8% GEL, 27.8% FC, 72.2% Current Accounts & Demand Deposits5 8.2% page 43

44 Corporate Investment Banking (CIB) CIB Loan Yield quarterly CIB Cost of Deposit quarterly CIB standalone CIB standalone % 13.3% 12.6% 11.8% 1.9% 1.3% 1.6% 1.6% 1.2% Loan Yield Loan yield, GEL Loan yield, FC % 4.6% 4.5% 3.9% 3.9% 3.9% 3.3% 3.1% Cost of deposits Cost of deposits, GEL Cost of deposits, FC 1Q15 4Q15 1Q16 1Q15 4Q15 1Q16 CIB NIM quarterly CIB standalone % 3.8% 3.7% 1Q15 4Q15 1Q16 page 44

45 Investment Management unrivalled platform for profitable growth 1 2 Wealth Management Research Strong international presence: Israel (since 28), UK (21), Hungary (212) and Turkey (213). Planned expansion - Cyprus, Singapore, USA. Sector, macro and fixed income coverage International distribution AUM of GEL 1,343 million, up 11% y- o-y Diversified funding sources: Georgia 44% Israel 12% UK 4% Germany 3% Other 35% 4 Brokerage Investment Management Corporate Advisory 3 Wide product coverage Bond placement In March 216, G&T successfully placed a USD 5mn 2-year bond of a non- BGEO Group affiliated company, Nikora Corporate advisory platform Team with sector expertise and international M&A experience Exclusive partner of SAXO Bank via While Label structure, that provides highly adaptive trading platform with professional tools, insights and world-class execution Proven track record of more than 15 completed transactions over the past 8 years with an accumulated transaction value of more than GEL 2 million page 45

46 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business Georgia Healthcare Group Georgian Macro Overview Appendices page 46

47 GHG Income Statement Highlights P&L Income Statement Healthcare services Medical insurance Total GHG GEL thousands; unless otherwise Chang, Change, Change, Change, Change, 1Q16 1Q15 4Q15 1Q16 1Q15 4Q15 1Q16 1Q15 noted Y-o-Y Q-o-Q Y-o-Y Q-o-Q Y-o-Y 4Q15 Change, Q-o-Q Revenue, gross 6,451 42, % 55, ,936 12, % 14, ,682 53, % 68,72 4.3% Corrections & rebates (41) (957) -57.2% (1,86) -62.2% (41) (957) -57.2% (1,86) -62.2% Revenue, net 6,41 41, % 54, % 12,936 12, % 14, ,272 52, % 67, % Cost of services (32,998) (24,273) 35.9% (3,7) 1. (11,953) (1,837) 1.3% (12,917) -7.5% (43,257) (33,339) 29.7% (41,618) 3.9% Gross profit 27,43 17, % 24, % 983 2, % 1, % 28,15 19, % 26,16 7.7% Total operating expenses (9,456) (7,923) 19.3% (8,857) 6.8% (1,66) (1,76) -5.7% (1,627) 2. (11,15) (9,592) 15.8% (1,48) 6. Other operating income ,8-76.1% (21) 47 NMF (5) % EBITDA 17,828 9, % 16, % (699) 442 NMF (17) NMF 17,129 1, % 16, % EBITDA margin 29.5% 22.6% 29.8% -5.4% 3.4% -.1% 23.9% 18.8% 24. Depreciation and amortisation (4,261) (2,186) 94.9% (4,46) 5.3% (24) (136) 5. (249) -18. (4,465) (2,322) 92.3% (4,295) 4. Net interest (expense) / income (2,259) (4,73) -44.5% (5,535) -59.2% 63 (28) NMF % (1,656) (4,11) -59.6% (5,377) -69.2% Net (losses) / gains from foreign currencies (411) 2,97 NMF (1,586) -74.1% % (6) NMF (26) 3,44 NMF (1,592) -83.7% Net non-recurring (expense) / income 1,968 (211) NMF % (676) NMF 1,968 (211) NMF (192) NMF Profit before income tax expense 12,865 6, % 5, % (149) 775 NMF (79) -81.1% 12,716 6, % 5, Income tax (expense) / benefit (712) (491) 45. (26) 245.1% 19 (116) NMF % (693) (67) 14.2% (14) NMF Profit for the period 12,153 5, % 5, % (13) 659 NMF (598) -78.3% 12,23 6, % 5, Attributable to: - shareholders of the Company 1,51 5, % 4, % (13) 659 NMF (598) -78.3% 9,921 5, % 3, % - non-controlling interests 2, % 1, , % 1, Sources: GHG internal reporting, financials are for 1Q16 Note: healthcare services business and medical insurance business financials do not include inter business eliminations. Detailed financials, including inter business eliminations, are provided in annexes page 47

48 E 216F 217F 218F E 216F 217F 218F E 216F 217F 218F 219F 22F 4.8% 5.1% 5.3% 5.3% 5.5% 6.1% 6.4% % 7.6% 7.8% Capacity Revenue Georgia healthcare market & GHG market share evolvement GHG strategy Hospitals Ambulatories Pharmaceuticals Maintain dominant market share in hospitals by capacity and revenue GHG Replicating hospital consolidation experience in outpatient segment, with a first mover advantage Redistribution of funds expected from pharmaceuticals to ambulatory services GEL 1.2bln (1) GEL.9bln (1) GEL 1.3bln (1) GHG Market shares 18% Market share by revenue Market share by revenue 26.7% Bed market share 33. 1% 1Q16 Long-term target 15. >15. Market share by sales 38.4% Share in total Healthcare spending 25. 1Q16 Long-term target 1Q16 medium term target 2, 1,5 1, Market Hospitals, GEL mln CAGR'3-14: 13.7% '14-18: 11% 1,23 1, ,647 1,489 1,341 2, 1,5 1, 5 - Ambulatories, GEL mln CAGR'3-14: 17.9% '14-18: 16% , , , GDP nominal, GEL bln CAGR'3-14: 11.8% '15-2: 9% Growth drivers Low utilisation (5-6) Low equipment penetration Fragmented market System inefficiency (low nurse-to-doctor ratio) GHG: accelerated revenue market share growth on the back of well-invested asset base Low outpatient encounters Fragmented market New prescription policy GHG: replicating hospital cluster model and consolidation experience in ambulatory sector new prescription policy introduced in 214 ambulatory market consolidation Weakening of existing pharma-duopoly Spending on pharma Georgia s 38% vs 16-17% in Europe; decreasing trend in comparable countries (1) Frost & Sullivan analysis, 215 Sources: GHG internal reporting; Frost & Sullivan analysis, 215; NHA, Ministry of Labor, Health and Social Affairs of Georgia; NCDC; OECD, World Health Organisation and World Bank, 213 data page 48

49 GHG - Long-term, High-growth Story Medium-term Target (5-1 Year Horizon) Long-term Target (Beyond 1 Year Horizon) Georgia 214 or most recent year (1) Georgia medium-term (1) EM 214 or most recent year (2) Spending per capita (US$) 217 (Georgia) 52 1,76 Price inflation (heart surgery, US$) $ $ 6,5 (GHG) 9, 25, $ GHG Revenue per bed (US$) Outpatient Encounters per capita 32, (GHG) 3.5 (Georgia) Significant expansion of capacity by k 5.4 Substantial room to grow beyond k 8.9 Nurse to doctor ratio 1:1.3 (Georgia) 4:1 (Georgia, WHO recommendation) 3.4:1 Pharmaceuticals share in total healthcare spending 38.4% (Georgia) 25% 15.4% Sources: (1) Bed utilisation for referral hospitals; World Bank; GHG internal reporting; Management Estimates; Ministry of Finance of Georgia; Frost & Sullivan 215; NCDC healthcare statistical yearbook 214 (2) WHO: Average of countries: Chile, Costa Rica, Czech Republic, Estonia, Croatia, Hungary, Lithuania, Latvia, Poland, Russian Federation, Slovak Republic; BAML Global Hospital Benchmark, August 214 page 49

50 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business m2 Real Estate Georgian Macro Overview Appendices page 5

51 m2 Financial Highlights P&L Balance sheet Income Statement Highlights 1Q16 1Q15 Change 4Q15 Change Gel thousands, unless otherwise stated Y-O-Y Q-O-Q Balance Sheet Gel thousands, unless otherwise stated Mar-16 Mar-15 Change Dec-15 Change Y-O-Y Q-O-Q Real estate revenue 28,592 3, % 47, % Cost of real estate (22,74) (2,865) NMF (34,869) -34.8% Gross real estate profit 5,852 1, % 12, % Gross other investment profit 1, NMF 7, Revenue 7,668 1, % 19, % Salaries and other employee benefits (32) (321) -.3% (356) -1.1% Administrative expenses (1,135) (1,41) 9. (1,515) -25.1% Operating expenses (1,455) (1,362) 6.8% (1,871) -22.2% EBITDA 6,213 (7) NMF 18,2-65.5% Depreciation and amortization of investment business (53) (42) 26.2% (55) -3.6% Net foreign currency loss from investment business 386 (371) NMF (836) NMF Interest income from investment business Interest expense from investment business (125) (1,11) -87.6% (173) -27.7% Net operating income before non-recurring items 6,421 (1,323) NMF 16, % Net non-recurring items (23) (73) -68.5% (7) NMF Profit before income tax 6,398 (1,396) NMF 16, % Income tax (expense) benefit (96) 29 NMF (2,64) -63.1% Profit 5,438 (1,187) NMF 14, Liquid assets 5,24 71, % 29, % Loans to customers and finance lease receivables Accounts receivable and other loans 1,7 1, % Insurance premiums receivable Prepayments 23,551 8, % 26, % Inventories 95,139 86, % 95, % Investment property 117,722 65,19 8.8% 18, % Property and equipment 1,569 1, % 1, % Total assets 31,87 244, % 275, % Client deposits and notes Amounts due to credit institutions 37,118 4, % 3, % Debt securities issued 47,38 66, % 48, % Accruals and deferred income 96,538 89,65 8.4% 19, % Total liabilities 19, , % 167, % Total equity 111,378 79, % 17, % page 51

52 At a glance Major player on Georgian real estate market 1 Residential Developments 2 Affordable housing Commercial space (offices, industrial properties, high street retail) Yielding Business Hotels Key Segments & market size Market: US$ 1.2bln 1 As a residential real estate developer, m 2 targets mass market customers by introducing high quality and comfortable living standards in Georgia and making them affordable. Market: US$ 2.5bln 2 As a property manager, m 2 makes opportunistic investments and manages a well diversified portfolio of yielding assets, primarily consisting of high street real estate assets, and also including industrial and office space real estate assets. Market: US$ 1.9bln 3 As a hotel developer and operator, m 2 targets 3-star, mixed use hotels (residential combined with hotel development). m 2 finances equity needs of the hotel from the profits and land value unlocked through sale of the apartments in the same development. Asset base (as of 1Q16) Includes: 1. Inventory of residential real estate 2. Land bank US$ 55 million 4 59% Includes: 1. High street retail 2. Industrial properties: warehouses and logistics centers 3. Offices US$ 17 million Includes: US$ 2 million 17% 1. Hotels (mixed use) 2. Land bank 2% Dollar denominated, inflation hedged cash flow stream Track record - Delivering average 65% IRR on residential projects - Started operations in 21 and since: - Completed 6 projects 1,669 apartments, 87% sold with US$ 123.4mln sales value, land value unlocked US$ 16.4mln - Ongoing 2 projects 838 apartments, 29% sold with US$ 2.mln sales value, land value to be unlocked US$ 8.9mln - All completed projects were on budget and on schedule - Land bank of value US$ 43.4mln, with c.52 apartments - Generated annual yield of 9.7% in 215 on portfolio rented out. Rent earning assets are with capital appreciation upside. - m 2 has developed its current yielding portfolio through: - m 2 retains commercial space (ground floor) at its own residential developments. This constitutes up to 25% of total yielding portfolio - Acquired opportunistically the commercial space. This constitutes over 75% of total yielding portfolio m 2 attained exclusive development agreement with Wyndham to develop Wyndham s 3-star brand Ramada Encore exclusively in Georgia. Plan is to build at least 3 hotels within next 7 years with minimum 37 rooms in total. 3 projects in the pipeline: 1) 2 hotels in Tbilisi land acquired, project design stage 2) 1 hotel in Kutaisi searching for property 1 US$ value of annual transaction in the capital city in 214 (NPRG, Colliers Company own data) 2 trade volume in Georgia in gross tourism inflows in Total Assets are US$ 75mln. Pie charts do not sum-up to 1 due to Cash holdings of US$ 21mln page 52

53 Project highlights Project timeline Start date: Unmatched track record All projects were completed on budget and on schedule 1 SEP apartments 2 APR apartments 3 4 DEC apartments 295 apartments 5 JUL apartments 6 SEP apartments 7 JUL apartments 8 DEC apartments 2,57 apartments in total: 1,669 apartments completed with 86% sales and 838 apartments under construction with 38% pre-sales 1 Chubinishvili street 2 Tamarashvili street 3 Nutsubidze street 4 Kazbegi Street 123 apartments 522 apartments 221apartments 295 apartments IRR: 47% IRR: 46% IRR: 58% IRR: 165% Equity multiple: x1.8 Equity multiple: x1.6 Equity multiple: x1.2 Equity multiple: x2.2 Apartments sold: 123/123, 1 Apartments sold: 522/522, 1 Apartments sold: 23/221, 92% Apartments sold: 266/295, 9 Pre-sales 1 was: 92% Pre-sales was: 94% Pre-sales: 89% Pre-sales: 9 Start date: Sep 21 Start date: May 212 Start date: Dec 213 Start date: Dec 213 Completion: Aug 212 Completion: Jun 214 Completion: Sep 215 Completion: Mar 216 Sales: US$ 9.9mln Sales: US$ 48.mln Sales: US$ 16.2mln Sales: US$ 24.4mln Land value unlocked: US$.9mln Land value unlocked: US$ 5.4mln Land value unlocked: US$ 2.2mln Land value unlocked: US$ 3.6mln 5 Tamarashvili Street II 6 Moscow avenue 7 Kartozia Street 8 Skyline 27 apartments 238 apartments 819 apartments 19 apartments IRR: 71% IRR: 31% IRR: 31% IRR: 329% Equity multiple: x2.5 Equity multiple: x1.2 Equity multiple: x1.7 Equity multiple: x1.1 Apartments sold: 194/27, 72% Apartments sold: 147/238, 62% Pre-sales: 231/819, 28% Pre-sales: 9/19, 47% Pre-sales: 71% Pre-sales: 61% Pre-sales: US$ 16.4mln Pre-sales: US$ 3.7mln Start date: Jul 214 Start date: Sep 214 Start date: Nov 215 Start date: Dec 215 Completion: May 216 Completion: May 216 Completion expected: Sep 218 Completion expected: Dec 216 Sales: US$ 18.mln Sales: US$ 6.9mln Construction progress: 1 completed Construction progress: 5% completed Land value unlocked: US$ 2.7mln Land value unlocked: US$ 1.6mln Land value to be unlocked: US$ 5.8mln Land value to be unlocked: US$ 3.1mln N N Completed projects On-going projects Note 1: Pre-sales is defined as sales before project completion Note 2: Off-plan sales is defined as sales before commencement of construction phase Off-plan sales: 173/819, 21% Off-plan sales: $11.7mln Pre-sales: 58/819, 7% Pre-sales: $4.7mln page 53

54 m 2 Real Estate Strategy: accelerating growth GOAL Accelerate growth, building on existing track record, to develop m 2 into a sizable player on Georgian real estate market Residential Developments Commercial space Hotels Growth highlights Liquidating all land-plots by developing housing. Start development of third party lands. Currently, own land bank of US$ 43.4mln*, with capacity of c.52 apartments (in addition to 2,51 apartments in existing 8 projects, both completed and on-going) Grow portfolio of yielding assets by retaining investment property from own residential developments, and acquiring opportunistically and/or developing high street retail, commercial and office space, with capital gain upside and c.1-12% annual yield. Investment policy: Good location Good tenant Good lease terms 1-12% yield range Develop 3 hotels (3-star, select service mixed-use hotels) in next 7 years in Tbilisi and Kutaisi with minimum roomcount of 37 in total, catering to budget travelers Ramada Encore exclusivity for 7 years Investment per room US$ 7k Occupancy rate 74% (after 3rd year stabilised) ADR US$ 11 (Tbilisi) US$ 15 (Kutaisi) *Excludes hotel lands page 54

55 Project highlights Project timeline Start date: 1 APR apartments Strong existing pipeline US$ 422.1mln total investment MAY 216 (2) 62 apartments (1) 152 rooms 353 apartments AUG rooms 34 apartments 3 DEC rooms Accelerating the growth 1 JAN 217 1,97 apartments 32 sqm commercial space 2 JAN 219 1,746 apartments 3,73 sqm commercial space APR 221 1,4 apartments 39,514 sqm commercial space Existing land bank of US$ 45.6mln value, with c.52 apartments 1 Kavtaradze street 2 5 Chavchavadze avenue 1 2 (economy/low cost development) (upscale development) 544 apartments IRR: 26%, expected Expected sales: US$ 26. mln Start: Apr-16 Completion: Mar-18 Total completion cost: US$ 23.1mln Land value: US$ 2.6mln Equity multiple: x1.5 3 Ramada Encore (Kutaisi 3-star hotel) Hotel: 127 rooms, 6 sqm (gross) Start: Dec 16; Completion: Sep 18 Total completion cost: US$ 11.3mln Profit stabilized year: US$ 1.2mln ADR (stabilized year): US$ apartments IRR: 99%, expected Expected sales: US$ 16.5 mln Start: May-16 Completion: Sep-17 Total completion cost: US$ 12.1mln Land value: US$ 3.3 mln Equity multiple: x1.8 Ramada Encore (Kazbegi 15 mixed-use) Hotel: 152 rooms, 7 sqm (gross) Start: May-16; Completion: Nov-17 Total completion cost: US$ 13.2mln Profit stabilized year: US$ 1.4mln ADR (stabilized year): US$ 11 Residential: 353 apartments IRR: 45% Expected sales: US$ 47.1 mln Start: May-16; Completion: Nov-17 Total completion cost: US$ 37.mln Equity multiple: x1.8 Dighomi development m 2 owns 13 hectare of land in close proximity to the city center. Plan is to develop a modern neighborhood with c.4,2 apartments, 3, sqm of retail, 2, sqm of offices, primary school, kindergarten, outpatient clinic, park and plaza. The project will be a novel development combining multi-family real estate for all types of customers: micro lofts for millennials, townhouses with private patios for larger families, high rise apartment blocks and small size units to meet the budget constraints of the clients. Retail will host hypermarket and plaza level shops, cafes and restaurants. Almost 4 hectares will be dedicated to park and greenery to provide the residents and the guests of the neighborhood with relaxing atmosphere. Project highlights Total Expected sales, US$ mln Start date Jan-17 Jan-17 Jan-19 Apr-21 Completion date Apr-24 Mar-2 Jan-22 Apr-24 Total completion cost, US$ mln Land value, US$ mln Number of apartments 4,243 1,97 1,746 1,4 Commercial space 54, ,629 49,392 Equity multiple 1.9 Ramada Encore (Meliqishvili mixed-use) Hotel: 127 rooms, 59 sqm (gross) Start: Aug-16; Completion: Feb-18 Total completion cost: US$ 11.9mln Profit stabilized year: US$ 1.2mln ADR (stabilized year): US$ 11 Residential: 34 apartments IRR: 329% Expected sales: US$ 6.2 mln Start: Aug-16; Completion: Feb-18 Total completion cost: US$ 4.3mln Equity multiple: x N Residential development N Hotel development N Dighomi development (Residential & Commercial space). Numbers designate project phases. page 55

56 m 2 Real Estate Hotel strategy 3-star hotel opportunity in Tbilisi Develop 3 hotels in next 7 years in Tbilisi catering to budget travelers Visitors in Georgia 25% CAGR 3-15 Limited supply last Branded hotel opening in Tbilisi in 212 6, 5,898 5,516 5,392 Distribution of rooms in Tbilisi by accommodation type, 211 5, 4,428 Wyndham Ramada Anchor exclusivity for 7 years Equity investment US$ 7 million Number of rooms 37 Investment per room US$ 7k Occupancy rate 65% (3 rd year stabilised) ADR US$ 1 4, 3, 2, 1, 1,5 1,29 1, ,32 2,822 Other accommodation units (local) 74% Internationally branded hotels 26% ROE 2 Foreign visitors (thousand persons) Source: Galt & Taggart Research page 56

57 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business Renewable Energy Opportunity Georgian Macro Overview Appendices page 57

58 Opportunities Renewable Energy opportunity 1 2 Underpenetrated industry Cheap to develop Only 2-25% of Georgia s hydro resources utilised US$ 1.5mln for 1MW development in Georgia 3 Strategic partnership Strategic partnership with industry specialists RP Global (Austria) 4 5 Small investment to date BGEO planned investment in ongoing projects Only US 1mln invested during first 1.5 years of due-diligence and planning BGEO investment US$ 28mln Total investment US$ 43mln (partnership: 65% BGEO 35% RP Global) Expected IRR 25%+ page 58

59 Renewable Energy 5 year roadmap Goal Establish renewable energy platform, targeting 1MW+ in 4 medium size hydro power plants by 219 Development 2 ongoing projects 15MW, 4 HPPs Projects Mestiachala 1 & 2 Zoti 1 & 2 Pipeline Estimated Capacity 1 MW 5MW 55MW Estimated Project Timeline Note: Project timeline includes only construction period. In general construction period is preceded by a 1-2 year pre-construction period. On average 5% of total project cost is spent during this period on due diligence page 59

60 Renewable Energy 5 year roadmap Goal Establish renewable energy platform, targeting 1MW+ in 4 medium size hydro power plants by 219 Financing Pipeline BGEO contribution US$ 28mln over next 4 years (estimated total equity US$ 43mln) Small investment until now Staged investments 4 years BGEO investment page 6

61 Renewable Energy 5 year roadmap Goal Expected IRR 25%+ Math EBITDA (run rate) Total US$ 15.9mln BGEO share US$ 1.3mln Equity contribution US$ 43mln US$ 28mln Exit opportunities 1 2 Sale in parts Scale up (2 nd stage) and public listing or strategic sale page 61

62 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business GGU Georgian Global Utilities Georgian Macro Overview Appendices page 62

63 GEL millions GGU a privately-owned natural monopoly GGU is the only profitable water-utilities player in Georgia with plenty of efficiency rooms GGU is the largest privately owned water utility company in Georgia 2 core activities: 1. Water supply (including wastewater collection and processing) Provides water to 1.4mln people (1/3 of Georgia) 215A: 52M m3 1. Generation of electric power Owns and operates 3 HPPs with total installed capacity of 143MW. Generated power is primarily used by GGU s water business. The excess amount of generated power is sold to the third party clients every yeargeneration of electric power: Revenue 215A: GEL 117.7M EBITDA 215A: GEL 61.5M Company has strong execution track record & financial strength Management team with extensive experience in utility business BB- rating assigned by Fitch Ratings to major subsidiary of GGU Georgian Water and Power in 215 (currently Georgia s sovereign rating is BB- and the country ceiling is BB by Fitch) First bond placement by utility company in Georgia (GEL 8.6mln) through Georgian Water and Power in 215 Strong EBITDA growth in 215 of 1 y-o-y Low leverage (215A Debt/EBITDA: 1.2x) EBITDA (in GEL mln) & EBITDA margin (in %) CAGR % E 216F 217F 218F EBITDA growth drivers: Cost saving from reduction in water delivery losses to 4, from current 5 Double effect from water delivery loss reduction selling freed-up energy page 63

64 Acquisition of 75% interest in GGU an Attractive Investment Opportunity Acquisition of 75% interest in GGU Acquisition of remaining 75% stake in GGU Consideration US$ 7mln, all cash (no holdback), payable within 1month after signage of Sale and Purchase Agreement The transaction values GGU s enterprise value at GEL million, or 4.2x EV / EBITDA 216E GGU will distribute dividends in the amount of GEL 13. million to the existing shareholders before the completion of the buy-out The transaction is expected to be both, P/E and B/V accretive from day one BGEO will fund the acquisition through a combination of the BGEO s existing unallocated cash and additional debt GGU s existing senior management team will continue to lead the business following the buy-out Overview of 25% acquisition in 214 Transaction was structured in several steps: Acquisition of 25% shareholding for GEL47.6m (US$26m) Option to acquire an additional 24.9% within 1 months for GEL47.6m (US$26m), plus 2 per annum accrued on the call option consideration over the period from closing date to exercise date less any dividends distributed through the call option period. Subsequently, BGEO did not exercise the call option Attractive valuation with GGU valued at EV / EBITDA 214E deal multiple of 4.7x, while industry peers were trading at 8.5x average EV / EBITDA 214E multiple (1) BGEO also provided a US$25mn loan to GGU with proceeds paid as dividend to the selling shareholders The transaction was earnings accretive Exit strategy through potential IPO is feasible Strong potential for value generation for shareholders in short term Strong management and streamlined operations but room for potential further improvement exists Transaction Rationale Attractive Investment Opportunity GGU s strategy A profitable company with significant capacity for growth A natural monopoly Cash generating business, no additional equity financing required for planned capex Potential to improve utilisation GGU is an established business, targeting further EBITDA growth as a result of its strategy, which implies strong cash flow generation post prudent capital expenditures. Stable cash collection rate. Average collection rates at only 65% in major cities. And average collection rates from households in Georgia only 45% (2). GGU s collection rates are currently 96%. Increase of the energy efficiency and water loss reduction. Cost saving from reduction in water delivery losses to 4, from current 5. Existing high level of water losses is about 4-5 times higher than that in the Western Europe, creating an opportunity for efficiency gains. There is dual-effect from water delivery loss reduction, as freed-up energy can be sold to third parties. Generation of additional income streams. This implies utilizing GGU s existing infrastructure and developing hydropower plants to increase electricity sales to third parties; installing turbinators to achieve more efficient water supply. Notes: (1) Universe of comparable companies includes Pennon Group, Acea, Artesian Resources, American State Water Company, Athens Water and Thessaloniki Water Supply. (2) The latest available data (from 25) page 64

65 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business Teliani Valley Georgian Macro Overview Appendices page 65

66 Teliani Valley Business overview Goal Become leading beverages producer and distributor in Caucasus Strong existing franchise New business line Leading wine producer With wide distribution platform Launch beer production Teliani Business Black Sea Poti Batumi Russian Federation Georgia Tbilisi Rustavi Caspian Sea Turkey Armenia Azerbaijan Baku 3 million bottles sold annually US$ 8mln revenue in 215 US$ 1.7mln EBITDA in of sales from export 4,4 sales points Exporting to 26 countries, including all FSU, Poland, Sweden, Finland, USA, Canada, Brazil, China, Thailand, Singapore Launch beer production facility in Georgia 1 year exclusivity with Heineken to sell in Georgia, Armenia and Azerbaijan (17mln population) page 66

67 Teliani Valley Exclusive Heineken producer in Caucasus Exclusive Heineken producer in Caucasus Strong management with proven track record Highly concentrated market Low consumption per capita compared to peers Investment Rationale 1.3 EBITDA Net Income Domestic market segmentation (Q3 215) 31% 6% 12% 51% Effes Georgia Zedazeni Argo Other Beer Consumption in Peer Countries 214 (l/capita) Peer Average page 67

68 Teliani Valley Exclusive Heineken producer in Caucasus Exclusive Heineken producer in Caucasus Investment EBITDA projection Exit options EBITDA Evolution, USDmn ( ) Financials Total investment USD 4.6mln, of which USD 15.3mln is equity BGEO to invest USD 9.8mln in total, amounting to 64% of shares of Teliani % % % 23.1% % 24.2% E 218E 219E 22E 221E 222E Trade sale Teliani Valley EBITDA Global Beer Georgia EBITDA EBITDA margin page 68

69 Contents Bank of Georgia Holdings PLC Overview Results Discussion Bank of Georgia Holdings PLC Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices page 69

70 Georgia at a glance General Facts Area: 69,7 sq km Population (212): 4.5 mln Life expectancy: 77 years Official language: Georgian Literacy: 1 Capital: Tbilisi Currency (code): Lari (GEL) Economy Nominal GDP (Geostat) 215: GEL 31.7 bn (US$14. bn) Real GDP growth rate : 7.2%, 6.4%, 3.3%, 4.6%, 2.8% Real GDP average 1 year growth rate: 5.1% GDP per capita 215 (PPP) per IMF: US$ 9,629 Annual inflation (e-o-p) 215: 4.9% External public debt to GDP 215: 32.6% Sovereign ratings: S&P BB-/B/Stable, affirmed in November 215 Moody s Ba3/NP/Stable, affirmed in March 216 Fitch BB-/B/Stable, affirmed in October 215 page 7

71 Georgia s key economic drivers Liberal economic policy Regional logistics and tourism hub Top performer globally in WB Doing Business over the past 12 years Liberty Act (effective January 214) ensures a credible fiscal and monetary framework: Public expenditure/gdp capped at 3; Fiscal deficit/gdp capped at 3%; Public debt/gdp capped at 6 Business friendly environment and low tax regime (attested by favourable international rankings) A natural transport and logistics hub, connecting land-locked energy rich countries in the east and European markets in the west Access to a market of 9mn customers without customs duties: Free trade agreements with EU, CIS and Turkey and GSP with USA, Canada, Japan, Norway and Switzerland, negotiations ongoing on Georgia-China free trade agreement Tourism revenues on the rise: tourism inflows stood at 13.9% of GDP in 215 and arrivals reached 5.9mln visitors in 215 (up 6.9% y-o-y) Regional energy transit corridor accounting for 1.6% of the world s oil and gas transit volumes Strong FDI Support from international community An influx of foreign investors on the back of the economic reforms have boosted productivity and accelerated growth FDI at US$1,351mln (9.7% of GDP) in 215 (down 23.2% y-o-y) FDI averaged 1 of GDP in Productivity gains accounted for 66% of the annual average 5.6% growth over , according to the World Bank Georgia and the EU signed an Association Agreement and DCFTA in June 214 Progress in achieving visa-free travel to the EU is another major success in Georgian foreign policy. Georgian passport holders are expected to start free entrance to the EU countries from 2H16 Discussions commenced with the USA to drive inward investments and exports Strong political support from NATO, EU, US, UN and member of WTO since 2; Substantial support from DFIs, the US and EU Electricity transit hub potential Developed, stable and competitively priced energy sector Only 2 of hydropower capacity utilized; 88 hydropower plants are in various stages of construction or development Georgia imports natural gas mainly from Azerbaijan Significantly boosted transmission capacity in recent years, a new 4 kv line to Turkey built, other transmission lines to Armenia and Russia upgraded Additional 5, MW transmission capacity development in the pipeline, facilitating cross-border electricity trade and energy swaps to Eastern Europe Political environment stabilised Georgia underscored its commitment to European values by securing a democratic transfer of political power in successive parliamentary, presidential, and local elections and by signing an Association Agreement and free trade agreement with the EU New constitution amendments passed in 213 to enhance governing responsibility of Parliament and reduce the powers of the Presidency Continued economic relationship with Russia, although economic dependence is relatively low Russia began issuing visas to Georgians in March 29; Georgia abolished visa requirements for Russians -The Russian side recently announced to ease visa procedures for Georgians citizens effective December 23, 215 Direct flights between the two countries resumed in January 21 Member of WTO since 2, allowed Russia s access to WTO; In 213 trade restored with Russia In 215, Russia and Ukraine together accounted for 1.1% of Georgia s exports and 14. of imports; just 4.1% of cumulative FDI over page 71

72 Growth oriented reforms Ease of Doing Business 216 (WB-IFC Doing Business Report) Economic Freedom Index 216 (Heritage Foundation) UK USA Sweden Norway Estonia GEORGIA Armenia Czech Rep. Romania Kazakhstan Montenegro Turkey Serbia Azerbaijan Ukraine WB named Georgia top performer globally in doing business over the past 12 years Estonia UK USA Georgia Latvia Hungary Bulgaria Romania France Turkey Italy Azerbaijan Russia Ukraine Global Corruption Barometer TI 213 Business Bribery Risk, 214 Trace International Denmark Norway GEORGIA UK Estonia US Romania Bulgaria Czech Republic Armenia Latvia Turkey Greece Serbia Lithuania Kazakhstan Ukraine 1% 3% 4% 5% 6% 7% 7% 8% % admitting having paid a bribe last year 15% 18% 19% 21% 22% 26% 26% 32% 37% Germany USA Georgia Norway Netherlands UK Estonia Poland Czech Rep. Serbia Turkey Montenegro Romania Armenia Russia Azerbaijan Sources: Transparency International, Heritage Foundation, World Bank page 72

73 Government 4-pillar of reform initiatives Structural Reforms Promoting Transit & Tourism Hub Tax Reform Corporate income tax reform Enhancing easiness of tax compliance Roads Plan to finish all spinal projects by 22 East- West Highway, other supporting infrastructure Capital Market Reform Boosting stock exchange activities Developing of local bond market Rail Baku Tbilisi Kars new railroad line Railway modernization project Pension Reform Introduction of private pension system PPP Reform Public Investment Management Framework Deposit Insurance Accounting Reform Association Agreement Agenda Introduction of transparent and efficient PPP framework Improved efficiency of state projects Boosting private savings Enhancing trust to financial system Increased transparency and financial accountability Enhanced protection of shareholder rights Promoting Open Governance Air Maritime Tbilisi International Airport 2 nd runway to be constructed International Cargo terminal Anaklia deep water Black Sea port Strategic location Capable of accommodating Panamax type cargo vessels High capacity up to 1mln tons turnover annually Up to USD 1bln for first phase (out of 9) in Georgia Education Reform Improvement of public services offered to the private sector Creation of Front Office Application of Single Window Principle General Education Reform Maximising quality of teaching in secondary schools Involvement of the private sector in legislative process Discussion of draft legislation at an early stage Fundamental Reform of Higher Education Based on the comprehensive research of the labor market needs Strict monitoring of implementation of government decisions Creation of a special unit for monitoring purposes Improvement of Vocational Education Increase involvement of the private sector in the professional education page 73

74 Ukraine Latvia Estonia Czech Republic Russia Lithuania Romania Moldova Turkey Poland Georgia Diversified resilient economy Gross domestic product Nominal GDP structure, % % 9.6% 9.4% % % % 7.2% 6.4% 3.4% 4.6% 2.8% 2 15% 1 5% Financial interm. 3.7% Healthcare 6. Hotels & restaurants 2.5% Other 11. Trade 16.6% Maufacturing 16.5% % -5% Real Estate 6.6% Transport & commun. 1.7% Source: Geostat Nimonal GDP, US$ bn Real GDP growth, y/y % Construction 8. Agriculture 9.2% Source: Geostat Public administration 9.3% Comparative real GDP growth rates, % ( average) GDP per capita 6% 5% 4% 3% 2% 1% -1% -2% -.8% 1.8% 1.9% 1.9% 2.5% 2.6% 2.7% 3.6% 3.8% 3.8% 5.1% 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 4,943 9,29 9,63 8,6 8,526 7,287 5,788 6,135 6,3 6,571 4,329 3,711 4,131 4,267 4,428 3,779 3,789 3,431 3,159 2,479 2,694 2,951 1,863 1, ,22 Sources: IMF, Geostat Nominal GDP per capita, US$ Sources: IMF GDP per capita, PPP page 74

75 Georgia 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Latvia Romania Macedonia Slovak Rep. Lithuania Estonia Kyrgyz Rep. Armenia Moldova Czech Rep. Bulgaria Kazakhstan Azerbaijan Russia Belarus Productivity gains have been the main engine of growth since 24 Overall contribution of capital, labour, and Total Factor Productivity (TFP) to growth, Contributions of capital, labour, and TFP to growth during periods TFP growth 3.65% Source: Georgia Rising (213), WB Capital stock 1.6 Labor force.32% 1 8% 6% 4% 2% -2% -4% 3.65% 6.32% 1.48% 2.25% Capital stock Labor force TFP growth Source: Georgia Rising (213), WB.67% -2.2% 3.86% 1.56% Real GDP growth projection, Employed persons in business sector 5% 4% 3% 2% 1% -1% -2% -3% -4% 216F 217F % -13.6% 12.7% % % 12.5% Sources: IMF, WEO April 216 Employment in business sector, ' Source: GeoStat, MOF Pers. income tax revenues, % change y/y page 75

76 Further job creation is achievable Unemployment rate down 2.2ppts y/y to 12.4% in 214 Average monthly wages and income per household 1,9 18% 5 1,8 1,7 16% 14% 4 1,6 1,5 1,4 12% 1 8% 3 2 1,3 1,2 1,1 1, % 4% 2% 1 Sources: GeoStat Employment (thousands) Unemployment rate Sources: GeoStat Wages, US$ Total income, US$ Share of services in total employment has increased Hired workers account for c.39.7% in total employment 2, 1,8 1,6 1,4 1,2 1, Services Agriculture Industry Public sector Non-public sector Source: GeoStat Note: services include construction Sources: GeoStat page 76

77 F 217F Turkey Macedonia Romania Czech Rep. Georgia Lithuania Bosnia & Herz. Switzerland Denmark Armenia Slovakia Belarus Finland Montenegro Netherlands Germany Hungary Ukraine Slovenia Austria Croatia UK Canada USA Belgium Italy F Demonstrated fiscal discipline and low public debt Fiscal deficit as % of GDP Breakdown of public debt -2% -4% -6% -8% % -2.6% -3.4% -4.8% -6.5% Fiscal deficit as % of GDP Fiscal deficit/gdp capped at 3% -9.2% -6.7% -3.6% -2.8% -2.6% % -3. Domestic 21% External 79% Multilateral 56% Bilateral 13% Eurobond 9% External public debt portfolio weighted average interest rate 1.9% (Contractual maturity 23 years) Source: Ministry of Finance of Georgia Source: Ministry of Finance of Georgia, as of end-215 Public debt as % of GDP Gross government debt/gdp, Public debt/gdp capped at % Total public debt to GDP, % External public debt to GDP, % Sources: Ministry of Finance of Georgia, Geostat Source: IMF page 77

78 Turkey Armenia Georgia Latvia Estonia Belarus Romania Albania Serbia Lithuania Hungary Russia Macedonia Bos and Herz Bulgaria Poland Croatia Croatia Romania Turkey Latvia Lithuania Serbia Poland Macedonia Russia Estonia Armenia Belarus Albania Hungary Bulgaria Georgia Bos and Herz F Investing in infrastructure and spending low on social Revenues and expenditures Current and capital expenditure 12, 1, 8, 6, 4, 2, 37.2% 33.9% 3.7% 3.6% 29.3% 3.2% 3.5% F Current Expenditures 77.9% 78.1% % 21.9% Capital Expenditures 82.3% 83.6% 81.6% 83.2% 17.7% 16.4% 18.4% 16.8% Total Budget Receipts, GEL mn Expenditures (Capital + Current), GEL mn Expenditures (capital + current) as % of GDP Source: Ministry of Finance, GeoStat Sources: Ministry of Finance Government social expenditure as % of GDP Government capital expenditure as % of GDP F 215F Source: IMF F 215F Source: IMF page 78

79 Fiscal Performance Consolidated budget tax revenues Consolidated budget - expenditures and privatization GEL mln % +14.1% 216 Source: Ministry of Finance +11.5% +8.2% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % 12.7% Current spending, % change y/y 1Q15 1Q16 Sources: Ministry of Finance 82.2% -3.1% Capital spending, % change y/y 53.7% -12.8% Privatization, % change y/y Consolidated budget balance State budget - revenues above plan in 1Q ,5 2, 1,5 1, 5 1,99 2,5 2,378 2,267 Operating Balance, GEL mn 1Q14 1Q15 1Q16 Overall Balance, GEL mn Total inflows, GEL mn 1Q16 plan 1Q16 actual Total outflows, GEL mn Source: Ministry of Finance Source: Ministry of Finance page 79

80 Diversified foreign trade Imports of goods and services Goods imports, US$ bln Services imports, US$ bln Source: NBG BOP statistics Source:, NBG BOP statistics Exports of goods and services Serveces exports, US$ bln Goods exports, Geo-originated, US$ bln Re-exports, US$ bln Imports, 215 Exports, 215 Oil imports UAE 3% USA 3% Ukraine 6% Azerbaijan 7% China 7% Sources: Geostat Japan 3% Other 13% Russia 8% EU 33% Turkey 17% Canada 3% Uzbekista n 4% USA 5% Other 18% China 6% Russia 7% Armenia 8% Turkey 9% EU 29% Azerbaijan 11% 1, Sources: GeoStat 1Q16 imports US$93.2mln, down 28.1% y-o-y Oil imports, US$ mn Oil imports, % change, y/y 1 75% 5 25% -25% -5 page 8

81 F Diversified sources of capital inflow Strong foreign investor interest Tourist arrivals and revenues on the rise US$1.35 bln in 215, down 23.2% 1.1mln visitors in 1Q16, up % 9.7% 19.8% 15.3% 12.2% % % 5.8% 5.8% 1.6% 9.7% 25% 2 15% 1 5% 6, 5, 4, 3, 2, 1, 5,392 5,516 5,898 4,428 2,822 2,32 1,52 1,29 1,5 1,155 1,426 1,489 1, , 5, 4, 3, 2, 1, FDI, US$ bn FDI as a % of GDP Foreign visitors (thousand persons, LHS) Net tourist revenue (US$ mn, RHS) Sources: Geostat Sources: Georgian National Tourism Agency, National Bank of Georgia Remittances - steady source of external funding Donor funding for public infrastructure projects US$237.1 mln in 1Q16, down 4.9% 6 1,4 1,2 1, % 4.9% % % 7.2% 7.1% % 8.1% 8.2% 7.7% 7.6% 1,168 1,226 1,322 1, % 99 9% 8% 7% 6% 5% 4% 3% 2% 1% Net remittances, US$ mn Net remittances as % of GDP Investment projects, credits, US$ mn Investment projects, grants, US$ mn Source: National Bank of Georgia Source: Ministry of Finance of Georgia page 81

82 Current account deficit supported by FDI Current account balance (% of nominal GDP) % 9% 8% Tourism revenues on the rise 15% 16% 11% 6% 6% 6.2% Current transfers - steady source of external funding 3.9% 5.1% 8.1% 8.7% % -9.7% -11.1% -1.5% -1.3% -12.8% -11.7% -1.6% -11.8% -15.1% Trade deficit driven by FDI -19.8% Goods, net Services, net Income, net Transfers, net CA deficit net FDI Sources: Geostat, NBG FDI and capital goods import Building international reserves 2 18% 16% 14% 12% 1 8% 6% 4% 2% 9.7% 8.5% % 5.6% 5.8% 19.8% 15.3% 12.2% 7.9% 8.2% 7.9% 6.1% % % 9.7% 7.7% 5.8% 5.8% 8.4% 7.4% 7.7% 8.3% 6.9% US$ bln FDI to GDP, % Source: Geostat, NBG Capital goods imports to GDP, % Source: NBG page 82

83 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Jan-11 Apr-11 Jul-11 Oct-11 Feb-12 May-12 Aug-12 Dec-12 Mar-13 Jun-13 Sep-13 Jan-14 Apr-14 Jul-14 Nov-14 Feb-15 May-15 Aug-15 Dec-15 Mar-16 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Inflation target - 5% for 216 and 4% for 217 Annual inflation Monthly inflation rate 9% 8% 7% 6% 5% 4% 3% 2% 1% -1% -2% -3% 4.1% 9% 8% 7% 6% 5% 4% 3% 2% 1% -1% -2% -3% % 1..5%. -.5% % % 1..5%. -.3% -.5% % Sources: Geostat Core (non-food, non-energy) Headline Inflation Sources: Geostat World commodity prices indices Average inflation rate % 6% 4% 2% 4.8% Source: IMF Note: Jan25=1 Total Non-energy Energy -2% Source: GeoStat page 83

84 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 International reserves-sufficient to finance more than 3 months of imports International reserves Central Bank s interventions US$ sale US$ purchase NBG is net buyer of US$ 15 mln YTD Gross International Reserves, US$ bn Net Foreign Assets, US$ bn NBG monthly net interventions US$ mn Sources: NBG Sources: NBG Note: data provided as of 5 Monetary policy rate Dollarization 9% 8% 7% 6% 5% 4% 3% 2% 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% 8 75% 7 65% 6 55% 8 75% 7 65% 6 55% Deposit dollarization Loan dollarization Source: NBG Source: NBG 24.9% page 84

85 Jan-3 Jul-3 Feb-4 Aug-4 Mar-5 Sep-5 Apr-6 Nov-6 May-7 Dec-7 Jun-8 Jan-9 Jul-9 Feb-1 Sep-1 Mar-11 Oct-11 Apr-12 Nov-12 May-13 Dec-13 Jul-14 Jan-15 Aug-15 Feb-16 Jan-3 Jul-3 Feb-4 Aug-4 Mar-5 Sep-5 Apr-6 Nov-6 May-7 Dec-7 Jun-8 Jan-9 Jul-9 Feb-1 Sep-1 Mar-11 Oct-11 Apr-12 Nov-12 May-13 Dec-13 Jul-14 Jan-15 Aug-15 Feb-16 Jan-3 Jul-3 Feb-4 Aug-4 Mar-5 Sep-5 Apr-6 Nov-6 May-7 Dec-7 Jun-8 Jan-9 Jul-9 Feb-1 Sep-1 Mar-11 Oct-11 Apr-12 Nov-12 May-13 Dec-13 Jul-14 Jan-15 Aug-15 Feb-16 Floating exchange rate - Policy priority FX reserves Real effective exchange rate (REER) US$ bln Sources: NBG US$ 2.5 bln reserves as of March FX Reserves M2 multiplier Sources: NBG M2 and annual inflation M2 and USD/GEL % 14% 12% 1 8% 6% 4% 2% -2% -4% -6% Lari deppriciation Lari appreciation Source: NBG M2, % change, y/y (LHS) Annual inflation, eop (RHS) Source: NBG M2 % change, y/y (LHS) USD/GEL % change, y/y (RHS) page 85

86 GEL Billions Growing and well capitalised banking sector Summary Prudent regulation ensuring financial stability High level of liquidity requirements from NBG at 3 of liabilities, resulting in banking sector liquid assets to client deposits of 41% as of Dec 215 Resilient banking sector Demonstrated strong resilience towards both domestic and external shocks without single bank going bankrupt No nationalization of the banks and no government ownership since 1994 Very low leverage with retail loans at 25% of GDP and total loans at 5 of GDP as of 215 resulting in low number of defaults during the global crisis Source: National Bank of Georgia, Geostat Banking sector assets, loans and deposits NPLs to Gross loans (%), Assets Loans Deposits Source: NBG 27.7% CAGR Source: WB Turkey Georgia Austria Belgium Denmark Latvia Belarus Slovakia Czech Rep. Lithuania Kosovo Russia Malta Armenia Macedonia Slovenia Kazakhstan Hungary Romania Bos. & Herz. Moldova Croatia Ukraine Source: National Bank of Georgia page 86

87 Belarus Moldova Kazakhstan Azerbaijan Armenia Ukraine Georgia Czech Rep Bulgaria Turkey Underpenetrated retail banking sector provides room for further growth Corporate loans to GDP Households loans to GDP 45% 4 35% 3 25% 2 15% 1 5% 9% 8% 6% 7% 6% 6% 1 13% 6% 6% 8% % 15% 14% 22% 17% 17% 17% 17% 18% 18% 2 22% 23% External corporate indebtedness to GDP Corporate loans to GDP Source: NBG,GeoStat 45% 4 35% 3 25% 2 15% 25% 1 3% 3% 4% 6% 9% 13% 11% 11% 13% 14% 18% 21% 5% Source: NBG,GeoStat Banking Sector loans to GDP Georgian banks better placed due to sound financials Country Fitch Rating Outlook Sector Outlook Armenia B Negative Negative Azerbaijan B Stable Negative Belarus B Stable Negative Georgia BB- Stable Stable Kazakhstan B Stable Negative Russia BB Negative Negative Ukraine CCC None Negative Loans to GDP, 214 Loans to GDP, 215 Uzbekistan B Stable Stable Source: IMF Source: Fitch page 87

88 Armenia Georgia Russia Turkey Moldova Azerbaijan Belarus Kazakhstan Ukraine Azerbaijan Turkey Georgia Armenia Russia Kazakhstan Moldova Ukraine Belarus Georgia Ukraine Turkey Russia Armenia Belarus Moldova Azerbaijan Flexible FX regime shielded reserves and supported to macro stability Currency weakening vs US$ Georgia used less reserves to support GEL 6 48% 36% 24% 12% -12% 15.5% 22.8% 24.6% 29.2% Armenia Georgia Turkey Moldova Russia USD/AMD USD/GEL USD/TYR USD/MDL USD/RUB 45.7% 46.1% 47.9% 48.7% Kazakhstan USD/KZT 51.5% Belarus Azerbaijan Ukraine USD/BYR USD/AZN USD/UAH 25% 2 15% 1 5% -5% % -15.3% -15.9% -18.2% Reserve loss, % -32.6% -34.6% -37.2% -75.7% LHS: Weakening against USD RHS: Annual inflation, 216 latest Source: Bloomberg, National Statistics Offices Note: US$ per unit of national currency, period 1-Aug Apr-216 Source: IMF Note: Feb-216 vs Aug-214; Armenia s reserves exclude a US$ 5mn Eurobond issued in March 215 Inflation remains modest in Georgia Monetary policy rates 45% 4 35% 3 25% 2 15% 1 5% -5% End-214 End-215 Latest % 2 15% 1 5% End-214 End-215 Latest-216 Source: Central banks Source: Central banks page 88

89 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Recent trends - Tourism on the rise, exports/remittances bottoming out Tourist arrivals growing robustly Remittances down from Russia and Greece % % % % % -8-4 Source: GNTA International arrivals, mn % change, y/y Source: NBG Inflow, US$ mn % change, y/y Exports suffered mainly due to lower re-exports Trade deficit down as consumer goods imports fell % 13% -13% -27% % 8% 2% 29% 2 13% 2% 19% 2 14% 9% 9% 1 12% -18% -35% -1-27% -6% -16% -14% -25% -26% -14% -19% Source: GeoStat Exports, US$ mn % change y/y, exports Source: GeoStat Note: Excluding one-offs page 89

90 Contents BGEO Group PLC Overview Results Discussion BGEO Group PLC Results Discussion Banking Business Results Discussion Investment Business Georgian Macro Overview Appendices Analyst Coverage Express Banking Solo Banking Financial Statements page 9

91 Analyst coverage BGEO Group PLC Consensus Target Price: GBP Feb.216 GBP GBP Apr May.216 GBP 24. GBP Jun May.216 GBP GBP Jun Feb.215 GBP GBP Feb May.216 GBP 27.9 GBP Dec May.216 GBP 29.5 page 91

92 Express emerging retail banking How Express works Express Branches 2 1,34,734 Express Cards for Transport payments Opening accounts and deposits Issuing loans and credit cards Credit card and loan repayments Cash deposit into accounts Money transfers Utility and other payments Acts as payments card in metro, buses and mini-buses 3 2,627 Express Pay Terminals 4 8,175 POS Terminals at 3,356 Merchants Credit card repayments Loan repayments Cash deposit into accounts Loan activation Utility and other payments Mobile top-ups MetroMoney top-ups Payments via cards and Express points P2P transactions between merchant and supplier Credit limit with interest rate page 92

93 No. of transitions s Express Banking Capturing Emerging Mass Market Customers 28,822 Express Pay terminals 19,41 25,928 x2 Express branches 5,621 4,949 7,363 49% ATMs 3,86 3,172 4,676 47% POS terminals 3,58 4,21 6,8 x2 1Q16 1Q15 1Q14 7,148 Express cards 3,625 5,269 x2 Internet banking 1,273 1, % Mobile banking x3-5, 1, 15, 2, 25, 3, 35, 4,319,81 Tellers 3,956,472 4,21,59 +9% page 93

94 Solo a fundamentally different approach to premium banking SOLO Lounges Through the recently launched Solo, we target to attract new clients (currently 13,284) to significantly increase market share in premium banking from c.13% at the beginning of 215 New Solo offers: Tailor made banking solutions New financial products such as bonds Concierge-style environment Access to exclusive products and events Lifestyle opportunities 3x higher new clients attracted per banker ratio, compared to same period last year page 94

95 Expanding into Tbilisi Istitutionalising the business GHG roadmap - Creating single largest healthcare player Year Milestone EV/EBITDA Investment per bed BGH Investment GEL mln Facilities & beds Decision to invest 211 State infrastructure reform starts Started investing in hospitals Merged with Block Georgia (non-cash) 3.1x, GEL 74k Imedi L acquisition 4.9x, GEL 47k Investment to support organic growth GEL 56k State Universal Healthcare Program starts Acquired Caraps 6.x, GEL 142k Accelerate growth 214 Acquired Avante 3.7x, GEL 73k Acquired Sunstone GEL 99k Acquired Traumatology 3.9x, GEL 134k 1 6 Acquired Block minority 215 Acquired HTMC 6.4x, GEL 26k Acquired Deka GEL 183k 1 8 Launched ambulatory expansion strategy IPO-ed Total (as of March 216) ,686 page 95