Bank of Georgia Investor Presentation November 2010 · 2018. 5. 4. · November 2010 Page 7 GDP per...

November 2010

GROWTH AT THE RIGHT PRICELSE: BGEO / GSE:GEB

JSC Bank of Georgia investor presentation

Merrill Lynch Russia & CIS 1-1 ConferenceNew York, November 2010

November 2010

Introduction to Bank of GeorgiaThe leading universal bank in Georgia

No.1 by assets (34%), (1) gross loans (34%), (1) client deposits (30%) (1) and equity (39%) (1). September 2010 YTD market share gain 2.2%Assets of GEL 3.6 bn (USD 2.0 bn), Net Loans of GEL 2.1 bn (USD 1.1 bn), Client Deposits of GEL 1.7 bn (USD 0.9) and Equity of GEL 679.6 million (USD 376.2 bn)

Leading retail banking, with top brand, best distribution network and broadest range of services of any bank in Georgia. Number of Retail Clients 729,500, Number of Branches 137, ATMs 388Leading corporate bank with approximately 90,500+ legal entities and over 171,000+ current accountsLeading wealth management, insurance, brokerage, leasing and card-processing services providerBanking operations in Ukraine (BG Bank) and Belarus (BNB) account for less than 10% of BoG’s consolidated total assets The only Georgian entity with credit ratings from all three global rating agencies

S&P: ‘B/B; Fitch Ratings: ‘B+/B’ – at the sovereign ceiling; Moody’s: ‘B3/NP (FC)’ & ‘Ba3/NP (LC)’Listed on the London Stock Exchange (GDRs) and Georgian Stock Exchange

Market Cap (LSE) US$ 546 mln as 10 November 2010Approximately 95% free float

Issue of the first ever Eurobonds in GeorgiaBloomberg: BKGEO; 5 year, 9%, US$200 mln(US$ 50 mln bought back)B/Ba2/B (composite B+)

(1) All data according to the NBG as of 30 September 2010

Institutional Shareholders*Local Shares Held by Domestic and Foreign Retail ShareholdersManagement and Employees**

93.0%3.9%3.1%

Ownership Structure

*through BNY Nominees Limited** includes GDRs held as part of EECP

17.2% 19.0% 17.8%

27.9%32.9% 33.0% 34.2%35.4%

0%

10%

20%

30%

40%

2003 2004 2005 2006 2007 2008 2009 Q3 2010

BoG Market Share by Assets

November 2010

Group structure

Commercial Banking

Georgia

Corporate Banking

Retail Banking

Wealth Management

BG Bank BNB BG

CapitalAldagi

BCI

JSC “Bank of Georgia”

Securities Insurance

November 2010

The Georgian Economy

November 2010

Georgia’s Economy – Basic FactsArea: 69,700 sq kmPopulation: 4.4 million (as of January 1, 2009)Life expectancy: 76.5 yearsOfficial language: GeorgianLiteracy: 100%Capital: TbilisiCurrency (code): Lari (GEL)GDP 2010F: US$11.5 billionGDP real growth rate 2009A: -3.9%GDP real growth rate 2010F: 6.0%GDP per capita 2010F (Nominal): US$ 2,610GDP per capita 2010F (PPP): US$ 4,971Budget Deficit 2010F: 6.3 % of GDPInflation rate 2010F: 6.0%External public debt / GDP 2010F: 36.0%Sovereign ratings:

Fitch B+/StableS&P B+/Stable/B+Moody’s Ba3/Stable

Source: Government of Georgia/IMF/Bank of Georgia estimates

November 2010

Strong economic growth before crisis … starting again?

GDP per capita

Gross Domestic Product

Source: National Statistics Office of Georgia

4.05.1

6.4

7.8

10.2

12.8

10.711.511.1%

5.9%

9.6% 9.4%

12.3%

6.0%

-3.9%

2.3%

-2

0

2

4

6

8

10

12

14

2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010F

USD billion

-5%

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

15%

Nominal GDP (LHS) Real GDP Growth (RHS)

2,610

4,971

919 1,188 1,484 1,7642,315

2,9212,450

2,966 3,2423,644

4,0384,664 4,863 4,747

0

1,000

2,000

3,000

4,000

5,000

6,000

2003 2004 2005 2006 2007 2008 2009 2010F

USD

Nominal GDP per capita GDP per capita PPP

November 2010

GDP per capita is low, leaving much room to climbGDP per capita across countries

Source: IMF, National Bank of Georgia

US$

2,555 2,610 2,641 2,7372,984 3,012

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Bulgaria 2003 Georgia 2010F Turkey 2002 Romania 2003 Russia 2003 Serbia 2004

US$

2,569 2,6103,735

5,1667,523

8,681 8,711

11,30212,914

14,402

18,256

31,778

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Ukraine2009

Georgia2010F

China 2009 Belarus 2009 Romania2009

Russia 2009 Turkey2009 Poland 2009 Hungary2009

Estonia 2009 CzechRepublic

2009

EU Average2009

November 2010

Key drivers of economic growth

Increased importance of Georgia as regional transportation and logistics hub with geopolitically important location for cross country trade and energy transit.

Export CAGR of 17% from 2003 to 2009; 33% y-o-y increase in nine months 2010. Net electricity exporter since 2007.

FDI averaging at 16% of GDP during past three years, with cumulative FDI (2004 – 2009) in country reaching 60.5% of GDP as of YE 2009.

Rapidly developing Financial sector with demonstrated resilience to crises (conservative regulation; No government bailouts) with high capital base to support the growth.

Financial Services

Export Growth

LibertarianEconomy

RegionalHub

FDIs

November 2010

Libertarian economic policies kick-start modernizationBribe payers index (% are not paying bribes)

Ease of doing business

Tax and Tax rates slashed: Only six taxes, down from 21Flat personal income tax of 20% (15% by 2013)Corporate income tax 15%By 2012 no taxes on dividends, interest income or worldwide income

• “Liberty Act”Referendum is required for an increase in tax ratesBudget expenditure capped at 30% of GDP (effective FY2012)Budget deficit capped at 3%, effective FY2012Public debt capped at 60% of GDP, effective FY2012

Corruption and Red tape slashedAccording to IDA (International Development Association of

World Bank) Georgia ranks as a top business reformerCorruption significantly reduced, Transparency International ranked Georgia 7th out of 69 by Global Corruption Barometer98% of Georgians didn’t have to pay bribe in past year, according to International Republican InstituteGeorgia 11th out of 183 in the WB’s Ease of Doing Business (up from 112 in 2005)Customs code harmonized with EU; Capital controls abolished since 1990s

Source: Transparency International, the Heritage Foundation, World Bank 4

5

11

21

29

38

43

55

58

67

71

72

73

120

142

United States

UK

Georgia

Switzerland

Israel

Azerbaijan

Armenia

Romania

Belarus

EE Average

FSU Average

Poland

Turkey

Russia

Ukraine

54%

57%

86%

87%

96%

97%

98%

98%

98%

Azerbaijan

Armenia

Romania

Belarus

Poland

United Kingdom

Georgia

Turkey

United States

November 2010

Mining and quarrying, 0.8%

Public administration, 13.3%

Education, 3.9%

Transport & Communication, 10.8%

Manufacturing, 7.7%

Trade (Retail & Wholesale), 11.7%

Financial intermediation, 2.6%

Hotels and restaurants, 1.8%

Real estate, renting and business activities, 6.9%

Construction , 5.6%

Health, social and community work, 10.1%

Agriculture, hunting and forestry; fishing, 7.5%

Utilities & household processing, 4.6%

Regional hubBaku Tbilisi Ceyhan (BTC) oil export pipeline - operated by BP from Caspian Sea to Europe via the Turkish coast. 1.0 million bbl/day or circa 1.2% of the current World oil consumption (9% of the consumption by EU, 80% of aggregate consumption by Turkey, Romania, Bulgaria and Poland) is transported through BTC or railway; c. $4bln invested by BP Consortium;

Shah-Deniz (BTE) gas pipeline (South Caucasus pipeline) - 6.6 bcm/year operated by BP to transport gas from Caspian Sea to Turkey;

Iran-Azerbaijan-Georgia (IAG) gas pipeline – 3.5 bcm/yearWestern Route Pipeline (Baku Supsa) oil export pipeline - 5.75 mt/year operated by BP from Caspian Sea to European Markets through the Black Sea;Russia-Georgia-Armenia gas pipeline – 5.8 bcm/year

Free industrial zones created around Tbilisi, Poti (port), Kutaisi (second largest city). Tax rates in FIZ are largely 0%Two sea ports. Poti Sea Port privatized in December 2008 by Rakeen Group (UAE) to build infrastructure for operating Free Industrial ZoneTransportation Communication and Trade cumulative CAGR 2004-2009 of 9.4%

White White Stream Stream

(proposed(proposed))

GDP Breakdown

22.5%Upcoming Projects

NABUCCO Project is to finish by 2015, and White Stream project is flagged as “Priority Project” by EC

Baku-Akhalkalaki-Kars railway line - sanctioned in 2007 building railway to link Asia and Europe

LNG - Azerbaijan-Georgia-Romania-Hungary Black Sea liquefied natural gas export route will supply c.6- to 8-billion cubic meters of liquefied Azerbaijani natural gas per year to Europe via Black Sea tankers

November 2010

Export growth

WTO member since 2000. No quantitative restrictions on trade; As of November 2007 Georgia has entered into a FTA with Turkey

One of the two beneficiaries of the EU GSP+ Scheme in the CIS since 2006, which grants local companies the right to export 7,200 categories of goods duty-free into the EU. US-Georgia charter on Strategic Partnership envisions an update of Bilateral Investment Treaty, expansion of Georgian access to the GSP and the possibility of entry into Free Trade Agreement

Export growth of 33% y-o-y nine months 2010 driven by exports of main export items: agricultural products, ferroalloy, precious metals, aircraft, rail car, vessels, fertilizers and machinery

Significant investments made in export oriented companies. Import of capital goods amounted to c.13% of GDP from 2004 to 2009

Rapidly growing tourism sector. C.US$1.4B of donor money earmarked for investments in infrastructure. 2010 a record year in number of tourists visiting Georgia

Huge untapped hydro-power resources. Only 18% of Georgia’s hydro potential of 50 GWh is being utilized; 1,200 MW transmission line to Turkey will become operational in 2013 which will significantly boost export potential to Turkey

Electricity Export/Import

Number of tourists

Source: National Statistics Office of Georgia, Ministry of Energy of Georgia

'000

1,950

1,500 1,290

1,052 983

560368 313

-

500

1,000

1,500

2,000

2,500

2003 2004 2005 2006 2007 2008 2009 2010F

Europe excluding Turkey CIS Turkey Other

mln kWh

1,327

(1,080) (1,288) (1,399)

(777)(434) (255)

23671 122 96

749679634

(48)(649)

(844)

(1,217) (1,277)

(681)

20030

494

1,279

(1,500)

(1,000)

(500)

-

500

1,000

1,500

2,000

2003 2004 2005 2006 2007 2008 2009 Sep-10

Export Import Net export

November 2010

US$

mln

1,8652,493

3,318

4,413

5,917

7,499

5,267

6,215

193492

421686

725900

849

1,178

1,6473,6883,182

1,289 2,187 2,552 3,199 3,940

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2003 2004 2005 2006 2007 2008 2009 2010F

Imports of goods & services CAGR ('04-'09): 16% Exports of goods & services CAGR ('04-09): 14% Income and Transfers

US$

mln

98.3 261.7 942.0 1,092.6 658.0

2,982.41,698.4

1,423.4

(1,096.8)276.2176.7160.3

479.6351.01,508.1 2,291.8734.8

(353.9)(383.8) (1,175.3) (1,216.5)(709.2) (2,912.3)(2,010.0)

-9.5%

1.6%5.6%

3.2%7.7% 8.6%

-6.9%

-19.8%

-9.6%

-22.8%

-15.1%-11.1% -11.3%

7.9%5.5%

14.7%

-4,000-3,000-2,000-1,000

01,0002,0003,0004,0005,000

-25.0%-20.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%15.0%20.0%

Donor inflows (DI) Total private capital inflows (TPCI) CAD CAD as % of GDP CAD+TPCI+DI as % of GDP

2009200820072006200520042003 2010F

Trade structure

Current Account Deficit

Exports and Imports*

*Export and Import of goods and services

Source: Central Bank of Georgia

Donor Inflows include both public and private sectors. Donor inflows in 2009 adjusted according to the banking sector foreign debt outflows

Source: Central Bank of Georgia, Ministry of Finance of Georgia, BoG Forecasts for 2010

Current account Deficit amounted 9.8% of GDP in 1H 2010

GEL appreciated by 4.6% since June 2010

November 2010

FDIs and Donor assistanceFX reserves

FDI Inflows


Net remittances

Source: Government of Georgia presentation

483.0 450.0

1,190.0

2,015.0

1,564.0

658.0870

1,092.6

276.2

261.7

176.7160.3

942.0

658.07.0%

15.3%

19.8%

9.4%

12.2%

6.1%

7.7%

0

500

1,000

1,500

2,000

2,500

3,000

2004 2005 2006 2007 2008 2009 2010F

US$ mln

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Net FDI Donor inflows Net FDI as % of GDP

212.7315.4

420.5

755.4

917.9

766.5

950.04.2%

4.9%5.4%

7.4% 7.2% 7.2%

8.4%

0

100

200

300

400

500

600

700

800

900

1000

2004A 2005A 2006A 2007A 2008A 2009 2010F

US$ mln

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Net remittances (LHS) Net remittances as % of GDP (RHS)

Liberal regulatory environment for foreign businesses, resulting in FDI averaging at 16% of GDP during past three years, with cumulative FDI (2004 – 2009) in country reaching 60.5% of GDP as of YE 2009.

Unequivocal support from the West and IFIs with total financial pledge through 2011 of US$4.5 bln (42% of 2009 GDP). Approximately one third of the package is earmarked for financial sector. By end of FY 2010, cumulative donor commitment to Georgia under the Brussels pledge will total circa US$4.2 billion, with possibility of further upward adjustment. As of YE 2009, US$ 1.4 billion was disbursed

In addition:

Approved access to US$1.2 bln under SBA by IMF until 2011U.S. Committed US$ 124 mln investment in energy infrastructure development (February 2010)US$70 million from ADB for infrastructure repairs

US$ 2.11 bn

US$1.48 bnUS$0.93 bn

US$ 1.36 bn

US$0.19 bn


US$ 2,20 bn

1.3

1.01.1

0.8

0.8

0.8

1.71.5

-

500

1,000

1,500

2,000

2,500

2003 2004 2005 2006 2007 2008 2009 Sep-100.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8Fx reserves FX/M2

November 2010

Financial intermediation

* Includes only loans to households

Prudent Regulation Ensuring Financial StabilityHigh Regulatory Capital Requirement: Top 5 Banks average Tier I capital adequacy ratio (NBG standards) – 14.2%, Bank of Georgia – 15.2% (BOG standalone BIS Tier I Capital adequacy ratio 24.7%)

High level of liquidity requirements from NBG at 30% of Liabilities, Bank of Georgia 33.8%

Resilient Banking SectorDemonstrated strong resilience towards both domestic and external shocks without single bank going bankrupt

No nationalization of the banks has occurred, no government bail-out plans have been required, no Government ownership since 1995

Excess liquidity and excess capital that has been accumulated by the banking sector to enable boosting the financing of the economic growth

Very low leverage of population with Retail Loans below 10% of GDP and Total Loans at c. 30% of GDP resulted in contained number of defaults during the global crisis (Average LLP by BoG standalone as of end Q3 ‘10 at c. 6.5%)

Bank debt to GDP

22.3 24.3 28.9 33.141.5 45.7 47.0 47.3 49.5

67.976.0 76.9

90.4

114.6

186.0

-

20

40

60

80

100

120

140

160

180

200

Arm

enia

Azerbaijan

Georgia

Turkey

Rom

ania

Bulgaria

Russia

Poland

Belarus

Kuw

ait

Bahrain

Ukraine

UA

E

USA

*

EU*

Banking sector assets

GEL mln

389 522 616 893 1,353 1,860 1,699 2,372731 900 1,6452,585

4,4255,455

4,5245,202

216 275287

749

1,430

1,5502,069

2,271

-

2,000

4,000

6,000

8,000

10,000

12,000

2003 2004 2005 2006 2007 2008 2009 2010 YTDCash Net Loans Other Assets

1,336

8,2938,865

7,208

4,227

2,5481,697

9,846CAGR 33%

November 2010

Management target for 2010

November 2010

75.6

0.2

(98.9)

72.3

(100.0)

(80.0)

(60.0)

(40.0)

(20.0)

-

20.0

40.0

60.0

80.0

100.0

2007 2008 2009 2010F

GEL mln

Targeted financial performance 2010*

Target net provision expense for 2010

AssumptionsTarget pre-provision profit for 2010

2010 real GDP growth of 2%* in Georgia2010 inflation rate of 3.2%* in GeorgiaThe GEL/US$ exchange rate remains stable during 2010Geo-political stability is sustained in the region

* IMF Estimates

Target net income for 2010

68.02

21.85

13.035.73

135.0

27.0

127.9

106.8

0

40

80

120

160

2007 2008 2009 2010F

GEL mln

Profit before provisions Goodwill Impairment associated with BG BankLosses related to Real Estate Losses related to investmentsOther

135.6

50.0

133.1128.7

17.0

0.0

40.0

80.0

120.0

160.0

2007 2008 2009 2010F

GEL mln

* As announced in November 2009

10% upside risk

November 2010

Strategy

November 2010

Focus on restructuring of Ukrainian operations, with options varying from further scale down to divestingFocus on high margin, unattended SME sector in Belarus; 19.99% of equity interest in BNB sold to IFC in 1H 2010First stage of restructuring of equity investment business completed

Controlling stake in investment management company sold

Enhance operational efficiency through technological improvements:Temenos T24, core banking software, acquired in October ‘09 is in the process of implementation; Deployment of Softscape, talent management solution, and CRIF, credit scoring solution, is under way

Strategic objectives: grow at the right price

Wealth Management services launched in Israel, Ukraine and LondonDeposits from international clients reach GEL 135 mln, c. 8% of total deposits in Q3 2010Premier Banking launched for the affluent client base supported by the exclusivity of Amex Card issuing and acquiring business in Georgia

More efficient

Deposit funding

Lending machine

Despite high rate of bank debt growth in ’05-’09, ample room for growth with total loans/GDP under 30%; retail loans/GDP under 10%Both corporate and retail lending stepped up in Georgia, Corporate loans up 18.0% YTD and Retail loans up 21.6% YTDEmphasis on micro loans, SMEs, consumer loans and mortgages in Georgia

Focus on International operations

November 2010

Intention to pay dividends

November 2010

The Bank intends to propose the establishment of a progressive dividend policy at the 2010 AGMThe intention is to recommend GEL 0.30 dividend per share in 2011 in respect of 2010 financial year performanceDividend payment is subject to management achieving 2010 financial targets outlined aboveThe Bank anticipates increasing the dividend payment in the future

The new dividend policy is to set dividend payments while taking into consideration the need to maintain proper balance between the ability to finance growth and preserving progressive dividend

The new dividend policy will serve to further increase capital management discipline as we consider investing in our growth going forwardEstimated dividend payout for 2010 performance - GEL 9.4 million

# of Shares outstandingIntention to pay dividends for 2010

25,202,00927,154,918

31,252,553 31,306,071

YE 2006 YE 2007 YE 2008 YE 2009

November 2010

Governance

November 2010

22 22

• 7 non-executive SB members; non-executive Chairman

Supervisory Board

SB members• Neil Janin, Independent Director

experience: Director at McKinsey & Company in Paris; Co-chairman of the commission of the French Institute of Directors (IFA); Chase Manhattan Bank (now JP Morgan Chase) in New York and Paris; Procter & Gamble in Toronto.

• Ian Hague, Firebird Management LLC• Allan Hirst, Independent Director

experience: 25 years at Citibank, including CEO of Citibank, Russia; various senior capacities at Citibank

• Kaha Kiknavelidze, Independent Directorcurrently managing partner of Rioni Capital, London based investment fund; previously Executive Director of Oil and Gas research team for UBS

• Jyrki Talvitie*, East Capital• David Morrison, Independent Director

experience: senior partner at Sullivan & Cromwell LLP prior to retirement

• Al Breach, Independent Director experience: Head of Research, Strategist & Economist at UBS: Russia and CIS economist at Goldman Sachs

• Hanna Loikkanen, East Capital - Advisor to Bank of Georgia Supervisory Board.

* Expected to be replaced by Hanna Loikkanen by the EGM to be held on 22 November 2010

• Chief Executive Officer and 9 Executive members of Management Board

Management Board

MB members• Irakli Gilauri, CEO; formerly EBRD banker in Tbilisi and London, MS from

CASS Business School, London• Giorgi Chiladze, Finance; formerly CEO of BTA Bank (Georgia);

Program Trading Desk at Bear Sterns, NYC• Archil Gachechiladze, Corporate Banking; formerly Deputy CEO

of TBC Bank, Georgia; Lehman Brothers Private Equity, London; MBA from Cornell University

• Avto Namicheishvili, Legal; previously partner at Begiashvili &Co, law firm in Georgia. LLM from CEU, Hungary

• Irakli Burdiladze, Deputy CEO in charge of SB Real Estate; previously CFO at GMT Group, Georgian real estate developer. Masters degree from Johns Hopkins University

• Sulkhan Gvalia, Risk; founder of TUB, Georgian bank acquired by BOG in 2004

• Murtaz Kikoria, acting CEO of BG Bank; formerly senior banker at EBRD; Head of Banking Supervision at the National Bank of Georgia.

• Mikheil Gomarteli, Retail Banking; 10 years work experience at BOG

• Nick Shurgaia, International Business; previously CEO of VTB Georgia, Senior Banker at EBRD, London; MBA from LBS

• Vasil Revishvili, Head of Wealth Management; previously Head of the Investment Risk Unit and Senior Investment Manager at Pictet Asset Management in London and Geneva. MS in Finance from London Business School

A move to classical two-tier board structure

November 2010

Q3 2010 results highlights

November 2010

Q3 and 9 months 2010 P&L results highlights

NMF0.05 0.08 6.3%0.31 0.56 0.33 0.60 EPS (diluted) NMF0.05 0.08 6.3%0.34 0.63 0.37 0.66 EPS (basic)

Q3 2009Millions unless otherwise noted Q3 2010 Q2 20103 Growth1 Growth 2

Bank of Georgia (Consolidated, IFRS-Based) GEL US$ GEL US$ Q-O-Q GEL US$ Y-O-Y(Unaudited) (Unaudited) (Unaudited)

Net Interest Income 56.5 31.3 51.7 28.0 9.4% 48.9 29.2 15.5%Net Non-Interest Income 34.7 19.2 30.9 16.7 12.3% 30.4 18.1 14.1%Total Operating Income (Revenue)4 91.2 50.5 82.5 44.8 10.5% 79.3 47.3 15.0%Recurring Operating Costs 51.0 28.2 47.8 25.9 6.7% 45.0 26.8 13.5%Normalized Net Operating Income5 40.1 22.2 34.7 18.8 15.6% 34.3 20.5 16.9%Net Non-Recurring Income (Costs) (1.6) (0.9) 1.5 0.8 NMF (1.9) (1.1) -13.6%Profit Before Provisions 38.5 21.3 36.2 19.6 6.2% 32.4 19.3 18.7%Net Provision Expense 14.2 7.9 12.6 6.8 12.8% 30.0 17.9 -52.6%Net Income/ (Loss) 20.8 11.5 19.6 10.6 6.3% 2.6 1.6 NMF

1 Compared to Q2 2010, growth calculations based on GEL values.2 Compared to the same period in 2009; growth calculations based on GEL values.3 Q2 2010 and 6 months 2010 Consolidated numbers have been Reviewed 4 Revenue includes Net Interest Income and Net Non-Interest Income.5 Normalized for Net Non-Recurring Costs.

NMF0.06 0.10 0.91 1.64 EPS (diluted) NMF0.06 0.11 1.01 1.83 EPS (basic)

9 months 2009Millions unless otherwise noted 9 months 2010 Growth 2

Bank of Georgia (Consolidated, IFRS-Based) GEL US$ GEL US$ Y-O-Y(Unaudited) (Unaudited)

Net Interest Income 153.4 84.9 150.8 89.9 1.7%Net Non-Interest Income 96.2 53.3 90.8 54.1 5.9%Total Operating Income (Revenue)4 249.6 138.2 241.6 144.1 3.3%Recurring Operating Costs 145.1 80.3 135.9 81.1 6.7%Normalized Net Operating Income5 104.5 57.9 105.7 63.0 -1.1%Net Non-Recurring Income (Costs) (3.4) (1.9) (2.4) (1.4) 40.9%Profit Before Provisions 101.1 56.0 103.2 61.6 -2.1%Net Provision Expense 34.2 18.9 102.8 61.3 -66.8%Net Income/ (Loss) 57.2 31.7 3.4 2.0 NMF

Positive consecutive q-o-qnormalized operating leverage of 3.7%

November 2010

30 September 2010 Balance Sheet results highlights

14.5%15.7%Total Capital Adequacy Ratio (NBG)

15.8%15.2%Tier I Capital Adequacy Ratio (NBG)

32.7%32.6%Total Capital Adequacy Ratio (BIS)

20.3%19.9%Tier I Capital Adequacy Ratio (BIS)

13.69 22.96 11.25 20.74 12.01 21.69 Book Value Per Share, GEL & US$

428.4 718.5 352.3 649.8 376.2 679.6 Shareholders’ Equity

1,348.5 2,261.6 1,504.1 2,773.8 1,625.4 2,936.0 Total Liabilities

547.7 918.6 512.7 945.6 488.0 881.5 Borrowed Funds

705.1 1,182.5 806.4 1,487.2 918.1 1,658.5 Client Deposits

1,777.0 2,980.2 1,856.4 3,423.6 2,001.5 3,615.6 Total Assets

989.4 1,659.3 1,075.0 1,982.5 1,141.1 2,061.4 Net Loans

(Unaudited)(Unaudited)(Unaudited)

US$GELUS$GELUS$GELBank of Georgia (Consolidated, IFRS-Based)

Q3 2009Q2 2010Q3 2010Millions, unless otherwise noted

-5.5%13.5%4.6%Book Value Per Share,

-5.4%13.6%4.6%Shareholders’ Equity

29.8%26.8%5.8%Total Liabilities

-4.0%-3.5%-6.8%Borrowed Funds

40.3%30.3%11.5%Client Deposits

21.3%24.1%5.6%Total Assets

24.2%22.8%4.0%Net Loans

Y-O-YYTDQ-O-Q

ChangeChangeChange

November 2010

Assets

Corporate gross loan portfolio growth

Loan book, gross, Consolidated*Total assets, Consolidated

Retail gross loan portfolio growth

Gross loans grew 3.1% q-o-q, up 21.4% YTD and up 23.1% y-o-y

RB & WM, 45%GEL 1,022 mln

CB , 44%GEL 999 mln

BNB , 2%GEL 52 mln

BG Bank, 9%GEL 192 mln

* Does not include inter company eliminations

1,855.7 2,106.72,059.7 2,189.4 2,039.5

1,897.3 1,825.7 1,851.91,957.3

2,179.72,247.3

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

GEL mln

Gross loans

3,124.12,913.4

2,980.22,907.8

3,186.83,258.93,154.33,400.7

3,147.73,423.6

3,615.6

Record high

874826

875

794

928870

806765

880

951

1,016 1,039

0

200

400

600

800

1,000

1,200

YE 2007 31-Mar-08 30-Jun-08 30-Sep-08 31-Dec-08 31-Mar-09 30-Jun-09 30-Sep-09 31-Dec-09 31-Mar-10 30-Jun-10 30-Sep-10

GEL mln

-5% +6% -9% +17% -5%-7%-6% +15% +8% +7% +2%

656

755

931

1,000

932

861831

807847

930981

922

-

200

400

600

800

1,000

1,200

YE 2007 Q1 08 Q2 08 Q3 09 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

GEL mln

+15%+10%+22% +1% +7% -7% -3%-8% -3% +5% +5%

21.6%35.9%

November 2010

Loans

Leadership in consumer lending

Retail loan book breakdown, BoG StandaloneCorporate loan book breakdown, BoG Standalone

Retail loans originated

Credit cards and overdrafts, 14%

Micro loans, 19%

Mortgage loans, 40%

Consumer and other, 27%

FMCG, 14%

Energy, 10%

Industry & State, 10%

Construction & Real Estate, 18%

Other, 16%Pharmaceuticals and Healthcare,

1%Trade, 30%

No.1 corporate bank in Georgia

Circa 30.0% market share based on customer deposits(1)

Circa 29.6% market share based on corporate loans(2)

Integrated client coverage in key sectors

90,508 clients of which 9,242 served by dedicated relationship bankers

Circa 47% market share in trade finance and documentary operations(2)

Second largest leasing company in Georgia(2) – Georgian Leasing Company (GLC)

Increased the number of corporate clients using the Bank’s payroll services from 1,567 in Q2 2010 to 1,657 in Q3 2010

More than 6,000 corporate accounts were opened at the bank in Q3 2010, bringing the total number of current accounts to 171,052

58,12152,42353,264§ Number of consumer loans outstanding146.9130.9125.6• Volume of consumer loans outstanding (GEL mln)

94,48081,119105,040• Credit Cards Outstanding, of which34,35919,600-§ American Express cards1,6081,043-• Number of Solo clients outstanding, (premier banking)

Q3 2009 Q2 2010 Q3 2010

• Number of Retail Clients 701,441 714,484 729,578

122.1

177.5 183.3

235.6

266.9

317.6

140.2

74.968.8

97.5104.9

128.2

186.9

211.3

55.9

0

50

100

150

200

250

300

350

Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1' 10 Q2' 10 Q3 '10

GEL mln

278%

November 2010

Loan origination

Micro loans (RB & WM)

Consumer loans (RB & WM)Mortgage loans (RB & WM)

Other RB & WM loans

Standalone

358.8

23.1 46.7

406.1

58.7

417.3

-

50

100

150

200

250

300

350

400

450

Volume of MortgageLoans Originated

Volume of MortgageLoans Outstanding

GEL mln

Q3 2009 Q2 2010 Q3 2010

+16%

+103%+26%

+3%

60.3

143.3

65.3

135.5

79.9

159.7

-

20

40

60

80

100

120

140

160

180

Volume of Consumer LoansOriginated

Volume of Consumer LoansOutstanding

GEL mln

Q3 2009 Q2 2010 Q3 2010

+22%+8%

-5%+18%

92.3

25.7

156.8

71.778.3

182.7

-

20

40

60

80

100

120

140

160

180

200

Volume of Micro LoansOriginated

Volume of Micro LoansOutstanding

GEL mln

Q3 2009 Q2 2010 Q3 2010

+179%

+70%

+9%

+16%

272.5262.1

3.7 5.0

267.5

8.1-

50

100

150

200

250

300

Volume of Other RB & WMLoans Originated*

Volume of Other RB & WMLoans Outstanding

GEL mln

Q3 2009 Q2 2010 Q3 2010

+36%

-2 %

+62%

-2%

November 2010

RB cross-selling

Cards penetration rate*

RB loans penetration rate*Product/client ratio

Standalone

* Calculated as percentage of Bank of Georgia clients for the period

2.7

3.03.2

3.33.5

3.13.0

2.8 2.8 2.7 2.8 2.8 2.8

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 31-Mar-10

30-Jun-10 30-Sep-100.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Number of clients (LHS) Number of products (LHS) Product/Client Ratio (RHS)

1.1% 1.1% 1.1% 1.1% 1.2% 1.2%

9.2% 7.6% 7.6% 7.9% 8.7%

2.2% 2.1% 1.9% 1.5% 0.8% 0.6% 0.6% 0.7% 0.8%

35.8%39.3%

44.3%46.4% 47.9% 47.6%

44.5% 44.8%46.8% 45.5%

1.2%1.2%1.1%1.0%0.9%

11.8%

17.0%24.2%

29.1%

30.9%31.7%

1.1%2.0%

34.1%

0%

10%

20%

30%

40%

50%

60%

Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10

Mortgage Loan Penetration Rate Consumer Loan Penetration RateMicro Loan Penetration rate Other Loans Penetration Rate

95.6% 98.7%104.0%

75.4% 73.2%67.6% 66.1% 66.2% 65.7% 64.4%

23.6% 26.9%31.4%

24.8%20.6% 17.5% 15.0%

10.56% 11.38% 11.3% 12.9%

62.6%

0%

20%

40%

60%

80%

100%

120%

Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10Debit Cards Penetration Rate Credit Cards Penetration Rate

Current accounts & deposits penetration rate*

11.3%

111.2% 111.3% 112.8%122.4% 121.7% 119.4%

14.8%9.7%9.2%7.6%7.1%8.9%7.3%6.7%5.6%

10.8%10.3%

110.8%111.1%114.3%105.0% 121.5%

14.4%14.7%15.7%16.4%19.0%19.5%19.8%20.0%

14.3% 14.4%

0%

20%

40%

60%

80%

100%

120%

140%

Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10

Demand & Time deposits Penetrartion rateUniversal Current Accounts Penetration RateStandard Current Accounts Penetration Rate

November 2010

Loan portfolio quality

NPLs, BoG Standalone

NPLs, ConsolidatedLoan quality under the following stress tests

Loan loss reserve, Consolidated

Domestic and international economic crises

17% devaluation of Lari against US$ in one day in November 2008

Political tension in Georgia peak in Spring 2009

* Other NPLs include BNB and BG Bank

Bank of Georgia standalone NPLs declined 25.3% q-o-q to GEL 96.5 million, while BG Bank’(Ukraine) NPLs declined 22.1% q-o-q to GEL 32.7 million

39.6 44.4

129.0108.8

127.9147.7

166.3 173.6 180.0197.2 186.0

2.1% 2.1%

6.3%

5.0%

6.3%

7.8%

9.1% 9.4% 9.2% 9.0%8.3%

0

50

100

150

200

250

Q1 2008Q2 2008Q3 2008Q4 2008Q1 2009Q2 2009Q3 2009Q4 2009Q1 2010Q2 2010Q3 2010

GEL mln

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Loan loss reserves, ConsolidatedReserve For Loan Losses To Gross Loans, BoG Consolidated

GEL m ln

136.8129.2

96.5

111.3

115.9118.7

93.0

57.7

23.332.119.0

7.4%

6.5%

4.7%

7.5%

6.9%6.5%

6.4%

6.9%

5.0%

3.2%

1.3%1.7%

1.2%

7.0%

7.4%

2.0%

6.7%5.5%

4.9%

6.8%

1.9%

7.5%

0

20

40

60

80

100

120

140

160

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 20100%

1%

2%

3%

4%

5%

6%

7%

8%

NPLs % of Gross loans Loan loss reserve as % of gross loans

8.1 9.7 12.033.3 35.5

59.8

10.9 11.3

61.875.8

69.8 59.4

36.8

3.8

17.2

30.024.0 28.7

32.1 44.6

35.0

69.867.054.150.265.7

22.424.4

42.8

53.1208.4%

554.4%

124.1% 113.5%141.4%

106.6%

138.3%

99.3%116.1% 118.8%169.1%

0

20

40

60

80

100

120

140

160

180

200

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

GEL mln

0%

100%

200%

300%

400%

500%

600%

RB &WM CB Other* NPL coverage ratio

19.0

32.123.3

61.5

110.1

148.8

140.0 140.0

168.9173.7

131.5

November 2010

218.7211.2

180.7

163.1

134.4

107.893.398.6

70.481.676.5

0

20

40

60

80

100

120

140

160

180

200

220

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

GEL mln

376.1

326.3

283.1280.4

320.4326.0

403.4

363.6

414.7

448.6

494.2

0

100

200

300

400

500

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

GEL mln

Liabilities, Consolidated

Volume of CB deposits outstanding

Client deposits

Retail banking deposits

Total Client deposits grew by 40.3% y-o-y in Q3 ‘10 (11.5% q-o-q)

WM client deposits grew 62.7% y-o-y (3.6% q-o-q) in Q3 ’10

RB client deposits 51.5% y-o-y (10.2% q-o-q) in Q3 10

CB client deposits grew 34.0% y-o-y (17.1% q-o-q) in Q3 10

GEL 225 mln of borrowed fundsrepaid in 2009

Wealth Management deposits+210.5%

+76.3%

Record high

363.6 403.4 326.0 320.4 280.4 283.1 326.3 376.1 414.7 448.6 494.276.5 81.6

70.4 93.3 107.8163.1 180.7 211.2 218.7

652.7 681.5576.2 626.2 605.2 518.4

596.7587.6

656.1682.5

799.4233.2

228.2

229.4 147.7134.0

115.7128.6

145.7142.9

144.9

146.1

134.498.6

-66

967

2,000

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

GEL mln

RB Client Deposits WM Client Deposits CB Client Deposits Other

1,326 1,395

1,202 1,1931,133

1,025

1,1831,272

1,394 1,487

1,659

+61.8%

410.4 363.3 349.9 350.2 382.3322.9

403.2 370.0435.5 475.2

542.3

53.639.2 26.8

90.2 69.379.2

74.278.1

75.171.7

104.6188.7 279.0

199.5185.8 153.6

116.3

119.3 139.4145.6

135.6

152.5

0

100

200

300

400

500

600

700

800

900

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

GEL mln

Volume of CB time deposits outstandingVolume of CB demand deposits outstandingVolume of CB current accounts outstanding

November 2010

912.0

795.1

903.6947.8

1,137.8 1,162.8

1,011.4

918.6 913.3 945.6881.5

0

200

400

600

800

1000

1200

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

GEL mln

Deposits

Borrowed funds

Number of RB & WM time deposits issued

Deposit yields

Volume of RB & WM time deposits issued

-24.2%

10,912

17,13617,855

19,403

12,051

15,312

18,322 18,739 19,092 18,629

21,056

-

5,000

10,000

15,000

20,000

25,000

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

121.7 125.9 119.1100.2 94.8 99.0 112.8 113.7 116.7 128.4

159.8

8.016.9 16.2

25.820.0

34.940.6 34.6 40.7

33.0

36.0

0

50

100

150

200

250

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

GEL mln

Volume of RB time deposits issued Volume of WM time deposits issued

9.1%

8.2% 8.0%

10.4%

8.6%9.1%

9.6% 9.8%10.3%

9.9%10.3%

3.8% 4.0%

5.0%

7.7%

5.8% 5.7%

7.0% 6.9%

8.0% 7.9%7.3%

8.1%

5.6%5.4%7.2% 7.1%

5.8%

8.0%7.6%

8.4%

6.7%6.6%

7.9%8.2%

7.5%

0%

2%

4%

6%

8%

10%

12%

Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

RB Deposit Yields, BoG Standalone CB Deposit Yields, BoG Standalone Blended Deposit Yields, BoG Standalone

November 2010

Equity & Capital adequacy

BIS capital adequacy ratios, BoG Consolidated

NBG capital adequacy ratios, BoG StandaloneTotal Shareholder’s equity

Share price performance

30 September 2010 BV/share

US$12.01

Risk weighting of FX denominated assets at 150% according to the National Bank of Georgia standards

Risk weighting of FX denominated assets will be increased to 175% from January 2010

BGEO is just below the IPO price

Other LSE listed CIS banks are trading 40%-60% below IPO price

YTD # of GDRs traded 19.1 mlnVolume: US$ 222.8 mln

134.2% y-o-y109.0% YTD

679.6649.8611.7

598.4

718.5709.9711.8718.8739.3783.0

746.7

300.0

600.0

900.0

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

GEL mln

25.2% 25.0%23.5% 22.4% 21.9%

20.3% 19.9%

25.0%

22.6%21.6%24.7%

36.4%35.6%34.3%

26.3%25.3%

25.8%25.8%

34.7%34.6%

32.7% 32.6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio

18.3%

15.8%

18.2%16.6% 16.4%

17.8%

20.4% 19.7%

17.7%

15.8% 15.2%13.7%

16.3% 16.8% 15.9%14.5% 15.7%

14.2%15.1% 15.5% 13.5% 17.4% 18.4% 21.2%

0%

5%

10%

15%

20%

25%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q32010* Tier I Capital Adequacy Ratio Total Capital Adequacy Ratio

* Pro forma for new regulations

IPO Price

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

1-Ja

n-09

1-Fe

b-09

1-M

ar-0

9

1-A

pr-0

9

1-M

ay-0

9

1-Ju

n-09

1-Ju

l-09

1-A

ug-0

9

1-Se

p-09

1-O

ct-09

1-N

ov-0

9

1-D

ec-0

9

1-Ja

n-10

1-Fe

b-10

1-M

ar-1

0

1-A

pr-1

0

1-M

ay-1

0

1-Ju

n-10

1-Ju

l-10

1-A

ug-1

0

1-Se

p-10

1-O

ct-10

1-N

ov-1

0

US$

November 2010

27.0 40.4

87.4

164.5150.8 153.4

16.9

33.8

64.0

88.590.8 96.2

0.0

50.0

100.0

150.0

200.0

250.0

300.0

9 months 2005 9 months 2006 9 months 2007 9 months 2008 9 months 2009 9 months 2010

Net interest income Net non interest income

74.2

249.6241.6252.9

151.4

43.9

GEL mln

49.8 55.8 58.9 56.4 52.4 49.5 48.9 46.0 45.3 51.7 56.5

10.210.2

12.9 10.911.1 11.6 12.0 12.6 10.3

10.913.71.4

1.91.7

1.41.8 2.3 2.3 2.2

2.22.513.2

10.49.4 14.9

8.87.1 6.5 5.7 7.3

8.88.06.5

7.8 5.0 7.8

7.1 10.7 9.5 10.7 10.89.0

10.5

2.2

0

10

20

30

40

50

60

70

80

90

100

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

Net Interest Income Net Fee & Commission Income

Net Income From Documentary Operations Net foreign currency related income

Net Other Non-Interest Income

82.575.9

77.479.380.681.7

86.685.786.1

81.191.2

Georgia accounts for 81.5% of total consolidated YTD revenues, BG Bank 4.2% and BNB 3.6%

Standalone Revenue grew 8.4% q-o-q while standalone Total Recurring Operating Costs grew by 7.4% q-o-q, achieving positive standalone operating leverage 1.4% on q-o-q and 3.6% on y-o-y basis

Revenue Revenue as a function of loan book changeRevenue, Consolidated

Revenue, quarterly

+68.9%

+104.1%

-4.5% +3.3%

+15.0%

+67.1%

62.0% of Total Revenue

Revenue by segments Q3 2010

1,700

1,750

1,800

1,850

1,900

1,950

2,000

2,050

2,100

2,150

2,200

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Gross loans

RevenueGEL 241.6 mln

RevenueGEL 249.6 mln

O ther6.5%,

GEL5.9 mln

Aldagi BCI 4.5%,

GEL4.1 mln(-31.2% q-o-q)

BNB 3.5%,

GEL3.2 mln(+6.3% q-o-q)

BG Bank 3.3%,

GEL3.0 mln(-30.1% q-o-q)

BoG Standalone

82.2%,GEL74.9 mln

(+8.4% q-o-q)

Record high +10.5% q-o-q

November 2010

25.7 27.3 28.423.1 22.0 23.2 22.3 22.5 23.4 25.9 27.0

18.721.6 21.3

24.922.7 23.1 22.6 24.1 22.9

21.924.1

0

10

20

30

40

50

60

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

GEL mln

Personnel Costs Other Recurring Operating Costs

44.5

48.949.6

47.944.6 46.3

45.046.6 46.3 47.8

51.0

GEL mln

16.6 21.9

57.9

81.467.5

76.3

9.8

20.5

26.0

61.6

68.4

68.8

0

20

40

60

80

100

120

140

160

9 months 2005 9 months 2006 9 months 2007 9 months 2008 9 months 2009 9 months 2010

Personnel costs Other recurring operating costs

42.3

145.1135.9143.0

83.9

26.4

Costs, ConsolidatedRecurring operating costs

Costs by segments, Q3 2010

Employees

Recurring operating costs+6.7% q-o-q

+6.7% y-o-y

+13.0% y-o-y

+0.5% y-o-y

Other, 15.7%GEL 8.0 mln

Aldagi BCI, 4.6%

GEL 2.4 mln(-48.6% q-o- q)

BNB, 4.9%GEL 2.5 mln

(+25.3% q-o-q )

BG Bank, 6.4%GEL 3.3 mln

(-32.9% q-o-q)

BoG standalone,

68.4%GEL 34.9 mln(+7.4% q-o-q)

3,056

3,619

3,853

2,741

2,692

2,665

2,669

2,674

2,825

2,963

3,060

824

836

842

786

757

707

617

621

593

468

454

5,118

5,048

4,781

4,798

4,914

4,964

4,949

6,196

5,911

4,926

5,313

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Group Consolidated BoG Standalone BG Bank

November 2010

GEL mln

45.1 40.533.7 36.8 32.4

(76.1)

26.436.2 38.5

(59.0)

(102.3)

8.7

34.0

20.819.616.82.6

(4.3)5.1

(1.1)

28.331.9

-120

-100

-80

-60

-40

-20

0

20

40

60

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

Profit/(Loss) Before Provisions Net Income

34.3

30.8 29.6

34.7

40.1

37.138.7

36.337.336.6

34.3

0

5

10

15

20

25

30

35

40

45

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

GEL mln

Operating profit, Provision expense

Profit (loss) before provisions/ Net Income/Loss, Consolidated

Net provision expense BoG standaloneNormalized net operating income, Consolidated

Net operating cash flow

Consolidated Net Normalized Operating Income (NNOI) increased 15.6% q-o-q up 16.9% y-o-y

Consolidated Net provision expenses ofGEL 14.2 mln in Q3 2010, GEL 12.6 mln in Q2 2010 and GEL 30.0 mln in Q3 2009 improved by 52.6% y-o-y

Bank of Georgia Standalone Net provision expenses of Q3 2010 declined by 44.3% y-o-y

Net Income for nine months 2010 was GEL 57.2 mln

.

Related to the armed conflict in August 2008

+15.6% q-o-q

18.217.729.624.0

(4.5)

103.9

8.66.712.3 6.5 9.9

-40

-20

0

20

40

60

80

100

120

140

160

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

GEL mln

9m 2010 9m 2009

Cash flow from operating activitiesInterest received 303,443 283,745 Interest paid (151,331) (167,643) Fees and commissions received 54,013 49,489 Fees and commissions paid (9,581) (9,155) Net realized gains from trading securities 2,564 2,169 Net realized gains from investments securities - 277 Net realized gains from foreign currencies 24,892 19,282 Recoveries of loans to customers 15,354 8,213 Insurance premiums received 33,623 31,600 Insurance claims paid (21,162) (21,492) Other operating income received 10,207 10,605 Salaries and other employee benefits paid (70,812) (69,405) General and administrative and operating expenses paid (52,558) (54,857) Net cash flow from operating activities 138,652 82,828 Growth rate 67.4%

unaudited

November 2010

Profitability & selected ratiosNet loans/Client deposits

Cost Income RatioNet interest margin (annualized)

Cost of funds, Loan yields

136.9%147.8%

160.6%168.7%

140.3%131.9% 127.5%

133.3%124.3%

170.6%174.4%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

8.2%

8.1%8.0%

8.5%

9.1%9.0% 9.1%9.3%

10.1%9.8%8.9%

8.1%8.3%

7.8%

8.9%9.1% 8.8%9.9%

9.8%9.0%

8.6%7.5%

8.6% 8.1%

0%

2%

4%

6%

8%

10%

12%

Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

Net Interest Margin, Group Consolidated Net Interest Margin, BoG Standalone

GEL m ln

110.4104.395.089.093.794.5101.898.8

53.952.7

49.843.044.8

45.149.442.4 8.4%

20.2%

7.9%

8.6%

7.8%8.5%8.3%

8.3%7.2%

20.0%19.3% 20.1%19.7%

20.1%19.4%18.6%

0

20

40

60

80

100

120

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 20100%

5%

10%

15%

20%

25%

Interest Income Interest Expense Cost of Funds Loan Yield

52.9%60.8%

90.0%

54.9% 57.8% 56.1% 57.8%59.1%

198.3%

65.3%

41.0% 50.0%60.7%

44.0%50.8% 49.6% 49.0%

50.5% 58.0% 53.9%

29.6%28.8%31.4%

26.9% 28.1% 29.0% 30.8%26.7%

33.0%31.7%

0%

40%

80%

120%

160%

200%

Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

Cost/Income Ratio, ConsolidatedCost/Income Ratio, Bank of Georgia StandalonePersonnel costs/Total revenue, Consolidated

November 2010

Operating environment in Georgia is improving and 2010 looks promising for Bank of Georgia:

Consumer confidence and economic activity is increasing with a 11.5% q-o-q and 40.3% y-o-y increase in client deposits in Q3 2010; GDP real growth rate: 8.4% y-o-y Q2 2010; 6.0% 2010F; growth mainly driven by donor money inflows, export growth and credit growth in nine months 2010; VAT collection up by 20%+ y-o-y in recent months, YTD 2010 trade turnover up by 16.9% y-o-y, NBG reserves still on high level at around USD 2 bln, exceeding M2 by 1.5 times

Positive operating leverage achieved of 2.6% y-o-y and positive consecutive q-o-q normalized operating leverage of 3.7% driven by:

Second consecutive decrease of cost of funds, 8.6% in Q1 2010, 8.4% in Q2 2010, 7.9% in Q3 2010, as a result of deposit rate cuts

Solid growth of higher yielding retail loan book up 21.3% YTD

Increase of Net Interest Income as lending activity picked up

Record high:

Revenue of GEL 91.2 mln, up 10.5% q-o-q, up 15.0% y-o-y

Normalized net operating income of GEL 40.1 mln, up 15.6% q-o-q, up 16.9% y-o-y

Gross loans up 3.1% q-o-q, up 23.1% y-o-y

Client deposits up 11.5% q-o-q, up 40.3% y-o-y

As of 31 July 2010, the outstanding Eurobonds maturing in February 2012 amounted at US$149 million, out of original US$ 200 million, in August 2010 the Bank has signed agreements for US$ 50 million 5-year credit facilities with EBRD, US$ 50 million 7-year Financing Package agreement signed with EFSE in November 2010

YTD loan book growth funded through deposit inflows locally and internationally. WM Representative Office opened in London

Outlook for Q4 2010

• Growth expected to continue in Q4

• Higher yielding retail loan book expected to grow faster in 2nd half of the year

• Confident to deliver previously announced management target of net profit GEL 72 mln for 2010 with 10% upside risk

We came out strong from the downturn and are well positioned to take advantage of our high liquidity and strong capital to achieve growth at the right price….

…..by implementing our strategy to become more efficient, deposit funded lending machine

Summary

November 2010

EconomyAnnex

November 2010

FDI and Net remittances

Cumulative net remittances, 2008 – Q3 2010

Cumulative net FDI breakdown by origin, 2004 – Q2 2010

FDI breakdown by sectors, Q2 2010

Net remittances by countries, Q3 2010

Country US$ '000s % of totalRussia 1,371,750 59.8%USA 176,903 7.7%Greece 146,651 6.4%Spain 54,768 2.4%Ukraine 139,225 6.1%Turkey 57,333 2.5%UK 16,100 0.7%Israel 23,326 1.0%Kazakhstan 20,136 0.9%Germany 21,340 0.9%Other countries 268,224 11.7%Total 2,295,757 100.0%Source: National Bank of Georgia, National Statistics Office of Georgia

Country US$ ‘000s % of totalUK 770,488 11.6%UAE 613,245 9.2%Turkey 565,356 8.5%Netherlands 571,968 8.6%British Virgin Islands 472,830 7.1%Kazakhstan 258,077 3.9%Azerbaijan 330,016 5.0%Czech Republic 341,867 5.1%Cyprus 275,657 4.1%Subtotal 4,199,503 63.2%Other countries 2,449,570 36.8%Total 6,649,073 100.0%

Energy sector, -1.3%

Financial sector , 6.1%

Agriculture, fishing, 1.2%

Industry, 21.3%

Construction, -4.1%

Hotels and restaurants, -7.6%

Other services, 14.3%

Real estate, 16.9%

Transports and communications,

53.0%

Russia, 61.4%

Other countries, 10.9%Germany, 1.6%

Ukraine, 3.3%

Turkey, 3.7%

Kazakhstan, 0.9%Israel, 1.3%

UK, 0.7%

USA, 8.0%

Greece, 6.2%

Spain, 2.2%

November 2010

FX Reserves and Inflation

NBG interventions

FX reserves, $ mln

Source: National Bank of Georgia, Ministry of Finance of Georgia

Inflation

2003-2009CAGR =48.6%

156.7 124.0 197.0(42.9)

(341.2)

(182.7)

(660.8)

432.4

(51.0)

(800)

(600)

(400)

(200)

0

200

400

600

2004 2005 2006 2007 2008 2009 Mar '10 Jun-10 Sep-10

0.0

0.5

1.0

1.5

2.0

2.5NBG Interventions Average Lari/US$

0

20

40

60

80

100

120

140

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Mar

-10

Jun-

10Se

p-10

-4-20246810121416

Real effective rate, Jan05=100 (LHS) CPI (e-o-p) CPI (average)

101.6115.7106.0

105.9109.2

7.9%

2.2%

9.4%

9.3%9.6%

5.2%

5.8%4.4%

10.7%10.4%

2.8%

3.7%

105.2

10.1%

107.2

9.8%

5.2%

US$ 2.11 bn


US$ 1.36 bn

US$0.19 bn


US$ 2,20 bn

1.3

1.01.1

0.8

0.8

0.8

1.71.5

-

500

1,000

1,500

2,000

2,500

2003 2004 2005 2006 2007 2008 2009 Sep-100.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8Fx reserves FX/M2

November 2010

Public debt: No burden to Public Finances

External public debt service

Breakdown of public debt

Public debt as % of GDP, 2009

Georgia’s economy is quite unleveraged compared to other emerging market economiesGeorgia’s public debt is 40.8% of GDP in 2009 down from 58.0% in 2003The external debt is all multilateral or bilateral and significant share is highly concessionalThis explains why the government debt service burden is lowEurobonds debut issuance of US$500 mln in April 2008, maturity date 2013

Source: “The Georgian Economy Overview”, Government of Georgia Presentation,

Source: “The Georgian Economy Overview”, Government of Georgia Presentation, June 2009. Source: World Bank, International Monetary Fund0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Czech Republic

Estonia

Hungary

Kazakhstan

Latvia

Poland

Georgia

Slovak Republic

Lithuania

Ukraine

Bulgaria

Turkey

Russia

1.86 1.73 1.79

3.384.150.83 0.85 0.85 0.89

0.97

1.00

1.03

2.681.70

40.3%

32.8%

46.1%

40.8%

28.5%

52.5%

26.4%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2004A 2005A 2006A 2007A 2008A 2009A 2010F

US$ billion

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

External public debt Internal public debt Total public debt as % of GDP

103.8 110.6

152.2

102.1

136.7

169.3

118.7

8.8%

7.1% 7.3%

4.4%

5.20%

2.9%

3.4%

0

20

40

60

80

100

120

140

160

180

2004A 2005A 2006A 2007A 2008A 2009A 2010F

US$ mln

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

External debt service External debt service as % of budget revenue

November 2010

Fiscal indicators: The worst seems pastOverall fiscal balance of the state budget

Fiscal revenue performance

Source: National Bank of Georgia, National Statistics Office of Georgia

305.

5

263.

1 379.

4

308.

4

377.

9

358.

4

444.

3

352.

2

390.

5

346.

3

362.

5 502.

6

303.

5

319.

6

499.

5

407.

6

442.

5

415.

3

459.

2

316.

1 408.

1

367.

1

366.

8

266.

4

266.

0

573.

2

314.

6

316.

8

293.

0 352.

1

320.

4 373.

0

328.

2

334.

9

447.

344

6.2

505.

1

290.

8

280.

6 348.

8

391.

9

386.

7

399.

4

362.

5

412.

8

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

January February March April May June July August September October November December

GEL mln

2007 2008 2009 2010

(815.7)

(1,258.6)

(1,720.5)(1,390.1)

(935.7)(468.9)

-4.5%

-7.3%

-9.4%

-6.6%

-4.8%

-3.4%

-2,000

-1,800

-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

02006 2007 2008 2009 2010F 2011F

GEL mln

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

Overall fiscal balance Overall fiscal balance as % of GDP

November 2010


Import structure by country, Q3 2010

Import structure by product, Q3 2010

Export structure by country, Q3 2010

Export structure by product, Q3 2010

Trade structure

Azerbaijan, 13.6%

Canada, 3.0%

Ukraine, 5.2%

Russia, 2.0%

Kazakhstan, 2.2%

United Arab Emirates, 1.5%

China, 0.9% EU Countries, 17.9%

Moldova, 3.7%

Other, 18.5%

Armenia, 14.0%

Turkey, 9.1%

USA, 8.4%

Ores, 5.6%Gems & Precious Stones, 5.9%

Cement, 0.2%

Fertilizers, 4.4%

Equipment & Rail Cars, 3.7%

Oil & Gas, 5.1%

Pharmaceuticals, 2.1%

Ferrous Metals, 22.9%

Others, 19.2%

Vehicles, 18.5%

Beverages, Spirits & Vinegar, 8.3%

Sugar, 0.1%

Vessels & Aircraft, 3.8%

EU Countries, 28.6%

Turkey, 11.8%

Azerbaijan, 6.5%Ukraine, 7.4%

Others, 23.5%

Russia, 2.4%

China, 4.6%

USA, 4.4%

Kazakhstan, 1.0%

Armenia, 3.5%

Turkmenistan, 4.4%

United Arab Emirates, 1.9%

Sugar, 2.9%

Others, 31.7%

Oil & Gas, 18.6%

Apparel & footwear, 3.7%

Ferrous Metals, 2.9%

Vehicles, 8.8%

Mechanical Equipment &

Electrical Machinery,

15.4%

Pharmaceuticals, 3.8%

Paper, 2.0%

Cereals, 3.6%

Plastic, 3.9%

Ferrous Metal Products, 2.7%

November 2010

Georgian banking sector – key trends 2007- Q3 2010

November 2010

32.9%

22.0%

7.7%9.6%

7.0%

4.8%

15.9%

33.0%

20.8%

8.6%9.8%

5.9%4.6%

17.3%

34.2%

20.7%

8.4% 9.5%

5.2%3.6%

18.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

BoG TBC ProCredit Bank Bank Republic Cartu VTB Other Banks

YE 2008

YE 2009

Sep-10

Peer group’s market share in total assetsGEL/US$

Period End YE 2006 = 1.71

YE 2007=1.59

YE 2008=1.67

Q1 2009= 1.67

Q2 2009=1.66

Q3 2009=1.68

YE 2009= 1.69

Q1 2010= 1.75

Q2 2010= 1.84

Q3 2010= 1.81

Note: all data based on standalone accounts as reported to the National Bank of Georgia and as published by the National Bank of Georgia www.nbg.gov.ge

http://www.nbg.gov.ge

November 2010

12.2%

6.0%6.4%

10.1%8.7%

23.7%

32.9%

13.0%

5.6%

7.6%10.1%10.2%

21.6%

31.8%

18.5%

3.6%

5.2%

9.5%

8.4%

20.7%

34.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

BoG TBC ProCredit Bank Republic Cartu VTB Other Banks

YE 2008

YE 2009

Sep-10

Peer group’s market share in gross loansGEL/US$


YE 2007=1.59

YE 2008=1.67

Q1 2009= 1.67

Q2 2009=1.66

Q3 2009=1.68

YE 2009= 1.69

Q1 2010= 1.75

Q2 2010= 1.84

Q3 2010= 1.81



November 2010

28.8%

22.5%

8.1%8.9%

6.5% 6.8%

18.5%

27.4%

24.1%

9.1%

10.8%

5.5%

2.7%

20.4%

29.4%

23.7%

8.5%

11.5%

3.6%2.0%

21.3%

0%

5%

10%

15%

20%

25%

30%

35%

BoG TBC ProCredit Bank Republic VTB Cartu Other Banks

YE 2008

YE 2009

Sep-10

Peer group’s market share in depositsGEL/US$


YE 2007=1.59

YE 2008=1.67

Q1 2009= 1.67

Q2 2009=1.66

Q3 2009=1.68

YE 2009= 1.69

Q1 2010= 1.75

Q2 2010= 1.84

Q3 2010= 1.81



November 2010

This presentation contains statements that constitute “forward-looking statements”, including, but not limited to, statements relating to the implementation of strategic initiatives and other statements relating to our business development and financial performance.

While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other factors could cause actual developments and results to differ materially from our expectations.

These factors include, but are not limited to, (1) general market, macroeconomic, governmental, legislative and regulatory trends, (2) movements in local and international currency exchange rates, interest rates and securities markets, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties and developments in the markets in which they operate, (6) management changes and changes to our group structure and (7) other key factors that we have indicated could adversely affect our business and financial performance, which are contained elsewhere in this presentation and in our past and future filings and reports, including those filed with the NSCG.

We are under no obligation (and expressly disclaim any such obligations) to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise.

Caution Regarding Forward-Looking Statements

November 2010

Contact

Irakli GilauriChief Executive Officer+995 32 444 [email protected]

Macca EkizashviliHead of Investor RelationsHead of Representative Office, London84 Brook St, London, W1K 5EH+44 203 178 [email protected]

mailto:[email protected]

mailto:[email protected]

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