tbc bank and the georgian banking sector

TBC Bank and the Georgian Banking Sector Giorgi Shagidze, Chief Financial Officer

Agenda

1

2 TBC Bank and the Georgian Banking Sector

Georgian Economy Outlook

�  Recent Achievements §  The World’s No. 1 Reformer, the World Bank & IFC Doing Business Report 2013;

§  Fourth Friendliest Tax Regime globally, the Forbes Tax Misery & Reform Index 2009;

§  No. 9 globally on the Ease of Doing Business (Doing Business Report 2013);

§  No. 1 globally in terms of registering property, the World Bank & IFC Doing Business Report 2013;

§  Georgia’s score in the 2012 Corruption Perceptions Index (CPI) survey is 52 on a scale of 0 (perceived to be highly corrupt) to 100 (perceived to be very clean).

§  Georgia’s economic freedom score is 72.2, making its economy the 21st freest in the 2013 Index

Georgia at a Glance

Source: GDP, GDP per capita and real GDP growth are based on Geostat preliminary figures;


�  General Information §  Population: 4.5 million

§  Currency: Georgian Lari (GEL)

�  Economy §  GDP: USD 15.8 billion

§  Inflation, December 2012 (YoY): -1.4%

�  Currency §  1 USD = GEL 1.6577, 1 EUR = GEL 2.1245*

§  USD/GEL during last five years: Max 1.89, Min 1.40

�  Rating §  Fitch : BB-/Stable / Standard & Poor's: BB-/Stable/ Moody's: Ba3/Stable

7.5% 6.2%

8.8%

11.0%

5.5%

3.0%

11.2%

2.0% -‐1.4%

2004 2005 2006 2007 2008 2009 2010 2011 2012E

Consumer Price Index, yoy (%)

919 1,188

1,484 1,764

2,315 2,921

2,455 2,623

3,231 3,520

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E

GDP Per Capita (PPP) Nominal GDP Per Capita -‐ (US$)

Economic Structure and Trends Nominal GDP 2012 and Real GDP Growth 2012 > Rapidly Growing GDP Per Capita – PPP and Nominal >

Consumer Price Index

11.1%

5.9% 9.6% 9.4%

12.3%

2.3%

-‐3.8%

6.3% 7.2% 6.1%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E

Nominal GDP (US$bln) Real GDP Growth, y-‐o-‐y (%)

* Figures based on Na@onal Sta@s@cs Office of Georgia 2012 * Figures based on Na@onal Sta@s@cs Office of Georgia and MOF 2012

* Based on Na@onal Sta@s@cs Office of Georgia, Preliminary Figures

Broad-‐based and diversified Nominal GDP Structure 2012 > >

4

Manufacturing, 22%

Energy sector, 20%

Transports and communicaWons

, 17% Agriculture, fishing, 3%

Real estate, 3%

Financial sector, 18%

Other sectors, 17%

* Figures based on Na@onal Sta@s@cs Office of Georgia 2012

TBC Bank and the Georgian Banking Sector

-‐2.6% -‐3.4%

-‐4.8%

-‐6.5%

-‐9.2%

-‐6.7%

-‐3.6%

-‐7.3%

-‐4.8% -‐4.0%

-‐2.9%

2005 2006 2007 2008 2009 2010 2011 2012F 2013F

Fiscal Deficit as % of Nominal GDP -‐ Current Path

Ini[ally Projected (2009E)

2.08

1.83 1.79

1.71

1.59 1.67 1.69

1.77

1.67 1.66 1.66

2.15

1.92

1.79 1.72

1.67

1.49

1.67

1.78

1.69 1.65 1.66

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q2013 Actual EOP Actual Average

Fiscal Deficit and Low Public Debt

Consolidated Budget Deficit

7.1% 7.2%

3.4%

2.0%

4.3%

4.4% 4.3% 3.8%

2005 2006 2007 2008 2009 2010 2011 2012E

as % of Budget Revenues

40.0%

32.0%

25.5%

31.2%

41.0% 42.4%

36.7% 35.8%

26.8%

21.1%

16.8%

23.5%

31.7% 33.6%

29.0% 28.6%

2005 2006 2007 2008 2009 2010 2011 2012E

Total Public Debt to Nominal GDP (%) External Public Debt to Nominal GDP (%)

5

Exchange Rate Dynamics USD/GEL


External and Total Public Debt Government External Debt Service

* Source: Ministry of Finance of Georgia (MOF) * Source: Ministry of Finance of Georgia (MOF)

* Source: Ministry of Finance of Georgia (MOF)

6

ü  No payroll tax or social insurance tax ü  No capital gains tax

ü  No wealth tax, inheritance tax or stamp duty

ü  Foreign-‐source income of individuals fully exempted

ü  Tax rates reduc[on [metable has been further accelerated in 2008

ü  Very strong poli[cal commitment to low and simple taxa[on and improvement of services

ü  Significantly streamlined tax and customs administra[on geared towards provision of maximum comfort to businesses and investors

6

‘04A ‘05A ‘06A ‘07A ’08A ‘09A ’10A ‘11F ‘12F ‘13F ‘14F

Number of Taxes 21 7 7 7 6 6 6 6 6 6 6

VAT 20% 20% 18% 18% 18% 18% 18% 18% 18% 18% 18%

Income Tax 12-‐ 20% 12% flat 12% flat 12% flat Social Tax + Income

Tax Social Tax + Income

Tax 20% 20% 20% 18% 15%

32% 25% 20%

Social Tax 33% 20% 20% 20% -‐ -‐ -‐ -‐ -‐ -‐ -‐

Corporate Profit Tax 20% 20% 20% 20% 15% 15% 15% 15% 15% 15% 15%

Dividend & Interest Income Tax 10% 10% 10% 10% 10% 5% 5% 5% 5% 3% 0%

Source: MOF

Annual Growth of Tax Income* One of the Best Low-‐Tax JurisdicWons

Source: MOF *Growth is given compared to the same period of previous year


Adrac[ve Tax Regime and Improving Fiscal Performance

35.9%

13.8%

7.4%

-‐12.3%

15.4%

6.8%

18.0%

27.5%

10.1% 13.0%

15.4%

6.2% 2.8%

Dec-‐11 Jan-‐12 Feb-‐12 Mar-‐12 Apr-‐12 May-‐12 Jun-‐12 Jul-‐12 Aug-‐12 Sep-‐12 Oct-‐12 Nov-‐12 Dec-‐12

-‐2,399,852 -‐2,590,074

-‐3,493,818

-‐4,213,884 1,265,920 1,397,404

1,653,915 2,399,826

-‐1,133,932 -‐1,192,670 -‐1,839,903 -‐1,814,058

2009 2010 2011 2012F Trade Deficit Remidances CAD

677,421 678,689 901,617

602,623

416,894 534,159

925,426 1,235,419

-‐39,616

20,178

-‐12,860 23,984

2009 2010 2011 2012F FDIs Porgolio & Other Investments, Net C&F Accounts Balance

Current Account Deficit and Offsejng Inflows

Current Account Deficit

Offsedng Inflows

USD

thou

sand

7

USD

thou

sand




10.2% 10.4% 12.7% 11.6%

C&F Accounts as % of GDP

-‐10.5% -‐10.2%

-‐12.7%

-‐11.5%

CAD as % of GDP

Agenda


Georgian Banking Sector 2

27.8% 28.6% 33.9% 44.9%

54.8% 54.3% 76.5%

39.3%

71.2%

3.3% 3.3% 4.8% 2.4% 18.8% 18.5% 14.8% 4.8% 1.0%

GEO KAZ ROM RUS TUR POL CZE UKR BUL

Loans/GDP Deposits/GDP Mortgage Penetra[on

Adrac[ve Macroeconomic and Banking Sector Fundamentals Real GDP growth 2011* and Real Loan Book Growth 2011 > Loan to GDP and Deposits to GDP at end-‐2011 >

Equity to Assets and ROaE at end 2011

-‐0.5% 4.7% 0.2% 17.7% 18.2% -‐2.9% 23.6%1 -‐6.4% 38.3%

BUL CZE ROM POL RUS UKR GEO KAZ TUR

Real GDP Growth Loan Book Growth

1 Georgia Loan Book Growth based on Na@onal Bank of Georgia * Real GDP Growth based on IMF Report April 2012

32.4% 38.3% 40.4% 45.5% 56.4% 59.7% 60.5% 61.3% 74.8% 27.8% 28.6% 33.9% 44.9%

54.8% 54.3% 76.5%

39.3%

71.2%

3.3% 3.3% 4.8% 2.4% 18.8% 18.5% 14.8% 4.8% 1.0%

GEO KAZ ROM RUS TUR POL CZE UKR BUL

Loans/GDP Deposits/GDP Mortgage Penetra[on

13.4% 52.9% 70.1% 104.6% n/a 83.9% 88.5% 14.9% n/a

2.6% 4.5% 5.3% 5.9% 6.6% 14.1% 14.9% 18.2% 30.6%

79.4% 152.0% 84.9% 61.9% 121.7% 97.9% 47.6% 100.5% 104.4%

TUR GEO POL CZE RUS ROM BUL UKR KAZ

Impaired Loans Reserve Coverage of Impaired Loans

8.1% 10.0% 10.2% 11.9% 12.6% 13.6% 14.7% 16.6%

14.9% 12.8% -‐2.7% 14.2% 18.2% 5.7% -‐5.3% 16.6%

CZE POL KAZ TUR RUS BUL UKR GEO

Equity/Assets ROAE

1For Russia eurobonds have been excluded from customer deposits (included in regulatory data) to derive deposit numbers and ra@os reported here

2Ukrainian impaired loans based on survey of rated banks; coverage ra@o based on survey NPLs and sector statutory reserves

Source: Na@onal banks and bank regulators, Fitch calcula@ons and es@mates. All data at end-‐2011.

Impaired Loans and Reserve Coverage at end-‐2011 > >

Card Penetra[on


16.0% 13.9%

19.1% 17.4% 17.0% 17.0% 17.7%

2007 2008 2009 2010 2011 2012 1Q2013

Capital Adequacy Ra[o -‐ NBG

55.3% 54.6% 56.0% 58.6% 56.6% 57.2%

24.7% 22.0%

26.7% 30.4% 30.1% 30.5%

2007 2008 2009 2010 2011 2012

Liquid Assets to Customer Deposits Liquid Assets to Total Assets

Economic Structure and Trends Banking Sector -‐ Loans > Banking Sector -‐ Deposits >

Banking Sector Liquidity RaWos

* Figures based Na@onal Bank of Georgia 2012

TradiWonally High Capital Adequacy RaWo > >

10

* Figures based on Na@onal Bank of Georgia

4,589,340

5,992,880 5,185,336

6,260,705

7,739,057

8,733,255

2007 2008 2009 2010 2011 2012

Banking Sector -‐ Loans

3,215,036 3,567,816

3,950,143

5,487,588

6,744,950

7,649,834

2007 2008 2009 2010 2011 2012

Banking Sector -‐ Deposits




Georgian Banking Sector – Eight Largest Banks 2012

11

A number of the world’s largest financial ins@tu@ons have partnered with Georgian banks :

Y 2002 Y 2004 Y 2006 Y 2008 Y 2010 Y 2012

Source: Na@onal Bank of Georgia. NBG Repor@ng Standard

87

88

109

209

296

361

1,187

1,401

Retail Deposits (GEL m)

177

263

293

427

530

688

2,468

2,530

Total Deposits (GEL m)

256

260

371

403

572

728

2,484

3,090

Total Loans (GEL m)


Agenda


TBC Bank 3

TBC Bank at a Glance

13

POS Terminals 3,002

ATMs TBC / TBC&Constanta

237 / 284

§  No 1 in Retail Deposits – 36% of market share as at 31 March 2013;

§  A leading bank in the country with 28% and 26% market share of total customer loans and total assets respec[vely as at 31 March 2013;

§  Number of customers: over 900k; Number of employees: c. 4,000;

§  Entered microfinance segment in May 2011 through acquiring Bank Constanta

§  Presence in Azerbaijan-‐subsidiary TBC Kredit -‐ non-‐banking credit organiza[on Branches

TBC / TBC&Constanta 59 / 110

Key Facts About TBC Bank

Shareholder Structure

Source: Market Shares are based on Na@onal Bank of Georgia and include Bank Constanta.

>

>

>

Two Founder Shareholders 25.9%

European Bank for Reconstruc[on and Development (EBRD) 20.2%

Interna[onal Financial Corpora[on (IFC) 20.2%

Deutsche Inves[[ons-‐und Entwicklungsgesellschat (DEG) 11.5%

JP Morgan 4.7%

Ashmore 4.3%

Netherlands Development Finance Company (FMO) 5.4%

Management and others 7.8%

Corporate, 43%

Retail, 39%

SME, 12%

Micro, 7%

Loan Portfolio Composition by Business Segments – 31 Mar 2013

TBC Financial Highlights and Ratios (31 March 2013)

Note: Exchange Rate Used: USD/GEL 1. 6577 as at 31 March 2013

BB-‐/Stable (FC Long Term IDR) B1/Stable (Bank Deposits – Fgn Curr)

Revised on 21 June 2012 Affirmed on 1 November 2012

B (FC Short Term IDR) Ba3 (Bank Deposits – Dom Curr)

Note: Number of accounts and number of employees include Bank Constanta

GEL million USD million

Total assets 3,718 2,243

Net loans 2,347 1,416

Customer deposits 2,388 1,440

Stockholders’ equity 628 379

Financial Ratios

ROaE (annualized) 13%

Cost to income 51%

Tier 1 CAR (BIS) 21%


History

14

‘Best Bank in Georgia 2012’ Euromoney Magazine

‘Bank of the Year 2011’ The Banker Magazine

‘Best Bank in Georgia 2011’ EMEA Finance Magazine

‘Best Bank -‐ Georgia 2012’ Global Finance Magazine

Selected Awards 2012

2011

2007

2006

2004

2000

2009

1992

TBC Bank was founded

Interna[onal Finance Corpora[on ("IFC") and Deutsche Inves[[ons Entwicklungsgesellschat mbH ("DEG") acquired equity interest in the bank each with a 10% share that represented the first footprint of Interna[onal Financial Ins[tu[ons in the bank’s shareholding structure

TBC Bank established JSC TBC Leasing in January 2004 with the total assets of GEL 0.5 million. The European Bank for Reconstruc[on and Development ("EBRD") became a shareholder of TBC Leasing by acquiring 9.94% of the company’s newly issued stock.

While ini[ally focusing solely on small and medium enterprises and the corporate segment at large, TBC Bank started developing services for the Georgian retail segment in 2006.

TBC Bank acquired 75.0% of the equity interest in TBC Kredit, formerly known as SOA Kredit, a non-‐banking credit organisa[on opera[ng in the financial services market in Azerbaijan since 1999.

In 2009, new interna[onal financial ins[tu[ons became TBC Bank’s shareholders. EBRD, FMO, JP Morgan and Ashmore acquired 20.08%, 3.27%, 5.00% and 5.00% respec[vely.

§  TBC Bank founded its subsidiary in Israel, TBC Invest, in the beginning of 2011. TBC Invest is the Bank’s representa[ve office opera[ng as an intermediary between Israeli clients and TBC Bank.

§  In May 2011, TBC Bank acquired Bank Constanta, concentrated purely on the micro segment in Georgia.

‘Best Consumer Internet Bank in Georgia 2012’

Global Finance Magazine

‘Best Integrated Consumer Bank Site in Central and Eastern Europe

2012’ Global Finance Magazine

‘Best Bank in Georgia 2012’ EMEA Finance Magazine

‘Best Bank -‐ Georgia 2013’ Global Finance Magazine

‘Best Corporate Brand of the Year’ “Golden Brand 2013” by Financial

and Global Idea


TBC Bank launched best in the region mul[channel system, including new internet banking service, iPhone applica[on. A number of projects have been ini[ated including CRM project and Basel II implementa[on.

FY 2012 Financial Snapshot (all figures in GEL million)

15

NPLs (PAR 90)*

1.0%

0.6%

1.7%

2.8%

Net Profit

98

92

49

3

Net Loans

2,370 (18.0% growth)

2,009 (45.5% growth)

1,381 (39.7% growth)

988

ROaE (annualised)

18.6%

21.8%

14.0%

1.0%

C/I**

56.3%

54.1%

55.8%

57.9%

**2009 Cost to Income Ra@o excludes extraordinary income *** Market Shares for Total Loans for 2012 and 2011 are provided for TBC Bank and its Subsidiary Bank Constanta acquired in 2011

2010

2009

2011

31 Dec 2012

2010

2009

2011

FY 2012

2010

2009

2011

31 Dec 2012

2010

2009

2011

FY 2012

2010

2009

2011

FY 2012

*NPL ra@os include accrued interest

Market Share (Total Loans)

28.4%

27.6%

23.8%

21.6%

2010

2009

2011

31 Dec 2012


Distribu[on Channels

16

Mul[channel Banking

POS Terminals 3,002

Cash-‐in Terminals 1,951

Branches 59

Internet Banking 56k

Ac[ve Users

Mobile Banking 11k

Ac[ve Users

iPhone/iPad Banking

Highly organised Call-‐Centre

Total Number of Branches

208

59

55

38

24

35

14 15 14 13

39

13 12 12 10

TBC BOG VTB Republic Procredit

Net Porgolio/Number of Branches Total Deposits/Number of Branches

GEL Mln

Source: TBC Bank Internal Figures

Source: Na@onal Bank of Georgia. NBG Repor@ng Standard

Source: Individual Banks Websites

Region-‐Best MulWchannel System > EffecWve Branch Network >

Net Loans and Deposits / Number of Branches >

91.4% 93.5%

94.8% 94.6% 95.3%

Q2/2010 Q4/2010 Q2/2011 Q4/2011 Q2/2012

TBC BOG BR PCB

Source: TNS Market research

Superior Customer Experience >


Closer to our society

17 Q3 2012 and 9 Months YTD Investor Presenta[on

�  ‘20 Years/12 Months’ – unique opportunity for young cinematographers to make feature films in accordance with modern cinema standards and share the experiences of the world-famous artists.

�  Artarea – establishment of the very first Internet TV devoted to the culture.

�  Saba – the introduction of the first ever online e-book store in Georgia.

�  TBC’s Art Gallery – hosting of the numerous exhibitions and a great opportunity for artists to expose their works to public.

�  TBC Clocks – sculpture by a famous Georgian artist, which represents a piece of modern art in the city.

TBC Bank distinguishes itself with its social responsibility and since the day of its foundation has been acting as one of the best corporate citizens of the country.

TBC’s involvement in the social and cultural projects makes it truly distinguished socially responsible institution in the Georgian banking sector and further contributes to its brand strength.

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Thank You

tbc bank and the georgian banking sector

Economy & Finance