Contents

3Q24 and 9M24 results

Earnings call on 12 November 2024, 14:00 GMT

Segmentation guide

CEO statement

Macroeconomic developments: Georgia

Macroeconomic developments: Armenia

Delivering on our strategic priorities

3Q24 and 9M24 consolidated results

Business Division results

Georgian Financial Services (GFS)

Armenian Financial Services (AFS)

Ameriabank: standalone financial information (not included in consolidated results)

Other Businesses

Consolidated financial information

Additional information

Glossary

Bank of Georgia Group PLC profile

Further information

Forward-looking statements

3Q24 and 9M24 results

Bank of Georgia Group PLC announces the Group's unaudited consolidated financial results for the third quarter and the first nine months 2024. Unless otherwise noted, numbers in this announcement are given for 3Q24 and 9M24 and the year-on-year comparisons are with adjusted figures of 3Q23 and 9M23 and the q-o-q comparisons are with adjusted figures of 2Q24.

The results are based on International Financial Reporting Standards (IFRS) as adopted by the United Kingdom, are unaudited and derived from management accounts.

Earnings call on 12 November 2024, 14:00 GMT

https://bankofgeorgia.zoom.us/j/92412821797?pwd=4yTawOnUWYmwxq2HOWInShx34akrpS.1

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Segmentation guide

Following the acquisition of Ameriabank at the end of March 2024, the Group results are presented by the following Business Divisions: 1) Georgian Financial Services (GFS), 2) Armenian Financial Services (AFS), and 3) Other Businesses.

·      GFS mainly comprises JSC Bank of Georgia and investment bank JSC Galt and Taggart

·      AFS includes CJSC Ameriabank

·      Other Businesses includes JSC Belarusky Narodny Bank (BNB) serving retail and SME clients in Belarus, JSC Digital Area - a digital ecosystem in Georgia including e-commerce, ticketing, and inventory management SaaS, Bank of Georgia Group PLC - the holding company, and other small entities and intragroup eliminations. 

Bank of Georgia Group PLC delivers 3Q24 consolidated profit of GEL 509.3m and 9M24 adjusted consolidated profit of GEL 1,308.3m

3Q24 consolidated profit was up 42.5% y-o-y to GEL 509.3 million, with a return on average equity standing at 32.1%

·      Georgian Financial Services (GFS) delivered a profit of GEL 411.4 million in 3Q24, with a return on equity of 36.7%.

·      Armenian Financial Services (AFS) posted a profit of GEL 91.4 million in 3Q24, with a return on equity of 23.1%.

·      The Group's loan book increased by 63.4% y-o-y as at 30 September 2024, driven by the consolidation of Ameriabank and a robust, 23.6% growth in GFS.

CEO statement

We delivered another strong quarter, posting a record profit of GEL 509.3 million and an ROE of 32.1%, driven by robust performances in our core business divisions in Georgia and Armenia, supported by lower cost of risk and strong macroeconomic fundamentals. We continued to focus on our strategic priorities and advanced the integration process of Ameriabank, with our various strategic integration workstreams progressing well and bringing the teams together.

The political situation in Georgia has been top of mind for many of our stakeholders recently. As we navigate a period of post-election political tensions which, unsurprisingly and understandably, elevate emotions in everyone, we remain focused on serving the whole of Georgia, supporting our customers and communities as a key systemic universal bank. We do not expect this period to have any significant impact on the economy. Therefore, we maintain our real GDP growth forecasts at 9% and 6% for 2024 and 2025 respectively, with that growth being underpinned by strong domestic demand, resilient external sector inflows, and prudent macroeconomic management.

We are proud that Bank of Georgia has recently been recognised as the World's Best Digital Bank 2024 by Global Finance, competing for this title alongside many prominent global banks. With over 1.5 million monthly active retail digital users in Georgia in September 2024, a remarkable 20.4% increase y-o-y, we are encouraged to see our digital platforms meeting diverse customer needs and receiving global recognition. The connection with our customers is reflected in our Net Promoter Score (NPS) of 67 points, also a remarkable result for any universal bank.

As for our financial performance, Georgian Financial Services has continued its robust growth, with net loans up 21.7% y-o-y and customer deposits up 14.9% y-o-y on a constant currency basis as at 30 September 2024. Operating income in 3Q24 was up 11.0% y-o-y to GEL 683.6 million, mainly driven by strong growth in net interest income. Without the GEL 25 million positive adjustment in net fee and commission income last year, operating income would have increased by 15.7% y-o-y. I mentioned last time that this year we have seen some pressure on operating expenses resulting from double-digit wage growth in the market for the past two years, but these pressures are now stabilising. Overall, profit in Georgian Financial Services was up 17.3% y-o-y in 3Q24 to GEL 411.4 million, with ROE at an exceptional 36.7%. We continue to maintain significant capital buffers and ample liquidity.

Armenian Financial Services also delivered strong results in 3Q24, with the q-o-q loan growth on a constant currency basis of 6.1%, profit reaching GEL 91.4 million and ROE standing at 23.1%. Strong domestic demand and ambitious public infrastructure projects are expected to support the growth momentum in Armenia, with expected real GDP growth of 6.0% in 2024 and 4.9% in 2025, according to IMF, thus providing positive impetus to our banking operations. As our teams continue the integration work, we will start to unlock new opportunities, which, we believe, are significant, especially in the retail segment.

Overall, our business as a whole is performing well, and we keep focusing on supporting our customers with innovative, customer-centric solutions, and delivering strong growth and profitability in our key geographies, Georgia and Armenia. 

Archil Gachechiladze

CEO, Bank of Georgia Group PLC

11 November 2024

Macroeconomic developments: Georgia

Strong economic growth

Economic activity accelerated further in 3Q24, with an estimated 11.1% real GDP growth y-o-y. Economic growth remained broad-based, driven by robust consumption and improving external demand. Galt & Taggart forecasts a 9% real GDP expansion for the full year 2024 and 6% growth in 2025. Upsides exist in public infrastructure projects and emerging service industries such as IT, transport and education. While geopolitical instability in the wider region poses downside risks, ample fiscal space and solid international reserves cushion the economy against potential shocks.

Improving external demand

Export of goods increased by a remarkable 25.6% y-o-y in 3Q24, primarily driven by re-exports and increased commodity prices, following modest contractions in the previous quarters. Import of goods rose by only 3.6% y-o-y in 3Q24, narrowing the merchandise trade deficit. Export of services also remained strong amid tourism season and steadily growing proceeds from transportation services. In 3Q24, tourism revenues increased by 8.0% y-o-y, with tourist visits returning to pre-pandemic levels. Money transfers stabilised in 3Q24, registering only a 0.9% y-o-y decline following last year's high base related to migrant inflows. Remittances form the US, EU countries and Israel continued to increase steadily. Overall, external sector inflows are expected to remain robust, supported by diversified income sources and improving conditions in partner economies.

Healthy bank lending

Bank lending remained robust in 3Q24, increasing by 18.8% y-o-y on a constant currency basis, following a 17.8% y-o-y growth in the previous quarter. Business lending continued to drive credit growth. Loan dollarisation declined further by 1.3 ppts y-o-y to 43.9% at the end of September 2024. The banking sector's credit portfolio remained healthy, with the non-performing loans ratio, according to the IMF, at 1.5% at the end of September 2024.

Strong fiscal discipline

In the first nine months of 2024, tax revenues rose by 19.4% y-o-y, driven by strong economic growth and last year's amendments to the corporate income tax code. The Government remains committed to fiscal consolidation, with the fiscal deficit planned at 2.5% of GDP in 2024, matching 2023 levels. The government debt-to-GDP ratio is set to decrease further to 36.5% in 2024, down 2.7 ppts y-o-y.

Low inflation and prudent monetary policy

Inflation remained low in 3Q24, supported by subdued domestic price pressures and stable GEL. Headline CPI inflation was 0.6% y-o-y in September 2024, down from 2.2% in June. Inflation is expected to remain below the National Bank of Georgia's (NBG) 3% target in 2024. The NBG has maintained its policy rate unchanged at 8.0% since May 2024 due to remaining inflation risks related to strong domestic demand and persistent geopolitical tensions.

Stable GEL

The GEL recovered in value against the US dollar in July 2024 after a brief period of weakness in the previous months. Pressures re-emerged in mid-October, driven by one-off large-scale transactions, according to the NBG. The central bank intervened in FX auctions by selling a total of US$ 213m in October to smooth out the volatility. As a result, the GEL remained stable, close to the beginning-of-year level against the US dollar as at 8 November 2024. In the medium term, strong external sector inflows and prudent macroeconomic management are expected to support the Georgian currency.

More information on the Georgian economy and financial sector can be found at https://galtandtaggart.com/en/research/aboutresearch.

Macroeconomic developments: Armenia

Robust economic growth

In Armenia, economic activity remained robust in 3Q24, fuelled by a supportive fiscal stance and easing monetary policy. Economic growth was predominantly driven by the construction, trade, and services sectors. Consumption and investment spending remained strong, while exports slowed. As a result, economic growth moderated to more sustainable levels, with the preliminary estimate of economic activity increasing by 6.3% y-o-y in 3Q24. The IMF projects real GDP growth of 6.0% and 4.9% for 2024 and 2025, respectively. While geopolitical tensions and weakening growth prospects in trading partners' economies present downside risks, improvements in infrastructure and ongoing structural reforms offer upside potential. Macroeconomic policies remain prudent, underpinning the resilience of the Armenian economy.

Resilient external sector and strong Dram

Export of goods normalised in 3Q24, increasing by 49.4% y-o-y, following extraordinary growth in the previous quarters, driven largely by gold re-exports. Imports slowed as well, with a 21.5% y-o-y growth. Export of services also declined, due to reduced tourist inflows and weakening global demand for IT services. However, remittances regained momentum, with total money transfers up 7.5% y-o-y in 3Q24 (vs. a 2.4% decline in 2Q24). Continued strength of merchandise exports and money transfers contributed to the strengthening of the Dram by 4.3% versus the US dollar year-to-date as at 8 November 2024, making it one of the best performing currencies in the region.

Low inflation and continued easing of monetary policy

In 3Q24, inflation remained low, supported by a strong Dram and declining food prices. Headline CPI inflation was 0.6% y-o-y in September 2024, well below the Central Bank of Armenia's (CBA) 4% target. Amid subdued price pressures, the CBA continued its gradual monetary easing, cutting the refinancing rate by a cumulative 2 ppts to 7.25% in as at end-October 2024, following a total reduction of 1.5 ppts in 2023.

Sound banking sector

The banking sector in Armenia remains well-capitalised, liquid and highly profitable. Estimated bank lending growth was 21.7% y-o-y in constant currency terms in 3Q24, following a 19.1% y-o-y growth in the previous quarter. The lending growth was predominantly driven by local currency loans, leading to a further reduction in loan dollarisation (down 1.9 ppts y-o-y to 33.7 by the end of September 2024).

Delivering on our strategic priorities

The main bank

Being the main bank in customers' daily lives by leveraging the digital and payments ecosystems.

Bank of Georgia (BOG)

In October 2024, JSC Bank of Georgia was recognised as the World's Best Digital Bank 2024 by Global Finance.

BOG continued to develop its payments acquiring business during the quarter. The volume of payment transactions in BOG's in-store/online POS terminals was up 31.2% y-o-y and 13.3% q-o-q in the third quarter of 2024, to GEL 5.3 bn. In 9M24, the volume of payment transactions totalled GEL 14.0bn (up 33.2% y-o-y). BOG's payments acquiring market share increased to 57.3% in September 2024 (up 2.1 ppts y-o-y).

Ameriabank

Ameriabank had 312 thousand monthly active retail customers as at September 2024 (up 13.5% y-o-y and up 3.8% q-o-q), of which Digital MAU was 188 thousand (up 39.0% y-o-y and up 8.6% q-o-q)[1].

Excellent customer experience

Anticipating customer needs and wants, and providing relevant products and services.

Bank of Georgia's Net Promoter Score (NPS) was 67 in 3Q24 (59 in 3Q23 and 71 in 2Q24).                                

Profitable growth

Growing the balance sheet profitably and focusing on areas with high growth potential.

·      Georgian Financial Services loan book grew 23.6% y-o-y and 3.6% q-o-q, amounting to GEL 22,444.1 million as at 30 September 2024. Growth on a constant currency basis was 21.7% y-o-y and 4.3% q-o-q.

·      Armenian Financial Services loan book grew 3.1% q-o-q (6.1% on a constant currency basis), amounting to GEL 7,955.7 million as at 30 September 2024.

Our key targets for the medium term are:

·      c.15% annual growth of the Group's loan book (the target was revised up from c.10% following the acquisition of Ameriabank in March 2024)

·      20%+ return on average equity

·      30-50% annual capital distribution ratio (dividends and share buybacks)

3Q24 and 9M24 consolidated results

In the commentary below, the Group's main Business Divisions are referred to as GFS (Georgian Financial Services) and AFS (Armenian Financial Services). Given the first-time consolidation of Ameriabank's P&L in 2Q24, the y-o-y growth rates at the Group level have been significantly impacted by the consolidation. To see the underlying performance of our business in Georgia, please see pages 10 to 12.  

Performance highlights

·      The Group generated operating income of GEL 937.7m in 3Q24 (up 45.9% y-o-y and down 1.2% q-o-q). In 9M24, operating income amounted to GEL 2,530.6m (up 35.1% y-o-y). The y-o-y increases in 3Q24 and 9M24 were largely driven by the consolidation of Ameriabank, together with 11.0% and 9.9% y-o-y increases respectively in GFS. In GFS, strong y-o-y growth in 3Q24 was recorded in net interest income and net foreign currency gain, partly offset by lower net fee and commission income resulting from a positive net GEL 25.0m booked in 3Q23 due to amendments in the accounting model for payment systems charges. Excluding this effect, the y-o-y growth in GFS net fee and commission income in 3Q24 would have been 21.0%. Compared with the prior quarter, operating income was broadly flat, with growth in GFS offset by lower operating income in AFS and Other Businesses.  

·      The Group's operating expenses amounted to GEL 326.4m in 3Q24 (up 76.2% y-o-y and down 3.4% q-o-q). The y-o-y growth on the Group level was mainly driven by the consolidation of Ameriabank, although increases have also been experienced at GFS. In 9M24, operating expenses amounted to GEL 852.3m (up 61.2% y-o-y), mainly due to the same reasons mentioned above. The Group's cost to income ratio was 34.8% in 3Q24 (28.8% in 3Q23 and 35.6% in 2Q24). In 9M24, cost to income ratio was 33.7% (28.2% in 9M23). The Group's cost to income ratio was negatively impacted by the higher cost to income ratio of AFS.

·      The Group's profit was GEL 509.3m in 3Q24 (up 42.5% y-o-y and up 18.4% q-o-q). The Group's profit (adjusted for one-off items) was GEL 1,308.3m in 9M24 (up 25.1% y-o-y). Return on average equity was 32.1% in 3Q24 (30.7% in 3Q23 and 28.0% in 2Q24). In 9M24, return on average equity (adjusted for one-off items) was 30.1% (31.1% in 9M23).

Asset quality

·    Loan portfolio quality has remained healthy. Cost of credit risk ratio was 0.2% in 3Q24 (0.6% in 3Q23 and 1.1% in 2Q24 or 0.4% if adjusted for Ameriabank initial ECL), driven by robust performances in both the Georgian and Armenian operations. In 9M24, cost of credit risk ratio was 0.6% (0.3% if adjusted for Ameriabank initial ECL charge) vs 0.8% in 9M23.

·      The NPLs to gross loans ratio improved to 1.8% as at 30 September 2024 (down 60 bps y-o-y and down 20 bps q-o-q). The y-o-y decrease was mainly driven by a decrease in GFS NPL ratio (down 50 bps y-o-y to 1.9%). AFS NPL ratio was also down q-o-q.                

Portfolio highlights

·      Loans to customers, factoring and finance lease receivables amounted to GEL 31,059.0m as at 30 September 2024, up 63.4% y-o-y and up 3.2% q-o-q in nominal terms. The significant y-o-y increase is attributable to the Ameriabank acquisition, as well as a 23.6% loan growth in GFS.

·    Client deposits and notes amounted to GEL 31,872.4m as at 30 September 2024 (up 46.6% y-o-y and up 3.8% q-o-q). The y-o-y growth was driven by the Ameriabank acquisition as well as a 16.8% deposit growth in GFS.

Capital return

·      In August 2024, the Board of Directors declared an interim dividend of GEL 3.38 per ordinary share in respect of the period ended 30 June 2024 to ordinary shareholders of Bank of Georgia Group PLC. The interim dividend was paid on 11 October 2024.

·      In addition, in August 2024, the Board announced a further share buyback and cancellation programme totalling GEL 73.4 million. The Company commenced the share buyback and cancellation programme in August 2024, and as at 31 October 2024 the Company had bought back 265,229 ordinary shares at a total cost of GEL 37.9 million, of which 247,729 shares were cancelled.

Business Division results 

Following the acquisition of Ameriabank in March 2024, the Group results are presented by the following Business Divisions: 1) Georgian Financial Services (GFS), 2) Armenian Financial Services (AFS), and 3) Other Businesses.

Georgian Financial Services (GFS)

Georgian Financial Services (GFS) mainly comprises JSC Bank of Georgia and investment bank JSC Galt and Taggart.

Performance highlights

·      GFS generated operating income of GEL 683.6m in 3Q24 (up 11.0% y-o-y and up 2.1% q-o-q). The y-o-y growth was mainly driven by net interest income, marginally offset by lower net fee and commission income (see below). In 9M24, operating income amounted to GEL 1,972.2m (up 9.9% y-o-y).

o  The y-o-y decline in net fee and commission income in 3Q24 was mainly attributable to a high base in 3Q23 as c. GEL25m net positive effect was recorded last year due to amendments in the accounting model for payment systems charges. Excluding this effect, net fee and commission income would have been up 21.0% y-o-y. The q-o-q decline was mainly driven by seasonally higher loyalty programme costs. In 9M24, net fee and commission income was GEL 338.7m (up 7.6% y-o-y); excluding c. GEL27m (significant advisory fee) and c. GEL25m (amendment effect) significant items recorded in 1Q23 and 3Q23 respectively, the underlying y-o-y growth in net fee and commission income in 9M24 would have been c. 29%.

o  The significant decline in net other income in 9M24 (down 71.1% y-o-y) was driven by a high base in 2Q23 reflecting a significant GEL 68.7m gain on the sale of repossessed assets.

·      The net interest margin increased slightly during the quarter and stood at 6.1% in 3Q24 (down 50 bps y-o-y and up 10 bps q-o-q). The redemption of the $100m AT1 perpetual bond at the end of June 2024 had a small positive impact on the margin. In 9M24, NIM was 6.1% (down 40 bps y-o-y), driven by a combination of higher cost of funds (up 40 bps y-o-y to 5.2%) and lower loan yield (down 20 bps y-o-y to 12.5%).

·      Operating expenses amounted to GEL 195.9m in 3Q24 (up 19.3% y-o-y and up 1.3% q-o-q). In 9M24, operating expenses increased by 18.7% y-o-y to GEL 555.9m. The y-o-y growth in operating expenses in the periods presented was mainly driven by increased salaries and other employee benefits, together with higher administrative expenses related to business growth and continuing investments in key strategic areas.

o  The y-o-y growth in salary costs reflected a combination of two factors: an increase in staff numbers to support business growth (up 8.5% y-o-y at Bank of Georgia as of September 2024) and higher wages driven by double-digit nominal wage growth in Georgia during 2022-2023. As 2024 has progressed, market nominal wage growth has been stabilising.

·    Cost of credit risk ratio was 0.1% in 3Q24 (0.7% in 3Q23 and 0.4% in 2Q24). The decrease was attributable to improvements in credit quality across all segments, reflecting the continued strength of the Georgian economy. In 9M24, cost of credit risk ratio stood at 0.3% vs 0.8% in 9M23.

·      Overall, GFS posted a profit of GEL 411.4m in 3Q24 (up 17.3% y-o-y and up 8.0% q-o-q). In 9M24, profit amounted to GEL 1,162.7m (up 13.2% y-o-y compared with adjusted profit in 9M23).

Portfolio highlights  

From 1Q24 the Corporate Center was separated as a new segment of GFS. The Corporate Center mainly includes treasury and custody operations. Previously, the Corporate Center's income and expenses were allocated to the Retail, SME, and CIB segments. The previous figures for the Retail, SME, and CIB segments have been restated.

·      GFS's loans to customers, factoring and finance lease receivables stood at GEL 22,444.1m (up 23.6% y-o-y and up 3.6% q-o-q) as at 30 September 2024. The y-o-y growth was mainly driven by CIB, followed by RB and SME respectively. The q-o-q growth was driven by RB, followed by CIB. On a constant currency basis, the loan book increased by 21.7% y-o-y and by 4.3% q-o-q.

·      57.1% of the loan book was denominated in GEL as at 30 September 2024 (56.3% at 30 September 2023 and 55.6% at 30 June 2024).

·      Client deposits and notes stood at GEL 24,079.7m as at 30 September 2024 (up 16.8% y-o-y and up 6.3% q-o-q). Strong y-o-y growth was recorded in RB and SME segments. The q-o-q growth was mainly driven by CIB, followed by Corporate Center (mainly due to higher Ministry of Finance deposits), and SME respectively. On a constant currency basis, deposits increased by 14.9% y-o-y and by 7.3% q-o-q. Product-wise, strong y-o-y and q-o-q growth in deposits was primarily driven by time deposits, followed by current accounts and demand deposits.

·   The share of GEL-denominated client deposits increased to 49.8% as at 30 September 2024 (49.1% at 30 September 2023 and 48.0% at 30 June 2024).

Liquidity

·      Bank of Georgia has maintained a strong liquidity position, with IFRS-based NBG liquidity coverage ratio at 126.3% as at 30 September 2024 (135.7% as at 30 September 2023 and 128.3% as at 30 June 2024), and IFRS-based NBG net stable funding ratio at 124.9% as at 30 September 2024 (134.5% as at 30 September 2023 and 126.9% as at 30 June 2024).

Capital position

·    Bank of Georgia continues to operate with robust capital adequacy levels. At 30 September 2024, the Bank's Basel III CET1, Tier1, and Total capital ratios stood at 17.2%, 20.8%, and 23.3%, respectively, all comfortably above the minimum requirements of 15.0%, 17.2%, 20.1%, respectively. The movement in capital adequacy ratios in 3Q24 and the potential impact of a 10% devaluation of GEL is as follows: 

·      Bank of Georgia's minimum capital requirements for December 2024 are expected to be 14.9%, 17.1% and 20.0% for CET1 ratio, Tier1 ratio, and Total capital ratio respectively.

Armenian Financial Services (AFS)

Armenian Financial Services (AFS) includes CJSC Ameriabank