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‘Russian Interest May Be Useful for the Banking Sector,’ABG The FINANCIAL


he net profit of the banking sector amounted to GEL 13 million in the first month of the current year, while last year’s result showed a loss of GEL 7 million, according to Zurab Gvasalia, President of the Association of Banks of Georgia. Gvasalia believes that positive economic tendencies have been developing in the


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country and in the banking sector as well, which will lead to much better results by the end of 2013. As the President of the Association of Banks of Georgia told The FINANCIAL, it is always very positive when foreign capital is entering in to the country and there is no reason to negatively consider Russian capital inflow in our banking sector.

Continued on p. 5

‘Bank Constanta’s Financial Performance - One of the Best in 2012’


ank Constanta reached a record level and enjoyed a market increase in its key financial performance indicators last year. Throughout 2012 Bank Constanta witnessed 65 percent growth in its assets and 64 percent growth in its credit

BG Capital Leader of the Capital Market of Georgia The FINANCIAL By Madona Gasanova


uring the past several years, BG Capital has been the leading investment bank in Georgia by market share. BG Capital offers clients a full range of investment services, including equity and fixedincome brokerage, research, investment banking and asset management services. Continued on p. 12


Apr. 1

Mar. 23

1.6577 2.1245 5.3331 0.9159

1.6587 2.1457 5.3623 0.9123

portfolio. The credit portfolio of Bank Constanta reached GEL 200 million in 2012. The Bank’s equity capital is about GEL 35 million nowadays.

Continued on p. 2

Bank Republic Changes Its DNA By Eugene Walters


hen Christian Carmagnolle became CEO of Bank Republic/Societe Generale Group, he announced the Group aimed to be the best bank in its strategic market by seeking excellence in customer care. But the bank needed to implement more structural changes

to streamline business processes and upgrade the quality of customer services to retain its ranking among the most reliable and dynamic financial institutions in Georgia. Carmagnolle and his team have made exhaustive improvements and plan to make even more in its efforts to make Bank Republic, Georgia’s most “socially responsible bank.” Continued on p. 6

Net Profit of TBC Bank in 2012 Amounted to GEL 97.8 Million The FINANCIAL


he net profit of TBC Bank totalled GEL 97.8 million last year. According to Vakhtang Butskhrikidze, CEO of the Bank, 2012 proved to be a

very successful year for the Bank. TBC implemented various innovative projects last year and received many international and regional awards as recognition of this.

Continued on p. 8

© 2013 The FINANCIAL. Intelligence business publication written expressly for opinion leaders and top business decision-makers




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1 April, 2013 |

‘Bank Constanta’s Financial Performance - One of the Best in 2012’

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The FINANCIAL By Mariam Papidze


ank Constanta reached a record level and enjoyed a market increase in its key financial performance indicators last year. Throughout 2012 Bank Constanta witnessed 65 percent growth in its assets and 64 percent growth in its credit portfolio. The credit portfolio of Bank Constanta reached GEL 200 million in 2012. The Bank’s equity capital is about GEL 35 million nowadays.

“Our financial results were some of the best in general in 2012,” said Levan Lebanidze, General Director of Bank Constanta. “We ended the year 2012 with net profit of about GEL 4.3 million. Return on Investment was 15 percent. The year 2012 was one of the most successful years in the history of Bank Constanta. The Bank’s market share has been growing intensively over the last few years. The Bank has grown by 65 percent in its total assets. This percentage is much higher than the total banking sector’s growth which was just 14 percent,” he added. “Out of the most important activities of 2012, I would single out the devel-

Levan Lebanidze, General Director of Bank Constanta

opment of the non-credit direction. The number of Bank Constanta’s branches has doubled. The service at our branches has been improved. We have about 51 representations, mainly in the regions throughout Georgia. Our plans for 2013 are very ambitious. We plan to offer credit cards to our customers this year and new types of deposit products,” said Lebanidze. As the General Director told The FINANCIAL, the number of the Bank’s customers increased dynamically in 2012. “There are about 50,000 creditors at Bank Constanta today. The number of depositors is also high. Our deposit portfolio consists of GEL 60 million with a fixed increase of GEL 47 million during 2012. The Bank has become the main supplier on the remittance market and intends to attract the majority of our customers in this direction. I would single out the innovative product “Inbox” as one of the most successful

new products of the Bank. It is very different from all other products currently available on the market,” he added. As the Bank’s Head of Marketing Department, Lasha Gogua said, “Inbox is a universal method of saving money.” Crediting the account is available from any fast payment terminal with a 6 digit Inbox number. “Inbox is one of the products whose main goal is to help customers save money,” said Gogua. “The product is intended for low-income people, mainly young people. Inbox has 40,000 customers today and unites low income people as well as large business owners. We are going to implement several subcategories for Inbox. Development of the non-credit direction was our priority in 2012 as Bank Constanta was not represented strongly enough in that area. The reason was that it had only recently developed as a bank,” he added.

Business and agro loans, as well as deposits and money transfers, were the most popular products at Bank Constanta, according to Gogua. During 2012, there was a decrease in the direction of interest rate in general. The same happened at Bank Constanta. “We always try to cheapen product supply for our customers by simplifying the procedures and implementing new technologies. For running a business the existing conditions are very supportive if the loan and business are correctly structured,” Lebanidze said. Bank Constanta became one of the largest employer companies in 2012 according to research done at Iliauni. “We employed about 500 people in 2012,” said Nana Chkhikvadze, CSR Specialist at Bank Constanta. “The majority of them were employed in the regions. Nowadays, the number of Bank Constanta’s employees exceeds

1,100 people. To be oriented on our employees is one of our focus points for 2013. It is also important for all new employees to develop a sense of corporate social responsibility,” she added. “As for the customers, our goal is consumer protection and transparency. The micro financing sector is a very specific segment and it is very important to improve the financial education of our customers. In the regions in particular, people are not aware of banking terminology for example. In our relations with our customer it is very important to speak a “language” they can understand. The increase in the numbers of our customers proves that they are satisfied with the service that is being provided by Bank Constanta,” Chkhikvadze said. This year, Bank Constanta representatives expect positive changes in the banking sector in general. “We know that a lot of

improvements are planned for the field of agriculture. This field is directly linked to Bank Constanta as we are oriented on exactly the same sector. Not just the banking sector, but others also will start thinking about how to use these new opportunities,” Lebanidze said. “Very active campaigns are being planned for the improvement of problematic directions. We see that very intensive and useful steps have been taken to help smallholdings. This will increase the share of agriculture in the country’s total products. Development of infrastructural projects is also planned which will support economic activities in the regions. These projects are about the fixing of roads, withdrawal of irrigation canals, building of factories. As we operate in the direction of agriculture, the implementation of all of these projects will be very useful for Bank Constanta,” Lebanidze added.




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1 April, 2013 |

The Long Road Global Banking and Finance: Erosion of Trust Capital Guy de Fontgalland


yprus, the tiny nation of some 1.4 million people enjoyed a princely status for some years, with a huge per capital income touching $39,000 per annum. For a country where both agriculture and other industrial sector contributed a mere 20% to the GDP and the balance 80% came from the services, the nation’s business model was based on attracting foreign depositor funds at attractive rates and conditions. The ballooning of the bank deposits gave Cyprus a heady feeling of economic superiority and financial strength. In a strange way, while being part of the European Union, Cyprus conducted its financial affairs with an entirely different perspective and somewhat different from the normal European tradition of financial behaviour. Cyprus’s business model of attracting large deposits into its banking system was not entirely unique or controversial. There are and have been a number of small states which successfully attracted foreign deposits, such as Switzerland, Luxembourg, Lichtenstein, and other tiny states elsewhere. The difference is that Cyprus took a beating from the

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Greek crisis, losing large funds in that country and without a strong financial governance or regulatory environment, much of the funds which came in took flight out of Cyprus as far back as June last year. According to records, some 45% of the deposits took flight. The banks’ capacities to leverage their cash positions were blunted and the road to bankruptcy was written on the wall. Now, it seems that while depositors of 100,000 Euros and less will be protected under the recent EU bail-out of Euro 10 billion, larger depositors will lose up to 40% of their deposits on a government plan to swap cash for bank shares. The controls on the flight of capital, while aimed at maintaining at home an eroded bank capital base, will deter anyone from depositing money into any Cyprus bank in the near future. The Cyprus banking system has collapsed, although

the high horse riders in the EU politburo will only declare that they have helped Cyprus avoid a total collapse and have saved their own tax payers from doling out hard earned money to save errant banks. It seems that there does not seem to be an end to the string of financial crisis and bailouts to a number of EU banks. Slovenia is next on the list of countries to cry for help and, if we were to go by the harsh and deterrent punishment meted out to Cyprus, Slovenia may receive a more painful caning for its own financial indiscipline. And who would be next after Slovenia is not that difficult to predict as most European countries are on the verge of tilting over the edge of the financial cliff. What is evident, through the last few years of crisis faced by the economic giants of the UnitContinued on p. 14

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1 April, 2013 ISSUE: 13 (342) © 2013 INTELLIGENCE GROUP LTD

Copyright and Intellectual Property Policy The FINANCIAL respects the intellectual property of others, and we ask our colleagues to do the same. The material published in The FINANCIAL may not be reproduced without the written consent of the publisher. All material in The FINANCIAL is protected by Georgian and international laws. The views expressed in The FINANCIAL are not necessarily the views of the publisher nor does the publisher carry any responsibility for those views. Permissions If you are seeking permission to use The FINANCIAL trademarks, logos, service marks, trade dress, slogans, screen shots, copyrighted designs, combination of headline fonts, or other brand features, please contact publisher. “&” is the copyrighted symbol used by The FINANCIAL FINANCIAL (The FINANCIAL) is registered trade mark of Intelligence Group ltd in Georgia and Ukraine. Trade mark registration by Sakpatenti - Registration date: October 24, 2007; Registration N: 85764; Trade mark registratrion by Ukrainian State Register body - Registration date: November 14, 2007. ADVERTISING All Advertisements are accepted subject to the publisher’s standard conditions of insertion. Copies may be obtained from advertisement and marketing department. TO GET the ADVERTISING RATE CARD please contact marketing at: see financial media kit online DISTRIBUTION The FINANCIAL distribution network covers 80 % of key companies operating in Georgia. 90 % is distributed in Tbilisi, Batumi and Poti. Newspaper delivered free of charge to more than 600 companies and their managers. To be included in the list please contact distribution department at: contact Us eDITOR-IN-cHIEF zVIAD pOCHKHUA E-MAIL: Phone: (+995 32) 2 252 275 hEAD OF mARKETING lALI jAVAKHIA E-MAIL: Phone: (+995 577) 74 17 00 consultant mamuka Pochkhua E-MAIL: Phone: (+995 599) 29 60 40 head of distribution department Temur tatishvili E-MAIL: Phone: (+995 599) 64 77 76 Copy Editor: Iona MacLaren Communication manager: Eka beridze Phone: (+995 577) 57 57 89 Photo Reporter: KHATIA PSUTURI Mailing address: 17 mtskheta Str. Tbilisi, Georgia OFFICE # 4 PHONE: (+995 32) 2 252 275 fax: (+95 32) 2 252 276 E-mail: on the web: daily news:

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‘Russian Interest May Be Useful for the Georgian Banking Sector,’ Zurab Gvasalia The FINANCIAL By Mariam Papidze


he net profit of the banking sector amounted to GEL 13 million in the first month of the current year, while last year’s result showed a loss of GEL 7 million, according to Zurab Gvasalia, President of the Association of Banks of Georgia. Gvasalia believes that positive economic tendencies have been developing in the country and in the banking sector as well, which will lead to much better results by the end of 2013. As the President of the Association of Banks of Georgia told The FINANCIAL, it is always very positive when foreign capital is entering in to the country and there is no reason to negatively consider Russian capital inflow in our banking sector. “In my opinion, if Russia is interested in the Georgian market, it is a very good thing. VTB Bank has been operating on the Georgian market for a long time already and it have only added value to the sector and Georgian economy. The Bank finances the Georgian economy, gives loans to real sectors, is taxed in Georgia and pays money in to the budget. Of course it would be much better and more profitable for the country if European or American capital were to enter the Georgian banking sector,” said Gvasalia. Q. How real is the Russian interest in the Georgian banking sector? If it is genuine, then what impact might this interest have on the whole sector? A. I do not see anything surprising in the interest of the Russian financial market as the Georgian banking sector is attractive and developed enough to garner attention not only from Russia but from other countries as well. A valid point is whether Russian financial institutions could satisfy the ambitions of the Georgian banking sector. Before entering the Georgian market Russian interest should first have some background, like the arrival in Georgia of the President of the Association of Russian Banks (ARB). The President came here three months ago. It is obvious that the President did not travel to Georgia for the purpose of tourism. The purpose of his visit was to get information about the trends in the Georgian banking sector and pass that on to the members of the ARB. We have had similar meetings with the representatives of other countries’ bank associations as well. Q. How would you assess the beginning of the year 2013 and what are your expectations for this year? A. They say that there has been a sharp decrease in banking sector activity since October 2012 and that this tendency has continued in the first months of the current year. I am referring to, first of all, credit activity. The volume of credit investment is reduced from GEL 8 billion, 733 million to GEL 8 billion, 687 million in the first month of 2013 compared to the

Zurab Gvasalia, President of the Association of Banks of Georgia

end of 2012. The drop is just 0.5 percent. Almost the same happened last year - the volume of credit investment decreased by 1 percent, from GEL 7 billion, 739 million to GEL 7 billion, 662 million. The drop is typical for the beginning of every year and not only in Georgia. The net profit of the sector amounted to GEL 13 million in the first month of the current year, while last year’s result showed loss of GEL 7 million. There are changes expected for the current legislation including the tax code, which will be helpful for the banking sector. It should be noted that, according to the February the net profit of the sector increased from GEL 13 million to GEL 43 million; Accordingly, expectations for the current year are much more positive than last year’s. Q. What were the financial results of Georgian banks in 2012 and how would you evaluate them? A. I consider sector profitability to have decreased in 2012. It was observed in the last quarter as well as during the whole year. The net profit amounted to GEL 134 million in 2012, which is almost 60 percent less than the previous year’s indicator - GEL 323 million. Last year’s revenues were increased by just 5 percent compared to the previous year and that is why net profit dropped. The banking sector’s revenue was increased by 31 percent in 2011 compared to 2010. The volume of loans was increased from GEL 7.7 billion to GEL 8.7 billion in 2012, which is a 13 percent increase, while in the same period of 2011 credit investment was increased by 24 percent compared to the previous year. Thus, a reduction in the sector’s profitability is linked to a reduction of credit activity. Both

of these factors were due to the tense and politically very active year. I am referring to the year 2012. That year, businesses switched to “waiting mode” and legislation connected to the banking sector, changed. All of this was reflected in the increase in risk and drop in credit activity in terms of business as well as retail renting. As a result of the above-mentioned legislative changes, Cartu Bank suffered loss. Unfortunately, the banking sector became a kind of “victim” of the country’s ongoing political processes, which was connected to Cartu Bank. Supposedly, Cartu Bank will compensate for this damage this year, which will be reflected positively in the banking sector. Q. What are the current trends in banking credits? A. A reduction of bank assets is somehow related to a passive regime of large business. On the one hand it is shown by the reducing volume of term deposits of legal entities; on the other hand - by a decrease in borrowed funds. I predict that this tendency will change in the second half of 2013. First of all, bank activity will increase by that time, including the attraction of investments. Also, large business is actively using sources of new funding. As evidence TBC Bank has adopted a new GEL 50 million credit line. The Bank made a statement about its agreement with the Asian Development Bank and said that it has very ambitious plans like other banks in the country. The activity, which was not observed in the first quarter of 2013, will begin in another quarter of the year in business in general and the banking sector as well. This activity will be supported by the new programmes implemented by the Government in the field of agriculture. Investment funds will be very useful as well.

Q. Could you please discuss the current tendencies in deposits and banks’ equity capital? A. For the first month of the current year bank capital increased by 3 percent compared to last year, from GEL 2 billion, 390 million to GEL 2 billion, 462 million. It is notable that nonbank deposits increased from GEL 7 billion, 650 million to GEL 7 billion, 671 million. As for the deposits of individuals, they increased from GEL 3 billion, 70 million to GEL 3 billion, 131 million. This is a very significant factor and expresses the population’s mood, which is very optimistic. Q. What is the interest rate on loans at present and is it possible to do business with this rate? A. I think this year will be distinguished by a decrease of interest rates. Several banks have already stated a new strategy of consumer and business loans. For example, Bank Republic has a new offer for business loans with very flexible conditions. Borrowers will be able to use a preferential period - to choose the preferred two months and be free from loan instalments during this time. A similar campaign has been started at TBC Bank. The Bank is offering its customers consumer loans with a 13.95 percent interest rate. For employees of organizations that are members of Bank of Georgia’s salary programme the Bank is offering them consumer loans till 1 May with very good conditions. Despite the fact that all these offers are just campaigns, they have still caused a reduction in interest rates. This gives the hope that the decrease will continue in the future as well. Q. Which are the most problematic or expensive loans that are difficult for customers to pay back? A. Unsecured and inappropriate loans are relatively expensive. As for the most problematic loans, they are related to mortgage loans. As well as banks, such loans are also given by unlicensed private mortgage holders in Georgia. Unfortunately 34 percent of mortgage loans come from them, which creates an abnormal situation. Unlike banks, the restructuring of loans is impossible. When it comes to the eviction of several thousand people, in this case it is a matter of precisely such types of loans. For example, in the years 20082012 the number of real estate units appropriated and sold by commercial banks amounted to 721, out of which last year’s result was 104 units. This data shows that the majority of the real estate units sold at auction is by private mortgage holders, which is shown in the summary of the data, but has connections to the auctions required by the banks. In total the value of movable and immovable property appropriated by banks is only 1.6 percent of the total assets as of November 2013. Of course, no one can prohibit the giving of a loan and cannot restrict the interest rate, but this issue needs regulating even if only for the social aspect.




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1 April, 2013 |

Bank Republic Changes Its DNA By Eugene Walters


hen Christian Carmagnolle became CEO of Bank Republic/ Societe Generale Group, he announced the Group aimed to be the best bank in its strategic market by seeking excellence in customer care. But the bank needed to implement more structural changes to streamline business processes and upgrade the quality of customer services to retain its ranking among the most reliable and dynamic financial institutions in Georgia. Carmagnolle and his team have made exhaustive improvements and plan to make even more in its efforts to make Bank Republic, Georgia’s most “socially responsible bank.” “We inherited a non-performing bank, at a loss for 3 years. There was no motivation. It was stagnating,” says Chief Commercial Officer, Ramaz Kukuladze, who joined the bank in September, 2011. The results of the bank’s new changes are evident in the positive performance of 2012, which was a good year in terms of quantitative and qualitative aspects. Among the chief changes was a move towards a performance based culture. By providing clients with real solutions, the Bank will gain the market share they are looking for. So far, the plan is paying off. Bank Republic ended up with a $15 million net profit at the end of 2012. “We are changing the organizational structure, the profitability, the DNA of the bank,” Mr. Kukuladze asserts. “We are rebranding ourselves to “relationship banking” and introducing new strategies.” He explains that typically, banks judge a client only by their assets and ignore the client’s real ability to pay a loan back. “That’s not the case with us. Our first point is to assess whether a client has enough cash flow to pay back the loan. Collateral is secondary.” Relationship banking involves actively working with the client to ascertain what size loan

Ramaz Kukuladze, Chief Commercial Officer is best for the client. The goal is to have a client that can meet his or her obligations. The attitude of relationship banking is reflected in Bank Republic’s new slogan, “Each of Us Matters,” a buzzword that means each stakeholder is as equally important as the next, whether they are a client or one of the Bank’s tellers. “It’s a team spirit philosophy we’re trying to build on,” Kukuladze says. With 2012, as a benchmark, 2013 looks to be a good year for Bank Republic. Right now, according to the NBG standards, of the top 5 leading banks in the country, Bank Republic has the largest return on equity so far. While it has always had a strong retail market, the Bank is re-engineering its branches to im-

prove it. The number of customers has grown by 28%, so that there are currently 210,000 retail clients. One of the Bank’s main challenges this year is to increase the number of active clients into its total portfolio of clients. The corporate market, however, has moved slower. One reason is that the Bank was more oriented towards large ticket deals. This year, SME is the bank’s major focus. Now, corporate clients will have the benefit of having the best prices on the market, however, the Bank team aims to be more diligent in assessing its corporate clients. “We are very picky about corporate loans,” Kukuladze admits. “We want the best companies to become our clients.” To improve its efficiency, the

Bank has redesigned its process for corporate loans by signing service level agreements with risks so that the number of days the client has to repay is in line with the market. It is not just about being in a better position with price, it’s also about being in line with the market and being flexible. Being in line with the market isn’t just about offering customized images on debit and credit cards; its about offering products suited to the ever changing demands of society and staying a step ahead of competition. Over the past year, Bank Republic has offered 20 new products from mortgages to customer loans. It was the first bank in Georgia to introduce the lowest interest rate customer loan - 13.95%. As

for internet banking, an interim solution has been launched for corporate internet banking, while retail banking will soon be introduced. A state of the art solution is slated for implementation in 2014/2015. Kukuladze states the Bank has been slow in internet banking because the starting position was behind when he and Mr. Carmagnolle joined the bank. This year, they will offer mobile banking to meet the needs of a new generation of clients who have new habits. In 2011, the Bank’s major product in its retail loan book was mortgages, which have a less divergent interest rate. In its portfolio the target was over 50%. The Bank’s aim is to reduce the mortgage weight and increase the weight of other retail markets it has a better margin on. Kukuladze says they are quite successful too. The rate of our customer loans increased, while mortgages are at 39%. “We are offering a much better product than before,” Kukuladze says. While it is mostly known for its mortgages, Bank Republic’s most popular products are customer loans. It has recently redesigned the loan process to radically improve its response time to clients. Now, 90% of its customers applying for loans need only wait 2 to 3 days maximum for the entire process, including disbursement. For larger scale tickets, the wait is 7 days maximum. “That’s much better than what the market is offering,” Kukuladze maintains. Moreover, in terms of loans, the Bank has the lowest interest rates in the country. It endeavors to stay 100 basis points (1%) below the competition on every product. It offers mortgages starting from 11% fixed rate and a variable rate starting from 9.8%. Consumer loans are at 13.95%. Bank Republic’s innovations include offering travel loans, installment loans and bundle automobile loans that offer gifts like insurance and petrol. The Bank maintains around a 15% market share in mortgages. Its overall shares in loans is 6.6%. Becoming a socially responsible bank is a process that requires vision, fortitude and discipline. It requires a thorough analysis of risks and a sincere relationship to clients. Ramaz Kukuladze calls it “advisory banking” and insists that such an approach is good for everybody and educates the client to achieve a better life. “At the end of the day, if we manage to be successful in providing the best advice, the client will be able to distinguish the difference between our bank and the competition,” he says.




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1 April, 2013 |

Net Profit of TBC Bank in 2012 Amounted to GEL 97.8 Million The FINANCIAL By Tako Khelaia


he net profit of TBC Bank totalled GEL 97.8 million last year. According to Vakhtang Butskhrikidze, CEO of the Bank, 2012 proved to be a very successful year for the Bank. TBC implemented various innovative projects last year and received many international and regional awards as recognition of this. According to Butskhrikidze, in 2012 total assets increased by 18.4%, which raised the Bank’s share on the market by 25.8%. The total amount of loans increased by 17% and amount of deposits - by 24.4%. The share on the credit market totalled 26.2% and on the deposits market - 31.5%. “Last year, TBC Bank celebrated its 20th anniversary and then embarked upon the start of a new decade. Twenty years is a significant amount of time for any company to have been operating in Georgia for, as the history of private business in the country is as old as that. We are very proud that TBC Bank has managed to develop steadily, despite the very difficult political and economic times the country has seen over the past 20 years. We are also exceedingly proud that it is a leading bank in Georgia today with USD 370 million capital and USD 2.5 billion assets,” Butskhrikidze said.

Vakhtang Butskhrikidze, TBC Bank CEO

“After 20 years we are very proud to have always served our company’s mission - to create new opportunities for individuals and businesses. This supports the country’s future economic development and growth,” Butskhrikidze said. “Last year we significantly expanded our business, we further improved our positions on the market and at the same time made our anniversary year a profitable and memorable one for society. Our position as leading bank on the retail deposits market has been especially cemented, as our bank’s share came to more than 35%.” As Butskhrikidze notes, as of the end of 2012 the total capital of TBC Group (including Bank Constanta)

had increased by 28% and amounted to GEL 604 million. The main supporting factor of the growth was an increase of the Group’s capital by bank shareholders by GEL 25 million and increase of Tier 2 Capital (secondary capital) by GEL 25 million. “Last year TBC Bank attracted GEL 192 million in financial resources. TBC received EUR 50 million from the world’s biggest international financial institution - European Investment Bank EIB; TBC Bank signed a loan agreement of USD 20 million with French company PROPARCO. This is the first investment of the company in Georgia,” Butskhrikidze said. “EBRD allocated a USD 10 million

loan within the frames of the Caucasus Energy Efficiency Programme (CEEP). A USD 5 million loan agreement was also signed with Dutch investment management company Triple Jump,” he added. TBC Bank serves about 1,000,000 customers in four business segments according to Butskhrikidze. It offers a wide spectrum of products to corporate, retail, small and medium business and micro finance segment customers. “We have a growing network in Georgia and its regions. We have a key role in the functioning of the country’s financial system.” “In 2012 TBC Group significantly increased its services with the help of its branches, ATMs and fast pay-

ment terminal network. As of the end of the year, in the Group’s network, there were 105 branches and service centres Georgia-wide, 274 ATMs and 2,888 fast payment terminals.” “Last year we took quite a crucial step forward in regard to offering people many different products and services. Of particular note is the ultramodern internet bank and mobile bank’s implementation. It’s remarkable that for the first time in Georgia TBC Bank has offered its customers internet bank applications for iPhones, Androids and other smartphones,” Butskhrikidze said. “This project received international recognition and success. The magazine Global Finance named TBC Bank the best mobile bank owner in Central and Eastern Europe. TBC is the only bank in Georgia to have received an award for this nomination and achieved regional recognition for this. I think these technological services will be the most highly demanded and popular on the Georgian banking market in 2013,” Butskhrikidze noted. Last year was successful for TBC in terms of international recognition as well. As Butskhrikidze notes, international rating agency Fitch Ratings increased TBC Bank’s international ratings in different categories: long term rating from BB to B+ and Viability rating from BB to B+. The Bank’s Rating Outlook was determined as Stable. “The magazines Euromoney, Global Finance and EMEA Finance all named TBC Bank the best bank in Georgia in 2012. Deutsche Bank and Commerzbank named TBC Bank the best bank according to High Quality Currency Transfer. This is the 7th award from Deutsche Bank in the category of currency transfers. The magazine Global Finance named TBC Bank the best provider of currency exchanges in Georgia in 2013,” Butskhrikidze said. “Social responsibility and being active in society are a signature of our brand. In 2012, in honour of our 20th anniversary, we supported the idea of creating new opportunities for culture, representatives of art and art itself. At the beginning of last year we started implementing long-term, innovative, cultural projects which not only positively affected the development of culture in the country, but also involved the contribution of many talented artists, cinematographers, and writers.” “We had many projects last year including the interesting cinema project ‘20 years 12 months’; the first internet television about culture ‘Artarea’; electronic book store ‘Saba’; and TBC Art Gallery’s gift to the city - the monument ‘TBC Clocks’.” “We celebrated the anniversary of the Bank with the opening of the monument TBC Clocks - the culmination of the company’s jubilee celebrations. The monument was created by one of Georgia’s contemporary artists. TBC Clocks is to be found in one of Tbilisi’s central squares and has now been added to the capital’s list of attractions. Time, precision, management, people and clocks as the most precise and steady mechanisms of all time - these are the main ideas behind TBC Clocks, which best represents our dependence on time. As a result we decided to ring in the new decade for our bank by creating the impressive monument TBC Clocks,” Butskhrikidze said.




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1 April, 2013 |

TBC Pay had 120% Growth in 2012 The FINANCIAL


By Tako Khelaia

ast year was the most successful year for instant payment system company TBC Pay. According to David Kenchadze, CEO of TBC Pay, the company had 120% growth in 2012. The company’s annual turnover last year amounted to GEL 300,000,000. The current year has also started well and the company is planning to offer some new services to its clients in 2013. “TBC Bank first created its instant payment service together with another company. It meant that for the first time people were able to pay with the help of terminals in different branches of the Bank. After time it became evident that there was growing opportunity for market development. Bank officials therefore decided to create their own company which would serve the branches. These fast pay terminals quickly became very popular and as a result TBC Pay boxes soon became available outside of the banks, as they have been now since 2010,” Kenchadze said. “The system of fast pay terminals was first developed gradually, but later became more aggressive on the market from 2011 onwards. Demand was very high, the market was ready and everything went well technically, so it was a good period for becoming active on the market,” Kenchadze said. “The most successful year for TBC Pay was 2012. We had a strong increase that year as the company grew by about 120% which is a fair result. Last year we were awarded by Golden Brand Awards 2011 for the category of ‘Fast Payment System - Favourite Brand’. The company’s growth has been developing at a natural pace in line with the constantly growing number of our everyday customers, the number of terminals and payment locations has also been expanding,” Kenchadze said.

David Kenchadze, CEO of TBC Pay

According to Kenchadze, many interesting services have been added to the pay boxes. The company has added the following to its terminals: the opportunity to make payments to other banks and about 150 other new services. “In total our pay boxes have more than 300 services which our customers use every day. We have a variety of categories from bank, mobile, totalizator, telecommunication, utilities, charity, different website services to many others. This year we plan to provide a number of new services and one of them will be appearing on the market soon; it will be launched in May,” Kenchadze said. “The year 2013 has started well. We had about 10% growth every month last year and such an increase can’t end abruptly, even if the market were to encounter some problems. In any case, there are no problems at the moment; we have a stable and growing market. So our company is maintaining this growth in 2013 as well. This increase has been due to some changes and reshuffles in regard to management as well as IT developments within the company. Increased efficiency and being maximally oriented on clients gave us the possibility to boost the company further still,” Kenchadze said. “Statistically, the most-used service at our company is mobile payments. The totalisator is another of the most demanded services at TBC Pay boxes, after which comes banking, communal expenses and tele-

communications. At the beginning we had a strategy of limited service in order to simplify the process for our customers. People quickly got used to the format however, so we have had no problems expanding the services since then. With the help of our terminals people can pay for not only Georgian services but foreign ones too. Now it’s possible to top-up a Ukrainian phone balance for example,” Kenchadze stated. As the CEO of TBC Pay says, about 180,000 people are using the company’s services every day. Pay boxes exist in most of the main regions of Georgia which are economically active, but the company also has small-sized terminals that are available in the smaller regions and which don’t require so much tending to. “If a region is economically undeveloped then neither we nor any other business will decide to enter it until it becomes more interesting. We have started bringing our terminals to big villages though, and for the future we will have entered some of the smaller villages and high, mountainous regions of Georgia,” Kenchadze said. “We have two main advantages on the market. First - our user-friendly interface; our terminals do not overload one with information, they are organized and easy to use. It’s vitally important for us to keep customers content with the service and to increase the number of our loyal clients. Our other competitive advantage is the quality. Of course there are

some system delays that occur from time to time, but we are always working on reducing the number of delays and working on improving them operatively. It’s a constant process,” Kenchadze said. “We have a monthly monitoring system and are always trying to come up with some new ideas. In most cases issues are caused by the clients themselves. That’s why there are some special rules which all customers should adhere to when using the pay boxes. Sometimes people insert coins earlier than is indicated on the screen for example, or sometimes there are cases when the power supply gets turned off for whatever reason and the terminals then don’t work. Also, the GPRS signals of mobile companies get scrambled during bad weather. There are many instances of vandalism, unfortunately; the terminals are often getting damaged. We have mobile groups working in their respective districts during the day whose job it is to try to solve any problems as quickly as possible,” Kenchadze said. TBC Pay has its own terminals as well as dealers. Any company has the opportunity to buy pay boxes from TBC Pay, sign an agreement and in that way become a dealer. “We buy our terminals from the famous Russian company Unicum, a leading company in Russia that has been on the market for a long time. They produce very high-quality products. We are only interested in the highest quality

mechanisms because that way we can ensure that our customers will be satisfied and we will have fewer expenses for fixing or servicing the terminals,” Kenchadze said. “We plan to widen our network this year. We are going to launch three know-how services which aren’t yet on the market. We are going to add some new providers, try to increase the number of terminals and coverage. We are trying to enter such places where society still doesn’t have such services. Our main aim will be to remain efficient on the market. We are trying to do something that is well nigh impossible, to develop at a very fast rate at the same time as maintaining efficiency. We will try to do this however. With the help of the correct management, the motivation and professionalism of our team, we managed to do this in 2012 and will try to do it even better in 2013,” Kenchadze said. “In total there are about 1,900 TBC Pay terminals that have been working during the last few months,” Kenchadze said. According to the CEO of the company, the fact that TBC Pay terminals are so closely associated with the name of one of Georgia’s leading banks is quite advantageous for them. “Clients generally have greater trust in TBC Pay boxes. They have more faith in paying with the help of our terminals and they are confident that, with us, they will not have any problems with their transactions,” Kenchadze said.




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BG Capital Leader of the Capital Market of Georgia The FINANCIAL By Madona Gasanova


uring the past several years, BG Capital has been the leading investment bank in Georgia by market share. BG Capital offers clients a full range of investment services, including equity and fixedincome brokerage, research, investment banking and asset management services. 2012 was the first year since the financial crisis that BG Capital had profits. In 2011 the company had a loss of GEL 138 thousand. By comparison, the financial net profit in 2012 amounted to about GEL 570 thousand, quite a good index for such a small team of professionals. In this exclusive interview with The FINANCIAL, Irakli Kirtava, General Director at BG Capital, explains the reasons for the lack of development of the securities market in Georgia and provides recommendations for what is necessary for the development of Georgian capital markets.

Georgian Capital Market Development Strategy Q. How would you evaluate the year 2012 for capital markets in Georgia? A. The trade results on the Georgian Stock Exchange are not impressive thus far, but the overall performance was better in 2012 than in 2011: the volume of transactions on the trading sessions amounted to GEL 8.9 million (GEL 2.5 mln in 2011), and the volume of secondary trading in securities permitted by the stock exchange on the overthe-counter market amounted to 8.5 million (GEL 16.8 mln in 2011). In addition, 28 February, 2012, marked the most significant transaction, when JSC Bank of Georgia made a tender offer and 98.35% of the Bank’s shares were exchanged for BANK OF GEORGIA HOLDINGS PLC shares. The transaction value according to the market price exceeded GEL 718 million. It is significant that BANK OF GEORGIA HOLDINGS PLC was admitted to the premium listing segment of the London Stock Exchange and since June 2012 has been included in the FTSE 250 Index among the largest companies on the LSE. It is also noteworthy that three Georgian companies have been able to place Eurobonds since then - Georgian Oil and Gas Corporation (USD 250 mln - 6.875%), Bank of Georgia (USD 250 mln - 7.75%), and Georgian Railway (USD 500 mln - 7.75%). Q. How have the recent political changes affected the investment climate in Georgia? A. I think that very little time has passed in view of statistical approaches for any significant tendency to be revealed. The only thing I can

say for sure is that during 2012, the volume of direct investments was decreasing dynamically (monthly), which is logical and can be explained by the anticipation of political changes last year and the related processes which accompanied the election campaign and the period after the change of political team. The new government is emphasizing the improved quality of the democratic processes, maximum engagement in civil society and media processes, judicial reform and warranties of property rights protection etc, all of which is very important for investors. I hope that the state’s conceptual view towards the development of the securities market will be added to this list, which will increase investor interest and further promote the country’s status to that of a safe and attractive investment environment. Q. What are the main reasons for the lack of development of the securities market in Georgia? A. The main reason for the lack of development of the stock market is that there is no established national vision as to how comprehensive the mission of capital markets is for the economic development of the country. Consequently, conceptual tasks have not been set, subject to being implemented in the near future and/ or with a long-term horizon, as a result of the development of the stock industry. Every project and legal amendment provided under the conditions of absence of long-term conceptual vision and strategic plan, could serve only to implement a specific task, or particular short-term objectives, though it will not assist the development of the securities market, or its infrastructure, or financial instruments over the long haul. It shall also be considered that the law adopted without the participation of a wide circle of professionals during the process of lawmaking has always included (and still includes) the risk that any amendment might serve the opinions and interests of a particular group of initiators and not the overall development of the stock markets and the improvement of the investment climate. It is necessary to determine conceptual priorities taking into account international experience and latest trends of development of the financial markets, Georgian scales and the country’s economic potential. The development of the stock market should take place step by step in order to allow representatives of the infrastructure to provide respective changes along with the realized amendments. The following shall be supported: improvement of the market volume and financial index; expanding the activities of economic players and increasing the quality of their service; growth of transparency and accountability and the provision of liquidity of financial instruments; the creation of motivators in order to develop international standards for corporate management and to increase the quality of protecting investors’ interests. A consistent programme for the development of the capital markets and its implementation will result in the formation of an attractive investment environment, which will play an important role in the Georgian economy. Q. What is the size of the companies that you provide services to? What kind of companies are subject to the publication of financial information? How many companies trade shares on the stock exchange? A. The securities market is oriented on large companies. It is more appealing for investors to buy liquid financial instruments, which are easy to sell due to the huge interest coming from investors. The interest and number of investors is conditioned

Irakli Kirtava, General Director at BG Capital

by the scale and the reputation of the company, as well as the quality and transparency of its financial information, high standard of company management, strategic plans and important projects. In Georgia, some companies that are admitted to the stock exchange and are held accountable, are not attractive for investors and should not be included in the category of reporting companies. In the meantime, some of the companies that are very important for the Georgian economy do not have any transparency requirements. In international practice, besides the public companies listed on stock-exchanges, high standards of accountability and transparency are a must for large enterprises that have a considerable number of shareholders, assets, capital or income exceeding a certain amount (or all of the aforementioned). Requirements for financial transparency are set for the companies, as well as the monopolies, also the companies that have a big impact on the social environment. Also it is desirable that Georgian companies should be required to be transparent as per international practice. The establishment of transparency and the growth of demand for quality are largely dependent on the reforms to be held in the country, interests of investors, public demand and antimonopoly regulations. There are 133 companies shares admitted to the stock exchange, but at the moment only 3 companies are listed. Of the 133 companies, deals are made on the shares of only about 50 companies on a yearly basis (part of which have only 2-3 deals). Only 8 companies have transactions on the stock-exchange, of which the shares of 2-3 companies are traded more often than others. It is of special importance to improve the quality of the issuers allowed to the stock-exchange and to pay attention to the securities with relatively higher potential of liquidity. It is important to develop a state method of approach in order to allow the shares of large joint-stock companies (including government enterprises), which are attractive to investors, to the listing of the local stock-exchange. Motivators are to generate interest to the issuers to allow securities to the listing of the stock-exchange, as well as to the investors, to invest and trade with the securities allowed to the listing. Q. BG Capital conducts research and analysis on the market sector on a regular basis. Which sectors are the most interesting and which less so for the securities market? A. Since 2001 BG Capital has conducted weekly reviews of the market. We also have the stock market index starting the same year. From time to time we also provide macroeconomic and sector analysis. At present sector analysis is provided

by Bank of Georgia’s research department. They have already issued reports on several leading sectors (energy, tourism) and companies, the quality of which fully meet with international standards and satisfy the interests of institutional investors regarding these Georgian sectors and companies. Every sector which has companies with great potential, high standards of financial transparency and corporate management could be interesting for the securities market. In Georgia, financial institutions, in particular commercial banks, are distinguished in so far as the abovementioned criteria and quality of accountability. Around 98% of transactions on the stockexchange are made with the securities of commercial banks. According to the economic reality and scale of the companies, we can say that the potential for liquid securities exists in the companies in the following industries: energy, transportation, communications and telecommunication, recycling and, of course, financial institutions. Q. BG Capital has the ability to trade on the largest stockexchanges in the world. Which Georgian companies have the potential to sell their stock on foreign stock exchanges? A. Extremely large Georgian companies have the potential to move to international exchanges, though, as well as their scale, they have to have financial accounting of a high level, international principles of corporate management and the owners of the controlling interest, other major shareholders and the company’s management, have to be ready to comply with the strict demands of going public and accountability that exist on international markets. It is preferable that these companies have relevant experience on the local stock market beforehand, having had their shares listed for several years and having witnessed capital growth in Georgia by placing their securities on the local stock exchange. This experience and the dynamics of the price and volume of securities will support the development of these companies and prepare the companies to place their securities on the international markets. On the other hand, the existence of the securities of major companies on the listing of the local stock-exchange will support the development of liquid financial instruments in the country, which is an important precondition to the realization of a pension reform. We cannot think about carrying out a pension reform if this process is not preceded by the development of attractive financial instruments and trade motivators on the local market in order to ensure their liquidity. Q. What are your expectations of 2013? A. Hopeful! - Taking into account

the messages received from the Government from the point of the creation of warranties for the protection of business and investors’ rights. The direction of state investment funds is of interest as well, and especially the fact that the economic team of the Government, together with experts, is starting to work for the creation of a document of economic strategy of the country. We, the team of professionals of the securities market, have already established a project of the concept of development of the capital market, which makes quite a solid document, with interpretation and argumentations of international best practice and global trends. We hope for this project, created by the participants of the market, to significantly help the Government in achieving the goals. Q. It is known that there is a preferential tax regime in Georgia. What other supporting activities do you know of from international practice that can increase investor interest? A. There is a very good preferential tax regime in Georgia in regard to the taxation of dividends, which is taken from international best practice. Herewith, there is a specific attempt in the Code to pay attention to the release of securities and individuals allowed to the stockexchange listing from the incomes made though sales and purchase if the free float rate of the shares of these companies are more than 25%, though, as far as I know, this point is not working in practice. According to international best practice, it is desirable to pay attention to the development of exemptions: on the securities allowed to the listing, for individuals as well as for the legal entities (exemptions are to be made especially for pension schemes); exemption shall be established for corporate, municipal and infrastructural loan securities (especially those allowed to the listing of the stock-exchange), as well as the currency hedging instruments, in order to allow every precondition to make these securities liquid financial instruments. Parallel to the tax exemptions, it is also of great importance to allow state securities market regulator, stock-exchange, central depository and market participants to provide maximally advantageous conditions towards listing securities. Q. What will be the main challenges for the development of the Georgian capital markets in 2013? A. At this point, the most important thing is that the securities market and related legislation are amended in view of conceptual longterm vision towards capital market development, which should be based on international best practices and global trends analysis. Attention should be paid to the increase of transparency and financial reporting quality; the establishment of proper criteria for the accountability of companies; the creation of incentives so that the leading companies have the desire to get on to the Stock Exchange Listing and securities become more attractive for investors; the creation of standards for the submission (upload) of reports and public information in electronic form, the creation and distribution of electronic information; the improvement of relations with international institutions and institutional investors; the involvement of local financial institutions in stock market activity; the instructing of the public in the securities market and the appearance of small investors. It is clear that not everything can be done altogether, but it is advisable to lay the foundation in 2013 to ensure that everything is done at least in the nearest future, and that Georgia becomes a country with an attractive investment climate.




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Within the project «Privileged Agro loan», Bank has already approved 15 loans.


Georgia’s National Competitiveness ISET Policy Institute issues the first national competitiveness report for Georgia in cooperation with USAID’s Economic Prosperity Initiative By Eric Livny, ISET Policy Institute Director


n the globalized world of today, achieving international competitiveness has become an important policy target for any country. While engaging in mutually beneficial trade, technological and cultural exchanges, countries compete with each other for scarce mobile resources - energy, financial capital, labor, technology, etc. Locations that offer the best conditions for economic activity – disciplined and skilled labor force, high quality services and urban amenities, transparent and efficient public administration, low taxes, safety and security, developed infrastructure, access to suppliers of raw materials and intermediate goods, on the one hand, and to markets, on the other – are magnets for investment and people. These locations (not only countries, but also regions and cities!) grow and reach prosperity, the ultimate goal of economic policy. Before delving into the main findings of the National Competitiveness Report for Georgia, it is probably advisable, first, to clarify the term “national competitiveness”, as there is still a debate around this term among economic scholars and political leaders. Let us begin by stating that national competitiveness is not about trade competitiveness. In other words, it is not to be measured by, say, Georgia’s ability to sell second hand vehicles to Azerbaijan, or the size of Georgia’s trade deficit vis-àvis Turkey. Moreover, an apparent lack of trade competitiveness could, in fact, imply strength of a nation. For example, Georgia’s large and growing trade deficit should be interpreted as a signal of competitiveness, not lack thereof: Georgia has been able to enjoy the benefits of running a large trade deficit precisely because it was perceived as a promising country, attracting foreign credit and direct investment. These credits and investments allowed Georgia, on the one

hand, to run trade deficits and import necessary consumption goods, and, on the other, to modernize large parts of its infrastructure and upgrade production capabilities, carrying a promise of higher labor and capital productivity in the future. National competitiveness is not necessarily about a zero-sum game among nations either. The spillovers from faster growing competitive nations to neighboring countries could be both negative and positive, as described by classical economic geography models (including the seminal Krugman model and its extensions). In the short run, growing regions may siphon off mobile production factors from their immediate environment, but the longer term impact could well be positive. For example, Georgia is benefiting from investments originating in the oil rich and more “competitive” Azerbaijan. It also enjoys the opportunity to trade with Azerbaijan and serve its trade and transportation flows, pipelines included. Moreover, the lion’s share of resources attracted by Azerbaijan is obtained in third countries, not at Georgia’s expense. The general point is that by increasing their competitiveness and growing faster, nations could boost economic development in their regional environment – through the trade channel, remittances, outsourcing, cultural and technological spillovers, and purchase of transportation and tourism services. We think of national competitiveness as a much broader and important notion and define it as a country’s ability to offer a good environment for economic activity and make productive use of available resources. Understandably, this ability depends on inherited conditions: cultural norms such as punctuality (not Georgia’s main strength), decency and hospitality, the quality of local labor and firms, geographic location, natural resource endowments, etc. While perhaps less obvious, a key role in attracting resources is played by the quality of national institutions: strength of democracy, rule of law, independent judiciary, ability to ensure equal opportunities for women, ethnic and religious minorities, access to healthcare and education for all. These institutions can be reformed, as Georgia has proven, through the political process, and hence their prominence in the competitiveness debate. Finally, government policies are important in ensuring security and macroeconomic stability, pursuing international agreements, and facilitating trade, travel and communication with the rest of the world. The internet is abound with indices that purport to measure various aspects of competitiveness: ease of doing

business, economic freedom, human development, democracy, political stability and violence, travel and tourism competitiveness, to mention just a few. Our focus in the report is on Georgia’s performance in the Global Competitiveness Index (GCI) produced by the World Economic Forum (WEF). This is one of the better known and comprehensive international rankings, covering more than 140 countries. The GCI is based on more than a hundred indicators (“drivers of economic performance”) divided, for analytical purposes, into twelve “pillars of competitiveness”. Georgia has been included in the GCI since 2005, shortly after the Rose Revolution. Reflecting the rapid growth of its economy and considerable improvements in governance, quality of institutions and infrastructure, Georgia has since advanced in the GCI, both over time and, to a lesser extent, relative to peer countries. Last year was a breakthrough year as far relative progress is concerned: Georgia moved from 88th to 77th position in the global ranking, above the average for CIS countries, and very close to the much larger Ukraine (73rd). Overall, considering the 2005-2012 period, Georgia has become one of the best improvers in GCI. Should Georgia’s policymakers be happy to see the country making progress in the GCI ranking? Yes. Should they relax? Absolutely not! It is important to realize that what the Global Competitiveness Index measures is Georgia’s potential productivity. The actual productivity of the Georgian economy leaves much to be desired. Further gains are not conceivable without massive private investment, foreign and domestic, in modern agribusiness, service industry and manufacturing. Only in this way will Georgia be able to create better employment opportunities for the country’s rural population and youth. For this to happen, Georgia’s new administration has to take drastic measures to reduce systemic investment risks by ensuring political stability, improving the quality of institutions (justice administration and protection of property rights, in particular), continuing to upgrade the public infrastructure, providing coordination among individual investors, and, last but not least, improving Georgia’s access to external markets, in the EU and closer to home. The National Competitiveness Report for Georgia is made possible tates Agency for International Development (USAID). The contents are the responsibility of the author and do not necessarily reflect the view of USAID, the United States Government, or EWMI.

ithin the project «Privileged Agro loan» up to 100 applications were submitted. Total amount of applications 2,000 000 (two million) GEL. At the present moment the number of approved loans is 15, with total amount up to 500 000 (five hundred thousand) GEL. So far all received application are within two components, which stipulate the loan issuance in the amount of from 5000 to 100 000 GEL, not more than 8%. Loan purpose is turnover and fixed assets financing for agricultural appointment. VTB Bank participates in three components; this means that any person engaged in agricultural activities can get Agro Credit in VTB Bank for any purpose with in the project. Interest- free commodity loan (installment) – provides 6 month interest-free install-

ments for small farms, for the acquisition of seeds, planting materials, pesticides and veterinary preparations. The farmer has opportunity to get in the store listed materials and at the end of the season to repay the cost of these materials.The amount of credit shall not exceed 5000 GEL. Privileged Agro loan for small and large farms provides turnover and fixed assets financing for agricultural purpose. Loan amount is determined from 5000 to 100 000 GEL. Interest rate for entrepreneur sand farmers will be not more than 8%. Privileged Agro loan for agricultural enterprises suppose the creation of new agricultural enterprises and technical refurbishment of the existing ones. Loan amount is determined from 30 000 to 600 000 USD, Interest rate not more than 3%. Maximum loan period 7 years.

Final Agreement with Rixos will cost additional $10mln


rofessional discussions held on the project Rixos in recent months, eventually ended this week with the agreement signed between the company CityM and the international network of luxury hotels Rixos. High-qualified constructors and designers were frequently sent by Rixos to Georgia and during their last visit a final standard of the project has been agreed. Rixos representatives learnt the importance of the museums’ district in detail and constructors were asked to take into consideration the cultural spirit of the place while designing a lobby of the building. According to them a whole design of Rixos should be an integral part of the museums district. In the building with the standard 5stars+ will be 120 luxury apartments, hotel rooms, high fashion boutiques, galleries connected with the museum, cafes that will connect to Gudiashvili street and the Sky Bar with the splendid view over the whole city. Itsik Moshe CEO of the company CityM states that requirements of Rixos are very high. Thus in order to meet the standards of Rixos during a final stage of construction is needed additional $10mln than when

you build according local high standards. Moreover, Itsik Moshe claims that the entry to the Rixos network means the entrance in the big family of Rixos and he congratulates Rixos with launching their activities in Davos, Switzerland. According to Moshe, “Rixos becomes a leader in all countries where the network operates because of its high-class and professional services.” He adds that realization of the project in the most prestigious district, in the heart of the city, and participation of Rixos is very challenging. It demands working 24 hours a day, uncompromised attachment to the project, and personal supervision together with Israeli and Georgian staff on the process of construction. Gokhan Sarper, the operating manager of Rixos states the Rixos project in Georgia will be leading in Eastern Europe because of its non typical, unique architecture,thanks to the strong will of CityM to place a first-class building in Tbilisi and of course because of high standard requirements of Rixos. According to Sarper, Gudiashvili street of museums, defined as the center of culture and art, will get an additional site which apparently will become a landmark of the city.




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The Long Road Continued from p. 5

ed States and Europe and its siblings in the EU, is that there has been and continues to be a crass and shocking disregard for the rules of the financial game and that the long-cherished trust in the guardians of people’s money and wealth has been severely destroyed. There is a now the crisis of an Erosion of Trust Capital. The mood everywhere now is like that of the young angry man on a street in Nicosia, screaming into BBC’s correspondent ears: I do not trust the banks and I do not trust the Government. And that brilliant financial reporter Richard Quest on CNN saying that the “US economy is like a sparkling diamond in Europe’s excrement”. Since the financial crisis loomed large in the United States, in the United Kingdom , in Europe and across many developing nations, we have witnessed a pathetic response from the world’s leaders except those highly controversial and most certainly very unorthodox solutions such as printing of more money and dumping into the banks to ease liquidity problems. Austerity measures introduced across the board – from France to Italy, from the United States to the United Kingdom – were merely government cut-backs in social welfare budgets

and a not-so-intelligent reduction in public service. The crisis, yet to find the right set of solutions, has also brought about a total disconnect between the world’s top leadership and its people. To begin with, it is near impossible for ordinary people to understand what the crisis is all about, how it all came to be and how deeply it affects their lives, except to know that they have lost their jobs, that they cannot find new jobs, and that they do not have much money to have a better life. Ordinary people who have the power to change their governments through a democratic system of voting at the polls may find it hard to decipher large numbers such as a billion or a trillion; may find it difficult understand why banks which lose so much money and are near bankruptcy pay out millions to their executives as bonuses; may find it impossible to figure out how the European Central Bank or the Federal Reserve in the United States produce magic dollars and Euros to dump into the market to steady sinking banks. Out there, there are two worlds: one that controls finance and dissipates wealth of most of the people of this earth and the other a world of good, normal and law abiding people who have been taken for a long, long ride by the financial bandits of this world, and whose sweat and tears do

not make the headlines. Trust is the biggest capital, not necessarily money or resources. It is the trust between people, between institutions, between nations that allow money and resources to continue to have value. It is trust that prevents conflicts and wars. It is trust that makes people believe in banks and put their hard-earned savings without a guarantee. It is trust that makes people think that those who rule over the financial empires are honest, that they have a great deal of integrity and that they will all play by the rules of the game. It is trust that makes this world peaceful, cohesive and productive. We need to have a global leadership of nations which will find not merely short term financial solutions to fix problems, but evolve a clear, intelligent, consistent and durable strategy to ensure that there is a code of conduct relating to financial discipline among banks and financial institutions that is both legal and enforceable. The world now has a system of bringing human rights violators and murderers to an international court. There must be a system of bringing errant banks and financial institutions to justice only because their judgements, negligence and actions can cause hardships to millions of people. We need to recreate and sustain the Trust Capital.

VACANCY Ad title: Regional Economic Development for Southern Regions of Georgia Programme (RED) Fund Manager Provided by: CNFA Published: April 1 Deadline: April 10 CNFA, an implementing partner of the consortium constituted by the NIRAS A/S as the lead PIC; CNFA and Mercy Corps, is seeking a long-term Fund Manager for the Regional Economic Development for Southern Regions of Georgia Programme (RED) that is a joint Danish-Swiss programme. The overall goal of the RED programme is to contribute to the economic growth of the agriculture sector and reduction of poverty in the regions of Samtskhe-Javakheti and Kvemo Kartli. RED will focus on the following strategic areas: (a) advice and guidance on how to improve the husbandry and marketing of potatoes (both seed and ware); (b) advice and guidance aimed at improving quantity and quality of selected value chains; and, (c) Encourage demand based direct private investment in the programme targeted activities using a programme created debt financing and co-investment facility. The Fund manager will have direct reporting lines to RED Team Leader and CNFA. The manager for the Fund for Investment in Agribusiness (FIAB) will be responsible for the management of the fund resources, financial and operational reporting to the FIAB Board of Trustees and RED Programme management. This will include the supervision and delegation of responsibilities to all RED Programme Component C staff. Operationally, the fund manager will be responsible for all accounting and financial management of FIAB resources and be able to provide accurate reports to the Board of Trustees and other interested parties under international financial reporting standards. Additionally, the Fund manager will provide advice, guidance and oversight to RED programme Component C staff in the preparation of bankable value chai n financing applications and appropriate co-investment proposal to achieve project objectives. The Fund manager must have a senior executive profile, with experience in finance and agribusiness development in Georgia and with solid corporate management credentials. Specific duties and responsibilities: • The Fund Manager will supervise and directing the use of Funds for Investment in Agribusiness to meet the RED objectives. This will include, without limitation, implementing all accounting policies and procedures of FIAB, providing timely reports to the FIAB Board of Trustees, order external audits as directed by the Board of Trustees and develop an appropriate database to track the use and impact of FIAB assets under a multitude of access to finance methodologies. • With guidance from and in cooperation with PCT and the team leader prepare the procedures and guidelines governing the Fund for Investment in Agribusiness • Assist in the developing the criteria for loan applications qualifications and over-all loan programme manuals • Assist in establishing the criteria for grant review and award, ensuring transparency in the proposal application, evaluation and award process and that implementation and outcomes are in accordance with program objectives and SDC grant making policies • Identify potential banks and MFI that could participate in the project • Prepare or delegate the development of an awareness and promotion campaign for the Fund for Investment in Agribusiness • Liaise closely with the value chain specialists to identify profitable investment opportunities • Managing the fund calls, SELF loan programme funds, selection process, issuance of matching grants and MoU and contracts with selected financial institutions. • Provision of specialist business advisory on feasibility studies and planning to applicants as needed. Ensure that environmental and gender considerations are included in the investment proposals and chosen interventions. • Oversee financial management of grant disbursements and ensure compliance with SDC rules and regulations. • Monitor grant implementation and grantee performance, and ensure that procedures are established and complied with for grant development, worthiness, implementation, management, monitoring, evaluation, and closing. • Any other activity or function assigned by the RED Programme Team Leader Timing of the assignment The timing of the activities will be from the close of this announcement through October 31, 2016 – end of project. The job opening is available immediately. Qualifications: General Qualifications: • Relevant university degree in finance or business management • 10 years of relevant professional experience including 5 years in senior management positions • Highly motivated innovator with excellent communication and interpersonal skills • Good analytical and conceptual skills Specific Qualifications: • Knowledge and experience with International Financial Reporting Standards • Knowledge of the agriculture sector of Georgia, Potato and Livestock Sector knowledge is highly desirable • Experience of finance and credit programme management in a development and commercial context. • Grant programme management experience is highly desirable Experience in the region: - Work experience in transitional countries. Work experience in Georgia is an advantage - Fluency in English - Knowledge of Georgian and Russian is an advantage Application instructions: Please submit your English CV with the position title “RED Fund Manager” in the subject line, by April 10, 2013 to:

best georgian banks By Daan Harmsen, Financial Manager, GeoCapital Microfinance Organization

Staying mentally healthy in the heat of the (business) battle “In the first year I would work from 9.30 am till 3am, every day. You keep telling yourself, this is going to get better. But it doesn’t, not really,” says an anonymous former investment banker in Joris Luyendijk’s article series about the financial sector in the Guardian. “As a young banker in M&A [ed: Mergers and Acquisitions], you have no social life, I mean, none. A work week has seven days. There’s no time for friends, and when you have a few hours off, you try to maximise it.” This young guy is not alone: investment banking is an industry that is known for requiring extreme dedication from its junior staff. While most of us do not work such long hours every day, the fact that you are reading this magazine probably means that you are interested in your professional success. And make no mistake, achieving success means putting in effort and hours. People who work from nine to five don’t change the world. Becoming successful requires dedication, hard work, and making sacrifices. However, just blindly working, working, and working even more probably will not take you very far. Instead, follow my advice, and manage your energy with an “energy plan”. An energy plan involves consciously managing your energy: making good sleep choices, finding resting moments, and eliminating distraction. Sleep is something that most workaholics economize on first. If we have a lot of work to do, why not sleep less? In fact, that is what the banker in our example was doing. He was at work every day between 9.30 a.m. and 3 a.m. This means that he only had 6.5 hours of daily downtime. Assuming that he also spent some time getting to and from work, and hopefully taking care of his personal hygiene, this means he likely didn’t get more than five hours of sleep every day. The optimal number of hours of sleep is different for every person, but the vast majority of people perform best when they sleep around seven or eight hours every night. If you sleep less, you acquire a sleep debt, which may take several days to recover from. If for some reason, you are really not able to get enough sleep at night, try taking short naps during the day. Research has shown that short naps can significantly decrease your level of fatigue and increase your workplace performance. Google for example, recognizes the importance of taking naps and has installed special “napping pods” in its offices that employees can use to refuel. There are two things to keep in mind if you are considering implementing a napping strategy. First, make sure your naps are not too long. Twenty minutes seems to be the maximum. If you sleep longer, you will suffer from something called “sleep inertia”, which means that you feel sleepier after you wake up, because your body hasn’t gone through the entire two-hour sleep cycle yet. Second, although napping may increase your performance, it is still considered by many as inappropriate office behavior. Employers will often think of it as slacking off, or lazy behavior. If you have your own office, this may easier: just close your door. A friend of mine once told me about another trick: when he was working as an analyst at an American investment bank, he would simply pay a visit to the restroom, and take a 15-minute

nap while sitting down on the toilet. The second part of the energy plan is rest. Didn’t we just discuss sleep, I hear you ask? While this might come as news to you, sometimes there are times when you are awake, and don’t work, and these moments are often called “rest”. This allows you to mentally recharge. As Tony Schwartz of the Energy Project put it, we are sprinters, not marathon runners. Our brains cannot physically focus on one thing for more than an hour or so. After that, the fuel runs out, and you need some time to recharge. Build these moments of rest into your day. If you feel that you are losing focus, don’t push it. Instead, take five minutes, and get some fresh air. Talk to your colleagues. Do something that doesn’t take as much mental energy, like washing a few dishes in your office kitchen. Don’t skim on lunch time, and try to not to eat at your desk. Meals are crucial for refuelling. If you feel like you are having trouble taking these brakes, plan them, and put them into your schedule. The third part of the energy plan revolves around eliminating distraction. This is probably the trickiest part for most of us, because we all want to do everything. There are thousands of different tasks competing for our attention. But as we spend entire days on all the small things that come up, it can be hard to make time for the big projects that are truly important. It all starts with accepting one simple but confrontational truth: you will never get everything done. If you are an ambitious professional, your to-do list will never be empty. Accept that, and embrace it, and don’t feel bad if some small stuff doesn’t get done. Instead, focus on the big stuff, and really think hard about the things you are doing. “You should begin by thinking carefully about why you are engaging in any activity and what you expect to get out of it,” says Harvard lecturer Bob Pozen and former CEO in his book “Extreme Productivity”. For example, if you regularly get invitations to meetings, ask yourself if these are actually useful, and if you couldn’t just get the same information from a followup e-mail. Eliminating distraction also involves some very mundane things. If you’re working on something important that requires you to focus, try as much as possible to eliminate distraction in your environment. Get a set of noise-canceling headphones to drown the noise, if that annoys you. Close your office door if you can. Turn off notifications on your cellphone or computer. But most importantly, don’t work on small stuff as it comes up. It is extremely tempting to work on something small that just came up, because it will free you from the chains of that boring report. It is instantaneous pleasure for your brain. Don’t give into it. Instead write it down, and revisit it once you are done with your task. Most of the small stuff can wait. “I used to be the kind of person who enjoys life, who gets up in the morning eager for another day. The past two years I found myself changing. I lost my interest in politics, in sports … I began to wonder: what’s happening to me?,” says the banker from our introductory paragraph. Don’t let that be you. Even though a nine-tofive job is probably not an option, if you sleep enough, rest enough, and eliminate distraction, you will be a lot happier, healthier, and above all, more productive.




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1 April, 2013 |



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best georgian banks | 1 April, 2013

Khachapuri Index is exclusively provided to The FINANCIAL by ISET

april 2013



he cost of cooking one standard Imeretian khachapuri in March 2013 was in the 2.8 to 3.4 GEL price range, with the average price of 3.13 GEL. Prices decreased everywhere across Georgia. The Tbilisi price of khachapuri was down by 2.2%, and we saw even more significant declines in Kutaisi and Batumi by 7.8 and 6.9%, respectively. The Telavi khachapuri price went down by 5.5%. Overall, in monthly terms, the Khachapuri Index went down by 6.2%. This change was mainly driven by two factors. Firstly, for the first time since August 2008, when we started to compute the Khachapuri Index, the price for natural gas declined by 0.05 GEL. This does slightly affect the khachapuri price, as energy prices are taken into account when the production cost of a khachapuri is calculated. However, this effect accounted only for about one Tetri of the final price. The second and more important reason is a general seasonal decline in dairy products that can be observed every year. Every year in March, this development is driven by the Easter Lent period that many Georgians observe. The Easter Lent decreased the demand for cheese and other dairy products, and, in line with the fundamental law of supply and demand, the prices of these ingredients decrease. In March 2013, prices of cheese and butter were down by 8.7 and 2.5% respectively, and the price of milk declined by 2.4%. This significant seasonal decline is a consistent pattern in every year’s khachapuri price trend (see chart), but as it is always in economics, after every downturn follows an upturn (look at the chart again!). So we can be fully confident that khachapuri prices will increase in April, when the price of dairy ingredients traditionally spikes at the end of the Easter Lent and Georgians rush to get their khachapuris prepared.

ECONOMIC LESSON OF THE WEEK: FOOD ECONOMICS When economists discuss the constraints for economic development of a country like Georgia, one thing is always taken as given: That people have enough to eat. Of course there are people in this country who are suffering from hunger and malnutrition, but these are rather exceptional outgrowths of extreme poverty. By

and large, Georgians have enough money in their pockets to buy bread, vegetables, meat, and dairy products at street vendors, at local food markets, or even at super markets. The fact that hunger was overcome in Georgia and many other regions of the world is a spectacular achievement which is often not appreciated appropriately. Since times immemorial, the growth and development of human societies was constrained by the supply of food. Up to about 8000 BC, humans were hunters and gatherers, moving around in rather small groups and following their prey animals. Then some ingenious people in the Middle East and Mesopotamia had the amazing idea to stay at one place, substituting seeding for gathering and breeding for hunting. Regarding its consequences, this Neolithic Revolution was arguably the most important leap human civilization ever made – it dwarfs the invention of nuclear power or the trip to the moon. Through seeding and breeding, food supply became much less prone to the vagaries of nature. Agriculture was born. For the most part of human history that followed, food production was still the most relevant constraint for human progress. A farmer had to feed himself and his family, and only what he produced in excess of that, the so called surplus, could feed artisans, poets, composers, musicians, priests, and scholars. So whether or not a society developed a culture that went beyond primitive rural folklore was determined by the size of its agricultural surpluses. It is therefore all but surprising that the first high civilizations of humankind came into being in exactly those areas where food was relatively abundant, namely at the Nile, where more than one harvest per year was possible even in ancient times, and at the fertile regions of the Euphrates and Tigris rivers in Mesopotamia. Through the invention of agriculture and the ongoing development of its techniques, it was possible to sustain a much bigger population than previously. Yet nonetheless,

there was not enough food for everybody. In the end of the 18th century, the English economist Thomas Malthus wrote his famous Essay on the Principles of Population. From demographic data and records of famines in medieval and renaissance Europe, he developed the first theory of demographic dynamics. The crucial assumption of his theory was that human reproduction proceeded exponentially but food production grew only linearly, if at all. As a result, the amount of humans living in the world would regularly exceed what could be sustained with given agricultural resources, notably land. Today’s economists agree that by and large, his analysis was correct in describing the population dynamics of medieval and renaissance Europe pretty well. It is an interesting side aspect that Malthus set up his economic theory in order to back a political standpoint (like many economists do). Malthus was born into a privileged family. A clergyman by profession, the Christian ideal of poverty and altruism arguably caused a cognitive dissonance between his religious beliefs and the fact that many people in his society not only had difficulties to make meets end, but were suffering from the most severe poverty, hunger, and starvation. A minority, on the other hand, to which he belonged, was living quite comfortably. Malthus’ theory intends to justify the huge wealth differentials of his days, as it suggests that famines, starvation, and malnutrition are inevitable facts of the human society. Any measures to alleviate this misery through charity and redistribution would just lead to higher reproduction rates of the poor classes and thus eventually to even more suffering than if one would just let the poor people die. Not a very likable theory, and maybe Malthus deserves well that he invented these ideas exactly at the time when they were invalidated. For the last 200 years, Malthus was not an issue. Since the beginning of the Industrial Revolution, food supply has gradually become less of a concern in developed countries. One could even say that the

term Industrial Revolution is misleading, because for most of the last two centuries, productivity gains in agriculture surpassed those of the manufacturing sector. In addition to higher productivity, fossil fuels became the predominant source of energy and land was not needed anymore to feed workhorses and oxen for production and for the transportation of people and cargo. Likewise, the physical workforce of humans was largely replaced by steam engines and later combustion motors. All this led to a situation in which the economy did not depend anymore on energy grown on farms, allowing to free the agricultural resources that were previously used for energy generation for food production. Food was no binding constraint anymore for human reproduction, and world population soared. Today we are at 7 billion people living on this planet, and it is projected to exceed 10 billions within this century.

THE FUTURE So far we looked at the past, but what is the future of food supply? With all the great developments in mind, one should keep in mind that even in the current situation, hunger has not disappeared, in particular in Africa. There are estimations that every single day, more than 30.000 children in the world are dying from hunger and malnutrition. According to Hans-Werner Sinn, a contemporary economist from Germany, the situation is rather going to become worse than better. To understand his argument, one has to remind that world oil prices started to rise about 10 years ago and ever since remained on a high level, just briefly interrupted by the 2008 financial crisis. Yet even though the world economy is in an ongoing recession for many years now, oil prices do not return to their previous levels. Though the oil industry and many oil economists would disagree, it is well possible that world oil resources, at least those that are easily accessible, are approaching exhaustion. If that would be the

case, future oil prices would simply not return to their previous low levels. But how does this relate to food supply? The higher the price for oil, the more reasonable and profitable it is to produce biofuel. The production of biofuel, however, competes with the production of food. If more and more of the land is devoted to the production of rape, this goes at the expense of food production, and food prices go up. Indeed, in 2008 there were riots in the streets of Mexico and other Latin American countries triggered by an increase in food prices, making it difficult for people to make their traditional maize pitas. This was directly connected to the huge amount of biofuel produced in Europe, the USA, and South America in that year, reducing the supply of maize and wheat on the world market. Though currently in Europe and the USA biofuel production is only profitable if it is subsidized by the government, high oil prices and improvements in the biofuel technology may make these subsidies obsolete. According to Sinn’s pessimistic theory, we are now moving back to a pre-Malthusian world in which food production and energy generation are competing for the same agricultural resources. If he is right, the vicious patterns predicted by Malthu s’ theory would start to haunt humankind again in the future. It is Eastern now and many Georgians subscribe to a strictly vegetarian diet. This may point at a way for coping with the world food supply problem. If there is any possibility to feed a future population of 10 billion people, it will almost surely imply that most of them go vegetarian. It uses 16 plant calories to produce one beef calorie, and hence one can feed a much more people if they do not eat meat. If all Chinese would eat as much meat as the North Americans, there would not be enough land in the world to provide the necessary amount of meat. Seen in this way, the Easter Lent may be a model for the future, not for religious but for economic reasons. A Happy Easter celebration to everybody!

THE ISET KHACHAPURI INDEX The ISET Policy Institute (ISETPI, is an independent think-tank associated with the International School of Economics at TSU (ISET). ISET-PI designed a simple and robust way of tracking inflation and the differences in the cost of living across Georgia’s major cities. Unlike traditional “consumer baskets” used for monitoring price inflation, our “basket” includes only those ingredients that are needed to cook one Imeretian khachapuri (cheese, butter, flour, yeast, eggs, and milk) and energy inputs (gas and electricity). We conduct a monthly survey of the major markets in Tbilisi, Kutaisi, Batumi and Telavi to measure the differences in the cost of living across Georgia and to track the monthly fluctuations in the prices of all relevant ingredients.



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1 April, 2013 |

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La Brioche 20 Telavi Str. Tel: 277 20 20 Fax: 277 21 20

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1 April, 2013 |

JSC “Bank Constanta”

Date: 31-Dec-12 in lari

Balance Sheet Respective period of the previous year

Reporting Period N 1 2 3 4 5 6.1 6.2 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31



Cash Due from NBG Due from Banks Dealing Securities Investment Securities Loans Less: Loan Loss Reserves Net Loans Accrued Interest and Dividends Receivable Other Real Estate Owned & Repossessed Assets Equity Investments Fixed Assets and Intangible Assets Other Assets TOTAL ASSETS LIABILITIES Due to Banks Current (Accounts) Deposits Demand Deposits Time Deposits Own Debt Securities Borrowings Accrued Interest and Dividends Payable Other Liabilities Subordinated Debentures Total Liabilities EQUITY CAPITAL Common Stock Preferred Stock Less: Repurchased Shares Share Premium General Reserves Retained Earnings Asset Revaluation Reserves Total Equty Capital TOTAL LIABILITIES AND EQUITY CAPITAL






4,349,578 3,709,993 8,059,572 3,219,801 9,728,493 12,948,294 4,723,683 11,245,382 15,969,065 0 0 0 0 0 0 71,324,823 122,942,523 194,267,346 -2,888,202 -5,061,219 -7,949,421 68,436,621 117,881,304 186,317,925 2,558,248 1,849,439 4,407,688 296,021 0 296,021 114,000 0 114,000 17,921,345 0 17,921,345 2,046,642 1,030,830 3,077,473 103,665,940 145,445,442 249,111,382

1,934,776 1,005,838 4,355,476 0 0 34,790,420 -774,879 34,015,541 1,077,533 266,607 114,000 11,418,092 1,007,575 55,195,438

2,610,761 4,545,537 6,924,748 7,930,587 2,911,784 7,267,260 0 0 0 0 83,568,309 118,358,730 -2,092,125 -2,867,004 81,476,185 115,491,726 1,392,840 2,470,373 X 266,607 0 114,000 X 11,418,092 620,423 1,627,998 95,936,741 151,132,179

5,038,033 0 5,038,033 2,930,019 1,904,029 4,834,048 10,207,953 2,428,324 12,636,277 22,460,338 15,477,249 37,937,587 0 0 0 16,497,395 127,035,170 143,532,565 896,148 2,751,861 3,648,010 2,756,005 51,724 2,807,729 5,000,000 0 5,000,000 65,785,891 149,648,357 215,434,248

66,329 1,195,452 317,425 4,348,541 0 17,846,322 628,194 1,320,077 5,000,000 30,722,341

0 66,329 1,096,011 2,291,463 955,650 1,273,076 5,750,710 10,099,251 0 0 88,292,684 106,139,006 1,785,139 2,413,333 43,826 1,363,902 0 5,000,000 97,924,021 128,646,361

27,422,564 X 27,422,564 0 X 0 0 X 0 983,287 X 983,287 0 X 0 4,621,657 X 4,621,657 649,625 X 649,625 33,677,134 X 33,677,134 99,463,025 149,648,357 249,111,382

20,905,850 0 0 0 0 930,343 649,625 22,485,818 53,208,158

X 20,905,850 X 0 X 0 X 0 X 0 X 930,343 X 649,625 X 22,485,818 97,924,021 151,132,179


Bank Constanta is originated from the NGO “Constanta Foundation” which was established in 1997 by the small group of individuals with the headship of Ms Tamar Lebanidze. In December, 2007 Constanta started its operations as Joint Stock Company (JSC); following this important change, on July 3, 2008 Constanta received the banking license from the National Bank of Georgia (NBG) and started to conduct commercial banking operations under the brand new name JSC Bank Constanta.  At that time, 67.8% of banking shares was hold by «Constanta +», and 32.2% - by the private shareholders. In July 2010, Oikocredit, Ecumenical Development Co-operative Society U.A., came in as the first foreign shareholder of the Bank. In May 2011, another important investment was made into Bank Constanta’s share capital - TBC Bank purchased «Constanta +» equity and acquired total 80% of bank›s share capital. Oikocredit maintained its 13% stake in the bank and the private shareholders retained 7% banking shares. After capital increase in November 2011 TBC Bank became 83% shareholder of Bank Constanta. Shareholder Structure: 83.26% - JSC TBC Bank 10.97% - Oikocredit, Ecumenical Development Co-operative Society U.A 5.77% - Individual Shareholders


Bank Constanta is a full-service bank providing easily accessible and high quality financial services with special focus on micro, small and medium entrepreneurs. We believe that by offering adequately tailored banking services we support increasing living standards of the customers, thus creating lasting social value for communities in which we operate.


Our vision is to become the bank of the first choice for micro, small and medium businesses, to provide our customers with cost effective high quality and customer oriented banking services in order to support them develop their businesses, create additional jobs, improve living standards and provide their families with better future.

Société Générale Group GENERAL INFORMATION Société Générale is one of the leading European financial services groups. Anchored in the heart of the economy, the Société Générale Group was built on a universal banking model based on three pillars– Retail Banking in France, International Retail Banking and Corporate and Investment Banking. These pillars are backed by two business lines which work with them hand-inhand. These include Specialized Financial Services and Insurance and Global Investment Management and Services. This diversified model provides the basis for the group’s financial strength. Currently, Société Générale Group holds a 93.64% stake in Bank Republic and a 6.36% share participation in the European Bank for Reconstruction and Development (EBRD). The Relationship Bank of Reference Société Générale is committed to a strategy of promoting sustainable growth and aims to use its performance to finance the economy, as well as its customers’ projects. In line with this strategy, Société Générale’s ambition is to become the relationship bank of reference on the market, recognized for its expertise, closeness with its customers and chosen for the quality and commitment of its teams.

Bank Republic, Société Générale Group Mission: Bank Republic, as a member of the international group Société Générale, acts in accordance with the group’s general development strategy. The bank aims to provide proper and sustainable financing to the Georgian economy and ensure relevant solutions to the needs of its clients, while adhering to CSR principles. Bank Republic also offers professional challenges and career development opportunities to its staff.

Vision: Bank Republic’s stable development is based on our capability to build and maintain sustainable relationships with our clients and partners, thanks to the fair and professional attitudes of our staff. A corporate culture based on the team spirit approach is reflected in our values and is the key to future success.

Shift to Relationship Banking – New Strategy “Each of Us Matters” “Each of us Matters” is not merely a communications message. This is the bank’s new brand strategy. This means that all employees and clients of the bank will form a team that is united under one common goal, where the success of one party predetermines the progress of the other. Taking into account the current environment, it can be said that the Georgian banking sector has reached a stage where customers have developed specific demands regarding banks. Improved tariffs and conditions are no longer enough. Clients require a financial partner that can be trusted and cooperation with whom will not be limited to only one particular transaction. The relationship with a client is based on bilateral cooperation in which the bank acts as the client’s partner and the client’s success means the bank’s success. As such, the idea behind “Each of Us Matters” represents an inclusive approach and includes Bank Republic, Société Générale Group clients as well as its employees. When the team principle is applied, it is especially important for each participant member to understand and embrace a common direction, to share similar values and to strive towards a common goal. It is particularly emphasized that each Bank Republic employee is as important and valuable as each client is. In fact, the roles and functions of all employees

are critical for the existence of an efficient, well-run operation. In other words, the bank’s success depends on the aspirations of each individual unit and depends on a collective team spirit. The new brand strategy of the Bank Republic Société Générale Group aims to strengthen its position on the market as a socially responsible financial institution, whose goal is to offer its bank customers (both individual and corporate), banking products that are tailored to their financial capacity, needs and life’s pace. As such, Bank Republic carries out and will continue to offer educational activities that help its customers manage their finances more efficiently.

“Relationship Mark”

vices to the market’s needs– not the other way around. Bank Republic is an expert financial institution that strives to educate and advise all existing and potential customers. 2012 started very successfully for Bank Republic. Throughout the year, the bank actively took into consideration the lifestyles and holiday aspirations of the Georgian population by offering new actions and attractive proposals to suit these desires. In 2012, the bank launched a special campaign called “Close to the Client”. Within the scope of the campaign, more than 20 locations were selected throughout Tbilisi and 12 other cities across Georgia. Mobile branches were then placed in each location in an effort to bring the bank closer to the client.

The Bank Republic, Société Générale Group was first to offer consumer loans at 13.95%– the lowest rate on the market. Due to high interest and demand on the market, the campaign was prolonged in 2013. Another unique product offered by the Bank Republic, Société Générale Group is the Flexible Mortgage Loan. With the Flexible Mortgage Loan you receive an interest rate that is lower and more flexible than the standard mortgage loan rate. The variable rate mortgage depends on LIBOR. In terms of savings products, along with a variety of standard deposits, Bank Republic launched two unique products – the “More” deposit and child deposit gift cards.


To strengthen its new brand positioning as relationship oriented and as a socially responsible financial institution, the Bank Republic, Société Générale Group has developed the “Relationship Mark”. Visually, this mark will be placed on different projects implemented by the bank and advertisement materials. This will remind the customer of the bank’s values and business strategy, as well as how the bank approaches its clients and partners in a relationship where each of us matter. New Branches: In 2012, Bank Republic opened two new service centers. Bank Republic currently has 41 branches and service centers and more than 135 ATMs across the country. New Services and Products Bank Republic shifted to a market oriented strategy – the bank matches its products and ser-

Interest Income Interest Expense Net Interest Income Net Fees and Commissions Income Net Banking Income Operating Expenses Net Non-Interest Income Net Income Before Reserves and Allowances Total Loss on Possible Devaluation of Assets Profit Before Taxes & Extraordinary Gains/Losses Profit Tax Net Profit

Balance Sheet Assets

Cash & Equivalents Securities Gross Loans: Retail Corporate Less: Allowances for Loan Losses Net Loans Net Fixed and Intangible Assets Other Assets (Cash, Securities, Other Assets) Total Assets Liabilities Deposits (Retail & Corporate, Banks) Borrowed Funds Other Liabilities Total Liabilities Shareholders’ Equity Total Liabilities and Shareholders’ Equity

2012 Actual (in thousands) 68,032 28,402 39,630 32,000 71,630 52,974 (20,974) 18,656 562 18,094 2,858 15,236 2012 Actual (in thousands)

121 786

141 51 572   (61) 511 61 22 786   486 166 14 666



23 | 1 April, 2013

best georgian banks

TBC Bank Shareholders: EBRD, IFC, DEG, FMO, JP Morgan, Ashmore

Mission & vision: Mission:

We create new opportunities for the success of people and businesses. Our aspiration is to continue sustainable growth while remaining committed to our social and environmental responsibilities. We aim to become the finest financial institution in the region and, in turn, promote the international image of Georgia, and the Caucasus as a whole.


Through the best employees, strong branding and superior customer experience provided via innovative, multichannel facilities we will: have the largest franchise of medium and high-income retail and SME business segments; be the core bank for large corporate businesses; be the leader in micro-finance be the leader in the non-resident deposits segment; be the bank of regional importance.

Int. rating & awards 2012:

Fitch Ratings upgraded TBC Bank’s ratings in different categories: Long-term IDR was raised to ‘BB-’ from ‘B+’ and VR - to ‘bb-’ from ‘b+’, with a Stable Outlook. TBC Bank was the first bank in Georgia to be awarded for the “Best Consumer Internet Bank in Georgia” by Global Finance Magazine and was the first bank in the Caucasus to win a regional award for the “Best Integrated Consumer Bank Site in Central and Eastern Europe” by the same publication. The Euromoney, Global Finance, and EMEA Finance Magazines named TBC Bank as the “Best Bank in Georgia 2012 in Georgia.” Deutsche Bank and Commerzbank awarded TBC Bank for USD STP Excellence, with Deutsche Bank also recognizing TBC for EUR STP Excellence for the first time in 2012. This is the seventh award for STP Excellence from Deutsche Bank. TBC Bank was named as the “Best Foreign Exchange Provider in Georgia 2013” by Global Finance Magazine. Number of branches: During 2012, TBC Group (TBC and Constanta) expanded its service coverage in Georgia by increasing its branch, ATM and POS terminal network. As a result of this expansion, as of 31 December 2012, the Group had 105 branches and service-centers, 274 ATMs and 2,888 point of sale (POS) terminals throughout Georgia. Customer groups: Serving over 860,000 customers through our extensively developed retail, corporate , SME and micro segments.

In 2012 TBC Bank launched yet another first for Georgia – a convenient remote banking service for its clients – special versions of mobile banking for any type of mobile phone – iPhone, Android and other smart phones.

Gold Certificate At the beginning of 2012 TBC Bank introduced one of the most secure and stable banking products – the National Gold Certificate of Georgia. The Gold Certificate is a unique banking product since it insures the client against risk, protecting the client’s property from any economic, social or monetary crisis.

Public campaigns: deposits campaigns: Last year TBC Bank planned and implemented several successful programmes which resulted in a significant increase in the retail deposits portfolio and further strengthened the Bank’s position as leader in Georgia’s retail deposit market. During the first half of the year TBC Bank carried out a campaign involving an adventure game with a specially designed character. Over several months thousands of TBC depositors were given the opportunity play the game on the Internet and win prizes. In second half of the year the Bank launched another campaign for depositors. The lottery draw took place and three lucky depositors with winning tickets won GEL 10,000, 15,000 and 20,000. As a result of these campaigns, the deposits portfolio increased by 25%, reaching a level unprecedented on Georgian market – GEL 1 360 459.

Festival of Cards/ internet and mobile bank lottery TBC Bank launched its Festival of Cards during which clients using their TBC issued Visa or MasterCard to pay for shopping or services would automatically collect lottery tickets with the chance to win cash prizes, travel vouchers, Apple, and other branded prizes. Two customers won GEL 10,000 each, while another two won travel vouchers to a destination of their choice. In 2012 a separate lottery was organised for clients who only use TBC Bank’s Internet and mobile banking services, offering the chance to win various Apple prizes such as an iPhone 4, iPhone 3G and a MacBook Pro; while the winner of the final lottery won the grand prize of a car.

CSR and Charity

Latest developments: Changes in Shareholding Structure: Two founder shareholders EBRD IFC DEG JP Morgan FMO Ashmore Management and others

Mobile banking for all modern Smart phones

25.9% 20.2% 20.2% 11.5% 5.1% 5.4% 4.3% 7.4%

New services or products offered:

Updated Internet Banking – the best integrated consumer Internet banking in the region In 2012 TBC Bank implemented the best model of Internet banking in Georgia, providing clients with remote access to all of the services available at branch offices or service centers. With the help of its new Internet banking the TBC customer has service 24 hours a day. He/she is able to carry out any transaction and receive information at any time, anywhere.

High social responsibility is something which differentiates TBC Bank from many other companies. During its 20-year existence, TBC Bank has regularly contributed to the implementation of various cultural and social projects; while in 2012 the Bank decided to commemorate its 20th anniversary by dedicating the whole year to providing support for culture and the arts. At the beginning of 2012, TBC Bank started a series of long-term, innovative cultural projects, which would not only impact the development of culture in general, but also be of great significance to the lives of many talented artists, actors, filmmakers and writers. TBC Bank’s 20th Anniversary projects implemented in 2012 included: The film project ‘20 years/12 months’ ‘Artarea’ – the first Internet TV channel devoted to culture The House of Electronic Books ‘Saba’ TBC Art Gallery – Supporting great art Gift to the City – Sculpture by a famous Georgian artist

Other projects In addition to the above-mentioned projects launched in its anniversary year, TBC Bank has continued to finance the

implementation of its social, public and cultural projects that have developed as traditional priorities for the Bank: Financing the restoration and improvement of historical architectural monuments: Promotion of tourism development in Georgia’s mountainous regions: Providing support to people affected by the war of August 2008 Promotion of modern art and culture In 2012 TBC Bank invested a total of GEL 3 million in social responsibility projects, affirming its commitment to leading the way in Corporate Social Responsibility. Profit for the period

2012 to 2011 Comparison Profit for 2012 was GEL 97.8 million, up GEL 6.2 million, or 6.8%, compared to GEL 91.6 million achieved in 2011. The Bank reached a ROAE of 18.6% during 2012, compared to 21.8% achieved during 2011, reflecting a significant 25.3% increase in average total equity to GEL 526.3, compared to GEL 420.2 as of 2011 due to the additional capital injection from existing shareholders in an amount of GEL 25 million in the fourth quarter of 2012.

Quarterly Comparison Q4 2012 and Q4 2011 Comparison

In the fourth quarter 2012, the profit for the period was GEL 24.4 million, up GEL 4.7 million, or 23.7%, compared to GEL 19.7 million achieved in the fourth quarter of 2011. The 23.7% YoY increase in net profit and comparatively high 26.3% YoY increase in average total equity due to the above mentioned capital injection, drove the Bank’s ROAE to 16.9% during the period, down 0.3 percentage point, compared to 17.2% delivered in the same quarter of 2011.

Q4 2012 and Q3 2012 Comparison

On a quarterly basis, the profit for the period remained broadly flat, down GEL 0.1 million, or 0.5%, compared to the third quarter of 2012, which drove the return on average equity down by 1.5 percentage points due to the capital injections in the fourth quarter of 2012.

2012 to 2011 Comparison In 2012, the net interest income was GEL 238.7 million, up GEL 29.6 million, or 14.1%, compared to GEL 209.1 million achieved in the previous year. The increase was a result of 26.7% growth in interest income to GEL 456.5 million from GEL 360.2 million that more than offset the 44.2% growth in interest expense to GEL 217.9 million from GEL 151.1 million. The growth in interest income was due to the 17.0% increase of gross loan portfolio in 2012. Correspondingly, in 2012, interest income from loans was GEL 414.2 million, up GEL 90.7 million, or 28.0%, compared to GEL 323.5 million in 2011. During 2012, loan yields remained relatively stable at 17.4%, down 0.1 percentage points, compared to 17.5% in the previous year. In the same way, the interest yield on average interest earning assets was 14.8%, down 0.2 percentage points, compared to 15.0% in 2011, which was attributable to the general trend of the reduction of the interest rates of investment securities and increased liquidity (please see page 16) that resulted in the reduced shares of gross loan book in average interest earning assets to 82.3%, compared to 90.4% in 2011. The increase in interest expense reflected the strong 24.4% growth in the customer deposit portfolio in 2012 and a corresponding increase in the interest expense on total customer deposits, which reached GEL 156.6 million, up GEL 51.2 million, or 48.6%, compared to GEL 105.4 million in 2011. In 2012, deposit rates increased to 7.1% from 6.5%, up 0.6 percentage points aligned with the general upward trend in deposit rates. This was the major factor contributing to the increase in the cost of funding to 7.2%, up 0.6 percentage points, compared to the cost of funding of 6.6% in 2011. The above mentioned reasons, as well

as increased liquidity and general market trend of declining NIMs in the country during 2012, drove the Bank’s NIM to 7.7%, down 1.0 percentage points, compared to 8.7% in the previous year.

Assets As of the 2012 year end, total assets reached GEL 3,899.7 million, up GEL 599.7 million or 18.2% from 31 December, 2011. This increase was mainly attributable to the rise in net loan portfolio by GEL 361.5 million or 18.0% to GEL 2,370.2 million, compared to the 2011 year end. The growth in loan portfolio during 2012 was predominantly due to the Group’s gross corporate and retail segments which grew GEL 138.2 million and GEL 111.9 million respectively. Despite the small portfolio size of the Group’s SME and micro segments, in 2012 each of these segments experienced strong growth of GEL 58.2 million and GEL 60.9 million, respectively. In addition to the solid performance in the loan portfolio, the increase in assets was also a reflection of an increase in cash and cash equivalents and due to banks by GEL 79.0 million to GEL 744.2 million. The Bank’s liquidity ratio defined by the National Bank of Georgia (NBG) increased to 36.6% as of the 2012 year end, compared to 33.5% as of 31 December 2011. The increase in liquidity is in line with the Management’s decision to maintain high liquidity position (for detailed explanation, see note 1 above in “net income” discussion part of this document).

Liabilities As of the 2012 year end, total liabilities reached GEL 3,295.7 million, up GEL 464.4 million, or 16.4% Y-o-Y. This increase was mainly attributable to an increase of GEL 487.7 million, or 24.4% Y-o-Y in customer deposits reaching GEL 2,486.9 million. This increase is largely due to the increase in retail deposits which grew GEL 299.2 million to GEL 1,398.1 million during 2012. With this portfolio, the Group maintained the largest retail deposits portfolio in the Georgian market. In terms of the other segments, corporate deposits grew GEL 100.8 million, SME grew GEL 85.6 million and micro deposits grew GEL 2.2 million. Such solid performance in customer deposits drove the share of total customer deposits to total liabilities from 70.6% as of year end 2011 to 75.5% in 2012. Similarly, such strong deposit inflow during the year led the Group’s gross loans to client deposits ratio to further improve to 102.0% as of 31 December 2012 compared to 108.4% as of 31 December 2011. As of 31 December 2012, borrowed funds and subordinated debt were GEL 666.0 million, up 0.9% Y-o-Y. Due to the Bank’s high liquidity position, the Management did not utilize some committed funding from international financial institutions.

Total Equity As of 31 December 2012, total equity was GEL 604.0 million, up 28.9% on a Y-oY basis. The main factors contributing to this increase were the net income attributable to the Bank’s shareholders of GEL 96.5 million and increased equity of GEL 25 million from the Bank’s existing shareholders, including IFC (International Financial Corporation), EBRD (European Bank for Reconstruction and Development), DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH) and FMO (Nederlandsche Financierings-Maatschappij voor Ontwikkelingslanden N.V.). In terms of the regulatory capital, as of 31 December 2012, the Bank improved its NBG tier 1 and total capital ratios to 11.2% and 13.6% respectively, compared to 8.5% and 13.1% for the same period of the previous year. As per the Basel standards, the Bank’s BIS tier 1 capital ratio was 20.3%, up from 17.9% as of 31 December 2011. The tier 1 capital ratio was positively impacted by the increase in tier 1 capital, which as of December 31, 2012 was GEL 559.4 million, GEL 126.5 million higher than on 31 December 2011. In addition, TBC Bank extended its subordinated loan agreement with FMO, for USD 15 million which further strengthened the Bank’s total capital posiContinued on p. 24




best georgian banks Continued from p. 23

tion. Risk weighted assets were GEL 2,761.4 million as of 31 December 2012, up 14.1% compared to 31 December 2011.

Analysis by Segments Business Lines Retail Banking In 2012 TBC Bank further solidified its position as the leader retail bank on the market with the largest market share in retail deposits of 35.2% and a 23.1% market share in retail loans. In 2012 the retail segment grew by 13.3% in loans and 27.2% in deposits reaching total portfolios of GEL 1,398 million and GEL 954 million in loans and deposits respectively. In addition, in 2012 the Group significantly increased its number of retail account reaching 835,000, an increase of c. 190,000 or 30% from YE 2011.The Group’s retail business has been historically differentiated by the best customer experience and the strongest brand. In addition, the Group’s multichannel capabilities have become another differentiating factor.

Corporate Banking 2012 marked another successful year of growth for the Group’s corporate banking division where the Group reached 28.5% of the market share in loans and 27.8% of the market share in deposits. Corporate loan portfolio grew by 13.8% and deposits portfolio by 14.4% reaching GEL 1,142 million of total loans and GEL 800 million of total deposits portfolios. Furthermore, the Group’s corporate number of

1 April, 2013 |

accounts reached 4,600 as of 31 December 2012, constituting an increase of 240 accounts during the year. Management believes that the Group’s broad sector coverage, main industry expertise, flexibility and long term partnership with the clients differentiates the Group from the competitors.

SME Banking 2012 the Group actively continued providing financial solutions to its existing and new clients with the aim to support their growth and turn them into large corporate businesses. With such aspirations, we are proud to be one of the fastest growing SME lenders where in 2012 our loan and deposits portfolio grew by 24.7% and 42.7% respectively, reaching total loan book of GEL 58 million and total deposits book of GEL 85 million. Moreover, SME client base reached 33,000, an increase of 4,300 or 15% from prior year. Management believes that the Group’s sophisticated service and sales model, flexibility and individual client approach differentiates the Group from the competitors.

Micro-Bank Constanta With already second year presence on the Micro segment through Bank Constanta, we acquired and further strengthened the expertise and knowledge in this segment which was exemplified in the Bank Constanta financial results. In 2012, bank Constanta further approved its position as the leading players in the micro-finance sector by reference to its significantly growing business scale, client base and countrywide branch coverage. Bank Constanta increased its loan portfolio by GEL 78.0 million and deposits port-

folio by GEL 42.1 million reaching GEL 197.0 million and GEL 55.9 million of total loans and deposits portfolio respectively. Management believes that, Constanta’s wide branch network, broad range of product offering tailored to the micro finance segment as well as strong expertise in the sector, clearly differentiates the Group on this market.

Subsidiaries TBC Kredit

FINANCIAL HIGHLIGHTS 2012: Profit Before Tax

Total Operating Income

Net Income

GEL 112.3 million

GEL 326.8 million

GEL 97.8 million

ROE (Return on average equity)

CAR (Capital Adequacy Ratio)

C/I (Cost to income) 1




Total Assets

Gross Loans to Customers

Customer Deposits2

GEL 3.9 billion GEL 2.5 billion GEL 2.5 billion

TBC Leasing TBC Leasing JSC was founded by TBC Bank in 2004 and as of 31 December 2012, holds 90% of total TBC Leasing shares. In 2005, EBRD became the shareholder of TBC Leasing, accounting for 10% of its total shares. In 2012, TBC Leasing portfolio grew by GEL 6 million reaching total leasing portfolio of GEL 30 million. Despite a very small rise in the portfolio, along with the leasing market development in the country, TBC Leasing has ambitious plans on portfolio growth.

deposits: Golden Deposit, Current&Savings Accounts, Term Deposits, Term Plus Deposits Finance and Insurance: Business Finance, International Trade Finance, Business leasing, Insurance Products Banking – Sms banking, Online banking, treasury products, cash collection

TBC Invest


TBC Invest is a fully owned subsidiary of TBC Bank, operating in Israel as an intermediary between potential clients and TBC Bank. The main aim of this company is to attract deposits from Israeli market which are believed to be less expensive source of funding. 2012 was very successful year for TBC Invest, it has increased its deposits portfolio

loan products: consumer and mortgage loans, credit cards and overdrafts, instant loan, pawnshop and so on. deposit products: child deposit, term and term plus deposits, my safe, gold deposit, bonus deposit, deposit my goal and so on. Banking – internet/mobile banking, sms service, digipass application, etc.


Income Statement Discussion In millions of GEL Interest income Interest expense Net interest income Provision for loan impairment Net interest income after provision for loan impairment Net fee and commission income Other operating income Other provision for impairment charges Administrative and other operating expenses Profit before tax Income tax expense Profit for the period   ROAE

Net Interest Income 2012 414.2 27.2 7.0 5.7 2.4 0.0 456.5 5.4 156.6 42.6 13.2 0.1 217.9 238.7 7.7%

by USD 29 million over one year reaching total deposits portfolio of USD 43 million and attracted over 230 new customers.

TBC Bank hols 75.0% equity interest in TBC Kredit,– a rapidly growing non-banking credit organization which has been operating in Azerbaijan’s MSME market since 1999. TBC Kredit has extensive experience in dealing with MSME finance, as well as consumer loans and mortgage loans. 2012 TBC Kredit continued active growth by reaching gross loans portfolio of GEL 60.5 million, an increase of 31% Y-o-Y resulting from the increase in active client base by 500 to 3600 as of 31 December 2012. This growth in client number was partially supported by the branch network expansion whereby TBC Kredit added one more branch in the capital Baku.

Consolidated Results of Operations

In millions of GEL Loans and advances to customers Investment securities available for sale Due from other banks Investments in leases Investment securities held to maturity Other Interest income Due to other banks Customer accounts Other borrowed funds Subordinated debt Other Interest expense Net interest income Net Interest Margin


2012 456.5 217.9 238.7 -23.2 215.5 39.3 48.8 -7.5 -183.8 112.3 -14.5 97.8

2011 360.2 151.1 209.1 -16.0 193.0 28.7 30.7 -0.1 -145.3 107.1 -15.5 91.6

Change in % 26.7% 44.2% 14.1% 44.3% 11.6% 36.9% 58.8% 5212.1% 26.6% 4.9% -6.3% 6.8%




Balance Sheet Discussion 2011 323.5 23.3 6.1 3.4 3.6 0.3 360.2 3.0 105.4 28.2 14.5 0.0 151.1 209.1 8.7%

Change in % 28.0% 17.0% 13.9% 66.8% -34.8% -93.2% 26.7% 78.0% 48.6% 51.0% -8.8% 134.2% 44.2% 14.1% -1.0%

In millions of GEL



Y-o-Y Change %







Financial securities




Fixed and intangible assets & investment property




Cash and due from banks Loans and advances to customers (Net)

Other assets




Total assets




Due to other banks




Customer accounts







Borrowed funds & Subordinated Debt Other liabilities




Total Liabilities







Total equity

JSC “ProCredit Bank” Shareholders - 100 % - ProCredit Holding AG & Co. KGaA.

Mission Statement ProCredit Bank Georgia is a development-oriented fullservice bank. We offer excellent customer service to private individuals and enterprises. In our operations, we adhere to a numbers of core principles: we value transparency in our communication with customers,

we do not promote consumer lending and we provide services which are based both on an understanding of each client’s situation and on sound financial analysis. This responsible approach to banking allows us to build long-term partnership with our clients based on mutual trust. In our operations with business clients, we focus on very small, small, and medium-sized enterprises, as we are convinced that these businesses create jobs and make a vital contribution

to the economies in which they operate. By offering simple and accessible deposit facilities and other banking services and by investing substantial resources in financial education we aim to promote a culture of savings and responsibility which can help to bring greater stability and security to ordinary households. Our shareholders expect a sustainable return on investment over long term, rather than being focused on short-term profit maximization. We invest extensively in

the training and development of our staff in order to create an open and efficient working atmosphere, and to provide friendly and competent service for our customers.

Int. rating & awards Long-term foreign and local currency IDRs affirmed at “BB”, Outlook Stable Short-term foreign and local currency IDRs affirmed at “B”

Viability Rating affirmed at “BB-” Viability Rating affirmed at “BB-” Number of branches – 58 New branches: Avlabari Service Point, Ghudushauri Service Point Relocation: Marneuli Branch, Rustaveli Service point, Central Branch/Head Office Renovation/Redesign of branches: Melikishvili Service Point, Gldani Branch, Gamsakhurdia Service point, Saburtalo Branch, Zugdidi Branch, Gori Branch. Continued on p. 25




best georgian banks | 1 April, 2013 Members of Extended Management

Continued from p. 24

New services or products offered

Tea Tabagari Nukri Tetrashvili Irakli Zatishvili

Eco Loans for business and private clients Service Packages Renewed Internet Banking Service – possibility of opening deposits and debit card registering Renewed Savings Deposit and “My Piggy Bank” (savings for children)

Latest developments: Changes in shareholders none Changes in management:

2011 Members of Management Board Maya MeredovaGeneral Director Sascha Ternes - Director Ketevan Khuskivadze- Director 2012 Members of Management Board Sascha Ternes General Director Ketevan Khuskivadze - Director Ketevan Burduli – Director

PRODUCTS AND SERVICES Loans: Business loans - business loans are meant for business clients and personal needs of their founders. Loan repayment flexible/individual schedule may be tailored to business needs; Agro loans – agro loans are intended for proprietors engaged in various types of agricultural activity; Business overdrafts – a business overdraft is meant for financing of the business short-term liquidity; Credit exposure limit – a credit exposure limit is a maximum amount preliminary determined/ approved for the client, within which it’s possible to issue different lending products during a certain period of time without conducting an additional financial analysis; Housing Loans –for Private clients, Real estate acquisition and renovation purposes;

Home Improvement – for renovation and furniture purposes; Consumer - every consumer purposes; start-up; for Support of existing business ; Salary Overdraft - short-term loan facility repayable from your next month’s salary; Eco Loans for business and private clients - Eco loan finances the energy efficiency measures, renewable energy technologies and of environmentally friendly activities for all types of our clients.

Banking: Internet Banking - Internet Banking is convenient tool to have access to E-banking services any time from anywhere, to perform national and international transfers or make transaction between clients own accounts, pay utility and other payments. Open accounts and register the products. Internet banking is available for private clients as well as for legal entities; SMS Service - SMS Service allows clients to receive information from the bank via mobile phone in the form of short text messages. SMS service gives possibility to control your accounts, to save time and to be safe. Clients having full package of SMS banking have possibility to use

Info Service 2022 and receive desirable information any time, 24 hours a day. Service is available for private clients as well as for legal entities; Telephone Banking - With application of a telephone PIN code it is possible to receive information about balances and turnover on your accounts. This service is available for private and legal entities but for private individuals additionally is possible to perform conversion operations and perform the transfers between their own accounts; Standing Order - Standing order is an order client gives to the Bank to transfer a specific amount of money at regular intervals. It is used by clients in order to perform regular transfers and they do not need to visit the bank frequently. Service is available for private and legal clients; Pay box Services - Pay box system gives possibility to deposit an amount on client’s current and saving account or to place amount for loan installment. Service is available only for private individuals.

money deposited with the fixed Interest Rate and term. Interest payment monthly or at the end of maturity; Flexible Term Deposit - fixed amount of money deposited with the fixed Interest Rate and term. Interest payment monthly or at the end of maturity. Compared to term deposit advantage is that in case of premature cancelation higher interest rate is accrued; Savings Plan-deposit opened with minimum initial amount. Monthly installment of minimum amount is required. Opened with fixed amount of period; Savings-deposit opened with minimum initial amount, has no maturity date. Deposit amount is easily accessible and there is no limitation in later withdrawal or depositing. Monthly capitalization of interest rate. Possibility of interest realization either on savings or current account; Child Deposit - deposit opened with minimum initial amount. Maturity date until the child reaches 18 years. Possibility to make additional deposits on the account; “My Piggy Bank”- savings account for children.

Deposits and payment:

Debit Cards –For Private Individuals : Visa Electron, Visa Classic, MasterCard Maestro, MasterCard Standard; For Legal Entities : Visa Business Cards;

Term Deposit- fixed amount of

VTB bank Georgia Shareholders: The largest shareholder of JSC VTB Bank Georgia is OJSC VTB Bank (96.31% of shares).

VTB Bank Mission & vision:

Mission-Providing world-class financial services and a better future for customers, shareholders and society. Vision- seeks to be number one in all its target markets

Int. rating & awards: Credit Rating (16 December 2011) Forecast Long-term Credit Rating in Foreign Currency Short-term Credit Rating in Foreign Currency Individual Rating Support Rating Country “Upper Limit”

Stable ВВ В D/E 3 ВВ-

Number of branches: 24 New branches:

Gldani Branch-3, Khizanishvili St., 0167 Saburtalo Branch Office Operations De-

2012 Overview Bank of Georgia Holdings plc (LSE: BGEO LN) (the “Bank”), the holding company of JSC Bank of Georgia and its subsidiaries, Georgia’s leading bank, announced on 19 Feb, 2013 the consolidated results for year ended 31 December 2012 (IFRS based, derived from management accounts with such announcement approved by the board of directors of BGH on 15 February 2013). The Bank reported full-year 2012 profit of GEL 179.6 million (US$ 108.4 million/GBP 67.4 million), or GEL 5.22 per share (US$3.15 per share/ GBP1.96 per share). Unless otherwise mentioned, all comparisons refer to the full year 2011 results.

Positive operating leverage maintained with strong profitability

o Net interest margin of 7.9% in 2012, compared to 7.8% in 2011;  Q4 2012 NIM increased to

partment -24a, Pekini St., 0160 Batumi Branch Office Operations Department -32, Gogebashvili St., 6000 Varketili Branch-Metro “Varketili” Business Centre Tsereteli Branch-67, Ak. Tsereteli Ave., 0154 Kutaisi Branch Office Operations Department - 28a, chavchavadze Ave., 4600

New services or products offered: VTB Credit Card

Card type- VISA Classic Card service fee (annual) -GEL 50 Card validity -2 years Card currency -GEL Grace period- 55 days Interest rate -30

Instant Loan

Interest rate From-0% Minimum loan amount- GEL 150 Maximum loan amount -GEL 5,000

Loan term -Up to 24 Loan currency- GEL Contribution by customer -From 0%

Deposits and payment: Different deposits offered by VTB Bank are the most convenient and effective means for storing and accumulating money.

Term Deposit

Term deposit is the most high income way of storing money in bank. The Term deposit is opened for the predetermined term and money can be deposited only once. Term:from 3 month to 2 years Minimum amount:100 units Currency:GEL/USD/EUR

Salary Deposit

In this case, certain amount will be monthly transferred from the salary card of the individual to the deposit. The deposit allows you saving certain amount from the monthly income and at the same accrue

the interest at high rate. Term:from 3 month to 2 years Minimum amount:not required Currency:GEL/USD/EUR

Loans: Consumer loans

Consumer loans of VTB Bank will help you achieving your goals Minimum loan amount

GEL 400

Maximum loan amount

GEL 30,000

Loan term

Up to 36 months

Loan currency


Mortgage loans

We offer you mortgage loan programs to better arrange your lives Mortgage- construction/repair interest rate Maximum loan amount Loan term Loan currency Contribution by the customer

From 12% USD 200,000 10 years GEL, USD, EUR Not required

Bank of Georgia 7.8% from 7.3% in Q3 2012. o Revenue increased by GEL 64.5 million, or 14.9%, y-o-y, to GEL 498.3 million; excluding the benefit of the one-off currency hedge gains in 2011, revenue increased by 21.9%;  Q4 2012 revenue grew 11.1% y-o-y to GEL 128.3 million; excluding the benefit of the one-off currency hedge in Q4 2011, Q4 2012 revenue grew 15.5%. o Positive operating leverage maintained, as operating expenses increased at a lower rate than revenue, up 5.2% y-o-y to GEL 221.2 million; excluding the 2011 one-off gains, operating leverage was 16.7%;  Q4 2012 operating expenses were largely flat q-o-q at GEL 54.0 million. o Cost to Income ratio improved to 44.4% from 48.5% in 2011, and to 42.1% in Q4 2012 from 44.4% in Q3 2012. o Profit before tax from continuing operations of GEL 212.8 million, up by GEL 40.7 million, or 23.7%; excluding the benefit of one-off currency hedge gains in 2011, profit grew 44.7%. o Profit for the period increased by GEL 43.8 million, or 32.3%, to GEL 179.6 million.

o Earnings per share (basic) increased by 17.6% to GEL 5.22. o Return on Average Assets (ROAA) increased to 3.5%, compared to 3.2%. o Return on Average Equity (ROAE) increased to 19.1%, from 18.3%.

Strong balance sheet and capital position maintained

o Cost of Funds declined to 7.3% in 2012, compared to 8.0%.  Q4 2012 Cost of Funds of 6.6%, down from 7.1% in Q3 2012 and 8.4% in Q4 2011. o Net loan book increased by 18.2% during the year , while client deposits increased 2.7%, reflecting the Bank’s strategy to improve its cost of funding by reducing high interest paying corporate deposits;  In US$ terms the net loan book increased by 19.2% reflecting the stable currency position.  Retail Banking client deposits grew 15.5%, Wealth Management client deposits grew 33.2%, Cor-

porate Banking declined 17.1%, reflecting the targeted outflow of high-interest paying deposits. o Cost of Risk increased to 1.3% in 2012 from 0.9% in 2011, reflecting the absence of the previous year’s net releases and recoveries and higher provisions in the second half of 2012. o Strong funding and liquidity position with a Net Loans to Customer Funds ratio of 114.8%. Net Loans to Customer Funds and Long-Term IFI Funding ratio was 91.9%. National Bank of Georgia (NBG) liquidity ratio of 41.1%, compared to 37.8% a year ago and to a 30% minimum requirement by the NBG. o BIS Tier 1 capital adequacy ratio improved to 22.0%. o Book Value per Share increased by 16.7% y-o-y to GEL 30.33 (US$18.31/GBP11.38). o Balance Sheet leverage reduced to 4.3 times at 31 December 2012, compared to 4.7 times at 31 December 2011 and 4.5 times at 30 September 2012.

Business highlights

o Strong performances from each of the Bank’s businesses

in Georgia – Corporate Banking and Retail Banking reported continued loan growth and improving efficiencies. o Retail Banking continues to deliver strong franchise growth, supported by the successful rollout of the Express Banking strategy in 2012. o Corporate Banking has delivered strong, well-diversified balance sheet growth over the last 12 months; customer lending grew 23.1% o Wealth Management continued to expand its client franchise with deposits increasing by 33.2% to GEL 605.2 million during the year. o Excellent progress in developing the Bank’s synergistic businesses: Insurance and Healthcare business expansion through acquisition of Imedi L International. Integration successfully executed, realising annual synergies of GEL 8.7 million; Affordable Housing completed its pilot project of an 123 apartment building realising SBRE’s first profit of GEL 1.7 million; a second 522 apartment building project is in progress. Continued on p. 26




best georgian banks Continued from p. 25

1 April, 2013 |


Bank of Georgia

CONSOLIDATED INCOME STATEMENT GEL thousands, unless otherwise noted

Loans to customers Investment securities Amounts due from credit institutions Finance lease receivables Interest income Amounts due to customers Amounts due to credit institutions Interest expense Net interest income before interest rate swaps Net gain (loss) from interest rate swaps Net interest income Fee and commission income Fee and commission expense Net fee and commission income Net insurance premiums earned Net insurance claims incurred Net insurance revenue Healthcare revenue Cost of healthcare services Net healthcare revenue Net gain from trading and investment securities Net gain from revaluation of investment property Net gain from foreign currencies Other operating income Other operating non-interest income Revenue Salaries and other employee benefits General and administrative expenses Depreciation and amortization expenses Other operating expenses Operating non-interest expenses Operating income before cost of credit risk Impairment charge on loans to customers Impairment charge on finance lease receivables Impairment reversal (charge) on other assets and provisions Cost of credit risk Net operating income Net non-operating expense Profit before Income tax expense Income tax expense Profit from continuing operations Net loss from discontinued operations Profit Attributable to: – shareholders of the Group – non-controlling interests Earning per share (basic) Earning per share (diluted)

Dec-12 YTD Unaudited 509,339 33,950 15,813 8,701 567,803 (202,484) (79,492) (281,976) 285,827 (1,710) 284,117 109,278 (22,791) 86,487 91,176 (57,038) 34,138 54,376 (31,030) 23,346 2,308 49,571 18,288 70,167 498,255 (122,556) (67,041) (28,606) (2,949) (221,152) 277,103 (39,186) (495)

Dec-11 YTD Audited

Change Y-O-Y %

438,989 37,701 18,103 6,565 501,358 (167,294) (99,763) (267,057) 234,301 4,984 239,285 93,541 (18,204) 75,337 46,396 (28,658) 17,738 5,700 (3,242) 2,458 1,382 1,984 76,441 19,128 98,935 433,753 (114,622) (61,942) (27,254) (6,347) (210,165) 223,588 (23,216) (317)

16.0% -9.9% -12.6% 32.5% 13.3% 21.0% -20.3% 5.6% 22.0% NMF 18.7% 16.8% 25.2% 14.8% 96.5% 99.0% 92.5% NMF NMF NMF 67.0% -100.0% -35.2% -4.4% -29.1% 14.9% 6.9% 8.2% 5.0% -53.5% 5.2% 23.9% 68.8% 56.2%




(44,717) 232,386 (19,634) 212,752 (33,200) 179,552 179,552

(22,196) 201,392 (29,338) 172,054 (21,125) 150,929 (15,219) 135,710

101.5% 15.4% -33.1% 23.7% 57.2% 19.0% -100.0% 32.3%

174,437 5,115 5.22 5.17

132,531 3,179 4.44 4.20

31.6% 60.9% 17.6% 23.1%

CONSOLIDATED BALANCE SHEET GEL thousands, unless otherwise noted Dec-12




Change Y-O-Y %

Sep-12 Unaudited

Cash and cash equivalents


























Investment property






Property and equipment












Intangible assets






Income tax assets












Other assets






Total assets






Amounts due to customers, of which:






Client deposits































Total liabilities






Share capital






Promissory notes and CDs issued Amounts due to credit institutions Income tax liabilities Provisions Other liabilities

Additional paid-in capital






Treasury shares






Other reserves





















Retained earnings Total equity attributable to shareholders of the Group Non-controlling interests Total equity






Total liabilities and equity











Book value per share


Balance Sheet



in Gel










Due from NBG





Due from Banks





Dealing Securities





Investment Securities



















Less: Loan Loss Reserves


Net Loans


Accrued Interest and Dividends Receivable


Other Real Estate Owned & Repossessed Assets





Equity Investments
















14 Current (Accounts) Deposits




15 Demand Deposits







10 Fixed Assets and Intangible Assets 11 Other Assets 12 TOTAL ASSETS LIABILITIES 13 Due to Banks

16 Time Deposits 17 Own Debt Securities


18 Borrowings 19 Accrued Interest and Dividends Payable
















23 Common Stock




24 Preferred Stock




25 Less: Repurchased Shares




26 Share Premium




27 General Reserves




28 Retained Earnings




29 Asset Revaluation Reserves




30 Total Equty Capital








20 Other Liabilities 21 Subordinated Debentures 22 Total Liabilities EQUITY CAPITAL

Change Q-O-Q %

Amounts due from credit institutions Investment securities Loans to customers and finance lease receivables Investments in associates


KSB Bank Shareholders:

H. H. Sheikh Nahayan Mabarak Al Nahayan – 45% H. H. Sheikh Hamed Bin Zayed Al Nahayan – 20% H. H. Sheikh Mansur Bin Zayed Bin Sultan Al Nahayan – 15% H. H. Sheikh Mohamed Buti Al Hamed – 15% LTD. Investment Trading Group – 5%

Mission & vision: Mission

The objective of KSB Bank, as the member of the international investment group, is to become the financial institution of the international level through team efforts and goal-directed activities.


KSB Bank is one of the first investments of the largest company “Dhabi Group” in Georgia. 45% shareholder of the company is His Excellency, Sheikh Nahayan Mabarak Al Nahayan, State Minister of Education and scientific Research of the United Arab Emirates. The bank provides the services to the

corporate, as well as the retail customers. KSB Bank operates throughout Georgia through 19 branches and 25 service centers offering the banking service and wide spectrum of the products to its customers. Partners to the KSB Bank are the largest Georgian companies, such as: the Revenues Service, Prosecutor’s Office, Telasi, National Bureau of Enforcement, Tbilisi Opera and Ballet Theatre of Zakarya Paliashvili and many other companies cooperating with and recommending KSB Bank as the alternative and the bank providing high level services. KSB Bank cares about strengthening the values of the national culture and provides the general sponsorship to Tbilisi Opera and Ballet Theatre of Zakarya Paliashvili, making its contribution to cultural development of the country.

Number of branches: 19 Latest developments:

Changes in management: Natia Chkoidze – Acting Director-general Public campaigns and charity: (Foundation “IAVNANA”, “Makhatas Mta” also charity projects)




best georgian banks | 1 April, 2013

Number of Unpaid Loans on the Rise, Statistics Show The FINANCIAL By Mariam Papidze


he current volume and term structure tendency of commercial bank loans including those overdue shows that there has been an increase in unpaid loans, which can lead to economic debt, according to National Bank of Georgia. The statistics show that the volume of loans in arrears has amounted to GEL 25,301,550 thousand in the first three months of 2013, while it was a little bit less in the same period of 2012 - at GEL 23,287,694 thousand. For the whole of 2012, the volume of loans in arrears reached GEL 98,591,927 thousand. That year the statistics showed an increase again compared to the previous year as in 2011 the debt consisted of GEL 82,449,277 thousand and in 2010 GEL 68,016,081 thousand. In total, loans with fixed maturities have amounted to GEL 24,369,275 thousand in the first three months of 2013, compared to GEL 94,894,246 thousand in 2012 and GEL 79,324,647 in 2011. Out of this amount, short-term loans have come to GEL 5,780,506 thousand in 2013, compared to GEL 22,487,423 thousand in 2012 and GEL 19,530,871 thousand in 2011. As for long-term loans, they have amounted to GEL 18,588,770 thousand so far in 2013, but were GEL 72,406,823 thousand in 2012 and GEL 59,793,776 thousand in 2011. Out of commercial bank loans, the amount of overdue loans consisted of GEL 652,960 thousand in the first three months of 2013, compared to GEL 2,536,014 thousand in 2012 and GEL 2,148,605 thousand

in 2011. Among them, short-term overdue loans were GEL 374,615 thousand in 2013, GEL 1,379,206 thousand in 2012 and GEL 1,101,865 thousand in 2011. As for the amount of long-term overdue loans, their amount has reached GEL 278,344 thousand so far in 2013, compared to GEL 1,156,808 thousand in 2012 and GEL 1,046,741 thousand in 2011. Accrued interest has reached GEL 279,315 thousand in 2013, whereas it was GEL 1,161,668 thousand in 2012 and GEL 976,025 thousand in 2011 including accrued interest on short-term loans as well as on longterm loans. Total loans including overdue loans in the national currency have amounted to GEL 8,107,012 thousand in 2013, compared to the GEL 31,530,594 thousand in 2012 and GEL 23,319,677 thousand in 2011. This is the total data of loans with fixed maturities, overdue loans and accrued interest. Total loans including overdue loans in a foreign currency have amounted to GEL 17,194,538 thousand so far in 2013, whereas their number was GEL 67,061,333 thousand in 2012 and GEL 59,129,600 thousand in 2011. This data includes loans with fixed maturities, overdue loans and accrued interest. “Customers often encounter difficulties in covering loans when they are not structured properly,” said Levan Lebanidze, the General Director of Bank Constanta. “Sometimes a loan can become problematic even though it was structured well at the start. In cases like this, Bank Constanta’s policy is to be as flexible as possible. We listen to the client, study the case, find the reasons for the problem and then make a deci-

sion accordingly. We do our best to support our clients and to help them cover the loan as it is in our interests to be able to rescue their business,” he added. “Before sorting out the most problematic loans, I would like to mention that what’s very important is first of all, the procedure of giving out a loan. This procedure requires a high level of responsibility from the side of the financial institution as well as from the customer. It is very important to find out how knowledgeable the customer is before taking on a loan. We pay a great deal of attention to the correct structuring of loans and correctly choosing clients. We do not give out a loan if we are not assured that this loan will be used to develop a specific business and that this business will then be able to cover the repayment of the loan,” Lebanidze added. “In the event a customer does encounter difficulty in repaying a loan, Bank of Georgia can offer them the option of debt restructuring,” said Khatuna Kakabadze of Bank of Georgia. “Debt restructuring means offering the borrower a more convenient payment plan to cover the debt. We offer them a new loan that replaces the outstanding balance on the older loan, and is paid over a longer period, usually with a lower instalment amount. Our priority is for the borrower to be able to cover the loan,” she added. “The statistic of inactive loans at Bank of Georgia is stable,” Kakabadze said. According to her, the ratio of inactive loans to the total loan portfolio was 3.7 percent in 2011 and 3.9 percent in 2012.

Highest Amount of Loans Issued in Tbilisi’s Trade Sector in 2012 The FINANCIAL By Mariam Papidze


he highest number of loans in 2012 was issued in Tbilisi, followed by the region of Adjara. The lowest amount of loans was issued in the Samtskhe-Javakheti region. In the capital city of Georgia the number of loans in the national currency amounted to GEL 29,307,200 and in foreign currency - GEL 68,849,400 in 2012. In Adjara it was GEL 18,024,000 in the national currency and GEL 29,875,000 in foreign currency; Samegrelo-Zemo Svaneti - GEL 15,717,000 in the national currency and GEL 9,380,000 in foreign currency; Guria - GEL 4,509,000 in national currency and GEL 550,000 in foreign currency; Imereti-Racha-Lechkhumi - GEL 23,469,000 in national currency and GEL 16,984,000 in foreign currency; Kvemo Svaneti - GEL 329,000 in national currency and GEL 670,000 in foreign currency; Shida Kartli - GEL 14,635,000 in national currency and GEL 3,941,000 in foreign currency; Mzkheta-Mtianeti - GEL 909,000 in national currency and GEL 19,000 in foreign currency; Kakheti GEL 19,088,000 in national currency and GEL 8,593,000 in foreign currency; Kvemo Kartli - GEL 14,272,000 in national currency and GEL 7,604,000 in foreign currency; Samtskhe-Javakheti - GEL 4,106,000 in national currency and GEL 1,749,000 in foreign currency. As for 2013, in January the number of loans issued in the national currency

amounted to GEL 142,068,000 and in foreign currency - GEL 177,341,000. The sequence of regions for this period is almost the same as it was in 2012. Loans granted during the period in the national currency to residential legal entities by type of activity amounted to GEL 2,329,902 thousand in 2012 and GEL 351,989 thousand in January of 2013. The trade sector comes first in terms of issued loans with a total value of GEL 871,641 thousand in 2012 and GEL 138,106 thousand in 2013. Then comes industry with a total value of GEL 826,238 thousand in 2012 and GEL 121,421 thousand in 2013. Then there is the construction sector in third place with a total value of GEL 302,382 thousand in 2012 and GEL 33,220 thousand in 2013. Transport and communication sector’s loan total amounted to GEL 60,028 thousand in 2012 and GEL 13,556 thousand in 2013. Healthcare and social services took loans of GEL 40,485 thousand in 2012 and GEL 1,789 thousand in 2013. The top sectors in terms of issued loans is continued by agriculture, the forestry and fishing sector which took a loan with a total value of GEL 20,378 thousand in 2012 and GEL 1,578 thousand in 2013. GEL 20,086 thousand was the loan amount of the financial intermediation sector in 2012 which consisted of GEL 2,556 thousand in 2013. Real estate, researches took loans worth a total of GEL 17,111 thousand in 2012 and GEL 10,075 thousand in 2013. Then follows education with a total value of GEL 15,882 thousand in 2012 and GEL 4,396 thousand in 2013. Finally, the least amount of loans was taken by the hotels and restaurants

sector, which amounted to GEL 3,417 thousand in 2012 and GEL 138 thousand in 2013. The abovementioned data shows loans issued in the national currency. Loans granted during the period in foreign currency to residential legal entities by type of activity amounted to GEL 2,329,902 thousand in 2012 and GEL 351,989 thousand in January of 2013. The trade sector still comes first in issued loans with a total value of GEL 1,868,239 thousand in 2012 and 52,888 thousand in 2013. Here is the list of other sectors: industry - GEL 818,847 thousand in 2012 and GEL 96,851 thousand in 2013; construction - GEL 286,289 thousand in 2012 and GEL 52,888 thousand in 2013; healthcare and social services - GEL 130,515 thousand in 2012 and GEL 13,571 thousand in 2013; transport and communication - GEL 112,511 thousand in 2012 and GEL 7,744 thousand in 2013; real estate, researches - GEL 85,719 thousand in 2012 and GEL 12,316 thousand in 2013; hotels and restaurants - GEL 57,073 thousand in 2012 and GEL 9,497 thousand in 2013; agriculture, forestry and fishing - GEL 39,500 thousand in 2012 and GEL 5,046 thousand in 2013; financial intermediation - GEL 22,202 thousand in 2012 and GEL 4,890 thousand in 2013; finally education - GEL 20,568 thousand in 2012 and GEL 2,433 thousand in 2013. Commercial banks term loans to residents in national and foreign currencies by sectors of the national economy amounted to GEL 2,309,697 thousand in 2012 and GEL 535,608 thousand in the first three months of 2013 in total.


s the results for 2012 have emerged, it is clear that the Georgian banking sector continues to grow and prosper based on the initial results released by four of the largest banks in March 2013. These banks represent approximately 75% of the banking assets in Georgia. Using the data publically released by TBC, Liberty Bank, ProCredit Bank and Bank of Georgia, KPMG

has completed the preliminary results of its annual Georgian Banking Sector Overview. Please note that these unaudited results are preliminary in nature. Assets and Deposits of these selected banks increased 19% and 12%, respectively, in 2012 whilst Income and Net Profit after Taxes increased 6 % and 14% respectively as the profitability of the banks continues to rise. KPMG has listed the key financial indicators and highlights of 2012 below:

Total Value of Transactions with Payment Cards Reaches GEL 1,283,505,000 in First Two Months of 2013 The FINANCIAL By Mariam Papidze


n total, 7,786,692 payment credit cards were in circulation in 2012 and 2,284,988 units in the first two months of 2013, out of which the number of Visa cards was 5,587,398 units in 2012 (1,830,931 units in 2013), EC/MC 606,957 units (113,543 units in 2013) and other - 1,592,337 units (340,514 units in 2013), according to the National Bank of Georgia. The number of payment debit cards which were in circulation in 2012 reached 44,849,738 units in 2012 and 8,305,308 units in 2013 in total. Among them, Visa cards consisted of 36,908,046 units (6,237,593 units in 2013), EC/MC - 3,755,239 units (1,072,043 units in 2013) and other 4,186,453 units (995,672 units in 2013). Georgia is number one in the Caucasus when it comes to the number of Visa cards in the country, and number two after Armenia when it comes to the PV/TV ratio, according to Svetlana Georbelidze, Visa Country Manager for Ukraine, Georgia, Armenia and Moldova. A record amount of money transferred was observed in Georgia in 2012, statistics provided by National Bank of Georgia show. The total amount of money transfers in 2012 was USD 1,334,513 thousand; the sum is USD 66,387,000 more than it was in 2011. Georgia received the largest volume of money transfers of the last five years in 2012. The average volume of money transferred to Georgia has always been more than a billion, although 2009 was an exception. With USD 841,778,000 Georgians received the lowest measure of money transferred by their relatives who live or work in foreign countries as job migrants that year. Russia, Greece, Italy, the USA, Ukraine, Turkey, Spain, the UK, Israel, Germany and Kazakhstan lead the list of the top countries from which more than a million is transmitted monthly. Russia still remains without rival as the number one remittance-source country, as it is from there that 53.4% of transferred money is transmitted. While in December more than USD 60 million was transferred to Georgia from Russia, the amount of money coming from the other ten countries combined was just USD 40.25 million. July is the leading month in inflows with a total value of USD 117,145 thousand, and December in terms of outflows - with USD 11,782 thousand, according to the statistics of money transfers per month provided by NBG. Unistream holds the largest share of money transfers. Money transfers by systems show that people mostly use Unistream, Western Union and Anelik for sending money. The inflow amount via Western Union was USD 168,006 thousand in 2012, and the outflow USD 36,924 thousand. This is followed by Unistream with USD 232,766 thou-

sand inflow and USD 11,583 thousand outflow. Third place is held by Anelik with USD 108,875 thousand inflow and USD 6,119 thousand outflow. In January 2013, the volume of money transfers from abroad constituted USD 94.1 million, which is USD 9.7 million, or 11.5 percent, more than the same amount for January 2012. The 11 biggest donor countries, from which the volume of such transfers exceeded USD 1 million in January, were responsible for 93.2 percent of total money transfers from abroad. As National Bank of Georgia said, in January 2012 the share of these 11 countries constituted 91.4 percent of the total volume of money transfers. In January 2013, USD 9.5 million (or GEL 15.7 million) was transferred from Georgia as opposed to the USD 6.9 million (or GEL 11.5 million) in January 2012. There was an increase in transactions via the internet in 2012 compared to 2011. The number of transactions reached 6,783,255 units with a total value of GEL 318,015 thousand in 2012 and 3,731,520 units with a total value of GEL 226,909 thousand. As for the first two months of 2013, the amount was 1,374,867 units with a total value of GEL 71,329 thousand. There were 20,742 ATMs in Georgia in 2012, compared to 18,184 in 2011. The number of ATMs added to the network in January and February of 2013 was 3,908. POS terminals in merchant and service outlets reached 120,344 units in 2012, and 95,697 in 2011. The number of new POS terminals added in the first two months of 2013 was 22,353. As for the POS terminals in banks’ branches and service centers, their number reached 32,888 units in 2012, 30,918 units in 2011. The number of new units installed so far in 2013 is 4,997. The number of transactions with payment cards consisted of 59,647,454 units, while their number in 2011 was 49,468,870. This year, there have been 10,246,196 transactions so far, of which the number of transactions within the Georgian economy with payment cards issued by residents was 9,494,764 units this year; last year 55,865,037 units and in 2011 46,848,021 units. By comparison, the number of transactions made within the Georgian economy with payment cards issued by non-residents was 751,432 units in 2013, 3,782,417 units in 2012 and 2,620,849 units in 2011. The total value of transactions made with payment cards has reached GEL 1,283,505,000 in 2013, compared to GEL 8,102,748,000 in 2012, and GEL 7,150,055,000 - in 2011. Out of that amount, the value of transactions made within the Georgian economy with payment cards issued by residents amounted to GEL 1,138,079,000 in 2013, GEL 7,288,450,000 in 2012 and GEL 6,539,946,000 in 2011. The value of transactions made within the Georgian economy with payment cards issued by non-residents reached GEL 145,427,000 in 2013, GEL 814,297,000 in 2012 and GEL 610,109,000 in 2011.



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1 April, 2013 |

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