Lion Finance Group PLC · LSE:BGEO
Lion Finance — Bank of Georgia Group — FY2023 Earnings Presentation
63 slides from Lion Finance's earnings presentation, Mar 15, 2024
Slide 1: Investor Presentation 4Q23 & FY23 Performance
INVESTOR PRESENTATION 15 March 2024 4Q23 & FY23 Performance www.bankofgeorgiagroup.com
Slide 2: Disclaimer – forward looking statements
Disclaimer – forward looking statements This presentation contains forward-looking statements, including, but not limited to, statements concerning expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs,
Slide 3: The Group delivered a strong performance in 4Q23 and FY23
The Group delivered a strong performance in 4Q23 and FY23 Highlights of the quarter December 2023 Profit ROE C/I GEL 329m 26.7% 34.3% up 0.8% y-o-y NPS MAU Highlights of the year 59 1.4m up 21.0% y-o-y Profit ROE C/I GEL 1,375m 29.9% 29.8% up 21.4% y-o-y Due to the settlement of a legacy claim, the
Slide 4: Contents
Contents MACROECONOMIC HIGHLIGHTS GROUP OVERVIEW AND STRATEGY 4Q23 AND FY23 RESULTS APPENDICIES 4
Slide 5: Robust economic growth persisted in 2023
Robust economic growth persisted in 2023 as slowing external demand was substituted by stronger domestic spending Real GDP y-o-y growth Key growth drivers in 2023: ▪ Robust domestic demand driven by strong investment and consumption spending 2011-2022 2021 2022 2023 2024F 2025F average ▪ Increased a
Slide 6: Solid external sector inflows in 2023
Solid external sector inflows in 2023 despite recent slowdown from the previous year’s high base Export of goods Import of goods Export of goods, US$ bn % change y-o-y Import of goods, US$ bn % change y-o-y 2.0 50% 5.0 50% 3.98 4.11 1.50 1.55 1.49 3.88 1.6 40% 4.0 40% 1.2 30% 3.0 30% 0.8 20% 2.0 20%
Slide 7: Improving inflation outlook and central bank rate cuts
Steady improvements in the inflation outlook enabling the central bank to continue cutting interest rate Inflation and monetary policy rate Monetary policy rate Annual CPI inflation Inflation target 16% 16% 5-year 14% Annual Jan-24 Feb-24 14% average ▪ Inflation is expected to remain low amid Headli
Slide 8: GEL supported by sustained FX inflows
GEL supported by sustained FX inflows Currency movements vs. US$, 12/31/2022 – 2/29/2024 4.8% 2.4% 1.6% 1.5% -0.2% -2.4% -3.5% -11.2% -23.6% -29.7% -66.7% ▪ Despite some interim volatility, GEL remained broadly unchanged against USD in 2023, after a 12.5% appreciation in 2022 ▪ In the medium term, G
Slide 9: Adequately high international reserves cushion the economy
Adequately high international reserves cushion the economy against external shocks Gross reserves increased by US$102 m in In 4Q23, the NBG discontinued hard 2023, while net reserved were up US$ 623 m currency purchases as FX inflows slowed Gross international reserves, USD bn Central bank’s interve
Slide 10: Healthy banking sector, with dollarisation down to historically low levels
Healthy banking sector, with dollarisation down to historically low levels Bank loan book growth vs. nominal Loan and deposit dollarisation Non-performing bank loans to total gross GDP growth loans in selected countries, Sep-2023 Nominal GDP growth, y-o-y Bank loan dollarisation Lithuania 0.5% Eston
Slide 11: Private debt-to-GDP picked up while public debt-to-GDP decreased
In 2023, private debt-to-GDP picked up gradually amid healthy lending growth, while public debt-to-GDP decreased further Banking sector loans to households Public debt as % of GDP and legal entities as % of GDP Household loans to GDP Legal entity loans to GDP Domestic public debt to GDP External pub
Slide 12: Contents
Contents MACROECONOMIC HIGHLIGHTS GROUP OVERVIEW AND STRATEGY 4Q23 AND FY23 RESULTS APPENDICIES 12
Slide 13: Who we are
Who we are A FTSE-250 company with a diversified Corporate and institutional investor base. Retail Banking Investment Banking Net loans: GEL 8.5bn Net loans: GEL 6.5bn MAU: 1,809K MAU: 4K Retail digital banking leader in Georgia 33% 44% Top of mind and the most trusted bank in Georgia 23% Consistent
Slide 14: What we focus on
What we focus on Our strategic priorities Mobile Payments Loyalty Relevant in customers’ Increasing customer Growing payments Excellent customer daily lives engagement business experience Our enablers Effective risk Customer-centricity Data and AI People and culture Brand strength management Key med
Slide 15: Track record of growth and strong performance
Track record of growth and strong performance 32.4% 29.9% 26.1% 25.8% 1600 58 59 62 ROAE 55 20%+ 1400 1,375 1,357 52 46 13.0% 1200 1,132 1,121 37 42 1000 853 32 800 727 2019 2020 2021 2022 2023 699 22 600 514 519 27.0% 12 400 20.0% 295 18.9% 19.8% 22.0% Loan book YoY 2 200 19.6% growth 12.9% 0 2019
Slide 16: Returning capital to shareholders
Returning capital to shareholders Capital distribution Number of shares outstanding (period-end)** GEL millions millions PAYOUT 36% 33% 34% 32% 30% 30% 35% 37% 37% RATIO:* 49.2 49.2 49.2 47.5 535 514 2.0 1.6 2.3 45.8 2.5 2.2 188 162 This includes a final dividend of 257 GEL 4.94 per 47.2 47.5 46.9 s
Slide 17: Our retail customers have become more digital and engaged
Our retail customers have become more digital and engaged Figures given for JSC Bank of Georgia standalone Monthly active users (Retail) Digital engagement of active customers thousands 1,809 75.0% 1,739 71.9% 72.6% 1,632 1,671 1,698 +10.8% 68.7% 70.3% y-o-y 1,357 1,221 1,263 1,121 1,174 +21.0% 50.9
Slide 18: Developing our financial super app
Developing our financial super app to fulfill a variety of customer needs Credit Lifestyle • End-to-end online consumer • Offers from partner merchants lending • Buy now, pay later • Pre-approved credit limits • Gift cards • Fully online credit card Daily banking • Transactions Savings NEW • Payment
Slide 19: sCoolApp | the first financial mobile application for juniors
sCoolApp | the first financial mobile application for juniors Figures given for JSC Bank of Georgia standalone Monthly active digital users thousands MONEY CHECK FINANCIAL +170.3% BALANCE REQUEST / TRACKER BILL SPLIT +27.9% 90 STORIES & EXCLUSIVE 70 OFFERS PIGGYBANK CARD DETAILS & 62 TRANSACTIONS 45
Slide 20: Increasing product sales in retail digital channels
Focusing on increasing product sales in retail digital channels Figures given for JSC Bank of Georgia standalone Number of transactions* Products sales in digital channels** millions thousands Share of digital Share of channel 60.2% 62.6% 63.9% 65.5% 68.0% products sold 45.2% 44.1% 42.5% 47.1% 70.3%
Slide 21: Full digital experience for our business customers
Full digital experience for our business customers Figures given for JSC Bank of Georgia standalone Monthly active digital users Number of transactions thousands millions +28.6% +25.5% +7.4% +12.4% 74 5.5 69 65 4.9 4.6 58 60 4.4 4.0 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 4Q22 1Q23 2Q23 3Q23 4Q23 89% Cus
Slide 22: Payments business – our daily touchpoint with customers
Payments business – our daily touchpoint with customers Figures given for JSC Bank of Georgia standalone Acquiring - volume of payment transactions Issuing – payment MAU GEL millions thousands +38.2% +20.1% +10.1% +7.6% 4,455 1,249 4,047 1,161 1,126 2,994 3,469 1,083 3,223 1,648 1,040 1,383 1,150 1,
Slide 23: Fostering a customer-centric culture
Fostering a customer-centric culture Figures given for JSC Bank of Georgia standalone NPS* 60 61 Engaging with customers proactively and responding in real 58 58 59 59 time 55 54 52 49 Anticipating customer needs, wants, and future behavior 46 47 42 43 39 38 Harnessing strong human relationships wit
Slide 24: Empowering our employees
Empowering our employees Figures given for JSC Bank of Georgia standalone eNPS 58 60 61 Focusing on employee experience 54 56 53 50 46 Fostering a high-trust environment and strong feedback culture Attracting and developing top talent Doing business in line with our core values and business principl
Slide 25: Contents
Contents MACROECONOMIC HIGHLIGHTS GROUP OVERVIEW AND STRATEGY 4Q23 AND FY23 RESULTS APPENDICIES 25
Slide 26: Financial highlights of 4Q23 and FY23
Financial highlights of 4Q23 and FY23 4Q23 FY23 26.7% ROE 29.9% Net loans 31 Dec 2023 GEL 20.2bn +20.0% y-o-y +19.6% y-o-y 0.4% Cost of credit risk ratio 0.7% +6.4% q-o-q +5.5% q-o-q On a constant currency basis 34.3% Cost to income ratio 29.8% Deposits 31 Dec 2023 GEL 20.5bn +12.4% y-o-y +12.2% y-o
Slide 27: Strong underlying performance
Strong underlying performance All currency data are in GEL m unless otherwise stated Operating income* Net non-interest income* +12.4% +26.4% -8.3% +11.6% +2.3% +3.2% 271 915 667 2,530 642 657 250 820 230 115 585 564 2,002 222 36 27 82 6 18 271 222 230 915 192 192 9 366 250 820 98 97 466 125 71 100
Slide 28: Investing for growth while maintaining focus on efficiency
Investing for growth while maintaining the focus on efficiency All currency data are in GEL m unless otherwise stated Operating expenses Cost to income ratio* +24.4% +17.6% +21.5% 225 754 5 34.3% 2 641 125 181 185 35 32.0% 179 4 1 164 1 1 111 31.0% 31 29.8% 32 1 30 205 28 74 29.1% 28.8% 164 46 46 26
Slide 29: Strong loan and deposit growth dynamics
Strong loan and deposit growth dynamics All currency data are in GEL m unless otherwise stated Loan portfolio Deposit portfolio +20.0% +12.4% +19.6% +12.2% -5.6% +6.4% -6.3% +5.5% 21,744 20,523 19,011 20,233 19,647 18,282 18,261 18,310 16,862 16,993 9,394 11,716 8,487 8,785 11,011 11,693 8,007 7,895
Slide 30: Focusing on profitability while maintaining strong competitive positions
Focusing on profitability while maintaining strong competitive positions Market share – gross loans Market share – customer deposits 40.3% 40.1% 40.1% 42.3% 39.8% 39.5% 39.1% 38.8% 39.4% 39.6% 39.3% 40.1% 37.2% 38.9% 37.4% 39.0% 36.1% 36.7% 36.8% 36.8% Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Dec-22 Mar-2
Slide 31: NIM increase driven by higher loan yield and lower cost of funds
The y-o-y increase in NIM in FY23 was driven by higher loan yield and lower cost of funds Net interest margin Loan yield, cost of funds, cost of deposits 12.7% 12.5% 12.5% 12.6% 12.4% 11.5% 12.0% 6.6% 6.6% 6.5% 6.4% 6.3% 5.7% 5.4% 4.6% 4.5% 4.8% 4.7% 4.9% 4.9% 4.7% 4.1% 4.2% 4.2% 4.0% 3.4% 3.6% 3.6%
Slide 32: Healthy loan portfolio
Healthy loan portfolio All currency data are in GEL m unless otherwise stated Cost of credit risk ratio Loan portfolio quality NPL coverage 66.4% 72.8% 70.4% 69.1% 69.2% 1.0% 0.8% NPL coverage adjusted for the discounted value of collateral 0.9% 0.8% 0.7% 0.6% 128.9% 128.7% 126.4% 122.1% 117.6% 0.4%
Slide 33: Robust bottom-line growth and profitability
Robust bottom-line growth and profitability All currency data are in GEL m unless otherwise stated Profit (adjusted)* ROE* +0.8% +21.4% 33.7% 34.6% 32.4% -8.1% 30.7% 29.9% 1,132 1,375 27.9% 26.7% 387 357 326 301 329 4Q22 1Q23 2Q23 3Q23 4Q23 FY22 FY23 4Q22 1Q23 2Q23 3Q23 4Q23 FY22 FY23 Profit (report
Slide 34: Strong capital position at Bank of Georgia
Strong capital position at Bank of Georgia Figures given for JSC Bank of Georgia standalone All currency data are in GEL m unless otherwise stated Evolution of capital ratios during 4Q23 Capital Minimum Buffer above Potential impact 30 Sep 4Q23 Business Currency Capital 31 Dec facility requirement m
Slide 35: Strong liquidity position
Strong liquidity position Figures given for JSC Bank of Georgia standalone Liquidity coverage and net stable Net loans to customer funds and DFIs funding ratios* JSC Bank of Georgia standalone (Basel III liquidity) 135.7% 134.5% 132.4% 131.9% 129.8% 130.1% 130.4% 128.2% 125.2% 98.6% 92.3% 92.8% 93.1
Slide 36: Diversified funding structure
Diversified funding structure All currency data are in GEL m unless otherwise stated Interest-bearing liabilities Borrowed funds maturity profile (US$, million)* As at 31 December 2023 +8.0% +3.0% 25,332 26,100 24,174 23,389 421 22,723 426 2,493 646 2,373 2,113 608 621 1,841 790 2,663 1,905 3,154 1,
Slide 37: Contents
Contents MACROECONOMIC HIGHLIGHTS GROUP OVERVIEW AND STRATEGY 4Q23 AND FY23 RESULTS APPENDICIES: ADDITIONAL INFORMATION AND SEGMENT RESULTS 37
Slide 38: Bank of Georgia's diversified loan book
Bank of Georgia’s diversified loan book (gross loans by segment) Figures given for JSC Bank of Georgia standalone All currency data are in GEL m unless otherwise stated As at 31 December 2023 6,546 33% 8,653 Total gross loans: GEL 19,812m 44% Allowance for ECL: GEL 294m Total net loans: GEL 19,517m
Slide 39: Retail Banking gross loan portfolio by product
Retail Banking gross loan portfolio by product Figures given for JSC Bank of Georgia standalone 7% As at 31 December 2023 Total gross loans: GEL 8,653m 47% Allowance for ECL: GEL 151m Total net loans: GEL 8,503m 46% Mortgages Consumer Other Other products in Retail Banking include car loans, micro l
Slide 40: Corporate Banking gross loan portfolio by sector
Corporate Banking gross loan portfolio by sector Figures given for JSC Bank of Georgia standalone Other 22% Real estate As at 31 December 2023 20% Total gross loans: GEL 6,546m Allowance for ECL: GEL 82m Total net loans: GEL 6,464m Electricity, gas and water supply 10% Manufacturing 17% Top 10 CB bo
Slide 41: Retail Banking – loan and deposit portfolio
Retail Banking – loan and deposit portfolio All currency data are in GEL m unless otherwise stated Loan portfolio Deposit portfolio +16.4% +15.3% +16.2% +15.1% +5.5% +7.4% +5.0% +6.4% Growth on a 12,598 8,059 8,503 11,255 11,729 7,305 7,392 7,735 constant 10,924 10,663 1,955 currency 1,913 1,902 1,9
Slide 42: SME Banking – loan and deposit portfolio
SME Banking – loan and deposit portfolio All currency data are in GEL m unless otherwise stated Loan portfolio Deposit portfolio +12.0% +24.4% +11.4% +2.9% +24.1% +7.6% +1.9% +6.9% 4,336 4,422 4,551 Growth on a 1,745 1,877 4,064 4,091 constant 1,509 1,628 1,469 currency 680 1,909 1,885 1,981 625 673
Slide 43: Corporate Banking – loan and deposit portfolio
Corporate Banking – loan and deposit portfolio All currency data are in GEL m unless otherwise stated Loan portfolio Deposit portfolio +8.9% +31.2% +9.0% -29.2% +30.5% +14.1% -29.4% +12.6% Growth on a 7,419 6,464 constant 5,932 5,506 5,664 5,334 1,755 5,256 4,926 4,925 currency 4,825 1,581 basis 1,7
Slide 44: Borrowers and FX risk
Borrowers and FX risk % is given for Bank of Georgia standalone gross loan portfolios FC loans exposed to FC loans with no GEL loans (% of FX risk* (% of exposure to FX risk (% segment portfolio) segment portfolio) of segment portfolio) Retail Banking 77.3% 17.8% 4.9% Mortgages 30.6% 13.2% 3.5% Cons
Slide 45: Contents
Contents MACROECONOMIC HIGHLIGHTS GROUP OVERVIEW AND STRATEGY 4Q23 AND FY23 RESULTS APPENDICIES: CORPORATE GOVERNANCE 45
Slide 46: FTSE-250 company with a diversified institutional investor base
We are a FTSE-250 company with a diversified institutional investor base Top 10 shareholders* Shareholder base by country 31 December 2023 31 December 2023 Shareholder name Ownership 1 JSC Georgia Capital** 19.7% 28.1% 2 BlackRock 5.0% 37.8% 3 M&G Investment Management Ltd 4.8% 4 Dimensional Fund Ad
Slide 47: Board of Directors
Board of Directors – governance which facilitates sustainable value creation Mel Carvill, Non-Executive Chair Hanna Loikkanen, Senior Independent Non-Executive Experience: formerly Senior Independent Director of Sanne Group Plc, Director Head of Corporate Finance and M&A, and Strategic Planning and
Slide 48: Diverse and experienced management team
Diverse and experienced management team creating opportunities Archil Gachechiladze, Chief Executive Officer Sulkhan Gvalia, Deputy CEO, Chief Financial Officer With the Group since 2009, serving in various senior positions, With the Group since 2004, serving in various senior positions, including a
Slide 49: Diverse and experienced management team
Diverse and experienced management team creating opportunities Vakhtang Bobokhidze, Co-director of International Tornike Kuprashvili, Head of SME Banking (with effect from 1 April 2024) Business With the Group since 2014. Joined the Bank as a Principal Corporate Banker and during his 10-year career
Slide 50: Delivering social impact
Delivering social impact Our impact focus areas Financial inclusion Employee empowerment Education in communities Objectives To be the employer of choice for top talent, providing equal To use the power of To give more school students in opportunities for development technology and product Georgia a
Slide 51: ESG scores from independent rating agencies
ESG scores from independent rating agencies ISS* ENVIRONMENT 3 SOCIAL 2 GOVERNANCE 6 MSCI** Bank of Georgia falls into the highest scoring range relative to global peers CCC B BB BBB A AA AAA LAGGARD AVERAGE LEADER FTSE4GOOD Index Included in the global responsible investment index FTSE4GOOD since 2
Slide 52: Contents
Contents MACROECONOMIC HIGHLIGHTS GROUP OVERVIEW AND STRATEGY 4Q23 AND FY23 RESULTS APPENDICIES: ADDITIONAL MACROECONOMIC DATA 52
Slide 53: Diversified and resilient economy
Diversified and resilient economy Gross domestic product Nominal GDP by sector, 9M23 Nominal GDP per capita, US$ Real GDP growth, % Trade 10.5% 10.4% 15.2% 7.4% 7.0% Other 6.4% 27.7% 4.8% 4.8% 5.0% 4.4% Manufacturing 3.6% 10.6% 3.0% 2.9% 4,062 4,023 5,023 4,696 4,359 4,624 4,256 6,676 4,013 4,422 4,
Slide 54: One of the fastest-growing economies in the region
Uzbekistan 5.9% Türkiye 5.3% Georgia 4.8% Armenia 4.2% Poland 3.8% Source: IMF, Geostat Romania 3.5% Hungary 3.4% Lithuania 3.2% Moldova 3.1% 2013-2022 average Estonia 2.9% Slovenia 2.6% Croatia 2.6% Latvia 2.5% Bulgaria 2.3% Slovak Rep. 2.3% N. Macedonia 2.3% Czech Rep. 2.2% Comparative real GDP gr
Slide 55: Georgian economy becoming more service-led and export-oriented
The Georgian economy is becoming more service-led and export-oriented Economic activities by gross value added, Export of services, US$ bn. % of total Services Inductry-related acrtivities Agriculture Travel Transport IT Other 5.70 8.4% 9.5% 8.3% 7.6% 7.7% 5.41 0.39 0.41 22.9% 24.5% 21.7% 4.60 0.60
Slide 56: Unemployment down to historical low levels
Unemployment down to historical low levels Labor market dynamics Composition of employment, 2022 Employed, '000 persons Unemployment rate, % 1,500 30% 100% 100% 27.2% 26.7%26.4% Agriculture 17.9% 25% 32.2% 1,200 23.0% 80% 80% Self- 21.9% 21.7% 21.6% employed 20.6% 20.3% Industry- 19.2% 20% related 1
Slide 57: Fiscal consolidation on the back of strong economic growth
Fiscal consolidation on the back of strong economic growth Fiscal balance as % of GDP Consolidated budget tax revenues, GEL m 0% 2021 2022 2023 -2.0% -1.9% +13.5% y-o-y growth in 2023 (+29.9% in 2022) -2.1% -2.4% -2.5% -1.7% -2.7% 2,000 -3.0% -2.3% -2.6% 1,800 -2.8% 1,600 1,400 -5% 1,200 -5.3% -6.1%
Slide 58: Contents
Contents MACROECONOMIC HIGHLIGHTS GROUP OVERVIEW AND STRATEGY 4Q23 AND FY23 RESULTS APPENDICIES: FINANCIAL INFORMATION 58
Slide 59: Income statement highlights
Income statement highlights Change Change Change GEL thousands 4Q23 4Q22 3Q23 FY23 FY22 y-o-y q-o-q y-o-y INCOME STATEMENT HIGLIGHTS Net interest income 427,661 334,645 27.8% 419,976 1.8% 1,615,446 1,182,335 36.6% Net fee and commission income 114,066 97,932 16.5% 118,949 -4.1% 434,482 317,491 36.8%
Slide 60: Balance sheet highlights
Balance sheet highlights Change Change GEL thousands Dec-23 Dec-22 y-o-y Sep-23 q-o-q BALANCE SHEET HIGHLIGHTS Liquid assets 9,984,238 10,367,600 -3.7% 10,258,057 -2.7% Cash and cash equivalents 3,101,824 3,584,843 -13.5% 2,959,832 4.8% Amounts due from credit institutions 1,752,657 2,433,028 -28.0%
Slide 61: Key ratios
Key ratios KEY RATIOS 4Q23 4Q22 3Q23 FY23 FY22 ROAA 4.2% 4.7% 4.8% 4.7% 4.4% ROAE 26.7% 33.7% 30.7% 29.9% 32.4% Net interest margin 6.3% 5.7% 6.6% 6.5% 5.4% Loan yield 12.4% 12.0% 12.6% 12.5% 11.5% Liquid assets yield 5.0% 4.2% 4.7% 4.7% 4.3% Cost of funds 4.9% 4.6% 4.7% 4.7% 4.9% Cost of client dep
Slide 62: Definitions
Definitions Strategic terms ▪ Active merchant At least one transaction executed within the past month ▪ Active POS terminal At least one transaction executed within the past month ▪ Digital daily active user (Digital DAU) Average daily number of retail customers who logged into our mBank/iBank at le
Slide 63: Company information
Company information Registered address Auditors 42 Brook Street Ernst & Young LLP London W1K 5DB 25 Churchill Place United Kingdom Canary Wharf Registered under number 10917019 in England and Wales London E14 5EY United Kingdom Secretary Computershare Company Secretarial Services Limited Registrar T