Lion Finance Group (LSE:BGEO) Q2 2026 Earnings Call

0:00 Welcome to Lion Finance Group's Quarterly Earnings Call. Today, we're pleased to present our performance and results for the second quarter and the first half of twenty twenty six. My name is Pinar Shakunya. I'm Head of IR. And today, I'll be moderating this call. I am joined, as always, by the group CEO, Archulka Cicewazze Group as well as Bank of Georgia CFO, Georgi Shagide Ameria Bank's CFO, Johannes Oroyan and our Group Economist, Araceli Kokkeli. We'll present we'll go through the results presentation first. And then in the second half of this call, you'll be able to ask questions. Please be aware that this call is being recorded. And with that, I'll first hand over to Arcio for the opening remarks, and then we'll continue with the deep dives.

0:48 Arcio, please go ahead. Thank you for joining the call. I'm very happy to report a very strong quarter. In the second quarter, we had we registered a very high quality of the franchise, is shown in the Net Promoter Score in both markets being very high as well as a significant growth of our retail franchise, which is reflected in growth of monthly active users in Georgia reaching very close to half of the population, meaning the total population including the small kids and so forth and not all bankable of 1,900,000 which is 13.3% higher than last year and much higher growth, so some penetration happening in Armenia getting close to 400,000 monthly active users.

1:47 What's also interesting is that in Georgia we also achieved more than a million daily active users so that more than a million people open our application daily. In terms of the revenue numbers, second quarter was up by 23.419.6% for the first half year. And profit was similarly strong growth where we had 20.6% growth in the first quarter the second quarter, sorry, and 17.3% for the half year. Also, which was very strong showing was balance sheet growth both on loans as well as deposits with 2326.8% accordingly.

2:34 That's in constant currency. As you may remember, we guide about 50% growth, but usually deliver around 20% over the last few years as the macro has been stronger than the average outlook that we have for longer term. Having said that, 23% is stronger than our historic average. That's happening while we have a lower than guided cost of risk of 0.6% in the second quarter and 0.5% for the first half year and delivering about 27% return on equity. So very strong numbers, not only in terms of profitability, but growth in terms of revenue as well as balance sheet. We also had positive operating jaws in both markets and then obviously combined.

3:29 So all in all, very, very good numbers as well as strong numbers in terms of the quality of the franchise shown in terms of coverage of monthly active users and the satisfaction of the customers. So I'm very appreciative of of the whole team's efforts that that will lead them to deliver these results. So with that, I will I will let Atatio tell us about the macroeconomic environment in Armenia and Georgia. Hello, everyone. I will share with you the recent macroeconomic developments and outlook for our core markets, Georgia and Armenia. And let me start with growth performance. In the first half of the year, Georgian economy has demonstrated and maintained strong growth performance with real GDP growth reaching 7.9% year on year. With this strong number and also improving economic resilience, we have revised our full year real GDP growth forecast for 2026 from seven percent to 7.5%.

4:34 The Armenian economy expanded by 4% year on year in the first quarter, reflecting high base effect from the previous year and some pre election uncertainty. The preliminary numbers show that growth trajectory improved significantly from quarter two, and our full year real GDP growth performance growth outlook for Armenia is 5.5%. Overall, this growth projections remain significantly above the peer median, median, and they are expected to be driven by services in the following years, as it was the case in the previous periods, as the right hand side chart shows. This service led growth is expected to be broad based, export oriented, and productivity enhancing.

5:26 To give you a few highlights in this area, Armenia launched the largest AI factory in the CIS region just a few days ago, and Georgia has moved on to the construction phase of its first deep sea port. The strong growth performance has been also supported by diversified and resilient external sector inflows, including export proceeds, tourism revenues and remittances. As this slide shows, the overall inflows continues to increase in the first half of twenty twenty six despite escalations in tensions in The Middle East. The resilient inflows have also supported currency strength. Georgian lari and Armenian drum continued to appreciate against the US dollar in the first seven months of 2026.

6:21 And in fact, these two currencies are among the best performers, three best performers in the broader region, as the right hand side chart shows. Importantly, the strength of Georgian Lari and Armenian Tram has been also underpinned by credible macroeconomic policy frameworks in the two countries reflected in declining deposit dollarization trend and also growing demand for local currency government securities among international investors. These structural drivers are expected to remain in place in the following years and support local currency values. The currency's trend also contributes to price stability, and in recent months, we have seen signs of inflation stabilization in both countries following some uptick in previous periods, driven by global increases in food and energy prices.

7:22 More importantly, service price inflation has been relatively stable in both countries, reinforcing our confidence that inflation should go back to central banks' 3% targets next year as base effects unwind. The central banks continue to be attentive of remaining inflation risks as global commodity markets remain volatile. In May, the National Bank of Georgia increased its policy rate by 25 basis points, signaling its continued commitment to price stability. For the rest of the year, we do not anticipate any policy rate moves from either Central Bank. And in 2027, we see room for around 75 basis point cuts by National Bank of Georgia had it gradually exits moderately tight policy stance.

8:19 The central banks have been also actively building international reserves. This has been enabled by resilient inflows and ongoing trend of deposit federalization. As of end July, gross reserves reached new record highs of US7.5 billion dollars in Georgia and US6.2 billion dollars in Armenia. Importantly, the reserve levels remain within adequacy ranges, providing solid buffers against possible external shocks. Also, reserve levels have been a major factor behind improving credit outlooks of both countries recently. Fiscal policy is another pillar of macroeconomic resilience.

9:09 Both Georgia and Armenia continue to demonstrate fiscal discipline through prudent management of public debt. As this chart shows, the Georgian authorities remain on a deleveraging path, maintaining narrow fiscal deficits. The Armenian authorities have managed to stabilize public debt levels despite temporarily elevated spending needs. In both countries, public debt continues to deadolarize, reducing the fiscal sector's exposure to exchange rate movements. And lastly, the banking sectors in Georgia and Armenia have benefited from favorable macroeconomic conditions. They continue to deliver robust growth and sustain strong asset quality.

9:59 Loan dollarization levels remain low by historical standards with recent uptick in Armenia related to business lending. Capitalizations are highest among the regional peers in Georgia and Armenia as measured by Tier one capital to assets ratios. This demonstrates prudent risk management practices in both countries and a conservative supervisory approach. So this concludes my part. Thank you, and back to you, Leeni. Thank you, Akaky. Now Georgi will walk us through the main highlights of the Georgian financial services first. Thank you, Akaki. Thank you, Nini. Let me share the presentation.

10:49 So, good afternoon, everyone. As as Achal said, we had another quarter of very strong financial performance across the board. I'll be now going through Georgian Financial Services, so we'll start with the highlights for the quarter. Our profit for the quarter grew by 14.150.4% year on year, and for the first half of the year, it grew by 13.5%. This resulted into the return on equity of 30.430.9%, respectively. Our loan book grew by 17.1% at constant currency rate and 24.2% in deposits.

11:36 If we exclude Ministry of Finance, deposit growth was about 18.4%. Retail monthly active customers grew by 9.5% reaching 2,280,000, and retail digital monthly active users grew by 13.3% reaching 1,920,000. Now, this slide basically shows why we believe our customer growth is durable and it is supported by growth digital ecosystems, as you can see on the left hand side of the slide. On the right hand side, I can stress few numbers. On the retail app, our customer satisfaction was very high at 92% with the scores at Apple Store and Google Play at four point six and four point seven, respectively.

12:34 Our digital daily active users reached 1,000,000, so pretty much 1,000,000 people open our app every day. 88% of our loans were granted through digital channels. In business banking app, a similar dynamics would be customer satisfaction score at 92%, digital monthly active users being at 84% of total monthly active customers. Here too, at the Apple Store and Google Play, we have very high scores at 4.9. And I want finally on this slide to reiterate that Global Finance named us as the world's best digital bank in both 2024 and twenty twenty five years.

13:28 Moving on to payment slide, payments are one of the core pillars for the ecosystems that I mentioned. You can see a very strong growth in acquiring volumes 20% year on year or 12% or 12.7% quarter over quarter. In terms of issuing, this growth was 11.9% year on year in terms of number of cards, reaching 1,700,000, which is about 2.5 growth quarter over quarter. We reached 28,008 active merchant terminals, which were 13.3% growth year on year. And finally, our market share for the acquiring volumes will further strengthen the reach of 56.7%.

14:28 Now, in terms of customer centricity, which is shown here in terms of Net Promoter Score, it's approximately doubled over the period shown. And then for the recent six quarters, it was more than 70%. While it's a little bit dropped last 0.5, It is still within the acceptable statistical noise and being above 70%, it is extraordinarily high on par with very strong customers or the best customer centric banks in the world. This allows us to anticipate customer needs and wants before the customers approach us and then translate it into the respective financials as we do this.

15:24 Loan and deposit growth was strong as well, 17.1% at the constant currency rate growth of the loan year on year or 4.2% growth of the loan book quarter over quarter. The growth across the board, corporate and retail banking leading the growth in loans. The digitalization remained broadly stable with 5057.8% local currency loans contributing to total loans. In terms of deposits, the growth was 24.2% constant currency rate. As I said, if we exclude Ministry of Finance deposit, the growth would be 18.4% year on year and 3.5% quarter over quarter.

16:17 Now, in the quarterly growth here, the SME led percentage growth wise. And then, in terms of the denollarization, the local currency deposits contributed to 58.1% to total deposits. And this brings to final slide of my part of the presentation with the growth and strong profitability actually further strengthened our positions both for capital and for liquidity. We operate with the buffers comfortably above the minimum respective requirements. In terms of capital, we operate 2.7, three point four and two point two percentage points above the respective CET1, Tier one and total capital requirements.

17:10 In terms of liquidity coverage ratio, we were at 152% and net funding ratio at 132.9%, both above the minimum 100% requirements. Now, we will be deploying the liquidity in dollars supporting growth, the liquidity in local currency may remain the same, but we optimize cost of funding so that the high liquidity also has positive impact on our profitability. So thank you, and Minya, please. Thank you, Georgi. And now let's move on to the Armenian financial services, and Johannes will discuss the results. Yes. Thank you.

17:56 I am very happy to share also pretty impressive results for the second quarter for the Armenian Financial Services. So for the second quarter, our net profit grew about 50% year over year. And for the first six months, the growth was slightly more than 42% to reach $272,000,000 gels. Return on equity by the end of the second quarter was 23.1%. And these were predominantly due to two factors. On one hand, we had very significant and impressive growth on the balance sheet. Our loan book grew by almost 37% in constant currency and deposits grew 37.1% in constant currency basis, with NIM stable from one quarter to another.

18:49 At the same time, there is also a significant boost by noninterest income. Indeed, our net gain commission income grew by more than 38% year over year and net foreign currency gain grew 19.3% year over year. Cost to income ratio came down lower than 40% for Q2. We do continue to grow expansively. Our monthly active customers grew by almost 28% to surpass 500,000. As during the previous quarters, our digital MAU grew much faster at 47% year over year.

19:37 This growth of accelerated MAU and DAOs is predominantly due to our digital ecosystem that we have been building around a super app that goes beyond banking functionality. As presented earlier, it has two main pillars. On one hand, we're building a system to satisfy the customer needs in terms of their banking and financial needs, both in terms of functionality and user experience. At the same time, it's still around microservice architecture for better scalability. And here you can see different pillars that are building this banking and beyond banking proposition for our customer base. As already mentioned, our digital MAU grew by 47% year over year.

20:25 Our DAU grew even faster, 58 year over year. And our digital engagement increased by almost 10 percentage points to a surplus of 75% by end of Q2. We launched our MyaMirror STAR, that is a virtual application for kids, last year, and it is really picking up both for financial educational purposes as well as to satisfy very basic needs of younger population. Here you can also see more details about our loan deposit portfolio. Our loan portfolio in constant currency grew almost 37%. The structure continues to be very balanced in terms of foreign currency, and 65 is loans in FX and 45% is local currency.

21:19 The mix of local currency has slightly gone down. This is predominantly due to the fact that our corporate loans grew a bit faster. Indeed, year over year it grew 45% despite being the largest in the country. This really reflects and resembles the large infrastructure and private projects that are unleashing in the country, as Akaky also presented. Our retail loans grew 26.8% in constant currency days, and consumer loans grew 39%. In terms of our deposits, the dollarization continues to evolve, and this is predominantly due to the fact of having very stable Armenian brands over the course of the last few years.

22:08 The growth overall was slightly more than 37% in constant currency basis, whereas the share of local currency is slightly more than 60. We do continue to be the largest lender in the economy and to the households as well. At the same time, we were able to increase our market share, both in terms of loans by 1.7 percentage points as well as for deposits by 1.1 percentage point. I think it's also important to mention that beyond simply lending and attracting from customers, our transactional banking has seen a very significant boost. Indeed, our acquiring business volume grew by 48% year over year.

22:59 At the same time, our issuing business payment model grew by more than 60% year over year to surpass $400,000 In terms of capital position, we were able to improve and have more than 1.5 percentage point headroom on top of the CDR requirement. These changes have been predominantly due to three factors. One, we did distribute the second tranche of our AT1 notes. As you might remember, we had the first flush in February of this year at 8.5% coupon. The second flush of, again, dollars 50,000,000 was distributed in April by 8.0 coupon.

23:45 At the same time, Central Bank of Armenia introduced some easing on risk weights for the SMEs starting from April, aligning it with the Basel III requirements. And as a result of these changes also, we were able to pay our first dividends to the group in the amount of 157,000,000 JAL. We continue to have very comfortable liquidity position as well. Our LCR sits at 180, and our NSFR is 126. This is it for me, and then I'll be happy to take more questions later. Thank you. Thank you, Johannes. And now we're handing over back to Artshel who will summarize the results and discuss them from the group perspective.

24:33 Johannes, I think the group results are good. Hello? I think the group results are good, but when I hear Ameriabank separately, it's hard hard back to follow. It is 35% increase in loan and deposits and then 40% in acquiring Williams payment acquiring is is we know is the thing to follow. Just one second. I mean, in a second. Yes, so to summarize what it translates into the group numbers, the operating income has gone up by 19.5% for the quarter year over year, 17.3% for first the half.

25:47 And we saw that the net interest income has gone up year over year by 21.8% of which 18% was Georgia and 28.6 was Armenia. Obviously, Armenia is experiencing much higher growth, although Georgian is also not too bad with about 17% growth on constant currency. Net non interest income was up by 14.2%, slightly less in Georgia, 7.1% and we'll see the breakdown of the fee and commission and FX separately. And the Armenia was up by almost 30% year over year, which was very strong showing. Now in terms of how that breaks down is that net gain commission income was showed a very healthy growth of 26.3, of which 25% year over year was Georgia, which benefited from a lower base last year. And if you normalize for that, which was something to do with the Mastercard fee structure, which unwounded in the fourth quarter.

26:51 So if you normalize that, it would be around 17%, If I'm not mistaken, normalize, sorry, 22.3%. And then in terms of Armenia, Armenia had also an adjustment last year. We're have something in the base, which this this time, it it is there. And if you adjust it for that and normalize the net fee and commission income growth would be 27.5% in the year over year in the quarter. In net effects, Georgia had a slight decline, there continues to be a very competitive environment in Georgia for the effects, but showed a very strong growth in Armenia of 19.3%, which is what good news.

27:41 And operating expenses were 12.8% combined, of which 13.9% was 2.6% was Armenia. If you adjust for the base effect of the sign up bonus, which ended last in the third quarter, you would be looking at 13.5% in Armenia. In both markets, the operating jaws were positive and obviously the combined was positive as well. And you can see that in the costincome ratio, the overall group's costincome ratio reduced by two percentage points from year over year in the quarter, second quarter, as you can see from 36.4% to 34.4%. And in Georgia, the reduction was slightly, and I mean a slightly bigger one for the reasons that we discussed. So being under 35% for the combined entity is a comfortable place to be.

28:34 As we described, the growth overall for the group was 2326.8% for the deposits, both well above our medium term guidance. Net interest margin stayed stable in Armenia and showed a slight uptick in Georgia because of slight reduction in deposits and slight picking the loan. So nothing significant really happened there, but it was still positive. Going forward, we should expect broad stability, which growing dollars, but there will be some offsetting factors as well. Cost of risk, although it was slightly up in Armenia due to the consumer loan proportion become larger.

29:22 But otherwise, it's still well below our internal guidance of 80 to 100 basis points, so 0.6. And for the half year, it came out to be 0.5. So, the coverage didn't change much. And the profitability as we discussed was 20.6% higher year over year and 17.3% for the full year. Return on equity stood at around 27% and return on average assets was a very strong showing also just shy of 4%. So all in all, all of this translates into stronger capital distribution. So the board recommended second quarter dividend of and five.

30:14 Last year, we had dividend only for half a year. So, no, not quarterly. The half year number compares to the previous half year number by which is up by 15.7%. So we are continuing to strongly increase the capital distribution and there will be also another PLN59 million spent the invested in the stock as the share buyback. So we'll continue that our tradition of two thirds to one third roughly, dividend versus buyback. So this is to summarize the fact which we already mentioned a couple of times that our midterm growth, which is 15%, we are beating the target very strongly with 23% in both markets. By the way, we are ahead of the market growth and in customer and in terms of the return on equity, are also well above our guidance at 27% and we're distributing about 30% given the fact that we are growing much faster than our midterm average. So we're deploying capital at very comfortable rates and sitting at very comfortable buffers as well. So that's on our side and we will stop here and open for Q and A. Yes, and so basically we can move to the Q and A and we have a few raised hands already from our analysts. The first on the line

31:44 is Jens Ehrenberg. Hi, Jens. Hi, Nini. Hi, guys. Thanks for the presentation. I suppose well done on another very, very strong quarter. Just a couple from my side. Firstly, on Georgia, appreciate, actually, you said there was not too much that happened on the NIM. I think this is the second quarter in a row where you're well ahead of sort of my expectations on the NIM. So is there anything that came out of this that would give you, I don't know, that would give you sort of more confidence in the sustainability the NIM as to where it is right now? And then secondly, for Johannes on Armenia. I think you've highlighted the investment in infrastructure activity that's been supporting the corporate side.

32:34 I suppose how much do you think will that remain a key driver for the business? And more broadly, how should we think about sort of the split between really the underlying market growth versus further market share gains in the Marriott Bank? So maybe I'll start with NIM. So yes, we believe that the ability to retain that NIM is very strong. So we'll be slightly higher, slightly lower. It doesn't really change much overall in the big picture. I understand that it's good to calculate exactly, but the life doesn't happen like this. Right now, what we can see is that there's pressure at mean can slightly increase in fact, I think there are also some other factors that could reduce it. So we are seeing growth stability and we feel quite strongly about it. So, yeah, that's all I can say about that.

33:36 Roland? Yes, thank you. I mean, we have been presenting that there are I mean, overall economic outlook in the country is very positive. It has been very positive for the last couple of years, and for the near future we still remain very positive, as Akaki presented. It is not only due to the large scale projects that are happening in the country, but also the overall base or the macroeconomic stability is there. Ameriaban, being the largest lender in Armenia, obviously is taking advantage of the situation in a good way that is being able to serve more and more customers, both that existed here and also the new large projects that are being established.

34:22 If you look backwards and if you look at our plans as well, there is a very solid growth for the market overall, but we have been beating the market year after year, and we will be continuing to do that as well. So I would anticipate that overall, due to the very positive macroeconomic environment, overall the banking system will continue its significant growth, but we will do our best to win over some of our competitors to increase our market share as well as alongside growing overall market. Yes, with the retail rollout. Years, AmeriBank has been the one premium brand, the one brand in corporate and the one premium retail brand, which is rolled out to the mass retail using the digital capabilities.

35:21 So that will very much continue. It's just shy of 400,000 monthly active users and can easily be well above 1,000,000. So this will take years obviously, but it will be happening. Understood. That's very helpful. Thank you. Thank you, Jens. So the next question comes from. Can you hear me? Yes. Go ahead. Great. I've got a couple if you can help me, please. First, on the Georgian deposit market shares. On the slide 20, you can see that there's a little bit of a dip in terms of Georgia, also TBC. Is there anything here going on in terms of competition we should be thinking about, or is that more the strategy to get below the 40, and then we can get the the 50 bps capital release on the back of that as well? Yeah. That's the first question.

36:20 It's it's engineered, basically. We've been targeting to go below 40 without upsetting customers too much. So, I mean, we can easily go on the 40, like, in in one month, but you don't want to be a place where people don't think of you and they want to deposit money, right? So you're taking a time and very careful consideration how to do it. But yes, that's exactly right. I mean, we want it to be below 40 and then capital release will take some time though because the way it's applied is the last twelve months, every test will be below 40. So it will take us six to twelve months to get there. But yes, that's what we should anticipate 50 bps release. Thank you. That's helpful. And and then secondly, you've the capital ratio for for Georgia. You've given it for Armenia, and you can see a dividend upstream for both to the group. What what's the capital position of the group?

37:15 Because that's a dividend paying entity, that's also the acquisition entity. And in terms of CET1 there and sort of the excess capital held at that level, how does that look? There's no leverage there. Guillaume, do you want to cover that? Yeah. We don't have any capital requirement at the group level. It is a holding company. We do keep some cash to meet the various expenses requirements as as well as some cash for for for future growth. There is no there is no capital requirements at the group level. But in terms of the capital position, I think it's do you remember the the the capital position there? It's, like, $60,000,000, maybe more or less, but it's all cash.

38:05 So we don't have much assets there other than the holding company, and and we killed any any leverage there for number of years ago. So there's not much there and there's a little bit of cash as a buffer. Okay. That's helpful. And then finally, just on cost of risk in Armenia. Is there anything that we should be thinking about there as the consumer loans are growing quite fast and there's a pickup there in terms of retail cost of risk? When we look at it as product by product, by all the products, are still way below our midterm guidance, and we are very comfortable at the levels that they are at. Obviously, consumer loans in general are a bit more risky but with higher yield.

38:53 Technically, in terms of risk reward combination, we are very comfortable with the yield and risk level for the consumer loans as well. But obviously, the more the structure of the balance sheet will change, we may see some changes to the risk position as well as net interest income position. Great. Thank you. So overall overall numbers are comfortable. Obviously, you're when you're looking at the 40% increase year over year, we'll be looking at the different subgroups and dissecting and so forth. But overall numbers are are are still very slow. I think she was done with questions. Thank you, Shil. The next on the line is Alex Kantarovich.

39:52 Thank you. Thank you for this opportunity. I hope you can hear me. Great results. It was a pleasure to go through them. I would like to ask about the second half. If the regular adjustments for seasonality of OpEx, for example, if second half trends would be broadly comparable to the first half. This is my first question. The second question is much broader given that there were reports of certain issues, geopolitical issues for Armenia with Russia. If you can see any macroeconomic impact potentially, that will be my worry.

40:45 Other than that, once again, great trends, great results. Thank you. Yes. In terms of the second half, we have all the reasons to to to believe that they will be as strong as the first half. Usually, in fact, it's it's it's more. So if we look at the history of of our banks, given the the high growth and because the first quarter is slightly slower, usually, second half is is, you know, better in terms of activity and so forth. There's no guarantees, obviously, but the anticipation are all positive. Regarding Johannes, do you want to cover the Yeah. Sure. In terms of the the recent development of the relationship between Armenia and Russia, I mean, there are some limitations on the foreign trade, but that covers less than 8% of the trade with Russia.

41:41 Obviously, in a short term perspective, there have been some subsectors that have experienced some shock. The government of Armenia has taken certain measures to minimize this impact. And when we discuss the issue with our customers, we feel that by and large the measures that have been taken by the government of Armenia are we can call enough to cover that short term shock. And today most of those products are being exported to other countries, mostly to Europe or other regions. So we do not really anticipate in the mid term to long term any significant impact of the limitations that have been introduced over the previous two months on the development or economic development of the country, and it is fully in line with the recent reports that have been on Armenia in terms of forecast of GDP growth and so on. That's great. Very clear.

42:47 Thank you. Thank you, Alex. The next on the line is Dmitry Vasov. Thank you very much for the opportunity to ask questions. Again, congrats on very strong results. My questions would be about Romania, also a bit broad ones. So the first one is about your ambition to get to 30% plus market share at some point in midterm. Like is this organic or also includes potentially some inorganic capabilities? And then the second one is on the overall market. Like the figures are very impressive and we see very little slowdown in the market overall.

43:34 Do you have the understanding when we would see a bit of normalization and slowdown? Thank you very much. Regarding the acquisition versus organic growth, maybe I'll cover that, Mona, and then take the second question. So we would be open I mean, first of all, our default case is is to go on with the operate organic growth. Obviously, we'll be open for the inorganic, but that would depend on the regulators' openness to seeing such merger given the fact that we are already the largest player on the market. Having said that, who knows? Our default case is organic.

44:22 Please go on. Yes. In terms of market position, you're right. I mean, overall, the market has produced very good numbers for the last couple of years. And when we look at the macroeconomic forecasts, both down internally within our group as well as third party, we still remain pretty optimistic about overall development. Also as presented for Ameriabank in particular, we do expect to grow a bit faster than the market in both sectors for corporate and retail. For retail, as Arstro mentioned, it's predominantly due to the rollout. We see very impressive results in terms of growth. Our MAU is growing at 47%, acquiring business is growing 48%, our consumer loans are growing at 39%, and indeed more than 96% of those loans are A Z automated.

45:25 So it not only enables us to land some bigger chunk of the population, but also the cost of loan underwriting is going down significantly. So we do hope to continue these developments further, and we still remain very positive both for the banking sector overall, and also we plan to beat the market in terms of overall growth. Could I have a very quick follow-up on the Venomso market share? Can you please remind me what sort of the regulatory cap on the market share in Armenia? There is no regulatory market cap in Armenia, at least as of today, because we are the largest vendor and we are slightly shy of 23%.

46:19 As of today, there is no cap. Thank you very much. Just to be clear, there's no cap in Georgia either. But on the deposit side, from the financial system stability point of view, above 40% is higher capital requirements and it's just not worth it to go much further than that on the deposit side. Thank you. Thank you, Dmitry. The next question is from Ben Maher. Hi, Ben. Hi. I've just got three questions, please. The first one is on the customer spread in Armenia. I think in local currency, it's still showing signs of pressure. I think last quarter was mainly driven by the deposits, but this quarter seems more on the asset side. So just interested in any color behind that.

47:09 Second question is, again, in Armenia. Cost growth is still well below revenue growth. I'm just interested in how do you expect this to continue? Or how do you expect cost growth to evolve in the second half relative to revenue growth? And then my final question, I think it was already touched upon such M and A in Armenia. A capital buffer is obviously now comfortably above your minimums. How do you view you know, you don't necessarily put the trip in Armenia. How do you view new market new potential markets? Are there any kind of countries that you're interested in? Thank you. Let me cover the second and third one, and then I'll ask you to repeat the first question. Ben, sorry, I didn't really quite get the question.

47:57 So in terms of having a positive dose ratio for the last couple of years, that has been enabled predominantly due to the investments that we have been doing into our digitalization in general. As I mentioned, for example, in terms of underwriting, the cost of single loan underwriting for consumer loans is going up more than 30 times. And moreover, I mean, in terms of overall coverage option, today we are able to serve any customer on the territory of Armenia without having a physical presence nearby. We see, you've seen, and I've mentioned several times about our growth rate of miles and miles, that our customers tend to use our digital channels more.

48:45 And due to the fact that the single usage is technically the marginal cost of usage of our mobile banking or other digital channels is close to zero, I think it's very much expected that costs are growing much slower than revenues. Plus on the revenues, we do already experience significant network effect And that was something that we were talking about two years ago, that our rolling into mass market would enable us network effect on the revenue or asset side as well. And now when we are serving more than 500,000 of the active customers, we are getting more and more of that.

49:33 You can see it in our P and L as well as on our balance sheet. If you don't mind, we can repeat the first question. Just on the customer spread in local currency, it's down again Q on Q. Just interested in any color behind that. Thank you. Yes. So there has been some changes in the regulatory environment where our required reserves in the Central Bank of Armenia in local currency have been reduced. Instead, we have been reserving in FX. And that has created temporary additional excess liquidity in local currency in the local market.

50:19 That has had its impact on the short term in terms of rates, both on the borrowing and lending side. We do expect that to normalize by the end of the year. And overall, for both technical currencies, we anticipate in the midterm to have broadly stable spreads that will translate into broadly stable NIM. Great. Thank you. And and the third one was what are the other markets that we would consider looking at as a group to to enter? And and we laid it out during the investor investor meeting in June that the target markets would be the Baltics, the Balkans, and and two countries in Central Asia, two large countries.

51:15 Having said that, because we are we are focused on on the largest players in the market, top three or top five, some of the larger countries, that also means that we we will be waiting and seeing the looking for the right opportunity. Great, thank you. Thank you, Ben. The next on the line is Simon Nellis. Hi. Thanks very much for the opportunity. Congratulations on the strong result. Just a quick question on the dividend from Armenia. Are you going to be paying dividends regularly from that business? Or is it going be an annual event?

52:01 And roughly how much of the earnings do you expect to be upstreaming? That would be my first question. And then yes, sorry if you've touched on this before, but could you just elaborate on the outlook for margins in both Georgia and Armenia a bit? Is the sharp increase in margin we saw in Georgia sustainable? Or do you expect that to normalize somewhat? Thank you. So I'll start with the So the margins we expect broadly stable in both markets and there are different kind of moves on the positive and negative sides, which will be I think offsetting each other In short, there's slight we'll be deploying more liquidity, dollar liquidity in in Georgia. Having said that, there's slight some other changes that are also taking. In Armenia, it should be more or less stable going forward at 6% as we can see.

53:00 What was the other one? The dividends. On the dividend side, it's a business that's delivering right now 22%, 23% return on equity and growing at 35%. So obviously, we will not be counting on giving out too much money. Having said that, given the regulatory change and the deployment of the Tier one capital, additional Tier one capital, we had a little bit of extra capital and we thought it was a good idea to pull it out. In other words, until we see very high growth, we'll be reinvesting the capital or retained earnings in Armenia. When it normalizes closer to 10 to 15 in a number of years' time, obviously we'll be taking up and generally have the extra dividends, extra earnings.

53:50 But not, you know, we shouldn't count going forward because the expectation is that the high growth will continue 20 plus percent. Understood. Very clear. Thank you. Thank you, Simon. The next question comes from Milker Samuelson. Hi, Milker. Guys, congratulations to another strong set of numbers. I wanted to ask on the slide for the liquidity on GFS. Do you report the increase in both LCR as well as net stable funding. And you mentioned you're doing a liquidity exercise to sort of see over that. Could you maybe elaborate a little bit on that strategy, what you're trying to do and some quantification as well as, I guess, both on the deposits as well as other sources of funding?

54:41 Thank you very much. You will be the last person. Yeah. So from the perspective of liquidity indeed both increased, and you may remember that we when we issued the bonds about 1.5 ago when it further strengthened it. What we will be doing is that in terms of the dollar liquidity, we will be using it to support the growth. But for the liquidity in Malari, the high liquidity most likely will remain. But what we are doing is that we are optimizing the cost of that liquidity so that it still has positive impact on our balance and on our financials. Number wise, I think the dollar liquidity, which is not reported here, will decrease most likely by 10 percentage point.

55:32 And then we may see these numbers to go down and not dramatically, though, if I'm answering your question. Yes. And that's mostly via term deposits or, like, what's deposit strategy to lower it that you reduce term deposits or just elaborate a little bit on that? Sure. I mean, mostly, they are the large deposits that could be term or current account when it comes to corporate. But then, again, we try to be careful with our chill set that next time the customer needs to deposit money, so we still need to be here. And then it is mix of large term and current account. Okay. Very clear. Thank you.

56:18 Thank you. Thank you, Mokert. The next question is from Roman Fuzaylov. Hi, Roman. Hi, guys. Can you hear me? Yes. Great. Thanks for the call. Congrats on the results. Really fantastic numbers again. A couple of questions for me. The first one on Armenia. I saw that the loan to deposit ratio remains, I think, about 125%, 130%. And I wonder over time whether there is a plan to bring that number below 100 or if you're comfortable continuing to operate at this level. And if there is a plan to bring it down, whether that will be a source of margin pressure over time at the Armenia business as you replace some of that funding deposit funding or maybe not?

57:11 And the second question is on international expansion. There was a big transaction in your kind of target geography with Luminor being acquired by OTP during the quarter. I wonder if that was something that you guys looked at, whether that was of interest or not, if you had any comments on that. Thank you. So, Louis, we'll start with the last one. I cannot comment on that. Okay. Okay. I guess that's simple. For the Armenian operations, you're right. Our loan to deposit ratio is about 100%. But I mean, that's somewhere where we are feeling very comfortable because if you look at the mix of our liabilities, we have a significant chunk of the IFI borrowings that we consider very stable on long term.

58:10 So it really helps us in terms of because local borrowings are usually much shorter term contractually. Obviously, behaviorally, they're getting longer tenure, but contractually they're shorter term. Hence, we always prefer to mix it with the long term IFI borrowings that are giving us also better comfort in terms of our gaps. Over the times, we have confirmed that these funds are very stable in their nature and whenever needed, we were able to rely on them as well. So despite having loan to deposit ratio formally above 100% without inclusion of the DFI borrowings obviously, due to the fact that we are working with more than 1,000 DFIs, one of the most active partners of the DFIs in Armenia.

59:11 It gives us full comfort. Is there a meaningful chunk of non DFI borrowing on the Armenian liabilities mix or no? We do have non DFI F5 borrowings from international financial institutions as well, but their size is much smaller. Okay. Thank you, Laurence. Thank you, guys. And plus, we also have some funds mostly due to the trade finance operation. We are the largest trade finance operator in the country, that is also shorter term. And in terms of size, it's smaller, though more significant than simple FI borrowings.

1:00:03 And Roman, right now, a lot of FI's are highly motivated to increase their exposure in Armenia. Interesting. So we we we should expect that sort of structure to sustain 100% plus for the foreseeable future? For the next few years, yes. Okay. Understood. Thank you very And and and surprisingly, what what you can see is what we have seen in Georgia as well over the years is that in times of crisis, in fact that I find funding is increased. So it's complicated and it's very stabilizing for the emerging markets like ourselves. Yep. Makes sense. Okay. Thank you. Thank you. Thank you, Roman. I think Jens has erased him, but I think he forgot to put it down.

1:00:56 There is one question from Nikolay Dimitrov. He's asking, we're observing blockbuster numbers in Armenia. Where are you in the process of repositioning? Amiriabank, would you say you are 70% there or the process is almost complete? Definitely not complete. And we are not 70% there. In terms of what we would like to see is we would like to see more than million monthly active users and and other deposit and loan products being offered to to our retail clients there. Juan, do you want to say anything there? Yeah. I mean, if we're it depends. If the question is on the results, then suddenly, I mean, we are not halfway where we want to be and where we plan to be. But if we are talking about the product mix positioning in the market, then probably we are well beyond the 50% of the way that we've done. I mean, if you look Ameriabank as top of mind, where we were a few years ago and where we are now, I mean, we have almost doubled the top of mind kind of recognition of the brand.

1:02:16 And because, as Arthur mentioned, ten years ago, Amir Bank was perceived as an exclusive bank for mid income population, today it's openly regarded as a bank for all, and that's very important. At the same time, all our products and propositions that we have rolled out for the mass market, for mid income market, I think those are also very important significant moves to cover the needs of different layers or different segments of the population. If the question is on the results, yes, definitely we are not halfway there. In terms of being prepared for it, I would say we're more than half.

1:03:07 Thank you, Ramon. It's very well said. But the coverage and the potential in the market is quite large. There are a lot of large projects being implemented in Armenia and entrepreneurial spirit is there. And we have a very strong team on the market. The brand and operation is top of the line. So with all of that, we believe that the current coverage of retail of just shy of 400,000 can triple over the years. So that that's a fantastic opportunity in a high growth environment. I see one raised hand from Daniel. So let me try to.

1:03:53 Hello. This is Dan from Virgin. Am I audible? Yeah. Great. Congratulations on the results. I just had a question on Armenia. If I look at Ameriabank's stand alone disclosures, I see that loans classified under agriculture, forestry and timber account for about 11% of gross loans. Ivanes, I was wondering if you could shed some light on what these exposures are given that you mentioned that you had these conversations with the clients, you're not seeing a lot of risk from the trade restrictions that Russia has imposed on Armenian exports. That would be most appreciated. Our exposure to the agricultural sector is mostly industrial scale agriculture.

1:04:45 We do not really have at least significant exposure to the smaller farms. So we are talking about large greenhouses, large gardens, so on that deploy latest technology that are much more efficient. And then when we compare in terms of production capabilities, they are several times higher than the sector average. And a chunk of it also has been developed during the recent years post COVID when the government of Armenia launched a new project of modernization of the agricultural sector and deployed two new projects of co financing or subsidizing some of the costs of industrial large scale agricultural projects.

1:05:45 As I mentioned, obviously we have done initial analysis when it comes to the recent limitations in terms of Russian export. While some of our customers have been exporting to Russia earlier, we see that in the mid term or even long term perspective, this change that has been introduced over the last two or three months will not really pose any significant risk neither on their business nor on our balance sheet. Yeah, thank you. Just as a follow-up, have you had any request to restructure any of these loans? Because I seem to recall that the government's now rolled out a an interest rate subsidy scheme to support agricultural borrowers.

1:06:40 Yeah. As I mentioned earlier, the bigger thing was short term shocks. And most of these large scale customers have been under the government either co financing or subsidy programs. The government has actually announced that they're extending these programs, some of them were maturing this year and next year. That will technically kind of take away the short term shock from the customers. So that's one of the examples where the measures taken by the government were able to kind of protect these players. Hence, as I said, yes, there are being some complications in terms of finding new routes of transportation, entering new markets. It's never that easy.

1:07:36 But I think on the both political level as well as actually we see the developments that we see on the ground are very much promising that these customers should not have any problems neither this year or in the near future. Sounds very encouraging. Thank you so much. Sure. Thank you, Ben. You. Ben, to provide a little bit more color, that's all right. Can, should I let him in? So this project are top of the line in terms of technology, deploying the latest technology from the, in case of orchard, let's say the Italian trees and the pre irrigation and so forth, at the highest level, highly automated, brand new.

1:08:31 The reality is that as they change the market, the target market, their margins will be squeezed. Having said that, their business model was outrageously profitable. So even by changing one market to the other, of course, they will make less money, but they should be fine. Some of the larger ones have very strong sponsor support as well, so we have gone through We don't expect a major charge of that. You. Archer, there is one the only question left in the Q and A chat from Daniela Mirkov.

1:09:19 Are widening EU sanctions creating any compliance risk for Bank of Georgia? And do we have any exposure to the oil refinery today? We we don't, in fact. So we didn't bank the the company. So that's that's not it doesn't create any any any risks with that. So no. No no more questions? Well, we know in fact on on that is that they are in detailed negotiations with the European authorities to to see what they can do is basically because they their business model is still very valid working on the non non Russian oil given how demanded the refinery capacity has has become worldwide.

1:10:16 No more questions. What they will do, but we're not supposed to know. Should we summarize, Yes. I I'm glad to say that this is a very strong quarter. So as we are delivering 27% return on equity with very solid capital position, which is the highest in the wider region in fact. And we are growing at 20 plus percent in almost everything, selling loans 23% and deposits 28% in acquiring business 20% plus in Georgia and 48% in Armenia.

1:11:06 Deepening and strengthening the Georgian franchise, growing rapidly Armenia franchise, doing all of this while having positive operating jaws in both markets and then obviously combined and growing the top franchise, which is delivering 27%, growing at 20 plus percent. So I think that combination speaks for itself and I will leave you with this and I hope that for our shareholders this is a positive news and this will stay as a positive news with you as you take your vacation. And I wish you to to rest well and come back energized after the August holidays.

1:11:52 Thank you very much. You. Everyone take care. Bye bye. You.