Best Banks - 1 May, 2017 by The FINANCIAL

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1 May, 2017

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BESTBANKS2016

Payment Cards Statistics “I See İşbank Georgia Being a Solid

Market Player in the Georgian Banking ING Survey: Sector,” Ozan Gür, CEO of İşbank Georgian A Cashless Bank of Georgia Focusing National Society Is Currency is Coming on SME Development See on p. 6

ZURAB GVASALIA, President of the Association of Banks of Georgia

See on p. 2

See on p. 16

See on p. 17

Happy customers is our goal

Weekly Market

NIKA KURDIANI, TBC Bank Deputy CEO and Bank Republic CEO

Stabilized

See on p. 15

CURRENCIES

See on p. 10

Watch

By Galt & Taggart

EBRD initiates first-ever Eurobond issued in Georgian local currency See on p. 20

See on p. 26

1 USD 1 EUR 100 RUB 1 TRY

Apr 29

Apr 22

2.4416 2.6701 4.2768 0.6873

2.4038 2.5718 4.2720 0.6591

THE WORLD’S LARGEST TURKISH BANK* IS IN GEORGIA. We look forward to working with you to find solutions to all your financial needs.

İşbank Tbilisi Branch

İşbank Batumi Branch

No. 140/B, Agmashenebeli Av., 0102, Tbilisi, Georgia Phone: +995 322 310 515 (ext.) 2400/2403

No. 1/25, L. Asatiani/Rustaveli St., 6000, Batumi, Georgia Phone: +995 422 242 950/951 (ext.) 2400/1400

www.isbank.ge

*The Banker magazine’s July 2016 ranking of the “Top 1000 World Banks.”

CMYK

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

best banks 2016 CURRENT PRICES ON GASOLINE AND DIESEL

Prices in GEL G-Force Premium 2.27 G-Force Euro Regular 2.17 Euro Regular 2.07 G-Force Euro Diesel 2.25 Euro Diesel 2.05 CNG 1.45

Prices in GEL

Prices in GEL Eko Super Eko Premium Eko Diesel Euro Diesel Euro Regular Diesel Energy

2.41 2.28 2.22 2.12 2.10 2.04

Eurosuper Premium Avangard EuroPremium Euroregular Eurodeasel

Prices in GEL 2.29 2.19 0.00 1.99 1.99

Nano Super Nano Premium Nano Euro Regular Nano Diesel Nano Euro Diesel GNG

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. Please contact marketing at: marketing@finchannel.com see financial media kit online www.finchannel.com Download RATE CARD

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: temuri@financial.ge CONTACT US EDITOR-IN-CHIEF ZVIAD POCHKHUA E-MAIL: editor@financial.ge editor@finchannel.com Phone: (+995 32) 2 252 275 HEAD OF MARKETING LALI JAVAKHIA E-MAIL: marketing@financial.ge marketing@finchannel.com Phone: (+995 577) 74 17 00 CONSULTANT MAMUKA POCHKHUA E-MAIL: finance@financial.ge Phone: (+995 599) 29 60 40 HEAD OF DISTRIBUTION DEPARTMENT TEMUR TATISHVILI E-MAIL: temuri@financial.ge Phone: (+995 599) 64 77 76 COPY EDITOR: IONA MACLAREN COMMUNICATION MANAGER: EKA BERIDZE Phone: (+995 577) 57 57 89 PHOTO REPORTER: KHATIA (JUDA) PSUTURI MAILING ADDRESS: 17 mtskheta Str. Tbilisi, Georgia OFFICE # 4 PHONE: (+995 32) 2 252 275 (+995 32) 2 477 549 FAX: (+95 32) 2 252 276 E-mail: info@finchannel.com on the web: www.financial.ge daily news: www.finchannel.com

Intelligence Group ltd. 2017 Member of

1 MAY, 2017, GEORGIA

International School of Economics at TSU Policy Institute

Prices in GEL 2.39 2.26 2.06 1.99 2.17 1.44

Efix Euro 98 Efix Euro Premium Euro Regular Efix Euro Diesel Euro Diesel

2.39 2.25 2.04 2.02 2.20

GASOLINE PRICES PRESENTED BY

BUSINESSTRAVELCOM

HOTEL AND AIRTICKET BOOKING: 2 999 662 | SKY.GE

KHACHAPURI INDEX

AGRINDEX: MEAT PRICES ARE ON FIRE

or the first time in more than two years, meat prices are displaying a steady increase; month-to-month changes in prices have been positive for the last four months. These changes bounced back, slowly bringing meat prices to their earlier values, and in January 2017 year-to-year changes also become positive. Furthermore, in March 2017, the year-to-year increase in meat prices reached +7.11%, while the change compared-to-base period was +6.97%. It is interesting that month-to-month changes in meat prices had been decidedly modest in recent years (within a 1% margin), while in February and March of 2017 similar changes exceeded 2%. The main cause of the increase in meat prices is the boosting of exports of meat and livestock from Georgia. According to GeoStat’s preliminary data, the export of live bovine animals for the first three months of 2017 exceeded 9.8 mln USD, while the corresponding figure for the

Data source: Ministry of Agriculture of Georgia

same period of 2016 equalled just 3.8 mln USD. The increase in the export of sheep meat

from the country is also dramatic; these increased 40-fold (from 57,000 to 2.27 mln USD) in the

first three months of 2017 compared to the same period of last year.

What can Georgia learn from Sweden’s Educational Disaster? by LAURA MANUKYAN and FLORIAN BIERMANN

FROM ISET ECONOMIST

ISET-PI.GE/blog

(ISET)

etween 2000 and 2012, Sweden fell in the Programme for International Student Assessment (PISA) by 16 places from the 7th to the 23rd rank, and in the 2015 PISA study, Sweden ranked 28th of 34 countries in mathematics! As the OECD writes: “No other PISA-participating country saw a steeper decline in student performance over the past decade than Sweden.” Who is to blame?

Too much competition? Those from the left side of the political spectrum claim that too much freedom of choice was introduced to the Swedish educational system. Since 1992, a voucher system (as proposed by Milton Friedman already in the 1960’s) allows parents to send their children to private schools without having to pay tuition. Public schools are free of charge, and private schools receive a fixed payment for each student redeeming their voucher at the school. As Raymond Fisman of the Columbia Business School writes: “Swedish school reforms did incorporate the essential features of the voucher system advocated by Friedman. The hope was that schools would have clear financial incentives to provide a better education and could be more responsive to customer (i.e., parental) needs and wants when

freed from the burden imposed by a centralized bureaucracy. And the Swedish market for education was open to all, meaning any entrepreneur, whether motivated by religious beliefs, social concern, or the almighty dollar, could launch a school as long as he could maintain its accreditation and attract ‘paying’ customers.” In the ears of market libertarians, this sounds like a winning approach. Yet, Fisman argues that the schools were competing with one another not through quality, but through “ease of access” and “ease of receiving a degree” (unlike in the US and in Georgia, in Sweden the grading also of impor-

tant exams is done by the teachers of the school where the test-takers are enrolled). Fisman concludes: “A sizable portion of the much-vaunted outperformance of voucher school students could be chalked up to nothing more than easy grading. More surprising still, the voucher school grade inflation is almost as high for math and science (where you’d think an answer is either right or wrong) as it is for Swedish.” This explanation is contested by other researchers, like the controversial economist Tino Sanandaji from the Stockholm School of Economics, who points out that only 14 percent of fifteen-

year-olds were attending private schools. As the “race to the bottom” would not affect public schools, which have funding that does not directly depend on the number of enrolled students, he argues that the voucher system cannot be blamed for Sweden’s educational disaster. Sanandaji rather attributes the decline to experiments with new pedagogical methods, where traditional classes have been replaced by group work and “research projects” and a softening of the grading system. Continued on p. 12

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

best banks 2016

“Within the Next Ten Years I See İşbank Georgia Being a Solid Market Player in the Georgian Banking Sector,” Ozan Gür, CEO of İşbank By TAMAR KHELAIA The FINANCIAL

s of 31st of March, 2017, İşbank Georgia’s assets size was around USD 128 mln, having increased by 42% compared with the same period of the previous year. The main part of the assets are the loan portfolio (61% of total assets) with an amount of USD 78 mln, increased by 26% compared with the same period of the previous year, according to Ozan Gür, CEO of İşbank. “We have been operating in Georgia as a subsidiary company of the world’s biggest Turkish bank, İşbank, according to the Banker’s Top 1000 Banks list. It is one of the biggest groups in the financial sector, with a total size of assets around USD 89 bln as of 31st of December, 2016. At the beginning stage, our company started operating as a branch in 2012 and was transformed into the Bank (JSC İşbank Georgia) as of 1st of August, 2015. As of 31st of March, 2017, İşbank Georgia’s assets structure has been mainly denominated in USD, with a dollarization rate of 86%. The majority of funding is from the parent company, USD 58 mln (45% of total funding). Total equity capital is around USD 13 mln and regulatory capital - USD 29 mln.

OZAN GÜR, CEO of İşbank

Q. Which segment has changed compared to previously, and in what ways? A. The Bank was concentrated on the corporate segment at the beginning stage, but we are increasing our activity in the SME segment too. As of 31st of March, 2017, the Corporate and SME segments’ shares in the loan portfolio are 92% and 4%, respectively. We plan to increase the SME segment’s share to 10%-15% in the near future. Q. How has the GEL devaluation affected İşbank Georgia? A. The GEL devaluation didn’t have any significant impact on our financial position. As for effect on loan portfolio quality, in general currency devaluation is an additional stress for borrowers who have loans in a currency different to their income. As the retail segment’s share of our loan

portfolio is very small, and most of the individual borrowers are non-residents, living in Georgia and their income being mainly in a foreign currency, hasn’t affected the quality of the loan portfolio either. Q. How has the socalled Larization plan affected İşbank? A. The individual borrowers’ share is very small and out of them, we have only had several customers who have met the criteria of the Larization project. As a result, this didn’t have any effect on İşbank Georgia. Q. How do you evaluate the efficiency of economic Larization? A. The overall dollarization rate of the Georgian banking sector is around 65%, which is still high and creates additional currency risks for the banks, as well as for the borrowers, mainly for individu-

als. Therefore, such kinds of promotions are very important and, I guess, will have a huge positive effect in the future. Q. As the Georgian PM says, access to long term resources denominated in GEL is a cornerstone of reform. But is it attractive for Turkish investors? A. Availability of resources denominated in GEL is very important for any kind of business whether it be local production, in the service sector, or any kind of import, as long as the company’s income from sales of goods or services are in GEL. In this case the exception would be mainly business-related to export operations. At the moment, unfortunately, Georgia’s import balance is negative; therefore most of the businesses operating in Georgia are very sensitive towards acquiring

financing in a foreign currency. The same would apply regardless of the nationality of the investor. Q. What are the current trends in the loan and deposit segment? A. Due to GEL exchange rate volatility, GEL resource demand has increased. As a result, GEL-denominated deposit rates have increased slightly. On the other hand, foreign currency interest rates of both (USD and EUR) deposits and loans are significantly lower due to less demand. This trend will continue unless the exchange rate shows less volatility and more stability. İşbank’s current borrowers mostly consist of Healthcare, Real Estate Management and Development sectors but we embrace such sectors as Oil Products, Energy, Consumer Products, Consumer Services, Telecommunications etc.

Q. What is the share of corporate banking at İşbank Georgia and how is it developing? A. As previously mentioned in figures, most of our current loan portfolio consists of corporate clients. According to our future development strategy, we plan to be mostly active in this segment. Q. Tell us about personal banking and finance at İşbank. How competitive are the services provided to individuals by İşbank in terms of service fees? A. Currently we are concentrating on cooperation with legal entities and their salary projects only, therefore we are not promoting the personal banking direction. According to our strategy we do not plan to enter that segment due to the existing competition in the retail banking sector. Q. What are the novelties in online banking of-

fered by İşbank? In Turkey İşbank has started to provide a money transfer service via Apple’s iMessage. Will this be available for Georgian customers? A. We are constantly working to improve our distance banking service products as according to our vision this is the future concept of banking. People are very tense at the moment, therefore online banking services and their functionalities have to improve and widen in order to become more sophisticated to match the time. Currently our internet-banking and mobile banking platforms are in the functionality development process ready to be launched by the end of 2017. The novelty of transfer service through iMessage offered by İşbank in Turkey is not yet available locally but we will be trying to implement this service locally as soon as possible. Q. What are the main challenges encountered by İşbank in the business? A. From our perspective, the main challenge for us is that by the time we entered the business in Georgia, this sector was quite developed and companies had already started to choose their banks. Our mission is to raise awareness about us as one of the largest Turkish banks in the world which can be trusted in the same way as any other serious local actors. On top of this, we have significant strengths compared to other market players. This includes pricing on financing trade operations related to Turkey and European countries, and we plan to be active on financing this direction. Q. Are you going to develop İşbank’s retail banking? A. For the time being we are not planning activity in retail business at least until the end of next year due to the existing saturation of the largest Georgian banks and our newly started and comparatively modest presence with only two branches (Tbilisi and Batumi). However, I am sure this can change over time. Q. Tell us a little about banking in Turkey. What are the differences? A. The banking sector in Turkey is very strong due to the strict regulations that effectuated after the big banking crises in 2001. There are 53 banks in Turkey (34 deposit banks, 13 development and investment banks, 6 participation banks). The total asset size of the sector is nearly USD 800 billion. Despite the global economic crisis and the Eurozone crisis, the high capital adequacy ratio of Turkish banks allowed them to achieve strong financial statements. The Banks provide their customers with every type of banking instruments and day by day we can see that digitalization in the sector is improving. Q. Where do you see İşbank in the next 10 years? A. Within the next 10 years I see İşbank Georgia being a solid market player in the Georgian banking sector and being one of the first choice banks adjusted to perfectly fit businesses operating locally.

CMYK

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

best banks 2016

Under Pressure? You Must Live in Asia Not Europe

Non-audited Financial information JSC Georgia Isbank Georgia JSC Isbank Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2016 2016 000’GEL 16,373 (7,892) 8,481

2015 000’GEL 12,767 (6,060) 6,707

5 6 7

1,334 (1,041) 293 1,189 9,963 861 (3,615) (2,757)

803 (677) 126 1,308 8,141 (1,324) (2,739) (2,202)

4,452 (665)

Notes 4 4 4

Interest income Interest expense Net interest income Fee and commission gain Fee and commission expense Net fee and commission income Net foreign exchange income Operating income Impairment losses Personnel expenses Other general administrative expenses Profit/(loss) before income tax Income tax (expense)/benefit Profit/(loss) and total comprehensive income/(loss) for the year

3,787

1,876 (205) JSC Isbank Georgia 1,671

2014 000’GEL 5,060 (1,464) 3,596 288 (243) 44 280 3,921 (1,091) (1,696) (1,274) (140) 30 (110)

Statement of financial position as at 31 December 2016 ASSETS Cash and cash equivalents

Mandatory reserves at National Bank of Georgia Securities

44,098

38,889

14,034

46,607

25,819

5,436

1,018

Loans to customers

179,786

145,285

69,091

Property, equipment and intangible assets

2,283

2,831

1,951

Deferred tax assets

142

Other assets

2,258

233

758

Total assets

276,050

213,057

91,412

LIABILITIES

The FINANCIAL

ccording to the new Ipsos MORI Global Trends Survey, due to be launched in May 2017, many countries around the world have seen an increase in the number of their citizens who feel under pressure to be successful and make money. Overall, the survey, conducted among online adults aged under 65 in 23 countries around the world, found on average 54% felt that they felt under a lot of pressure to be successful and make money, an increase of seven points on a like-for-like basis between 2014 and 2016. The survey also finds continued high levels of support for the idea that it is more important to have a good work-life balance than a successful career, with 81% agreeing across the 23 countries. The survey finds that 15 of the countries covered have seen a rise between 2014 and 2016 in the number of people feeling under pressure to be successful. All parts of the world are seeing an increase in their citizens feeling under pressure: In Europe – Belgium (up 16 points), France (up 10), Sweden (up 10), Germany (up 8), Britain (up 7), Spain (up 6) and Italy (also up 6) In North America – the United States (up 10) and Canada (up 8) In Asia-Pacific –Australia (up 15), South Korea (up 11), and Japan (up 8) In emerging economies in the rest of the world –Brazil (up 15), India (up 11) and South Africa (up 9). Overall, emerging markets are more likely to feel under pressure than established economies (by 62% to 49% - especially in countries such as South Africa, India and China, compared with European countries such as Italy, Sweden, Spain and France), and younger generations (Millennials and Gen Z) are more likely to feel the pressure than older generations. There is little difference though by level of income. Of course, most people want to achieve success – even if that means disruption to their current lives – but that does not mean that the majority only value success by material possessions. On average, two in three agree that they want to “achieve success personally and professionally, even if I have to totally change the way I live”, but only a minority (37%) say they measure their success by the

things that they own. Again, in both cases, these apparently materialist views are much higher in emerging markets than in established economies. For example, the desire for success even at the cost of personal disruption is highest in India, Mexico, South Africa, Peru and China, and lowest in Italy and Sweden, while material success is valued most in China, India, Turkey and Brazil, and least in Spain, Sweden, Britain and Canada (and Argentina). Younger generations, too – the Millennials and Gen Z – are more likely to say they measure success in material terms. Perhaps related to the pressure that many people are feeling, there is strong belief in every country in this study in the importance of a good work-life balance. On average, 81% agree that “it is more important to have a good work-life balance than to have a successful career”, and in no country does agreement dip below 70%. Alongside this increase in pressure, many countries around the world see an increase in the proportion of their citizens who say “I have enough trouble worrying about my own problems than worrying about other people’s”. There has been an increase in 16 of the countries surveyed, again from around the world: Belgium (up 9 points since 2014), Brazil (+7), Canada (+5), China (+7), France (+9), Germany (+10), India (+9), Italy (+9), Japan (+7), Poland (+7), Russia (+8), South Korea (+8), Spain (+12), Sweden (+13), Turkey (+18), and the US (+9). Overall, 56% across the 23 countries feel they have enough trouble worrying about their own problems, but in this case established economies tend to be more caught up in their own issues than emerging markets (by 57% to 51% - especially in the US, South Korea, Australia, Canada and Belgium while lowest in Peru, Indonesia, Argentina and Mexico). This may be related to the greater level of pessimism for the future in established economies. Overall, only 37% on average across the 23 countries say they think today’s youth will be better able to have a successful career than their parents, while 40% think it will be worse. However, among emerging markets optimists are in the majority at 56% - but in established economies like the UK and France they are very much in the minority at just 24%.

Deposits and balances from banks

173,884

126,224

8,932

Current accounts and deposits from customers

65,100

55,016

32,843

Other borrowed funds

36,709

Deferred tax liabilities

579

Other liabilities

1,203

280

722

Total liabilities

240,766

181,560

79,206

30,000

13,013

EQUITY Share capital Statutory reserve Retained earnings/(accumulated losses)

5,284 16

Total equity Total liabilities and equity

35,284 276,050

1,497 JSC Isbank Georgia 31,497 213,057

(807) 12,206 91,412

Statement of Cash Flows for the year ended 31 December 2016 CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) before income tax

4,452

1,876

(140)

Adjustments for: Depreciation and amortization

836

563

289

Interest income

(16,373)

(12,767)

(5,060)

Interest expense

7,892

6,060

1,464

Impairment losses

(861)

1,324

1,091

(1,189)

(1,308)

(280)

(5,243)

(4,252)

(2,636 6)

(16,203)

(18,334)

(4,670) (49,486)

Net foreign exchange gain

Change in operating assets and liabilities: Increase in mandatory reserves at National Bank of Georgia Increase in securities

(1,018) (17,863)

(55,611)

Decrease/(increase) in other assets

(1,891)

525

(754)

Increase in deposits and balances from banks

30,061

63,527

6,590

Increase in current accounts and deposits from customers

5,368

14,093

28,519

923

(443)

712 5) (21,725

Increase in loans to customers

(Decrease)/increase in other liabilities Cash flows used in operations before interest and foreign exchange

(5,866)

(495)

Interest receipts

14,541

11,837

4,037

Interest payments

(7,925)

(4,762)

(1,248) 401

Net receipts from foreign exchange

957

998

Income tax paid

(126)

Cash flows from/(used in) operations

1,581

7,578

5) (18,535

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, equipment and intangible assets

(288)

(1,444)

(1,228)

Cash flows used in investing activities

(288)

(1,444)

8) (1,228

Receipts from other borrowed funds

23,010

Repayment of other borrowed funds

(2,216)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts from increase of share capital/statutory reserve

17,620

156

Cash flows from financing activities

17,620

20,950

Net increase in cash and cash equivalents

1,293

23,754

1,187 7

Effect of changes in exchange rates on cash and cash equivalents

3,916

1,101

229

Cash and cash equivalents as at the beginning of the year

38,889

14,034

12,618

44,098

38,889

14,034

Cash and cash equivalents as at the end of the year

Non-audited financial information is provided according to IFRS.

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

best banks 2016

THE WORLD’S LARGEST TURKISH BANK* IS IN GEORGIA.

We look forward to working with you to find solutions to all your financial needs. İşbank Tbilisi Branch

İşbank Batumi Branch

No. 140/B, Agmashenebeli Av., 0102, Tbilisi, Georgia Phone: +995 322 310 515 (ext.) 2400/2403

No. 1/25, L. Asatiani/Rustaveli St., 6000, Batumi, Georgia Phone: +995 422 242 950/951 (ext.) 2400/1400

www.isbank.ge

*The Banker magazine’s July 2016 ranking of the “Top 1000 World Banks.”

CMYK

HEADLINE NEWS & ANALYSIS

best banks 2016 National Bank of Georgia

1 MAY, 2017 | FINCHANNEL.COM

Payment Cards Statistics As for IV quarter 2016 : Number of the payment cards issued by the commercial banks of Georgia amounted to 9.3 million approximately. Compared to the previous (the third) quarter, number of issued cards increased by 5%. The share of issued credit cards in the total issued cards remains the same and amounted to 8%. Compared to the IV quarter of 2015 the total number of issued cards increased by 15%. The number of issued cards per 10 inhabitants in Georgia is 25.

During the IV Quarter of 2016: The total number of internet payments performed by the cards issued in Georgia is 3.8 million with the value 213.1 million Gel. Compared to the previous (the third) quarter, the internet transactions performed by the card issued in Georgia increased by 24% in terms of volume and by 12% in terms of value. Compared to the IV quarter of 2015, the number of internet payments increased by 53%, while the value increased by 48%. Continued on p. 15

Source- GB TGI Clickstream, Q3 2015

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HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

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HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

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Almost Twice As Many People Prefer Relaxing Vacations To Active Ones

Non-audited Financial information

Cartu Bank INCOME STATEMENT Year ended 31.12.2016

Interest income Interest expense

109 188 -38 080

111 065

71 108

81 736

-485

(32 912)

70 623

48 824

19 023 8 810 7 409 (4 638) (274) 11 397

32 841 5 645 6 805 (3 992)

41 727

49 833

112 350

98 657

-29 313

(29 849)

83 037

68 808

-7 755

(9 867)

75 283

58 941

75 513 (230) 75 283

58 940 1 58 941

542 (10 500) 1 494

3 408 (1 832) (236)

(8 465)

1 340

67 048 (230)

60 280 1

66 818

60 281

NET INTEREST INCOME BEFORE (PROVISION)/Recovery of provision FOR IMPAIRMENT LOSSES ON INTEREST BEARING ASSETS Recovery of provision for impairment losses on interest bearing NET INTEREST INCOME Net gain on financial assets at fair value through profit or loss Net gain on foreign exchange operations Fee and commission income Fee and commission expense Recovery / Provision for guarantees and other contingencies Other income, NET

The FINANCIAL

n a 17-country online survey conducted by GfK, well over half (59 percent) of people say they prefer a vacation “where I relax and take it easy”. This compares to just over a third (35 percent) who prefer “an active vacation where I do or see lots of things”. Only six percent are not sure which type they prefer. Internationally, there is next to no difference between men and women in these preferences. Men are potentially very slightly more lazy in their holiday choice than women – standing at 60 percent of men prefering a relaxing vacation, compared to 58 percent of women. But for active holidays, men and women stand neck and neck at 35 percent each.

Internationally, the biggest differences we see are when it comes to age groups. Teenagers are the most inclined to favor active holidays, with 43 percent selecting this and 51 percent preferring a relaxing holiday. The preference for active vacations then drops steadily with each age band, ending with those aged in their fifties, and those aged 60 or over, both standing at just one third (33 percent) favoring active holidays. However, the age group with the highest percentage saying they prefer relaxing holidays is not the oldest two age groups – it is those aged in their forties, standing at 64 percent. Compare this to those aged 60 or over, where 57 percent say they favor relaxing vacations.

Nearly half of Italians Families and French with teenagers prefer active slightly holidays, more while inclined over two to active thirds of holidays than others Brazilians The presence of children in and South the household appears to Koreans make only limited difference to people’s holiday preferenc- want to es, compared to the international average. For those with relax. children under six years old in the household, or those with children aged between six and twelve, just under two thirds (62 percent) favor relaxing vacations and just over a third favor active ones. For people with teenagers in the household, relaxing holidays become slightly less popular, falling to 57 percent, while active holidays rise to 39 percent.

Teenagers most inclined to energetic vacations; those aged in their forties are most inclined to lazy ones.

Italy (45 percent), France (44 percent) and Spain (43 percent) lead in having the highest percentage of their online population who prefer active vacations where they do and see lots of things. In contrast, Brazil (71 percent), South Korea (66 percent) and Japan (also 66 percent) lead for having the highest percentages preferring a relaxing vacation where they take it easy. Laurence Michael, global lead of travel and hospitality research at GfK, comments, “The value of these findings for the travel industry lies in combining this selfreported data with our travel insights, which are based on live forward booking data from a growing number of sales points. With this multilayered approach, we understand what is being booked and by whom - helping our clients to fine-tune their audience segmentation and identify customer potential, both globally and at countryspecific level.”

NET NON-INTEREST INCOME OPERATING INCOME OPERATING EXPENSES PROFIT/(LOSS) BEFORE INCOME TAX Income tax expense NET PROFIT/(LOSS) Attributable to: Equity shareholders of the Parent Minority interest

Other comprehensive income Items that may be reclassified subsequently to profit or loss: Net gain/(loss) resulting on revaluation of available-for-sale financial assets during the year Transferred to profit for the year

Income tax Other comprehensive income after income tax Attributable to: Equity shareholders of the Parent Minority interest

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Year ended 31.12.2015

(29 329)

(1 257) 9 791

BALANCE SHEET დეკ 31.დ 2016

31.დეკ 2015

ASSETS: Cash and cash equivalents Mandatory cash balance with the NBG Financial assets at fair value through profit or loss Due from financial institutions Loans to customers Investments available-for-sale Investments held to maturity Property and equipment Defered income tax assets Other assets

298 616 143 009 30 355 6 026 854 369 57 19 045 14 555 249 54 113

173 671 76 835 38 111 2 192

TOTAL ASSETS

1 420 394

1 192 723

Due to banks and other financial institutions Deposits by customers Other Borrowed Funds Provisions Current income tax liabilities Other liabilities Deferred tax liability Subordinated debt

19 605 747 610 124 400 2 267 491 14 070 6 550 227 179

55 257 597 946 41 911 1 993 6 255 13 452 10 762 188 744

Total liabilities

1 142 171

916 319

114 430 9 424 154 452

114 430 9 423 8 464 144 094

278 306

276 412

-83

-7

278 223

276 405

1 420 394

1 192 723

824 618

10 017 18 919 15 866 249

32 245

LIABILITIES AND EQUITY

LIABILITIES:

EQUITY: Equity attributable to equity holders of the parent: Share capital Additional paid in capital Available-for-sale reserve Retained earnings/(Accumulated deficit) Total equity attributable to equity holders of the parent Minority interest Total equity

TOTAL LIABILITIES AND EQUITY

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

best banks 2016

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CMYK

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

best banks 2016

Happy customers is our goal

he merger of TBC Bank and Bank Republic comes to an end. The financial talked to Nika Kurdiani, TBC Bank Deputy CEO and Bank Republic CEO on merger update. What is the current status of the merger between TBC Bank and Bank Republic? The merger started in October 2016, when TBC Bank acquired Bank Republic. The process will be completed in several days, after which Bank Republic will be rebranded as TBC Bank. What does this mean for BR customers? What will change for them? There will not be any principal changes apart from the fact that BR customers will join a larger and more powerful bank, with a broader range of facilities and services. They will have access to everything that TBC Bank offers, including internet and mobile banking services, which have been named the best by a number of international organizations. They will also enjoy a wide choice of credit facilities and a variety of debit and credit cards that have been designed to suit every need. Besides, TBC Bank has a much larger branch and ATM network. BR customers will benefit from breakthrough products such as the Loyalty Program and the Ertguli (Loyal) card, which is transforming bank card culture in the country. In addition, TBC Bank offers Ti Bot, the first Chatbot in Georgia, and interactive software on Facebook Messenger that is programmed to provide banking consultations and call center type services. All these services, which were created by TBC Bank’s considerable human and financial resources, will now be available to BR customers as well. How does the banking culture differ at the two banks? How will banking be different for BR customers after the merger? First of all, I should point out that TBC Bank and Bank Republic had a lot

NIKA KURDIANI, TBC Bank Deputy CEO and Bank Republic CEO

in common. Both of them targeted almost the same segments and served the same type of customers. Moreover, our policies frequently converged as some customers were served by both banks. Therefore, there will not be significant post-merger cultural changes. While some banks differ materially in terms of operational culture and specifics, TBC Bank and Bank Republic had similar operating models. However, TBC Bank has always given a high priority to service quality, not only in its branches but across all of its channels and products – at all points where customers’ interests are concerned. BR customers will soon experience this as well. We are sure that their first emotion after the merger will

be delight in the high quality service. What was Bank Republic’s strongest area in the banking sector? Bank Republic’s strongest position was in retail banking, especially in recent years. In 2016, the loan portfolio exceeded GEL 1 billion. Bank Republic was also successful in mortgage loans, and that trend will continue after the merger. It is interesting to note that, following the merger, Bank Republic grew in size. Why is that? Normally, when two financial institutions merge, one of them suffers credit portfolio loss, as the merger itself is associated with a number of technical challenges, and that translates into losses. On the

other hand, the acquiring company finds it difficult to align the integration processes with its immediate goals and, as a result, a small part of its portfolio is lost. In our case, TBC Bank firmly took the reins of all key areas. We assumed the management of all focal directions from the very start, which enabled us not only to maintain but to expand the BR portfolio. As mentioned, it exceeded 1 billion GEL and we are proud of that. This is our second merger, the first being Bank Constanta, and we are happy that the process has been successful and painless. How long will the adaptation period be for the two banks? As you know, the merger technically comes to an end on May 6. The staff, the

clientele and the banking processes have already been integrated and streamlined. However, considerable work and attention is still necessary to ensure the process is properly managed. Thus, we will have to work particularly hard in the first six months to one year following the legal and technical merger. How many new clients did TBC Bank acquire? After the merger with Bank Republic, we have around 2 million individual customers – the biggest index on the Georgian market. Naturally, this means expansion and a new stage for our bank. What are the plans after the merger? How will the market develop and how will TBC Bank’s strategy change?

As you know, TBC Bank has been ranked the second largest bank in Georgia for about 10 years. In the last five years, it has aggressively expanded its market share through organic as well as inorganic growth, i.e. the mergers. We first acquired Bank Constanta, then Bank Republic and also bought other banks’ portfolios, all of which have contributed to our advancement in the market. Being the first means being the largest among commercial banks. We have over 40% of the retail market in our portfolio. In fact, our successful expansion in the retail market represents a great challenge, as we do not compete to be the biggest; we compete to make our customers the happiest and to do business with them. We aim to expand our business by attracting and taking care of a growing number of customers. Leading companies never rest; we intend to take advantage of our position to develop and to focus on issues that make us unique, not only in Georgia but in the Caucasus. In which direction do you plan to expand, banking or financial services? A financial group is not limited to banking but also covers a wide range of financial services: brokerage, leasing, insurance and so on. We also target these directions. TBC Leasing is the biggest leasing company in Georgia; TBC Broker is our subsidiary. You may also remember that last year we acquired the Kopenbur insurance company and created TBC Insurance on its basis. We believe it is strategically important to develop business insurance and gain a remarkable market share in this sector. On the whole, we plan to maintain a dominant position in financial services in the future. What are the three main massages that you would like to give Bank Republic clients? Thank you for this question. We want Bank Republic clients to feel that TBC Bank is proud to continue to develop together with a bank of such a quality and scale as Bank Republic and we will do our best to provide the highest quality of service possible to our clients. We are constantly trying to deliver the best customer service as well as a wide range of innovative and modern products and services to our clients. I want to thank both TBC Bank and Bank Republic clients for being with us.

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

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CMYK

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

best banks 2016 Pasha Bank

N the Bank.

ame of the bank: PASHA Bank Georgia Shareholders: PASHA Bank OJSC (Azerbaijan) is 100% shareholder of

Mission & vision: Mission: PASHA Bank is a Bakubased financial institution operating in Azerbaijan, Georgia and Turkey – providing full range of high-quality corporate and investment banking services to large and medium-sized enterprises. We treat our clients and partners with hospitality and double attention focusing on the mutual prosperity. We put their interests at the cornerstone of our corporate strategy, looking to achieve new heights, together and contribute to the sustainable growth of each and every client. Vision: We strive to contribute to the growth and development of the Georgian and regional economy through funding value accretive projects while providing top-quality service both locally and regionally. We are committed to our long standing philosophy of doing business in ethical, reliable and sustainable manner.

Int. rating & awards: “The Fastest Growing Corporate Bank in Georgia 2015” by International Finance Magazine; “The Fastest Growing Corporate Bank in Georgia 2015” by Global Banking and Finance Review Awards; “The Bank of the Year 2014” by Caspian Energy Group Number of branches: 1 Branch Customer groups: Large and medium-sized enterprises

Latest developments: Changes in shareholders: None Changes in management: Chingiz Abdullayev became the Member of the Board of Directors and Chief Financial Officer on January 13th, 2016.

Received awards and participation: “The Fastest Growing Corporate Bank in Georgia 2015” by International Finance Magazine; “The Fastest Growing Corporate Bank in Georgia 2015” by Global Banking and Finance Review Awards; New branches: N/A New services or products offered: N/A

Public campaigns and charity: April, 2017 – PASHA Bank joined the project “Aghadgine” and funded the planting of 500 trees. April, 2017 – PASHA Bank planted 1,000 Georgian Oak (Quercus Iberica) and Imeretian Oak (Quercus Imeretina) trees, the latter of which is in the Red List of threatened species of plants. The seedlings were planted in Imereti region and fully covered one of the areas in Ajameti Managed Reserve that rehabilitation processes are carried. April, 2017 - PASHA Bank Supported Eco Project in Kondoli Village. December, 2016 - PASHA Bank planted 2017 Georgian Pine Trees near Borjomi, where 260 hectares of forest got burnt down in August 2008. September, 2016 - PASHA Bank donated more than 50 books to the Spotlight Marketing Library that was initiated by PASHA Bank back

in 2015 and supported by Tbilisi Mediathek. July, 2016 - PASHA Bank funded a training organized by Tbilisi Hippo Fund and International School of Intellect and Education (ISIE) for socially vulnerable and successful students.

Financial highlights: Analysis by segment: N/A Average balance sheet and net interest: Net interest income for 2016 year – GEL 16,587 thousand Total equities and liabilities: Equity: GEL 103,284 thousand, Liabilities: GEL 179,201 thousand, Total Assets: GEL 282,485 thousand (as of 31.12.2016) Analysis of changes in net interest income: During 2016 year Net Interest Income increased by 26% Trends and tendencies/Balance sheet: Loan Portfolio decreased by 12.4%. Return on Average Assets was 1.7 %, Return on average Equity was 4.8 % Income statement: Net profit of year 2016: GEL 4,881 thousand

CEOs statement: PASHA Bank Georgia ended the year with the highest net profit figure achieved since opening for business in Georgia four years ago. For a second year running we were able to generate positive return for shareholders, firmly establishing the Bank as a specialized corporate segment player. Our success notwithstanding, 2016 was a difficult year for the Georgian banking sector as a whole. External shocks that led to drastic GEL devaluation in 2015 persisted throughout 2016. The economy grew at a modest 2.7% per annum which translated into sluggish demand for corporate banking products and services. The corporate banking portfolio of the banking sector remained flat. The growth driver was retail banking

SHAHIN MAMMADOV, Chairman of PASHA Bank Georgia Board of Directors, CEO

and, to a lesser extent, SME and micro segments. Lackluster demand for corporate banking services put a downward pressure on the interest rates with certain competitors’ deals priced even below the sovereign cost of borrowing. Continuing exchange rate volatility kept the demand for loans almost exclusively in the realm of GEL-denominated lending. Unlike in previous years, when GEL loans usually priced in double digits were in less demand as opposed to foreign currency loans priced in single digits, customers woke up to the potentially disastrous effects of foreign currency borrowing. Many customers, especially larger corporates, converted all or substantial parts of their foreign currency-denominated interest bearing liabilities into GEL, pricing differential between and GEL and USD-denominated lending notwithstanding. The situation was aggravated by the lack of GELfunding that has been felt throughout the banking sector for the last couple of years. This is a trend likely to persist for the foreseeable future as the sources of GEL fund-

ing remain few and far between. The Larization Program, in force since January 2017, has further increased the demand for GEL. In the face of these difficulties PASHA Bank Georgia chose to place an emphasis on the maintenance of the portfolio quality, even if this had to come at the expense of loan portfolio growth. PASHA Bank Georgia managed to generate the highest ever net profit of GEL 4.8 mln in its history of operating in Georgia. Our return on average equity of 5% is also the highest ever. In a no-growth environment, we were able to exceed budgeted profitability metrics through proactive yield management within the confines of our current portfolio, as well as placing strong focus on GEL lending which, due to the scarcity of the latter, generated better returns than foreign currency lending for the reporting period. Subdued economic growth also adversely affected the loan syndication market. There were relatively few mega projects launched in 2016 that would have required a creation of a lending syndicate. Constrained portfolio growth prevented us from diluting high portfolio concentrations on certain individual clients and industries. This is a negative development we countered by intensifying post-disbursement monitoring efforts with an eye towards spotting and reacting to the warning signs at the first hint of the trouble. Such a proactive approach to portfolio management enabled us to finish the year with the market leading NPL rate of 0 (assessed as per Bank’s internal grading methodology). Over the course of last year the Bank took a further step forward in terms of institutional development. Main improvements were done in adopting best practices in corporate governance. Activities of main governing bodies of the Bank expanded further. A regular compliance, risk management and internal controls reporting was instituted and takes place at regular

intervals giving the Bank’s management real-time updates on respective matters. Last year we placed an extra emphasis on the project concerned with formulation and update of normative documentary base by formalizing and describing main business processes of the Bank. Another major development of last year is the upgrade of our regulatory reporting systems which have moved from a manual to automated basis, reducing the human error risk (operational risk) in the process. Also group-wide revenue and cost synergy projects took off in earnest resulting in significant and systematic capturing of the synergistic potential across the group on revenue as well as the cost sides. Our close cooperation with PASHA Bank Azerbaijan expanded as well. We extensively utilized a risk transfer approach, whereby PASHA Bank Georgia provides funding for existing clients of PASHA Bank Azerbaijan active in Georgia, secured by letters of guarantee issued by PASHA Bank Azerbaijan. This is something we hope to intensify further as the regional businesses turn to Georgia in search of growth and yield. On the liability side, we have benefited to some extent from the mentioned higher interest rate environment as this has enabled us to attract foreign currency denominated deposits from the Azerbaijani corporates. The difficult operating environment of 2016 once again brought into the spotlight the relative strengths and weaknesses of our current business model. A number of initiatives aimed at transforming the business model to encompass business segments other than corporate were launched. This work will be bought to completion over the course of 2017. The goal is to identify the optimal business model for the 2018-2020 strategic period and, should the decision be made to change the business model, prepare for the rollout before the current year is out.

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

best banks 2016

UK hospitality and leisure industry set for bumper year I

Israel: Housing’s Too Tight to Mention

The FINANCIAL -- British hotels and the leisure industry are set for a record year with a substantial increase in both home and international visitors planning holidays in the UK. The Barclays Corporate Banking report, Destination UK: driving growth in the UK hospitality and leisure sector reveals the 2017 holiday and leisure preferences of almost 10,000 guests from the UK, continental Europe, the US, Middle East, Asia and Australia. Among the 63% of international holidaymakers who said they are more interested in holidaying in the UK than this time last year, perhaps unsurprisingly, 31% cited the weaker pound. However, more attention grabbing is the fifth of respondents reporting that TV programmes like The Crown are driving British appeal, particularly among Chinese (44%) and US (26%) guests, and that high-profile advertising campaigns (29%) are having their effect on overseas audiences. Greater spending power (30%) was also cited as a key reason why they were more interested in visiting the UK in 2017.

Staycationers attracted by convenience and the variety of holidays The staycation’s popularity also

continues to rise, with nearly a third (30%) of UK holidaymakers expecting to spend more of their holiday time in the UK this year. The convenience of holidaying at home is the primary draw. Half of UK respondents choosing a UK break described the familiarity of food, language and travel options as making the UK ‘hassle free’ with 31% now more aware of UK holiday options. Nearly four in ten respondents (38%) of those citing cost as a factor behind a UK break said the weaker pound made holidays in the UK preferable to those abroad, and 39% said a domestic holiday represents better value for money in 2017. The research reveals that the average British budget for UK breaks is £800 with over a fifth (22%) of holidaymakers planning to spend more than £1000 on their UK getaways. During their staycations, Brits also expect to spend an average of £309 on accommodation, £152 on dining out and £121 on shopping, if they were to spend time holidaying in the UK this year.

International holidaymakers influenced by Brexit The majority of international holidaymakers (51%) report that the vote to leave the EU has had no impact on their likelihood to visit the UK, and nearly a third (31%) reported that they are more likely to visit the UK than before the Referendum. However, the study also highlighted

the role of the UK as a tourism hub with nearly a quarter (24%) of those who said they would be less likely to visit the UK post-Brexit citing worries about onward travel to other European destinations. This was especially important for guests from Australia (44%) who are potentially looking to combine their visit with multiple European destinations owing to the longer travel distance. Visas are also a concern as of the 10% of international tourists who said they are less interested in visiting the UK today than 12 months ago- nearly 1 in 5 (19%) cite this as a worry. Other international trends revealed by the research include the regions visitors are keenest to visit, with London (67%) and Scotland (44%) topping the list. Interest in Oxford and Cambridge is also notably higher for Chinese guests. Overall, tourists are eager to experience the UK’s landmarks (51%), history and museums (44%) and natural landscapes (41%). The average length of a UK visit is just over one week at 9 days and the average budget for planned holidays this year per family, including airfares is £3443. However, American and Chinese guests blow even larger budgets on their planned holidays this year with average spends of £5230 and £5424 respectively. Visitors from China and the US also have significantly larger shopping budgets, with visitors from these countries having an average of £800 and £713 to spend in British shops respectively, compared to the overall budget of £453 set aside by international visitors on average.

Experiences and technology rise up the leisure and holiday wish list Younger UK consumers are more interested in a high-tech approach to the leisure sector than older consumers. Over a third (36%) of 18-34s would be more likely to use a bar that invested in automated drinks dispensing, compared to just 6% of the 55 and overs. Younger consumers are also more comfortable with automated ordering in restaurants, with 43% of 18-34s saying they would be more likely to use such a restaurant compared to 14% of the 55 and overs. The current trend towards upmarket cinemas and bowling centres serving alcohol are also more popular with younger consumers. Nearly a third (30%) of 18-34s said they would be more likely to use a cinema that served alcohol, compared to half of all consumers 55+ who said that it would put them off. Regions such as London where this trend is most established, were much more likely to be interested (37%) than guests from other regions such as the East of England where only one in ten (17%) would be more likely to visit a cinema that offered alcohol.

The FINANCIAL

srael has a housing problem. Construction has not kept up with the rising number of households, so the young and the less well-off find it increasingly difficult to afford their own homes, while rising rents take up a growing portion of the income of poorer households. It is getting more and more expensive to buy a home in Israel. In the 10 years to the end of 2016, average housing prices rose by about 125 percent and rents by 62 percent. The situation is especially difficult in Tel Aviv, Israel’s financial and business hub, where it would take the average household 13 years to buy a home—almost twice the national average―if all their income were dedicated to solely this purpose, according to IMF. The reasons for this housing shortage are manifold. Municipalities have strong incentives to approve construction of commercial properties rather than residential projects that pay less tax to municipalities and need additional infrastructure and public services. The state owns most of the land that is not yet developed, and the planning, approval, and construction process faces cumbersome administrative hurdles that stretch out the time from the start of planning to completion for up to 13 years, although recent reforms are estimated to have expedited the planning and approvals process by 2-6 years. Heaviest hit are the young and low-income families. As it takes more time to save up the down payment for a new flat, they must rent apartments for longer. In turn, their rising demand drives up rental costs. But it is the poorest who feel the impact the most: the share they spend on rent has jumped 5 percentage points in the decade to 2013-15. Meanwhile, on the other end of the income spectrum, wealthier households have responded to low interest rates in recent years by increasingly investing in flats for rent. This reinforces the upward pressure on prices that makes it more difficult for young, less well-off households to achieve home ownership. Israel’s rental apartments are mainly offered by small-scale landlords, in part because rental income is taxable for companies but largely not taxable for individuals. In response to the mass protests in 2011 opposing the continued rise in the cost of living, especially the cost of apartments for young families, the Israeli authorities have already taken significant steps, including shortening planning procedures, using “blanket agreements” with municipalities to promote residential development, and discouraging investor demand through tax measures. The IMF recommends more measures to expand supply and improve affordability: Correcting municipal incentives for residential property development would make the supply of housing more responsive to demand in a lasting manner; privatizing more land for residential projects, dramatically expanding the scale of urban renewal, and improving public transportation to help relieve demand in major centers; allowing broader entry of foreign construction companies and streamlining building regulations would reduce construction time and costs; and further developing and improving the rental market.

CMYK

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

best banks 2016

“State budget plan for the first quarter of 2017 was fulfilled with 6% surplus.” Mariam CHACHUA

Table 1: First Quarter Tax Revenues in 2016-2017

FactChek

n 7 April 2017, at the session of the Parliament of Georgia, an MP from the Georgian Dream, Irakli Kovzanadze stated that in the first quarter, state budget incomes have exceeded the planned amount by 6%, whilst total state budget incomes were increased by GEL 496 million as compared to the same period of the previous year. FactCheck verified the accuracy of the aforementioned statement. The state budget income plan for the first quarter of 2017 is GEL 2,537.6 million. According to the Treasury Service, as of 1 April 2017, GEL 2,690.3 million was collected as state budget income, which is 6% (GEL 152.7 million) more as compared to the planned amount and GEL 496.4 million more as compared to the figure registered in the same period of the previous year. Of note is that state budget includes tax revenues together

GEL Million

2016 (Fact) 2017 (Fact) Difference

Growth Rate(%)

Tax Revenues

1956.5

2274.3

317.8

16.2%

Income Tax

334.7

643

315.3

94.2%

Profit Tax

205.8

259

53.2

25.9%

Value Added Tax

728.1

960.8

232.7

32.0%

Excise

226.8

331

104.2

45.9%

with grants and national debt. This year, GEL 88 million was transferred into the state budget in the form of grant, which is 32% more as compared to the figure given in the state budget plan. At the same time, national debt has increased by GEL 223 million, which constitutes 81% of the planned amount. This happened at the expense of preferential investment loans, as the country received GEL 135 million (71% of the planned amount) as an investment loan, instead of planned GEL 190 million. Significant growth has been registered in the tax revenues component. In the first quar-

ter of 2017, it was planned to collect GEL 2,097 million as tax revenues. According to the data of the Treasury Service, as of 1 April 2017, the actual figure of tax revenues was GEL 2,274.3 which is 8.5% (GEL 177.3 million) more as compared to the planned amount. Tax revenues were fulfilled in surplus largely at the expense of growth of profit and value added tax. In the first quarter of this year state budget received GEL259 million as profit tax, whilst revenues from value added tax exceeded the planned amount by 20.4%. In the first quarter of the

previous year, GEL 1,956.5 million was collected from taxes. Therefore, tax revenues are increased by GEL 317 million (16.2%) as compared to the previous year. As Table 1 illustrates, revenues from all kinds of taxes have been increased as compared to the previous year. Growth of the income tax is especially high, as it has almost doubled as compared to 2016. This year’s budget was planned at 4% economic growth rate and according to the data of the National Statistics Office of Georgia, economy grew by 4.8% in January-February. However, economic growth rate is not high enough to cause such a substantial growth of the tax revenues. Some additional factors have also affected the growth of tax revenues. Since January 2017, Georgia’s Tax Code has been amended to some extent. According to the changes enacted in the law, since January this year, excise rate on fuel and tobacco has increased which resulted in growth of excise tax revenues in the budget. Of note is that, since

January 2017, Revenue Service of Georgia has amended the VAT collection rule which made advance payments made for delivery of goods subject to VAT collection. Therefore, whilst old rule required VAT payment for the next month, new rule stipulates early VAT payments to the budget, which in turn increases VAT revenues for the current period. Changes have also been enacted in income and profit tax collection rules, obliging the enterprises to pay profit taxes on a monthly basis. Additionally, certain kinds of expenditures are no longer subtracted from total income, which increases the amount of tax.

Conclusion In January-February 2017, economy grew by 4.8%, which exceeds the 4% economic growth

IRAKLI KOVZANADZE, MP from the Georgian Dream

rate planned in the budget. Obviously, economic growth has positively affected the tax revenues of the state budget. State budget incomes have been fulfilled with 6% surplus and increased by GEL 496 million as compared to the previous year. Of these figures, tax revenues are 8.5% more as compared to the planned amount and are increased by 16.2% (GEL 317.8 million) as compared to 2016. Of note is that together with economic growth, amendments enacted in the Tax Code have also facilitated the growth of tax revenues. FactCheck concludes that Irakli Kovzanadze’s statement is TRUE.

The views expressed in this website are those of FactCheck.ge and do not reflect the views of The FINANCIAL or the supporting organisations This article is exclusively written for The FINANCIAL. It’s co-financed by The FINANCIAL.

What can Georgia learn from Sweden’s Educational Disaster? Continued from p. 2

Too much immigration? Another reason is put forward by Daniel Heller Sahlgren, Ph.D. student at the London School of Economics. He thinks that the slide does not primarily reflect a decline in the quality of the Swedish school system but attributes it to immigration. He summarizes his econometric findings in an article in The Spectator: “The change in pupil demographics due to immigration explains almost a third of the average decline between 2000 and 2012: 19 per cent in mathematical literacy, 28 per cent in reading literacy, and 41 per cent in scientific literacy. The effect is especially pronounced in recent years, coinciding with accelerating refugee immigration. Indeed, between 2009 and 2012, 43 per cent of the average Pisa score decline is explained by altered demographics: a full 29 per cent in mathematical literacy, 45 per cent in reading literacy, and 62 per cent in scientific literacy.”

Sahlgren’s explanation is in line with the observation that homogeneity (as opposed to diversity) seems to be conducive to learning success. Finland, which was largely spared by the international immigration flows until the late 2000’s, had an unusually homogeneous population. Particularly the frequently praised Finnish village schools, where innovative cross-age and crosssocial background teaching takes place, have very homogeneous student bodies. And when Finland became a destination for immigrant flows, its performance started to decline. From 2009 to 2012, Finland dropped by 2.8 percent in math, by 3 percent in science, and by 1.7 percent in reading comprehension. In the 2015 results, Finland’s continued to fall back, and it is now ranked 12th in math, fifth in science and fourth in reading (which is, of course, still pretty good, but Finland previously took first place in PISA).

Lessons for Georgia “I received a distinction for both my degrees and I

now clean s*** in a foreign country,” says Benjamin Bosch, a young Spaniard who became emblematic for some European countries’ high youth unemployment rates. Holding two bachelors and one master’s degree, he ended up in a London café cleaning bathrooms. One could find similar cases in Georgia. A fictitious Beka Boschadze might say: “I received two Ph.D.’s and three master’s degrees but now drive around as a taxi driver in a s***ty Opel in Tbilisi”. Georgia’s performance in PISA is even worse than Sweden’s. In the 2015 PISA study, Georgia took the places 59 in math, 61 in science, and 64 in reading (out of 72 countries). But what are the reasons? Georgia has no noteworthy immigration (the population is quite heterogeneous but the different ethnicities are culturally similar), and given the centralized NAEC exams, there is no risk for a “race to the bottom” in Georgia. The reasons for the bad performance of Georgia and Sweden are in fact

FROM ISET ECONOMIST For more: very different. In Georgia, degrees and formally high qualifications do usually not ensure job market success. This is very different in Sweden and many other northern European countries, where the unemployment rates of highly skilled people are far below general unemployment rates and highskilled unemployment is largely unaffected by the business cycle. Unlike in Sweden, the problem in Georgia is not so much a structural one, but it is about acquired skills: the human capital acquired in Georgia is hardly valued by employers, and many Georgians learn what is not demanded on the market. Georgian educational policy should therefore be guided by the following question: what are the skills and qualifications that are demanded in the 21 st century?

ISET-PI.GE/blog

The answer might be given by Melamed and Salant (2010), who surveyed the literature and identified the so-called “21 st Century Skills”: informational literacy, higher order thinking, communicate and cooperate, technological competence, and learning how to learn. Informational literacy refers to the ability to gather, edit, analyze, process, and connect information. Higher order thinking is about problem solving, argumentation, and the competence to criticize. The meaning of the other skills is selfexplanatory. None of these skills refer to formal knowledge about a subject matter. Moreover, given their nature, the 21 st century skills can be, and need to be, conveyed throughout the whole educational career of a person, which today starts at preschool education and ends at retire-

ment age (the so-called “lifelong learning”). The debate of how what is an optimal education is very old. Many ideas, from Montessori to Steiner (Waldorf Schools) to Summerhill, have been discussed and tried out since the 19 th century, and there is no consensus on the most effective way of teaching. At the same time, classical teaching is all but dead – even Soviet style learning has experienced a revival with the Russian Schools of Mathematics, which are mushrooming throughout the USA, offering “best practices of math schools in the former Soviet Union, adapted to the US educational environment.” In a follow-up article, we will look at different innovative approaches to education and discuss which of those may be most suitable for Georgia.

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

best banks 2016

Georgian National Currency is Stabilized situation with problem loans? A. Over the last few years the index has been more stable and reached 3%. According to data of the first quarter of 2017, the proportion of inactive loans towards total loans is 3.7%. These results speak of the stability of the banking sector. The liquidity ratio is also quite stable and amounts to about 22%. Q. How has the GEL devaluation affected banks’ operations? A. Total revenue of commercial banks amounted to GEL 1,071,331,000. In comparison with the same period of the last year, banks’ revenue has increased by GEL 110 million to GEL 257 million. As noted above, total assets increased by GEL 0.4 billion (or 1.5%), while without the currency exchange factor, revenue increased three times. Q. Please assess the Larization plan introduced by the Georgian Government? A. According to 1Q results, loans issued in GEL increased by 5.8 percent. This is quite a significant growth rate and it’s thanks to the state Larization programme. According to it, all loans up to GEL 100,000 are to be issued in the Georgian national currency. Since small and medium enterprises borrow money mainly in GEL, this

will significantly reduce credit risks. Q. Since January 2017 the GEL exchange rate has been more or less stabilized, though recently USD against GEL again strengthened its position. How does this affect the activities of bank clients in Georgia? A. As you know, countries with nonconvertible currency are characterized by an instability of currency exchange rate. The GEL was strengthened during the mentioned period, from 2.45 to 2.38. So such scenario was expected. Now we see that the GEL has stabilized at 2.45 again. Since December 2016 the range of GEL exchange rate has been within 2.40-2.45 mark. This is also due to proper management of budget resources, income and expenses, which were badly affecting the GEL last year. According to 1Q results the state budget balance increased by GEL 704 mln to GEL 929 mln due to exceeding tax collection and proper balancing of expenses. Budget deficit spending is at a minimal rate. By increasing excise tax the Georgian Government filled expected losses in the budget. We also see that price hikes caused by inflation were temporary, which indicates a proper monetary and fiscal policy.

“China has made a serious progress in terms of importing Georgian wine. It now ranks second among the partner countries.”

OTAR DANELIA, member of the Parliamentary Majority

By TAMAR KHELAIA The FINANCIAL Q. How do you assess the financial results of Georgian banks for the 1Q of 2017? A. As of the 1st of April, 2017, the banking sector’s own funds totalled GEL 4.3 billion, which is 14.5% of the banking sector’s total assets. If we compare to the previous month, in March Georgian commercial banks’ total assets (in current rate) increased by GEL 0.4 billion (1.5%). It amounted to GEL 29.8 billion. Commercial banks’ volume of credit investment totalled GEL18.4 billion as of the 1st of April, 2017. It’s remarkable that currency rates have such an influence on banks’ assets and liabilities. In March 2017, the volume of loans in the national currency increased by GEL 396.6 million (5.8%). The volume of loans in the foreign currency decreased by GEL 704.1 million (5.9%), excluding the effect of the exchange rate decreased by 0.6%. During March 2017, the crediting of individuals decreased by 0.7% (GEL 63.2 million), and as of the 1st of April of the current year, it totalled GEL 9.3 billion. As of the 1st of April, 2017, the Larization rate of total loans amounted to 39.07%.

Ani NADIRASHVILI

FactChek

n 19 April 2017, at the plenary session of the Parliament of Georgia, the member of the Parliamentary Majority, Otar Danelia stated in his speech: “China has made a significant progress and at the present moment it is ranked second in terms of volume of imports of the Georgian wine. The export of the Georgian wine to China has increased fourfold. As of today, 15 million bottles of wine have already been exported and of that amount 2 million bottles were exported to China.” FactCheck took interest in the accuracy of the aforementioned statement. According to the information of the National Wine Agency of Georgia, 14 million

ZURAB GVASALIA, President of the Association of Banks of Georgia

In comparison with the 1st of March, excluding the exchange rate factor, the Larization of total loans had increased by 1.46%. The volume of non-banking deposits placed in the banking sector amounted to GEL 16.1 billion as of the 1st of April, which is GEL 470.6

million (2.8%) less in comparison with the results of the 1st of March (excluding the exchange rate change factor, 0.9% more). In March, compared to the previous month, term deposits decreased by GEL 314.6 million (3.4%), but excluding the exchange rate

change factor increased by 1.0%. The index of deposit Larization, as of the 1st of April, totalled 30.81%. The average weighted percentage was 4.4%, where the interest in national currency was 8.5%, and in foreign currency – 2.8% . Q. What is the current

Table 1: Wine Exports Statistics. 2011-2017

Table 2: Largest Export Markets of the Georgian Wine (Bottle of Wine)

Years 2011 2012 2013 2014 2015 2016 2017 (January-March)

Countries Russia China Ukraine Poland Kazakhstan

USD Thousand 54,086 64,827 128,299 180,401 95,795 113,496 31,338

Growth/Decrease % 20 98 41 -46 16 64

Source: National Statistics Office of Georgia

bottles of wine were exported in January-March 2017, which is 85% more as compared to the same period of the previous year. Total cost of the exported wine constitutes USD 32.2 million, which is 77% more as compared to the same period of 2016. As illustrated by the Table 1, according to the information of the National Statistics Office of Georgia, wine export figures have been growing annually in 2011-2015. In 2015,

wine export dropped by 46%. From 2016 onward, trend of growth has been kept in place. Of note is that among Georgia’s export partner countries, China occupies the second position, with 13% share (1,794,000 bottles) of total wine exports in JanuaryMarch of 2017, which is 383% more as compared to the figure registered in the same period of the previous year. In regard to volume of the Georgian wine exported to Chi-

2015 18,308,177 2,672,154 3,412,453 1,600,302 5,195,949

nese market in 2016, 5,299,149 bottles of wine were exported to China in 2016, which is 98% more as compared to the figure of 2015. In 2016, China’s share of total Georgian wine exports was 11%. As illustrated by the Table, top five largest export markets for Georgian wine are Russia, China, Ukraine, Poland and Kazakhstan.

Conclusion In January-March 2017, in total 14,199,018

2016 27,222,076 5,299,149 5,811,050 2,329,820 3,393,435

2017 (First Quarter) 8,987,745 1,794,200 1,305,508 561,294 473,515

bottles of wine were put on export. Among the export partner countries, China is ranked second. In the first quarter of this year, 1,794,000 bottles of wine were exported to China, which is 13% of total wine exports and 383% higher as

compared to the figure registered in the same period of the previous year. Of note is that Georgian wine export bound for the Chinese market has been growing annually. FactCheck concludes that Otar Danelia’s statement is TRUE.

CMYK

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

best banks 2016

Bank of Georgia Focusing on SME Development Tamta KLDIASHVILI

he EBRD and EU are joining forces with Bank of Georgia to help Georgia’s private sector reach new opportunities. Implemented by Bank of Georgia through credit lines, the facility aims to support SME development in the context of the Association Agreement/ the Deep and Comprehensive Free Trade Area (DCFTA). The establishment of a freetrade area is part of the EU’s Association Agreements (AAs) with Georgia signed in 2014. It offers local firms access to the EU Single Market, the world’s largest free-trade area. The facility allows companies to take full advantage of the opportunities offered by the DCFTA. The support of start-ups and women enterprises must be emphasized. Collaboration between the EU, EBRD and Bank of Georgia can be very beneficial for the development of both businesses and the country. The FINANCIAL talked to Mr. Zura Masurashvili, head of the MSME Banking department at BOG, to discuss the prospects of SME development in Georgia.

Q. Last year EBRD granted Bank of Georgia an EU financing facility, which aims to support SME development in the context of the Association Agreement/the Deep and Comprehensive Free Trade Area (DCFTA), allowing companies to take full advantage of the opportunities offered by the DCFTA. Can you tell us about the outcome of this financing project? A. Bank of Georgia was granted the equivalent of USD 100 million by EBRD to develop Georgian business. Half of it, 50 million, involves the DCFTA component. It is a very important initiative for business support. We created a special product - the European Business Loan - aiming to modernize local business, and ensure that their products and services meet EU standards. On the one hand it will help Georgian companies to bring their products to the European market. And on the other hand it will replace imported goods with high quality Georgian ones. To support this important affair, the EU will give a cashback of up to 15% to companies which use this credit line. The most important thing is that, at the same time, companies have the chance to become a part of government projects, for example “Produce in Georgia’’, or “Cheap Agro”, and simultaneously take a subsidy as part of a bank rate. At present it is a unique opportunity for business development in Georgia. Q. Can you tell us how the EBRD/EU financing facility implemented by Bank of Georgia improved product quality and modernised SME services to meet EU standards? A. Businesses are mainly investing in new technologies and equipment, productionlines, safety of industrial

premises and energy effectiveness. Also they are passing certifications, according to EU requirements. With the European Business Loan we have financed beer production, wine and ice-cream production. They have increased production volumes, but at the same time cut down on the amount of expenditure. In certain cases new installations have given them the opportunity to export their production. We helped and gave finances to several hotels, car service centres, companies which create advertising materials, textile enterprises, asphalt companies and so on. All of these companies were modernized in line with EU standards. Q. It was said that financing will create an environment that is beneficial to cross-border trade and economic growth in Georgia. Can you give us some examples and success stories? A. We have some very good examples. After the process of modernization many businesses have had an opportunity to export to the EU market. We may consider the example of Georgian clothes; also plants, including primrose, liquorice, sweetbrier, nettle and wild apple, which can be found in the forests of Racha. Q. Tell us about women entrepreneurs. How have they benefited from the programme? Why was the financing programme aimed specifically at supporting businesses that are managed or owned by female entrepreneurs for better access to finance? A. Due to the same credit

line, USD 10 million is destined for the development of female enterprises. Generally, in our country the main business owners are males. 70% of our credit portfolios are owned and managed by men. Because of that we have decided to encourage and start financing women’s start-ups. It will help many women to start a business and become more successful. Q. How has the financing facility improved the access of entrepreneurs to know-how and advice? A. Due to the DCFTA credit line we held several events to grow awareness. We invited businesspeople, introduced them in general to the DCFTA and credit line possibilities, the process of implementation. We invited the experts of those countries which have already passed and have access to the European market, also the experts who will introduce to Georgian companies the procedures for certification (for those who want start exporting). These kinds of activities are very important for the successful implementation of the DCFTA in banking and in the country. As well as these financing resources the Bank has a very successful business support programme. It involves business consulting and training. We have recently finished several very important business video catalogues. On the one hand this helps businesses to become more popular, while on the other hand they serve as an inspiration to others. Besides that, we were the first to have opened a branch, made way for business and collaboration. By the way we have created a special corner for businesses, where our

clients are free to place their production. This helps them to become popular and to network. In May we will set up a new BOG portal. Interesting articles can be found there, about business settlement and management. Visitors to the portal will be inspired by the biggest success stories. In general, the portal will help to give advice for business development. Q. Tell us about the technical advice delivered by international experts which is being provided free of charge to these SMEs. Can you give us numbers, statistics? A. Bank of Georgia has been collaborating with European experts. They help businesspeople to invest in the proper way. They estimate that investments are being made due to European standards. Georgian businesspeople are freely being helped. All of these activities help the Bank, companies, and of course the country, to meet EU standards. A tenth of entrepreneurs have received proper technical advice from the Bank and consulting companies. Q. What are the main challenges while issuing SME loans? A. At present Bank of Georgia is a partner and adviser of business. The process and procedures are so simple that enterprises don’t have to prepare in some special way for financial support. They work on a project with the Bank and we help them to get proper financing. If we talk about DCFTA financing the process doesn’t differ. The only difference is the involvement of international experts. Their support is very flexible, effective and successful.

Q. What is the share of SME borrowers which have succeeded in their startups? A. A few month ago, Bank of Georgia was the first to support and finance women start-ups in our country. It is well-known that start-ups are a risky segment. Our bank takes every case very responsibly and carefully. We don’t want our borrowers to have any trouble with loans. Because of that we only choose the ideas whose success we strongly believe in. Up until now we haven’t made any mistakes in this area. It is a recent project so it is a bit premature to talk of its results. Q. Do you provide future assistance to companies whose start-ups fail? A. Beside bank lending we also provide our customer with some advice. We have gained valuable information in the banking system. We have transformed it through our competence and are helping enterprises. Besides that, for the start-ups we have special training programmes - on how to set up an organization. They also have a grace period of an operational tariff for one year. This has a positive effect on business. With constant communication and advice, we are able to facilitate their success. Q. What are the rates of loans offered to SMEs? A. The rates of loans depend on many things. For example on loan currency, loan dates and terms, risks and so on. At present rates are very competitive and in general finances are accessible for any kind of business. Q. Which regions are the most active in terms

of using this special financing? A. We have financed enterprises in almost every region due to the DCFTA, but Adjara, Kakheti and Imereti must be emphasized in particular. However, overall we have the highest numbers in the capital. Q. Please can you identify the main problems hampering the development of SMEs in Georgia? A. I deem that, at present, we have all the possible opportunities for business development. Registration of companies, opening a bank account and getting bank assistance can be done in just a few minutes. According to the World Bank’s rating, Georgia holds one of the main positions in that field. Due to some indexes, for instance getting finances, Georgia holds 7th position. This is promoted by banks and the Georgian Government, with projects Produce in Georgia, Host in Georgia, Cheap Agro, Start-up Georgia and so on. Is spite of that the main problem is market size and low capacity to buy goods. The higher the income of people, the better business develops. These two things are interlinked and dependent on each other. Q. What is the share of SME financing in Bank of Georgia’s loan portfolio? A. The SME portfolio is GEL 1.4 billion. It is 22% of the bank’s total portfolio. The role of banks in Georgia’s strategy is to empower this direction, to ensure more finances for business and other non-financial services. In general we want to develop a new level of business service.

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

best banks 2016

ING Survey: A Cashless Society Is Coming The FINANCIAL -- Cash is king, right? Yes, but its dominance is dwindling in many countries. And people seem to like it that way too: given the choice, one in three people in Europe would go completely cashless, according to a new ING survey. Due to the rise of cash alternatives and the convenience of using them, 68% say that they would rather visit a shop that only accepted cashless payments instead of just cash. The desire to drop cash altogether is higher in emerging economies than in rich countries. These are a few of the findings from the fifth ING International Survey Mobile Banking 2017 – Cashless Society. The aim of this annual survey is to learn how consumers around the world spend, save, invest and feel about money. The focus this year was to explore their preferences when paying for goods and services. Around 1,000 people in 15 countries (Europe plus the US and Australia) took part in the internet-based polling during the month of February.

Cash alternatives on the rise Technological progress in the last few decades has led to a rapid rise in alternatives to cash. Physical notes and coins were initially replaced by debit and credit cards. Yet all four of these options are again replaced by new digital alternatives, such as paying for something through a mobile device (called mobile payments). Meanwhile, some countries are actively discouraging, or outlawing, cash payments altogether. According to some experts, this is in order to halt corruption and tax evasion. In the eurozone, for example, the EUR 500 note will be withdrawn completely by the end of 2018. ING’s latest consumer survey suggests that a cashless society is not only within reach, but desired by many Europeans. One in five people in Europe (21%) said they rarely carry cash anymore. And if

given the option, one in three in Europe would go completely cashless. Of all the 15 countries surveyed, Germans carry the most cash and French and Americans the least. Over half of all respondents said they are using less cash today than they did 12 months ago. “The days of rushing to the ATM so you have enough money for the weekend are long gone,” commented ING senior economist Ian Bright. “Card and even mobile phone payments are increasingly being seen as safe substitutes.”

tween countries. One would expect that in countries that already have a sophisticated infrastructure for digital payments, the public there would embrace a cashless society the most. Not so. The desire to go cashless is more pronounced in emerging economies than in developed economies. In Turkey, for example, 42% would be willing to go completely cash-free versus 21% of Brits and 23% of Dutchmen – the two lowest percentages of all the countries surveyed.

Country differences

The small stuff

However, there are stark differences in attitude be-

Cash is still the dominant way to pay for smaller

transactions. Almost 90% of respondents say they usually use cash when paying for amounts up to EUR 10. That percentage falls to around half for sums between EUR 11 and EUR 50. Once a transaction amount exceeds EUR 100, only 12% of people like to use cash.

How ‘safe’ is cash? By contrast, attitudes about the safety of cash and cash equivalents are surprisingly similar across all countries. More than half (55%) associate cashless payments with a ‘high’ or ‘very high’ level of security. That is more or less on par with the percentage of people (59%) who said that

paying with cash is ‘safe’ or ‘very safe’. Here, Germany and Austria are the outliers: people in these countries have less trust in cash alternatives than anywhere else: 77% of Germans and 71% of Austrians believe cash is much safer than cashless payments.

cards or a mobile device, twothirds said they felt comfortable that they could get by for the next three days. But once the horizon extends, the level of comfort declines: 38% believed they could get by for the next month with no cash on hand.

No cash in In retreat, my wallet – but not what now? dead Despite a growing preference for cashless transactions, there is still a limit to how long people would be willing to walk around without cash. Asked whether they thought they could get by if they didn’t have cash on them, but did have their debt

While the role of cash is clearly declining in daily life, it’s still likely to stick around for a while. Despite a growing preference for cashless transactions, around three quarters of people surveyed in Europe said they never go completely cashless.

EU Member States granted protection to more than 700 000 asylum seekers in 2016 Over half of the beneficiaries were Syrians The FINANCIAL

he 28 Member States of the European Union (EU) granted protection status to 710 400 asylum seekers in 2016, more than double

the number of 2015. In addition to these, the EU Member States received over 14 000 resettled refugees. The largest group of beneficiaries of protection status in the EU in 2016 remained citizens of Syria (405 600 persons, or 57% of the total number of persons granted protection status in the EU Member States), followed by citizens of Iraq (65 800 or 9%) and those of Afghanistan (61 800 or 9%). The number of decisions granting protection status to

Syrians has more than doubled since 2015: they were the largest group granted protection status in nineteen Member States in 2016. Of the 405 600 Syrians granted protection status in the EU, more than 70% were recorded in Germany (294 700).

Over half of asylum decisions at the first instance

made in the EU resulted in protection status In 2016, over 1 100 000 first instance decisions on asylum applications were made in the EU Member States and a further 221 000 final decisions following an appeal. Decisions made at the first instance resulted in almost 673 000 persons being granted protection

status, while a further 38 000 received protection status on appeal.

Recognition rates differs greatly between citizenships The rate of recognition, i.e. the share of positive decisions in the total number of decisions, was 61% for first

instance decisions in the EU. For final decisions on appeal, the recognition rate was 17%. The outcomes of decisions on asylum applications, and therefore the recognition rate, vary between countries of citizenship of asylum applicants. Among the twenty main citizenships of asylum applicants on which decisions were taken at first instance in 2016, recognition rates in the EU ranged from less than 5% for citizens of the Western Balkan countries to 98% for Syrians.

CMYK

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

best banks 2016 JSC Terabank Shareholders of JSC “Terabank” and their shares: 1. H. H. Sheikh Nahayan Mabarak Al Nahayan – 45% 2. H. H. Sheikh Hamdan Bin Zayed Al Nahayan – 20% 3. H. H. Sheikh Mohamed Buti Al Hamed – 15% 4. H. H. Sheikh Mansur Bin Zayed Bin Sultan Al Nahayan – 15% 5. LTD. Investment Trading Group – 5%

Balance Sheet *

Reporting Period N

Latest developments: Changes in shareholders: no changes Changes in management: no changes . Chief Executive Officer - Thea Lortkipanidze, Chief Commercial Officer - Zurab Azarashvili, Chief Financial Officer - Sophie Jugeli, Chief Risks Officer - Temur Abuladze, Chief Operating Officer - Vakho Khutsishvili. Received awards and participation: N/A New branches: New branches to be opened in Zugdidi and Batumi New services or products offered: Client loyalty program “Terabyte” Cash Back Services, Tera Wallet Service, Mobile Banking with free mobile internet (for Magti customers). Public campaigns and charity: 2016 was a significant year for Terabank as the previous brand KSB with 17 year history on Georgian market was successfully replaced with Terabank. Last year bank changed its business strategy and identified SMEs as its core target audience. In order to offer our customers best in class quality service in a comfortable space complete rebranding of the communication style, tone of voice and physical interiors has been carried out. Massive campaign has been launched to incorporate these changes and introduce the new brand to its target audience and not only. Campaign was covered through all communication channels and with its key message – My financial home aimed to position the new brand as the favorite bank and reliable financial partner for SMEs, their owners and employees and their family members. Another major campaign started in 2017 is a deposit and loans ruffle with the key message: Build your life. This campaign is an exceptional one in Georgia as it makes possible for the one lucky customer to build his/her entire life in one moment. Own apartment, new car, travel and consistent income – everything one needs to forget everyday routine and focus on only the most enjoyable things in life – will be won by a single person for the first time. Other 3 ruffles will let our lucky customers win everything they need for their house, car and pleasant travel.

GEL

Total

GEL

Total

Cash

11,037,462

15,437,098

26,474,560

12,086,398

21,356,871

33,443,269

Due from NBG

11,191,445

84,745,142

95,936,587

18,645,303

42,991,032

61,636,336

Due from Banks

83,438

18,703,332

18,786,771

79,134

26,953,853

27,032,987

Dealing Securities Investment Securities

35,325,506

31,154,517

171,820,201

280,947,802

452,768,003

196,408,689

294,887,872

491,296,561

(16,496,824)

(21,237,903)

(37,734,727)

(9,358,498)

(13,509,230)

(22,867,728)

155,323,378

259,709,899

415,033,276

187,050,191

281,378,643

468,428,833

1,629,625

1,679,734

3,309,359

1,846,498

1,316,173

3,162,671

10,707,118

11,226,735

2,538

45,440,409

43,852,989

4,556,378

1,206,768

5,763,146

2,747,947

336,499

3,084,446

275,297,298

381,481,972

656,779,270

308,692,250

374,333,071

683,025,321

5 6.1

Int. rating & awards: N/A Number of branches: Branches – 17, Service desks – 6. (2 new branches to be opened in 2017) Customer groups: SME & Micro, Retail & Corporate

ASSETS

Mission & vision: VISION Our vision is to become a full-fledged commercial bank, the benchmark for excellence in SME Banking and active player in Retail banking in Georgia. We aspire to be a bank of choice and a trusted partner for entrepreneurs, their employees, and their clients; a valuable investment for our shareholders; a preferred employer for our staff, and a good corporate citizen for society. MISSION Our mission is to improve the lives of entrepreneurs, their employees, and their clients by fulfilling their business and personal financial needs. We achieve this by providing solutions, exceptional service and personal attention. By supporting entrepreneurs in a responsible, flexible and efficient way, we contribute to the growth and development of business sector and overall economy of Georgia.

in lari

Respective period of the previous year

6.2 6

8 9 10 11 12

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 6,400,000

2,599,697

8,999,697

5,000,000

22,702,283

27,702,283

Due to Banks Current (Accounts) Deposits

81,143,450

100,845,245

181,988,695

88,901,346

71,996,792

160,898,138

Demand Deposits

25,022,373

60,149,527

85,171,899

27,710,458

41,731,390

69,441,848

Time Deposits Own Debt Securities

44,247,335

140,620,259

184,867,594

83,948,189

170,146,182

254,094,371

Borrowings Accrued Interest and Dividends Payable

40,600,000

7,335,600

47,935,600

19,890,360

575,759

2,342,220

2,917,979

1,453,114

4,147,661

5,600,775

3,809,782

6,067,087

9,876,869

4,560,177

1,815,685

6,375,862

Other Liabilities Subordinated Debentures

31,056,302

35,520,934

Total Liabilities

201,798,699

351,015,936

552,814,635

211,573,284

367,951,288

579,524,572

121,372,000

111,000,000

16 17 18

19 20

EQUITY CAPITAL 23

Common Stock

Preferred Stock Less: Repurchased Shares

Share Premium

General Reserves

Retained Earnings Asset Revaluation Reserves

(17,407,367)

(7,499,251)

Total Equty Capital TOTAL LIABILITIES AND EQUITY CAPITAL

103,964,633

103,500,749

305,763,332

351,015,936

656,779,269

315,074,033

367,951,288

683,025,321

28 29 30

Income Statement *

Respective period of the previous year

Reporting Period N

GEL

Total

GEL

Total

190,623 5,006,950 0

(1,049) 7,260,618 0

189,574 12,267,568 0

178,270 6,244,389 0

4,006 8,482,829 0

182,276 14,727,218 0

1,052,521 11,348

2,523,994 0

3,576,514 11,348

1,316,047 7,195

1,418,063 0

2,734,109 7,195

171,655

206,885

378,540

141,981

89,073

231,053

188,078

774,908

962,987

302,080

146,178

448,258

Interest Income 1 2 2.1 2.2 2.3 2.4 2.5 2.6

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

best banks 2016

Income Statement *

Respective period of the previous year

Reporting Period N 2.7 2.8 2.9 3 4 5 6

GEL

Communications Sector Loans from Individuals Loans from Other Sectors Loans Fees/penalties income from loans to customers Interest and Discount Income from Securities Other Interest Income Total Interest Income

Total

GEL

Total

904 2,654,541 927,904

4,562 1,780,465 1,969,804

5,466 4,435,006 2,897,707

976 3,162,544 1,313,567

3,789 1,768,304 5,057,423

4,765 4,930,848 6,370,990

301,688

273,056

574,744

280,454

264,710

545,163

795,314 197,049 6,491,624

0 47,734 7,580,358

795,314 244,783 14,071,982

774,986 111,530 7,589,628

0 45,960 8,797,504

774,986 157,489 16,387,132

1,836,659 1,161,981

1,085,473 1,903,321

2,922,132 3,065,302

2,766,785 2,346,350

680,809 2,553,062

3,447,594 4,899,412

33,129

238

33,366

44,614

132,730

177,344

337,620 0 3,369,389 3,122,235

841,443 0 3,830,475 3,749,883

1,179,063 0 7,199,864 6,872,119

291,636 0 5,449,385 2,140,243

1,044,203 0 4,410,804 4,386,700

1,335,839 0 9,860,189 6,526,943

673,482

254,246

927,728

595,420

137,466

732,886

Fee and Commission Income

1,061,889

921,637

1,983,527

952,948

694,989

1,647,937

Fee and Commission Expense Dividend Income Gain (Loss) from Dealing Securities Gain (Loss) from Investment Securities Gain (Loss) from Foreign Exchange Trading Gain (Loss) from Foreign Exchange Translation Gain (Loss) on Sales of Fixed Assets Non-Interest Income from other Banking Operations Other Non-Interest Income Total Non-IInterest Income

388,407 0

667,392 0

1,055,799 0

357,527 0

557,523 0

915,050 0

978,577 (1,083,717 )

772,771

978,577 (1,083,717 )

540,792

276

493,632

2,750 3,759 575,127

140,543 216 395,005

143,293 3,974 970,132

0 1,442 2,404,056

7,067 28 144,560

7,067 1,469 2,548,616

Interest Expense 7 8 9 10 11 12 13 14

Interest Paid on Demand Deposits Interest Paid on Time Deposits Interest Paid on Banks Deposits Interest Paid on Own Debt Securities Interest Paid on Other Borrowings Other Interest Expenses Total Interest Expense Net Interest Income

Sokhumi Begins Issuing Residence Permits to Ethnic Georgians

Non-IInterest Income 15 ###

Net Fee and Commission Income

### 16 17 18 19 20 21 22 23 24

Non-IInterest Expenses 111,230

84,487

195,717

122,954

9,357

132,311

26 27 28 29 30 31 32

Non-Interest Expenses from other Banking Operations Bank Development, Consultation and Marketing Expenses Personnel Expenses Operating Costs of Fixed Assets Depreciation Expense Other Non-Interest Expenses Total Non-IInterest Expenses Net Non-IInterest Income

343,290 2,504,786 1,234 1,077,269 1,421,750 5,459,560 (4,884,433)

4,352 0 0 0 8,768 97,607 297,398

347,642 2,504,786 1,234 1,077,269 1,430,519 5,557,167 (4,587,035)

278,765 2,385,165 3,923 967,370 1,153,877 4,912,054 (2,507,998)

0 0 0 0 0 9,357 135,203

278,765 2,385,165 3,923 967,370 1,153,877 4,921,411 (2,372,795)

Net Income before Provisions

(1,762,197)

4,047,281

2,285,084

(367,755)

4,521,904

4,154,149

(3,932,222)

1,814,381

779,957

1,060,464

(3,152,265)

2,874,845

1,390,068 0

4,047,281 0

(3,242,600) 0

4,521,904 0

1,390,068 0

4,047,281 0

(3,242,600) 0

4,521,904 0

1,390,068

4,047,281

5,437,349 0 5,437,349 0 5,437,349

(3,242,600)

4,521,904

1,279,304 0 1,279,304 0 1,279,304

34 35 36 37

38 39 40 41 42

Loan Loss Reserve Provision for Possible Losses on Investments and Securities Provision for Possible Losses on Other Assets Total Provisions for Possible Losses

Net Income before Taxes and Extraordinary Items Taxation Net Income after Taxation Extraordinary Items

Net Income

Continued from p. 17

bkhazian authorities, backed by Russian government began issuing residence permits to ethnic Georgians of Abkhazia, following a four-year-long uncertainly over the legal status of residents of Gali District, the region’s predominantly ethnic Georgian-populated area. According to the local internal affairs ministry, the residence permits are issued for a renewable term of five years and are designed for “foreign citizens or persons without citizenship.” The ministry also reported on April 21, that the residence permit holders living out of breakaway Abkhazia for over six months would be stripped of the document. The document allows its owners to retain Georgian citizenship, to reside in the region and cross the Administrative Boundary Line (ABL) with the rest of Georgia. It will not, however, give full political rights to its holders. According to Sokhumi-based newspaper Nuzhnaya, the residence permit enables its holder to sell and bequeath property in Abkhazia, but does not permit the property purchase. Sokhumi authorities also plan to start consultations with the Moscow on recognizing the residence permits as travel documents for entry to and exit from the Russian federation. The document is pointedly intended for the ethnic Georgian residents of Gali district – the only part of Abkhazia with remaining Georgian population that has survived several waves of ethnic-based expulsion. The number of ethnic Georgians eligible for the “residence permits” will be limited, however. According to the region’s internal affairs ministry, applicants for the permits will need to provide documents proving that they have lived in Abkhazia for at least ten years since 1999. The citizenship passport, the other available document for Abkhazia’s residents, according to the region’s law on citizenship, can only be owned by an ethnic Abkhaz, also a person who is not an ethnic Abkhaz, but who lived in Abkhazia from 1994 to 1999, and who is not a citizen of another state, except the Russian Federation. When combined, the two provisions effectively exclude almost half of Gali district’s 80-thousand strong pre-war population on top of the remaining 200 000 ethnic Georgians from other parts of Abkhazia, who fled the region as a result of the 1992-1993 armed conflict. Aslan Kobakhia, interior minister of breakaway Abkhazia who oversees the “passportization” process, warned local residents at a public meeting on April 21 that those ethnic Georgian residents who would try to possess Abkhaz citizenship (instead of residence permit) while simultaneously retaining the Georgian citizenship, would “forever lose Abkhazia.” Authorities in Sokhumi suspended issuing Abkhaz passports to ethnic Georgian residents of the region in 2013, fearing that the process might result into, as some Abkhaz officials put it, “Georgianization of Abkhazia.” Almost 23 000 Gali residents were removed from the voters’ lists in 2014, shortly before the region’s presidential election on August 24. As a result, only 603 voters were registered in Gali district during the legilslative polls held by Sokhumi authorities on March 12, 2017. The Abkhaz authorities were also unable to conduct local council elections that took place in the rest of Abkhazia in 2016. The outgoing Sokhumi parliament had to issue a special decision, prolonging the term of Gali district council elected in February 2011. According to 2011 census by the Abkhaz authorities, over 46,000 ethnic Georgians live in Abkhazia, mainly in the Gali district, which makes over 19% of the breakaway region’s population. Source: Civil.ge

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HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

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EBRD initiates first-ever Eurobond issued in Georgian local currency

The FINANCIAL

he European Bank for Reconstruction and Development (EBRD) has marked a historic milestone by issuing its first-ever Eurobond both denominated and settled in Georgian lari (GEL). This development has been made possible by a recent establishment of a link between Clearstream and the Georgian domestic market which not only allows GEL to become a settlement currency in the international central securities depository, but also should encourage more international investment in the domestic market. The 5-year bond totalling GEL 120 million (€46.7 million equivalent) was leadmanaged and underwritten by JSC TBC Bank. The coupon on the EBRD’s inaugural GELsettled Eurobond is linked to the three-month rate on certificates of deposit (CDs) issued by the National Bank of Georgia (NBG). The EBRD will apply for the bonds to be listed on the London Stock Exchange, following which an application will be made to the NBG for the Eurobond to be eligible for sale and repurchase operations carried out by the NBG. The EBRD has played a leading role in the development of the local currency and capital markets in Georgia, working with the Georgian government,

the NBG and local financial institutions over many years, including throughout the recent global economic crisis, both to encourage borrowing in local currency and to develop and strengthen local capital markets. “The NBG actively supports the issuance of GELdenominated bonds by IFIs which is of great importance for Georgian capital market development”, Archil Mestvirishvili, Vice Governor of the NBG commented. “It

is notable that the EBRD was the first IFI to issue GELdenominated bonds in the local market in 2014, and now the EBRD again pioneers issuance of Eurobonds in Georgian lari. We hope that increased availability of GEL-denominated AAArated bonds will increase the attractiveness of the Georgian capital markets for local and foreign investors alike.” “Issuance of GELdenominated Eurobonds under the EBRD’s Global

Medium Term Note (GMTN) Programme that will be listed on the London Stock Exchange is an important achievement for the Georgian financial sector that will further support the liquidity of the local currency and attract international investors to the domestic market,” Vakhtang Butskhrikidze, CEO of JSC TBC Bank, remarked. This transaction is in line with the EBRD’s strategy in Georgia to deepen financial

intermediation and develop local currency and capital markets to enable the local private sector access to finance. To date, the EBRD has invested a total of €3.1 billion in 205 projects in various sectors of the Georgian economy. Its first loan in Georgian lari was signed in March 2010. By Loretta Martikian, EBRD

Advertiser: Georgian Railway. Contact FINANCIAL Ad Dep at marketing@finchannel.com

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Payment Cards Statistics Continued from p. 6

Transactions carried out by Payment Service Providers registered at NBG Volume of Payments During Month Under Review

January (2013) February March April May June July August September October November December January (2014) February March April May June July August September October November December January (2015) February March April May June July August September October November December Jamuary (2016) February March April May June July August September October November December Jamuary (2017) February

20 084 259 19 776 379 22 000 260 37 611 298 36 878 634 37 695 797 36 508 535 34 833 142 37 870 106 42 595 151 36 030 558 39 356 842 35 204 111 33 639 494 41 565 747 39 876 879 41 828 157 41 344 401 39 181 899 35 669 165 39 432 128 43 293 036 40 736 071 43 422 787 36 317 943 38 461 985 41 054 457 38 967 221 44 607 292 42 535 411 40 491 377 38 818 499 44 476 682 51 695 026 43 871 805 46 065 512 31 396 415 40 620 594 45 537 682 44 721 482 43 944 331 43 504 722 40 782 538 37 595 310 42 127 210 43 897 490 45 298 739 45 504 860 40 513 786 40 272 426

Value of Payments During Month Under Review

121 220 427,49 125 150 969,12 131 855 357,94 140 245 705,76 138 481 869,60 136 107 281,87 152 085 196,68 158 622 299,14 171 651 708,08 180 694 045,71 169 966 307,32 192 797 189,13 184 806 300,02 190 894 682,49 218 438 399,80 223 202 717,45 227 737 411,78 239 638 178,77 244 995 497,65 241 855 548,90 261 022 349,93 280 956 783,16 279 984 245,98 322 048 223,73 285 438 057,27 302 423 543,59 335 752 593,15 327 343 816,13 345 489 863,59 338 371 557,92 357 476 792,08 353 159 337,33 394 136 257,36 399 597 430,44 396 642 384,83 453 657 228,71 404 223 574,78 455 659 534,63 478 077 079,10 479 969 189,59 476 475 149,62 480 695 043,13 487 249 772,81 505 970 584,96 543 915 938,38 547 494 608,76 535 262 258,84 583 660 433,85 543 714 510,31 544 986 337,06

During the IV quarter, 2016: The total number of the operations performed by the cards issued in Georgia both in Georgia and in abroad, amounted to 37.5 million operations with the value 4.4 billion Gel. The total 96% of the volume and 94% of the value performed inside the Country, while the rest 4% and 6% accordingly - outside of the Country. 62% of the volume and 20% of the value of the total transactions were performed by POS terminals at merchant outlets. Compared to the previous quarter (the third quarter) the above share of the volume increased by 2 percentage point and the share of the value - by 1 percentage point. The total transactions performed by the cards issued in Georgia increased by 7% in terms of volume and by 11% in terms of value compared to the third quarter, 2016. Compared to the IV quarter of 2015 the volume of card transactions issued in Georgia increased by 27% and the value by 24%. Among these transactions the number of POS payments at merchant outlets increased by 42% and the value by 33%. Cash withdrawal transactions increased by 8% in terms of volume and by 22% in terms of value.

Continued on p. 16

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best banks 2016

Payment Cards Statistics Continued from p. 15

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

Employment rate of people aged 20 to 64 in the EU reached a new peak at 71.1% in 2016 The FINANCIAL

n 2016, the employment rate of the population aged 20 to 64 in the European Union (EU) stood at 71.1%, up compared with both 2015 (70.1%) and its previous peak recorded in 2008 (70.3%). The Europe 2020 strategy target is to reach a total employment rate for people aged 20 to 64 of at least 75% in the EU by 2020. This objective has been translated into national targets in order to reflect the situation and possibilities of each Member State to contribute to the common goal. The upward trend in employment rate is visible both for men and women. For men, their employment rate hit 76.9% in 2016, an increase compared with 2015 (75.9%) but still below its 2008 level (77.8%). As for women, their employment rate has continuously risen since 2010 to reach 65.3% in 2016. Similarly, the employment rate of persons aged 55 to 64 in the EU has grown steadily over the last years, from 38.4% in 2002 to 55.3% in 2016. The greater participation of older workers is also one of the objectives of the Europe 2020 strategy on employment. This information comes from an article issued by Eurostat, the statistical office of the European Union, based on the 2016 results of the European Labour Force Survey. This survey collects data on employment and unemployment, as well as on a large range of other variables related to the labour market, of which only a small selection is shown in this News Release.

2016 Data Comparison with Corresponding Period of the Previous Year: Card transactions inside the Country increased by 27% in terms of volume and by 23% in terms of value. The number of POS payments at merchant outlets increased by 43%, while the value increased by 37%. Cash withdrawal transactions increased by 10% in terms of volume and by 21% in terms of value.

During the IVth quarter of 2016 by the cards issued in Georgia were performed 21.6 million POS payments at merchant outlets (including e-commerce transactions) with the value 675 billion Gel inside the Country. the above indicator of the volume is higher by 10% and the value by 18% than the corresponding figures of the previous (third) quarter.

A quarter of Member States already achieved their Europe 2020 employment target Compared with 2015, the employment rate for those aged 20 to 64 increased in 2016 in all Member States except Luxembourg where it remained nearly stable. It grew most strongly in Hungary, Slovakia, the Czech Republic, Spain, Lithuania and Malta. Employment rates above 75% were recorded in Sweden (81.2%), Germany (78.7%), the United Kingdom (77.6%), Denmark (77.4%), the Netherlands (77.1%), the Czech Republic (76.7%), Estonia (76.6%) and Lithuania (75.2%). Among these Member States, the Czech Republic, Germany, Estonia, Lithuania and Sweden have already met or exceeded their 2020 national targets for this indicator in 2016, as have Ireland and Latvia. Malta is only 0.4 percentage points from reaching its target. On the other hand, the lowest employment rate was observed in Greece (56.2%), followed by Croatia (61.4%), Italy (61.6%) as well as Spain (63.9%).

Narrowest gender

employment gap in Lithuania, widest in Malta Employment rates of men and women continued however to vary considerably in many Member States in 2016. The difference between the employment rate of women and that of men aged 20-64 was lowest in Lithuania (74.3% for women vs. 76.2% for men, or -1.9 percentage points), Latvia (-2.9 pp), Finland (-3.3 pp) and Sweden (-3.8 pp). At the opposite end of the scale, the largest difference between the employment rate of women and that of men was observed in Malta (55.5% for women vs. 83.1% for men, or -27.6 pp). Big gaps were also recorded in Italy (-20.1 pp), Greece (-19.0 pp), Romania (-17.6 pp) and the Czech Republic (-16.0 pp). At EU level, the difference between the employment rate of women aged 20-64 (65.3%) and that of men aged 20-64 (76.9%) was -11.6 pp in 2016, compared with -17.3 pp in 2002.

Employment rate of those aged 55 to 64 at its highest point in the EU From 2002 onwards, the employment rate of people aged 5564 in the EU has grown steadily to reach 55.3% in 2016, compared with 38.4% in 2002. The growth was stronger for women (from 29.1% in 2002 to 48.9% in 2016) than for men (48.2% in 2002 vs. 62.0% in 2016). As a consequence, the gap between the employment rate of women and men aged 55-64 in the EU has been reduced, from a 19.1 percentage points difference in 2002 to a 13.1 pp difference in 2016.

More than two-thirds of persons aged 55 to 64 have a job in Sweden, Germany and Denmark In 2016, over half of the population aged 55 to 64 was in employment in fifteen EU Member States. The highest employment rate for this age group was observed in Sweden (75.5%), ahead of Germany (68.6%), Denmark (67.8%), Estonia (65.2%), Lithuania (64.6%), the Netherlands (63.5%) and the United Kingdom (63.4%). On the other hand, the lowest employment rates were registered in Greece (36.3%), Croatia (38.1%), Slovenia (38.5%) and Luxembourg (39.6%). Compared with 2015, the employment rate for those aged 55 to 64 increased in 2016 in all EU Member States except Croatia.

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HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

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European Commission approves disbursement of EUR 23 million in assistance to Georgia

The FINANCIAL

he European Commission, on behalf of the EU, approved the disbursement of the second tranche of EUR 23 million under its MacroFinancial Assistance (MFA) to Georgia. The funds – EUR 10 million in grants and EUR 13 million in low-interest loans – will be disbursed in May 2017. This is the final instalment of the second of two MFA operations, each in an amount of EUR 46 million. The first one was fully disbursed in 20092010. The EU’s MFA programme was intended to strengthen Georgia’s external and budgetary positions and to support the government’s agenda of economic, social and financial reforms. The policy programme attached to the EU’s assistance, which was jointly agreed by Georgia and the EU in December 2014, included measures aimed at improving public finance management, fostering social inclusiveness and strengthening financial supervision. It also contained measures related to trade and competition policies, which aimed to help Georgia fully reap the benefits of the EUGeorgia Association Agreement (AA), including a Deep and Comprehensive Free Trade Area (DCFTA), which was signed in 2014, provisionally applied from September 2014 and entered into force in July 2016.

“The disbursement is part of the EU’s long-standing support to Georgia and its citizens”, Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxations and Customs, said. “On the back of successful completion of critical reform commitments and improved stability, but at a time when our partner continues to face a challenging balance-ofpayments and fiscal situation, the EU’s assistance will help alleviate Georgia’s short-term financing needs. It will also support the implementation of key reforms aimed at boosting economic growth and job creation, reinforcing social safety nets and strengthening the stability of the financial sector.” Macro-financial assistance (MFA) operations are part of the EU’s wider engagement with neighbouring countries and are intended as an exceptional EU crisis response instrument. They are available to EU partner countries experiencing severe balance-of-payments issues. EU assistance to Georgia is also delivered through other financial instruments, such as budget support. In August 2013, the EU approved an MFA programme for Georgia of up to EUR 46 million, to be disbursed in two equal tranches of EUR 23 million. The European Commission signed a memorandum of understanding with Georgia in December 2014 and disbursed the first MFA tranche in early 2015 (EUR 13

million in grants in January 2015 and EUR 10 million in loans in April 2015). This second and final instalment follows the recent agreement between Georgia and the International Monetary Fund on a new assistance programme. Based on the findings gathered during a review mission conducted in November 2015, the Commission concluded that Georgia had implemented all MFA policy measures associated with the second tranche of MFA (worth EUR 10 million in grants and EUR 13 million in loans). The disbursement of this tranche was foreseen to take place in 2016, but had to be delayed due to the lack of progress with the implementation of Georgia’s programme with the International Monetary Fund (IMF). With the approval by the IMF Executive Board of a new $285 million Extended Fund Facility for Georgia on 12 April 2017, the Commission has decided to proceed with the disbursement of the second tranche of MFA. This MFA programme for Georgia is the second of two operations pledged by the EU at the International Donor Conference which took place in Brussels in October 2008, in the aftermath of the military conflict with Russia. A previous EU MFA programme for Georgia, also amounting to EUR 46 million and exclusively composed of grants, had been successfully implemented in 2009-2010.

60% of banks plan to invest in new technologies as market challenges persist The FINANCIAL

hile only 11% of banking executives expect their financial performance to improve significantly over the next 12 months, the majority of banks (60%) are investing in new customer facing technologies according to the EY Global Banking Outlook 2017. The survey of senior executives at almost 300 banks across Europe, the Americas, Africa and Asia-Pacific identified two priorities for growth in the sector: recruiting and retaining talent and investing in new customer-facing technology. Banks need to focus on improving five specific areas inside their organizations according to the survey: Reshape – The banking industry will coalesce around four primary business models: local boutiques, global boutiques, regional champions and universal super banks. Banks must pick one and then restructure operations accordingly.

Control – Banks need to strengthen their three lines of defense risk management approach by improving efficiency, strengthening focus on vendor management and creating simpler supply chains. Protect – Banks need to minimize internal and external threats by putting legacy issues in the past and demonstrating they have systems in place to prevent money laundering and financial crime. They also need to prepare for cyber attacks and future outages. Optimize – The operating costto-asset ratio for banks has barely moved in the past five years. Banks need to shift to a forward-looking effort to embrace technology and drive “next-generation efficiency” in expense management to make progress. Grow – Banks need to invest in staff and technology to support innovation to defend market share and work to ensure that they remain competitive as customers become more willing to use financial products offered by non-traditional partners.

Women and Families Across the World

The FINANCIAL -- In a global online survey of adults aged under 65 in 22 countries, only four in ten (37%) believe that “the role of women in society is to be good mothers and wives”, while many more (58%) disagree. According to the Ipsos MORI Global Trends Survey 2017, most people take a liberal view towards the role of women. When it comes to parenting, however, traditional views are more prevalent. A majority across the 22 countries think that it is better for parents of children to be married rather than unmarried (57%), and even more strongly that parents today do not take enough responsibility for the behaviour of their children (77%). The research also shows clear differences of opinion between emerging vs established economies, between men and women, and most notably, between those with religious faith and those without. Across 22 countries in only three do most think the role of women is

to be good mothers and wives – Indonesia (76%), Russia (69%) and India (64%). More liberal views are clearly in the majority in most established economies (although less so in Germany and the US), but in four Western European countries there have been significant increases in agreement with the more traditional view: in Germany (up ten points since 2014 to 41%), France (up eight to 24%), Spain (up seven to 19%) and Sweden (up eight to 17%). There have also been significant increases in India (up seven points to 64%), and in Turkey (up 11 points to 47%). Men are more likely than women to think women should be wives and mothers (by 41% to 34%, on average), but there is an even greater divide by religious belief. Those with religious beliefs are almost twice as likely to side with the traditional view on gender roles than those who describe themselves as agnostic or atheist (by 42% to 24%).

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HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

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Ever greater share of persons aged 30 to 34 with tertiary educational attainment in the EU...

SES Increases its Satellite Reach in Georgia by 21% in one year

SATELLITE IS THE LEADING TV RECEPTION MODE IN GEORGIA AND SERVES 47% OF TV HOMES

... and ever fewer early leavers from education and training The FINANCIAL

he share of persons aged 30 to 34 in the European Union (EU) who have completed tertiary education continued to steadily increase, from 23.6% in 2002 when the series started to 39.1% in 2016. This pattern was even more significant for women (from 24.5% in 2002 to 43.9% in 2016, meaning above the overall Europe 2020 target) than for men (from 22.6% to 34.4%, meaning still below the overall Europe 2020 target). The Europe 2020 strategy’s target is that at least 40% of 30-34-year-olds in the EU should have completed tertiary education by 2020. Meanwhile, the share of early leavers from education and training (aged 18-24) has steadily decreased in the EU, from 17.0% in 2002 to 10.7% in 2016. Young women (9.2% in 2016) are less affected than young men (12.2%). The Europe 2020 target is to reduce the rates of early school leaving in the EU to below 10% by 2020.

Highest share of those aged 3034 with tertiary education in Lithuania, lowest in Romania and Italy In 2016, the proportion of those aged 30 to 34 who had completed tertiary education increased compared with 2002 in every Member State for which the time-series is available. In 2016, at least half of the population aged 30 to 34 had completed tertiary education in Lithuania (58.7%), Luxembourg (54.6%), Cyprus (53.4%), Ireland (52.9%) as well as Sweden (51.0%). At the opposite end of the scale, the lowest proportions were observed in Romania (25.6%), Italy (26.2%), Croatia (29.5%) and Malta (29.8%). Thirteen Member States have already met or exceeded their 2020 national target for this indicator: the Czech Republic, Denmark, Estonia, Greece, Italy, Cyprus, Latvia, Lithuania, the Netherlands, Austria, Slovenia, Finland and Sweden. In 2016, the share of persons aged 30 to 34 who have completed tertia-

ry education is significantly higher for women than men in all Member States, except Germany.

Lowest share of ‘early school leavers’ in Croatia, highest in Malta and Spain Compared with 2006, the proportion of early leavers from education and training decreased in 2016 in all Member States for which the timeseries is available, except the Czech Republic, Romania and Slovakia. In 2016, the lowest proportions of ‘early school leavers’ were observed in Croatia (2.8%), Lithuania (4.8%), Slovenia (4.9%) and Poland (5.2%), while the highest shares were recorded in Malta (19.6%), Spain (19.0%) and Romania (18.5%). Thirteen Member States have already fulfilled their 2020 national target for this indicator: Belgium, Denmark, Ireland, Greece, France, Croatia, Italy, Cyprus, Lithuania, Luxembourg, Austria, Slovenia and Finland. In 2016, the share of early leavers from education and training was lower for women than men in every EU Member State, except Bulgaria, the Czech Republic and Romania.

The FINANCIAL -- SES announced today that its technical reach in Georgia has increased to 455 000 TV homes, which represents a 5% increase compared to last year. SES’s direct reach (DTH) has increased by 21% to 141,000 homes in one year. SES is the world-leading satellite operator and the first to deliver a differentiated and scalable GEO-MEO offering worldwide, with more than 50 satellites in Geostationary Earth Orbit (GEO) and 12 in Medium Earth Orbit (MEO). The SES Satellite Monitor YE2016 results reveal that satellite is by far the leading TV reception mode in Georgia, reaching 47% of TV homes directly or over 510 000 DTH homes. SES plays a key role in the market as it reaches 455 000 TV homes (including direct reach (DTH) as well as cable and IPTV homes), which represents a 5% increase compared to last year. SES provides services to approximately 124 000 homes that are subscribed to the MagtiSat TV offers. The fascination for higher picture quality has clearly gained momentum in Georgia, with an 11% increase of all HDTV homes in the country. The number of TV homes enjoying HD thanks to satellite has increased to 158,000 homes - an 11% growth compared to last year. SES serves 34% of satellite HDTV homes in Georgia (54,000 homes), which represents a 54% increase. UHD Awareness is raising worldwide and global trend of UHD development is also seen in Georgia. If in 2015 27% of Georgian population were aware of UHD and 9% owned a UHD screen, in 2016 there is a vivid growth in both categories of population. Already 37 % of population are aware of UHD and 15% already own

this type of screen. “The Satellite Monitor study confirms the role of satellite as the central pillar of the digital broadcasting infrastructure,” said Håkan Sjödin, Vice President, Sales Nordic, Baltic and Eastern Europe at SES. “SES continues to play an important role in the development of digital TV in Georgia, and we expect the trend to ever better picture quality to continue and further boost the video market.” Europe: Satellite is the leading TV reception mode Satellite is the leading mode of TV reception in Europe, with 35% of TV homes reached directly (88 million). The results also prove the key role of SES in Europe, with 70% of European satellite households being served by SES satellites. Additionally, SES plays a key role, thanks to its indirect reach, by serving 94% of cable homes and 90% of IPTV homes in the region. The results show that the number of TV households enjoying HD content in Europe has almost doubled over the past five years and demonstrated 10% growth comparing to YE2015. SES now serves 93 million HDTV homes, which represents 78% of European Satellite HDTV homes. The number of Ultra HD screens in Europe has gradually increased over the past years, tripling from 6 million in 2014 to over 17 million in 2016. As of the end of last year, almost 7% of European homes are already equipped with an Ultra HD screen. SES increases its reach worldwide SES’s technical reach worldwide has increased to 325 million TV homes. This represents an increase of eight million TV homes compared to 2015, and an overall growth of 18% since 2012.

Turkey Blocks Access To Wikipedia

urkish officials have blocked all access to the popular Wikipedia website within the country. Turkey’s Information and Communication Technologies Authority (BTK) said on April 29 that it carried out the ban on wikipedia. org but did not give a reason for the move. Turkish media said the ban is a result of Wikipedia failing to remove content that officials claim is promoting terror and also linking Turkey with terror groups. A formal court order on the ban is

expected to follow in the coming days. The blockage, which affected all language editions of the website in Turkey, was detected at about 8 a.m. local time after an administrative order was made by authorities, according to the Turkey Blocks monitoring group. Turkey is well known for temporarily blocking access to popular websites, including Facebook and Twitter, and in March 2014 began blocking YouTube for several months. Based on reporting by AFP, Reuters, and AP

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ProCredit Bank, Georgia Shareholders:

New branches:

ProCredit Holding AG & Co. KGaA – 100%

Batumi flagship – A new and innovative 24/7 Zone in Batumi. The predominantly green 24/7 Zone is a synthesis of business, art and nature. Modern equipments which allow clients to make deposits, withdrawals, and transfers around the clock, aims to provide clients with comfortable banking experience.

Mission & vision: ProCredit Bank is a developmentoriented commercial bank. We offer excellent customer service to small and medium enterprises and to private individuals who would like to save. In our operations, we adhere to a number of core principles: we value transparency in our communication with customers, we do not promote consumer lending, we strive to minimize our ecological footprint, and we provide services which are based both on an understanding of each client’s situation and on sound financial analysis. In our operations with business clients, we focus on 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 financial responsibility. Our shareholders expect a sustainable return on investment over the 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 (customer) service for our clients.

Int. rating & awards: In May 2016 Fitch Ratings affirmed the Outlook on the Longterm Issuer Default Ratings (IDRs) of ProCredit Bank. ProCredit Bank continues to carry the best and the highest possible rating in Georgia which is one notch above the sovereign rating (BB-/Stable).

Number of branches: As of 31.12.2016 32 branches

Customer groups: The bank focuses on small and medium-sized enterprises as well as business owners, their employees and social circle.

Latest developments: Changes in shareholders: Changes in management: Composition of the Board of Directors: Ketevan Khuskivadze – Director Natia Tkhilaishvili - Director Alex Matua – Director David Gabelashvili – Director

Received awards and participation: ISO 14001 certification ProCredit Bank is the first bank in Georgia to receive ISO 14001 certification for environmental management.

New services or products offered: Co-financing – An attractive lending programme with preferential terms and conditions for companies operating in Georgia. Moreover, under the Co-finance Programme, a joint venture between ProCredit Bank Georgia and ProCredit Bank Germany, companies can be financed directly from Germany at preferential European interest rates. The programme aims to support businesses that have a sustainable, long-term development plan and which require funding in the range of EUR 750k to EUR 5m. Contactless cards and Pay Stickers- ProCredit Bank offered its customers contactless cards and Pay Stickers, enabling them to make quick and easy payments when shopping. Universal Plus Cash-in ATM – A new machine Universal plus ATM was placed in Zone 24/7. New ATM allows users to deposit/ withdraw about 300 notes in one transaction. The deposited amount is counted automatically and credited to the desired account immediately. The ATMs accept both domestic and foreign currencies. Eco mobility Loan – ProCredit Bank offered eco auto loans to its customers to buy electric and hybrid cars. The advantage of the loan, together with its eco purpose, is an attractive interest rate that is much lower than those offered in standard auto loans on the market. In addition, customers are able to join forces with the bank to implement environmentallyfriendly investments. Eco deposits - Eco deposits have different conditions from standard deposit terms. The bank directs funds from eco deposits to finance eco projects. Eco depositors can find quarterly information on ProCredit’s official webpage about where the deposits have been invested.

Public campaigns and charity: Summer ProRhythm Public event Summer ProRhythm organized by ProCredit was held in Batumi, at the seaside adjacent to the Alphabetic Tower. The Sukhishvilebi National Ballet Ensemble performed for an enthusiastic audience. The show ended with spectacular musical fireworks display. This was the first time that a musical fireworks display of this scale was put on in Georgia. Earth day - ProCredit Bank celebrated Earth Day. The bank symbolically gave trees of abundance to its employees and customers to celebrate Earth Day, a gesture which can be interpreted in two ways. On the one hand, the trees reminded the recipients to take care of the environment, and on the other hand, the bank wished its customers abundance and financial well-being.

ProCredit Bank’s ratings:

Long-term foreign and local currency IDRs, Outlook Stable

Short-term foreign and local currency IDRs

Viability Rating

bb-

Support Rating

CMYK

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

best banks 2016

markets

Weekly Market Watch ECONOMY

Key macro indicators 2M17

Real GDP grew 5.3% y/y in March 2017

GDP (% change) GDP per capita (ppp)

Georgia’s economy expanded 5.3% y/y in March 2017, after growing 4.4% y/y in previous month, according to GeoStat’s rapid estimates. Overall, in 1Q17 GDP growth was 5.0% y/y compared to 3.3% growth in 1Q16. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.

GDP per capita (US$)

4.8%

2.7%

2.9%

…

9,630 3,767

…

3,853 3.7

3.7

5.5%

1.8%

4.9%

2.8

2.5

CAD (% of GDP)

…

13.3%)

11.9%

Fiscal deficit (% of GDP)

…

4.1%

3.7%

Total public debt (% of GDP)

…

44.6%

41.4%

Inflation (eop) Gross reserves (US$ bn)

Source: Official data, IMF, G&T

Ease of Doing Business # 16 (regional leader)

Source: GeoStat

Loan and Deposit dollarization

BB-

Ba3

BB-

Stable Affirmed Nov-2016

Positive Affirmed Mar-2016

Stable Affirmed Mar-2017

Source: Rating agencies

Global Competitiveness Index # 59 (improving trend) Source: World Bank, Heritage Foundaition and World Economic Forum

Source: NBG Note: Index growth means appreciation of exchange rate, decline means depreciation of exchange rate.

EQUITIES

Georgia Eurobonds, YTM (%)

TBC Bank Group (TBCG LN)

NPLs at 3.7% y/y in March 2017 In March 2017, the banking sector loan portfolio increased 13.0% y/y after growing 12.4% y/y in previous month, excluding the exchange rate effect. In unadjusted terms, loan portfolio was up 17.9% y/y and 0.6% m/m to GEL 18.8bn (US$ 7.6bn). Deposits were up 10.6% y/y excluding the exchange rate effect. In unadjusted terms, deposits were up 12.6% y/y and down 2.8% m/m to GEL 16.1bn (US$ 6.6bn). Deposit dollarization reached 69.2% (-1.6ppts y/y and -1.3ppts m/m). NPLs stood at 3.7% in March 2017, up 0.5ppts y/y and down 0.1ppts m/m.

Georgia Healthcare Group (GHG LN)

BGEO Group PLC (BGEO LN)

Corporate Eurobonds: BGEO Group Eurobonds (BGEOLN) closed at 5.8% yield, trading at 101.0 (unchanged w/w). GOGC Eurobonds (GEOROG) were trading at 105.5 (+0.3% w/w), yielding 5.2%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 110.5 (+0.1% w/w), yielding 5.4%. Georgian Sovereign Eurobonds (GEORG) closed at 111.0 (+0.1% w/w) at 3.8% yield to maturity.

M2RE 10/19

Source: Bloomberg

Local bonds GWP 12/21

Economic Freedom Index # 13 (mostly free)

Nominal Effective Exchange Rate and Real Effective Exchange Rate

Source: NBG

FIXED INCOME

International ranking, 2016-17

2015

3.7

Population (mn)

Georgia sovereign credit ratings

Real GDP growth, %

2016

WEEKLY MARKET WATCH EXCLUSIVELY PROVIDED TO THE FINANCIAL BY GALT & TAGGART

Eurobonds

Nikora 03/18

GLC 09/17

GEOROG 04/21

BGEOLN 07/23

GEORG 04/21

GRAIL 07/22

Amount, US$ mn Issue date

30*

25.0

5.0

10.0

250

350

500

12/16

10/16

03/16

09/14

04/16

07/16

04/11

07/12

Maturity date

12/21

10/19

03/18

09/17

04/21

07/23

04/21

07/22

Coupon, % Fitch/S&P/ Moody's Mid price, US$

10.25

7.5

11.0

8.75

6.750

6.000

6.875

7.750

BB-/-/-

-/-/-

BB-/B+/-

BB-/-/B1 BB-/BB-/Ba3

B+/B+/-

n/a

101.1

101.6

101.0

105.5

101.1

111.0

Mid yield, %

n/a

7.00%

9.0%

6.00%

5.2

5.8

3.8

110.5 5.4

Z-spread, bps

n/a

338.1

200.1

346.7

375.9

BGEO Group (BGEO LN) shares closed at GBP 36.00/share (+2.68% w/w and +12.50% m/m). More than 533k shares traded in the range of GBP 34.63 – 36.33/share. Average daily traded volume was 111k in the last 4 weeks. FTSE 250 Index, of

Source: Bloomberg

which BGEO is a constituent, gained 1.37% w/w and gained 3.54% m/m. The volume of BGEO shares traded was at 1.35% of its capitalization. TBC Bank Group (TBCG LN) closed the week at GBP 16.25 (+5.59% w/w and +8.33% m/m). More than 927k shares changed hands in the range of GBP 15.30 – 16.41/share. Averaged daily traded

volume was 68k in the last 4 weeks. Georgia Healthcare Group (GHG LN) shares closed at GBP 3.55/share (-2.07% w/w and -2.07% m/m). More than 162k shares were traded in the range of GBP 3.55 – 3.65/share. Average daily traded volume was 15k in the last 4 weeks. The volume of GHG shares traded was at 0.12% of its capitalization.

MONEY MARKET Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL 1,200mn (US$ 484.4mn). Certificates of deposit: NBG sold 91-day, GEL 20mn (US$ 8.2mn) certificates of deposit, with an aver-

age yield of 6.88% (down by 2bps from previous issue). Ministry of Finance Treasury Notes: 5-year GEL 25.0mn (US$ 10.2mn) T-Notes of Ministry of Finance were sold at the auction held at NBG on April 26, 2017. The weighted average yield was fixed at 8.638%. The nearest treasury security auction is scheduled for May 3, 2017, where GEL 40.0mn nominal value 1-years T-Bills will be sold.

T-bills / T-notes, yield curve

*GWP 12/21 bonds are in Georgian lari

Monetary policy rate

Eastern European sovereign 10-year bond performance Issuer Georgia Azerbaijan Bulgaria Croatia Hungary Romania Russia Turkey Source: Bloomberg

Amount, US$ mn 500 1,250 323 1,250 3,000 2,250 3,500 2,000

Coupon, % 6.875% 4.750% 5.000% 3.875% 6.375% 6.750% 5.000% 5.625%

Maturity date 12/04/2021 18/03/2024 19/07/2021 30/05/2022 29/03/2021 07/02/2022 29/04/2020 30/03/2021

Ratings (Fitch/S&P/Moody) BB-/BB-/Ba3 BB+/BB+/Ba1 BBB-/BB+/Baa2 BB/BB/Ba2 BBB-/BBB-/Baa3 BBB-/BBB-/Baa3 BBB-/BB+/Ba1 BB+/BB/Ba1

Mid yield, % 3.8 4.4 0.4 2.0 2.8 3.1 2.6 3.9

Source: NBG *Note: As of latest auction.

Source: NBG

WEEKLY MARKET WATCH EXCLUSIVELY PROVIDED TO THE FINANCIAL BY GALT & TAGGART Investments (or any short-term transactions) in emerging markets involve significant risk and volatility and may not be suitable for everyone. The readers of this document must make their own investment decisions as they believe appropriate based on their specific objectives and financial situation. When doing so, such recipients should be sure to make their own assessment of the risks inherent in emerging market investments, including potential political and economic instability, other political risks including without limitation changes to laws and tariffs, and nationalization of assets, and currency exchange risk.

GALT & TAGGART Address: 79 D. Agmashenebeli Avenue, Tbilisi 0102, Georgia Tel: + (995) 32 2401 111 Email: gt@gt.ge

CMYK

HEADLINE NEWS & ANALYSIS FINCHANNEL.COM | 1 MAY, 2017

best banks 2016

JSC “Basisbank” Balance Sheet *

in lari

Respective period of the previous year

Reporting Period ASSETS

N 1

Cash

Due from NBG

Due from Banks

Dealing Securities

Investment Securities

6,1

Loans

6,2

Less: Loan Loss Reserves

GEL

10 390 729

11 944 515

22 335 245

7 049 444

101 671 054

108 720 498

9 707 639

56 341 012

66 048 650

239 006

47 938 494

48 177 500

3 864 069

63 299 873

67 163 942

118 505 115

92 229 845

176 443 442

416 411 077

592 854 520

170 982 970

279 768 230

450 751 199

-5 542 950

-20 731 210

-26 274 160

-5 208 936

-14 773 374

-19 982 310

170 900 492

395 679 868

566 580 360

165 774 034

264 994 856

430 768 889

2 129 092

5 285 638

2 546 084

1 726 556

4 272 640

4 517 590

4 548 679

3 859 355

5 259 355

21 793 352

23 134 000

Accrued Interest and Dividends Receivable

3 156 546

Other Real Estate Owned & Repossessed Assets

4 517 590

Equity Investments

3 859 355

Fixed Assets and Intangible Assets Other Assets

Total

24 661 041

TOTAL ASSETS

14 148 907

Net Loans

GEL

10 512 133

Total

X 0

21 793 352

X 0 X

4 548 679 5 259 355 23 134 000

3 258 972

218 570

3 477 542

3 193 290

5 086 371

8 279 661

343 792 006

561 785 984

905 577 990

320 647 724

403 393 182

724 040 906

LIABILITIES 13

Due to Banks

13 001 144

15 049 856

28 051 001

7 027 488

3 719 231

10 746 719

Current (Accounts) Deposits

47 341 597

80 423 918

127 765 516

43 534 067

42 484 851

86 018 918

Demand Deposits

29 535 849

91 398 246

120 934 095

17 876 974

41 628 279

59 505 253

Time Deposits

22 605 573

280 940 477

303 546 050

40 623 452

254 658 994

295 282 447

Own Debt Securities

Borrowings

Accrued Interest and Dividends Payable

Other Liabilities

21 22

Subordinated Debentures Total Liabilities

30 405 053

107 588 800

137 993 853

33 438 167

59 467 326

92 905 493

520 545

6 471 511

6 992 056

507 040

5 689 606

6 196 646

6 272 763

984 182

7 256 945

7 358 720

5 786 880

13 145 600

4 735 800

149 682 524

582 856 991

732 539 515

150 365 908

418 170 968

568 536 876

EQUITY CAPITAL 23

Common Stock

16 057 277

16 013 147

Preferred Stock

Less: Repurchased Shares

Share Premium

74 865 296

74 477 813

General Reserves

65 529 805

35 303 003

Retained Earnings

7 984 442

21 108 412

Asset Revaluation Reserves

8 601 655

173 038 475

155 504 030

905 577 990

305 869 938

Total Equty Capital

173 038 475

TOTAL LIABILITIES AND EQUITY CAPITAL

322 720 999

582 856 991

418 170 968

Income Statement *

724 040 906

in lari

Reporting Period N

GEL

Respective period of the previous year Total

GEL

Total

245 377 5 185 508

233 667 7 936 535

1 104 124 68 903 131 266 236 744 298 055 21 2 066 377 1 280 017 78 445 2 139 398 183 959 7 832 688

2 572 676 1 843 260 834 942 650 303 923 18 305 3 589 687 246 617 263 711

479 044 13 122 043 0 3 676 800 70 745 392 100 1 179 395 601 978 18 327 5 656 064 1 526 634 342 156 2 139 398 248 416 16 331 058

712 113 565 531 581 168 15 640 784 399

321 685 2 739 213 21 269

2 658 849 5 173 839

3 949 899 4 548 471

Interest Income 1 2 2,1 2,2 2,3 2,4 2,5 2,6 2,7 2,8 2,9 3 4 5 6

Interest Income from Bank's "Nostro" and Deposit Accounts Interest Income from Loans from the Interbank Loans from the Retail or Service Sector Loans from the Energy Sector Loans from the Agriculture and Forestry Sector Loans from the Construction Sector Loans from the Mining and Mineral Processing Sector Loans from the Transportation or Communications Sector Loans from Individuals Loans from Other Sectors Loans Fees/penalties income from loans to customers Interest and Discount Income from Securities Other Interest Income Total Interest Income

7 8 9 10 11 12 13 14

136 852 4 309 008 18 410 949 122 53 714 123 024 193 510 195 911 6 1 867 415 907 896 47 515 2 481 834 174 671 7 149 880

63 317 9 296 914 3 194 280 2 959 161 273 997 313 231 890 11 672 3 693 106 1 004 419 191 269 1 080 911 10 632 411

200 169 13 605 921 18 410 4 143 402 56 674 284 297 1 190 823 427 802 11 678 5 560 521 1 912 315 238 784 2 481 834 1 255 582 17 782 291

64 457 8 498 370

Interest Expense

Non-Interest Income

892 334 504 714 67 215 40 612 588 910

537 217 2 478 591 117 644 1 751 720

2 093 786 5 056 094

4 885 171 5 747 240

1 429 551 2 983 305 184 859 40 612 2 340 630 0 6 978 957 10 803 334

867 732

1 033 797 3 304 743 602 436 15 640 1 652 131 0 6 608 748 9 722 310

Continued on p. 25

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best banks 2016

HEADLINE NEWS & ANALYSIS 1 MAY, 2017 | FINCHANNEL.COM

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