#1LUSHOƆCML ¿563N BANK OF GEORGIA GROWTH AT THE RIGHT PRICE JSC Bank of Georgia Investor Presentation January 2010 LSE: BGEO/GSE:GEB#2Agenda Topic Introduction to Bank of Georgia Overview of global & Georgian economies Governance Change Expected financial performance in Q4 2009 Management targets for 2010 Intention to pay dividends Strategy update Q3 2009 results Lobko BANK OF GEORGIA www.bog.ge/ir January 2010 Page 2#3Introduction to Bank of Georgia The leading universal bank in Georgia No.1 by assets (33.6%),(1) loans (31.1%),(1) client deposits (29.3%)(1) and equity (40.4%)(1) Leading retail banking, with top brand, best distribution network and broadest range of services of any bank in Georgia Retail Accounts September June December 2009 2009 2008 895,000+ 880,000+ Cards Outstanding 569,000+ 590,000+ 866,000+ 639,000+ Branches 140 140 151 ATMs 380 394 416 Leading corporate bank with approximately 81,000 legal entities and over 150,000 current accounts Leading card-processing, leasing, insurance, wealth management and asset management services provider The only Georgian entity with credit ratings from all three global rating agencies S&P: 'B/B' - at the sovereign ceiling Fitch Ratings: ‘B/B’ Moody's: 'B3/NP (FC)' & 'Ba3/NP (LC)' Listed on the London Stock Exchange (GDRs) and Georgian Stock Exchange Market Cap (LSE) US$ 225 mln as of 6 November 2009 Approximately 95% free float Issue of the first ever Eurobonds in Georgia Bloomberg: BKGEO; 5 year, 9%, US$200 mln B/Ba2/B (composite B+) LOCAL SEO www.bog.ge/ir BANK OF GEORGIA Investment highlights Undisputed leader of Georgian financial services industry with market-leading retail and corporate banking franchise Strongly positioned to benefit from US$4.5 bln international assistance package pledged to Georgia by international donors in the aftermath of Russia-Georgia conflict in August 2008 Disciplined capital management, low leverage, conservative liquidity position, no exposure to sub-prime Sophisticated management team with Western banking & finance background Transparency and good governance, over 89% institutionally owned. Supervisory Board includes two large institutional shareholders and two independent directors January 2010 Page 3#4LUSHOƆCML ¿563N BANK OF GEORGIA The Georgian Economy in a Brightening World January 2010#5A Bright Outlook for EM The 2008 crisis will look like an inflection point for the great EM story - an inflection point as their relative progress will accelerate. Why? Disinflation - even deflation - will reign in the West, meaning very low base rates: Cyclical slack and large output gaps "Japan disease": Private & public balance sheet issues force savings / debt repayments Demographics: Slow or no population growth leads to slack Globalization: Competitive forces and cheap labor have a lot further to run Technology: The digital age has just begun; its deflationary power is huge Governments will counteract these forces with very low rates and some money printing. But to create real inflation it will require a sustained long period of such; In these years "risk" capital will flow East & South seeking growth Low "hard" currency rates will spur and chase - 10+% US$ GDP growth in EM: - Strong domestic balance sheets and momentum mean EM domestic demand intact Competitive advantages and technology transfers will spur investment and productivity Very low hard currency rates are the icing on the cake The result? Current accounts gradually moving to deficit amidst investment booms Oil and other commodity prices, plus local macro policy, will be key cyclical determiners, not Western rates Lobko BANK OF GEORGIA www.bog.ge/ir January 2010 Page 5#6Georgia's Economy – Basic Facts Area: 69,700 sq km Population: 4,631,000 (2008E) Life expectancy: 76.5 years Official language: Georgian Literacy: 100% Capital: Tbilisi Currency (code): Lari (GEL) GDP (2009F): US$12.6 billion GDP real growth rate 2009F: -1.5% - GDP per capita 2009F (market): US$2,900 GDP per capita 2009F (PPP): US$4,750 Current account deficit 2009F: US$1.5bn, 12% of GDP Budget Deficit 2009F: 9.5% of GDP Inflation rate (October, 12-month rate) 2009: 3.2% External public debt / GDP 2009F: 25% Lobko BANK OF GEORGIA www.bog.ge/ir January 2010 Page 6#7Georgia's Economy: An Open Window on Opportunity Georgia has a good opportunity to solidify its liberal economic system and embark on increasingly rapid, long-term sustainable growth War and global crisis brought growth to a sharp halt in 2008, but the episode looks past War and the ensuing domestic political crisis look to have passed Saakashvili and government are again focusing on their domestic agenda International aid package of $4.5bn over 3 years (12% of GDP pa) helped stabilize the economy - and see it through the concurrent global financial crisis The IFI financing (into 2011) matches the political cycle to offer a wide window - Presidential elections due in Jan 2013, parliamentary in 2012. Saakashvili cannot run again The key economic challenge? To fund and grow out of the big 12% of GDP CA deficit Need to secure sustained strong FDI to fund deficit and finance investment Grow exports Manage inflows and build on the already sizeable fx reserve cushion Will she succeed? The opportunity is clear: Strong EM outlook with low rates The chance of 3 years of political stability A remarkably liberal tax & legal framework A strategic position in a neighborhood full of opportunity as well as risk - Turkey, Black Sea & Central Asia balance Russian risk Lobko BANK OF GEORGIA www.bog.ge/ir January 2010 Page 7#8Libertarian economic policies kick-start modernization Tax and tax rates slashed Now only 6 taxes, down from 21 Flat personal income tax of 20% (to come down to 15% by 2013) Corporate income tax 15% By 2012, no taxes on dividends, interest income, or world-wide income "Liberty Act": Referendum is required for an increase in tax rates Budget expenditure capped at 30% of GDP (FY 2012) Budget deficit capped at 3% of GDP (FY2012) Public debt capped at 60% of GDP (FY2012) Budget earmarks are limited Red tape and import duties cut Free industrial zones created around Poti (port), Kutaisi (second largest city) etc. (Tax rates in zones largely 0%) Customs code harmonized with EU. Customs procedures reduced from 15 to 7 Capital controls abolished Corruption significantly reduced In the World Bank's Ease of Doing Business survey in 2009 Georgia was 11th (out of 183), from 112th in 2005 In the 2009 Transparency International Corruption Index Georgia was 66th (4.1 score), just below Turkey (61st, 4.4), the same as Croatia and above Brazil (75th, 3.7), China (79th, 3.6), India (84th, 3.4) and Russia & Ukraine (146th= 2.2) According to the International Republican Institute survey, 98% of Georgians didn't have to pay a bribe in the past 12 months In Forbes Tax Misery & Reform Index, Georgia was 4th best behind Hong Kong, UAE & Qatar Ambition: Create a fast-growing free enterprise economy that attracts investment and become regional logistical and banking hub LOLO BANK OF GEORGIA www.bog.ge/ir January 2010 Page 8#9Loka GDP per capita is low, leaving much room to climb GDP per capita across countries, 2008 US$ 50,000 40,000 30,000 20,000 39,000 16,680 13,980 12,530 10,580 9,500 10,000 7,770 8,230 5,190 3,850 2,520 2,747 0 Ukraine Georgia China Belarus Romania Russia Turkey Poland Hungary Estonia Czech Republic Western Europe average Source: National Bank of Georgia www.bog.ge/ir BANK OF GEORGIA (EU 15+) January 2010 Page 9#10Strong economic growth before crisis ... starting again? Gross domestic product (GDP) 5.9% 9.6% 9.4% US$ billion 14 11.1% 12 10 8 6 4 2 0 -2 2003 2004 2005 2006 Nominal GDP (LHS) 12.3% NU 2007 Real GDP Growth (RHS) 14% 12% 10% 8% 6% 2% 4% 2% 0% -2% 2008 2009F 2010F 1% GDP per capita US$ 6,000 5,000 4,000 2,966 3,000 2,000 919 1,000 0 2003 Source: State Statistics Department of Georgia Lobko BANK OF GEORGIA www.bog.ge/ir 1,188 3,242 1,484 3,644 1,764 4,038 2,315 4,664 2,920 4,863 2,877 2004 2005 2006 2007 2008 2009F Nominal GDP per capita ■GDP per capita PPP 4,747 January 2010 Page 10#11Current account deficit is big; but basic balance OK... Exports & imports of goods & service, % GDP % GDP 60% 50% 40% 30% 20% 10% 0% 2004 2008 2009 H1 2005 2006 Exports G&S 2007 Imports G&S Net current transfers Current Account Deficit & Basic Balance, % GDP % GDP 5% 0% -5% -10% -15% -20% -25% 2004 2005 Current account decifit Source: National Bank of Georgia, Ministry of Finance of Georgia Labkon BANK OF GEORGIA www.bog.ge/ir Basic Balance (CAFDI) 2006 2007 2008 2009F January 2010 Page 11#12...so FX reserves rose, while inflows funded investment FX reserves, $ mn US $ mln Record high for Georgia 2,000 1,500 1,000 500 0 2005 2006 2007 2008 2009 (latest) 2003 2004 FDI&Investment, % GDP % GDP 30% 25% 20% 15% 10% 5% 0% 2004 2005 2006 Source: National Bank of Georgia, Ministry of Finance of Georgia Investment FDI Loka BANK OF GEORGIA www.bog.ge/ir 2007 2008 2009F January 2010 Page 12#13Money boomed; now inflation is low and FX stable M0, M2, M3 (in US$), CPI inflation, % yoy 80% 60% 40% 20% 0% -20% M3 (in US$) M2 MO -40% Dec-99 Dec-00 Dec-01 CPI inflation Dec-02 Dec-03 Dec-04 FX rates:Nominal Lari/US$ & Real Effective 160 140 120 100 80 Dec-99 Source: National Bank of Georgia Lobko BANK OF GEORGIA. www.bog.ge/ir Dec-00 Dec-01 Dec-02 Dec-03 Real effective rate, Jan04-100 (LHS) Lari/US$ (RHS) + 1.2 1.4 1.6 1.8 2.0 2.2 2.4 Dec-04 January 2010 Page 13#1420000 300 700 600 500 400 305.49 303.53 266.4 263.15 319.61 266 -2,000.0 -1,600.0 -1,200.0 Fiscal indicators: The worst seems past Overall fiscal balance of the state budget, 2004-2009F GEL mln 0.0 2006 2007 2008 2009F 0.0% 2010F 2011F -468.9 -400.0 -815.7 -2.0% -935.7 -1,258.6 -1,390.1 -4.5% -800.0 -3.4% -4.8% -4.0% -1,720.5 -6.6% Overall fiscal balance Overall fiscal balance as % of GDP Overall fiscal balance of the state budget, 2004-2009F GEL mln 379.45 499.48 573.2 0 January February March April Lobko BANK OF GEORGIA www.bog.ge/ir 308.36 407.61 314.6 377.9 316.8 442.5 358.4 293 415.3 May June 2007 2008 2009 444.2% 459.17 352.105: July August 352.2 316.15 320.422 390.5 408.1 373.021: 346.3 -9.4% 367.1 328.230 362.5 366.8 September October November December 502.56 447.31 January 2010 Page 14 -7.3% -10.0% -8.0% -6.0%#15Breakdown of public debt Public debt Georgia's economy is quite unleveraged compared to other emerging market economies Georgia's public debt is 29% of GDP in 2008 down from 56% in 2003 Paris club rescheduling in 2001 and 2004 The external debt is all multilateral or bilateral and significant share is highly concessional This explains why the government debt service burden is low Eurobonds debut issuance of US$500 mln in April 2008, maturity date 2013 US$ billion External public debt service 4.5 56.1% 60.0% 50.5% 4.0 1.03 50.0% 3.5 40.0% 3.0 0.97 40.0% 32.0% 32.8% 2.5 0.83 0.85 0.89 30.0% 0.85 2.0 0.76 29.0% 25.5% 1.5 3.11 20.0% 2.48 1.0 1.86 1.56 1.73 1.70 1.79 10.0% 0.5 0.0 0.0% 2003 2004 2005 2006 2007 2008 2009F External public debt Internal public debt Total public debt as % of GDP Source: "The Georgian Economy Overview", Government of Georgia Presentation, June 2009. General government debt as % of GDP, Q1 ‘09 US$ mln 250.0 8.8% 200.0 7.1% 7.3% 10.0% 9.0% Kazakhstan Russia Estonia 8.0% Bulgaria 5.9% 7.0% Czech Republic 150.0 6.0% Slovak Republic 5.0% 3.4% 100.0 193.4 4.0% 152.2 2.2% 3.0% Belarus Lithuania 50.0 103.8 110.6 102.1 87.7 2.0% 1.0% 0.0% 2004 2005 2006 2007 2008 2009F External debt service External debt service as % of budget revenue Source: "The Georgian Economy Overview", Government of Georgia Presentation, June 2009. LOLEJN BANK OF GEORGIA. www.bog.ge/ir Ukraine Turkey Armenia Latvia Poland Georgia Hungary 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% ■2008 Q1 '09 general government debt/2009F GDP Source: World Bank, International Monetary Fund January 2010 Page 15#16Robust Banking Sector Growth As % of GEL mln YE 2007 Total Assets 7,208 YE 2008 8,866 Q3 '09 GDP* 2007 Y-O-Y 2008 Q3 '09, Top 5 Y-O-Y YTD Banks Georgia Banks Market Share (YE 2007) Bank of Market Share (YE 2008) Top 5 Bank of Market Share (October 2009) Top 5 Banks Bank of Georgia Georgia 7,877 36.69% 70.90% 23.00% -11.2% 80.00% 35.20% 79.26% 32.89% 78.50% 33.63% Gross Loans 4,589 5,993 5,210 24.27% Client Deposits** 3,511 3,845 3,644 Equity 1,471 1,517 1,511 16.97% 7.04% 71.50% 30.59% 50.90% 9.51% 65.50% 3.14% -13.1% 81.70% 32.70% 81.78% -5.2% 81.40% 31.40% 75.00% 28.76% 82.27% -0.4% 73.30% 33.80% 75.69% 40.03% 81.18% 32.87% 81.83% 31.60% 29.30% 40.71% *Q3 2009 banking sector data to 2009F GDP ** Total Deposits except for Q3 2009 Source: National Bank of Georgia Bank debt to GDP, 2008 Ensuring solvency and stability of the banks High BIS Capital Adequacy Ratio: Banking Sector Average - 21%, Bank of Georgia -30% High level of liquidity requirements from NBG at 20% of Liabilities Low Leverage in the banking sector: Banking Sector Average - Bank of Georgia - 3.1x 4.2x, Financial Supervisory Agency established under the auspices of the National Bank of Georgia - monitors liquidity /risks of the banks and takes measures to ensure solvency of the commercial banks Resilient Banking Sector Demonstrated strong resilience towards domestic challenges during the August 2008 conflict as well as towards external shocks of global financial turmoil No nationalization of the banks have occurred, no government bail-out plans have been required, no Government ownership since 1995 No rampant liquidity issues on the market No exposure to CDOs or other "toxic" assets Loans to GDP ratio stands at circa 25% Georgia Turkey Russia Poland Romania Kazakhstan Czech Republic Hungary Israel Belgium Italy France Germany Portugal Austria Great Britain Sweden Ireland Lobko BANK OF GEORGIA www.bog.ge/ir 0 50 100 150 200 250 Source: ING, Central Banks Page 16 January 2010 Page 16#17GDP Breakdown: Trade, Logistics, Services GDP Breakdown, 2008 LOLE BANK OF GEORGIA Health, social and community work 9% Agriculture etc. 10% Mining and quarrying 1% Education 4% Public administration 18% Real estate and imputed rent etc. 6% Financial intermediation Source: National Bank of Georgia www.bog.ge/ir 2% Transport & communication- 11% Page 17 Manufacturing 9% Utilities & household processing 5% Construction 6% Trade (Retail & Wholesale) 17% Hotels and restaurants 2% January 2010 Page 17#18Trade structure WTO member since Import structure by country, 9 months 2009 2000 No quantitative restrictions on trade Simplified customs regime since August 2006, new customs code becomes effective in January 2007 One of the two beneficiaries of the EU GSP+ Scheme in the CIS since 2006, granting local companies the right to export 7,200 categories of goods duty-free As of November 2007 Georgia has entered into a free trade agreement with Turkey US-Georgia charter on strategic partnership envisions an update of Bilateral Investment Treaty, expansion of Georgian access to the General System of Preferences and the possibility of entry into Free Trade Agreement Kazakhstan, 0.4% Armenia, 1.0%- Others, 6.0% Bulgaria, 3.9%- Turkmenistan, 2.8% USA, 5.4% United Arab Emirates, 2.3% China, 3.5% Russia, 6.4% Export structure by country, 9 months 2009 United Arab Emirates, 1.5% Kazakhstan, 1.9%- Russia, 2.6%- USA, 2.9%- Bulgaria, 7.4% Armenia, 7.4% EU Countries, 29.9% Ukraine, 9.5% Turkey, 18.5% Azerbaijan, 12.1% Import structure by product,9 months 2009 Others, 37.3% Sugar, 1.5% Paper, 1.9%- Ferrous Metal Products, 2.2% Mechanical Equipment & Electrical Machinery, 20.1% Mechanical Equipment & Electrical Machinery, 17.5% Vehicles, 8.1% -Ferrous Metals, 1.8% Apparel & footwear, Plastic, 2.9% Cereals, 4.2% Pharmaceuticals, 4.2% 3.0% Ukraine, 6.2% Canada, 10.4% Azerbaijan, 16.3% China, 0.5% - Other, 0.5% Turkey, 21.6% EU Countries, 20.8% Export structure by product, 9 months 2009 Ferrous Metals, 0.5% Others, 36.7% Sugar, 0.1%- Vessels & Aircraft, 0.3%- Pharmaceuticals, 1.3% Oil & Gas, 4.8%- Vehicles, 0.3% Beverages, Spirits & Vinegar, 10.9% Equipment & Rail Cars, 12.9% Ores, 6.1% Gems & Precious Stones, 18.2% Cement, 2.3% Fertilizers, 4.7% Source: State Statistics Department of Georgia www.bog.ge/ir LOORIN BANK OF GEORGIA Page 18 January 2010 Page 18#19Net remittances Net remittances, 2004-2009 US$ mln 1200.0 7.4% 7.5% 8.0% 7.0% 1000.0 5.8% 5.4% 4.9% 800.0 4.1% 6.0% 5.0% Net remittances by countries, 9 months '09 Germany, 1.1% Kazakhstan, 1.0%- Israel, 1.0% Other countries, 13.5% 600.0 4.0% UK, 0.7%- 955.2 3.0% 400.0 755.4 750.0 Turkey, 2.9%- Ukraine, 6.6% 2.0% 200.0 420.5 315.4 1.0% Spain, 2.6% Russia, 54.3% 212.7 0.0 0.0% 2004 2005 2006 2007 2008 2009F Net Remittances (LHS) Greece, 7.4% USA, 8.9% Net Remittances as % of GDP Cumulative net remittances by countries, 2004-9 months '09 Germany, 0.7% Kazakhstan, 0.9%- Israel, 0.9% Other countries 12.0% Cumulative net remittances, 2004 9 months '09 Country Russia US$ '000s 1,920,441 % of total 60.8% USA 346,086 11.0% Greece 147,885 4.7% Ukraine 109,011 3.4% Spain 79,392 2.5% Turkey 65,449 2.1% UK 30,595 1.0% UK, 1.0%. Israel 29,024 0.9% Kazakhstan 29,708 0.9% Turkey, 2.1%- Germany 21,941 0.7% France 15,748 0.5% Canada 12,736 0.4% Belgium 4,990 0.2% Netherlands 4,046 0.1% UAE 2.346 0.1% Azerbaijan (151) 0.0% Other countries 340,839 10.8% Total 3,160,086 100.0% Source: National Bank of Georgia Labkon BANK OF GEORGIA www.bog.ge/ir Ukraine, 3.4% Spain, 2.5% Greece, 4.7% Russia 60.8% USA, 11.0% January 2010 Page 19#200.0 100.0 200.0 400.0 300.0 89.4 500,0 600.0 105.9 700.0 FDI Quarterly FDI inflows US$ mln 800.0- 178.S 146.C 306.5 280.7 456.7 421.4 401.5 489.1 702.9 537.7 605.4 Q1'05 Q2 '05 Q3 '05 Q4 '05 Q1'06 Q2'06 Q3 '06 Q4 '06 Q1'07 Q2 '07 Q3 '07 Q4'07 Q1'08 Q2 '08 Q3 '08 Q4 '08 Q1'09 Q2 '09 134.7 286.2 133.9 92.2 1,500.0 2,000.0 FDI Inflows US$ mln 2,500.0 9.7% 1,000.0 7.0% 1,190.4 15.3% 19.8% 12.2% 500.0 499.1 449.8 0.0 0.0% 2004 2005 2006 2007 2008 2009F Net FDI -Net FDI as % of GDP 2,014.8 10.0% 7.8% 1,564.0 990.0 5.0% Cumulative net FDI breakdown by origin 2004- Q2 2009 Country UK US$ mln 782,594 % FDI breakdown by sectors (2007- Q2 2009) Banking system, 4.3% 30ther, 2.7% Agriculture, 0.7% 12.50% UAE 562,175 8.90% USA Turkey 522,486 8.30% 499,683 8.00% Industry, 16.3% Netherlands 490,444 7.80% Other services, 20.6% British Virgin Islands Kazakhstan Czech Republic 429,086 6.80% 302,563 4.80% 289,957 4.60% Energy sector 17.9% Cyprus 289,890 4.60% Real estate, 10.2% Bahamas 243,518 3.90% Subtotal 4,412,396 70.20% Transports and communications, 21.1% Construction, 6.2% Other countries 1,871,821 29.80% Total 6,284,217 100.00% Labo BANK OF GEORGIA www.bog.ge/ir January 2010 Page 20 15.0% 20.0% 25.0%#21Breakdown of pledged donor funds by countries and financial organizations EU member states, 3.8% US$ 173 mln Norway, 0.9% US$40 mln Switzerland, 0.4% US$19 mln Other, 0.6% US$29 mln Japan, 4.4% US$200 mln European Community, 14.1% US$638 mln United States, 22.0% US$ 1,000 mln Asian Development. Bank, 6.6% US$ 300 mln European Investment Bank, 7.3% US$329.6 mln EBRD, 20.4% US$926.84 mln Financial institutions & organizations, 53.7% US$2,438 mln IFC, 7.7% US$350 mln World Bank, 11.7% US$ 530 mln Total pledged funds: US$4,535 million Source: Ministry of Finance of Georgia Loka BANK OF GEORGIA www.bog.ge/ir COEB, 0.03% US$1.32 mln January 2010 Page 21#22...and more donor money to flow Implementation of the pledge made at the international donors' conference for Georgia (Brussels, 22 October 2008) Pubic sector Loans Grants Total public sector Private sector Committed amount as of 31 August '09 (US$ mln) Actual disbursements Actual To be additionally as of 31 August ‘09 disbursements/Com formally committed mitted amount (%) in 2009 (pipeline) (US$ mln) To be received in 2009 549.6 340.4 62.2% 864.6 130.2 593.6 330.9 55.7% 459.0 170.6 1,140.5 671.3 58.9% 1,323.6 300.9 660.0 500.0 Total public and private Source: Ministry of Finance of Georgia 1,800.5 1,823.6 500 kv. power transmission line (EBRD, EIB, KfW) East-West highway improvement project (WB, Japan) Adjara bypass road (ADB) Vaziani-Gombori-Telavi road (WB) South Georgia road (MCG) Secondary and local roads (WB) Rehabilitation of infrastructure facilities in Batumi (KfW) Regional and municipal infrastructure development projects (ADB, EBRD) Source: Ministry of Finance of Georgia Loka BANK OF GEORGIA www.bog.ge/ir January 2010 Page 22#23LUSHOƆCML ¿563N BANK OF GEORGIA Governance change January 2010#24. Enhancing governance: moving to classical two-tier board structure Bank of Georgia is introducing a classical two-tier board structure Management board will be led by the CEO Supervisory Board will be comprised of only non-executive directors, including the Chairman This move is aimed to further enhance Bank of Georgia's governance bringing it even closer to best market practice Current CEO/Executive Chairman management structure has served well when we were building the bank's internal structures New governance structure will be more effective now that the management team reporting to Irakli Gilauri is complete Current governance structure Supervisory Board 5 non-executive SB members 2 executive SB members • ⚫ Nick Enukidze, Chairman (oversaw IR, M&A, • Funding, Ukraine, Investment banking) ⚫ Irakli Gilauri, CEO (oversaw day-to-day management of the group) . New governance structure Supervisory Board . 7 non-executive SB members Nick Enukidze will be nominated for election as non- executive Chairman following 2010 AGM ⚫ His executive responsibilities will be redistributed to Irakli Gilauri and the management board Irakli Gilauri will resign from SB at 2010 AGM Management Board ⚫ Led by Irakli Gilauri, CEO . Includes 8 deputy CEOs (from only 3 deputy CEOs in 2008) Loka BANK OF GEORGIA www.bog.ge/ir Page 24 Management Board • Led by Irakli Gilauri, CEO Includes 8 deputy CEOs January 2010 Page 24#25LUSHOƆCML ¿563N BANK OF GEORGIA Expected Q4 2009 financial performance January 2010#26Lobko Expected financial performance Q4 2009 Expected pre-provision profit Q4 09 (excluding one-offs) 140 127.9 120 106.8 100 80 60 40 20 0 2007 36.8 34.0 32.4 31.0 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Expected net provision expense Q4 09 140 128.7 120 100 80 60 40 17.0 20 40.7 32.1 30.0 28.0 ° 0 2007 2008 QI 2009 Q2 2009 Q3 2009 Q4 2009 BANK OF GEORGIA www.bog.ge/ir January 2010 Page 26#27Lobko Goodwill write-off BANK OF GEORGIA GEL 134.7 mln BG Bank GEL 68.0 mln Impairment BG Bank (Ukraine) fully impaired in Q4 2009 GEL 66.6 mln GEL 68.0 mln BNB GEL 23.4 mln Insurance GEL 18.4 mln Intellect & TUB, GEL 23.2 mln Other, GEL 1.6 mln BNB GEL 23.4 mln Insurance GEL 18.4 mln Intellect & TUB GEL 23.2 mln Other, GEL 1.6mln The amount to be written off in Q4 09 represents all of the goodwill associated with BG Bank The Bank's allocated capital in respect to BG Bank is expected to amount GEL 33.0 million after the write off, weakening of Hryvna against Lari, and BG Bank's losses in 2009 including expected loss in Q4 2009 According to the required periodic goodwill impairment test conducted by the Bank on all of its acquisitions, no other goodwill had to be impaired www.bog.ge/ir January 2010 Page 27#28Real estate assets mark-down GEL'000 Historical Cost Value Before Write Down Write Down Value After WD/VBWD Write Down VAWD/ HC (VBWD) (WD) (VAWD) LC investments 24,287 28,265 (13,525) 14,740 -47.8% 60.7% SBRE investments 24,435 47,356 (15,396) 31,960 -32.5% 130.8% Other real estate assets 20,762 20,762 (6,507) 14,255 -31.3% 68.7% Total 69,484 96,384 (35,428) 60,956 -36.8% 87.7% Provided that current operation environment continues, the Bank does not expect further write- downs in respect of either LC or SBRE investments in coming year We have seen number of secondary real estate transactions picking up and real estate prices stabilizing The Bank originally invested a total of GEL 16.9 million in LC and SBRE Net asset value of LC and SBRE attributable to the Bank after the write-down will amount to GEL 20.5 million, well above the historical cost of the Bank's investment After the write downs total regulatory capital ratio of Bank of Georgia is expected to decrease from Q3 2009 level 21.2% to 20.4% as of 1st of January 2010 and Tier I from 20.4% to 17.6%, respectively Loka BANK OF GEORGIA www.bog.ge/ir Page 28 January 2010 Page 28#29LUSHOƆCML ¿563N BANK OF GEORGIA Management targets for 2010 January 2010#30Targeted financial performance 2010 Target pre-provision profit 2010 GEL million 160 2009 Pre provision profit is normalized 134.2 127.9 135.0 for goodwill write- 120 106.8 off, investment and real estate mark- 80 downs 40 0 2007 2008 2009F 2010F Assumptions 2010 real GDP growth of 2%* in Georgia 2010 inflation rate of 3.2%* in Georgia The GEL/US$ exchange rate remains stable during 2010 ☑Geo-political stability is sustained in the region Target net provision expense 2010 GEL million 160 120 80 60 40 40 17.0 128.7 130.8 50.0 2007 2008 2009F 2010F Lobko BANK OF GEORGIA www.bog.ge/ir January 2010 Page 30#31LUSHOƆCML ¿563N BANK OF GEORGIA Intention to pay dividends January 2010#32Intention to pay dividends for 2010 # of Shares outstanding 31,252,553 31,306,071 27,154,918 25,202,009 YE 2006 YE 2007 YE 2008 Oct-09 The new dividend policy will serve to further increase capital management discipline as we consider investing in our growth going forward Estimated dividend payout for 2010 performance - GEL 9.4 million The Bank intends to propose the establishment of a progressive dividend policy at the 2010 AGM The intention is to recommend GEL 0.30 dividend per share in 2011 in respect of 2010 financial year performance Dividend payment is subject to management achieving 2010 financial targets outlined above The Bank anticipates increasing the dividend payment in the future The new dividend policy is to set dividend payments while taking into consideration the need to maintain proper balance between the ability to finance growth and preserving progressive dividend Lobko BANK OF GEORGIA www.bog.ge/ir Page 32 January 2010 Page 32#33LUSHOƆCML ¿563N BANK OF GEORGIA Strategy January 2010#34• . Strategy from 2004 to 2008 Growth! Growth! Growth! -Universal banking model focusing on market share growth in Georgia Particular emphasis on high margin retail banking business and number of retail customers driven by novel product offerings Investing in consumer driven non-core businesses to benefit from the growth of Georgia's economy ⚫ Expand in CIS banking markets through acquisitions in order to create new "pockets" of growth What was done . Market share in total assets in Georgia grew from 17% to 33% - achieving 721% balance sheet growth over 4 years Number of retail current accounts grew from c.50,000 to over 895,000 and share of retail portfolio in total loan book increased from 38% to 53% • Acquired banks in Ukraine and Belarus Invested in two most rapidly growing sectors through Liberty Consumer, an investment company focusing on consumer segment and SB Real Estate – real estate investment company Shortfalls Ukraine ⚫ Investing in non-core assets: profit contribution marginal for BoG, not worth of management time and conflict of interest with the Bank's core banking activity ⚫ Having realized our shortfalls, we have adapted our strategy and further enhanced management team Lobko BANK OF GEORGIA. www.bog.ge/ir Page 34 January 2010 Page 34#35. . Strategy 2009 - 2012 Grow at the Right Price to become more Efficient, Deposit Funded Lending Machine Maintain market share around 30% in the major balance sheet items in Georgia Continue to focus on universal banking model in Georgia with particular emphasis on under-leveraged retail banking (retail loans to GDP of c. 8%) Grow retail business through differentiated products and services to target different retail segment with particular emphasis on "mass affluent❞ segment Target small banks in Georgia for acquisition at around one times book to capture synergies & growth Expand Wealth Management business internationally by building presence in developed countries to help contain net loan to deposit ratio. Stepping up deposit "imports" will enable us to tap debt capital markets with relatively favorable terms Divest non-core assets (Liberty Consumer and SB Real Estate) over time Focus on specific banking operations in Ukraine and Belarus, before considering any other international acquisition in emerging markets • Getting Things Done BoG gained 2.8% market share in retail deposits and 0.4% market share in total client deposits YTD Maintained retail business infrastructure during the downturn & launched, for the first time in Georgia, Premier Banking (under the Solo brand) to penetrate “mass affluent" segment As part of "mass affluent” retail strategy, won tender to exclusively issue and acquire American Express cards in Georgia for 7 years. BoG started issuing AmEx credit cards in November Opened Wealth Management offices in Tel Aviv (now covering Jordan as well) and most recently one in Kiev. As a result, 56.6% (GEL 74.4 mln) of Wealth Management deposits are held by non-residents, while Wealth Management deposits grew by 36% YTD Bought state-of-the-art core banking software with build in CRM (Temenos) & HR talent management software (Softscape) to further increase efficiency Focused operations on Trade Finance, Wealth Management & Brokerage in Ukraine and on Premier Banking and SME in Belarus Lobko BANK OF GEORGIA www.bog.ge/ir Page 35 January 2010 Page 35#36Immediate Priorities - Georgia As operating environment is improving we intend to take advantage of high liquidity (excess liquidity of GEL 360 mln as of end of October 2009) and strong capital (CAR-20%) to step up lending in underleveraged Georgian economy (banking debt to GDP of c. 25%) In order to capture new business, we are decreasing interest rates on corporate and retail loans Aggressively stepping up lending to top corporate clients in Georgia, including refinancing their loans with other Georgian banks Lending rates decreased from 16% - 18% to 14.5% -16.5% Focus on retail lending in Georgia with particular emphasis on micro loans, consumer loans and mortgages of up to US$ 100,000 Minimum rate on micro loans has been decreased from 26% to 17% Minimum rate on mortgages has been decreased from 16.5% to 14.5% At the same time we made two rounds of interest rate cuts on retail deposits On 1-year US Dollar deposits interest has been cut from 11.75% to 10.5%. Further interest rate cuts are expected in 1H 2010 We are also in process of aggressively decreasing interest rates on corporate account balances on case by case basis Focus on loan recoveries. Loan loss reserves amounts to GEL 123 mln in BoG standalone accounts Lobko BANK OF GEORGIA www.bog.ge/ir Page 36 January 2010 Page 36#37Lending Opportunities in Corporate Sector in Georgia On the back of deleveraging in 2009, we expect lending to pick-up in 2010 We see following opportunities in corporate sector in Georgia: Underleveraged utility sector (circa 9% loans to sector GDP) * Underleveraged healthcare sector, which is under privatization and needs to be rebuilt (circa 2% loans to sector GDP) * Food processing and agribusiness, substituting imported goods (circa 3.5% loans to sector GDP) Hydropower sector, which is gearing for exports to Turkey While BoG has significant market share in the retail and corporate banking segments, SME is still underpenetrated BoG's SME loan portfolio is only GEL 70 mln (circa 4% of BoG loan book) or estimated market share of circa 15% BoG can leverage its corporate banking business to grow its market share in SME segment Lobko BANK OF GEORGIA www.bog.ge/ir Page 37 January 2010 Page 37#38Labo Immediate Priorities - Internationally Belarus (Belarusky Narodny Bank - BNB): Inject EUR 10.5 mln in order to meet new minimum regulatory capital requirement of EUR 25 mln from 1st of January 2010 We also see new capital requirement as opportunity to acquire small bank(s), which can not meet new minimum capital requirement in Belarus to leverage up BNB and gain synergies We are also in discussion with IFIs as potential equity partners (and lenders), with BoG to maintain majority stake Lending to high margin, unattended SME sector, interest rates on SME lending vary between 18% to 22% in US$ Target 1% population of Belarus (c. 100,000) through novel Premier Banking offerings Ukraine (BG Bank): Focus on further downscaling retail business and stepping up trade finance, integrating wealth management business with brokerage. Number of branches has been decreased from 38 Q1 2008 to 18 branches by Q3 2009 and headcount reduced from 824 to 617 Leverage on Georgian corporate banking and brokerage to build trade finance business in Ukraine to capture part of the US$ 1.0 bln trade between Georgian and Ukraine and nearly US$ 4 bln trade between Belarus and Ukraine Focus on loan recovery. Loan loss reserves amounts to GEL 50 mln or 27% of gross loan book of BG Bank BANK OF GEORGIA www.bog.ge/ir Page 38 January 2010 Page 38#39LUSHOƆCML ¿563N BANK OF GEORGIA Q3 2009 Results Overview January 2010#40In Q3 2009 Total operating Income/Revenue was GEL 79.3 mln Revenue Revenue GEL mln 100 85.9 86.6 86.1 81.7 81.1 80.6 79.3 (-1.6% q-o-q decline) 30.3 27.1 30.2 31.3 29.3 31.1 30.4 In 9 months 2009 50 Total operating Income/Revenue was GEL 241.6 mln (-4.5% y-o-y decline) 55.8 58.9 56.4 49.8 52.4 49.5 48.9 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Net Interest Income Net Non-Interest Income Revenue by segments Q3 2009 Belarus 2.6% GEL 2.1mln (22.6% q-o-q) Aldagi BCI 8.0% GEL6.3mln (1.9% q-o-q) Other 5.2% GEL 4.1 mln (-13.9% q-o-q) Ukraine 6.6% GEL 5.3mln (-5.9% q-o-q) BoG Standalone 77.6% GEL61.5 mln (-1.3% q-o-q) Net interest margin (annualized) Georgia accounts for 90.8% of total consolidated revenues, BG Bank 6.6% and BNB 2.6% Even though our excess liquidity in Georgia exceeded GEL 320 mln, our net interest margin stayed unchanged at 9.1% in Q3 2009 Composition of revenue Q3 2009 Net foreign Net income from currency related documentary operations 2.9% income 8.2% Net fee and commission income GEL 6.5 mln (-8.4% q-o-q) GEL 2.3 mln (30.6% q-o-q) 13.3% GEL 10.5 mln (-9.3% q-o-q) Net other non- interest income 14.0% GEL 11,1 mln (+3.5% q-o-q) 11.0% Net interest income 7.0% 61.7% GEL 48.9 mln (-1.1% q-o-q) 6.0% Lobko BANK OF GEORGIA www.bog.ge/ir Page 40 10.1% 9.8% 10.0% 10.0% 9.6% 9.1% 8.9% 9.8% 9.9% 9.3% 9.0% 9.0% 9.3% 9.1% 9.0% 8.6% 8.0% 5.0% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 -Net Interest Margin, Group Consolidated Net Interest Margin, BoG Standalone January 2010 Page 40#412009 YTD Net Foreign Currency related income, Revenue cont'd Net fee & commission income GEL mln decreased by 32.5%, due to the decrease of FX transaction volumes in Georgia and 15.0 10.9 10.2 10.2 10.0 6.1 Net foreign currency related income GEL mln 20.0 11.6 11.1 10.5 15.0 13.2 10.4 10.0 9.4 14.9 -31.4% Ukraine 5.0 8.8 7.1 6.5 5.0 2009 YTD Income from 0.0 documentary Q12008 Q2 2008 Q3 2008 Q4 2008 Q12009 0.0 Q2 2009 Q3 2009 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 operations increased by 26.4% 2009 YTD Net Other Non Income from documentary operations +37.3% GEL mln Interest Income 3.0 increased by Other non-interest income GEL mln +112% increase in brokerage 103.7%, mostly due to the 2.0 1.9 1.7 1.4 1.4 12 2.3 10.7 11.1 2.3 1.8 7.8 8 6.5 7.8 7.1 5.0 1.3 1.9 (+21.5% YTD) 1.0 4 and insurance 0.4 0.3 1.3 1.6 0.1 5.1 4.9 (+123.2% YTD) 3.2 3.0 2.5 1.7 income 1.6 0.0 0 Q12008 Q2 2008 Q3 2008 Q4 2008 Q12009 Q2 2009 Q3 2009 Lobko BANK OF GEORGIA www.bog.ge/ir QI 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Net Insurance Income Brokerage Income January 2010 Page 41#422009 YTD Total Costs Recurring operating costs Employees Recurring GEL mln Operating costs -3% 4,798 Q3 2009 2,663 617 decreased by 60- -9.4% 4,914 4.9% 48.9 Q2 2009 2,660 49.7 47.9 46.3 44.9 707 44.5 44.7 4,989 Q1 2009 2,692 2009 YTD 40 757 21.6 21.3 personnel costs 18.7 24.8 22.7 23.1 22.6 4,979 Q4 2008 2,741 decreased by 786 17.0% 6,165 20 Q3 2008 3,853 789 25.7 27.3 28.4 -4% 23.1 22.0 23.2 22.3 5,909 2009 YTD Q2 2008 3,619 778 headcount 0 4,926 Q1 2008 3,056 reductions Q1 2008 Q2 2008 amounted to 181 Q3 2008 Other recurring Operating Costs Personnel costs Q4 2008 Q1 2009 Q2 2009 Q3 2009 824 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 BG Bank BoG Standalone ■Group Consolidated Recurring operating cost by segments, Q3 2009 Cost Income Ratio Aldagi BCI 8.2% GEL 3.7 mln (-7.1% q-o-q BNB Other 12.9% GEL 5.8 mln (-12.2% q-o-q) 110% 90% 90.0% 70% 60.8% 3.2% GEL 1.5 mln (-0.5% q-0-9) 59.1% 52.9% -60.7% 57.8% 53.0% BG Bank 8.7% BoG Standalone 50% 44.4% 66.9% 50.8% 50.5% 50.0% GEL 3.9 mln GEL 30.1 mln 45.1% 41.0% 42.2% (-14.3% q-o-q) (+1.3% q-o-q) 30% Q1 2008 Q2 2008 Q3 2008 Q1 2009 Q2 2009 Q3 2009 Lobko BANK OF GEORGIA www.bog.ge/ir Q4 2008 Cost/Income Ratio, Consolidated -Cost Income Ratio, Bank of Georgia Standalone January 2010 Page 42#43Operating profit, Provision expense Consolidated Net Normalized net operating income, profit provision expenses of before provisions improved by 26.3% q-o-q Bank of Georgia Standalone Net GEL mln 60 Revaluation of investment property, restructuring, etc Net provision expense BoG Consolidated GEL mln 45.1 120 40.5 38.7 40 36.6 37.1 36.3 37.136.8 33.7 34.3 34.0 34.332.4 80 provision expenses declined 20 103.2 -26.3% 0 Q1 2008 Q2 2008 by 40.2% q-o-q FBG Bank's Net provision expense grew by 17.1% q- 0-q which drove overall changes higher Net income for 8.7 Net provision expense BoG Standalone War Related Provisions 40 40.7 32.1 30.0 15.0 7.5 7.2 0 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Normalised Net Opearting Income Profit before provisions Net provision expense BG Bank Standalone +17.1% Q3 2009 was GEL 2.6 mln. 2009 YTD Net income was GEL GEL mln 160 3.4 mln (161.2% y-o-y growth) 110 GEL mln 20.0 -40.2% 15.0 103.9 10.0 60 24.0 29.6 17.7 5.0 6.7 8.6 (2.1) (1.3) 10 0.4 0.5 18.2 9.3 11.0 13.0 lui 0.0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 -40 -5.0 Lobko BANK OF GEORGIA www.bog.ge/ir January 2010 Page 43#44☑Total assets declined by 5.5% y-o-y Gross loans Assets & liabilities Total assets +2.5% GEL mln 4,000.0 3,147.7 3,400.7 3,154.3 3,258.9 3,186.8 2,907.8 2,980.2 declined by 11.0% y-o-y 2,000.0 2,106.7 1,855.7 2,059.7 2,189.4 2,046.8 1,904.7 -10.4% 1,833.1 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Gross Loans Corporate loan book breakdown Lobko BANK OF GEORGIA Pharmaceuticals and Healthcare, 2% Other, 11% Industry & State, 10% Construction & Real Estate, 17% www.bog.ge/ir Trade, 36% FMCG, 15% Energy, 9% Loan book Ukraine 10.2% Belarus 1.4% RB & WM 47.3% CB 41.5% Retail loan book breakdown Micro loans, 11% Credit cards and overdrafts, 17% Consumer and other*, 31% Mortgage loans, 41% January 2010 Page 44#45208.4% 138.3% 40.0 19.0 32.1 115.9 million 0.0 Q1 2008 Q2 2008 Consolidated NPLs of GEL 139.8 million improved by 6% q-0-9 driven by 2.4% q-o-q decrease Loan portfolio quality NPLs Consolidated 160.0 120.0 554.4% 104.6 148.8 -6.0% 139.8 Will of Bank of Georgia Standalone NPLs GEL 80.0 64.3 169.1% 129.3% 104.2% 124.2% 600.0% 300.0% Loan loss reserve, Consolidated 200.0 9.5% 10.0% 8.1% 6.3% 6.6% 5.0% 100.0 5.0% 173.7 129.0 108.8 135.2 155.1 2.1% 2.1% 23.3 39.6 44.4 0.0 0.0% 0.0% Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q1 2008 Q2 2008 Q4 2008 Q3 2009 Q3 2008 Loan loss reserves Reserve for loan losses to gross loans, BoGconsolidated Q1 2009 Q2 2009 Q3 2009 NPLs NPLs, BoG Standalone NPL Coverage Ratio GEL mln 140.0 Loan loss reserve, BoG Standalone 6.9% 7.0% 8.0% GEL mln 120.0 6.8% 7.5% 8.0% 6.7% 70.0 3.2% 41.1 4.7% 51.3 61.4 4.0% 60.0 5.5% 43.1 36.4 4.9% 83.6 38.2 45.2 4.0% 1.7% 1.7% 41.6 1.2% 1.3% 67.4 54.5 2.0% 1.9% 2.0% 22.4 46.3 67.9 67.9 16.6 10.9 11.3 10.8 57.7 22.7 8.7 8.1 9.7 12.0 11.4 16.3 49.8 0.0 0.0% 29.8 22.2 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 16.5 Q3 2009 14.5 0.0 0.0% RB & WM Q4 2007 01 2008 Q2 2008 CB % of Gross loans. Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 RB & WM CB - Loan loss reserve as % of gross loans Lobko BANK OF GEORGIA www.bog.ge/ir January 2010 Page 45#46WM client Client deposits, BoG Standalone Total liabilities Client deposits, BoG Standalone deposits grew GEL mln 35.9% YTD 2009 3,000.0 and 86.3% y-o-y +16.3% 2,617.7 2,540.1 2,474.9 GEL mln 1,400.0 1,166.6 2,401.1 2,414.9 1,092.8 2,197.9 2,261.6 1,057.5 972.6 1,042.4 979.0 909.2 RB client deposits 1,500.0 795.1 903.6 1,137.8 947.8 1,162.8 918.6 1,011.4 700.0 652.7 681.5 grew 3.8% YTD 576.2 626.7 605.2 594.9 519.0 2009 and 16.2% q-o-q 1,326.2 1,395.4 1.202.0 1,193.1 1,132.9 1,025.3 1,182.5 363.6 403.4 326.0 319.0 280.4 285.0 331.2 CB client deposits grew 14.3% q-o-q Q1 2008 Q2 2008 Client Deposits Q3 2008 Q4 2008 Borrowed funds Q1 2009 Q2 2009 Q3 2009 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Other Liabilties and declined 5.1% YTD ■RB Client Deposits CB Client Deposits WM Client Deposits Market share of retail deposits grew by 2.4% YTD WM Client deposits 140.0 81.6 76.5 70.4 70.0 105.2 96.7 93.3 Net loans/Client deposits +26.8% 131.4 200.0% 100.0% 174.4% 168.7% 170.6% 160.6% 147.8% 140.3% 136.9% 0.0 Q1 2008 0.0% Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Lobko BANK OF GEORGIA www.bog.ge/ir January 2010 Page 46#47Equity & Capital adequacy Total Shareholder's equity GEL mln NBG capital adequacy ratios, BoG Standalone 30.0% 900.0 20.4% 783.0 20.0% 18.3% 18.2% 17.8% 746.7 739.3 15.8% 16.6% 16.4% 750.0 718.8 718.5 711.8 709.9 21.2% 10.0% 17.4% 18.4% 16.3% 15.1% 15.5% 13.5% 600.0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 0.0% Q1 2008 Q2 2008 Q3 2008 ■Tier I Capital Adequacy Ratio BIS capital adequacy ratios, BoG Consolidated 40.0% 30.0% 25.4% 25.2% 25.0% 24.7% 23.9% 22.5% 22.2% 25.8% 20.0% 25.8% 25.3% 27.3% 31.7% 34.2% 34.6% 10.0% 0.0% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Tier I Capital Adequacy Ratio Q1 2009 Q2 2009 Q3 2009 Total Capital Adequacy Ratio Lobko BANK OF GEORGIA www.bog.ge/ir Q4 2008 Q1 2009 Q2 2009 Q3 2009 ■Total Capital Adequacy Ratio Highlights Total Capital Adequacy Ratio of Bank of Georgia Standalone grew to 21.2% from 18.4% in Q2 2009 Tier 1 Capital adequacy Ratio of Bank of Georgia Standalone grew to 20.4% from 17.8% in Q2 2009 Both ratios by NBG standards The increase mostly a result of the Georgian FSA's decision to reduce the risk-weighting of foreign currency denominated loans from 175% to 150% January 2010 Page 47#48Summary Operating environment in Georgia is improving and 2010 looks promising for Bank of Georgia: NPLs stabilized - 6% q-o-q decrease in Q3 2009 ☑Consumer confidence and economic activity is increasing - 15% q-o-q increase in client deposits in Q3 2009 - National Bank of Georgia has highest FX reserves in Georgia's history – US$2+ bn, a 56% increase in FX reserves YTD * We came out strong from the downturn and are well positioned to take advantage of our high liquidity and strong capital to achieve growth at the right price.... ....by implementing our strategy to become more efficient, deposit funded lending machine Lobko BANK OF GEORGIA www.bog.ge/ir Page 48 January 2010 Page 48#49Caution Regarding Forward-Looking Statements This presentation contains statements that constitute "forward-looking statements", including, but not limited to, statements relating to the implementation of strategic initiatives and other statements relating to our business development and financial performance. While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, (1) general market, macroeconomic, governmental, legislative and regulatory trends, (2) movements in local and international currency exchange rates, interest rates and securities markets, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties and developments in the markets in which they operate, (6) management changes and changes to our group structure and (7) other key factors that we have indicated could adversely affect our business and financial performance, which are contained elsewhere in this presentation and in our past and future filings and reports, including those filed with the NSCG. We are under no obligation (and expressly disclaim any such obligations) to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise. Lobko BANK OF GEORGIA www.bog.ge/ir Page 49 January 2010 Page 49#50Contact Nick Enukidze Chairman of the Supervisory Board +995 32 444 800 [email protected] Lobko BANK OF GEORGIA www.bog.ge/ir Irakli Gilauri Chief Executive Officer +995 32 444 109 [email protected] Macca Ekizashvili Head of Investor Relations +995 32 444 256 [email protected] January 2010 Page 50