#1LUSHOƆCML ¿563N BANK OF GEORGIA GROWTH AT THE RIGHT PRICE LSE: BGEO/GSE:GEB JSC Bank of Georgia investor presentation September 2010 Unicredit 7th Annual Emerging Europe Conference September 13-14, 2010, London#2Introduction to Bank of Georgia The leading universal bank in Georgia No.1 by assets (35%), (¹) gross loans (33%), (¹) client deposits (30%) (¹) and equity (40%) (¹) Assets of GEL 3.5 bn (USD 1.9 bn), Net Loans of GEL 2.0 bn (USD 1.1 bn), Client Deposits of GEL 1.5 bn (USD 0.8) and Equity of GEL 649.3 million (USD 352.1 bn) Leading retail banking, with top brand, best distribution network and broadest range of services of any bank in Georgia June 2010 March 2010 June 2009 Number of Retail Clients 714,400+ 732,900+ 695,000++ Retail Accounts Cards Outstanding Branches 953,000+ 996,500+ 935,000+ 551,000+ 570,000+ 590,000+ 137 140 140 ATMs 387 379 394 Leading corporate bank with approximately 88,100+ legal entities and over 164,800+ current accounts Leading card-processing, leasing, insurance, wealth management and brokerage services provider Banking operations in Ukraine and Belarus, with BG Bank (Ukraine) and BNB (Belarus) accounting for less than 10% of BoG's consolidated total assets 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$ 383 mln as of 10 September 2010 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+) Ownership Structure Management & Local Shares Employees**, Held by Institutional Shareholders 5.6% 3.3% Local Shares Held by Domestic and Foreign Retail Shareholders, 3.8% GDR Holders*, 87.3% (1) All data according to the NBG as of 30 June 2010 LOLO BANK OF GEORGIA www.bog.ge/ir *through BNY Nominees Limited ** includes GDRs held as part of EECP September 2010 Page 2#3LUSHOƆCML ¿563N BANK OF GEORGIA The Georgian Economy September 2010#4Georgia's Economy – Basic Facts Area: 69,700 sq km - Population: 4.4 million (as of January 1, 2009) Life expectancy: 76.5 years Official language: Georgian Literacy: 100% Capital: Tbilisi Currency (code): Lari (GEL) GDP (2009A): US$10.7 billion GDP real growth rate 2009A: - 3.9% GDP real growth rate 2010F: 4.5% White Stream (proposed) Russia Georgia Supsa Nabucco gas pipeline to Central Europe (planned) GDP per capita 2009A (market): US$ 2,450 GDP per capita 2009E (PPP): US$ 4,747 Current account deficit 2009: US$ 1.3bn, 11.9% of GDP Current account deficit 2010F : US$ 1.5bn, 13.6% of GDP Budget Deficit 2009E: 9.3% of GDP Cehyan Budget Deficit 2010F: 6.3 % of GDP Inflation rate 2010F: 6.0% External public debt / GDP 2009A: 31.8% Sovereign ratings: Fitch B+/Stable S&P B+/Stable/B+ Lobko BANK OF GEORGIA www.bog.ge/ir Baku-Tbilisi-Ceyhan oil pipeline Baku-Supsa oil pipeline Caspian Sea Kazakhstan Trans-Caspian gas pipeline (proposed) Azerbaijan Sangachal Türkmenbasy Terminal Armenia Baku-Tbilisi-Erzurum Erzurum gas pipeline Iran Turkey Iraq Syria Turkmenistan September 2010 Page 4#5Selected macro economic data Quarterly net remittances US$ mln 300 250- 200- 184 150- 100- 50 236 225 273 146 176 216 228 202 182 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009. Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 CPI Highlights Q2 2010 Net remittances increased by 14.6% y-o-y GDP real growth rate: 7-7.5% y-o-y Q2 2010F; 4.5% 2010F; growth mainly driven by donor money inflows and credit growth in1H 2010 VAT collection up by 20%+ y-o-y in recent months, 1H 2010 trade turnover up by 18% y-o-y to GEL 2.9 bln 1H 2010 Exports up by 40% 1H 2010 Imports up by 13% NBG reserves still on high level at around USD 2 bln, exceeding M2 by 1.5 times Quarterly tax revenue by categories GEL mln 12% 11.0% 1200 1,123 1,130 10% 10.0% 9.2% 9.2% 8.8% 8.2% 8%- 81 1,000 65 1000 116 105 44 100 188 192 800 171 6.2% 6%- 5.8% 5.5% 600 259 275 252 3.7% 4% 400 3.0% 2.8% 2.2% 1.7% 475 497 200 433 2% 0 0% 2005 2006 2007 2008 2009 Mar-10 Jun-10 Q1 2008 CPI (e-o-p) ■CPI (average) VAT PIT Q1 2009 ■ СІТ Q1 2010 Excise Other Source: National Statistics Office of Georgia, Government of Georgia Labkon BANK OF GEORGIA www.bog.ge/ir September 2010 Page 5#6Key drivers of economic growth Export-led growth with sufficient diversity Agricultural products, ferroalloy, aircraft, rail car, vessels and vehicles, fertilizers, machinery Oil and gas pipelines - Russia-Georgia-Armenia pipeline; Shah-Deniz (BTE) gas pipeline; Iran-Azerbaijan-Georgia (IAG) gas pipeline; Baku-Supsa oil pipeline; Baku-Tbilisi-Ceyhan (BTC) oil pipeline; NABUCCO Project is to finish by 2014 Grow potential revenue, tourism sector - c.US$1.4 bn donor money earmarked for investments in infrastructure Baku-Akhalkalaki-Kars railway line - sanctioned in 2007 building railway to link Asia and Europe; Huge untapped hydro-power resources - only 18% of Georgia's hydro potential is being utilized; current export capacity of c. 150 MW Increasing domestic consumption Consumer spending in 2008 - US$3.8bn estimated average household size of 3.5, far higher than in most CEE/CIS peers less than 18,000 households (out of the estimated total of 1.3 million) have mortgages Consumer debt per capita stood at US$92 as of YE 2009 Debt /GDP under 30%; Retail loans/GDP under 10% Libertarian policies kick-start modernization Tax and Tax rates slashed: Only six taxes, down from 21 Flat personal income tax of 20% (15% by 2013) Corporate income tax 15% By 2012 no taxes on dividends, interest income or worldwide income "Liberty Act" Referendum is required for an increase in tax rates Budget expenditure capped at 30% of GDP (effective FY2012) Budget deficit capped at 3%, effective FY2012 Public debt capped at 60% of GDP, effective FY2012 Red tape and import duties cut Customs code harmonized with EU; Capital controls abolished since 1990s Corruption significantly reduced Georgia 11th out of 183 in the WB's Ease of Doing Business 98% of Georgians didn't have to pay bribe in past year, according to International Republican Institute Economic growth is supported by Free industrial zones created around Poti (port), Kutaisi (second largest city) etc. (Tax rates in zones largely 0%) Poti Sea Port privatized in December 2008 by Rakeen Group (UAE) to build infrastructure for operating Free Industrial Zone Net transfers from abroad Increasing consumer spending Sustained government spending Source: Ministry of Economic Development, Ministry of Finance, State Statistics Department www.bog.ge/ir Lobko BANK OF GEORGIA September 2010 Page 6#7GDP breakdown: trade, logistics, services GDP Breakdown, Q1 2010 Health, social and community work, 8.9% Agriculture, hunting and forestry; fishing, 8.6% Mining and quarrying, 0.7% Education, 4.9% Public administration, 9.8% Real estate, renting and business activities, 3.6% Financial intermediation, 2.7% LOLE BANK OF GEORGIA Manufacturing, 7.7% Utilities & household processing, 5.5% Construction, 4.2% Source: National Bank of Georgia Transport & Communication, 11.5% Hotels and restaurants, 2.2% Trade (Retail & Wholesale), 13.7% www.bog.ge/ir September 2010 Page 7#8GDP per capita is low, leaving much room to climb GDP per capita across countries US$ 45,000 40,000 35,000 30,000 25,000 20,000 13,980 15,000 12,530 10,580 10,000 7,770 8,230 5,190 3,850 5,000 2,520 2,450 39,000 Ukraine Georgia China Belarus Romania Russia Poland Hungary Estonia Western Europe average (EU US$ 15+) 4,500 4,000 3,500 2,984 3,012 2,921 3,000 2,737 2,641 2,555 2,500 2,000 1,500 1,000 500 0 Bulgaria 2003 Source: IMF, National Bank of Georgia Labkon BANK OF GEORGIA www.bog.ge/ir Turkey 2002 Romania 2003 Georgia 2008 Russia 2003 Serbia 2004 September 2010 Page 8#9Strong economic growth before crisis ... starting again? Gross domestic product (GDP) USD billion 14 12.8 15% 12.3% 12 11.1% 11.2 13% 10.7 9.6% 9.4% 10.2 11% 10 9% 7.8 8 5.9% 6.4 7% 4.5% 6 5.1 5% 4.0 2.7% 3% 4 1% 2 -1% 0 -3.9% -3% -2 -5% 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010F Nominal GDP (LHS) Real GDP Growth (RHS) GDP per capita USD 6,000 5,000 4,664 4,000 4,038 3,644 2,966 3,242 3,000 4,971 4,863 4,747 2,921 2,560 2,315 2,450 2,000 1,764 1,484 1,188 919 1,000 0 2003 Source: National Statistics Office of Georgia Lobko BANK OF GEORGIA www.bog.ge/ir 2004 2005 2006 2007 2008 2009 2010F Nominal GDP per capita ■GDP per capita PPP September 2010 Page 9#10Loka US$ mln US$ mln Current Account Deficit Exports and Imports* Remittances Exports of goods & services CAGR ('04-09): 14% Imports of goods & services CAGR ('04-'09): 16% 7,499.0 8,000 7,000 6,000 5,000 4,412.9 4,000 3,318.1 3,000 2,492.8 2,551.6 1,865.3 2,187.5 2,000 1,646.9 420.5 1,288.5 315.4 212.7 1,000 165.8 0 2003 2004 *Export and Import of goods and services Source: Central Bank of Georgia Current Account Deficit Donor inflows (DI) 5,916.9 3,182.4 755.4 5,266.8 6,153.7 3,688.4 3,800.5 950.0 3,199.2 917.9 766.5 2005 2006 2007 2008 2009 2010F Total private capital inflows (TPCI) CAD CAD as % of GDP CAD+TPCI+DI as % of GDP 5,000 20.0% I 4,000 14.1% 15.0% 7.7% 3,000 5.6% 79% 1.7% 3.1% 5.5% 4.7% 10.0% 2,982.4 2,000 1,698.4 5.0% 1,000 734.8 351.0 479.6 0 98.3 160.3 176.7 -6.9% (709.5) -1,000 (383.3) (353.5) 1,508.1 261.7 (1,174.6) 2,291.8 276.2 (2,008.7) 1,423.4 0.0% 942.0 (2,915.3) 1,092.6 (1,274.3) 658.0 (1,544.3) -5.0% I -10.0% -9.6% -11.1% -2,000 -11.9% -15.0% -15.1% -13.6% -3,000 -20.0% -19.7% -4,000 -22.8% -25.0% 2009 2010F 2003 2004 2005 2006 2007 2008 Donor Inflows include both public and private sectors. Donor inflows in 2009 adjusted according to the banking sector foreign debt outflows Source: Central Bank of Georgia, Minister of Finance of Georgia BANK OF GEORGIA www.bog.ge/ir September 2010 Page 10#11…so FX reserves rose, while inflows funded investment FX reserves, $ mln 2500 2000 2003-2009 CAGR 48.6% Fx reserves FX/M2 1.7 1.7 1500 0.8 0.8 1.1 1.0 1.3 1000 0.8 US$0.93 bn US$1.48 bn US$0.49 bn US$ 1.36 bn 500 US$0.38 bn US$0.19 bn US$ 2.11 bn Record high for Georgia 2.0 1.8 1.6 1.4 1.5 US$ 2.20 bn 1.2 1.0 0.8 US$ 1.86 bn 0.6 0.4 22 0.2 0 2003 0.0 2004 2005 2006 2007 2008 2009 Mar '10 Jun-10 NBG Interventions Inflation NBG Interventions -Average Lari/US$ 140 16 600.0 2.5 115.7 14 432.4 120 101.6 105.9 106.0 108.3 12 10.0% 400.0 100 2.0 200.0 880 8.89 11.0% 107.9 10 8.2% 8 9.2% 9.2% 3.7% 156.7 197.0 5.5% 5.8% '6 124.0 60 1.5 6.2% 4 0.0 (42.9) 2004 2005 2006 2007 2008 2009 Mar '10 Jun-10 40 2.8% 2 (200.0) 2.2% 0 (182.7) 1.0 20 0 (400.0) (341.2) 0.5 (600.0) Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Mar-10 Jun-10 (660.8) (800.0) 0.0 Real effective rate, Jan05-100 (LHS) CPI (e-o-p) CPI (average) Loka Source: National Bank of Georgia, Ministry of Finance of Georgia BANK OF GEORGIA www.bog.ge/ir September 2010 Page 11#12FDI and Net remittances Cumulative net FDI breakdown by origin, 2004 - Q2 2010 Country FDI breakdown by sectors, Q2 2010 Financial sector, 6.1% Agriculture, fishing, 1.2% Other services, 14.3% Industry, 21.3% Energy sector, - UK US$ '000s 770,488 % of total 11.6% UAE 613,245 9.2% Turkey 565,356 8.5% Netherlands 571,968 8.6% British Virgin Islands 472,830 7.1% Real estate, 16.9% Kazakhstan 258,077 3.9% Azerbaijan 330,016 5.0% Czech Republic 341,867 5.1% Cyprus 275,657 4.1% Subtotal 4,199,503 63.2% Other countries 2,449,570 Total 6,649,073 36.8% 100.0% Cumulative net remittances, 2007-Q2 2010 Country Russia USA Greece Spain Ukraine Turkey UK Israel Kazakhstan Germany Other countries Total Transports and communications, 53.0% 1.3% Construction,- 4.1% Hotels and restaurants, -7.6% Net remittances by countries, Q2 2010 Other countries. Germany, 1.5%- 11.6% US$ '000s 1,717,761 % of total 60.8% Kazakhstan, 0.7%- Israel, 1.4% 272,138 9.6% UK, 0.7% 157,725 5.6% 78,011 2.8% Turkey, 3.6%- 137,785 4.9% Ukraine, 5.1% 62,096 2.2% Spain, 2.4% 22,738 0.8% 26,879 1.0% Greece, 7.0% 28,465 1.0% 21,451 0.8% 298,575 10.6% 2,823,623 100.0% Source: National Bank of Georgia, National Statistics Office of Georgia Labkon BANK OF GEORGIA www.bog.ge/ir USA, 8.6% Russia, 57.4% September 2010 Page 12#137.4% 7.2% 7.2% More money to flow... US$ mln 1000 ☐ Unequivocal support from the West and IFIs with total financial pledge Net remittances through 2011 of US$4.5 bln (42% of 2009 GDP). Approximately one third of the package is earmarked for financial sector. By end of FY 2010, cumulative donor commitment to Georgia under the Brussels pledge will total circa US$4.2 billion, with possibility of further upward adjustment. As of YE 2009, US$ 1.4 billion was disbursed In addition: ☑Approved access to US$1.2 bln under SBA by IMF until 2011 U.S. Committed US$ 124 mln investment in energy infrastructure development (February 2010) US$70 million from ADB for infrastructure repairs Liberal regulatory environment for foreign businesses, resulting in FDI averaging at 16% of GDP during past three years, with cumulative FDI (2004-2009) in country reaching 60.5% of GDP as of YE 2009. Quarterly FDI inflows US$ mln 800.0 900 800 700 5.4% 600 4.9% 4.2% 500 400 300 200 420.5 315.4 100 212.7 0 2004 A 2005A FDI Inflows US$ mln 3,000 2006A Net remittances (LHS) 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0.0 280.7 421.4 01.5 489.1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 04 Q1 Q2 Q3 Q4 '05 '05 '05 '05 '06 '06 '06 '06 '07 Source: National Statistics Office of Georgia '07 '07 '07 Labkon BANK OF GEORGIA www.bog.ge/ir 34.7 Q2 Q3 Q4 22 8 2 2 '08 '08 '08 '08 917.9 766.5 755.4 2007A 2008A 9% 8.4% 8% 7% 6% 5% 950.0 4% 3% 2% 1% 0% 2009 2010F Net remittances as % of GDP (RHS) 25.0% 2,500 2,000 1,500 261.7 1,000 7.0% 2,015.0 9.4% 82 114.C 77.2 173.2 194.0 75.7 196.5 160.3 176.7 1,190.0 500 483.0 450.0 19.8% 20.0% 942.0 276.2 15.3% illu 15.0% 12.2% 1,092.6 10.0% 658.0 1,564.0 7.7% 6.1% 5.0% 870 658.0 0 2004 2005 2006 2007 2008 2009 0.0% 2010F Q2 Q3 Q4 Q1 02 '09 '09 '09 '09 '10 '10 Net FDI Source: Government of Georgia presentation Donor inflows Net FDI as % of GDP September 2010 Page 13#14Fiscal indicators: The worst seems past Overall fiscal balance of the state budget, 2004-2009F GEL mln 0.0 0.0% 2006 2007 2008 2009 2010F 2011F -200.0 -1.0% -468.9 -400.0 -815.7 -2.0% -935.7 -600.0 -3.0% -1,258.6 -1,390.1 -4.5% -800.0 -4.0% -3.4% -1,720.5 -1,000.0 -5.0% -4.8% -1,200.0 -6.0% -1,400.0 -7.0% -6.6% -7.3% -1,600.0 -8.0% -1,800.0 -9.0% -2,000.0 -9.4% -10.0 Overall fiscal balance Fiscal revenue performance GEL mln 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0.0 January February March April May ■2007 Source: National Bank of Georgia, National Statistics Office of Georgia Labkon BANK OF GEORGIA www.bog.ge/ir June -Overall fiscal balance as % of GDP 2008 July 2009 August 2010 September October November December September 2010 Page 14#15Public debt Georgia's economy is quite unleveraged compared to other emerging market economies Georgia's public debt is 40.8% of GDP in 2009 down from 58.0% 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$500 mln in April 2008, maturity date 2013 Breakdown of public debt US$ billion 6.0 4.0 60.0% 46.1% 5.0 52.5% 50.0% 1.03 40.3% 1.00 40.0% 32.8% 40.8% 0.97 3.0 26.4% 30.0% 0.83 28.5% 0.85 0.89 0.85 2.0 4.15 20.0% 3.38 2.68 1.86 10.0% 1.73 1.70 1.79 10 1.0 External public debt service US$ mln 180 8.8% 160 140 120 100 60 80 60 40 40 20 7.3% 7.1% 110.6 103.8 0 2004A 2005A 152.2 0.0 0.0% 2004A 2005A 2006A 2007A 2008A 2009 A 2010F External public debt Internal public debt Total public debt as % of GDP Source: "The Georgian Economy Overview", Government of Georgia Presentation, Public debt as % of GDP, 2009 Russia Turkey 10% 9% Bulgaria 8% Ukraine 7% Lithuania 6% 5.20% Slovak Republic 4.4% 5% 169.3 Georgia 4% 136.7 Poland 3.4% 118.7 3% 102.1 Latvia 2.9% 2% Kazakhstan Hungary 2006A 2007 A 2008A 2009A 1% 0% 2010F External debt service External debt service as % of budget revenue Source: "The Georgian Economy Overview", Government of Georgia Presentation, June 2009. Labkon BANK OF GEORGIA www.bog.ge/ir Estonia Czech Republic 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Source: World Bank, International Monetary Fund September 2010 Page 15#16Trade structure ☑WTO member since Import structure by country, Q2 2010 2000 No quantitative restrictions on trade Simplified customs Kazakhstan, 1.3% Armenia, 1.0%- regime since August Turkmenistan, 1.4% USA, 4.1% Others, 10.1% EU Countries, 2006, new customs 29.5% 3.1% Export structure by country, Q2 2010 China, 1.5% United Arab Emirates, 2.1% Kazakhstan, 2.4%- Russia, 3.9% Other, 10.0% Turkey, 17.0% 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 China, 6.0% Russia, 5.4% Ukraine, 11.1% Azerbaijan, 8.7% Turkey, 18.2% As of November 2007 Import structure by product, Q2 2010 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 Ferrous Metal Paper, 2.1% Products, 3.2% Plastic, 3.7%- Cereals, 3.3%- Pharmaceuticals, 4.0% Apparel & footwear, 4.0% Ferrous Metals, 2.8% Vehicles, 8.4% Mechanical Equipment & Electrical Machinery, 15.5% Source: National Statistics Office of Georgia www.bog.ge/ir LOLE BANK OF GEORGIA. Sugar, 0.9% Others, 34.1% Oil & Gas, 18.1% EU Countries, 13.8% USA, 13.7% Armenia, 9.5% Ukraine, 6.8% Azerbaijan, 14.9% Canada, 4.5% Export structure by product, Q2 2010 Pharmaceuticals, 1.8% Others, 16.6% Ferrous Metals, 32.4% Vessels & Aircraft, 10.8% Oil & Gas, 5.6% Equipment & Rail Cars, 1.7% Fertilizers, 5.1% Cement, 0.1%- Gems & Precious Stones, 4.6% Ores, 4.8% Vehicles, 5.8% Beverages, Spirits & Vinegar, 10.5% September 2010 Page 16#17LUSHOƆCML ¿563N BANK OF GEORGIA Management target for 2010 September 2010#18Targeted financial performance 2010 Target pre-provision profit for 2010 GEL mln 160 127.9 135.6 5.73 135.0 13.03 120 106.8 21.85 80 40 0 2007 Profit before provisions Losses related to Real Estate Other 68.02 27.0 2008 2009 2010F Goodwill Impairment associated with BG Bank Losses related to investments Target net provision expense for 2010 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 income for 2010 GEL mln 160.0 120.0 80.0 133.1 128.7 GEL mln 100.0 75.6 80.0 60.0 40.0 20.0 0.2 10 72.3 2007 2008 2009 2010F 50.0 (20.0) (40.0) 40.0 17.0 (60.0) (80.0) 0.0 (100.0) 2007 2008 2009 2010F * IMF Estimates (98.9) Lobko BANK OF GEORGIA www.bog.ge/ir September 2010 Page 18#19LUSHOƆCML ¿563N BANK OF GEORGIA Strategy September 2010#20Strategic objectives: grow at the right price More efficient Deposit funding Lending machine Focus on International operations, Divesting of non-core assets Labkon BANK OF GEORGIA Enhance operational efficiency through technological improvements: Temenos T24, core banking software, acquired in October ‘09 is in the process of implementation; Deployment of Softscape, talent management solution, and CRIF, credit scoring solution, is under way Wealth Management services launched in Israel, Ukraine and London K Deposits from international clients reach GEL 100 mln in '09, c. 8% of total deposits Premier Banking launched for the affluent client base supported by the exclusivity of Amex Card issuing and acquiring business in Georgia Despite high rate of bank debt growth in '05-'09, ample room for growth with total loans/GDP under 30%; retail loans/GDP under 10% Lending rates decreased from 16-18% to 14.5-16.5% as both corporate and retail lending stepped up in Georgia Emphasis on micro loans, SMEs, consumer loans and mortgages in Georgia Scale down operations of BG Bank; leverage on corporate banking and brokerage to build trade finance business in Ukraine to capture growing (c.U$1 bn) trade between Georgia and Ukraine Focus on high margin, unattended SME sector in Belarus; explore the possibility of third party investor, such as IFIs, in BNB First stage of restructuring of equity investment business completed Controlling stake in investment management company sold Strategic objectives for 2010: Cost control combined with Loan book growth www.bog.ge/ir September 2010 Page 20#21LUSHOƆCML ¿563N BANK OF GEORGIA Intention to pay dividends September 2010#22Intention to pay dividends for 2010 # of Shares outstanding 31,252,553 27,154,918 25,202,009 31,306,071 III YE 2006 YE 2007 YE 2008 YE 2009 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 September 2010 Page 22#23LUSHOƆCML ¿563N BANK OF GEORGIA Governance September 2010#24A move to classical two-tier board structure Supervisory Board ⚫ 7 non-executive SB members; non-executive Chairman SB members ⚫ Neil Janin, Independent Director experience: Director at McKinsey & Company in Paris; Co-chairman of the commission of the French Institute of Directors (IFA); Chase Manhattan Bank (now JP Morgan Chase) in New York and Paris; Procter & Gamble in Toronto. • Ian Hague, Firebird Management LLC • Allan Hirst, Independent Director experience: 25 years at Citibank, including CEO of Citibank, Russia; various senior capacities at Citibank Kaha Kiknavelidze, Independent Director currently managing partner of Rioni Capital, London based investment fund; previously Executive Director of Oil and Gas research team for UBS Jyrki Talvitie, East Capital ⚫ David Morrison, Independent Director experience: senior partner at Sullivan & Cromwell LLP prior to retirement Al Breach, Independent Director experience: Head of Research, Strategist & Economist at UBS: Russia and CIS economist at Goldman Sachs . Management Board Chief Executive Officer and 9 Executive members of Management Board MB members . . . • · . . Irakli Gilauri, CEO; formerly EBRD banker in Tbilisi and London, MS from CASS Business School, London Giorgi Chiladze, Finance; formerly CEO of BTA Bank (Georgia); Program Trading Desk at Bear Sterns, NYC Archil Gachechiladze, Corporate Banking; formerly Deputy CEO of TBC Bank, Georgia; Lehman Brothers Private Equity, London; MBA from Cornell University Avto Namicheishvili, Legal; previously partner at Begiashvili &Co, law firm in Georgia. LLM from CEU, Hungary Irakli Burdiladze, COO; previously CFO at GMT Group, Georgian real estate developer. Masters degree from Johns Hopkins University Sulkhan Gvalia, Risk; founder of TUB, Georgian bank acquired by BOG in 2004 Murtaz Kikoria, acting CEO of BG Bank; formerly senior banker at EBRD; Head of Banking Supervision at the National Bank of Georgia. Mikheil Gomarteli, Retail Banking; 10 years work experience at BOG Nick Shurgaia, International Business; previously CEO of VTB Georgia, Senior Banker at EBRD, London; MBA from LBS Vasil Revishvili, Head of Wealth Management; previously Head of the Investment Risk Unit and Senior Investment Manager at Pictet Asset Management in London and Geneva. MS in Finance from London Business School LOCAL SEO BANK OF GEORGIA www.bog.ge/ir September 2010 Page 24#25LUSHOƆCML ¿563N BANK OF GEORGIA Q2 2010 results highlights September 2010#26Gross loans grew 10.9% q-o-q, Assets Total assets GEL mln up 17.2% YTD and 4,000 19.4% y-0-y 19.2% YTD (11.1% q-o-q up 14.0% y-o-y 3,400.7 3,471.9 3,500 3,147.7 3,154.3 3,258.9 3,186.8 2,980.2 3,124.1 2,907.8 2,913.4 Standalone Gross 3,000 loans grew 7.9% q- 2,500 0-q, up 14.3% YTD and up 15.5% 2,000 Loan book, gross BNB, 2% GEL 41.8 mln BG Bank, 9% GEL 201.0 mln y-o-y 1,500 Retail gross loan 1,000 2,106.7 2,059.7 2,189.4 2,046.8 2,163.3 1,855.7 1,904.7 1,833.1 1,851.9 1,950.6 CB,47% GEL 1,017.4 mln book grew by 500 15.2% YTD and 0 RB & WM, 45% GEL 966.0 mln Corporate gross loan book grew by 15.6% YTD The Balance Sheet growth since the beginning of the year in 1H 2010 resulted in 2.1% market share gain by assets, 1.1% market share gain by gross loans and 2.5% market share gain by client deposits 35% market share by assets, record high level Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Gross loans Corporate loan book breakdown, BoG Standalone Pharmaceuticals and Healthcare, 2% Other, 14% Industry & State, 12% Construction & Trade, 31% Real Estate, 17% Energy, 11% FMCG, 13% Retail loan book breakdown, BoG Standalone Micro loans, 16% Mortgage loans, 42% Credit cards and overdrafts, 15% Consumer and other, 27% Lobko BANK OF GEORGIA www.bog.ge/ir September 2010 Page 26#27Loan portfolio quality Bank of Georgia Loan quality under the following stress tests standalone NPLs declined 5.6% q- 0-q to GEL 129.2 million, while BG Bank' (Ukraine) NPLs grew 45.6% q-o- q to GEL 41.9 million Armed conflict with Russia in August 2008 17% devaluation of Lari against US$ in one day in November 2008 Political crisis in Georgia peak in Spring 2009 NPLs, BoG Standalone NPLs Consolidated GEL mln 200 180 160 140 1320 100 554.4% 30.1 23.9 28.6 600% 500% 32.1 44.6 400% 69.2 58.9 300% 88 80 208.4% 17.2 51.3 61.4 75.4 138.3% 60- 7.169.1% 200% 1211% 118.8% 99.3% 119.3% 102.6% 109.3% 40 100% 41.6 20 22.4 11.3 10.9 35.9 22.7 67.6 70.3 8.1 9.7 12.0 46.3 54.5 67.4 0 0% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 RB & WM CB Other* Q3 2009 NPL coverage ratio Q4 2009 Q1 2010 Q2 2010 * Other NPLs include BNB and BG Bank Loan loss reserve, Consolidated GEL mln GEL mln 160 8% 7.5% 7.5% 200.0 7.4% 9.1% 9.0% 10.0% 8.9% 8.8% 6.8% 140- 6.9% 6.9% 180.0 9.0% 7.4% 7% 7.8% 7.0% 160.0 8.0% 120 6.7% 6.4% 6.5% 6% 5.5% 140.0 6.3% 6.3% 7.0% 4.9% 100 80 5% 120.0 5.0% 6.0% 4.7% 100.0 189.8 5.0% 80 4% 3.2% 166.3 167.0 173.3 111.3 80.0 4.0% 118.7 136.8 147.7 129.2 115.9 60 3% 129.0 127.9 60.0 2.1% 2.1% 3.0% 40 -1.9% 2.0% 87.4 64.3 1.3% 1.7% 101.4 40.0 2.0% 2% 20.0 39.6 44.4 1.0% 20 H2% 32.1 23.3 19.0 0 Q1 2008 Q2 2008 1% 0.0 0.0% Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 04 2009 Q1 2010 NPLS % of Gross loans Loan loss reserve as % of gross loans 0% Q2 2010 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Loan loss reserves Reserve For Loan Losses To Gross Loans, BoG Consolidated Labo BANK OF GEORGIA www.bog.ge/ir September 2010 Page 27#28Total Client deposits grew by 46.2% y-o-y in Q2 '10 (7.5% q- o-q Liabilities Client deposits GEL mln 2,000 Record high Wealth Management deposits GEL mln +96.9% 131.4 163.1 180.7 212.3 120.0 1,499 WM client 1,500 1,395 1,394 deposits grew 1,326 1,272 151.9 1,193 100.0 1,202 1,183 142.9 107.8 98.7 93.3 96.9% y-o-y 228.4 233.2 1,133 1,025 145.7 212.3 (17.5% q-o-q) 81.6 174.1 76.5 229.4 125.0 180.7 81.6 154.0 80.0 76.5 163.1 1,000 98.7 131.4 70.4 in Q2 '10 70.4 93.3 116.0 107.8 681.5 683.5 656.1 60.0 652.7 FRB client 576.2 626.7 587.6 594.9 605.2 518.4 deposits 59.3% 500 40.0 y-o-y (8.7% q-o- q) in Q2 10 FCB client deposits grew 31.8% y-o-y (4.2% q-o-q) in 363.6 403.4 326.0 319.8 280.4 283.1 331.2 376.1 414.7 450.8 20.0 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 ■RB Client Deposits CB Client Deposits WM Client Deposits Other 0.0 Retail banking deposits +59.3% GEL mln 500 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Borrowed funds GEL mln -21.6% Q2 10 GEL 225 mln of 403.4 borrowed funds repaid in 2009 400 363.6 300 200 100 1500 450.8 414.7 1250 376.1 331.2 326.0 319.8 280.4 283.1 1000 947.8 903.6 795.1 750 500 250 1,137.8 1,162.8 1,011.4 945.6 918.6 913.3 912.0 0 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Lobko BANK OF GEORGIA www.bog.ge/ir September 2010 Page 28#29Equity & Capital adequacy Total Shareholder's equity GEL mln 900.0 Risk weighting of FX denominated assets at 150% according to the National Bank of Georgia standards 600.0 40% 783.0 746.7 739.3 718.8 711.8 709.9 718.5 649.3 611.7 15% 598.4 300.0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 BIS capital adequacy ratios, BoG Consolidated US$ 14.00 35% 36.2% 35.6% 33.8% 34.3% 34.9% 12.00 30% 25.3% 26.5% 10.00 25.2% 25.0% 24.9% 24.7% 23.4% 25% 21.7% 22.6% 21.7% 21.4% 8.00 19.6% 20% 25.8% 25.8% 32.5% 6.00 15% 10% 5% 0% Loka BANK OF GEORGIA Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 ■Tier I Capital Adequacy Ratio ■Total Capital Adequacy Ratio www.bog.ge/ir 0.00 2.00 4.00 1-Jan-09 1-Feb-09- 5% 25% NBG capital adequacy ratios, BoG Standalone 20.4% 19.7% 20% 18.3% 18.2% 17.8% 17.7% 16.6% 16.4% 15.8% 15.8% 10% 16.8% 16.3% 15.9% 15.1% 15.5% 13.5% 17.4% 18.4% 21.2% 14.5% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 ■Tier I Capital Adequacy Ratio Share price performance Total Capital Adequacy Ratio 1-Mar-09 1-Apr-09 1-May-09 1-Jun-09- 1-Jul-09 что мищать 30 June 2010 BV/share US$11.24 1-Aug-09- 1-Feb-10 1-Mar-10 1-Apr-10 1-May-10 1-Jun-10 1-Jul-10 1-Aug-10- September 2010 Page 29#30Georgia accounts Revenue for 83.0% of total Revenue consolidated +79.2% 167.0 revenues, BG 180.0 Bank 4.9% and 160.0 BNB 3.6% 140.0 +104.8% Positive 120.0 consolidated 93.2 100.0 operating 80.0 leverage achieved +56.4% 36.3 60.0 (16.4% q-o-q 45.5 basis and 4.2% y- 40.0 29.1 19.6 56.9 o-y basis) as 10.8 20.0 25.9 Revenue grew 18.3 0.0 9.1% q-o-q and 1H 2005 1H 2006 Total Recurring Net interest income Operating Costs -2.8% -2.2% 162.3 158.6 61.4 60.4 61.7 105.6 101.9 96.9 1H 2007 1H 2008 1H 2009 1H 2010 Net non interest income Revenue by segments Q2 2010 Belarus 3.6%, GEL3.0 mln (+1.6% q-0-9) Ukraine 4.9%, GEL4.1 mln (+33.5% q-0- 9) Aldagi BCI 5.7%, GEL4.7 mln (+4.4% q-o-q) Other 2.7%, GEL2.3 mln (-62.6% q-0- BOG Standalone 83.0%, GEL68.7 mln (+15.7% q-0- 9) lagged with 3.3% Revenue, quarterly q-o-q growth. GEL mln +2.7% 100 Standalone 86.6 90 86.1 85.9 82.8 Revenue grew 81.1 81.7 80.6 79.3 77.4 80 75.9 15.3% q-o-q while standalone 70 30.3 27.1 30.2 29.3 31.1 31.3 31.1 Total Recurring 30.4 31.3 60 30.6 Operating Costs 50 grew by 5.6% q- Composition of revenue Q2 2010 Net foreign currency related income 10.7%, GEL 8.8 mln (+20.5% q-o-q) Net fee and commision income 13.1%, GEL 10.9 mln (+5.2% q-o-q) Net income from documentary operations 2.6%, GEL 2.2 mln (-1.1% q-o-q) o-q, achieving 40 positive 30 55.8 58.9 56.4 52.4 standalone 49.8 49.5 48.9 51.7 46.0 45.3 20 operating leverage 8.4% on 10 q-o-q and 1.8% 0 on q-o-q baisis Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Net Interest Income Net Non-Interest Income Net other non- interest income 11.2%, GEL 9.3 mln (-14.3% q-o-q) Net interest income 62.4%, GEL 51.7 mln (+14.2% q-o-q) Lobko BANK OF GEORGIA www.bog.ge/ir September 2010 Page 30#31Revenue cont'd Net fee & commission income GEL mln 14 12 10.2 10.2 10 8 6 4 2 12.9 Net foreign currency related income GEL mln 14.9 16 12.0 12.6 13.2 10.9 11.1 11.6 14 10.3 10.9 12 10.4 9.4 10 8.8 8 6 4 2 0 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Income from documentary operations GEL mln 3¬ 2 1.9 17 1.7 1.4 2 1 1.4 2.3 2.3 2.3 2.2 2.2 222 1.8 7.1 6.5 5.7 7.3 23 8.8 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Other non-interest income GEL mln 12 10 3.7 3.0 4.4 4.4 8 0.3 0.3 16 4.7 1.0 1.3 3.3 3.6 1.8 4 1.4 0.4 8:3 1.3 1.6 0.1 5.1 2 3.2 2.5 3.0 1.7 1.6 0 -0.4 -0.4 T -1.1 ار. 0.2 4.6 0.6 1.9 0.2 1.9 1.9 0.2 0.2 0.2 4.9 3.7 4.2 4.2 T -0.5 T 1 -2 -3.4 ΟΙ Q2 -4 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2008 2008 2008 0 -6 ■Net Insurance Income Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 ■Asset Management Income 2009 2009 2009 2009 2010 2010 ■Brokerage Income Realized Net Investment Gains Other Loka BANK OF GEORGIA www.bog.ge/ir September 2010 Page 31#32Costs Recurring operating costs Employees 279 100.0 94.1 93.3 Q2 2010 2,968 4,911 91.0 90.0 393 Q1 2010 2.825 5.048 80.0 621 Q4 2009 2.674 40.3 14,781 70.0 45.0 45.8 617 Q3 2009 2,669 4,798 60.0 49.9 707 Q2 2009 2,665 4,914 50.0 757 Q1 2009 2,692 40.0 19.5 4,964 786 Q4 2008 30.0 2,741 4,977 53.0 49.0 45.2 842 20.0 24.2 18.7 1.8 30.4 1.7 10.0 13.4 11.0 Q3 2008 3.853 6,196 836 Q2 2008 3,619 5,911 0.0 824 Q1 2008 3,056 1H 2005 1H 2006 1H 2007 1H 2008 4,926 1H 2009 1H 2010 0 Personnel costs Other recurring operating costs Recurring operating costs 1,000 2,000 3,000 4,000 Group Consolidated ■BoG Standalone Net non-recurring income/(costs) 5,000 6,000 7,000 BG Bank GEL mln 60 GEL mln 20.0 +3.3% q-o-q 8.5 +3.2% y-o-y 3.2 (2.6) 0.0 (0.2) (0.3) (1.9) 1.9 (3.3) 48.9 49.6 47.9 47.8 46.6 46.3 44.6 46.3 45.0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 44.5 40 50 50 40 (20.0) 21.3 21.6 22.2 18.7 24.9 23.1 22.7 22.6 24.1 22.9 (40.0) 30 20 20 (60.0) 25.7 27.3 28.4 25.6 23.1 22.0 23.2 22.3 22.5 23.4 10 (80.0) 0 (100.0) Q1 2008 Q2 2008 Q3 2008 Q4 2008 Personnel Costs Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 ■Other Recurring Operating Costs (120.0) Lobko BANK OF GEORGIA www.bog.ge/ir (30.0) Includes Goodwill impairment of GEL 68 mln associated with BG Bank and Real estates mark down (106.8) September 2010 Page 32#33Consolidated Net Normalized GEL mln 45.0 Operating Income (NNOI) 40.0 38.7 37.3 36.6 36.3 37.1 increased 18.1% 34.3 35.0 34.3 q-o-q up 2.1% 30.8 Operating profit, Provision expense Normalized net operating income +18.1 q-o-q Net provision expense BoG standalone GEL mln 160 140 1420 Related to the armed conflict 35.0 120 in August 2008 103.9 29.6 100 30.0 у-о-у 80 25.0 80 C Consolidated 20.0 60 60 Net provision 15.0 expenses of GEL 13.1 mln 40 20 10.0 20 8.6 6.7 29.6 24.0 18.2 17.7 12.3 6.2 in Q2 2010, (4.5) 5.0 0 GEL 7.4 mln in Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q1 2010 and 0.0 -20 GEL 40.7 mln in Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 -40 Q2 2010 Net provision expense BG Bank Standalone improved by 67.9% y-o-y GEL mln 30.0 Profit (loss) before provisions/NI GEL mln 60.0 45.1 Bank of 40.0 33.7 25.0 Georgia 31.9 20.0 Standalone Net 20.0 18.2 provision expenses 15.0 declined by 79.1% y-o-y 11.0 9.3 10.0 Net Income for 5.0 1H 2010 was 0.4 GEL 36.2 mln (1.3) 0.5 0.0 ياتنا 0.0 Q1 2008 Q2 2008 Q3 2008 -20.0 8.7 (1.1) 5.1 12.9 -40.0 8.5 -60.0 (59.0) -80.0 2.0 40.5 28.3 Q4 2008 Q1 2009 (4.3) 36.8 19.5 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 maupu (76.1) 36.8 32.4 34.0 26.4 16.8 2.6 (1.6) -100.0 (102.3) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -120.0 2008 (5.0) 2008 2008 2008 2009 2009 2009 2009 2010 2010 Profit Before Provisions Net Income LOLEJN www.bog.ge/ir BANK OF GEORGIA September 2010 Page 33#348.3% 8.3% 100 7.2% 40 Net Interest Margin (NIM) improved from 8.0% in Q1 2010 to 8.3% in Q2 2010 as Cost of Funds declined Profitability & selected ratios Cost of funds 120 808 60 00 10 94.5 49.4 49.8 98.8 42.4 101.8 45.1 43.0 44.8 Net loans/Client deposits 10% 200% 8.6% 8.5% 9% 180% 174.4% 8.3% 168.7% 170.6% 7.8% 160.6% 93.7 95.0 8% 160% 89.0 147.8% 7% 136.9% 140% 6% 104.1 120% 52.4 5% 100% 4% 80% 3% 60% 2% 20 1% 40% 0 0% 20% Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 0% Interest Income Interest Expense Cost of Funds Net interest margin (annualized) 12% 140.3% 131.9% 131.7% 127.5% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Cost Income Ratio 9.8% 10.1% 10% 160% 8.9%9.1% 9.3% 9.8% 9.0% 9.1% 9.9% 9.0% 8.5% 9.1% 8% 8.1% 8.6% 8.8% 8.9% 8.0% 8.3% 8.6% 120% 7.5% 7.8% 8.0% 6% 4% 2% 0% Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 -Net Interest Margin, Group Consolidated Net Interest Margin, BoG Standalone Lobko BANK OF GEORGIA www.bog.ge/ir 200% 90.0% 198.3% A 65.3% 80% 60.8% 59.1% 52.9% 54.9% 57.8% 58.0% 55.5% 50.5% 53.9% 49.30 60.7% 50.80 49 5 46 5% 49.9% 40% 50.0% 48.9% 44.8% 44.0% 47.3% 46.5% 48.1% 47.1% 41.0% 0% Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 -Cost/Income Ratio, Consolidated Cost/Income Ratio, Bank of Georgia Standalone -Cash Cost/Income Ratio, Consolidated September 2010 Page 34#35Summary Operating environment in Georgia is improving and 2010 looks promising for Bank of Georgia: Consumer confidence and economic activity is increasing with a 7.5% q-o-q and 46.2% y-o-y increase in client deposits in Q2 2010; Q2 2010 Net remittances increased by 14.6% y-o-y; GDP real growth rate: 7-7.5% y-o-y Q2 2010F; 4.5% 2010F; growth mainly driven by donor money inflows and credit growth in1H 2010; VAT collection up by 20%+ y-o-y in recent months, 1H 2010 trade turnover up by 18% y-o-y to GEL 2.9 bln, NBG reserves still on high level at around USD 2 bln, exceeding M2 by 1.5 times Strong operating leverage achieved 16.4% on q-o-q and 4.2% on y-o-y basis driven by: Improvement in NIM from 8.0% to 8.3%, as our cost of funds decreased from 8.6% to 8.3%, as a result of deposit rate cuts Solid growth of higher yielding retail loan book Increase of Net Interest Income as lending activities picked up Cost of Funds down from 8.6% in Q1 2010 to 8.3% in Q2 2010 As a result Consolidated Cost/Income ratio decreased from 65.3% in Q1 to 55.5% in Q2 2010, standalone Cost/Income ratio decreased from 53.9% in Q1 2010 to 49.9% in Q2 2010 As of 31 July 2010, the outstanding Eurobonds maturing in February 2012 amounted to US$149 million, out of original US$ 200 million, in August 2010 the Bank has signed agreements for US$ 50 million 5-year credit facilities with EBRD Loan book growth to be funded through deposit inflows locally and internationally. WM Representative Office opened in London Management target for 2010 • . The growth rate of balance sheet in Q3 lower than Q2 due to seasonality effect as business activities in July and August is usually low Growth expected to resume in Q4 • Higher yielding retail loan book expected to grow faster in 2nd half of the year • Confident to deliver previously announced management target for 2010 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 LOLO BANK OF GEORGIA www.bog.ge/ir September 2010 Page 35#36Caution 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 September 2010 Page 36#37Contact Irakli Gilauri Chief Executive Officer +995 32 444 109 [email protected] Lobko BANK OF GEORGIA www.bog.ge/ir Macca Ekizashvili Head of Investor Relations +995 32 444 256 [email protected] September 2010 Page 37