We are a Georgia focused banking group with an investment arm, aiming to deliver on 4x20 strategy

Our story

Our strategy

Our strategy combines pushing the most lucrative touch points of our business model with seizing opportunities in Georgia. 

Our strategy – Georgia-focused banking group with an investment arm – reflects our competitive strengths as well as market opportunities. It combines pushing the most lucrative touch points of our business model with seizing opportunities presented to us in Georgia.

At the end of 2015, we introduced our updated 4x20 strategy, which entails a 20% metric for our ROAE, retail loan growth, IRR for the investment business and investment business profit contribution to the Group. The updated strategy will allow us to capture compelling investment opportunities in Georgia’s corporate sector, in addition to our continued commitment to developing our strong banking business.

Over the last few years, we have made substantial progress in delivering growth in our Retail Banking, Corporate Banking, and Investment Management businesses. This growth has been combined with maintaining a solid capital and liquidity position as well as consistently high returns on shareholder equity, with dividends more than quadrupling over the last three years and an excellent total return being provided to shareholders. In addition, we have made great progress in developing and profitably growing our non-banking operations, namely healthcare and real estate.

To achieve our strategy, we plan to increase the relative size of our highly profitable Retail Banking business and to generate additional non-interest income from advisory and other fee-generating businesses. In addition, we plan to make further equity investments in areas outside our core banking operations. This strategy will improve returns through direct equity investments, capturing compelling opportunities in the Georgian corporate sector. Georgia’s rapidly growing economy provides opportunities in an underdeveloped market. Our management expertise and access to international capital markets, combined with the limited buyer universe for large domestic acquisitions in Georgia, positions us well to acquire high-quality assets at attractive valuations.

Georgia-focused banking group with an investment arm

  • Banking Business
  • 1 ROAE c.20%
    – ROAE of 21.7% in 2015
  • 2GROWTH c.20%
    – Aiming 20% growth in retail banking business
    – Net Loan Book growth of 35.3% in 2015, 19.0% on constant currency basis

  • Investment Business
  • 3Min. IRR of 20%
    – Target investments with min. 20% IRR and partial or full exit in max 6 years
  • 4Profit up to 20%
    – no more than 20% of BGEO’s future net income will be generated from our non-banking business

Dividend policy:
Regular dividends: Linked to recurring profit from banking business at 25-40% of dividend payout ratio

Dividend policy:
Special Capital Return: Aiming for at least three special capital returns over the next five years


1At least 20% RoE in Banking Business

Profitability is expected to be driven by further growth in both the retail and corporate banking businesses with an increased focus on the significantly more profitable retail franchise, as we aim to increase our share in retail loans.

2At least  20% Retail loan book growth

Our net loan book has grown at a CAGR of 23.6% from 2010 to 2015 and we remain committed to at least 20% growth in our retail customer lending. Our focus is on increasing retail loan portfolio to 65%, from its current 55%, over the next three years. Specifically, we are looking to further grow our Express (self-service) Banking network as well as our payments business, transform our retail mass market operations, through the Bank of Georgia brand, into a customer-centric bank and significantly increase our market share in the mass affluent segment, with our premium brand Solo.

3Internal rate of return of at least 20% for each of company's individual future investments 

We will target investments with a minimum of 20% IRR and partial or full exit in a maximum of six years. We will acquire only businesses that we believe have a well-defined exit path, to which end we will target companies with potential EBITDA of at least US$ 30 million within three to four years post acquisition with a view to potential future exits, including by way of stock market listings or trade sale.

Our investment approach: We take a highly disciplined approach to unlocking value through selective investments in Georgia, which have a well-defined exit path. 

- Ample opportunities with small capital commitments. The underdeveloped corporate sector and weak competition create ample opportunities to benefit from growth prospects in various sectors of the Georgian economy.

- Capital needed to fund growth. Demand for capital for well-performing companies is growing. Access to capital provides a significant advantage. 

- Opportunities to add value through better management. There is significant potential to improve operating performance through better management. We see EBITDA potential of at least GEL 60 million (c.US$30 million) in three–four years. 

- Low competition from other investors. The limited number of potential buyers translates into attractive valuations.


4A maximum 20% profit contribution, of the Group’s profits, from our investments in non-banking businesses

We aim to remain primarily a banking group, with an investment arm. No matter how well our non-banking companies do in terms of operating results, we want to see their exit to unlock the value and with the generated profit return capital to our shareholders.

Dividends: Our future dividend policy is expected to comprise recurring dividend payments linked to recurring profits from the banking group, with a targeted dividend payout ratio of 25–40%. In addition, we will aim to provide capital return upon the realisation of our financial investments and are targeting at least three capital returns in the next five years. Some of the profits may be reinvested if further attractive investment opportunities arise.


Our strategy

Our strategy combines pushing the most lucrative touch points of our business model with seizing opportunities in Georgia.

How we are going to achieve our targets over the next two to three years

Banking Business – crown jewel in our Group and the key driver of profitability

We have three segments in the banking business, of which Retail Banking will drive most of our

Banking Business growth, Corporate Banking and Investment Management will improve our

ROAE, with the latter also contributing an increasing share of our fee and commission income.

Strategic goal

Bank of Georgia aims to shift the mix of its customer lending to become 65% retail and 35% corporate with the product per client ratio in the Retail Bank targeted to increase to 3.0 products, from a current 1.7 products.

How we are doing this

  • Expand our product offering through continuous innovation to remain at the forefront of meeting the growing funding and investment needs of our extensive retail customer and corporate client base.
  • Expand our Express Banking strategy to increase our number of customers by attracting the currently unbanked population and by means of a shift towards transactional banking.
  • Expand on our market-leading payments business in Georgia through our Express Banking strategy.
  • Leverage our superior distribution network and local expertise across various business lines to step up our cross-selling strategies.
  • Shift from current segment approach to client-centric approach with an aim to capture growth opportunities and increase penetration through cross-selling, to be measured primarily by an improvement in product/client ratio.
  • With Solo strategy, we aim to significantly increase our market share in the mass affluent segment over the next three to four years.
  • Continued investment in our IT and payment business.

The Bank will continue to reduce concentration risk in the corporate lending portfolio, with the support of the Investment Management business, to target the top ten borrowers to represent less than 10% of the total loan portfolio.

  • In February 2016, we announced combination of the Bank’s Corporate Banking and Investment Management businesses into a Corporate Investment Banking business (CIB). The merged business will leverage our superior knowledge and capital markets capabilities in the Georgian and neighbouring markets both in terms of reach and the expertise that we have accumulated during the past several years through our corporate advisory, research and brokerage practices united under Galt & Taggart – a wholly owned subsidiary of Bank of Georgia at the forefront of capital markets development in the country.
  • As a result, we expect to grow our fee income, improve the Bank’s ROAE and reduce concentration risk in the corporate lending portfolio. Reflecting this change, the Group will report CIB business results separately starting in the first quarter 2016.

The net interest margin is expected to be c.7.25% – 7.75%.

  • Leverage the Bank’s pricing power stemming from its market leadership to maintain strong loan yield levels and continue optimising its Cost of Deposits without compromising deposit growth.
  • Access international capital markets to attract cheaper international funding.

The Bank aims to manage to a Cost/Income ratio of around 35% over the medium term.

  • Continued cost control measures and implementation of technologies aimed at improving workflow efficiency.
  • Leverage the strength of our scope and franchise to increase the cost-efficiency benefit for the underlying businesses and the Group as whole.
  • Expansion of Express Banking strategy and investing in express technologies to enable us to further scale up the business with minimal incremental operating costs.
  • Education platform to contribute further to lowering operating costs over the medium and long term.

The Bank will continue to enhance its already prudent risk management practice, and the Bank’s cost of risk ratio is expected to be in the 1.5%-2.0% range.

  •  Risk management system is based on the principle of continually assessing risk throughout the life of any operation.
  • Ongoing monitoring and control allowing efficient adjustments in case of any negative changes in the conditions on which the preliminary risk assessment was made.
  • Determination of an acceptable risk level.
  • Continuous analysis of efficiency of the risk management system.

Investment Business

The planned capital allocations in the Investment Businesses during the 2015-2018 period are expected to total approximately US$ 35 million.

Investment Business

Healthcare business – Georgia HealthcareGroup

Strategic goal

  • At least double 2015 revenues in 2018.
  • Achieve a 20% return on average equity and start paying dividends by 2019.
  • Launch two hospitals with a total of 700 hospital beds by 2017, and achieve a market share of hospital revenue in excess of 30% in the medium to long term.
  • Roll out a network of ambulatory clinics to achieve a 17% market share by revenues in the medium to long term.

Real Estate business – m2 Real Estate

  • To target an internal rate of return of c.40%+, while delivering a capital return to the Group of US$ 20-25million over the next five years.

Utility business – Georgia Global Utilities

  • To target an internal rate of return of c.40%+, while delivering a capital return to the Group of US$ 20-25million over the next five years.

Hydro business – Georgian Renewable Power Company

  • We aim to establish a renewable energy platform, targeting 100MW+ in four medium-sized hydro power plants by 2019, while targeting an IRR in excess of 25%.

Beverages business – Teliani Valley

  • To launch beer production, within a budget of US$ 37 million, by the end of 2016.