We are a Georgia focused investment platform, aiming to deliver on 4x20 strategy

Our Business

Banking Business
RETAIL BANKING


CLIENT-CENTRIC, MULTI-BRAND STRATEGY FOR OUR C.2.1 MILLION CLIENTS


We are the leading retail banking player in Georgia, serving c.2.1 million customers through the widest network of 273 retail branches, 801 ATMs and 2,729 Express Pay (self-service) terminals, a sales force of more than 3,000 people, along with our diverse products and services. Our Retail Banking business, the prominent ingredient of our business, runs a client-centric, multi-brand strategy which reaches the entire spectrum of retail customers through three well-established and recognised brands:


1. Express – designed to magnetise emerging retail customers with minimal incremental operational costs through cost-efficient distance channels such as our Express Pay terminals, internet and mobile banking and technology-intensive Express branches; 

2. Bank of Georgia – providing the long-established traditional banking services to our mass retail clients; and 

3. Solo – targeting mass affluent customers and providing a unique blend of banking and lifestyle products and services.  

CORPORATE INVESTMENT BANKING


INTEGRATED SOLUTIONS FOR OUR CIB CLIENTS 


Our Bank is the leading corporate lender in the country with deep sector knowledge and local expertise. Our Corporate Banking business is characterised by outstanding flexibility in meeting our corporate clients’ needs and offers the most comprehensive range of products and services in the country. We are proud to accommodate more than 3,000 businesses in Georgia and play our part in developing various sectors of the economy such as trade, energy, industry and tourism, among others. Corporate Banking additionally serves as the country’s leading trade finance business and provides leasing services through the Group’s wholly-owned subsidiary, Georgian Leasing Company (GLC). 


We are at the forefront of capital markets development in Georgia. We aim to 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 the Group. Our brokerage business, serves regional and international markets, including hard-to-reach frontier economies. Our Macro and Sectoral Research currently covers the Georgian and Azeri economies and publishes Georgian sector research (subscription to the research on www.galtandtaggart.com). 

WEALTH MANAGEMENT


WE ARE AN ESTABLISHED LEADER OF INVESTMENT MANAGEMENT SERVICES IN GEORGIA


Accommodating international clients from 68 countries, our Wealth Management business provides private banking services to our high-net worth individual clients and offers investment management products internationally through representative offices in London, Budapest, Istanbul and Tel Aviv. As Georgia has a pay-as-you-go pension system, the Bank believes that its wealth management franchise can benefit by focusing on the distribution of local debts. 

BNB


WELL CAPITALISED SME BANK IN BELARUS 


OJSC Belarusky Narodny Bank (BNB) offers individual and business banking services principally to SMEs and middle-income retail banking customers in Belarus. BNB was one of the first privately-owned commercial banks in Belarus, established in 1992. The Group has recently increased its ownership of BNB from 80% to 95% while IFC now holds the remaining 5%. BNB is a non-core business and the Group aims to exit from it eventually.

Investment Business
GEORGIA HEALTHCARE GROUP (GHG)


THE LEADING INTEGRATED PLAYER IN THE GEORGIAN HEALTHCARE ECOSYSTEM OF GEL 3.4 BILLION VALUE


Georgia Healthcare Group PLC is the UK incorporated holding company of the largest healthcare services provider in the fast-growing, predominantly privately-owned, Georgian health market. GHG offers by far the most comprehensive range of inpatient and outpatient services in Georgia. GHG targets the mass market segment through its vertically integrated network of 35 hospitals and ten ambulatory clusters, including 13 district ambulatory clinics and 28 express ambulatory clinics as at 31 December 2016. GHG is the single largest market participant, accounting for 23.4% of total hospital bed capacity in the country as at 31 December 2016. GHG is the largest pharmaceuticals retailer and wholesaler in Georgia, with approximately 29%* market share by revenue in 2016. GHG has approximately two million client interactions per month, with 0.5 million loyalty card members. GHG is also the largest provider of medical insurance in Georgia, with a 35.1% market share based on net insurance premiums earned and has approximately 211,000 insurance customers as at 31 December 2016.

*Including ABC’s market share acquired by GHG in January 2017.

m² REAL ESTATE (m²)


A FAST-GROWING, LEADING REAL ESTATE DEVELOPER AND ASSET MANAGER IN GEORGIA


Our real estate business, the Group’s wholly-owned subsidiary, m² Real Estate, develops and sells residential and commercial properties in Georgia. m² also manages yielding real estate asset portfolio, which it accumulated through its own developments as well as opportunistic investments in high street real estate. For the past couple of years m² has established itself as one of the most recognisable and trustworthy residential housing brands in the country. m² Real Estate outsources the construction and architecture works while focusing on project management and sales. m² Real Estate completed sales of 2,047 apartments worth US$ 172.9 million since 2011 with 97.2% of apartments sold in six successfully completed projects and 35.1% pre-sales in four ongoing projects. The number of apartments financed with BOG’s mortgages in all m² Real Estate projects as of 31 December 2016 totalled 946, with an aggregate amount of GEL 110.7 million. m² Real Estate has the exclusive right to develop Wyndham Ramada Anchor hotels in Georgia. Construction of one hotel has begun and work on two more is expected to start during 2017.

GEORGIA GLOBAL UTILITIES (GGU)


MAJOR UTILITY AND ENERGY COMPANY, WITH CLEAR GROWTH OPPORTUNITIES AND ROOM TO IMPROVE EFFICIENCY


GGU has two main business lines – water utility and electric power generation. In its water utility business, GGU is a natural monopoly that supplies water and provides a wastewater service to 1.4 million people (approximately one-third of Georgia’s population) in three cities: Tbilisi, Mtskheta and Rustavi. In the electric power business, GGU owns and operates four hydropower generation facilities with a total capacity of 149MW. Generated power is primarily used by GGU’s water business, with the excess amount of generated capacity sold to third parties. GGU has a pipeline of developments in hydro power plants and wind and solar energy production. When BGEO acquired its initial stake in GGU in 2014, the Group put in place a strong management team. The team has been further strengthened since the acquisition of full control in 2016.

TELIANI VALLEY


CREATING A LEADING BEVERAGES PRODUCER AND DISTRIBUTOR IN CAUCASUS


Teliani is a leading Georgian wine producer and beverage distributor with a wide distribution platform of a variety of imported beverages as well as own produced wine. Teliani sells over three million bottles of wine annually, with about 60% of sales coming from exports. Building on its existing franchise of distribution, Teliani is currently expanding into a new business line of beer and soft beverage production, with a ten-year exclusivity from Heineken to sell in three countries: Georgia, Armenia and Azerbaijan – a total population of 17 million people. The construction of the beer production facility has been completed during 2016 and Teliani aims to start brewing in the first half of 2017. With a strong management team and a proven track record, Teliani aims to become a leading beverages producer and distributor in the South Caucasuss.

P&C INSURANCE


THE LEADING PROPERTY AND CASUALTY INSURANCE BUSINESS


Our Property & Casualty business (P&C or Aldagi) is a leading player in the Georgian P&C insurance market, with a market share of 34.9% in 2016. Covering more than 700,000 insured customers, the P&C insurance business is synergistic to the to the Bank’s operations. Aldagi will be stepping-up cross-selling of its insurance products with the Bank’s Retail Banking and Corporate Investment Banking products.

We believe that our business model is simple and purpose built to capture growth opportunities in Georgia

We are a Georgia–focused investment platform. We have a successful track record of delivering profitable growth for more than a decade, growing our market capitalisation since 2004 by approximately 80 times.

Comprising at least 80% of the Group’s profit, our Banking Business includes Retail Banking, Corporate Investment Banking, Wealth Management, P&C Insurance and banking operations in Belarus through BNB.

Comprising up to 20% of our profit, the Investment Business includes our healthcare business, real estate business, utility & energy business and beverage business. We believe that our Banking Business is the number one or two player on the market in all its major business lines and each of our investment businesses is number one in its market.

Investors

Regular dividends

Capital returns

 
 
 
 
 

Banking Business

Investment Business

BGEO Group


WE RUN TWO FORMS OF CAPITAL RETURN:

1. Ordinary Dividends paid by the Banking Business.
Ordinary dividends are linked to the recurring profit from our Banking Business, with an aim of a 25-40% dividend payout ratio. Bank of Georgia is by far the largest and most valuable asset in our Group, which provides a stable dividend flow to our shareholders. Implementing our strategy successfully should improve the quality of ordinary dividend generation capabilities of Bank of Georgia and make it more sustainable over a long period of time. 

2. Special Capital Returns (SCR), generated by our Investment Business.
We updated our strategy in December 2014 and introduced the Investment Business and the concept of Special Capital Returns (SCR). The Investment Business aims to deliver SCRs from divestments of our portfolio of companies. Our aim over a five-year period is to deliver SCRs of at least 50% in aggregate of the ordinary dividends delivered by the Banking Business over the 2015-2019 period. We view SCRs in three different forms: cash dividends, BGEO share buybacks and the potential distribution of shares in our listed portfolio company. We are also aiming to buyback shares for our management trust, rather than issue new ones – as we historically used to do. The aim is not to increase the Group’s outstanding number of shares from the current 39.5 million level.



CAPITAL RETURNS: THREE FORMS, FIVE-YEAR CYCLE

Three forms of special capital return 1Cash dividends 2Stock dividends 3Share buyback
Five-year cycle for capital return
Strategy Announced 50% of regular dividends paid during 2015-2019 50% of regular dividends paid during 2020-2024

THE WAY WE INVEST AND MANAGE THE COMPANIES

Due to the limited access to capital and management in a small frontier economy such as Georgia, we see a much better risk return profile when investing in Georgian companies than when lending to those same corporates. We also believe that the Group will be adding value for our shareholders by investing in opportunities which currently are not accessible to our shareholders, changing management and governance, institutionalising and scaling up the companies and, most importantly, unlocking value by exiting from these companies over time. Our Plan A in exit is to take the Company public. This way, as far as possible, it is our firm intention to create an opportunity for our shareholders to participate in such offerings.

1. BE OPPORTUNISTIC AND DISCIPLINED

The Georgian economy was born around ten years ago and different sectors and businesses are in the process of formation, access to capital and management is limited, owners of businesses are cash poor and therefore good opportunities can be captured cheaply. At the same time, we are under no pressure to make new investments and we are extremely selective and opportunistic and will not commit more than US$ 25 million in a single investment in a sector where we are not already present. Our dividend policy is a natural self-discipline mechanism for our Investment Business.

2. IN SCALE WE TRUST

Achieving superior economies of scale in a small frontier economy is an essential part of the success. It actually significantly diminishes the risk of failure.

3. GET OUR HANDS DIRTY

Similarly to the limited access to capital in this country, the availability of management is limited and by producing top talent in the country we can add value for our shareholders. We understand that great management teams make great companies, and investing time in growing people continues to be critical for the success of our strategy.

4. GOOD GOVERNANCE MAKES GOOD RETURNS

We are big believers that robust governance is the source of value creation for our shareholders. The natural and simple alignment of interest between shareholders and management by awarding long-term stock works well for value creation and, finally, we want to have good balance by having separate people as the Chairman and CEO of the Company.

5. LIQUIDITY IS KING

In order for our strategy to work we need to be disciplined in unlocking the value of companies in which we invest and manage. Taking companies public is our preferred option for exit, as it is our intention to give our shareholders an opportunity to participate.




BGEO INVESTMENT PHILOSOPHY
BGEO AS AN INVESTMENT PLATFORM

  PRIVATE EQUITY CONGLOMERATE
Investment is not a primary mandate
Platform to produce executive management
Decentralised subsidiaries/investments

Mandate to divest
Within
6 Years
  Neither PE nor Conglomerate    

At the core of our success, both in banking and investment businesses, lie our strengths and capabilities that we have built over the last decade to create superior value for our shareholders as we follow – and in many ways lead – Georgia’s path to prosperity.

1. Unrivalled strength of the franchise
We are market leaders in all of our businesses offering the
most comprehensive range of products and services in Georgia
  • Leading Bank by market share in total assets – 33.5%
  • Leading Bank by market share in client deposits – 32.2%
  • Leading Bank by market share in total gross loans – 32.7%
  • No.1 in healthcare services sector – 23.4% by beds
  • No.1 insurance business – 35.3% (Health), 34.9% (P&C and Life)
  • Largest real estate business
  • Largest utilities business
  • Largest wine business
Leading Bank  in retail banking with the widest segment offering through our three well-established and trusted brands with distinctive culture and values
  • 2,141,300 total retail banking clients, of which:
  • 472,000 Express clients (emerging retail segment)
  • 1,650,000 Bank of Georgia clients (mass retail and MSME segment)
  • 19,300 Solo clients (mass affluent segment)

2. Unmatched scale and distribution
Extensive reach through the largest distribution network in the country translating into superior cross selling ability, significant economies of scale and efficiency gains
  • c.2.1 million Retail Banking customers
  • 1,383 wealth management clients from 68 different countries
  • 278 bank branches, 801 ATMs, 10,357 POS terminals, 2,729 Express Pay terminals, more than 3,000 sales force
  • 76 healthcare facilities and 2,557 hospital beds, located in six regions that contain two-thirds of the population of Georgia
  • 88 points of sale and more than 551 account managers servicing over 700,000 P&C insurance clients
  • m² Real Estate developed 1,672 apartments in six completed projects and 1,202 apartments in four ongoing projects
  • Supplying water to over 1.4 million population in Georgia
  • Selling over 3 million bottles of wine in over 26 countries annually
3. Leader in banking technologies
Capturing more than half of the merchant-acquiring network in the country

  • 10,357 POS terminals
  • 122,400 active internet banking users, up 38.0% y-o-y
  • 74,800 mobile banking users, up 57.5% y-o-y
  • Transactions executed through remote channels increased significantly vs about 10.0% decrease in transactions executed through tellers
4. Comprehensive local knowledge
Deep insight into the Georgian market through trusted relationships with our extensive client base and coverage across all sectors of the economy
  • c.3,000 Corporate Banking customers
  • c.126,900 SME and micro customers
Strong research capabilities through Galt & Taggart Research, providing unmatched insight in the Georgian macro and main sectors of the Georgian economy (www.galtandtaggart.com)
  • Georgian macroeconomic research
  • Azerbaijan macroeconomic research
  • Regional macro portal
  • Georgian sector research including: Energy, Real Estate, Agriculture, Tourism, Wine, Healthcare
  • Fixed income corporate research including: Georgian Railway and Georgian Oil and Gas Corporation
  • Weekly news coverage, including market data and economic updates
5. Access to capital markets and superiority in liability management
Superior access to both equity and debt capital, provides flexibility with liability management and is our key competitive advantage in realising our ambition to capture attractive investment opportunities in Georgia
  • IPO on the LSE in 2006 (first from Georgia and second from the CIS)
  • US$ 200 million bond issue in 2007 (first from Georgia)
  • US$ 100 million capital raised in 2008
  • Premium listing on the LSE in 2012 (first from Georgia)
  • US$ 250 million Eurobond issued in 2012
  • US$ 150 million Eurobond issued in 2013
  • US$ 114 million capital raised in 2014
  • IPO on the LSE in 2015 of our healthcare subsidiary - GHG (first non-financial company to list from the region)
  • US$ 350 million Eurobond issued in 2016
Undisputed leader in the local capital market industry through Galt & Taggart, and Bank of Georgia custody
  • GEL 618.5 million local corporate bonds placed by Galt & Taggart since 2014
  • The only international sub-custodian in the region through State Street, Citi and Clearstream Bank Luxembourg
The strength of our franchise and brand name translates into pricing power driving down Cost of Deposits. Ability to replace more costly borrowings with cheaper funding also leads to improved funding costs
  • Lower deposit rates than offered on the market
  • Cost of Client Deposits and Notes 3.8% in 2016, down from 7.5% in 2010
  • Cost of Funds 4.7% in 2016, down from 8.2% in 2010
6. Robust governance aligned with UK corporate governance code
Culture of transparency and adherence to robust governance
  • Premium listed company on the LSE
  • Component of FTSE 250 Index
  • Fully independent Non-Executive Directors on the Board
Primarily deferred share-based compensation for top executives of the Group, aligning long-term shareholder interests with management reward
  • More than 80% of total compensation for each Management Board member comprises shares with a vesting period
  • No cash bonuses for senior management since 2011
7. Strong management skills with proven track record
As an employer of choice, attracts top talent both at senior and middle management levels
  • Western educated professionals with work experience at leading financial institutions such as Lehman Brothers, Bear Stearns, etc.
Proven track record in creating superior value for its shareholders through banking and investment businesses
  • Market valuation at US$ 1.0 billion, up x50 since 2004
  • As a result of GHG IPO, we achieved 121% IRR on our investment in GHG
  • IRR of >30% in completed real estate projects