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Liberty Bank Announces Unaudited IFRS-based Results

JSC Liberty Bank (the “Bank”) announced today its Q3 2017 & 9M 2017 consolidated results (IFRS-based, unaudited, based on management estimates), reporting Net Income of GEL 12.0 million in Q3 2017 (up 14.5% q-o-q and down 28.8% y-o-y) and GEL 33.1 million in 9M 2017 (down 0.1% y-o-y).

On 12 of October 2017, the Bank also announced the change of control, whereby European Financial Group B.V. (“EFG”), a company established and organised under the laws of the Kingdom of Netherlands, purchased a 74.64% equity interest in the Bank. The ultimate beneficial owners of EFG are Irakli Rukhadze (US Citizen), Ben Marson (UK citizen) and Igor Alexeev (US Citizen).

In light of the change of control Messrs. Lado Gurgenidze, Nurlan Abduov, Martin Graham, Malik Ishmuratov and Alexey Yusfin have left the Supervisory Board of the Bank and currently it consists of three members: Messrs. Irakli Rukhadze, Giorgi Kalandarishvili and David Shonia.

On 26 October 2017 Moody’s affirmed the Bank’s B1 long-term local and foreign currency deposit ratings and changed the outlook from stable to positive. The change in outlook was prompted by Moody’s assessment that the Bank’s access to capital markets may improve following the release of the encumbrance against the Bank’s ordinary shares.

“Overcoming the existing challenges, the Bank demonstrated solid results in Q3 2017. 9M 2017 Net Interest Income grew by 30.9% y-o-y, while our Recurring Operating Costs remained flat y-o-y, resulting in a Cost/Income ratio y-o-y decrease to 57.7% from 67.0%. Cost of funds has decreased to 7.77% from 8.85% y-o-y. Both loan book growth and cost containment strategies implemented by the management proved efficient. The Bank’s business focus and priorities remain the same for the remainder of the year: loan book growth in our key retail lending products, cost containment and continued active management of interest expense. Insofar as this focus remains unchanged, the Bank may be expected to continue to deliver on the bottomline.

The management of the Bank has been privileged to work with Lado Gurgenidze over the past eight years through the amazing transformation – from an obscure bankrupt Bank with assets of GEL 278 million, negative Capital Adequacy Ratio of -7.2% and less than 100,000 borrowers to the well-capitalised, third largest bank in Georgia, with the largest retail footprint and retail client base and total assets of GEL 1,631 million and ROAE of 22.9%. We thank Lado for his pivotal role in the Bank’s turnaround story and wish him further success in his future endeavors.

With that in mind we look forward to further growth and development together with the Bank’s new majority shareholder and the Supervisory Board to further grow our loan book and maintain the momentum of our business. I am sure this change led by Mr. Irakli Rukhadze will give the Bank new perspectives and opportunities due to his and his team’s extensive business knowledge and experience both on the local and international markets”, commented Aleksi Khoroshvili, Chief Executive Officer of the Bank.

Q3 2017 Financial Highlights

Net Interest Income increased in Q3 2017 by 2.5% q-o-q and 30.9% y-o-y to GEL 50.0 million. Interest Income increased by 3.5% q-o-q and 9.9% y-o-y to GEL 80.2 million in Q3 2017. Interest Expense increased by 5.0% q-o-q and decreased by 13.2% y-o-y in Q3 2017 to GEL 30.1 million. Annualised Net Interest Margin in Q3 2017 decreased to 14.25% from 14.37% in Q2 2017 and from 14.40% in Q3 2016. Net Fee & Commission Income amounted GEL 6.4 million in Q3 2017, down 3.6% q-o-q and 6.8% y-o-y. Total Operating Income in Q3 2017 reached GEL 58.5 million, an increase of 3.2% q-o-q and 23.7% y-o-y. Recurring Operating Costs decreased by 3.5% q-o-q and 0.04% y-o-y to GEL 29.5 million. Normalised Cost/Income Ratio decreased to 56.2% in Q3 2017 from 57.1% in Q2 2017 and 66.7% in Q3 2016. The Bank reported Normalised Net Operating Income of GEL 29.0 million in Q3 2017, an increase of 11.1% q-o-q and 63.2% y-o-y.

Pre-Provision Operating Profit increased in Q3 2017 by 10.7% q-o-q and 60.1% y-o-y to GEL 28.7 million. Pre-Tax Profit equalled GEL 14.2 million in Q3 2017, an increase of 14.9% q-o-q and 24.0% y-o-y. Net Provisions expense, in turn, grew in line with the growth of loan book and its evolving composition. Net Income in Q3 2017 reached GEL 12.0 million, up 14.5% q-o-q and down 28.8% y-o-y.

As at 30 September 2017, the Bank’s consolidated Total Assets stood at GEL 1,630.7 million, up 1.0% q-o-q and 3.4% y-o-y. The Liquidity Ratio (Liquid Assets divided by Total Assets) stood at 42.9% as at 30 September 2017, down from 44.2% as at 30 June 2017 and from 44.8% as at 30 September 2016. Gross Loans To Clients increased by 5.3% q-o-q and 26.9% y-o-y to GEL 898.7 million. Net Loans increased by 2.7% q-o-q and 19.0% y-o-y to GEL 703.6 million as at 30 September 2017. The Net Loans/Total Assets ratio increased to 43.2% as at 30 September 2017 from 42.4% as at 30 June 2017 and from 37.5% as at 30 September 2016. Client Balances & Deposits reached GEL 1,277.3 million as at 30 September 2017, down 0.4% q-o-q and up 0.5% y-o-y. Total Shareholders’ Equity as at 30 September 2017 equalled GEL 197.4 million, up 6.5% q-o-q and 19.7% y-o-y.

The Capital Adequacy Ratio as per the current NBG methodology reached 20.6% as at 30 September 2017, up from 20.4% as at 30 June 2017. The Capital Adequacy Ratio as per the new NBG methodology, which is largely in line with Basel II/III requirements, stood at 18.8% as at 30 September 2017, up from 16.8% as at 30 June 2017.

9M 2017 Financial Highlights

Net Interest Income increased in 9M 2017 by 27.1% y-o-y to GEL 146.3 million. Interest Income increased by 10.7% y-o-y to GEL 233.6 million in 9M 2017. Interest Expense decreased by 8.9% y-o-y in 9M 2017 to GEL 87.1 million. Annualised Net Interest Margin in 9M 2017 decreased to 14.1% from 15.2% in 9M 2016. Net Fee & Commission Income amounted to GEL 19.6 million in 9M 2017, up 0.1% y-o-y. Total Operating Income in 9M 2017 reached GEL 170.9 million, an increase of 22.7% y-o-y. Recurring Operating Costs increased by 4.0% y-o-y to GEL 91.8 million. Normalised Cost/Income Ratio decreased to 57.7% in 9M 2017 from 67.0% in 9M 2016. The Bank reported Normalised Net Operating Income of GEL 79.1 million in 9M 2017, an increase of 54.8% y-o-y.

Pre-Provision Operating Profit increased in 9M 2017 by 53.0% y-o-y to GEL 78.8 million. Pre-Tax Profit equalled GEL 38.9 million in 9M 2017, an increase of 28.4% y-o-y. Net Income in 9M 2017 reached GEL 33.1 million, down 0.1% y-o-y.