Chief Executive Officer’s Statement Archil Gachechiladze Chief Executive Officer I have recently joined Bank of Georgia Group as CEO, currency reserves to a record US$3.3 billion in December having previously served in Georgia Capital, which itself 2018. Since the year-end, the NBG has continued to was part of the same group until not long ago. In my first accumulate reserves, which now total US$3.5 billion. letter to you I would like to say a few words about last Perhaps most significantly, the country recorded its first year’s performance, the environment in which we operate ever current account surplus in the third quarter of 2018 – and the organisation which I am honoured to be serving. an extremely positive macroeconomic development for Georgia. It was also a positive development recently During 2018, the Group delivered another period of strong when Fitch Ratings upgraded Georgia’s credit rating balance sheet and fee income growth, combined with – an upgrade that we hope will soon filter through to superior profitability, achieved as a result of excellent Bank of Georgia’s credit rating. franchise growth and good cost management in both the Retail and Corporate Investment Banking businesses. Strong franchise growth in Retail Banking led to more For the full year, the Group’s revenues totalled GEL than 24.2% customer lending growth and 32.8% client 1,030.4 million, an increase of 14.5%, and profit before deposit growth year-on-year. On a constant currency non-recurring items and income tax increased by 25.1% to basis, customer lending growth was still strong at 22.3% GEL 494.7 million. The Group’s capability to deliver strong year-on-year. The Retail Banking’s clear focus over the Return on Average Equity continues, and ROAE exceeded last few quarters has been on growing the mortgage and 25% for the full year, compared to a medium-term target SME portfolios more rapidly than the unsecured consumer of more than 20%. lending portfolios, and loan originations in these portfolios have been extremely strong. Over the last 12 months, From a macroeconomic perspective, Georgia continues the mortgage portfolio increased by 48.8%, while SME to produce strong real GDP growth – 4.7% in 2018 – portfolio growth totalled 25.1%. primarily driven by private sector investments, with inflation remaining well contained at 1.5% in December Our customers are increasingly becoming more 2018, which is comfortably below the National Bank demanding, as convenience becomes ever more important. of Georgia’s (NBG) medium-term target of 3.0%. The It was therefore pleasing to see the Retail Banking client Government’s prudent macroeconomic policies continue base continue to expand, reflecting the success of the to serve the country well, and the economy has remained Bank’s digital penetration growth and the increased use extremely resilient to pressures in neighbouring countries of more cost-efficient remote channels. As a result, the and to some volatility in regional financial markets. Retail Bank now has more than 2.4 million customers – an increase of more than 125,000 customers over the Hard currency income has been strong for the country. last 12 months. Our fully transformed, user-friendly, Especially strong has been revenue from tourism, totalling multi-feature mobile banking application, mBank, has US$3.2 billion during the year and reaching almost 20% had nearly 600,000 downloads during the last two years. of GDP. Solid external inflows have enabled the NBG In addition, we comfortably exceeded our targeted to continue to buy US Dollars and accumulate foreign 40,000 SOLO clients by the end of 2018, with over 12 Annual Report 2018Bank of Georgia Group PLC