Overview of financial results continued •Capital adequacy requirements. Basel III Tier 1 and total capital adequacy ratios stood at 12.2% and 16.6%, respectively, as of 31 December 2018, as compared to minimum required level of 11.4% and 15.9%, respectively. At the same time common equity tier 1 (CET1) ratio stood at 12.2% compared to a 9.5% minimum requirement at 31 December 2018 and already above the estimated fully-loaded CET1 requirement for 2021. •The Bankerpublicationnamed JSC Bank of Georgia Bank of the Year 2018 in Central and Eastern Europe. One of the criteria for recognition was the Bank’s successful transformation from a product focus to a client-centric business model which has resulted in more effective tailor-made services through the Bank of Georgia’s multi-brand strategy. The Banker also outlined the Bank’s achievements in creating digital platforms and loyalty programmes, which are an integral part of Bank of Georgia’s client-centric business model and its focus on developing stronger customer relationships. The Banker distinguished Bank of Georgia, a London Stock Exchange listed company, for its best- in-class corporate governance standards and its competitive advantage in the local market in terms of attracting human and financial capital Discussion of segment results Retail Banking (RB) Retail Banking provides consumer loans, mortgage loans, overdrafts, credit card facilities and other credit facilities as well as funds transfer and settlement services and the handling of customer deposits for both individuals and legal entities (SME and micro businesses only). RB is represented by the following four sub-segments: (1) emerging retail (through our Express brand), (2) retail mass market; (3) SME and micro businesses – “MSME” (through our Bank of Georgia brand), and (4) mass affluent (through our SOLO brand). Income statement highlights Change GEL thousands, unless otherwise noted 2018 2017 y-o-y Net interest income 546,872 480,955 13.7% Net fee and commission income 118,858 99,790 19.1% Net foreign currency gain 56,358 28,937 94.8% Net other income 1,371 5,029 -72.7% Revenue 723,459 614,711 17.7% Salaries and other employee benefits (138,635) (125,668) 10.3% Administrative expenses (84,323) (72,464) 16.4% Depreciation and amortisation (39,133) (34,741) 12.6% Other operating expenses (2,333) (2,279) 2.4% Operating expenses (264,424) (235,152) 12.4% Profit from associate 1,339 1,311 0.0% Operating income before cost of risk 460,374 380,870 20.9% Cost of risk (130,714) (110,800) 18.0% Profit before non-recurring items and income tax 329,660 270,070 22.1% Net non-recurring items (35,110) (2,358) NMF Profit before income tax 294,550 267,712 10.0% Income tax expense (36,292) (18,046) 101.1% Profit 258,258 249,666 3.4% 94 Annual Report 2018Bank of Georgia Group PLC