Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697748948266.pdf (Georgia)
BANKING BUSINESS CREDIT RISK OVERVIEW BGEO Investor Day 9 November 2017 Tbilisi, Georgia Speaker: Giorgi Chiladze, CRO, JSC Bank of Georgia CONTENT Banking Business loan portfolio overview Cost of risk IFRS9 impact estimation Q&A 2 LOAN PORTFOLIO DYNAMICS NET BANKING BUSINESS LOAN PORTFOLIO s n o i l l i M L E G 4,541** 25% 20% 15% 10% 5% 0% 2014 2015 2016 Sep 2017 RB CIB Other* Y-o-Y Growth Rate * Other mainly includes BNB, GLC and Banking Business eliminations ** Growth drivers in RB – Sep 16 to Sep 17: • Mortgages- 43% • MSME – 42% • Consumer loans and credit card balances – 30% 3 LOANS TO GDP TREND BANKING SECTOR CREDIT TO GDP*, % Banking Penetration (Sector Loans to GDP) 100% 80% 60% 40% 20% 0 Bank loans to GDP, % Ukraine Armenia Bulgaria Georgia Turkey Latvia Lithuania Russia Serbia Estonia 41.4% 48.1% 53.2% 55.7% 56.9% 57.9% 62.1% 64.6% 74.7% 84.9% 4 * Based on NBG data Source: Central Banks, IMF, as of 31 Dec 2016 STABLE LENDING ENVIRONMENT MORTGAGES* – GEL 1,466 MILLION MSME – GEL 1,501 MILLION 30-90 DPD Portfolio 1.3% 1.3% 30-90 DPD Portfolio 1.0% 0.9% 0.6% 0.7% 0.7% 0.5% 0.9% 0.4% 0.5% 0.7% 0.5% 0.6% 0.6% 0.9% 0.7% 0.5% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 CONSUMER LOANS & CREDIT CARDS*– GEL 1,332 MILLION 30-90 DPD Portfolio EXPRESS & OTHER RETAIL*– GEL 353 MILLION 30-90 DPD Portfolio 1.3% 1.0% 0.9% 0.9% 0.7% 0.8% 1.1% 1.0% 0.9% 1.5% 1.6% 1.2% 1.3% 1.4% 1.1% 1.1% 1.1% 1.1% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 * Includes RB and WM gross loans 5 DIVERSIFIED EXPOSURE CONCENCTRATION OF TOP 10 BORROWERS 20% 15% 10% 16.8% 16.6% 15.7% 12.7% 11.8% EXPOSURE BY SECTOR AS OF SEP 2017*
 Manufacturing, 8.6% Real estate, 5.1% Construction, 4.0% Trade, 3.7% Hospitality, 2.6% Other Sectors, 10.8% SME loans, 9.3% Micro loans, 13.4% Residential mortgage loans, 20.2% 10.4% Consumer loans, 22.3% 2012 2013 2014 2015 2016 Sep 2017 Top 10 Concentration * Sector breakdown based on gross Banking Business portfolio 6 DE-DOLLARISATION BANKING BUSINESS* CIB CURRENCY BREAKDOWN 27% 33% 28% 29% 29% 73% 67% 72% 71% 71% 39% 61% 2012 2013 2014 2015 2016 Sep 2017 Foreign Currency National Currency RETAIL BANKING* 50% 59% 50% 46% 40% 51% 50% 41% 50% 54% 60% 49% 2012 2013 2014 2015 2016 Sep 2017 Foreign Currency National Currency * Currency Breakdown based on gross loan portfolio ** Includes credit cards USD loans with non- USD income 27% GEL and other currency loans 26%** USD loans with USD income 47% RETAIL BANKING CURRENCY BREAKDOWN USD loans with non- USD income 36% USD loans with USD income 10% GEL and other currency loans 54%** 7 PORTFOLIO AMORTISATION MORTGAGES*– GEL 1,466 MILLION MSME – GEL 1,501 MILLION Average duration 3.8 years 77% 76% Average duration 1.6 years 35% 34% 35% 34% 21% 20% 9% 12% 16% 17% 7% 8% 0-3 Years 3-5 Years 5-10 Years >10 Years 0-3 Years 3-5 Years 5-10 Years >10 Years Sep 2016 Sep 2017 Sep 2016 Sep 2017 GENERAL CONSUMER LOANS* – GEL 632 MILLION HOME EQUITY CONSUMER LOANS* – GEL 410 MILLION 97% 93% Average duration 1.2 years Average duration 2.6 years 3% 7% 47% 43% 23% 23% 29% 34% 0-3 Years 3-5 Years 5-10 Years >10 Years 0-3 Years 3-5 Years 5-10 Years >10 Years Sep 2016 Sep 2017 Sep 2016 Sep 2017 * Based on RB and WM gross loan portfolio 8 HIGH LEVEL OF COLLATERALISATION TOTAL LOAN BOOK BY COLLATERAL TYPES SEP 2016 VS SEP 2017 18% 19% 3% 4% 12% 10% Real Estate and Cash Sureties Movable Assets Unsecured 65% 69% • Inside end – Sep 2016 • Outside end – Sep 2017 • Based on standalone BOG data 9 STABLE REAL ESTATE ENVIRONMENT REAL ESTATE INDICES* 150 100 50 Inflation adjusted Real estate price index (3Q17=100, GEL) 2007 2008 2009 2010 2011 2012 2013
 2014 2015 2016 2017 CAPITALISATION (RENT TO PRICE) RATIO* 12% 10% 8% 6% 4% 2% 0% Capitalization Average 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * Based on NBG Data (Average taken over 3Q07 and 3Q17) 10 IMPROVING LOAN PORTFOLIO QUALITY BANKING BUSINESS NPL COMPOSITION BANKING BUSINESS NPL COVERAGE s n o i l l i m L E G 350 300 250 200 150 100 50 0 111.5% 109.6% 110.6% 132.1% 132.8% 120.6% 86.3% 82.8% 83.4% 86.7% 93.6% 67.5% 2012 2013 2014 2015 2016 Sep 2017 2012 2013 2014 2015 2016 Sep 2017 CIB RB Other NPL/Gross Loan portfolio NPL Coverage NPL Coverage adjusted by collateral value* * Only real estate assets are used for coverage adjustment 11 CONTENTS Banking Business loan portfolio overview Cost of risk IFRS9 impact estimation Q&A 12 COST OF RISK BANKING BUSINESS 2.7% 2.7% 2.2% 1.3% 1.3% 1.2% 2012 2013 2014 2015 2016 9M17 RETAIL BANKING CORPORATE & INVESTMENT BANKING 2.6% 2.3% 2.8% 1.8% 0.9% 0.4% 3.1% 2.2% 1.6% 1.7% 0.8% 1.0% 2012 2013 2014 2015 2016 9M17 2012 2013 2014 2015 2016 9M17 13 COST OF RISK - RETAIL BANKING COST OF RISK NET CHARGE-OFF RATE 3.2% 3.4% 3.1% 2.5% 2.3% 2.4% 2.1% 2.0% 2.0% 1.0% 0.5% 0.6% 0.5% 0.5% 0.4% 0.5% 0.5% 0.5% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 14 COST OF RISK COMPOSITION RB & WM GROSS LOAN BOOK FOR SEP 2017 GEL 4,651.1 MILLION RB &WM 9M17 COST OF RISK – 2.8% RB &WM 9M17 COST OF RISK DECOMPOSITION Express & Other Retail Loans Consumer Loans & Credit Cards MSME 353 1,332 1,501 Mortgages 1,466 15.8% 3.1% 1.7% 0.4% RB &WM 9M17 LOAN YIELD Express & Other Retail Loans (47.7%) Consumer Loans & Credit Cards (20.7%) MSME (12.4%) Mortgages (8.1%) 1.19% 0.88% 0.58% 0.13% Gross Loan Book Low Dollarisation level High Cost of Risk Decomposition 15 CONTENTS Banking Business loan portfolio overview Cost of risk IFRS9 impact
 estimation Q&A 16 IFRS 9 impact estimation Estimated impact on Banking Business Shareholder Equity Key changes in impairment model Reduction by GEL 44 million to GEL 58 million Or by 2.7% to 3.6% No impact on Regulatory Capital No change to Cost of Risk through the cycle Staging IFRS 9 introduces new 3-stage expected loss model compared to 2-stage incurred loss model in IAS 39 Calculation of impairment  Stage 1: 12 months expected credit losses  Stage 2 and 3: lifetime expected credit losses Macroeconomic parameters - Impairment under IFRS 9 is calculated based on forecasted macroeconomic parameters 17 QUESTIONS?
BGEO Investor Day 9 November 2017 Tbilisi, Georgia DISCLAIMER – FORWARD LOOKING STATEMENTS including, but not limited to, statements concerning This presentation contains forward-looking statements, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, competitive strengths and weaknesses, plans or goals relating to financial position and future operations and development.
Although BGEO Group PLC believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct.

By their nature, these forward-looking statements are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ materially from those currently being anticipated as reflected in such statements.
Important factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements, certain of which are beyond our control, include, among other things: currency fluctuations, including depreciation of the Georgian Lari, and macroeconomic risk; corporate loan portfolio exposure risk; regional tensions; regulatory risk; cyber security, information systems and financial crime risk; investment business strategy risk; and other key factors that we have indicated could adversely affect our business and financial performance, which are contained elsewhere in this presentation and in our past and future filings and reports, including the 'Principal Risks and Uncertainties' included in BGEO Group PLC's Annual Report and Accounts 2016 and in its Half Year 2017 Results announcement.
No part of this presentation constitutes, or shall be taken to constitute, an invitation or inducement to invest in BGEO Group PLC or any other entity, including any future entity such as BGEO Investments PLC or Bank of Georgia PLC, and must not be relied upon in any way in connection with any investment decision.

BGEO Group PLC undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
Nothing in this presentation should be construed as a profit forecast.

19