Georgia | Banks | Company Update

7 August 2013 GEL/US$ 1.6670 Liberty Bank Q2 2013 and 1H 2013 Results GSE: BANK | BLOOMBERG: BANK GG | ISIN: GE1100000300 Liberty Bank (GSE: BANK, not rated) announced its Q2 2013 and 1H 2013 consolidated financial results, reporting Net Income of GEL 1.3 mln in Q2 2013 (up 624.5% q-o-q) and Net Income of GEL 1.5 mln in 1H 2013 (up 0.3% y-o-y).
0.0099 0.0170 0.0055 -1.0% 11.2% -38.1% 5.5 54.5 32.7 19.6% 6.4 46.9%* 59.5%* 0.95%* 136.2 1.99%* 46.0 72.4% 500:1 Yes 30% 11.7% 0%

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Not Rated

Market Data
Current Price (GEL) 52 Week High (12/10/2012) 52 Week Low (09/01/2013) 1M Change 3M Change 12M Change Shares Outstanding (bn) MCap (GEL mln) MCap (US$ mln) Free Float (Including ESOP) Free Float (US$ mln) % Of Free Float Traded in 2010 % Of Free Float Traded in 2011 % Of Free Float Traded in 2012 Average Weekly Traded Volume in 2010-2012 (GEL '000) % Of Free Float Traded YTD Average Weekly Traded Volume YTD (GEL '000) Major Shareholder - Liberty Holding Georgia Ltd** Common Shares/GDR GDRs Fully Fungible? Current GDR Programme Ceiling (% Of Shares Outstanding) % Of Shares Outstanding Currently Converted Into GDRs Dividend Yield

Total Operating Income in Q2 2013 reached GEL 21.4 mln, up 22.7% q-o-q and up 1.8% y-o-y on a like-for-like basis (i.e. normalised for the GEL 4.2 mln quarterly fees received from the state that were discontinued after Q2 2012). Total Operating Income in 1H 2013 reached GEL 38.8 million, down 18.5% y-oy. Total Operating Income normalised for the loss of state fees decreased only by 0.8% y-o-y in 1H 2013, reflecting the high negative carry in the first few months of 2013. Recurring Operating Costs increased in Q2 2013 by 0.6% q-o-q and 3.7% y-o-y to GEL 17.0 mln. BANKs Normalised Cost/Income Ratio decreased to 79.6% in Q2 2013 as compared to 97.1% in Q1 2013 and increased from 66.9% in Q2 2012. BANK reported quarterly Normalised Net Operating Income of GEL 4.4 mln in Q2 2013, up 754.3% q-o-q and down 16.7% y-o-y on the like-for-like basis (normalised for the discontinued state fees). Recurring Operating Costs increased by 7.1% y-o-y to GEL 33.9 million in 1H 2013. Normalised Cost/Income Ratio increased to 87.5% in 1H 2013 as compared to 68.9 % in 1H 2012. BANK reported Normalised Net Operating Income of GEL 4.9 million in 1H 2013, down 44.1% y-o-y on the like-for-like basis (normalised for the discontinued state fees). BANK is the third largest bank in Georgia (by Total Assets), with the consolidated Total Assets reaching GEL 1,136.6 mln, up 18.7% q-o-q and 35.9% y-o-y. BANK continued to gain market share, reaching 7.7% market share by Total Assets as of 30 June 2013 (up from 6.3% as of 31 December 2012). Market share in Net Loans and Client Balances & Deposits reached 5.4% and 11.7% as of 30 June 2013, respectively (up from 4.7% and 9.0% as of 31 December 2012, respectively). BANKs BIS (Basel I) CAR stood at 17.4% as of 30 June 2013 as compared to BIS CAR of 18.3% as at YE 2012.

* By parties other than JSC Liberty Capital and Liberty Holding Georgia **Formerly Liberty Capital LLC; renamed to Liberty Holding Georgia in July 2012

Share Price Performance

150.00 130.00 110.00 90.00 70.00 50.00 30.00 10.00 Nov-10 Dec-10 Dec-10 Jan-11 Mar-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13

BANK Closing Price (Rebased) GSE Index (Rebased) MSCI Emerging Markets Banks Index (Rebased)

Capital Adequacy Ratio (as per the NBG methodology) reached 12.1% as at 30 June 2013. BANK was compliant, as of 30 June 2013, with the prudential capital adequacy ratios. BANKs Net Loans/Total Assets decreased to 39.4% as at Q2 2013 as compared to 44.6% as at YE 2012, reflecting the surge in Client Balances & Deposits in 1H 2013 However, looking ahead, we expect BANK to remain focused on the further improvement of its balance sheet structure. We believe BANK could reach Net Loans/Total Assets of 52% by YE 2013, with the annual balance sheet growth reaching or exceeding 31%. We forecast the overall Cost of Risk to reach 0.2% in 2013, due to the expected recoveries on large legacy loans to be made in 2H 2013. We forecast 2013 Net Income to reach GEL 14.0 mln, implying that ROAE and ROAA will reach 12.8% and 1.4%, respectively.

Source: GSE, Bloomberg

Key Financials & Ratios

Unaudited d Unaudited d Unaudited d

GEL mln, unless otherwise noted Consolidated, IFRS-based

Total Assets Net Loans Total Liabilities Client Balances & Deposits Shareholders Equity Revenue Net Income/(Loss) EPS Basic EPS Fully Diluted ROAA ROAE CAR (NBG) RWA/TA (NBG) * Annualised

Q2 2013 1,137 448 1,033 997 103 21.4 1.3 0.0002 0.0002 0.49%* 5.12%* 12.07% 60.78%

Q1 2013 958 393 856 825 102 17.4 0.2 0.00003 0.00003 0.08%* 0.72%* 12.78% 63.22%

Q2 2012 837 386 762 679 74 25.2 (1.4) NMF NMF -0.67%* -7.28%* 9.05% 75.81%

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Growth q-o-q 18.7% 14.0% 20.7% 20.7% 1.3% 22.7% 624.5%

Growth y-o-y 35.9% 16.1% 35.5% 46.7% 39.3% -15.3% NMF

ALERT RESEARCH ALERT

Valuation Metrics
P/E P/B BV Per Share 2012A 7.96 0.42 0.018* 2013F 3.93 0.49 0.020*

* Excluding Treasury Shares

Liberty Bank Q2 2013 and 1H 2013 Results GSE: BANK | BLOOMBERG: BANK.GG | ISIN: GE1100000300

Income Statement Consolidated, IFRS-based GEL '000, unless otherwise noted Interest Income Interest Expense Net Interest Income Fee And Commission Income Fee And Commission Expenses Net Fee And Commission Income Net Income From Documentary Operations Net Other Non-Interest Income Net Income From FX And Translation Operations Net Non-Interest Income Total Operating Income Recurring Operating Costs Normalised Net Operating Income Non-Recurring Costs/(Income) Profit (Pre-Bonus) Before Provisions Net Provisions Pre-Bonus Result Discretionary Bonus Pool Share Of Associates' Net Profit Pre-Tax Profit Accrued Or Paid Income Tax Benefit/(Expense) Impairment Of Deferred Tax Asset Net Income Unaudited Q2 2013 37,427 23,768 13,659 6,522 718 5,804 116 315 1,486 7,721 21,380 17,023 4,357 114 4,242 2,761 1,543 6 1,549 (235) 1,314 Unaudited Q1 2013 32,830 21,767 11,063 5,270 674 4,596 111 267 1,394 6,367 17,430 16,920 510 31 479 304 206 12 218 (36) 181 Unaudited Q2 2012 32,006 17,980 14,026 10,146 727 9,419 284 232 1,287 11,222 25,248 16,417 8,831 (51) 8,882 5,806 3,152 476 (43) 2,633 (4,019) (1,386) Growth q-o-q 14.0% 9.2% 23.5% 23.8% 6.5% 26.3% 4.8% 18.0% 6.6% 21.3% 22.7% 0.6% 754.3% 266.9% 786.0% 807.8% 650.5% 0.0% -52.9% 611.6% 547.3% 0.0% 624.5% Growth y-o-y 16.9% 32.2% -2.6% -35.7% -1.3% -38.4% -59.1% 35.6% 15.5% -31.2% -15.3% 3.7% -50.7% NMF -52.2% -52.4% -51.0% -100.0% NMF -41.2% NMF NMF NMF Unaudited 1H 2013 70,257 45,535 24,722 11,792 1,393 10,400 226 582 2,880 14,088 38,810 33,943 4,867 146 4,721 3,065 1,749 18 1,767 (271) 1,496 Unaudited 1H 2012 61,172 35,248 25,924 19,550 1,351 18,199 560 454 2,473 21,687 47,611 31,704 15,907 (176) 16,082 9,085 7,146 1,082 (39) 6,026 (4,534) 1,492 Growth y-o-y 14.9% 29.2% -4.6% -39.7% 3.1% -42.9% -59.6% 28.1% 16.4% -35.0% -18.5% 7.1% -69.4% NMF -70.6% -66.3% -75.5% -100.0% NMF -70.7% NMF -100.0% 0.3%

RESEARCH ALERT

RESEARCH ALERT

Balance Sheet Consolidated, IFRS-based GEL '000, unless otherwise noted Cash And Due From Banks Treasuries Other Fixed Income Instruments Net Loans Net Investments Investment Property Net Property, Plant And Equipment Net Other Assets Total Assets Total Balances & Deposits Borrowed Funds Other Liabilities Contingent Capital Participation Note Total Liabilities Shareholders' Equity Total Liabilities And Shareholders' Equity

Unaudited Q2 2013 412,809 104,172 447,780 244 4,793 125,240 23,404 1,136,604 997,896 20,132 1,033,123 103,481 1,136,604

Unaudited Q1 2013 324,758 73,572 392,828 196 4,793 124,710 20,586 957,825 826,769 17,510 855,662 102,163 957,825

Audited 2012 235,533 57,497 374,003 173 4,793 126,095 24,820 838,932 691,177 26,667 15,491 740,270 98,661 838,932

Unaudited Q2 2012 160,527 117,911 385,823 347 25,021 98,940 33,936 836,642 690,717 20,096 24,162 18,615 762,375 74,267 836,642

Growth q-o-q 27.1% 41.6% NMF 14.0% 24.5% 0.0% 0.4% 13.7% 18.7% 20.7% NMF 15.0% NMF 20.7% 1.3% 18.7%

Growth YTD 75.3% 81.2% NMF 19.7% 41.1% 0.0% -0.7% -5.7% 35.5% 44.4% -100.0% 30.0% NMF 39.6% 4.9% 35.5%

Growth y-o-y 157.2% -11.7% NMF 16.1% -29.7% -80.8% 26.6% -31.0% 35.9% 44.5% -100.0% -16.7% -100.0% 35.5% 39.3% 35.9%

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RESEARCH ALERT

Selected Ratios Consolidated, IFRS-based %, unless otherwise noted ROAA ROAE Net Interest Margin Net Spread Net Non-Interest Income/Total Operating Income Net Income/Total Operating Income Net Fee & Commission Income/Total Operating Income Net Fee & Commission Income/Average Total Assets Cost/Income Ratio (Normalised) Costs/Average Total Assets (Normalised) Personnel Costs/Total Operating Income Personnel Costs/Average Total Assets Personnel Costs/Total Recurring Operating Costs Net Loans/Total Assets Total Balances & Deposits/Total Liabilities Net Loans/Total Balances & Deposits Net Loans/Total Liabilities Liquid Assets/Total Assets Leverage (Total Liabilities/Equity), Times Shareholders' Equity/Total Assets Average Shareholders' Equity/Average Total Assets Loan Loss Reserves/Gross Loans NPLs/Gross Loans LLR Coverage Ratio Cost of Risk (Standalone)
Quarterly ratios are annualised, where applicable

Q2 2013 0.49% 5.12% 8.09% 10.70% 36.11% 6.15% 27.15% 2.18% 79.62% 6.38% 42.18% 3.38% 52.97% 39.40% 96.59% 44.87% 43.34% 45.48% 9.98 9.10% 9.62% 3.94% 6.67% 74.81% 2.06%

Q1 2013 0.08% 0.72% 7.63% 10.69% 36.53% 1.04% 26.37% 2.01% 97.07% 7.39% 51.42% 3.91% 52.97% 41.01% 96.62% 47.51% 45.91% 41.59% 8.38 10.67% 11.01% 4.04% 6.72% 75.54% 0.26%

Q2 2012 -0.67% -7.28% 9.53% 9.44% 44.45% -5.49% 37.31% 4.58% 66.91% 8.21% 36.07% 4.42% 55.47% 46.12% 90.60% 55.86% 50.61% 33.28% 10.27 8.88% 9.25% 7.95% 10.92% 93.69% 5.17%

1H 2013 0.30% 2.94% 7.9% 10.69% 36.30% 3.85% 26.80% 2.10% 87.46% 6.85% 46.33% 3.63% 52.97% 39.40% 96.59% 44.87% 43.34% 45.48% 9.98 9.10% 10.26% 3.94% 6.67% 74.81% 1.22%

1H2012 0.36% 3.96% 8.7% 8.47% 45.55% 3.13% 38.22% 4.45% 68.86% 8.01% 37.82% 4.40% 56.80% 46.12% 90.60% 55.86% 50.61% 33.28% 10.27 8.88% 9.21% 7.95% 10.92% 93.69% 4.31%

2012 0.62% 6.44% 9.03% 8.88% 40.60% 5.64% 31.77% 3.48% 75.37% 8.25% 40.85% 4.47% 56.14% 44.58% 93.37% 54.11% 50.52% 34.93% 7.50 11.76% 9.59% 4.33% 5.27% 98.99% 3.03%

2011 1.06% 13.29% 9.44% 9.78% 50.95% 9.15% 42.80% 4.96% 70.78% 8.21% 37.11% 4.30% 54.10% 43.74% 93.86% 51.73% 48.56% 35.35% 9.08 9.36% 7.99% 7.80% 11.66% 86.30% 6.21%

2010 1.11% 21.58% 11.89% 18.08% 62.43% 7.39% 51.29% 7.64% 73.16% 10.90% 40.12% 5.97% 54.83% 29.49% 80.52% 39.19% 31.54% 42.00% 15.25 6.15% 7.04% 11.02% 18.55% 59.84% 7.01%

2009 -1.70% -45.86% 3.16% 8.15% 89.85% -13.21% 71.49% 9.21% 103.44% 13.33% 48.99% 6.31% 47.36% 25.14% 81.38% 31.81% 25.88% 35.06% 33.80 2.87% 3.71% 20.34% 35.46% 60.35% 14.01%

RESEARCH ALERT

Liberty Bank Q2 2013 and 1H 2013 Results GSE: BANK | BLOOMBERG: BANK.GG | ISIN: GE1100000300 Liberty Securities Liberty Tower 74 I. Chavchavadze Ave Tbilisi, Georgia 0162 Tel: + 995 32 2555 500 research@libertysecurities.ge www.libertysecurities.ge Skype: liberty.securities Liberty Capital & Liberty Bank Tengiz Lashkhi Asset Management Director Liberty Securities +995 591 709 280 tengiz.lashkhi@libertysecurities.ge Temur Iremashvili Director Liberty Securities +995 591 158 877 temur.iremashvili@libertysecurities.ge Skype: Temur Iremashvili Victor Meskhi Director of Research Liberty Securities +995 593 551 506 victor.meskhi@libertysecurities.ge Skype: v.meskhi

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