Georgia | Banks | Company Update

7 November 2014
GEL/US$ 1.7556

Liberty Bank Q3 2014 and 9M 2014 Results

GSE: BANK | BLOOMBERG: BANK GG | ISIN: GE1100000300

Not Rated

RESEARCH

Liberty Bank (GSE: BANK, not rated) announced its Q3 2014 and 9M 2014 consolidated
financial results, reporting Net Income of GEL 6.0 mln in Q3 2014 (up 24.2% q-o-q and
19.7% y-o-y) and Net Income of GEL 14.3 mln in 9M 2014 (up 121.3% y-o-y).

Market Data
0.0145
0.0160
0.0111
-3.3%
-3.3%
26.1%
5.5
79.8
45.4
22.1%
10.0
1
46.9%
1
59.5%
1
0.95%
1
2.55%
111.8
3.41%1
17.2
70.8%
Reg S & 144A
500:1
Yes
30%
12.0%
0%
5.2
1.00
17.0%

RESEARCH ALERT
RESEARCH ALERT

RESEARCH ALERT
RESEARCH ALERT

Current Price (GEL)

52 Week High (05/05/2014)
52 Week Low (18/11/2013)
1M Change
3M Change
12M Change
Ordinary 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
% Of Free Float Traded in 2013
Average Weekly Traded Volume in 2010-2013 (GEL '000)
% Of Free Float Traded YTD
Average Weekly Traded Volume YTD (GEL '000)
Major Shareholder - Liberty Holding Georgia Ltd
GDR:
Common Shares/GDR
GDRs Fully Fungible?
Current GDR Programme Ceiling (% Of Shares Outstanding)
% Of Shares Outstanding Currently Converted Into GDRs
Dividend Yield (Ordinary Shares)
Convertible Preferred Shares Outstanding (mln)
Placement Price Per Convertible Preferred Share (GEL)
Convertible Preferred Dividend Yield/Placement Price

Jan-13
Jan-13
Mar-13
Apr-13
May-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14

300.0
270.0
240.0
210.0
180.0
150.0
120.0
90.0
60.0

BANK Closing Price (Rebased)

GSE Index (Rebased)
MSCI Emerging Markets Banks Index (Rebased)

Key Financials & Ratios

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 (Current NBG Regulation)
RWA/TA (Current NBG Regulation)
CAR (New NBG Regulation)
RWA/TA (New NBG Regulation)

Pre-Provision Operating Profit increased by 26.4% q-o-q and 258.5% y-o-y to GEL 15.9
mln in Q3 2014. Net Provision Expense in Q3 2014 reached GEL 7.5 mln, up 8.5% q-o-q
and compared to net recoveries of GEL 1.9 mln in Q3 2013. Pre-Tax Profit increased by
47.3% q-o-q and 20.0% y-o-y to GEL 7.0 mln in Q3 2014. Pre-Provision Operating Profit
increased by 333.6% y-o-y to GEL 39.7 mln in 9M 2014. Net provision expense in 9M
2014 reached GEL 21.2 mln as compared to Net Provision expense of GEL 1.2 mln in 9M
2013. 9M 2013 Net Provision expense reflects the recoveries of large legacy exposures.
Pre-Tax Profit increased by 105.5% y-o-y to GEL 15.7 mln in 9M 2014.
BANK is the third largest bank in Georgia (by Total Assets, Gross Loans and Client
Balances & Deposits), with the consolidated Total Assets reaching GEL 1,538.8 mln, up
4.6% q-o-q and 20.4% y-o-y. The Liquidity Ratio (Liquid Assets divided by Total Assets)
stood at 43.4% as at 30 September 2014, up from 41.3% as at 30 June 2014 and down
from 46.7% as at 30 September 2013. Gross Loans grew by 2.0% q-o-q and 35.5% y-o-y
to GEL 760.7 mln, driven by an increase in retail lending. Net Loans increased by 1.5% qo-q and 33.9% y-o-y to GEL 680.5 mln as at 30 September 2014. Client Balances &
Deposits reached GEL 1,351.5 mln as at 30 September 2014, up 4.5% q-o-q and 20.0% yo-y. Consolidated Shareholders Equity as at 30 September 2014 equalled GEL 127.6
mln, up 4.8% q-o-q and 18.4% y-o-y. BANKs market share reached 8.2% by Total Assets
as of 30 September 2014 (up from 7.7% as of 31 December 2013). Market share in Gross
Loans and Client Balances & Deposits reached 6.5% and 12.7% as of 30 September 2014,
respectively (up from 6.2% and 11.8% as of 31 December 2013, respectively).

Unaudited d Unaudited d Unaudited d

Q3 2014
1,539
681
1,411
1,352
128
38.6
6.0
0.0011
0.0010
1.60%2
19.77%2
13.93%
64.64%
12.60%
68.23%

Q2 2014
1,471
671
1,349
1,293
122
36.6
4.8
0.0009
0.0008
1.34%2
16.65%2
13.36%
64.64%
12.07%
70.32%

Q3 2013
1,278
508
1,170
1,126
108
23.2
5.0
0.0009
0.0008
1.63%2
19.06%2
12.87%
59.70%
NMF
NMF

Growth
q-o-q
4.6%
1.5%
4.6%
4.5%
4.8%
5.4%
24.2%

Growth
y-o-y
20.4%
33.9%
20.6%
20.0%
18.4%
66.3%
19.7%

2012A
7.96
0.42
0.0183

1. By parties other than JSC Liberty Capital and Liberty Holding Georgia LLC
2. Annualised
3. Excluding shares issued but not sold
4. Net Income less the preferred dividend used in the calculation

2013A
5.94
0.71
0.0203

The Capital Adequacy Ratio as per the old NBG methodology which is in line with Basel I
requirements reached 13.9% as at 30 September 2014. The Capital Adequacy Ratio as
per the new NBG regulation which is in line with Basel II requirements, with elements of
Basel III stood at 12.6%. Georgian banks are required to be in compliance with both old
and new capital adequacy requirements. BANK was compliant, as of 30 September
2014, with the prudential capital adequacy ratios.
BANKs Net Loans/Total Assets ratio decreased to 44.2% as at 30 September 2014 from
45.6% as at 30 June 2014. Looking ahead, we forecast Net Loans/Total Assets of 43.4%
by YE 2014, with the annual balance sheet growth reaching or exceeding 19.9%.
We forecast the overall Cost of Risk to reach 3.6% in 2014, assuming GEL 25.5 mln of net
provision charge and GEL 704.8 mln of the average Gross Loans.

Valuation Metrics
P/E
P/B
BV Per Share
P/Diluted EPS
P/Diluted Book Value
Diluted BV Per Share

Recurring Operating Costs increased by 4.4% q-o-q and 23.3% y-o-y to GEL 23.1 mln,
resulting in the positive Operating Leverage of 43.0% in Q3 2014. Normalised
Cost/Income Ratio increased to 63.3% in Q3 2014 from 63.0% in Q2 2014 and decreased
from 83.1% in Q3 2013. BANK reported Normalised Net Operating Income of GEL 15.4
mln in Q3 2014, an increase of 6.9% q-o-q and 248.8% y-o-y. Recurring Operating Costs
increased by 25.5% y-o-y to GEL 66.1 mln, resulting in the positive Operating Leverage of
47.4% in 9M 2014. Normalised Cost/Income Ratio decreased to 64.6% in 9M 2014 from
85.8% in 9M 2013. BANK reported Normalised Net Operating Income of GEL 41.1 mln in
9M 2014, an increase of 341.8% y-o-y.

BANKs BIS (Basel I) CAR stood at 15.5% as of 30 September 2014 as compared to BIS
CAR of 15.1% as at Q2 2014.

Source: GSE, Bloomberg

RESEARCH ALERT
RESEARCH ALERT
ALERT
RESEARCH ALERT

RESEARCH ALERT

Share Price Performance

Total Operating Income in Q3 2014 reached GEL 38.6 mln, an increase of 5.4% q-o-q and
66.3% y-o-y. Total Operating Income in 9M 2014 reached GEL 107.2 mln, an increase of
72.9% y-o-y.

2014F
4.534
0.64
0.0233
4.51
0.65
0.0233

We forecast 2014 Net Income to reach GEL 19.3 mln, implying that ROAE (attributable
to the ordinary shares) and ROAA will reach 15.3% and 1.3%, respectively.
On 31 October 2014, Fitch Ratings changed BANKs outlook from Stable to Positive
maintaining its B/B rating.
In Q4 2014, BANK faces an important milestone, as its contract for the distribution of
state pensions and welfare payments is expiring at YE 2014. BANK is expected to bid for
the new contract.

Liberty Bank Q3 2014 and 9M 2014 Results

GSE: BANK | BLOOMBERG: BANK.GG | ISIN: GE1100000300

RESEARCH ALERT

RESEARCH ALERT

RESEARCH ALERT

RESEARCH ALERT

RESEARCH ALERT

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)
Pre-Provision Operating Profit
Net Provisions
Pre-Bonus Result
Discretionary Bonus Pool
Share Of Associates' Net Profit
Pre-Tax Profit
Accrued Or Paid Income Tax Benefit/(Expense)
Current Deferred Tax Benefit
Net Income

Unaudited
Q3 2014
58,517
28,570
29,947
7,743
1,164
6,579
105
226
1,731
8,641
38,588
23,143
15,445
(439)
15,883
7,542
8,342
1,264
(53)
7,025
(1,074)
5,951

Unaudited
Q2 2014
55,206
26,922
28,285
7,258
925
6,333
92
262
1,635
8,323
36,608
22,164
14,443
1,879
12,565
6,948
5,662
893
(1)
4,768
(759)
784
4,792

Unaudited
Q3 2013
41,313
25,960
15,353
6,257
822
5,435
136
248
2,033
7,853
23,206
18,777
4,428
(2)
4,430
(1,890)
6,329
500
24
5,853
(880)
4,973

Balance Sheet
Consolidated, IFRS-based
GEL '000, unless otherwise noted
Cash And Due From Banks
Treasuries & CDs
Other Fixed Income Instruments
Net Loans
Accrued Interest & Dividends, Net
Net Investments
Net Property Owned
Investment Property
Net Property, Plant & Equipment
Net Intangible Assets
Net Other Assets
Total Assets
Total Balances & Deposits
Borrowed Funds
Payable Interest & Dividends
Provisions For Issued Guarantees
Other Liabilities
Total Liabilities
Shareholders' Equity
Total Liabilities And Shareholders' Equity
Selected Ratios
Consolidated, IFRS-based
%, unless otherwise noted
ROAA
ROAE
Net Interest Margin
Net Interest Margin1
Net Spread
Net Non-Interest Income/Total Operating Income
Net Income (Loss)/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 Deposits/Total Liabilities
Net Loans/Total 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

Q3 2014
1.60%
19.77%
11.64%
13.61%
13.54%
22.39%
15.42%
17.05%
1.77%
63.25%
6.56%
32.39%
3.36%
54.01%
44.22%
96.91%
49.76%
48.22%
43.44%
11.06
8.29%
8.44%
4.75%
5.52%
103.36%
3.37%

Q2 2014
1.34%
16.65%
11.58%
13.38%
13.32%
22.74%
13.09%
17.30%
1.78%
62.99%
6.47%
32.27%
3.31%
53.29%
45.60%
96.44%
51.55%
49.72%
41.30%
11.09
8.27%
8.44%
4.05%
5.00%
99.69%
3.79%

Growth q-o-q
6.0%
6.1%
5.9%
6.7%
25.9%
3.9%
13.6%
-13.8%
5.9%
3.8%
5.4%
4.4%
6.9%
-123.3%
26.4%
8.5%
47.3%
41.4%
NMF
47.3%
41.4%
-100.0%
24.2%

Growth y-o-y
41.6%
10.1%
95.1%
23.8%
41.6%
21.1%
-23.0%
-8.9%
-14.9%
10.0%
66.3%
23.3%
248.8%
NMF
258.5%
NMF
31.8%
NMF
-320.1%
20.0%
22.0%
NMF
19.7%

Unaudited
9M 2014
164,244
81,491
82,753
21,720
2,968
18,752
302
726
4,682
24,463
107,216
66,147
41,069
1,392
39,676
21,159
18,558
2,855
(43)
15,661
(2,426)
1,084
14,319

Unaudited
9M 2013
112,313
71,495
40,818
17,306
2,215
15,092
363
831
4,912
21,197
62,016
52,720
9,295
144
9,151
1,175
8,078
500
42
7,620
(1,151)
6,469

Growth y-o-y
46.2%
14.0%
102.7%
25.5%
34.0%
24.3%
-16.7%
-12.6%
-4.7%
15.4%
72.9%
25.5%
341.8%
867.6%
333.6%
1700.0%
129.7%
470.9%
NMF
105.5%
110.8%
NMF
121.3%

Unaudited
Q3 2014
481,414
187,059
680,520
11,819
310
1,086
4,986
133,656
10,241
27,713
1,538,805
1,367,600
13,442
133
30,060
1,411,234
127,571
1,538,805

Unaudited
Q2 2014
452,117
155,397
670,792
12,683
347
728
4,986
132,121
10,209
31,573
1,470,954
1,301,184
14,723
119
33,232
1,349,259
121,695
1,470,954

Unaudited
Q3 2013
419,932
176,364
508,381
7,220
322
798
4,793
127,142
9,869
22,766
1,277,587
1,127,607
18,519
181
23,542
1,169,848
107,739
1,277,587

Growth q-o-q
6.5%
20.4%
NMF
1.5%
-6.8%
-10.8%
49.2%
0.0%
1.2%
0.3%
-12.2%
4.6%
5.1%
NMF
-8.7%
11.4%
-9.5%
4.6%
4.8%
4.6%

Growth y-o-y
14.6%
6.1%
NMF
33.9%
63.7%
-3.8%
36.2%
4.0%
5.1%
3.8%
21.7%
20.4%
21.3%
NMF
-27.4%
-26.3%
27.7%
20.6%
18.4%
20.4%

Q3 2013
1.63%
19.06%
7.62%
9.01%
9.56%
33.84%
21.43%
23.42%
1.78%
83.07%
6.32%
46.52%
3.54%
57.49%
39.79%
96.39%
45.15%
43.46%
46.67%
10.86
8.43%
8.90%
3.90%
5.60%
89.67%
-1.82%

1. Net Interest Margin equals interest income from loans less interest expense divided by average gross loans for the same period
Quarterly ratios are annualised, where applicable

2013
1.14%
12.75%
7.96%
9.47%
9.89%
32.75%
14.40%
23.33%
1.85%
85.70%
6.80%
46.45%
3.68%
56.01%
45.60%
97.11%
51.49%
50.01%
40.71%
10.34
8.82%
9.32%
4.28%
4.74%
90.18%
-0.73%

2012
0.62%
6.46%
9.03%
9.74%
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%
5.22%
4.29%
121.56%
3.03%

2011
1.06%
13.29%
9.44%
9.39%
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%
9.69%
11.66%
86.30%
6.21%

2010
1.11%
21.58%
11.89%
12.38%
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%
12.67%
18.55%
59.84%
7.01%

2009
-1.70%
-45.86%
3.16%
9.45%
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%
22.38%
35.46%
60.35%
14.01%

Liberty Bank Q3 2014 and 9M 2014 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

Temur Iremashvili
Director
Liberty Securities
+995 591 158 877
temur.iremashvili@libertysecurities.ge
Skype: temur_75

Victor Meskhi
Director of Research
Liberty Securities
+995 593 551 506
victor.meskhi@libertysecurities.ge
Skype: v.meskhi

Tengiz Lashkhi
Asset Management Director
Liberty Securities
+995 591 709 280
tengiz.lashkhi@libertysecurities.ge

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