1st Quarter Results

Bank of Georgia

Group PLC

1st quarter 2018 results

Name of authorised official of issuer responsible for making notification:

Natia Kalandarishvili, Head of Investor Relations and Funding

www.bankofgeorgiagroup.com

www.bgeo.com

About Bank of Georgia Group PLC

The Group: Bank of Georgia Group PLC ("Bank of Georgia Group" or the "Group" - LSE: BGEO LN) is a UK incorporated holding company, the new parent company of BGEO Group PLC, which combines a Banking Business and an Investment Business ahead of the imminent demerger on 29 May 2018. The demerger, which will result into Investment Business's separation from the Group, was approved at the 2018 Annual General Meeting on 30 April 2018. Bank of Georgia Group PLC will be the holding company of the Banking Business following the demerger completion and effective from 29 May 2018.

The Banking Business comprises: a) retail banking and payment services, b) corporate investment banking and wealth management operations and c) banking operations in Belarus ("BNB"). JSC Bank of Georgia ("Bank of Georgia", "BOG" or the "Bank") is the core entity of the Group's Banking Business. The Banking Business targets to benefit from the underpenetrated banking sector in Georgia through both its retail banking and corporate investment banking services and aims to deliver on its strategy: (1) at least 20% ROAE, and (2) 15%-20% growth of its loan book.

The Investment Business or Georgia Capital, which is classified as discontinued operations in the Group's consolidated financial statements (Discontinued Operations, see details on page 4) comprise stakes in Georgia Global Utilities ("Utility and Energy Business" or "GGU"), m2 Real Estate ("Real Estate Business" or "m2"), Teliani Valley ("Beverage Business" or "Teliani"), Aldagi ("Property and Casualty Insurance Business" or "Aldagi"), Georgia Healthcare Group PLC ("Healthcare Business" or "GHG") - an LSE (London Stock Exchange) premium-listed company and has a 19.9% interest in the Banking Business. Georgia's fast-growing economy provides opportunities in a number of underdeveloped local sectors and Georgia Capital targets to capture these significant growth opportunities in the Georgian corporate sector.

FORWARD LOOKING STATEMENTS

This announcement contains forward-looking statements, including, but not limited to, statements concerning 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 Bank of Georgia 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; regional tensions and instability; regulatory risk across a wide range of industries; cyber security, information systems and financial crime risk; investment business and investment business strategy risk; risks associated with the demerger and future performance; and other key factors that indicated could adversely affect our business and financial performance, which are contained elsewhere in this document and in our past and future filings and reports of the Group, including the 'Principal Risks and Uncertainties' included in BGEO Group PLC's Annual Report and Accounts 2017. No part of this document constitutes, or shall be taken to constitute, an invitation or inducement to invest in Bank of Georgia Group PLC or any other entity, including Georgia Capital PLC or any of their associated entities, and must not be relied upon in any way in connection with any investment decision. Bank of Georgia Group PLC and other entities undertake 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 document should be construed as a profit forecast. 

CONTENT

Bank of Georgia Group PLC announces the Group's first quarter 2018 consolidated results. Unless otherwise noted, numbers are for 1Q18 and comparisons are with 1Q17. The results are based on International Financial Reporting Standards ("IFRS") as adopted by the European Union, are unaudited and derived from management accounts.

Bank of Georgia Group reviewed the classification of the Investment Business at 31 March 2018 in its consolidated financial statements. Management believes that the distribution of the Investment Business to its shareholders is highly probable following the approval of the demerger at the 2018 Annual General Meeting on 30 April 2018. As a result, and in line with IFRS, Bank of Georgia Group PLC classified the Investment Business as "disposal group held for distribution" in the 1Q18 consolidated balance sheet and its results of operations are reported under the "discontinued operations" line as a single amount in the 1Q18 consolidated income statement. Comparative periods have been accordingly restated to reflect reclassification of the Investment Business from "continuing operations" into "discontinued operations." Assets and liabilities held by the Investment Business are also presented separately in the consolidated balance sheet as of 31 March 2018 under "assets of disposal group held for distribution" and "liabilities of disposal group held for distribution."

BANK OF GEORGIA GROUP HIGHLIGHTS

Continued outstanding profitability and balance sheet growth momentum

Georgian economy continues to deliver strong growth momentum

§ Georgian economic growth in 1Q18 accelerated to 5.2% as exports, remittances and tourism revenues grew at double digits. Annual inflation decreased to 2.8% in March 2018. The Lari strengthened against the US dollar by 6.9% during 1Q18 supported by strong external earnings and solid growth. Georgia's US dollar reserves continued to improve and stood at US$ 3.0 billion at 31 March 2018

1As of 31 March 2018, loans and finance lease receivables growth on a constant currency basis was 21.3% and 5.0% on y-o-y and q-o-q basis, respectively

2As of 31 March 2018, client deposits and notes growth on a constant currency basis was 30.9% and 8.1% on y-o-y and q-o-q basis, respectively

3Investment Business is classified as discontinued operations in Bank of Georgia Group's 1Q18 consolidated financial statements

4Includes results of GHG's operations, which is classified as discontinued operations in Group's and Georgia Capital's consolidated financial statements 

BANKING BUSINESS HIGHLIGHTS

§ The Banking Business generated a strong quarterly profit of GEL 99.2mln in 1Q18 (up 19.3% y-o-y), while quarterly ROAE reached 25.9% in 1Q18 (up 220bps y-o-y)

§ Bank of Georgia became the largest bank in Georgia based on its 36.2% market share of total assets at 31 March 2018, according to the data published by National Bank of Georgia

§ Asset quality continued to improve during 1Q18. NPLs to gross loans ratio decreased to 3.1% at 31 March 2018 (4.6% at 31 March 2017 and 3.8% at 31 December 2017). NPL coverage ratio stood at 111.4% at 31 March 2018 (102.9% at 31 December 2017 adjusted for IFRS 9 impact), while the NPL coverage ratio adjusted for discounted value of collateral stood at 147.2% at 31 March 2018 (126.9% at 31 March 2017 and 130.6% at 31 December 2017). The asset quality improvement positively impacted the cost of risk ratio, which stood at 2.1% in 1Q18 (2.4% in 1Q17 and 2.1% in 4Q17)

§ The Banking Business loan book growth on a constant-currency basis reached 21.3% y-o-y and 5.0% q-o-q at 31 March 2018. Retail Banking loan book share in the total loan portfolio was 69.3% at 31 March 2018 (62.6% at 31 March 2017 and 68.0% at 31 December 2017)

§ Retail Banking ("RB") continued to deliver strong growth across all its business lines. Retail Banking revenue reached GEL 170.7mln in 1Q18, up 20.9% y-o-y, but down 3.0% q-o-q due to seasonality. The Retail Banking net loan book reached GEL 5,155.3mln at 31 March 2018, up 32.5% y-o-y and up 2.2% q-o-q. The growth on a constant-currency basis was 33.3% y-o-y and 5.7% q-o-q. The number of Retail Banking clients reached 2.4mln at the end of 1Q18, up 7.7% from 2.2mln at the end of 1Q17 and up 1.8% from 4Q17

§ Our Retail Banking product to client ratio increased to 2.2 in 1Q18 from 2.0 in 1Q17. By the end of 2017, we completed the transformation of our retail banking operations from a product-based model into a client-centric model, as well as the implementation of the client-centric model in our branches. We continue to see solid growth in sales volumes and the number of products sold to our clients in these branches, and this contributed to a 32.5% y-o-y growth in our retail loan book

§ Retail Banking client deposits increased to GEL 3,304.3mln at 31 March 2018, up 38.0% y-o-y and up 1.1% q-o-q. Growth on a constant-currency basis was 39.3% y-o-y and 6.4% q-o-q

§ Corporate Investment Banking ("CIB") continued further growth in 1Q18 after delivering on its risk de-concentration and loan portfolio repositioning targets in 2017. CIB's net loan book amounted to GEL 2,222.9mln at 31 March 2018, up 0.8% y-o-y and up 4.2% q-o-q on constant currency basis. The top 10 CIB client exposure was 10.3% at the end of 1Q18, down from 11.3% at 31 March 2017 and 10.7% at 31 December 2017

§ Investment Management's Assets Under Management ("AUM") increased to GEL 1,835.9mln in 1Q18, up 18.3% y-o-y and largely flat q-o-q, reflecting higher bond issuance activity by our brokerage arm Galt & Taggart

§ De-dollarisation of the loan book and clients deposits continued. Loan book in local currency accounted to 41.3% of the total book at 31 March 2018, compared to 33.5% a year ago and 38.3% in the previous quarter. The dollarisation of our loan book has decreased since last year as the demand for local currency denominated loans was stronger than the demand for foreign currency denominated loans, supported by the Government's de-dollarisation initiatives implemented at the beginning of last year. Client deposits in local currency represented 33.8% of the total deposit portfolio at 31 March 2018, compared to 26.7% at 31 March 2017 and 30.5% at 31 December 2017

§ Bank of Georgia continued to attract local currency funding to further support the increased demand on the local currency lending and the de-dollarisation of its loan book. In 1Q18, the Bank raised GEL 25mln financing with maturity of up to three years from a Swiss investment company Symbiotics to finance the Bank's micro, small and medium sized enterprises. Moreover, the Bank once again co-operated with Black Sea Trade and Development Bank and secured GEL 75mln, with tranches up to five years duration, to finance the Bank's SME lending

§ On 23 April 2018 Fitch revised the Outlook of JSC Bank of Georgia's Long-Term Issuer Default Rating (IDR) from Stable to Positive and affirmed the IDR at BB-. The revision of the Outlook to Positive reflects Fitch's view that the Bank's risk profile and financial metrics should benefit from the improving operating environment in Georgia

§ On 16 April 2018, International Finance Corporation named JSC Bank of Georgia as the Best Issuing Bank Partner for Women Owned Businesses in Europe and Central Asia for 2017

INVESTMENT BUSINESS HIGHLIGHTS

§ Georgia Capital issued inaugural international corporate bonds in March 2018. On 5 March 2018, JSC Georgia Capital priced US$ 300mln 6.125% notes due 2024 (the "Issuance"). The Issuance was the first international bond offering by a non-banking, non-state-backed company from Georgia. The proceeds from the issuance will be used to optimise the Group's capital structure ahead of the demerger and provide financing to the portfolio companies in order to take advantage of the attractive growth opportunities in Georgia

§ Our utility and energy business, GGU, delivered a stable performance in 1Q18. In 1Q18, GGU continued its investments in water pipeline infrastructure, leading to continued growth in the regulated asset base. As a result of the successful implementation of a number of efficiency projects, GGU was able to significantly reduce its own electricity consumption in 1Q18. GGU also continued construction works on the 50MW Mestiachala HPPs in north-western Georgia, while the 46MW Zoti HPPs are under development

§ In 1Q18, our real estate business, m2, sold 53 apartments with a total sales value of US$ 7.7mln reaching the highest ticket price per apartment in the history of m2, compared to 143 apartments sold with total sales value of US$ 10.1mln in 1Q17 and 165 apartments with a total sales value of US$ 14.5mln in 4Q17

§ In 1Q18, m2 achieved the first milestone in its hotel development strategy and opened its first hotel in Tbilisi (the "Hotel") under the Ramada Encore brand. The Hotel has a capacity of 152 rooms and will cater for the needs of the rapidly growing market for budget travellers in Georgia. During the first incomplete month of operation in March 2018, the Hotel's occupancy rate stood at 29%. m2 has invested US$ 14mln in Hotel development, including the land

§ In 1Q18, m2 acquired an 8,512 square metre land plot in Telavi, Kakheti region for a total cash consideration of US$ 1.5mln (excluding VAT) to develop a hotel with approximately 130 rooms. The hotel construction will be carried out by m2's construction arm. Telavi is the largest city in eastern Georgia and one of the major tourist destinations. The acquisition is in line with m2's hotel development strategy to reach a capacity of 1,000 hotel rooms and capitalise on growing tourist inflows in the country

§ On 3 May 2018, m2 acquired a partly constructed lifestyle hotel in Gudauri for a total cash consideration of US$7.2 million including VAT. The Gudauri hotel is expected to add at least 134 rooms to m2's portfolio and is conveniently located on the slopes in Gudauri, a leading ski resort in the Caucasus region, with ski-in and ski-out facilities. The skeleton of the building is already finished and the remaining construction works will be carried out by m2's construction arm. m2 expects the Gudauri hotel to open its doors to its first visitors in December 2018

§ Our property and casualty insurance business continued its organic growth and at 31 March 2018 Aldagi had 57,791 insured customers (up 47.2% y-o-y and up 21.2% q-o-q). The strong performance was mainly driven by developing regional markets through the launch of livestock insurance; organic growth of motor insurance business; and the introduction of card insurance sales in 1Q18. The quality of the motor insurance portfolio improved significantly, benefiting from the termination of relationships with loss making clients. The number of new insurance policies written reached 46,934 in 1Q18 (up 48.1% y-o-y and up 26.9% q-o-q)

§ In December 2017, the Parliament of Georgia approved Border Motor Third Party Liability Insurance (MTPL insurance for vehicles visiting Georgia either on a temporary or transit basis) through extensive cooperation with the Insurance State Supervision Service of Georgia (ISSSG). MTPL became mandatory from 1 March 2018 and the gross written premium in the first month of operations amounted to GEL 4.6mln, while 64,021 vehicles with foreign plates were insured. Aldagi's market share in Compulsory border MTPL in March 2018 was 18%

§ In February 2018, Georgia Capital acquired a 100% equity stake in a leading Georgian craft beer producer, Black Lion LLC (Black Lion) for the total consideration of $3.2mln. Black Lion is the largest producer of a premium class craft beer in Georgia that launched sales in the beginning of 2016 and sold approximately 300,000 litres of craft beer in 2017, primarily targeting restaurants and bars in Tbilisi

§ In April 2018, JSC Georgia Capital has acquired a 60% indirect controlling interest in Kindzmarauli Marani, LLC ("Kindzmarauli") through a locally established special-purpose vehicle for a total consideration of US$7.25mln (representing a cash payment for an equity stake and the buyout of an existing shareholder loan). Kindzmarauli is a producer of exquisite Georgian wines and spirits, which owns 350 hectares of vineyards in Georgia's Kakheti region. Georgia Capital will consolidate the results of Kindzmarauli's operations from the acquisition date, and expects that the acquisition will complement and strengthen its existing beverage business with an increased presence in the growing domestic and international markets for Georgian wine. With this acquisition, Georgia Capital's beverage business made a major step towards its wine business development strategy to reach a vineyard base of 1,000 hectares over the next three years and has now reached 436 hectares of vineyards. This supports the beverage business' wine production, which has been further helped by significant growth opportunities in international markets provided by Georgia's various free trade agreements, including those with China and the European Union

§ Our healthcare business, GHG, delivered a strong performance in 1Q18 as it continued to deliver on its strategic priorities across its healthcare services and pharmacy and distribution businesses, while the medical insurance business delivered positive EBITDA. Healthcare services EBITDA margin was 25.2% in 1Q18, compared to 25.3% in 1Q17 and 26.8% in 4Q17 reflecting the planned significant investment in new hospitals and polyclinics during 2017. The pharmacy and distribution business continued to generate a high EBITDA margin of 10.0% in 1Q18, compared to 7.8% in 1Q17 and 10.2% in 4Q17

§ GHG launched the 306-bed flagship Deka Hospital in Tbilisi in March, which added GEL 1.2mln to 1Q18 revenues. Deka has a strong historic reputation and occupies a prime location in the north-east of Tbilisi. Following the completion of the renovation, the 306-bed Deka hospital serves as a flagship hospital, being the hospital of choice for high-quality elective medical care countrywide

§ Following the partial opening of Tbilisi Referral Hospital in April 2017, GHG launched the remaining part of the hospital in December 2017, with an additional 112 renovated beds. The Hospital has already generated a 43% occupancy rate and contributed GEL 3.7mln to 1Q18 revenues

CHIEF EXECUTIVE OFFICER STATEMENT

In the first quarter of 2018, the last full quarter before the Group completes its planned demerger on 29 May 2018, the Group has delivered an extremely strong performance in all areas of the business, that resulted in an 18.8% year-on-year growth in profit for the quarter, to GEL 128.6 million, and earnings per share growth of 16.7% to GEL 3.08 per share. This strength reflects continued excellence from our Banking Business as well as increased momentum and strategic delivery from our Investment Businesses, both of which continue to be supported by Georgia's strong macroeconomic performance and business outlook.

From a macroeconomic perspective Georgia is going from strength to strength, with business momentum continuing to accelerate and tourism inflows into the country rising at unparalleled levels. In 1Q18, real GDP growth was at an estimated 5.2% year-on-year, with inflation remaining well contained at 2.8%. In addition, the Lari strengthened by 6.9% against the US Dollar during the first quarter. The National Bank of Georgia continues to increase Georgia's US dollar reserves and has recently been buying US Dollars, to mitigate further appreciation of the Lari.

The Banking Business delivered a strong result in what is traditionally the slow quarter of the year. On a constant-currency basis, the loan book grew 21.3% year-on-year, and 5.0% during the quarter. This reflected continued strong growth in Retail Banking, where the mortgage portfolio has increased by nearly 50% over the last 12 months, and in the corporate lending portfolio, which is now delivering high quality lending growth following the completion of our three year programme to reduce concentration risk at the end of last year. Whilst individual product loan yields have continued to remain stable, the recent pick-up of EUR denominated corporate lending and strong growth in the mortgage portfolio has contributed to a 30 basis point year-on-year reduction in the net interest margin. That said, we maintained our capital efficient approach within lending which, in addition to a reduction in credit risk, improved the return on average equity in the Banking Business to 25.9% in the quarter, compared to 23.7% in the first quarter last year. Costs remain well controlled, whilst ensuring that we continue to invest in building an increasingly strong customer franchise.

The Retail Banking customer franchise continues to grow strongly in all segments and the Retail Banking product to client ratio increased to 2.2, compared to 2.0 in the first quarter of last year. Asset quality continues to improve significantly. The Banking Business cost of risk ratio in the first quarter was 2.1%, in line with our medium-term cost of risk expectations. This was achieved at the same time that we continued to improve our asset quality, with non-performing lending reducing by 17.9% over the last three months, and the NPL Coverage ratio improving from 102.9% to 111.4% over the same period. The NPLs to Gross Loans ratio also reduced significantly, from 4.6% to 3.1%, over the last 12 months.

The Bank's capital and funding position remains strong. The National Bank of Georgia transitioned to Basel III standards, and introduced new capital adequacy requirements in December 2017 and on the new basis, the NBG (Basel III) Total capital and Tier 1 capital adequacy ratios were 17.3% and 12.4%, respectively, at the end of the first quarter, significantly in excess of the Bank's minimum capital requirements. Bank of Georgia continues to have strong capital ratios and high levels of internal capital generation.

The Group's Investment Business, Georgia Capital, is delivering its strategic priorities in each of its businesses together with strong growth and performance. Gross profit increased by 19.8% year-on-year to GEL 105.35 million, and net profit grew by 17.3% to GEL 29.4 million. In addition, the business is exploring further opportunities to expand into targeted service industries to increase the diversification and growth of its business portfolio.

Within the businesses, Georgia Healthcare posted net revenues of GEL 207 million during the quarter, an increase of 11.4%, reflecting a combination of high single-digit organic growth and the recent completion and launch of its 2 major hospital renovation projects. The first quarter EBITDA was GEL 31.4 million, an increase of 25.3%. The healthcare services EBITDA margin continues to be high at 25.2% and this is expected to improve towards 30%, as the dilutive effect of the significant roll-out impact of the two major hospital renovations and the ongoing roll-out of a nationwide chain of polyclinics starts to reduce. In the pharmacy and distribution business we continued to realise significant benefits from the integration of two leading pharmacy businesses and the EBITDA margin of 10.0% in the first quarter comfortably exceeded our target of "more than 8%" margin.

In our water utility and energy business, GGU, the management team continues to focus on improving energy efficiency, whilst investing in water pipeline infrastructure and growing the regulated asset base. GGU also continued construction and development works on 3 hydro power plant projects, totaling almost 100MW of planned additional capacity out of a targeted 1,000MW over the next five years.

The strong execution skills of our real estate business, m2 Real Estate, continue to unlock considerable value in the real estate development business. During the first quarter of 2018, m2 sold 53 apartments with a total sales value of $7.7 million, in addition to increasing its portfolio of yielding assets. In addition, strong progress has been made in the development of m2's hotel development strategy with the opening in March 2018 of its first Ramada Encore hotel, as well as the acquisition of a number of hotel projects that put m2 firmly on track to deliver its 1,000 hotel room strategy over the next three years.

The strong portfolio of new products developed by our property and casualty insurance business, Aldagi, supported 21.2% growth in insured customers over the last three months and Aldagi's position as the clear market leader in the fast-developing Georgian P&C insurance market. This strong growth was largely driven by the launch of livestock insurance, strong growth in the motor insurance business and the introduction of card insurance during the quarter.

Our beverage business, Teliani, increased its revenues by 94.4% year-on-year, primarily due to the launch of beer and lemonade production in 3Q17, and continued to diversify and expand its distribution network of wine and beer businesses, whilst also exploring investments targeting an increase in its vineyard base to 1,000 hectares over the next three years, from the current 86 hectares, which we already increased to 436 hectares in April 2018.

Following shareholder approval, on 30 April 2018, of the demerger of BGEO Group, this is the last quarterly report incorporating the results of both Bank of Georgia Group and Georgia Capital. The demerger is expected to be completed later this month, on 29 May 2018, when both companies will become separately listed on the premium segment of the London Stock Exchange. Over the last few years the Group has achieved remarkable growth and success in both the Banking and the Investment businesses. Leveraging on the continued success of Georgia and its expected future macroeconomic progress and strength, both businesses have exceptional customer franchises, management teams and employees that we, and the Board of Directors of both companies, expect to thrive as independent businesses that will build on their excellent track record for many years to come.

Irakli Gilauri, Kaha Kiknavelidze,

Chairman and CEO, Georgia Capital PLC CEO, Bank of Georgia Group PLC

5Includes results of GHG's operations, which is classified as discontinued operations in Group's and Georgia Capital's consolidated financial statements

FINANCIAL SUMMARY

6NPL Coverage Ratio adjusted for IFRS 9 was 102.9% at 31 December 2017

7Detailed Investment Business financials, which is classified as Discontinued Operations in Bank of Georgia Group's 1Q18 consolidated financial statements, are presented in Discussion of Investment Business results on page 22

8NPL Coverage Ratio adjusted for IFRS 9 was 102.9% at 31 December 2017

DISCUSSION OF RESULTS

Discussion of Banking Business Results

The Group's Banking Business is primarily comprised of three segments. (1) Retail Banking operations in Georgia principally provides consumer loans, mortgage loans, overdrafts, credit cards and other credit facilities, funds transfer and settlement services, and handling customers' deposits for both individuals as well as legal entities. Retail Banking targets the emerging retail, mass retail and mass affluent segments, together with small and medium enterprises and micro businesses. (2) Corporate Investment Banking comprises Corporate Banking and Investment Management operations in Georgia. Corporate Banking principally provides loans and other credit facilities, funds transfers and settlement services, trade finance services, documentary operations support and handles saving and term deposits for corporate and institutional customers. The Investment Management business principally provides private banking services to high net worth clients. (3) BNB, comprising JSC Belarusky Narodny Bank, principally provides retail and corporate banking services to clients in Belarus.

Performance highlights

§ Strong revenue of GEL 236.4mln in 1Q18 (up 10.6% y-o-y). Y-o-y revenue growth was primarily driven by an increase in net banking interest income, which resulted from strong loan book growth. Additionally, net fee and commission income increased 14.3% y-o-y contributing to increase of revenues in 1Q18 y-o-y

§ Net banking interest income. Our net banking interest income was up 12.0% y-o-y in 1Q18. The y-o-y increase was primarily driven by the strong growth of our Retail Banking loan book, which experienced 33.3% y-o-y constant currency growth in 1Q18

§ Net banking interest expense. Our net banking interest expense was up 25.6% y-o-y in 1Q18, primarily due to the issuance of GEL 500mln Lari denominated bonds in June 2017 and increased deposit generation both in our Retail and Corporate Investment Banking operations

§ Our NIM was 7.0% in 1Q18. 1Q18 NIM was down 40bps y-o-y due to the 10bps y-o-y decrease in loan yield and 20bps y-o-y increase in cost of funds. On a q-o-q basis, loan yield decreased by 40bps, while cost of funds remained flat, resulting in 30bps decline in 1Q18 NIM

§ Loan yield. Currency blended loan yield was 13.9% in 1Q18 (down 10bps y-o-y and down 40bps q-o-q). Both local and foreign currency loan yields decreased y-o-y and q-o-q, reflecting change in product mix, impact from seasonality and higher loan related prepayment fees in 4Q17. At the same time the overall loan yield was positively impacted by a continued shift towards high-yielding local currency denominated loans in the total loan portfolio mix

§ Liquid assets yield. Our liquid assets yield was 3.6% (up 30bps y-o-y and up 20bps q-o-q) in 1Q18. The foreign currency denominated liquid assets yield increased by 50bps y-o-y and 20bps q-o-q in 1Q18, as a result of the Federal Open Market Committee's decisions to raise interest rates, which triggered similar increases on interest rates paid by a) The National Bank of Georgia (the "NBG") on the Bank's obligatory reserves (foreign currency only) and b) correspondent banks on deposits placed by the Bank. This increase was partially offset by decline in local currency denominated liquid assets yield, which decreased by 30bps y-o-y and by 10bps q-o-q in 1Q18

§ Cost of funds. Cost of funds stood at 4.8% in 1Q18 (up 20bps y-o-y and flat q-o-q). Despite the significant increase in cost of debt securities issued following the issuance of GEL 500mln 11.0% Lari denominated notes in 2Q17 (up 170bps y-o-y in 1Q18), cost of funds remained largely flat as a result of a decrease in the cost of client deposits and notes (down 10bps y-o-y and q-o-q)

§ Shift to the GEL denominated loan book and client deposits continued both in Retail Banking and Corporate Investment Banking. Retail client loan book in foreign currency accounted for 46.0% of the total RB loan book at 31 March 2018 (54.2% at 31 March 2017 and 48.8% at 31 December 2017), while retail client foreign currency deposits comprised 71.0% of total RB deposits at 31 March 2018 (74.3% at 31 March 2017 and 72.1% at 31 December 2017). At 31 March 2018, 80.7% of CIB's loan book was denominated in foreign currency (82.1% at 31 March 2017 and 83.1% at 31 December 2017), while 60.2% of CIB deposits were denominated in foreign currency (69.4% at 31 March 2017 and 63.1% at 31 December 2017)

§ Net Loans to Customer Funds and DFI ratio. Customer funds (client deposits and notes) increased by 29.8% y-o-y and 3.1% q-o-q to GEL 7,296.1mln driven by strong deposit generation in both the Retail and Corporate Investment Banking operations. Retail banking client deposits and notes grew by 38.0% y-o-y and 1.1% q-o-q to GEL 3,304.3mln, while CIB client deposits grew by 25.0% y-o-y and 5.9% q-o-q to GEL 3,661.7mln. Our borrowings from DFIs also increased by 4.2% y-o-y to GEL 1,191.6mln. As a result, our Net Loans to Customer Funds and DFI ratio, which is closely monitored by management, remained strong at 91.8% (down from 95.6% at 31 March 2017 and 92.4% at 31 December 2017) despite the strong growth of the loan book

§ Net fee and commission income. Net fee and commission income performance y-o-y is mainly driven by the strong performance in our settlement operations supported by the success of our Express banking franchise

§ Net banking foreign currency gain. The net banking foreign currency gain was down 18.7% y-o-y in 1Q18, primarily driven by lower volatility of the GEL exchange rate during the first quarter of 2018

§ Net other banking income. Net other banking income increased y-o-y to GEL 5.7mln in 1Q18, largely driven by GEL 4.4mln net gains on derivative financial instruments recorded in 1Q18. Q-o-q decrease was primarily attributable to the GEL 7.3mln revaluation gain from investment properties recorded in 4Q17

§ Operating expenses amounted to GEL 87.4mln in 1Q18 (up 13.4% y-o-y and down 12.4% q-o-q). Operating leverage deteriorated by 2.8 percentage points y-o-y and improved by 3.2 percentage points q-o-q in 1Q18. Higher salaries and employee benefits in 1Q18 compared to a year ago mainly reflected the strong organic growth of Retail Banking operations. At the same time, 13.8% y-o-y increase in administrative expenses in 1Q18 was primarily driven by increased personnel training costs. The 20.5% q-o-q decrease in administrative expenses reflected higher seasonal advertising and marketing activities in 4Q17

§ Cost of risk ratio. The cost of risk ratio was 2.1% in 1Q18, down 30bps y-o-y and flat q-o-q. RB's 1Q18 cost of risk ratio was down 80bps y-o-y and up 80bps q-o-q, while CIB's cost of risk ratio was up 100bps y-o-y and down 190bps q-o-q

§ Quality of our loan book remains strong in 1Q18 as evidenced by following closely monitored metrics:

§ BNB - the Group's banking subsidiary in Belarus - generated a profit of GEL 2.3mln in 1Q18 (up from GEL 0.7mln in 1Q17and down 36.4% q-o-q); BNB's earnings were positively impacted by decreased levels of cost of risk in 1Q18 compared to the first quarter of last year. While Belarus experienced weak macro-economic conditions in 2016 and 1Q17, the economy started to show signs of stabilisation during 2017. As a result, BNB's cost of credit risk significantly improved and was down 87.3% y-o-y in 1Q18

§ BNB's loan book reached GEL 377.7mln at 31 March 2018, up 12.6% y-o-y, mostly reflecting an increase in corporate and consumer loans. Client deposits were GEL 288.3mln at 31 March 2018, up 22.2% y-o-y. This increase was primarily attributable to the agreement signed with BelSwissBank in June 2017, which allowed BNB to manage and service current and term deposit accounts and card operations of BelSwissBank's customers

§ BNB continues to remain strongly capitalised, with Capital Adequacy Ratios well above the requirements of its regulating Central Bank. At 31 March 2018, total CAR was 14.8%, above the 10% minimum requirement of the National Bank of the Republic of Belarus ("NBRB"), while Tier I CAR was 9.9%, above NBRB's 6% minimum requirement. Return on Average Equity ("ROAE") was 12.3% in 1Q18 (3.4% in 1Q17and 18.5% in 4Q17). Strong capitalisation and improved profitability allowed BNB to distribute dividend in the amount of GEL 1.2mln in 1Q18 (GEL 1.2mln in 2017, the first capital return to the Bank since the BNB acquisition in 2008)

§ As a result, the Banking Business profit totalled GEL 99.2mln in 1Q18 (up 19.3% y-o-y and down 7.4% q-o-q), while ROAE increased to 25.9% in 1Q18 (23.7% in 1Q17 and 27.8% in 4Q17)

Our balance sheet remains highly liquid (NBG Liquidity ratio of 36.5%) and strongly capitalised (NBG Basel III Tier I ratio of 12.4%) with a well-diversified funding base (Client Deposits and notes to Total Liabilities of 62.9%).

§ Liquidity. Liquid assets increased to GEL 4,514.3mln at 31 March 2018, up 32.8% y-o-y and up 3.9% q-o-q, largely driven by proceeds from the GEL 500mln Lari denominated bonds in June 2017, increase in local currency bonds, which are used by the Bank as collateral for short-term borrowings from the NBG, and additional proceeds as a result of the pushdown of $350mln Eurobonds of JSC BGEO Group in March 2018. Management successfully continued to deploy excess liquidity, accumulated as a result of these proceeds. As such, the NBG liquidity ratio stood at 36.5% at 31 March 2018 (37.4% at 31 March 2017 and 34.4% at 31 December 2017), above the regulatory minimum requirement of 30.0%, while the NBG liquidity coverage ratio was 135.2% at 31 March 2018 (112.4% at 31 December 2017), above the 100% minimum requirement level

§ Diversified funding base. Debt securities issued grew by 89.8% y-o-y and by 13.2% q-o-q. The y-o-y increase was driven by the issuance of GEL 500mln Lari denominated bonds in June 2017, which positively contributed to GEL liquidity, allowing us to significantly reduce short-term borrowings from the NBG (down 27.5% y-o-y). On q-o-q basis, the 13.2% increase was due to above mentioned pushdown of $350mln Eurobonds from JSC BGEO Group in March 2018

§ Loan book. Our net loan book and finance lease receivables reached GEL 7,792.1mln at 31 March 2018, up 20.4% y-o-y and up 0.7% q-o-q. As of 31 December 2017, retail book represented 69.3% of the total loan portfolio (62.6% at 31 March 2017 and 68.0% at 31 December 2017). While both local and foreign currency portfolios experienced y-o-y growth, the local currency loan portfolio demonstrated an outstanding increase of 48.1% y-o-y and 8.3% q-o-q, partially driven by the Government's de-dollarisation initiatives and our goal to increase the share of local currency loans in our portfolio

§ IFRS 9 implementation delivered - no impact on capital adequacy ratios. The Group has completed its IFRS 9 implementation programme and adopted IFRS 9, Financial Instruments from 1 January 2018. The Bank recognised the impact from IFRS 9 adoption of approximately GEL 31.5mln, gross of income tax (GEL 28.6mln, net of income tax), as a reduction to shareholders' equity at the transition date on 1 January 2018. As allowed by IFRS 9, the Group did not restate prior-period data. IFRS 9 does not have any impact on regulatory capital and capital adequacy ratios. Through-the-cycle cost of risk is expected to remain unchanged

§ Amendments to Capital Adequacy requirements. To transition to Basel III, National Bank of Georgia introduced new capital adequacy requirements in December 2017. According to the newly introduced methodology, at 31 March 2018 the Bank of Georgia's Basel III Tier 1 and Total Capital Adequacy ratios stood at 12.4% and 17.3%, respectively, as compared to minimum required level of 10.2% and 14.4%, respectively (12.4% and 17.9%, respectively, at 31 December 2017, above the minimum required level of 9.9% and 12.4%, respectively)

§ Over the last few months, the National Bank of Georgia has been working with banking sector participants to create a greater focus on lending to corporate and SME clients, and in the mortgage sector as opposed to the unsecured consumer sector. In May 2018, NBG introduced temporary limits on retail loans disbursed with no formal proof of income whilst consultations with commercial banks take place towards the introduction of Retail Lending Guidelines, expected in early 2019. As a result of these policy changes, we anticipate stronger mortgage and SME lending growth, than unsecured consumer lending

Discussion of Banking Business 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 itself represented by the following four sub-segments: (1) the emerging retail segment (through our Express brand), (2) retail mass market segment; (3) SME and micro businesses - "MSME" (through our Bank of Georgia brand), and (4) the mass affluent segment (through our Solo brand).

Performance highlights

§ Retail Banking delivered another strong quarterly result across all of its segments and generated total revenues of GEL 170.7mln in 1Q18 (up 20.9% y-o-y)

§ RB's net banking interest income grew by 21.4% y-o-y and 0.6% q-o-q in 1Q18 on the back of the strong growth in the Retail Banking loan portfolio. Record quarterly net banking interest income also reflects the benefits from the ongoing growth of the local currency loan portfolio, which generated 13.9ppts higher yield than the foreign currency loan portfolio in 1Q18

§ The Retail Banking net loan book reached GEL 5,155.3mln in 1Q18, up 32.5% y-o-y and up 2.2% q-o-q. Our local currency denominated loan book grew at a faster pace (up 56.0% y-o-y and up 7.7% q-o-q) than the foreign currency denominated loan book (up 12.6% y-o-y and down 3.6% q-o-q). As a result, the local currency denominated loan book accounted for 54.0% of the total Retail Banking loan book at 31 March 2018, up from 45.8% at 31 March 2017 and 51.2% at 31 December 2017

§ The loan book growth was a product of continued strong loan origination levels delivered across all major Retail Banking segments:

§ Retail Banking client deposits increased to GEL 3,304.3mln, up 38.0% y-o-y and up 1.1% q-o-q, despite a 20bps y-o-y decrease in the cost of deposits in 1Q18. The dollarisation level of our deposits decreased to 71.0% at 31 March 2018 from 74.3% at 31 March 2017 and from 72.1% at 31 December 2017. This is in line with the current decreasing trend of cost on foreign currency denominated deposits (down 50 bps y-o-y and down 10bps q-o-q in 1Q18) and an increasing trend of cost on local currency denominated deposits (up 40bps y-o-y and up 30bps q-o-q). The spread between the cost of RB's client deposits in GEL and foreign currency widened to 2.7ppts during 1Q18 (GEL: 4.8%; FC: 2.1%) compared to 1.8ppts in 1Q17 (GEL: 4.4%; FC: 2.6%) and 2.3ppts in 4Q17 (GEL: 4.5%; FC: 2.2%). Local currency denominated deposits increased at a faster pace to GEL 959.1mln (up 55.6% y-o-y and up 5.3% q-o-q), as compared to foreign currency denominated deposits that grew to GEL 2,345.2mln (up 31.9% y-o-y and largely flat q-o-q)

§ Retail Banking NIM was 8.3% in 1Q18, down 50bps y-o-y and down 10bps q-o-q. The lower NIM y-o-y and q-o-q in 1Q18 was attributable to flat loan yields, while the cost of funds grew by 50bps y-o-y and 10bps q-o-q, primarily due to increased local currency funding costs

§ Strong y-o-y growth in Retail Banking net fee and commission income. The 17.5% y-o-y increase in fee and commission income in 1Q18 was driven by an increase in settlement operations and the strong underlying growth in Solo and MSME platforms

§ RB cost of risk improved y-o-y in 1Q18. RB cost of credit risk was GEL 32.8mln in 1Q18 (down 1.2% y-o-y). The cost of risk ratio was 2.6% in 1Q18, down from 3.4% in 1Q17 and up from 1.8% in 4Q17. The q-o-q increase in cost of risk is due to seasonal factors

§ The number of Retail Banking clients reached c.2.4mln, up 7.7% y-o-y and up 1.8% q-o-q, while the number of total cards outstanding amounted to 2,246,396, up 7.0% y-o-y and up 0.9% q-o-q

§ Our Retail Banking business continues to deliver strong growth as we further develop our strategy, as demonstrated by the following performance indicators:

- Growth in the client base was due to the increased offering of cost-effective remote channels. The strong increase to 2,356,294 customers in 1Q18 (up 7.7% y-o-y and up 1.8% q-o-q) reflects the sustained growth in our client base over recent periods and was one of the drivers of the increase in our Retail Banking net fee and commission income

- The number of outstanding cards increased by 7.0% y-o-y in 1Q18. The increase reflected the launch of a loyalty programme Plus+ in July 2017, which is part of RB's customer-centric approach and our efforts to increase the Mass Retail segment's product to client ratio from current 1.8 to 3.0. We had 362,472 active Plus+ cards outstanding as at 31 March 2018

- The utilisation of Express Pay terminals continued to grow in 1Q18. The 1Q18 volume of transactions increased to GEL 1,496.2mln (up 54.4% y-o-y and up 1.2% q-o-q), while the number of transactions increased by 2.7% y-o-y, but down q-o-q. The decline in number of transactions was primarily driven by the switch of customers to digital channels, such as internet and mobile bank. The fees charged to clients for transactions executed through express pay terminals amounted to GEL 5.2mln in 1Q18, largely flat y-o-y and q-o-q

- Digital penetration growth. For mobile banking application, the number of transactions and the volume of transactions continue to show outstanding growth, primarily due to the introduction of our new mobile banking application in May 2017. The fully-transformed, user-friendly, multi-feature mobile banking application (mBank) continues to gain popularity. Since its launch on 29 May 2017, and over the course of the following ten months, approximately 332,387 downloads were made by the Bank's customers, while the previous application had less than 120,000 downloads since its launch. During the same period approximately 6.5 million online transactions were performed using the new application

- Significant growth in loans issued and deposits opened through Internet and Mobile Bank. In 2017, we started actively offering loans and deposit products to our customers through Internet Bank. In 1Q18, 9,088 loans were issued with a total value of GEL 14.3mln, and 2,324 deposits were opened with a total value of GEL 6.5mln through Internet Bank (565 loans with total value of GEL 1.6mln and 1,762 deposits with total value of GEL 2.7mln in 1Q17). Starting from 2018, our customers are able to take a loan via mBank as well. 5,111 loans were issued with total value of GEL 6.9mln using the mobile banking application during 1Q18

§ Solo, our premium banking brand, continues its strong growth momentum and investment in its lifestyle brand. The number of Solo clients reached 35,803 at 31 March 2018 (21,657 at 31 March 2017 and 32,104 at 31 December 2017), up 332.3% since its re-launch in April 2015. We are on track to achieving our target of 40,000 Solo clients by the end of 2018. We have now launched 12 Solo lounges, of which 9 are located in Tbilisi, the capital of Georgia, and 3 in major regional cities of Georgia. In 1Q18, annualised profit per Solo client was GEL 1,583 compared to a profit of GEL 74 and GEL 67 per Express and mass retail clients, respectively. Product to client ratio for Solo segment was 5.9, compared to 3.5 and 1.8 for Express and mass retail clients, respectively. While Solo clients currently represent 1.5% of our total retail client base, they contributed 24.4% to our retail loan book, 38.2% to our retail deposits, 13.6% and 20.8% to our net retail interest income and to our net retail fee and commission income, respectively, in 1Q18. The fee and commission income from the Solo segment increased y-o-y from GEL 2.6mln in 1Q17 to GEL 4.5mln in 1Q18. Solo Club, launched in 2Q17, a membership group within Solo, which offers exclusive access to Solo products and offers ahead of other Solo clients at a higher fee, continues to increase its client base. At 31 March 2018, Solo Club had 2,852 members, up 51.5% q-o-q

§ MSME banking continued to deliver solid growth. The number of MSME segment clients reached 174,284 at 31 March 2018, up 33.6% y-o-y and up 5.1% q-o-q. MSME's loan portfolio was GEL 1,780.3mln at 31 March 2018 (up 33.2% y-o-y and up 2.4% q-o-q). MSME segment generated revenue of GEL 35.4mln in 1Q18 (up 28.3% y-o-y and down 3.9% q-o-q)

§ As a result, Retail Banking profit reached GEL 68.3mln in 1Q18 (up 34.5% y-o-y and down 11.9% q-o-q). Retail Banking continued to deliver an outstanding ROAE , which reached 31.5% in 1Q18 (27.8% in 1Q17 and 36.6% in 4Q17)

Corporate Investment Banking (CIB)

CIB provides (1) loans and other credit facilities to Georgia's large corporate clients and other legal entities, excluding SME and micro businesses; (2) services such as fund transfers and settlements services, currency conversion operations, trade finance services and documentary operations as well as handling savings and term deposits; (3) finance lease facilities through the Bank's leasing operations arm, the Georgian Leasing Company; (4) brokerage services through Galt & Taggart; and (5) Wealth Management private banking services to high-net-worth individuals and offers investment management products internationally through representative offices in London, Budapest, Istanbul, Tel Aviv and Limassol.