Hello, everyone. Welcome to Bank of Georgia Group PLC's Conference Call. Today, we are presenting the consolidated results for the first quarter of 2024. My name is Nini Arshakuni, I'm Head of Investor Relations, and I'll be moderating today's call. I'm joined on this call by the Group CEO, Archil Gachechiladze and we'll start, as always, with a brief overview of the key developments and the results and then you'll be able to ask questions. Please note that this call is also being recorded. Then I'm handing over to Archil.

Thank you, Nini. I'm glad to report very good numbers, clearly good set. Basically, this is the first quarter where we are reporting our consolidated balance sheet, but I would like to highlight that this income statement is not consolidated. So this income that you see here is on a standalone basis, only the balance sheet end of March is consolidated with Ameriabank, because as you know, we completed the transaction at the end of March. So our result was GEL 369 million, which was up 22.5%, delivering 27.7% return on equity and share is 30% cost income. So a few words on the economy. The economy is doing pretty well. In fact, 2024 is forecasted to grow by 6%. The first quarter was 7.8%. So if not the political tool that we are experiencing right now, we will probably be updating this number, the 6%. But right now, in fact, given the fact that probably tourism will experience some hit as well as maybe some other things like small investments, we are not increasing the expected growth. Having said that, the impact we don't think will be significant enough on the economy to decrease that, obviously with the risks we’ve made. In terms of the refinancing rate has been lower to 8%, as recently, the last quarter percentage point was now has just been visible. And the inflation remains under 3%, which is a target rate of 1.5% is the headline with the inflation closer to the target range. So we think that with this decrease I think the further -- we don't expect further decrease until the end of the year and then we will see given the volatility a lot [indiscernible] to be seen. Export of goods was lower by 9.3% from 1 year ago, which was a very high base. The import of goods has decreased as well and remittances have normalized. Having said that, I think the export of services remained pretty strong, including tourists, but also on top of that is the IT export -- IT services export, transport and logistics export as well as the depreciation services export. All of that remained pretty strong, and that's what's driving alongside the investments, the growth in the economy. So in the first quarter, we've seen national methodology of buying the U.S. dollar from the market. So you see $214 million net buying, although the net reserves slightly decreased because of the large repayments of the national debt. Having said that, buying that $214 million in the first quarter is pretty remarkable because the first quarter is the seasonally in the period of time when Georgia imports energy, gas because of -- for heating -- for household heating as well as electricity production. So usually, there's a little bit of pressure on the currency. And at least, if not that, then it's not usually the time to buy hard currency because the tourist is relatively low at that point, it's a low season for tourists. And on the other side, we have this energy import. Nevertheless, I think National Bank has been buying above $200 million for the quarter. So that's why when we see some people ask what is our expectation regarding the currency? We've seen a few percentage points weakness as a result of the demonstrations and the volatility on the market. We don't expect significant changes there unless there are other items because of the overall pressure on appreciation that we've seen until now. So we have seen the loan and deposit dollarization in Georgia is stabilized about 50% and 45% roughly. And the bank's credit growth in constant currency has been up 17% and we've grown slightly more than that. Non-performing loans are at healthy level in both countries, Georgia is [indiscernible]. So Armenian economy is doing very well, in fact, slightly ahead of Georgia, a 9.2% estimate for GDP growth in the first quarter. The refinancing rate is very similar from 5 basis points higher and inflation is below 0%. So there's a little bit more room to cut rates here. And expected growth is similar to Georgia at 6%. So it's a pretty strong economic situation in Armenia. And in terms of the external exports and imports, we see strong growth. In fact, I spent a little bit of time at EBRD AGM in Armenia and have stayed there and met a number of businesses there and I was very impressed in terms of the energy and technology and mobilization of the main driving force behind the Armenian economy. I was pretty excited in fact about the tendencies and the energy that I saw there. Bank loan growth is similar to Georgia's, in fact, it's 17.4%. And bank loan dollarization is at 33.9% [indiscernible]. You have seen overall stability, slight depreciation on Georgia's side, about 3% and about 4% strengthening of Armenian Dram. Now a few things about the bank and how we will be. As you can see now, the bank comprises of the Georgian entity, which still are 3/4 of the assets and about 1/4 Armenian business and other business about 3%, that includes Belarus. We think Armenian business will be growing faster. So you'll see more of a rebalancing of this split. But basically, we are operating two leading banks in Georgia and Armenia in terms of top of mind, a very strong brand in both countries and very good high growth economies in both cases. So we are -- as a result of this investment, you have noticed that in April, we raised our guidance for growth from 10% to 15%. That's constant currency balance sheet and income statement should be growing about the same. And in terms of the profitability, we guided 20%-plus and the dividend share buyback will be 30% to 50%. So that's -- we are not changing that. Having said that, again, the expected high growth in Armenia of 20%-plus over the next few years. We rely less on dividends from Armenia at this point, but are counting on profitable growth. And that's why we'll probably be on the lower end of this range over the last few years. In Georgia, we have seen our number of monthly active users grow by 10%. On the digital front though, it has been just shy of 20%, which is very good. Right now, about 76% of all our users are also digital users, that's on retail side, and 49% of them is daily. So almost 700,000 people open our retail application on a daily basis, which is a pretty remarkable engagement for any financial hub. More than 70% of our transactions are digital. And then most of the rest is basically ATMs and the BOG Pay terminals. And about 1% of overall transactions is in the branches. We do -- we have had significant progress in terms of the digital sales. Now about 56% of all our sales are done through the digital channels. You may remember that over the last year or two, we have been talking about increasing this number to 60% plus at a sustainable level, maybe even at 70%. Last quarter, we had a big one because we had a very big trivia game that included some encouraging people to learn how to do different operations on their banking app and that's hence the very large level. But this has normalized now at about 56%, which is nice. On the Internet and mobile app for our businesses, we are experiencing incredible growth of 29% year-on-year. So from 60,000 customers to 78,000 customers, that's monthly active digital users. Number of transactions are up 25%. So this is seasonal in terms of transactions, but overall, yearly growth is pretty nice in fact. What we are seeing is our payments acquiring business is growing nicely as well. It's 33% volume growth. We are at 55% market share, which is very nice. On the issuing side, number of people that use our cards monthly active users are up by 18%. These are incredible numbers in terms of the fundamental business growth. That's what's underpinning the strength of our franchise. And all of this is based on our customer satisfaction scores. The NPS is just one peak longer that we measure. We measure many other things, including by channel and by product. And you can see that we are around 16 up from around 13 about 5 years ago. So that's what underpins the strength of the franchise. In Armenia there's plenty of upside. So one of the bank is a leading one on the corporate side, it has plenty of upside on the retail side. So we only have 180,000 monthly active digital users on the retail side, while the country has 80% of population of Georgians [indiscernible]. So if we were running about the same numbers, we should be looking at 1.1 million monthly active users were digital. So there's plenty of upside there. In terms of the market position, we are number one in loans and number two in deposits. And as I said, on the corporate side, the leadership is pretty strong and there is plenty to go on the retail. In terms of the numbers, we have had an incredible growth of our net loans and deposits because of the acquisition and the consolidation, as we said, 63% and 50% -- shy of 55%. Now if you carve out that and you look at the constant currency of Georgian operation, with 20% and shy of 16%, so pretty strong growth. Cost of risk was pretty benign at 0.3%, I think I mentioned already. Operating income up by 14%. Non-interest income was up by only 7.6% because of high base in fees of around GEL 27 million last year. But if you look at the fundamental growth of the net commission income, it's up by about 25%.Our operating expense is up 14.5%. So cost income is less than 30%. Loan portfolio up on a constant currency basis, 20%, which is pretty nice. And deposit portfolio up by 16%, shy of 16%. We've been able to maintain the net interest margin at 6.4%. Having said that, next quarter will probably be impacted by the fact that we raised Tier 1 -- $300 million of Tier 1 instrument, pretty strong interest from the investor side there. And we have seen a margin above the risk-free rate for 5-year decrease from the previous time we raised it was 8.6% and this time it was 5.6%. So it shows the really big trust in the Georgian banking as well as Bank of Georgia franchise from the investors, which we appreciate. Cost of risk, we've seen very good performance, probably also caused by the fact that the economy is doing very well. We also have experienced a one-off gain from the difference between the fair value as assessed by the PwC and the price that we paid for the Armenian acquisition. Return on assets remained high at 4.7%. In terms of the capital ratios, you see -- this is end of March. You see the capital ratios here, which are slightly less than we have seen previously. Having said that, this does not include the Tier 1 instrument that we raised in April. And we just also with the -- we used the option to call the previous $100 million Tier 1, which will be redeemed in June. So as a result of this net of these 2 transactions, the increase on the Tier 1 total will be extra 2.3% plus the retained earnings and so forth. So it's very healthy levels right now, it's close to 5% margins there. On Ameriabank, you see slightly less buffers, but you'll see that the business is generating strong earnings and we will be deploying those earnings in building up the buffers and to deploy for the growth of the business. Liquidity is pretty strong in both banks, as you can see. And we discussed the dividend saying these numbers are pretty well. So I'll stop here. This has been 15, 16 minutes. So it's a new record. So on that, I'll open up for the questions.

So we have the first question from Mark Webster. What do the opinion polls currently show for the elections in October? Do you have any additional comments? So we've not seen the latest opinion polls. We'll probably have those over the next few weeks. I think it's obvious that the Trojan train would experience lower popular footwork as a result of the recent developments. Having said that, we cannot assess at this point how large those will be. So everybody is waiting for the opinion polls. I think one thing I can say is that this -- you've seen a lot of people on the streets. But right now, everybody is getting ready for the elections. So that's the sentiment. And so overall, I think that's one thing to look out for which is in end of October.

This is the first time I'm not seeing raised hands now. So we'll...

That means that [Indiscernible] I've been able to preempt all the questions. That would be another record, no? Well, maybe not. Alexander, although without the last thing. What are the potential risks of Georgia exclusion from EU member candidates for the bank? Do you have a stress test scenario for the prolonged political crisis? Is that going to impact your deposit loan growth? Yes to all of them. So if we are excluded or our candidate member status is stopped, that would be an unfortunate news. Having said that, it will not have a direct impact on the economy because we are for years now enjoying the free trade agreements with the EU. And other than the trade part of the new candidacy, we have not been getting any other benefits from it. So nothing to speak of at this point. The real benefits start from investments in infrastructure when one goes through the negotiation stage, which we're not yet. So it will be an unfortunate loss of the upside rather than a direct impact. Having said that, I think sentiment will be negative, so that will be unfortunate. In terms of growth, so it will be basically reflected in the overall economic growth, and hence, in Georgia. Bank of Georgia balance sheet is a fortress balance sheet to use the word as one of the CEOs of one of the largest banks in the world. Because this say it has plenty of capital and plenty of liquidity and we intend to drive, especially in the increased -- in terms of increased volatility. How did you maintain NIM with lower rates? That's Robert The trick there is that NBG reduced slightly, only raised about 2%, 2.5%, the mandatory reserves on the dollar deposits. So that was the positive side. So maintenance was there, but that was a positive side there. There are also protests in Armenia. What is your opinion about the situation there? That's George [Indiscernible]. In Armenia, what we are seeing is that the ruling party is pretty popular and we understand that there are demonstrations there, but we don't expect any major changes, but we will monitor the situation there. Overall, I have to say that the Armenian economy and the businesses there, first-hand coming across them and spending time with them are pretty impressive and are very, very positive about the prospects in Armenia. Obviously, the political volatility has an impact, but it's going in the right direction in many ways. [Indiscernible] will referendum on loan occur? If so, then popular vote goes the against the law. Will [indiscernible] consider it? So far, we are not hearing that the referendum was plant on the law. The biggest vote on the law will be re-elections. So the law is past as of yesterday. And I think we will see what happens on the elections. If that will impacted the popularity or not, we'll see in October with all the statements that come from our vesting partners. So that is the package will have the effect or not that a lot of people expect.

We have the first raised hand from [Indiscernible]

Archil, there is talk of sanctions depending on what is in such a package. How might the bank be affected? Are there a lot of individuals that are likely to be targeted as clients?

Yes. So there's talk about it. If that becomes a reality, that will be unfortunate. But basically, what we are hearing is that there are talks of travel sanctions or rather visa bans. So visa ban is different from travel sanctions from that. It's private. So only the individual knows about it. So the visas will be revoked for people that are on that list, but they will not be made public. So that doesn't have a direct impact on financial system. Having said that, I think the next stage may be that they put some people who have been identified as being obstructing to democracy and so forth as well as helping Russia one way or the other. So if there are people on that list, we will have to freeze their assets for them if we are either lending to them or they are depositors. We went through a high-risk list, it will have an impact, but it will be easily absorbed by our profitability if we have to provision for such accounts. But we will follow U.S., U.K. and EU sanctions fully.

The next question is from Can Demir from Wood & Co.

Yes. I wanted to ask you actually about the GDP growth number that you have, which is 6% as far as I can tell. I mean, how confident do you feel on that given the slowdown on imports and exports? I mean, isn't that a tell-tale sign that the economy is slowing down a bit? So that's my first question.

Yes. I can understand why you may think so when you look at that. But one thing that we should start reporting, in fact we will, is the export of services, which is doing very well. And that plus investments is what's driving the growth. So those numbers are very strong. Investment, the location of businesses through Georgia, being increasing the Heineken production or starting the ratable for the fall Red Bull bottling for the wider region, setting up a lot of new logistics centers and so forth, and this is just now starting. It also get years to increase the capacity of this cargo go to really be able to service the wider central regional along the Chinese groups. So there's plenty of investment that needs to go into the cargo to increase the capacity. So on that one side, we are seeing only the first signs of that as well as the educational sector where the medical schools have received multiple times the students from India and Pakistan and other Middle Eastern countries that used to go to Moscow and give NPUC, but now it's only [indiscernible] as well as IT. And on the IT side, by the way, I was blown away by what I've seen in Armenia. Armenian IT system is really boomed. So that's another growth area there. And Georgia is pretty strong as well.

And on the cost of risk side of things, maybe your base case in terms of macro outlook remains the same. But maybe I'm thinking you could have a slower worst-case scenario and maybe you could increase the probability of the scenario as well given the backdrop. First of all, do you consider that kind of measures? And should we expect a higher cost of risk in the remainder of quarters on the back of that?

So what we are seeing right now, probably not. It could be a slight pick-up, but the volatility is big. So when the volatility is big, I mean, anything can happen. But right now, what we expect is 6% growth. A slight slowdown in tourist, but nothing major. Having said that, a lot depends on how the government will react to the feedback from the Western side coming. Will there be a negotiation like last year? Will there be strong positions? We will negotiate all of that, depends on that. So things don't get worse and then it will be pretty strong growth and probably cost of risk will be within our range. These things get worse then they will be higher. If things get better, it will be lower.

But there is no -- you don't plan to do macro overlays at this point?

In those kind of scenarios, it's part of our job as a bank to run all different kind of scenario and make sure that we are strong regardless of the outcomes. And believe me, the scenarios that we run, I will not be covering them here, but are all kinds and this happens every year. We survived every single time.

Of course. And maybe one last question on the fees, which slowed down considerably at least in the Georgian business as far as I can tell. Maybe can you talk about that a little bit?

Yes. I mean, you may have seen that last year, we had -- I want to call it a one-off, but particularly large investment banking fee of GEL 27 million, which doesn't happen every quarter. So if you exclude that, you see a growth of 20%-plus on our main part of our fee and commission income. That's a number of things, but a big part of it is our payments acquiring business, which is growing very, very well. So not much concerned there, Can. Nini, do you want to read-out the 2 questions that are coming from...

We have just one raised hand from Stephen Barrett from Cavendish. I'll let him speak first and then we can take the other questions.

I was wondering if you could give more color or commentary around the loan growth within Armenia. So obviously, the very high rates we saw last year have been sustained into 2024. And I was just wondering if you could give any more guidance around that as we look forward?

Yes. So in Armenia, bank loans to GDP is about 10 points lower than Georgia's. So there's more growth overall in the economy, slightly more growth in the overall economy, a slight pick-up in that ratio. So the loan growth are higher. And then we expect and we've already seen in 2023 the market share gain and we expect to see more of that. And so in fact, our expectation is that the growth over the next 3 years should be 20%-plus in Armenia, 10%-plus here. So that's the -- so we are raising our guidance to 15%.

We have two questions in the Q&A chat and they're actually similar in nature, basically asking during the past months, if we've seen any impact on the business, especially on the payments or transactions, any slowdown in international business transactions? And also any sign of the dollarization of deposits?

We have not seen any slowdown in the payments business. So we watch it weaken in fact just to make sure to have it because we are 55% of all payments acquired in the country. So we have a pretty good idea of the activity. And we also look at the mortgages. So we had about 10 days, during 10 days, there were like a slowdown in the mortgage disbursement, but then it picked up again. Over the last 2 weeks, we've seen pretty strong pick-up in mortgage disbursement. So when we had very large demonstrations, people did not take out a mortgage for a few days. But once it's upside, the normal life continues. So far, the impact has not been significant. What we have heard is that some of the hotels have complained about the cancellations of the bookings, especially from Europe. But it should not be significant, it should be manageable. I think Can has raised hand. Do you see that, Nini?

Yes. But I'll try to ask him.

Okay. In addition to the law on transparency in courts, the parliament also passed a law that appears to legalize asset transfers into Georgia without a lot of oversight. What -- how is the bank reacting to that? What are your policies going to be? Are they going to stay the same or change?

Yes. Can, that law has nothing to do about the oversight. So our policies of AML and transparency and the source of funds, et cetera, are strict. It probably is one of the strictest anywhere in the world and will remain so. So although on that law, those coverage, there's nothing. So it has something to do about the taxes or some assets moving from there to Georgia, it has nothing to do about the source of funds or the like. I hope that answers your question. Are there any other questions? Maybe there's one more question that I see from the anonymous. Maybe I should have a policy of not taking any anonymous questions. Due to the recent political situations in Georgia, have there been any run on the bank in the past week? The President Zourabichvili mentioned something similar in one of her interviews recently. Not really. What we have seen is in one day we've seen slight increase in the disbursements from the ATMs, but it was just for a few hours and there was nothing to speak of. So when we look at daily disbursements, we don't see any pick-up. So not really. What we have seen is more like the exchange rate moving from 2.7 to 2.8 and then dropping and finding that new place. So that was the biggest move in terms of the sentiment. Nikolay Dimitrov. Do you expect the business community in Georgia and Bank of Georgia in particular to take any active stance in the new legislation given the negative consequences for Georgia? Bank of Georgia is a systemic bank. Making political statements or having an active stance on it is none of our business. Antonio, anonymous. If the individual sanctions are imposed on the government officials, do you expect pressure on BOG executives by government agencies? No particular reason to expect such pressures because we have made it very clear that we will be following the U.S. and U.K. sanctions and the agency knows that and everybody knows that. So we will make sure that that is communicated further at any point.

There is one raised hand from Georgina Brittain [indiscernible].

So a quick question for me. We've obviously seen -- so I love your reference to Jamie Dimon, by the way, that was very good on the fortress balance sheet. So clearly, we've seen with your large competitor, TBC, we've seen various bits of management buying shares because we think they're very -- or they think they're very, very cheap indeed. So I was wondering if we're likely to see any of that and/or where are we on the buyback? And obviously, you've just done the Armenia acquisition with cash. So any thoughts on buybacks given your valuation?

So I have a huge respect for Jamie Dimon and we all look his letters and interests, it's interesting. In terms of the buybacks, so we have still about GEL 50 million left and it's an ongoing process on a daily basis. So probably we'll look at further buybacks as part of the overall interim dividend, capital return policy when we get to it and we may consider some more. But basically, right now, there's an ongoing buyback program happening. In terms of the management buying, I don't know if anybody sees the opportunity and wants to buy, they're happy to buy. If you're asking me, if I'll buy or not, 90% of my compensation is fixed and variable is in shares. And I've not sold a single share, I've in fact bought over the last 5 years. So that's the natural buying that I do.

No more raised hands.

On this bright note, it has been a real pleasure. Thank you very much for your support. I think the bank is doing very well in terms of delivering the results. I understand the volatility, which has had a negative effect on the share price, unfortunately. I hope that is temporary and we'll experience come back. As you have seen, our net income was GEL 369 million. And on a standalone basis, Ameriabank delivered GEL 84 million. So if you were looking at a pro forma consolidated, you would be looking at most of GEL 450 million net income. So that should be on a run rate basis what we are looking at. So the number that you are seeing now, obviously, does not include the Ameriabank. And if it did, then it would be above GEL 450 million, which is a strong delivery that we'll see. And in the second quarter, we should see a consolidated number and we will explain what it would mean in terms of the tangible book value and then the overall equity. And going forward, we'll probably continue reporting on the overall book value, which will include the one-off in terms of negative goodwill that you see in the book now. And we should be well above our mid-term targets or return target of 20%. So we've been delivering all above that. So on that bright note, thank you very much for your attention and until next time.

Thank you. See you next time.