Profitable
and Stable
Growth
MANAGEMENT REPORT AND
MANAGEMENT REPORT AND
FINANCIAL STATEMENTS 2023
FINANCIAL STATEMENTS 2023
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TBC Bank1
The leading financial group in Georgia
1 TBC Bank refers to JSC TBC Bank (the Bank) and its subsidiaries (together Group)
4 - 141
142 - 149
1. MANAGEMENT REPORT
2. GOVERNANCE
Overview - Information about who we are
8
TBC at a glance
Proven track record of growth and profitability
12
Executive Management team of JSC TBC Bank 14
Reflections from the top - Our Chairman and CEO
each provide an overview of the year under review,
covering the most significant developments
Chairman's statement
CEO letter
18
20
Our strategic approach - A review of our operating
environment, business model and strategy
Operating environment
Business model
Strategic priorities
Key performance indicators
ESG strategy
24
28
30
32
36
How we create value for - A run through of our value
proposition for each of our stakeholder groups
Customers
Colleagues
Community
Investors
Financial review
Risk management
Material existing and emerging risks
Climate-related financial disclosures 2023
42
72
80
84
84
92
96
118
Corporate governance
Supervisory Board biographies
144
146
150 - 281
3. FINANCIAL STATEMENTS
152
158
Independent auditors’ report
Consolidated statement of financial position
Consolidated statement of profit or loss and
other comprehensive income
159
Consolidated statement of changes in equity 160
161
Consolidated Ssatement of cash flows
Separate statement of financial position
162
Separate statement of profit or loss and other
comprehensive income
Separate statement of changes in equity
Separate statement of cash flows
Notes to the consolidated and
separate financial statements
163
164
165
166
282 - 291
4. ADDITIONAL INFORMATION
Glossary
Alternative performance measures
Abbreviations
284
286
291
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1 Management
Report
Overview
TBC AT A GLANCE
OVERVIEW
TBC at a glance
Who we are
TBC is a leading financial services group in Georgia
Powered by Georgian financial services
• TBC banking business: Retail, MSME, CIB & WM
• TBC Pay
• TBC Leasing
39.3%
40.1%
Market share1
in total loans
39.5% as of 31 Dec 2022
Market share1
in total deposits
40.3% as of 31 Dec 2022
+9% YoY
GEL
1.1 bln
Profit
+3.2pp YoY
32.0%
Group’s key financial highlights2
-0.6pp YoY
+0.4pp YoY
25.4%
ROE
+19%3 YoY
GEL
21.3 bln
6.3%
NIM
+12%3 YoY
GEL
19.9 bln
Cost to income
Gross loan portfolio4
Deposit portfolio
Group's key operating highlights2
+7% YoY
+15% YoY
-2.0pp YoY
1.6
mln
0.9
mln
46%
Monthly active customers
Digital MAU
Digital DAU/MAU
+12% YoY
-1.0pp YoY
+6.0pp YoY
938 K
Monthly active cardholders
58%
ENPS5
67%
NPS6
8
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1 Based on data published by the National Bank of Georgia on the analytical tool Tableau.
2 Definitions and detailed calculation of the APMs are given on pages 286-290.
3 Growth in constant currency.
4 Gross loan portfolio refers to loans and advances to customers. For more details, please refer to Note 9.
5 The Employee Net Promoter Score (ENPS) was measured in December 2023 by an independent consultant for the Bank’s employees.
6 The Net Promoter Score (NPS) was measured based on a survey conducted by the independent research company Sonar in December 2023.
FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 OVERVIEW CONTINUED
4
Our mission
Investors
10
10
Customers
To make
people’s
lives
easier
Our strategic priorities
Build on our
leading position
in Georgian
banking
Increase
digitalisation
levels
Keep improving
our customer
experience
Colleagues
How we differentiate ourselves
Best-in-class
digital
solutions
Advanced
data analytical
capabilities
Excellent corporate
governance and risk
management
Motivated
employees
921,000 digital
monthly active users
as of 31 Dec 2023
GEL 90 mln additional
income generated
in 2023
1 ISS Governance
quality score for
TBC PLC1 as of 31
Dec 2023 indicating
highest standards of
governance
58% Employee
Net Promoter Score
(ENPS)2 -
well above the
European
industry average
of 42%3
Community
1 TBC Bank Group PLC ("TBC PLC") is a holding company of JSC TBC Bank (the “Bank”) and its subsidiaries. TBC PLC is incorporated in England and
Wales and listed on the premium segment of the London Stock Exchange.
2 The Employee Net Promoter Score (ENPS) was measured in December by an independent consultant for the Bank’s employees.
3 The European industry average of Employee Net Promoter Score (ENPS) was measured in December 2023 by an independent consultant.
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OVERVIEW CONTINUEDFNANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
PROVEN TRACK RECORD OF GROWTH AND PROFITABILITY
Proven track record of
growth and profitability1
Profit (GEL mln)
CAGR
21%
843
1,119
1,023
546
433
337
Gross loan portfolio (GEL bln)
CAGR
15%
17.9
17.0
21.3
15.2
12.7
10.4
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
Return on equity (ROE)
Cost to income
26.3%
26.0%
25.4%
22.0%
23.8%
12.9%
37.8%
37.7%
35.1%
32.5%
28.8%
32.0%
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
12
13
1 Definitions and detailed calculation of the APMs are given on pages 286-290.
OVERVIEW CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 EXECUTIVE MANAGEMENT TEAM OF JSC TBC BANK
OVERVIEW CONTINUED
Executive Management
team of JSC TBC Bank
VAKHTANG BUTSKHRIKIDZE
Chief Executive Officer
NINO MASURASHVILI
Deputy CEO, Chief Risk Officer
GIORGI MEGRELISHVILI
Deputy CEO, Chief Financial Officer
For full biographies
please refer to our website:
www.tbcbankgroup.com
TORNIKE GOGICHAISHVILI
Deputy CEO, Retail & MSME banking,
Payments
GEORGE TKHELIDZE
Deputy CEO, Corporate & Investment
Banking, Wealth Management
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FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Reflections
from the top
CHAIRMAN'S STATEMENT
REFLECTIONS FROM THE TOP
Chairman's
statement
“Our success remains rooted
in our ongoing commitment
to making our customers’
lives easier”
CONTINUING TO ENHANCE OUR ESG STRATEGY
We have made important progress in ESG initiatives in 2023, across a number of areas. First, we successfully met
and beat our target of GEL 1 billion in sustainable financing, increasing this portfolio by 57% year-on-year. We have
also strived to further increase employee diversity, and I am proud to report that over 37% of middle-management
positions are now held by women. We also continue to make progress in terms of implementing Task Force on
Climate-related Financial Disclosures (TCFD) recommendations. Our best-in-class governance spanning capital
allocation, financial disclosure, board experience and shareholder communication remains a key plank in our approach
to ESG.
LOOKING AHEAD WITH CONFIDENCE
I firmly believe that a strategy centred around our mission of making our customers’ lives easier remains the right
one to keep developing as a team and as a business. Evidence of our positive progress is provided by another year
of record earnings, strong customer and balance sheet growth. Furthermore, I am confident that our executive
management team have the ability and resources to continue driving success for the Group and our many
stakeholders in the years to come.
Arne Berggren
Chairman
2 April 2024
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1 The Net Promoter Score (NPS) was measured based on survey conducted by the independent research company Sonar in December 2023
FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTDEAR STAKEHOLDERS, I am delighted to report on another year of exceptional financial performance for TBC. Our profit reached GEL 1.1 billion up by 9% year-on-year, while return on equity stood at 25.4%.DIGITALLY DELIVERING ON OUR MISSIONOur success remains rooted in our ongoing commitment to making our customers’ lives easier. I am proud to report that we remain the largest financial services provider in the country in terms of assets, loans and deposits, serving 1.6 million monthly active customers, equivalent to almost half of the country’s total population. Importantly, our customers continue to appreciate and recommend our services to families and friends, as is reflected in an excellent 6pp increase in our Georgian NPS score to 67%1.Digitalization sits at the heart of our financial services offerings and we continue to introduce new digital initiatives. For instance, a new mobile-based loyalty programme for our retail customers and a real-time settlement system for our business customers were introduced during the year. In line with our digital priorities, we continued to see our customers conduct more transactions via our remote channels in 2023, with the share of retail transactions through our mobile and internet banks increasing by 5pp to 68%. This shift has empowered us to redirect front-office staff towards delivering enhanced customer services and support, adding more value to our customer interactions and, over the long term, improving our operating efficiency. Beyond these customer-facing elements lie increasing investment in digital infrastructure, such as machine-learning AI underwriting tools and a rising share of end-to-end digital credit processes for our corporate clients.We continue to strive to offer more people access to a broader range of financial services. During the year, we launched new online subscription packages and brokerage services for our retail customers. Also, for our young generations, we created the Hi! App. Promoting financial inclusion is a key area of emphasis for us, and our goal is to empower young people by enhancing their financial literacy skills through active engagement with the app.MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 CEO LETTER
CEO letter
" We achieved record high
profit of GEL 1.1 bln, while our
return on equity was 25.4%"
Enhancing our digital footprint
We have also seen exciting developments in our digital capabilities. This includes the launch of a retail brokerage
service for our mass retail customers, which has already had strong take-up, a set of new online subscription packages
for our retail customers, and the roll-out of a platform for digital signatures within our corporate business, greatly
improving the speed and convenience of the credit process. The past year has also seen great progress in offloading
retail transactions from branches to our mobile and internet channels, which is good for both our customers and our
business.
Strong operating performance
Our operating income rose by 10% in 2023. This growth was driven by dynamic growth in net interest income, which
was up by 20% on the back of a combination of healthy loan book growth and very impressive net interest margin
expansion, which increased by 0.4 basis points to 6.3%. Net fee and commission income also generated encouraging
results, rising by 26% and driven by our payment operations.
The enduring benign economic backdrop was reflected in a cost of risk of just 0.7% for the year, while NPLs fell
from 2.2% to 2.0% at year end. At the same time, we delivered a 32.0% cost to income ratio. Our capital position has
remained very strong, supported by robust income generation. At the end of 2023, our CET1 ratio stood at 17.4%,
comfortably above the minimum regulatory requirement of 14.3%.
CONTINUING TO INVEST IN OUR PEOPLE
We would, of course, not have been able to achieve any of these excellent results without the continued efforts and
dedication of our team of around 9,000 dedicated colleagues. One of the ways in which we thanked many of our key
staff in 2023 was with a team trip to Paris to see Georgia play Australia in the Rugby World Cup. TBC has long been the
proud sponsor of the national rugby team, and while the result did not go our way, this was an invaluable exercise in
team building and a way of saying thank you to many of our key employees.
We also continue to offer our employees the tools to develop their skills across a wide range of areas. In 2023, more
than 2,000 employees participated in various courses and programs run by our TBC Academy, including business
development, agile transformation, brand experience, law, financial analytics, and refining essential soft skills.
LOOKING AHEAD
As we reflect on the achievements and challenges of the past year, we are filled with gratitude for the dedication and
resilience of our team, the unwavering support of our stakeholders, and the enduring trust of our customers.
In the coming year, our focus remains steadfast on driving digitalization and enhancing operational efficiency to
deliver exceptional value to our stakeholders.
Vakhtang Butskhrikidze
CEO
2 April 2024
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1 Bankable population includes population of Georgia, aged 18-65. Based on Geostat.
REFLECTIONS FROM THE TOP CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTDEAR STAKEHOLDERS,The geopolitical backdrop across the region remained very challenging in 2023 as the devastating war in Ukraine continued into a second year. I would like to reiterate my words of last year’s annual report that I firmly believe that Ukraine will prevail in its fight for freedom, and we continue to stand by Ukraine by offering our support to those who have suffered from the hardships of the war, through various programmes, charity activities and fundraisers.Thankfully, the past year did also provide some very positive news for Georgia and its 3.7 million people, with the EU’s decision in mid-December to grant Georgia candidate status. While much work remains to be done, this represents a massive step for Georgia in its long-term aim for closer integration with the EU, and I, and all of my fellow Georgians, can be rightly proud to have achieved this recognition.DELIVERING RECORD RESULTS2023 has been a strong year for TBC in terms of financial performance and key operating metrics. • Financials - our profit reached a record GEL 1,119 million, up by 9% year-on-year, while the return on equity was 25.4%. It is also worth noting that this was in a year in which there were no material one-offs in revenues, which had been the case in 2022, which saw very high FX revenues. • User base - By the end of 2023, the number of monthly active customers reached 1.6 million, accounting for approximately two-thirds of the total bankable population1 in Georgia.• Digital engagement across the Group - digital monthly active users (MAU) saw an acceleration during the year, reaching 921,000 by the end of 2023, up by 15% year-on-year, while the digital daily active users (DAU) amounted to 421,000, an increase of 10% over the same period. Maintaining our leadership position in GeorgiaWe delivered strong growth in 2023, enabling us to maintain a leadership position throughout the Georgian financial services landscape. Our loan book increased by 19% in constant currency terms, driven by our Corporate and Investment Banking (CIB) segment, and we were delighted to be recognised as the inaugural winner of the Best Corporate Bank in Georgia 2023 by Euromoney. Meanwhile, our deposit portfolio was up by 12%, also in constant currency terms. MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Our strategic
approach
OUR STRATEGIC APPROACH
OPERATING ENVIRONMENT
Operating environment
FISCAL STIMULUS
It is important to highlight that the strong recent economic growth is not a result of fiscal stimulus. In fact, fiscal
consolidation is underway. After reaching 9.2% of GDP in 2020 and a lower, but still large, level of 6.0% in 2021, the
budget deficit stood at 3.0% in 2022 and 2.8%3 in 2023.
GEORGIA1
GOVERNMENT DEBT AND BUDGET BALANCE (% OF GDP)
ECONOMIC GROWTH
After two successive years of double-digit growth in Georgia, economic activity moderated somewhat but remained
strong in 2023, with real GDP increasing by 7.5%.
REAL GDP GROWTH (%)
6.6
5.1
4.1
3.4
3.4
5.2
6.1
5.4
10.6
11.0
7.5
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
-3.0
7.0
32.5
-2.3
7.2
32.1
-2.1
8.5
33.1
2017
2018
2019
-3.0
9.8
29.4
-2.8
10.6
27.3
9.7
39.4
-6.0
2021
2022
2023
12.5
47.1
2020
-9.2
External Public debt
Domestic Public debt
Budget balance, RHS
Source: Geostat
EXTERNAL SECTOR
-6.3
Source: Geostat, MOF
The negative impact of lower international commodity prices on both exports and imports noticeably affected
external sector activity throughout 2023. Specifically, the growth of exports and imports denominated in US dollars
moderated to 9.1% and 14.0% for the full year 2023, respectively. Importantly, these commodity price dynamics had
a particular impact on domestic commodity exports, while re-exports performed strongly. At the same time, the
increase of the share of IT services in Georgian exports was notable, with a major driver being the arrival of migrants in
2022.
Given the high base effect caused by elevated immigration in 2022, the annual growth of tourism inflows also
normalized to 17.3% YoY in 2023, as migrants were gradually counted as residents by the National Bank of Georgia
(NBG) and so were excluded from the tourism sector. At the same time, the share of conventional tourism in total
inflows increased, as spending excluding visitors from Russia, Belarus and Ukraine increased by 38.2% YoY. Therefore,
while the migration peak is likely to be in the past, conventional tourism inflows have at least had a balancing impact.
Moreover, remittances also maintained positive momentum throughout the year after adjustment for Russia,
increasing by 27.9%2 YoY, despite decreasing notably in the fourth quarter. The high base effect, combined with a
significant drop of debt instruments and lower reinvestments, drove an annual reduction in foreign direct investments
(FDI) to Georgia of 61.5% in the third quarter. Nevertheless, once the record high level of FDI in 2022 is taken into
account, foreign investments in 2023 also appear solid.
YOY GROWTH OF INFLOWS AND IMPORTS IN 2023 (%)
26.6
27.9
17.3
9.1
14.0
Exports
Imports
FDI*
Tourism w/o
migrants**
Tourism with
migrants
Remittances***
-22.3
CREDIT GROWTH ON A CONSTANT CURRENCY BASIS
As of December 2023, bank credit increased by 17.0%4 YoY, compared to 12.1% growth at the end of December 2022,
at constant exchange rates. The relative acceleration at the end of the year was mainly driven by business loans, while
retail credit growth has moderated. At the same time, as inflation reduced significantly, the YoY growth in real credit
increased from 2.4% in December 2022 to 16.5% in December 2023.
GROWTH OF LOANS BY SEGMENTS (YOY, EXCL. FX EFFECT, %)
30
25
20
15
10
5
0
19.7
17.0
14.7
9
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Total credit
Legal
Individual
Note: Aug-22 decline in corporate credit was largely due to the prepayments
Source: NBG
*Sum of the first three quarters of the year
**Tourism revenues without migrants counted as residents by the NBG
***Remittances from Russia are adjusted for double counting with tourism inflows and other similar effects, based on TBC Capital estimates.
Source: NBG, Geostat
24
In February 2024, Geostat published the revised data of GDP and national accounts for 2010-2023.
1
2 Remittances from Russia are adjusted for double counting with tourism inflows and other similar effects, based on TBC Capital estimates.
3 Per IMF program definition.
4 Based on data published by NBG and FX-adjusted by TBC, based on Dec-2023 end of period exchange rate.
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FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
INFLATION, MONETARY POLICY, AND THE EXCHANGE RATE
While the first half of the year was still very strong in terms of foreign currency inflows, the second half was
characterized by normalisation towards the long-term trend. Accordingly, while the GEL exchange rate experienced
some volatility throughout the year, currency inflows aided by central bank interventions in the second half of the year
were sufficient to keep the rate broadly stable. USD/GEL stood at 2.69 at the end of December, almost unchanged
from 2.7 at the end of December 2022. Strong dynamics in the first half enabled the NBG to accumulate all-time-high
foreign currency reserves topping USD 5 billion. Throughout the year, the central bank purchased USD 1,449 million
and sold USD 169 million.
As a result of a broadly stable GEL and sustained disinflationary pass-through from international markets, CPI inflation
reduced significantly from 9.8% in December 2022 and stabilised well below the NBG target of 3%, standing at 0.4%
YoY in December 2023. Domestic and service inflation measures also normalized around the target. Due to low
inflation, the NBG delivered four rate cuts of 150 basis points in total, reducing the Monetary Policy Rate (MPR) to 9.5%.
CPI INFLATION AND MPR (%)
16
12
8
4
0
9.5
0.4
0
2
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2
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Annual CPI inflation
Monetary policy rate (MPR)
Source: NBG, Geostat
GOING FORWARD
Economic activity in Georgia moderated somewhat but remained strong in 2023 at 7.5%. Further normalisation is
expected with Georgia’s real GDP increasing by 5.6% in 2024 and 5.4% in 2025, according to TBC Capital projections.
More information on the latest analyses and projections can be found at www.tbccapital.ge.
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OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
BUSINESS MODEL
Business model
Our business model revolves around our customers as we aim to deliver a
best-in-class customer experience.
How we create value
What we deliver
OUR OPERATIONS
FINANCIAL SERVICES
Retail banking: a wide range of convenient digital products for individuals
MSME: a leading partner for micro, small and medium enterprises
CIB & WM: a full suite of services for our corporate and wealth management customers
Payments: seamless solutions covering all the payment needs of companies and individuals
Leasing: an alternative source of financing for our retail and corporate clients
How we deliver
CUTTING EDGE TECHNOLOGY
Innovate through technological advancement
PRUDENT RISK MANAGEMENT
Apply risk-adjusted profitability approach in decision-making. Ensure the Group maintains a
high degree of resilience
LARGE DATA HUB
Utilise our advanced data analytics capabilities to maximise customer value via personalised
offerings. Continue to develop AI and automation solutions to enhance business processes
OUTSTANDING TEAM
Attract, develop and retain the best talent
How we create value for our stakeholders
COLLEAGUES
Support our colleagues in their professional development and provide rewarding career
opportunities
CUSTOMERS
Provide tailored solutions and a superior customer experience to our clients
COMMUNITY
Support business development and foster job creation, as well as take an active part in CSR
and ESG activities
INVESTORS
Continue to create value by generating sustainable returns for our stakeholders and
maintaining effective, long-term relationships with our debt holders
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OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 STRATEGIC PRIORITIES
Strategic priorities
Our strategy aims to deliver on our mission to make people’s lives easier.
We can achieve this through providing high quality financial services to individuals and
companies in Georgia.
Each of our priorities has been carefully chosen and analysed to ensure that it
contributes towards maintaining the high profitability, strong growth profile and
customer trust.
Build on our leading position in Georgian banking
• Strengthen the bank’s position in the mass retail segment
• Grow capital efficient fee and commission income, with a particular focus on payments
•
• Enhance underwriting quality, powered by advanced technical infrastructure and data analytics
Increase operational efficiency and productivity
capabilities
• Attract and develop the best talent
Increasing digitalisation levels
Increase digital engagement in terms of transactions, sales and back-end infrastructure:
Increase the number of digital active users, both on a daily and monthly basis
•
• Maintain retail transactions offloading ratio1 at high levels
• Boost sales offloading for major products
• Raise productivity through fully digital processes
Keep on improving our customer experience
• Develop tailored financial services and products coupled with lifestyle offerings and deliver these in
the most convenient way for our customers
• Create a seamless customer experience across all channels
• Use our technology know-how to improve the products and services offered to our customers and
accelerate our time to deployment
30
31
1 Retail offloading ratios measure the share of transactions conducted in our remote channels, that is outside the branches.
OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 KEY PERFORMANCE INDICATORS
Key performance
indicators (KPIs)
We use a broad range of financial and non-financial measures in order to monitor our
performance and provide a balanced view that takes into account the interests of all our
stakeholders. The Supervisory Board regularly reviews the key performance indicators
(KPIs) in order to secure that they continue to show whether our strategy is working
and ensure the long-term sustainable growth of the Group. The summary of changes in
2023 is given in the table below:
KPIs added
KPIs removed
Group-wide financial KPIs
Strong growth and profitability
Profit
Resilient balance sheet
Additional KPIs
Growing customer base and engagement
Monthly active cardholders
Profit before tax
Loan book Larisation level
GROUP-WIDE FINANCIAL KPIS
STRONG GROWTH
AND PROFITABILITY
RESILIENT BALANCE SHEET
PROFIT (GEL mln)
CET 1 CAPITAL RATIO2
9
1
1
,
1
3
2
0
,
1
3
4
8
6
4
5
7
3
3
2019
2020
2021
2022
2023
In 2023, we generated record profit, which was driven by strong
revenue generation across the board.
%
4
7
1
.
14.3%
%
5
5
1
.
%
7
3
1
.
11.7%
11.6%
%
0
2
1
.
10.4%
%
4
0
1
.
7.4%
2019
2020
2021
2022
2023
Min. requirements
RETURN ON EQUITY (ROE)1
Our CET 1 capital ratio increased in 2023 due to strong
earnings generation, partially offset by business growth and
dividend distribution.
%
3
6
2
.
%
0
6
2
.
%
4
5
2
.
%
8
3
2
.
%
9
2
1
.
2019
2020
2021
2022
2023
Our robust profit generation is also reflected in a
consistently high return on equity.
NON-PERFORMING LOANS (NPL)1
%
7
4
.
%
7
2
.
%
4
2
.
%
2
2
.
%
0
2
.
COST TO INCOME RATIO1
2019
2020
2021
2022
2023
%
7
7
3
.
%
In 2023, asset quality improved across all business lines.
.
1
.
5
%3
5
2
%3
8
8
2
.
%
0
2
3
.
32
1 Definitions and detailed calculation of the APMs are given on pages 286-290.
2 Starting from 1 January 2023, capital adequacy ratios are based on IFRS accounting standards, whilst the numbers for the previous years were
calculated based on the local accounting standards.
33
2019
2020
2021
2022
2023
In 2023, Cost to Income ratio increase is driven by
normalisation of FX revenues.
OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 ADDITIONAL KPIS
STEADY GROWTH
GROWING CUSTOMER
BASE AND ENGAGEMENT
INCREASED DIGITAL
FOOTPRINT
HIGH EMPLOYEE
AND CUSTOMER
SATISFACTION LEVELS
LOAN BOOK GROWTH AT
CONSTANT CURRENCY
MONTHLY ACTIVE
CUSTOMERS (mln)1
DIGITAL MONTHLY
ACTIVE USERS ('000)1
CUSTOMER NET
PROMOTER SCORE (NPS)2
%
0
9
1
.
%
3
7
1
.
%
0
4
1
.
2021
2022
2023
6
.
1
5
.
1
4
.
1
2021
2022
2023
1
2
9
1
0
8
4
4
6
2021
2022
2023
%
7
6
%
1
6
%
6
5
2021
2022
2023
In 2023, our loan book increased by 19% as we maintained a
leading position in all key segments.
The growth in monthly active customers was mainly driven
by our retail customers.
Our digital monthly active users (MAU) continued to grow.
The customer net promoter score (NPS) measures how
willing customers are to recommend our products and
services to others.
DEPOSIT GROWTH AT
CONSTANT CURRENCY
# OF MONTHLY ACTIVE
CARDHOLDERS ('000)
%
2
0
3
.
%
1
.
3
2
%
6
.
1
1
2021
2022
2023
8
3
9
0
4
8
a
/
n
2021
2022
2023
DIGITAL DAILY ACTIVE
USERS / MONTHLY
ACTIVE USERS (DAU/MAU)1
%
8
4
%
6
4
%
4
4
EMPLOYEE NET
PROMOTER SCORE (ENPS)3
%
6
6
%
9
5
%
8
5
2021
2022
2023
2021
2022
2023
In 2023 our deposit portfolio grew in line with the market and we
maintained leadership positions in key segments.
Strong payments dynamics are being supported by growth
in the number of monthly active cardholders.
Our customers continue to actively engage with our digital
platforms.
Our ENPS for 2023 stood at 58%, well above the European
industry average of 42%4.
34
35
1 Terms are defined in Glossary on page 284-285.
2 The Net Promoter Score (NPS) was measured based on survey conducted by the independent research company Sonar in December 2023.
3 The Employee Net Promoter Score (ENPS) was measured in December by an independent consultant for the Bank’s employees.
4 The European industry average of Employee Net Promoter Score (ENPS) was measured in December 2023 by an independent consultant.
OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 ESG STRATEGY
ESG strategy
Our role is connected to our responsibility to contribute to a better
future through innovation and technology, to increase the accessibility
of financial services, and to enable our customers to be a part of the
globalised world.
Enhanced
governance of
ESG and climate-
related risks and
opportunities
Sustainable portfolio
growth
Access to green
and sustainable
financing sources
Customer aware-
ness, investor
confidence and
employee diversity
Impact
measurement
and reporting
Key achievements in 2023:
• The total volume of our sustainable portfolio reached GEL 1.23 billion, increasing by 57% year-on-year, when it stood
at GEL 782 million.
• We measured our direct performance towards the Paris Agreement targets.
• For the first time in Georgia, we calculated our financed emissions in line with the standard of the Partnership for
Carbon Accounting Financials (PCAF).
• We established the ESG Academy and developed the first green mindset and green financing course for our
employees and customers.
• The women participation in ICT Risk and Finance reached 46% (the target for 2023 was set at 45%).
• We reached our green and social procurement target of GEL 5 million.
The ESG Strategy follows a strategic road map, which reflects the milestones of our sustainability journey for the
following years. In 2023, we actively continued to implement initiatives to fulfil our targets, which are divided into four
pillars: direct environmental impact, indirect environmental impact, social impact, and governance.
Pillars 1 and 2: Direct and indirect environmental impact
2021 ESG Strategy target / initiative
2022 status
2023 status
Establish ESG governance
framework by the end of 2021
ESG governance framework
established at both Board and
executive management levels
Enhance ESG governance and
achieve a higher maturity level
Set up a system for measuring
sustainability impacts across the
Group, customers, employees and
society
Regular reporting on key parameters
to the ESG-related Committees at
Board and executive management
level established
Increased granularity and automation
of reporting, regular reporting on
climate-related risks, scenario
analysis, stress testing, and ESG risk
appetite
Increase the sustainable portfolio1
Volume of GEL 782 mln was achieved Volume of GEL 1.23 billion was
Develop the Group’s Policy on
Climate Change
Climate Change Policy developed
and approved
Green Taxonomy of the National
Bank of Georgia
The NBG introduced the Green
Taxonomy, developed in line with the
best international taxonomies. The
implementation action plan has been
finalised
Implementation of the green lending
framework
The green lending procedure
implemented
achieved
Development of sectoral guidelines
in line with the Climate Risk Radar of
the National Bank of Georgia (NBG)
The Green Taxonomy implemented;
the respective documentation,
procedure, calculation tools
implemented and training for
responsible staff conducted
Harmonisation of the green lending
procedure and the green taxonomy of
the NBG
In 2021, we published our first TCFD (Taskforce on Climate-related Financial Disclosures) report to demonstrate
our commitment to taking active measures to mitigate climate change, to assess and mitigate climate risks, and to
identify climate opportunities. Since 2021, we have advanced our TCFD framework further, especially in strategic
planning and risk management. We have taken significant steps to develop our scenario analysis capabilities to better
understand and act on the implications of climate-related risks and opportunities for our business and customers.
We have continued working with an external consultant and developed a stress testing model covering various
economic sectors in Georgia in order to capture the stress testing impact on the whole credit portfolio of TBC Bank.
These developments are described in the climate-related financial disclosures on pages 118-141 of the Report. We
understand that the transition to a lower-carbon and sustainable economy requires internal knowledge building,
as well as awareness raising among customers, businesses, and the public. We focus on internal capacity building,
involving in-house and external experts on a variety of topics: green lending, the NBG green taxonomy, the impact of
climate change, climate-related risks, and scenario analysis.
Pillar 3: Social Impact
In order to expand our focus on diversity, gender, and inclusion issues, we have developed a Diversity, Equality and
Inclusion Policy (available at our website: www.tbcbankgroup.com), which sets targets and establishes a methodology
to advance diversity, equality and inclusion, integrating its approach into the company’s operations and management
processes and focusing on diverse areas including gender, multicultural, multigenerational, and disability
backgrounds. We remain committed to having a gender-balanced workforce and culture that supports and empowers
women.
2021 ESG Strategy target / initiative
Enhance the diversity of our
employees
Increase customer loyalty, investor
confidence, and employee
motivation
2022 status
Diversity, Equality and Inclusion
(DEI) Policy, targets, and action plan
defined
Comprehensive ESG training
framework covering all TBC
employees and different
responsibility levels established
2023 status
Share of women in middle managers
and agile leaders at 40%
Measure ESG awareness among
employees and customers
1 Renewable energy and energy-efficiency loans, women and youth financing, NBG green and social taxonomy, green bonds and social
guarantees. More details are given on page 141.
36
37
OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONOur aspiration to contribute to sustainable development comes from our role as the leading financial institution in Georgia’s development. We are aware that we have an impact on the country’s economy, business development, employment, and societal progress. Our ESG Strategy reaffirms our commitment to making a long-term, sustainable contribution and to be the leading supporter of ESG principles in the country and the wider region. The ESG Strategy is reviewed and approved by the Supervisory Board annually, while implementation is overseen by ESG-related committees at the Board and executive management levels. The ESG Strategy defines several key areas and targets with different time horizons: MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Pillar 4: Governance
The Group ESG Strategy is reviewed and approved by the Supervisory Board annually, while implementation is
overseen by two ESG-related committees at the Supervisory Board and executive management levels. During the
year, the Committee supported and provided steering on the implementation of strategy, policies, and programmes
in relation to ESG matters for the Group and its subsidiaries, ensuring that the Group’s ESG Strategy is implemented
effectively, meeting the outlined objectives across all business areas.
In 2023, we started to develop individual ESG strategies in the subsidiaries of the Group. Several workshops were
conducted with staff from the subsidiaries and working groups were established.
2021 ESG Strategy target / initiative
Enhance the ESG governance
framework
2022 status
ESG governance framework
established at both Supervisory
Board and executive management
levels
2023 status
Enhance ESG governance and
achieve a higher maturity level
Set up a system for measuring
impacts on sustainability across the
Group, customers, employees, and
society
Regular reports on key parameters
to the ESG-related Committees at
Board and executive management
level established
ESG strategies in material
subsidiaries
Separate ESG Strategies developed
Increased granularity and
automation of reporting, regular
reporting on climate-related risks,
scenario analysis, stress testing, ESG
risk appetite
Implementation of ESG Strategies in
subsidiaries
In 2024, we will continue to follow our strategic plan and will focus on the following topics:
SUSTAINABLE PORTFOLIO
In 2024, we will continue to focus on the growth of the sustainable portfolio. The ESG strategy sets an ambitious target
of GEL 1.4 billion for our sustainable portfolio. The ESG strategy sets aspirational targets, such as Net-Zero greenhouse
gas (GHG) emissions related to our direct environmental impact by 2025 and an increase in the sustainable portfolio,
which consists of renewable energy loans, energy efficiency loans, and financing with social components such as
women and youth financing, supporting start-ups and rural enterprises.
ACTION PLAN FOR THE DIRECT NET-ZERO TARGET
In 2024, we will focus on the development of detailed transitional plans, which will be based on the measurement
results of the Group’s performance against the Paris Agreement targets for the reduction of GHG emissions. To
support the process, we contracted an international consultant company, local and international experts and
developed a detailed scope of work covering the following activities: calculation of financed emissions, carbon
reporting, Paris Agreement alignment, a decarbonization action plan, a carbon impact assessment methodology,
carbon footprint assessments of selected customers, and building institutional capacity.
MEASURE THE GROUP’S INDIRECT PERFORMANCE AGAINST THE PARIS AGREEMENT TARGETS
In 2023, we built internal capacity on relevant GHG emissions calculation methodologies and approaches. We
calculated financed emissions according to the PCAF standard. This was achieved via training and the use of external
consultancies. As the next step, we aim to measure our indirect performance in line with internationally established
standards and align it with science-based targets.
ESG ACADEMY
In 2023, we established the ESG Academy in order to raise awareness and knowledge of ESG topics including green
and social financing, regulatory requirements, diversity and affirmative approaches, sustainable business models and
practices among the Bank’s customers as well as TBC staff. The first training programme ‘Green mind-set and green
financing’ is supported by the partner international financial institutions (IFIs) – the Green for Growth Fund (GGF) and
the European Fund for Southeast Europe (EFSE). The development of the training program started in November 2023;
it will last for 22 months and will include extensive training over two days for 900 employees and one-day’s training for
up to 300 retail, MSME and corporate customers.
SILVER AWARD
ENVIRONMENTAL AND
SOCIAL BEST PRACTICE
2022
38
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
39
39
M
A
N
A
G
E
M
E
N
T
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
A
D
D
T
O
N
A
L
I
N
F
O
R
M
A
T
O
N
I
OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
40
41
How we create
value for
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 HOW WE CREATE VALUE FOR
CUSTOMERS
CUSTOMERS
Financial services
A Bank that is always by your side
Banking services
Other financial services
Retail banking
Leading retail
banking franchise
Medium, small and
micro enterprises
(MSME) banking
Top choice bank for MSMEs
Corporate and invest-
ment banking (CIB)
Leading CIB and wealth
management (WM) franchise
+7% YoY
+19%1 YoY
+12%1 YoY
GEL
21.3 bln
GEL
19.9 bln
1.6 mln
# of monthly
active customers
TBC Pay
TOP payments
provider
+26% YoY
GEL
10.2 bln
TBC Leasing
Leading leasing services
provider
+30% YoY
GEL
377 mln
Total loan book portfolio
Total deposit portfolio
Volume of payments
transactions
Leasing portfolio
1 Growth in constant currency.
42
43
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 RETAIL BANKING
2023 was a successful year for our retail banking franchise. In addition to double-digit
growth in our loan and deposit books, we made significant progress in expanding our
digital customer footprint and upgrading core aspects of our retail banking platform.
l
i
a
t
e
R
Mass
Retail
• A leading position across the mass retail segment;
• A full suite of financial products and services;
• Acclaimed digital channels;
• Efficient, convenient and accommodating next-gen branches.
Affluent
Retail
• Number one choice for affluent customers;
•
Innovative, flexible subscription model offering tailored
products and services;
• Strong positioning in lifestyle offerings.
YEAR IN REVIEW
MEASURING
SUCCESS
IN 2023
GEL 7.5 bln
(2022: GEL 6.8 bln)
RETAIL LOANS2
GEL 7.5 bln
(2022: GEL 6.5 bln)
RETAIL DEPOSITS2
RETAIL TRANSACTIONS BY CHANNEL
1%
17%
14%
68%
IBMB
ATMs
Terminals
Branches
DELIVERING STRONG BALANCE SHEET GROWTH
In 2023, our retail loan book grew by 11% year-on-year on a constant currency basis. This was driven by both mortgage
and non-mortgage lending. The mortgage portfolio grew by 11% on a constant currency basis and accounts for 63%
of the total retail loan portfolio, and we remain the leading player on the mortgage market. Non-mortgages, primarily
made up of car and unsecured consumer loans, grew by 11% on a constant currency basis, with a 37% share of the total
retail portfolio.
Our retail deposits also demonstrated strong growth, increasing by 14% year-on-year on a constant currency basis.
Also, our market share3 in retail loans and deposits stood at 38.1% and 36.0%, respectively.
RETAIL GROSS LOANS
PORTFOLIO (GEL BLN)2
RETAIL DEPOSIT
PORTFOLIO (GEL BLN)2
6.8
2.5
4.3
7.5
2.8
4.7
6.5
1.9
4.6
7.5
2.5
5.0
Mortgage
Non-mortgage
Foreign currency
Local currency
31 Dec
2022
31 Dec
2023
31 Dec
2022
31 Dec
2023
1.6 mln
(2022: 1.5 mln)
MONTHLY ACTIVE
CUSTOMERS
921 K
(2022: 801 K)
DIGITAL MONTHLY
ACTIVE USERS
938 K
(2022: 840 K)
# OF MONTHLY ACTIVE
CARDHOLDERS
1 Bankable population includes population of Georgia, aged 18-65. Based on Geostat.
2 Segmental numbers of 2022 do not correspond to the numbers disclosed in 2022, due to the updated methodology. For detailed information,
please refer to Note 27.
3 Market shares are based on data published by National Bank of Georgia on analytical tool Tableau. In this context retail refers to individual
customers.
44
45
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023ENHANCING DIGITALIZATIONContinuing to expand our digital customer footprintThe overall monthly active customer base increased in 2023 by 7% to 1.6 million, accounting for approximately two-thirds of the total bankable population1 in Georgia. We have also made excellent progress in helping the uptake of digital banking services both within our existing retail customer base and in reaching new customers as we support the ongoing shift in preference from cash to digital financial services in Georgia. This is reflected in a 15% increase in digital monthly active users (MAU) to 921,000 whilst the number of monthly active cardholders has risen by 12% in 2023 to 938,000. Importantly, more of our customers are making daily use of our digital banking services, as seen by the ratio of digital daily active users (DAU) to MAU of 46% in 2023.Increased transaction offloading to digital channelsOur customers are conducting more of their everyday banking transactions through remote channels, with 99% of retail transactions now conducted outside our branches. Breaking this down further, the share of retail transactions made through mobile and internet channels increased by an impressive 5 percentage points (pp) to 68% in 2023. Not only does this offer more convenience for our customers, but it has also enabled us to free up front office employees for the provision of more value-added customer services and support. TBC introduced the new “Hi! app” application for our youth segment.
It combines all the necessary and tailored services and products our
children and their parents need to make their daily lives easier.
Hi! app
for
schoolchildren
BOOSTING CUSTOMER ENGAGEMENT AND DIVERSIFYING OUR USER BASE
In 2023, we embarked on several significant initiatives to enhance customer engagement and diversify our customer
base.
• We successfully launched a new loyalty program, expanding the previous credit card related offering to include
938,000 active debit card users, which should greatly enhance the program's reach and usage. Through the mobile
banking platform, customers can earn Ertguli loyalty points in real-time and effortlessly redeem them. The scheme
offers various membership tiers linked to card and product usage, enabling faster points accumulation via exclusive
promotions. Our user-friendly mobile app acts as a central hub, showcasing incentives and simplifying point
tracking and redemption. Going forward, we plan to improve redemption options, empower partner merchants with
efficient campaign tools, introduce engaging gamification, and offer smart deals to boost customer engagement.
• Marking a major leap in our digital transformation journey, we introduced subscription packages for our mass retail
segment in our digital channels, surpassing the fourth quarter's initial target of 30% with a 60% digitalization rate
by 2023. We also introduced the Concept Digital Package subscription via mobile bank, enhancing user experience
and meeting customers’ specific needs. Additionally, we unveiled a digital card accessible to both mass and
affluent customer segments, enabling instant benefits upon subscription to various packages.
• We launched a mass market retail brokerage platform within our mobile app, enabling the convenient and user-
friendly trading experience of more than 6,500 equities and exchange-traded funds listed on American stock
exchanges without any commission. By eliminating the need for third-party intermediaries and physical presence,
TBC Digital Bank enables users to create diversified portfolios that align with their financial goals and risk appetite.
Our investment platform represents a big step forward in democratizing investment opportunities.
• We launched a new banking app Hi!, designed specifically for under 18s. Hi! offers a range of products and
services tailored to assist young people in navigating the early stages of their financial journey in a secure, fun and
informative way. Within the first 3 months since launch, Hi! acquired c. 7,000 monthly active users. The app provides
a user-friendly interface and aimes to provide educational resources and tools to empower young individuals in
managing their finances responsibly. With hyper personalized offerings for young people, Hi! is committed to
fostering a positive financial experience for the next generation.
• We rolled out video banking for our retail customers living abroad. This tool facilitates swift onboarding processes
and provides a convenient and efficient solution for clients to access various banking services. Face-to-face
interactions enable personalized service and real-time query resolution. Notably, customers can utilise this video
banking tool to open new accounts, obtain cards and initiate deposits. We are confident that this initiative ensures
an accessible and user-friendly banking solution, catering to the needs of Georgian citizens residing outside the
country.
• We have further enhanced the functionality of the online Buy Now Pay Later (BNPL) offering. We introduced
a post-sale BNPL option, enabling clients to receive a cash refund for their purchase and repay it over four
installments, representing a significant stride in meeting the evolving needs of our customers. With c.50,000 BNPL
loans disbursed this year alone, the increasing popularity of this product underscores its resonance with customers
seeking flexible and convenient payment alternatives. By addressing changing consumer preferences, our BNPL
offering not only meets market demands but also establishes a competitive edge in providing efficient solutions
that go beyond traditional payment methods.
DEVELOPING OUR PAYMENTS BUSINESS
Payments has been a big focus of our retail business in 2023, with progress in a number of areas.
Payments net revenues1 rose by 26% to GEL 269 million, amounting to 80% of Georgian net fee and commission
income. The main driver of card transaction profitability is the combination of increased number of monthly active
card holders and average ticket size for total payments.
Our customers are also increasingly using their cards for digital payments and the payments volume to cash ratio has
risen from 39% to 41%.
46
47
1 Payments net revenues refers to net fee and commission incomes from payments business of Georgia.
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
• We have applied advanced data analytics capabilities to more effectively analyse customer card activity,
enabling us to better predict cardholder churn as well as to offer more personalized campaigns to our one million
cardholders. In 2023, we introduced instant cashback for our customers, which positively impacted overall customer
satisfaction during marketing campaigns.
• Our roll out of transport solutions continues, with customers in 10 Georgian cities able to use TBC cards and digital
wallets for transport payments, enabling more people to benefit from the easy and convenient payments in their
daily lives.
• Digital wallets are gaining popularity in Georgia, already reaching up to 40% of total contactless payments.
We continue to support our digital first strategy and introduced digital cards under mass retail and Concept
subscription packages with various customer tailored offerings.
AWARD-WINNING RETAIL BANKING
We are delighted to announce that once again in 2023, our retail banking services have received international
recognition:
Best Online User
Experience (UX) Portal of
Corporate/Institutional
Digital Bank in Central
& Eastern Europe 2023
from Global Finance
Best Integrated
Consumer Banking Site
in Georgia 2023 from
Global Finance
Best Open Banking APIs
in Central & Eastern
Europe 2023 from Global
Finance
Best in Social Media
Marketing and Services
in Central & Eastern
Europe 2023 from Global
Finance
TBC CONCEPT
TBC Concept is our flagship banking service for affluent customers. It contributes a
significant share of total retail banking business, accounting for around 64% of our
retail loans and 52% of our retail deposits and is also a major contributor to our fee and
commission income.
MEASURING
SUCCESS
IN 2023
GEL 4.8 bln
(2022: GEL 4.2 bln)
LOAN PORTFOLIO
GEL 3.9 bln
(2022: GEL 3.5 bln)
DEPOSIT PORTFOLIO
116 K
(2022: 106 K)
MONTHLY ACTIVE
CUSTOMERS
With over 116,000 customers, TBC Concept is the leading private banking service provider in Georgia. We differentiate
ourselves by providing convenient and reliable digital banking services, offering special benefits on banking products
and delivering exclusive lifestyle offerings.
In 2023, TBC Concept continued to generate strong results. Our loan book and deposit portfolio increased by 13% and
11% year-on-year, respectively, on a constant currency basis. Customers are also engaging more with the services we
offer, as highlighted by revenue per customer increasing by 6% year-on-year.
TBC Concept offers clients various subscription packages, which are tailored to the needs of specific customer
groups. Our customers are increasingly engaging with us through digital banking. Hence, our highly popular “digital
package” primarily serves customers who prefer to do their daily banking operations online without the support of a
personal banker. Meanwhile, the “360 package” is designed for individuals who require a wider range of financial tools
and are interested in brokerage services to better manage their funds, including the ability to invest in international
equities and bonds.
In addition, affluent customers can benefit from our multi-functional TBC Concept Flagship Space. This is comprised
of 80% lifestyle and 20% banking and includes exhibition spaces, cafés, co-working areas, self-service and personal
banking zones. During the year, the TBC Concept Flagship Space hosted many different events for business, art and
culture.
During 2023, we continued to work on developing customer engagement. This included the launch of a Visa
Concierge chatbot which has been jointly developed by VISA and TBC Concept and which seamlessly integrates
the VISA Concierge service with the diverse advantages offered by Concept 360. With just one click, customers can
utilise the chatbot to seek assistance from the concierge, obtain details about Concept 360 privileges, sign up for
various events and take advantage of special offers available through Concept 360.
Affluent customers had exclusive access to over 500 special offers and promotions in 2023, including music and
film festivals, theater festivals, specially curated tours, travel, sports, shopping and other recreational activities. We
also continued to offer our Concept clients concierge services, including trip planning, studying abroad, restaurant
reservations, flower delivery, dry cleaning, laundry and car services.
We are proud that our private banking services once more earned international recognition and received Best Private
Bank in Georgia 2023 award from Euromoney.
48
49
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Making Life
easier
for emigrants
Video Banking
"This technological innovation simplified communication
with my own country. Smartphones and new technologies
are like a portal to Georgia. Directly as a result of
technological improvement, I easily opened a TBC Bank
account within 5 minutes through a video call.
I always wanted the money I earn through my work to
benefit me and my family directly and simultaneously
maintain the connection with Georgia, and in this regard,
TBC assists." - Tsinari Ghvaladze
Open the account, manage your finances yourself.
50
51
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 MSME Banking
Our banking business for micro, small and medium enterprises (MSME) had a
successful year in 2023, helped by a supportive economic environment for Georgian
companies. This was reflected in robust balance sheet growth as the MSME loan book
increased by 14% year-on-year in constant currency terms, with strong growth in both
micro and SME segments. There was also further progress in the roll out and uptake of
digital financial services for MSME customers.
E
M
S
M
Micro
SME
• A full range of financial products and solutions from start-ups to well-
established enterprises;
• Fast loan approval process driven by high automatization levels;
• Convenient subscription model;
• Best-in-class business support programme.
WELL-DIVERSIFIED MSME LOAN PORTFOLIO AS OF 31 DEC 2023
20.3%
14.4%
1.9%
2.2%
2.6%
3.3%
4.0%
5.4%
6.0%
7.3%
11.5%
10.9%
10.2%
Trade
Agriculture
Construction
Hospitality & leisure
Transportation
Healthcare
Automotive
Pawn shops
Food industry
Manufacturing
Services
Real estate
Other
YEAR IN REVIEW
MSME GROSS LOANS
PORTFOLIO (GEL BLN)1
MSME DEPOSIT
PORTFOLIO (GEL BLN)1
5.5
2.7
2.8
4.8
2.4
2.4
1.8
0.9
0.9
1.9
1.1
0.8
31 Dec
2022
31 Dec
2023
31 Dec
2022
31 Dec
2023
Micro
SME
Foreign currency
Local currency
MEASURING
SUCCESS
IN 2023
GEL 5.5 bln
(2022: GEL 4.8 bln)
MSME LOANS1
GEL 1.9 bln
(2022: GEL 1.8 bln)
MSME DEPOSITS1
68%
(2022: 77%)
OF NEWLY REGISTERED
BUSINESSES CHOOSE TBC2
62 K
(2022: 60 K)
MONTHLY
ACTIVE CUSTOMERS3
52
1 Segmental numbers of 2022 do not correspond to the numbers disclosed in 2022, due to the updated methodology. For detailed information,
please refer to Note 27.
2 Based on internal estimates as of 31 December 2023.
3
Includes monthly active MSME legal entities.
53
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MAINTAINING MOMENTUMThe MSME segment maintained solid growth momentum in 2023. The number of monthly active customers increased by 3% year-on-year to c. 62,000. The share of MSME customers using our digital banking platforms is growing, with digital monthly active customers rising by 3% to up to c. 35,000, equivalent to 17% of our MSME customer base. Over 68% of newly registered businesses are choosing to bank with TBC, which is testament to the quality of the products and service we are offering. Meanwhile, MSME business loan book and deposits rose by 14% and 8% year-on-year on a constant currency basis, respectively. GROWTH HELPED BY STREAMLINED PROCESSESLoan growth was driven by both micro and SME loans and continues to be supported by more streamlined business processes, including automation for loans below GEL 200,000. For the year as a whole, 77% of such loans were processed automatically, using pre-determined rules and a scoring model, which significantly decreased the time-to-money period. As a result, the share of micro loans in our total MSME portfolio increased by 1 pp year-on-year and reached 51%, making us the largest provider of micro business financing in the country. This year we continued our pre-accelerator programme with Impact Hub Georgia, which saw more than 50 selected
start-ups compete for investment and supported in developing a business plan, communication strategy and
technical plan, with the final taking place in Tallinn, Estonia.
In 2023, we also launched Start-up loans for innovative businesses, which aims to finance start-up ideas without
previous experience, collateral or downpayment with up to 18 months of grace period.
AGRICULTURAL INITIATIVES
To stimulate business growth in rural regions and facilitate new employment opportunities, we actively support local
enterprises by offering accessible and affordable financial support.
We work in partnership with several state programmes, including “Enterprise Georgia”, “Host in Georgia” and
“Preferential Agro Credit”, to support local production, as well as agricultural and hospitality businesses. The
programmes offer reduced interest rates through government subsidies. In 2023, we disbursed around 2,600 loans
totaling GEL 469 million.
We also undertook a 360-degree agricultural campaign, which was a blend of engaging video campaigns and an
educational newspaper dedicated to agribusiness, which included experiences from diverse agricultural backgrounds
and farmers in various regions.
TBC ANNUAL BUSINESS AWARDS
Since its inception in 2015, our Annual Business Awards event has aimed to promote and support business activities in
Georgia. Over the past seven years, it has evolved into the most eagerly awaited business event of the year, drawing in
over 4,000 companies from a broad cross-section of the economy. These businesses have showcased their success
stories, inspiring others to transform their ideas into reality. This year we had over 400 applicants competing for awards.
EARNING INTERNATIONAL RECOGNITION
We are proud that our digital banking offering continues to receive international recognition and received Best SME
Bank Award in Central & Eastern Europe 2023 award from Global Finance.
ENHANCING SERVICE OFFERING FOR MERCHANTS
We continually strive to improve the quality of products and services we offer our MSME customers.
• We have streamlined our merchant onboarding process by automating 80% of the point of sale (POS) application
processing. As a result, the average merchant registration time has been slashed from one business day to one
hour. Furthermore, the remote signing of POS agreements using SMS one-time-password (OTP) further enhances
efficiency. With the help of mobile POS terminals (TPOS), the entire merchant onboarding procedure now takes just
20-30 minutes, providing additional convenience and flexibility for small and micro merchants in untapped markets.
• Recognizing the critical importance of cash availability for our merchants, in 2023 we improved the settlement
process and rolled out a real-time settlement system for our acquiring business customers. This enables MSME
customers to receive funds on their account instantly when transactions are made, compared to the following
business day previously.
• We have worked to improve the customer experience during the onboarding process as well as daily reporting
capabilities by providing advanced analytical solutions using the www.tbcpayments.ge portal. We have added
a subscription model for monthly reporting, enabling merchants to customize their reports according to their
preferred timeframes.
• As e-commerce in Georgia increases, we are developing tools to help our MSME customers accept online
payments. In 2023, we simplified integration for merchants using the Shopify platform, and introduced Google Pay
as an alternative payment method alongside the existing Apple Pay and card payments for e-commerce.
• The number of merchant acquiring customers increased by 5% year-on-year in 2023 to almost 14,000 and the
number of active POS terminals rose by 14% to nearly 33,000. We have extended partnerships with Georgia’s
leading hospitality and delivery companies, strengthening the position in large corporate business segments as
well.
DIGITALIZATION AND REMOTE SERVICES INITIATIVES
• We have undertaken various initiatives to improve the functionality of our digital MSME platform, including
implementing video checks for existing customers. The transition from traditional on-site physical visits to much
more flexible video visits has made the loan application process much simpler and faster.
• We have expanded our outreach by investing in building the sales agent network as a channel for client acquisition
through the www.tbcconsuli.ge platform. This user-friendly platform enables easy enrollment for individuals to join
our sales team, where they will be able to sell common banking products and earn commissions.
• We have created a benchmark model which considers specific characteristics of businesses, allowing us to
calculate a client’s income according to predefined parameters, eliminating the need for filling in detailed income
statement forms. Beyond simplifying the application process, this change helps mitigate the risk associated with
potential fraudulent income declarations by clients. This in turn will enable us to increase the share of automated
decisions.
• We have also implemented risk-based pricing for micro and agricultural loans, enhancing our approach to loan
assessments and ensuring more tailored and accurate lending terms. The volume of fully digitally disbursed loans
increased substantially in 2023, rising from 63% to 85%.
OUR BUSINESS SUPPORT PROGRAMME
Educational resources for businesses
We are dedicated to helping our business clients succeed by offering a comprehensive support program. It includes
educational resources and tech tools available on www.tbcbusiness.ge, making everything accessible on one
platform. This included the addition of new business courses and training sessions, which benefited more than 54,000
customers in 2023. These sessions covered a range of subjects including marketing, finance, management and
taxation, empowering participants with essential knowledge and skills.
SUPPORTING START-UPS
The Startuperi platform supports early-stage companies, providing both financial and non-financial resources. The
programme aims to increase the number of successful startups in Georgia by providing them with easily accessible
capital, a digital platform for advertising campaigns, as well as various educational programmes, conferences and
partnerships with large companies.
54
55
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Supporting
innovative and
technology
Startup loans
Since childhood, I
have been interested
in nature and
landscaping. Now I am
a student and during
my studies I had the
idea to change my
city and create more
green spaces in it.
Gigi Tabaghua, Santi
When our factory
starts working in
Rustavi, we will be
able to recycle 8 tons
of wheels per day.
Luka Kapanadze, Ecowheels
56
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
57
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 CORPORATE AND
INVESTMENT BANKING
Our CIB segment delivered strong growth in 2023, with loans increasing by 31% year-
on-year and deposits up by 8%, both in constant currency terms. We remain the market
leader in corporate banking with 40.7%1 market share of the loan market.
Corporate
The largest and most trusted partner for corporate clients with the
leading position both in loans and deposits.
I
B
C
Wealth
management
An established wealth management business with growing
financial advisory and brokerage franchises.
Investment
banking
TBC Capital – the leading investment bank in corporate debt
capital markets (DCM) transactions and research.
YEAR IN REVIEW
We remain market leaders in trade finance with our GEL 2.4 billion guarantees portfolio up by 12% on a constant
currency basis, accounting for more than 46%3 market share. In 2023, our factoring portfolio increased by 57% year-on-
year on a constant currency terms to GEL 205 million. In 2023, we launched a dynamic platform catering to businesses of
all sizes, capable of swiftly managing daily invoices and offering fully digitalized factoring solutions. This transformation
streamlined procedures, cutting down financing time by more than 80%. This accelerated pace and digitalization
initiative not only enhanced efficiency, but also significantly improved our customer journey and experience.
TRANSACTIONAL BANKING PERFORMING STRONGLY
Our CIB deposit book increased by 8% year-on-year in constant currency terms, driven by solid growth in local
currency deposits. As a result, our market share1 in corporate deposits stood at 44.9%. The volume of FX transactions
from corporate clients amounted to GEL 21.7 billion, up by 7% year-on-year, however due to lower FX volatility
compared to last year, the margins generated on FX transactions led to a moderate increase in non-interest income.
Cash management volumes from corporate clients increased by GEL 242 million or 4% year-on-year and amounted to
GEL 6.9 billion.
CIB DEPOSIT PORTFOLIO
(GEL BLN)2
CIB NON-INTEREST
INCOME (GEL MLN)2
9.2
4.1
5.1
10.2
4.1
6.1
31 Dec
2022
31 Dec
2023
Local currency
Foreign currency
204
206
2022
2023
By installing bulk cash depository machines for our branches and large corporate clients, we have improved our
offloading ratio to 18.1%. We collected GEL 1.6 billion cash from our customers, which is a 23% improvement year-over-
year. Currently, we operate 84 of these machines, which are located in the premises of our large clients and in all our
major branches across the country.
ENHANCING DIGITALISATION AND PROCESS EFFICIENCY
• We have made progress in our commitment to optimize and digitalise the end-to-end credit origination and
disbursement process. We have reduced time-to-money by up to 40%.
• We've established a secure platform that enables signing of legal documents from any location, digitally. This
initiative significantly reduces the need for in-person visits to branches, improving customer experience and
accessibility. As of December 2023, around 51% of credit products, including loans and trade finance, were signed
digitally, representing significant progress in our digitalization initiatives.
• During 2023, we successfully integrated a fully functional factoring module with payment capability into our internet
bank. Now, customers can digitally access details on their factoring agreements and handle overdue payments.
MEASURING
SUCCESS
IN 2023
GEL 8.3 bln
(2022: GEL 6.3 bln)
CIB LOANS2
GEL 10.2 bln
(2022: GEL 9.2 bln)
CIB DEPOSITS2
GEL 2.1 bln
(2022: GEL 1.4 bln)
AUM
8.0 K
(2022: 7.7 K)
# OF CUSTOMERS
58
1 Based on data published by the National Bank of Georgia on the analytical toon Tableau as of 31 December 2023; in this context, corporate
refers to legal entities.
2 Segmental numbers of 2022 do not correspond to the numbers disclosed in 2022, due to the updated methodology. For detailed information,
please refer to Note 27.
3 Based on data published by National Bank of Georgia.
59
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023CORPORATE BANKINGDYNAMIC CREDIT GROWTH BOOSTING MARKET SHAREOur CIB loan book grew by 31% year-on-year in constant currency terms. This was mainly driven by increased exposure to large and mid-sized corporate clients which accounted for 56% of CIB loans, a 3 pp year-on-year increase. At the same time, the concentration ratio of the largest borrowers remains low, with the top 10 borrowers accounting for just over 6% of the total loan book. As a result, our market shares in corporate loans stood at 40.7%1 at the end of 2023.The loan book remains well-diversified across a wide range of sectors of the Georgian economy, with strong growth in 2023 in the production & trade of construction materials, agriculture and heavy manufacturing segments in particular. No single industry accounts for more than 22% of the total loan book. We also continue to diversify risk through loan syndication, which also generates additional fee and commission income. PREDICTIVE TOOL DEVELOPED TO CALCULATE CLIENT POTENTIAL
As a key component of our ongoing commercial excellence transformation initiative launched in 2020, we have
improved our corporate client management and analytical tools by incorporating estimates of client potential.
Leveraging extensive data analytics and machine learning capabilities, this tool plays a significant role in identifying
the banking potential of clients. This feature allows us to better evaluate profitability, understand client expectations,
identify financial needs and communicate more effectively with companies. As a result, our corporate clients receive a
timely and high-quality service.
INVESTMENT BANKING AND WEALTH MANAGEMENT
IMPROVING OUR BROKERAGE AND ADVISORY SERVICES
TBC Capital is the leading provider of investment banking services, brokerage and research solutions in Georgia.
We offer a full range of financial services from structuring to executing deals or advising on complex corporate
transactions. This year our corporate advisory team successfully closed its largest transaction to date – the minority
buyout of a leading payments provider in Uzbekistan, Payme, for the consideration of USD 55.7 million. By closing
this transaction, we reached an important milestone of concluding the first out-of-Georgia M&A (mergers and
acquisitions) deal. Furthermore, in 2023, TBC Capital successfully closed two more important deals – the first one was
a border-crossing M&A transaction in the e-commerce industry, while the second deal was a cross-sector synergy
facilitating transaction between the healthcare and education industries. Furthermore, the advisory branch continues
to grow by expanding its expertise across a growing number of industries and by completing multiple consulting and
valuation projects for private investors, as well as large corporates with international shareholder bases.
LEADING GEORGIA’S CAPITAL MARKET DEVELOPMENT
While still at an early stage of development, Georgia’s capital markets are experiencing rapid growth - the local
corporate market's total new issuance increased by 75% year-on-year to GEL 1.3 billion GEL. TBC Capital is at the
forefront of developing the DCM market, holding a 56%1 market share in debt capital markets transactions across a
broad range of sectors. We acted as placement agents in key milestone transactions, whether as sole manager or
alongside local investment banks. This included Tegeta Motors which, with TBC Capital as the sole lead manager,
issued the first-ever GEL bonds for individual investors with a fixed coupon rate on the market, enabling our retail
investors to invest money in Georgian Lari, supporting country’s Larisation strategy. Also, TBC Capital acted as a joint
lead manager to place a USD 150 million Sustainability Linked Bond, which marked the largest ever transaction on the
Georgian capital markets. We also participated in a number of ESG bond issues, serving as the placement agent for
three ESG bonds, encompassing both green and sustainability-linked initiatives. In two of those, TBC Capital acted as
the sole lead manager, underlying our commitment to promoting ESG bonds in Georgia.
TBC Capital acted as the sole lead manager for a total of five private bond placements in 2023, including IFI bonds.
LOCAL MARKET - PUBLIC OFFERINGS
CELLFIE MOBILE
TEGETA MOTORS
AUSTRIAN GEORGIAN
DEVELOPMENT
GEL 65,000,000
GEL 20,000,000
USD 15,000,000
3 Year, Public Placement,
TIBR6M+3.5%
December 2023
Joint Lead Manager
2 Year, Public Placement,
14.5%
2 Year, Public Placement,
8.5%
December 2023
Lead Manager
October 2023
Lead Manager
SILK REAL ESTATE
GEORGIA CAPITAL
TEGETA MOTORS
USD 20,000,000
USD 150,000,000 (SLB)
GEL 20,000,000 (Green)
3 Year, Public Placement,
9.25%
September 2023
Joint Lead Manager
5 Year, Public Placement,
8.5%
August 2023
Joint Lead Manager
2.5 Year Public Placement,
TIBR6M+3.5%
June 2023
Lead Manager
TBC LEASING
ENERGY DEVELOPMENT
GEORGIA
SILK REAL ESTATE
GEL 15,000,000 (Green)
USD 10,000,000
USD 20,000,000
3 Year, Public Placement,
TIBR6M+2.75%
2 Year, Public Placement,
8.5%
June 2023
Lead Manager
June 2023
Lead Manager
3 Year Public Placement,
9.0%
April 2023
Joint Lead Manager
TBC LEASING
RICO EXPRESS
GEL 100,000,000
GEL 130,000,000
3 Year Public Placement,
TIBR3M+2.75%
3 Year Public Placement,
TIBR1D+2.0%
March 2023
Lead Manager
March 2023
Lead Manager
LOCAL MARKET - PRIVATE OFFERINGS
IFI DEALS
TBC BANK
GROUP PLC
TBC LEASING
ADB
FMO
USD 15,000,000
USD 6,545,000
GEL 20,000,000
GEL 45,000,000
3 Year Private Placement
5 Year Private Placement
2.5 Year Private Placement
5 Year Private Placement
March 2023
Lead Manager
January 2023
Lead Manager
June 2023
Lead Manager
May 2023
Lead Manager
60
1 TBC Capital’s market share in publicly and privately issued corporate bonds in Georgia during 2023.
61
FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Supporting
the Georgian
Economy
Infrastructural Developments
We are committed to advancing infrastructure in Georgia through diverse partnerships and initiatives.
Our key projects include the construction of approximately 100 kilometers of roads, 30 kilometers of
highways and 70 bridges.
We expect public and private investment in infrastructure projects throughout Georgia to continue in the
years to come, a trend which we are very well placed to participate actively in.
LAUNCHING DIGITAL INVESTMENT PLATFORM FOR BROKERAGE CUSTOMERS
In 2023, we extended the range of financial service tools we offer by launching a digital investment solution in the TBC
Mobile app. This platform provides a convenient and commission-free trading experience for over 6,500 equities and
exchange-traded funds listed on American stock exchanges and reflects our commitment to making sophisticated
financial services accessible to a wider demographic. Alongside the app launch, TBC Capital ran an educational
campaign to equip users with investment guidelines and user-friendly tools to enhance their financial literacy. As of
December 2023, the app had over 6,200 registered users.
During 2023, TBC Capital’s total assets under management (AUM) increased by over 50% year-on-year to almost GEL
2.1 billion, which was mainly attributed to growth in resident clients’ AUM. This success is attributed to our continued
provision of personal advisory services for High Net Worth Individuals (HNWI), cash management services to
corporate clients and the mass affluent retail segment.
FURTHER EXPANSION OF OUR RESEARCH SERVICES
Our research division supports decision-makers with comprehensive and timely macroeconomic and sector-
specific analyses relating to Georgia and the broader regional landscape. This includes consistent weekly, monthly,
and quarterly publications. In 2023, we expanded our content to include new offerings, including electricity market
overview, retail trade in apparel and electronics and infrastructure sector overview. TBC Capital also held more than 40
individual and large-scale presentations and conferences with clients and wider audiences on such topics as FMCG
industry, real estate near the seaside, primary education and energy.
As strategic advisers, we provide our audience with insights on how the latest developments can impact their business
and the broader economy in general. We work with not only the clients of TBC, but also different business groups,
IFIs and representatives of embassies through business associations and chambers of commerce. In this regard, we
researched how EU candidate status could impact the Georgian economy and presented the findings to more than
200 members of the local business community. In aggregate, TBC Capital delivered over 200 publications in 2023, and
the complete list can be accessed at www.tbccapital.ge. Moreover, over the course of the year, TBC Capital ran several
large-scale conferences catering to both local and international stakeholders invested in Georgia.
INCREASING SHARE OF INVESTMENT PRODUCTS IN WEALTH MANAGEMENT AUM
Our Wealth Management team continues to offer a wide range of personalized banking and investment products to
our clients, as well as exclusive lifestyle benefits for premium events in the country. During 2023, investment product
penetration to total AUM increased from 21% to 33%, emphasizing the value of our personal advisory services and
increasing financial sophistication within this customer segment.
Among the new products and services added in 2023, we launched security-backed loans, a strategic initiative that
facilitates access to new lending resources for our wealth management clients. Also, we rolled out VISA Concierge,
which resonated very well, with a penetration rate exceeding 50% among eligible clients, underscoring the importance
of our value-added services.
We were named Best Corporate Bank in Georgia in the inaugural category awarded by Euromoney. This accolade
recognizes our continuous commitment to providing our clients with the best possible products and services. We
were also named:
Best Trade Finance and
Supply Chain provider in
Georgia 2023 from Global
Finance
Best Foreign Exchange
Provider in Georgia 2023
from Global Finance
Best Treasury and Cash
Management in Georgia
2023 from Global Finance
Market Leader and the
Best Service Provider in
Trade Finance in Georgia
Best Corporate Bank in
Georgia 2024
from Euromoney
Best Investment Bank
in Georgia 2023 from
Euromoney
Best Private Bank in
Georgia 2023 from
Euromoney
62
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FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Nuts Incorporated
GEOP
Founded in 2018, Nuts Incorporated has established itself as one of the leading agricultural
companies specialising in the growing and processing of nuts in Georgia. Together with the
700 hectares of almond and 2,500 hectares of hazelnut orchards, the company operates almond
and hazelnut processing plants, enabling them to produce a diverse range of nut products. Nuts
Incorporated has a large export footprint in Europe, accounting for more than 40% of the firm’s
harvest.
In 2023, TBC Bank partnered with the group by extending a lending facility which was used to expand
hazelnut orchards by 1,000 hectares and to acquire nut processing facilities.
TBC Bank is proud to be a part of the company’s growth story and looks forward to seeing the firm’s
further success.
Founded in 2014, “Georgian Products” (GEOP) is a manufacturer of pet products with its primary focus on
pet furniture production. GEOP offers customers a selection of more than 140 products, all manufactured
with environmentally friendly materials. The company’s sales exceeded GEL 25 million in 2023, all of
which is generated from export markets in the EU and the US.
TBC has been the company’s partner since its establishment. With the aid of TBC’s lending facilities, the
company has equipped its production facilities, enabling the firm to manufacture high quality products
at competitive prices.
TBC Bank is honored to contribute to the company's journey of expansion and excited to see its ongoing
success.
64
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FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
M
A
N
A
G
E
M
E
N
T
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
A
D
D
T
O
N
A
L
I
N
F
O
R
M
A
T
O
N
I
Investment module
in mobile bank
A new trending feature in our mobile bank. The investment module in our
mobile bank app simplifies the steps to successful investments.
66
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
67
HOW WE CREATE VALUE FOR CUSTOMERS CONTINUED
TBC PAY
TBC Pay is the leading payments provider in Georgia, offering convenient
payments solutions to customers via its wide network of self-service
terminals. Operating alongside the Georgian retail banking business, TBC
Pay forms another part of the payments customer value proposition for
retail clients, enabling convenient services such as P2P and bill payments.
MEASURING
SUCCESS
IN 2023
4.5 K
(2022: 4.3 K)
# OF SELF-SERVICE
GEL 10.2 bln
(2022: GEL 8.1 bln)
VOLUME OF PAYMENTS
TERMINALS
TRANSACTIONS
GEL 27 mln
(2022: GEL 20 mln)
PROFIT
1 Operating income refers to sum of net interest and net non-interest incomes.
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FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDAT A GLANCETBC Pay was launched in 2008, since which time it has established itself as the largest payment service provider in Georgia. Currently, the company operates around 4,500 self-service terminals throughout the country, as well as online and mobile applications. During 2023, the volume of transactions has increased by 26% year-on-year. YEAR IN REVIEWThe company’s primary focus is to improve customer experience. In 2023, the company reviewed and improved its service availability, including a full overhaul of its network infrastructure.In 2023, transaction turnover increased by 25% year-on-year to GEL 2.0 billion. Operating income1 increased by 29% year-on-year to GEL 61 million. In addition, profit grew by 35% year-on-year to GEL 27 million.Furthermore, in 2023, we installed a new IT platform which allows agents to offer their customers payment services in the name of TBC Pay with the help of an API on their websites and mobile applications.LOOKING AHEADIn 2024, TBC Pay plans to continue focusing on improving customer experience and system sustainability, achieving high security standards, and diversifying payment products.After legislative changes in 2023, payment service providers can now participate in open banking projects, which give customers an opportunity to access their finances in one space instead of using different online or mobile bank platforms. Our team is actively working in this area and plans to obtain an open banking licence in early 2024. We also plan to expand agent channels with the new technological platform implemented in 2023.MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 TBC LEASING
A wholly owned subsidiary of TBC Bank, TBC Leasing offers an alternative
source of financing to our retail and business clients. As of the end of 2023,
it had 86% share1 of the leasing market.
TBC Leasing continues its active involvement in the financing of green, renewable and energy-efficient assets through
various initiatives, including:
•
In 2023, TBC Leasing successfully placed GEL 15 million green public bonds. The placement was the first national
currency denominated green issuance on the local capital market among financial institutions. The proceeds from
the issuance have been directed to finance growth of TBC’s green leasing portfolio. The decision to issue Green
Bonds, along with the financing of energy-efficient assets - electric vehicles, production equipment, solar panels -
is a core part of the company's goal to help increase the availability of sustainable financing in the country and the
development of the local capital market.
MEASURING
SUCCESS
IN 2023
86%
(2022: 80%)
MARKET SHARE1
2,002
(2022: 2,034)
# OF CUSTOMERS
GEL 377 mln
(2022: GEL 290 mln)
LEASING PORTFOLIO
GEL 20 mln
(2022: GEL 14 mln)
PROFIT
•
In addition, we commenced a collaboration with the Green for Growth Fund (GGF) to develop a digital platform, which
will allow our customers to submit requests for funding for prospective solar photovoltaic projects and obtain quotes
from TBC Leasing in a more efficient way. This platform will be integrated into TBC Leasing’s website and will be
equipped with a leasing and an impact calculator for solar PV systems – which will enable potential clients to estimate
the leasing rates from different technology suppliers, including the main impact metrics such as energy and carbon
dioxide (CO2) emission reduction, savings in monetary terms and estimated payback period.
As a result, our green leasing portfolio has grown to GEL 32 million in 2023 from just GEL 25 million a year earlier. Over
the past five years, our green portfolio has increased by 6 times. We plan to further increase our green leasing portfolio
in the coming years.
LOOKING AHEAD
Despite solid growth in recent years, with a 5-year CAGR of 7%, the Georgian leasing market has substantial growth
potential given its still low penetration level, as leasing volumes account for only around 1% of Georgia’s GDP,
significantly below peer countries where leasing typically accounts for 4-5%2 of GDP. We believe TBC Leasing is well
positioned to continue to benefit from the further structural growth of this market.
CORPORATE LEASING PORTFOLIO
BREAKDOWN AS OF 31 DEC 2023
RETAIL LEASING PORTFOLIO
BREAKDOWN AS OF 31 DEC 2023
4%
5%
10%
10%
5%
27%
20%
19%
44%
56%
Construction
Service
Agriculture
Medicine
Development
Manufacturing
Trade
Other
Used cars
New cars
1 Based on internal estimates.
2 Based on UK Good Governance Fund, Leasing Market Research.
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FNANCIAL STATEMENTSMANAAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR CUSTOMERS CONTINUEDAT A GLANCEOur technical know-how and specialist knowledge and expertise enable us to offer our clients all-round asset finance solutions and other complementary advisory services, including financial leasing, operating leasing, and sale and leasebacks, all of which are tailored to the individual customer’s needs. We serve both individual customers and businesses operating across Georgia through authorized representative dealerships, vendors, direct sales channels, and TBC Bank branches. The ability to tap into TBC Bank's wide sales network is a major competitive advantage.YEAR IN REVIEWThe leasing portfolio expanded by 30% year-on-year in 2023 on a constant currency basis reaching GEL 377 million as of 31 December 2023, giving us a dominant 86%1 market share. 92% of the portfolio related to legal entities, led by the construction, service and manufacturing sectors. The remaining 8% of the portfolio related to individual clients. New cars accounted for 44% of the total retail portfolio, used cars the remaining 56%. In 2023, TBC Leasing generated profit of GEL 20 million, up 43% year-on-year.MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 COLLEAGUES
HOW WE CREATE VALUE FOR
COLLEAGUES
COLLEAGUES
We are dedicated to cultivating a safe and thriving workplace environment,
supporting individual development and growth, promoting diversity,
equality and inclusion within our workforce, all while delivering top-tier
services to our clients.
MEASURING
SUCCESS
IN 2023
58%
(2022: 59%)
EMPLOYEE NET
PROMOTER SCORE1
37%
(2022: 36%)
WOMEN IN MIDDLE
MANAGERIAL POSITIONS2
88%
(2022: 89%)
ENGAGEMENT
INDEX3
TBC Academy, established in 2011, provides a wide spectrum of learning programs to every member of the TBC group.
In 2023, more than 2,000 employees participated in various courses and programs including business development,
agile transformation, brand experience, law, financial analytics, and the refinement of essential soft skills.
Notably, TBC Academy expanded its Leadership programs, transcending national boundaries and providing our
employees with opportunities to develop leadership skills on a global scale. Among the essential topics covered in the
programs were: Strategic mindset, Communication, Negotiation, Leading Leaders etc. Up to 200 people successfully
graduated from these programs, with highly positive feedback.
We have also provided financial support to our employees to attend various external courses and gain international
certifications such as MBA, CFA, FRM, ACCA and others.
Ensuring a secure work environment continues to be our priority. In 2023 we renewed mental health program sessions,
which offer a range of benefits and various activities to support our employees, such as:
• Monthly newsletters focused on mental health for our employees, delivered via internal communication channels;
• Workshops, meetings, and physical activities for TBC Bank staff.
Throughout the year, we conducted six workshops dedicated specifically to stress management in everyday life, along
with offline seminars featuring professional speakers to enhance employee awareness. Additionally, we organized
various physical activities, such as Yoga Therapy. All these activities were planned and implemented based on
feedback from our employees.
We offer competitive remuneration packages to our employees, which are comprised of a fixed salary, performance-
based bonuses and a benefits package, which includes health insurance, critical disease and life insurance, paid sick
leave, as well as six months fully-paid maternity and paternity leave. Additional benefits include a social assistance
package in case of marriage, childbirth and family member support, paid days off for all employees and extra paid days
off for employees with more than three children, as well as special social payments for employees with more than four
children.
Throughout 2023, significant changes were implemented. In addition to rolling out a new HR Core system, we provided
improved benefits for employees, such as enhanced maternity benefits and insurance terms.
Performance management
Our performance management system is carefully designed to reinforce employee productivity while fostering a
culture of open communication and constructive feedback.
It is closely allied with our Group’s overall goals, focusing on clarity, fairness, and honesty. We're dedicated to making
sure our team members understand their roles within the company. We involve them in setting their own goals and
provide guidance to help them succeed. Regular feedback and constructive conversations are a natural part of the
performance management process.
We recognize that different roles call for different performance evaluation methods. For our front-line team, we set
monthly goals and tie rewards to their performance in sales and customer service. Middle managers and our non-
customer-facing staff are assessed using KPIs and a competency-based approach. In our commitment to continuous
improvement, we use a 360-degree evaluation process. This allows every team member to receive feedback from their
managers, colleagues and subordinates. It's a comprehensive way for our employees to understand how others view
their performance, discover strengths and identify areas for growth, all while acquiring new skills.
Throughout 2023, we proactively worked on fortifying our feedback culture. We organized a series of training sessions
for our employees, underlining the significance of open communication and collaboration, firmly convinced that by
working together, we can attain remarkable accomplishments.
Employee engagement and motivation
We strive to develop a supportive and empowering organizational culture to offer equal opportunities for work and
development and to foster a healthy work-life balance. Our strategy centers on actively promoting our company values to
be applied internationally by every employee, while encouraging cultural diversity and helping foster a global mindset.
1 The Employee Net Promoter Score (ENPS) was measured in December 2023 by an independent consultant for the Bank’s employees.
2 Branch managers, division and department heads, as well as middle level of the Group’s subsidiaries.
3 Engagement Index was measured in December 2023 by an independent consultant for the Bank’s employee’s and measures how much employees
feel involved and committed to TBC Bank.
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FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONOVERVIEW We value our people as our greatest asset and aim to be the top employer in the areas in which we operate. With an effective talent acquisition and development framework, we support the Group’s strategy and help to create maximum value for both TBC and our employees. We have implemented hybrid working arrangements providing our employees the flexibility to choose their work locations. Currently, the majority of our non-customer facing employees operate from remote settings, leading to higher levels of employee satisfaction and improved overall efficiency throughout the Group. In 2023, we implemented a significant salary increase averaging 24% for our bank employees in customer-facing and support roles, which together comprise 56% of our workforce. In 2023, around 500 members of the TBC Bank visited France for the Rugby World Cup to celebrate our accomplishments and foster a spirit of collaboration. Furthermore, TBC Bank employees participated in leadership training programs, including those by BLED (Bled school of management), Develor (Develor international), LPI (Leadership Pipeline Institute) and IMD (Institute of Management Development), held in Georgia and other countries. OUR MAIN STRATEGIC PRIORITIESTalent acquisition and developmentWe strive to be the best employer in the Georgian market and in line with this goal, we aim to build a best-in-class talent acquisition and development function.We actively monitor the labour market in Georgia and other countries in order to expand our capabilities to attract key personnel globally, in areas such as business, finance, risk and IT.For entry-level positions in back-office functions, we run a well-regarded internship programme to attract the best students from Georgia’s leading universities. After the successful completion of a one-year internship, the best candidates are offered employment in various departments, including finance, risk, corporate, marketing, IT and data analytics. In addition, we are actively cooperating with local universities and colleges, conducting job fairs, visits to universities over the county and actively participating in different marketing activities, in order to attract recent graduates across a wide range of roles.Since 2019, our internal IT Academy has been a hub for tech education, offering courses in front-end, back-end development, DevOps, and more. These courses are available free to both our employees and potential candidates. Led by experienced staff and industry professionals, the Academy has trained over 1,100 individuals from outside the organisation and 1,500 within, bringing in more than 300 skilled professionals to TBC Group.In 2023, our IT Academy launched a project in partnership with USAID (TBCxUSAID for technological education), aiming to train more than 700 participants, through 9 newly designed courses. We also introduced an iOS Laboratory. This project focuses on female empowerment and reaching regional areas.MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Our CEO and the executive management team are the main drivers in endorsing the corporate culture and values
through regular communication with employees. Hybrid meetings (virtual and in-person) are held consistently to
share the Group’s strategy and achievements as well as obtain feedback. Our existing social and cultural activities are
reviewed on a regular basis to keep them relevant for our colleagues.
We support and encourage our employees to actively consider applying for different positions, to participate in
open selection processes for a new job role, and to seek promotions within the Group. Under equal conditions, the
priority is given to internal candidates. In 2023, the promotion and horizontal transfer rate was around 35% for the
Bank. In 2023 we have been actively working on strengthening our IT functions by hiring international and local senior
domain experts, to support our business strategy. The Group succession Planning Policy was created and approved
in 2023. We successfully collaborated with Egon Zehnder in this process and still actively use their help in key people
development.
Emphasis is placed on acknowledging the achievements of our team members by sharing success narratives across
our internal communication channels. On top of that, we have implemented various internal rewards with the aim
of fostering a service-oriented culture and enhancing the focus on customer satisfaction among our employees.
Additionally, a mentorship program designed specifically for the frontline staff was implemented, with the aim of
facilitating the seamless integration of new hires into the operational processes.
We consistently track our employee satisfaction and engagement. Last year, 78% of our workforce actively
participated in the anonymous Employee Engagement survey, and our employee net promoter score (ENPS) remained
at a high level, at 58%1, compared to 59% in 2022, remaining well above the European industry average of 42%2. The
survey findings undergo comprehensive analysis and are subsequently presented to the executive management and
the Supervisory Board, feeding into strategic planning for future initiatives.
Sustaining a secure working environment continues to be our foremost concern. With the entire team, we are actively
pursuing new and effective approaches to enhance employee wellbeing and operational efficiency. For example,
in 2023 a revitalized mental health program was launched across the group, emphasizing a range of physical and
educational activities.
Equality and diversity
We are dedicated to fostering diversity, equality, and inclusivity within our workforce while actively combatting
discrimination in all its forms. Our organisation embraces and encourage our employees differences in age, gender,
race, color, disability, ethnic background, family or marital status, gender identity or expression, language, national
origin, physical and mental capabilities, political affiliation, religion, sexual orientation, socio-economic background,
and all other qualities that contribute to the individuality of our team members.
We guide our activities with our Diversity, Equality and Inclusion Policy. The Policy provides clear guidance for
ensuring the proactive and consistent integration of diversity, equality and inclusion in the Group’s work inside the
company, in the marketplace and in the community at large. The policy is available at: www.tbcbankgroup.com.
We remain committed to having a gender-balanced workforce and culture that supports and empowers women. We
set a target at the Bank level to increase the number of women in middle managers and agile leaders from the current
level of 40% to 43% by 2024. Starting from 2023, the agile managerial positions - Product Owners and Chapter Leads
- were included in combined target for middle management and agile leaders in order to reflect the organisational
transformation and structure in the Bank. Our experience shows that an agile structure creates a more dynamic working
environment, instills an open culture and empowers women and men in different roles and functions. Furthermore, in
2022 and 2023, we expanded our approach to certain subsidiaries of the Group and incorporated individual diversity
targets within their ESG strategies.
Affirming our commitment as endorsers of the WEPs (Women’s Empowerment Principles), we pledge to champion
gender equality, foster employee diversity, empower women, and highlight our dedication in public forums. For robust
monitoring and evaluation, we consistently collect, analyse, and report sex-disaggregated data monthly, establishing a
baseline, measuring outcomes, evaluating the impact of our initiatives, and tracking progress toward internal diversity
targets for specific positions.
In our ongoing support for equality, diversity, and inclusion, we continue to focus on training. From April 2023, our
employees partake in weekly face-to-face sessions covering topics like a healthy working environment, addressing
stereotypes, recognizing discrimination and its impact, understanding various forms of violence, and the significance
of equality and equity in the workplace and society.
The tables below show the data at the Group level.
SUPERVISORY BOARD*
EXECUTIVE MANAGEMENT
5
5
5
5
5
4
3
3
2
38%
62%
29%
71%
38%
63%
1
17%
83%
1
17%
83%
1
20%
80%
2021
2023
* Throughout 2022, we had three female non-executive directors until Maria Luisa Cicognani stepped down from the Board in
September 2022. On June 26, 2023 Janet Heckman was appointed to the Supervisory Board of JSC TBC Bank.
2023
2022
2022
2021
MIDDLE MANAGERIAL POSITIONS**
ALL EMPLOYEES
185
192
99
106
201
118
5,493
5,782
6,168
2,624
2,762
2,803
35%
65%
36%
64%
37%
63%
68%
32%
68%
32%
69%
31%
2021
2022
2023
2021
2022
2023
** Branch managers, division and department heads, as well as middle level of the Group’s subsidiaries.
Female
Male
We have a diverse team consisting of experienced professionals and young, talented individuals fresh from top
universities in Georgia and abroad. We strongly believe that this mix of ages fosters a dynamic, high-performing team,
resulting in better outcomes.
AGE DIVERSITY STATISTICS 2023
4%
11%
42%
Under 29
30-39
40-49
Over 50
43%
1 The Employee Net Promoter Score (ENPS) was measured in December 2023 by an independent consultant for the Bank’s employees.
2 The European industry average of Employee Net Promoter Score (ENPS) was measured in December 2023 by an independent consultant.
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FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR COLLEAGUES CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 In 2023, we implemented a new Health and Safety Policy. According to Georgian legislation, since September 2019
every company has been obliged to hire a Health, Safety and Environment (HSE) specialist to ensure implementation
of the HSE management system and standards. Currently, we outsource HSE management to an experienced
company that, together with the Bank’s team, is in the process of developing an HSE policy and strategy. Once every
four months, HSE specialists carry out inspections and develop specific reports about the risks and hazards in all
branches and offices. Twice a year, HSE specialists measure the microclimate and light in every branch and office to
make a more comfortable working environment for employees. Risk assessments are updated every four months,
highlighting which risks and hazards should be controlled. Every six months, we conduct fire and evacuation drills.
Once a year we conduct trainings for all employees in HSE, fire, electric, ergonomics, emergency action plan, stress
and human factors. The Health and Safety framework applies to all employees and contractors, both full-time and part-
time.
The Compliance Department regularly conducts tailored training sessions for different employee groups based
on their job specifications in the following areas: anti-corruption, anti-bribery, ethical issues, as well as anti-money
laundering and sanctions. During 2023, over 7,420 employees have undergone such training. Periodic audits are also
conducted by the Internal Audit Department to identify any violations or inappropriate behaviour.
Furthermore, on an annual basis, we conduct mandatory tests for all employees of the TBC Group to raise awareness
and highlight the importance of our internal policies and procedures. The topics include but are not limited to:
safe working environment, code of conduct and code of ethics, data and information security, whistleblowing,
environmental issues, inside information, corruption, money laundering, fraud and operational risks.
This year, internal control team conducted in-person fraud awareness trainings for our front office staff, involving
approximately 1,400 employees. These sessions aimed to enhance their ability to identify and prevent potentially
fraudulent activities, reinforcing our commitment to a secure operational environment. This proactive approach aligns
with our ongoing efforts to uphold the highest standards of integrity and protect our organisation from threats.
GENDER PAY GAP1
We regularly review our pay levels and make sure that men and women are paid equally for doing the same type of job.
In 2023, our mean gender gap for the Bank employees remained at the same level as 2022 at 44%, which means that, on
average, men received higher remuneration than women (mean gender pay gap in hourly pay). This is mainly due to the
higher number of women being employed in junior roles, including front-office customer service positions. While for
middle management, the mean gender pay gap was negative -17% in 2023 and -5% in 2022, which means that women
were better remunerated than men. We remain committed to achieving a better gender balance and increasing the
proportion of women working in senior and middle-level roles.
GENDER DISTRIBUTION ACROSS DIFFERENT POSITIONS*
72%
79%
64%
28%
36%
21%
61%
39%
Full Bank
Middle management
Front office
Back office
*The data in the given table is presented for the Bank only.
Female
Male
ETHICAL STANDARDS, RESPONSIBLE CONDUCT AND SAFETY AT WORK
TBC Group is dedicated to conducting business with a focus on upholding high ethical standards, respecting human
rights, cares about the environmental and community concerns, and encouraging its employees to act with integrity
and responsibility towards each other and other stakeholders.
For this purpose, we have developed a set of policies at the Group level. We closely monitor adherence to these. All
group level policies are revised and updated on a regular basis. During our 2023 revision process, several policies (AML
Policy, Sanctions Policy, Anti-Bribery, Anti-Corruption and Prevention of the Facilitation of Tax Evasion Policy, Group
Risk Appetite Statement related to Financial Crime) were combined into one policy - Anti-Financial Crime Policy. Also,
Code of Ethics and Code of Conduct were combined into one policy - Code of Conduct and Ethics.
These policies can be found on our IR website at www.tbcbankgroup.com and are comprised of:
• Code of Conduct and Ethics;
• Diversity, Equality and Inclusion Policy;
• Anti-Financial Crime Policy;
• Human Rights Policy;
•
• Global Data Protection Policy;
• Environmental and Climate Change Policy.
Incident Response Policy (Whistleblowing Policy);
We have introduced an Employee Discrimination, Violence and Harassment policy and the Health and Safety Policy at
the Bank level, with distribution extending to the group level.
The Employee Discrimination, Violence and Harassment policy applies to all employees, customers and all persons
with whom employees communicate or provide financial services. The policy defines types of violence covering
physical and/or mental violence as well as the threat of damage to a person or property, verbal abuse, psychological
pressure, sexual harassment, etc. Furthermore, the policy establishes a committee which is responsible for reviewing
reported cases, decision-making and adequate response actions, including cancelation and/or restriction of services
for a customer, contractor or other third party. The policy emphasizes once more, how important it is to provide a safe
and secure environment to our employees, both in the front and back office.
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1 The gender pay gap is calculated as of April 2023.
FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR COLLEAGUES CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 Together we’ll win
– supporting the
Georgian Rugby team
in France
As an integral part of our corporate culture, around 500 members of the
TBC Group visited France for the Rugby World Cup to celebrate our
accomplishments and foster a spirit of collaboration.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
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FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR COLLEAGUES CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 COMMUNITY
HOW WE CREATE VALUE FOR
COMMUNITY
COMMUNITY
We acknowledge our social responsibility and are committed to create
a more promising future for the communities in which we operate. Our
wide range of impactful and sustainable initiatives primarily center around
promoting business growth, empowering youth and women, and fostering
culture and sports.
CREATING EQUAL OPPORTUNITIES FOR WOMEN
• TBC and USAID Economic Security Program jointly hosted for the third consecutive year the Grace Hopper Award,
which recognizes accomplished women in the information and communication technology (ICT) industries in 6
different categories. The award also recognizes individuals and organizations for their contributions in empowering
women in ICT industry and for leading positive change in the sector in Georgia.
• The "500 Women in Tech" project is an important initiative aimed at eliminating gender biases in the tech industry
in Georgia. Developed in cooperation with the Business and Technology University of Tbilisi, UN Women, and
the Government of Norway, this program covered over 18 months and provided opportunities for women to
study various professions in the tech field. One of the key goals of the program was to empower women through
continuous learning and skill development. To further this mission, more than 60 participants were upskilled by TBC
IT Academy after completing the project's courses.
SUPPORTING OUR CULTURAL HERITAGE
• Since 2003, TBC has been the main sponsor of the SABA Literary Award, the biggest and preeminent literary event
in Georgia. To celebrate the 21st Anniversary of SABA, we decided to give our readers a special opportunity and
added a new nomination - "SABA Reader". This year, up to 400 books were reviewed and 16 winners were chosen in
12 different categories, with a prize fund of GEL 70,000. TBC and SABA also collaborate on www.saba.com.ge the
largest online platform for Georgian electronic and audio books. The platform was established in 2012 and provides
access to around 7,500 audio and electronic books for approximately 400,000 users.
• Libraries for emigrants - The collaborative efforts of the "TBC for Immigrants" team led to a partnership between
TBC and the National Parliamentary Library of Georgia which aims to make Georgian books available to Georgian
migrants worldwide. As a result of this initiative, thousands of Georgians living abroad now have access to literature
in their native language, with Georgian books distributed to various international libraries, including in Turkey and
Italy.
SUPPORTING RUGBY IN GEORGIA
The year 2023 was very important for Georgian Rugby, as the national team participated in the men’s Rugby World Cup
for the sixth time. TBC and the Georgian Rugby Union are working hand in hand to popularize rugby in Georgia and to
generate national interest in this sport. We believe that rugby can become one of Georgia's calling cards in the world
and play an important role in the development of young generations.
We are committed to the long-term development goals of the Georgian Rugby Union and we believe that in the end
we will win together - this is also the slogan of our campaign dedicated to the national team of Georgia.
SHOVI NATURAL DISASTER RELIEF FUND
On August 3rd, 2023, a TBC charity account was opened to help the victims of the natural disaster in Racha. TBC
donated GEL 500,000, while GEL 200,000 was donated by Georgian citizens, companies and organizations.
TBC has been cooperating with the Red Cross Society of Georgia and USAID's “Strong Village Program” in the
process of targeting the funds collected in the Shovi Fund. In partnership with USAID's Strong Village Program, a grant
competition was announced to support micro and small enterprises in the Glola community of Oni Municipality. A
portion of the total cost of the grant project (GEL 55,000) was financed by TBC's charity account.
SUPPORTING UKRAINIANS
Following the Russian invasion of Ukraine, TBC established a charity fund and invited organizations and individuals
to donate funds in support of the Ukrainian people. Over the past two years around GEL 2,000,000 has been raised
collectively by individuals, organizations and TBC (GEL 250,000 contribution). These funds have been transferred to
the National Bank of Ukraine to support such causes as to alleviate hardships of the Ukrainian people caused by the
war, rebuild Ukraine, support education and health sectors. At the local level, TBC’s Ukraine charity fund financed
local reputable organizations and various projects assisting Ukrainian nationals who had to move to Georgia as war
refugees.
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FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONENCOURAGING MSME BUSINESS DEVELOPMENT AND ENTREPRENEURSHIPIn the ever-evolving landscape of the business world, micro, small and medium enterprises (MSMEs) play an important role in promoting economic growth and entrepreneurship. With a deep understanding of the unique challenges faced by MSMEs, TBC Bank continues to empower these businesses, enabling them to thrive and contribute to the prosperity of the nation. Detailed information regarding these initiatives can be found in our MSME section on pages 52-57.SUPPORTING YOUNG GENERATIONS IN GEORGIAThroughout its history, TBC has consistently backed aspiring young individuals, many of whom have flourished into accomplished artists, scientists and professionals, excelling in diverse fields both within Georgia and internationally. In 2023, TBC maintained its support of the younger generation through the following initiatives: • Since 2018, TBC Scholarship has been one of the largest social responsibility projects in Georgia. The project aims to discover and support young, talented people from vulnerable families from all over the country. Each year, in co-operation with 14 partner organizations that specialise in children’s education and development, up to 200 Georgian young talented adults receive the scholarship in order to develop their knowledge and skills to become successful professionals. Since the launch of the project, TBC has supported up to 400 schoolchildren with various talents in science, sport and arts.• In 2023, TBC Bank was a general sponsor of the Tbilisi 2023 International Book Festival, an event with a 26-year legacy that has grown to become one of the largest and most influential educational fairs in Georgia. Notably, it has become a source of great inspiration for the youth of our nation, as nearly 40% of its attendees belong to Gen Z.• Supporting STEM education is one of TBC’s priorities. This year, with the general support of the TBC Education Program, WRO – World Robot Olympiad was held. The purpose of the competition is to popularize STEM among students and help them develop creative thinking and practical skills. 123 children from 8 different regions of Georgia took part in this year's Olympics. For the last nine years, TBC has partnered with young researchers and innovators in the annual competition for Georgian high school students - Leonardo da Vinci. The competition enables schoolchildren to demonstrate their talents in tech fields and gain access to further their educational opportunities. TBC provides marketing support for the competition, allocates its facilities and awards the winners.• Under the general support and sponsorship of TBC, the 10th anniversary event of the intellectual forum TEDxTbilisi was held in Georgia. TEDxTbilisi is an educational platform, which hosts more than 500 guests every year and allows them to hear innovative and interesting ideas. This was the first collaboration between TEDxTbilisi and TBC, wherein TBC has provided financial and communicational support for the forum.• In 2023, TBC, in collaboration with Geolab, PH International and USAID, created fully funded online technological courses for 10th and 11th graders within the TBC Educational Program. This is one of the company’s biggest educational projects that has beneficiaries in all the regions of Georgia. The program includes three-month technological courses in 9 different focus areas. Within the framework of the project, regional outings all over Georgia are organized. These meetings include recommendations and panel discussions from leading specialists in various fields of technology. At the end of 2023, there are more than 1,200 graduates throughout Georgia. MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 These courses allowed
me to learn new things
in technology and test
myself in this field. With
the knowledge gained
in TBC courses, I can
already create simple
websites. I would definitely
recommend this course to
my friend who is interested
in computer technology
Mariam Suluashvili from Poti
I have been passionate
about this field for years
and I was waiting for an
opportunity that would
bring me closer to my
dream work and help me
to develop in the desired
direction. I'm going
to dedicate my life to
technology, to coding. I
think these TBC courses
will be the initial foundation
of my future profession.”
Liza Tarieladze from Shuakhevi
82
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
I definitely recommend
to all my peers who are
interested in getting to
know modern technologies
better to register for TBC
courses, where you will find
a friendly environment,
professional trainers and
interesting challenges
Luka Zedginidze from Akhaltsihke
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Georgia's Biggest
Technology
Education Program
Fully funded, online technology courses for school students from all across Georgia.
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HOW WE CREATE VALUE FOR COMMUNITY CONTINUEDMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
HOW WE CREATE VALUE FOR
INVESTORS
INVESTORS
FINANCIAL REVIEW
Financial review
in thousands of GEL
Net interest income
Net fee and commission income
Other non-interest income
Total operating income
Total credit loss allowance
Operating expenses
Profit before tax
Income tax expense
Profit for the year
Balance sheet and capital highlights
in thousands of GEL
Total Assets
Gross Loans
Customer Deposits
Total Equity
CET 1 Capital (Basel III)
Tier 1 Capital (Basel III)
Total Capital (Basel III)
2023
1,495,596
334,476
302,040
2,132,112
(147,434)
(681,762)
1,302,916
(183,858)
1,119,058
31-Dec-23
31,771,136
21,276,749
19,942,516
4,747,709
4,235,033
4,772,913
5,374,301
2022
Change YoY
20.3%
25.9%
-31.0%
9.5%
27.6%
21.5%
2.6%
-25.5%
9.4%
1,243,095
265,650
437,644
1,946,389
(115,507)
(560,982)
1,269,900
(246,825)
1,023,075
31-Dec-22*
28,329,010
17,857,276
17,841,357
4,265,802
3,333,039
3,873,439
4,516,525
Risk Weighted Assets (Basel III)
24,336,690
21,508,072
* The capital ratios for 2022 are calculated based on the local accounting standards
Key APMs
ROE
ROA
NIM
Cost to income
Cost of risk
NPL to gross loans
NPL provision coverage ratio
Total NPL coverage ratio
CET 1 CAR (Basel III)
Tier 1 CAR (Basel III)
Total CAR (Basel III)
Leverage (Times)
* Capital ratios for 2022 are calculated based on local accounting standards
For the ratio definitions please refer to APMs on pages 286-290.
Net interest income
2023
25.4%
4.0%
6.3%
32.0%
0.7%
2.0%
74.7%
143.6%
17.4%
19.6%
22.1%
6.7x
2022*
26.0%
4.0%
5.9%
28.8%
0.6%
2.2%
92.1%
155.1%
15.5%
18.0%
21.0%
6.6x
Change YoY
-0.6 pp
0.0 pp
0.4 pp
3.2 pp
0.1 pp
-0.2 pp
-17.4 pp
-11.5 pp
1.9 pp
1.6 pp
1.1 pp
0.1x
Change YoY
In 2023, net interest income amounted to GEL 1,495.6 million, up by 20.3% on a YoY basis.
12.2%
19.1%
11.8%
11.3%
27.1%
23.2%
19.0%
13.2%
The YoY rise in interest income by GEL 469.6 million, or 21.2%, was mostly attributable to an increase in interest income
from loans related to a GEL 3,419.5 million, or 19.1%, increase in the respective portfolio, as well as a 0.6 pp rise in the
respective yield.
YoY interest expense increased by GEL 217.1 million, or 22.2%, mainly related to an increase in the deposit portfolio of
GEL 2,101.2 million, or 11.8%, and a 0.9 pp growth in deposit cost.
In 2023, our NIM stood at 6.3%, up by 0.4 pp on a YoY basis.
In thousands of GEL
Interest income
Interest expense*
Net interest income
NIM
* Interest expense includes net interest gains from currency swaps
2023
2,689,427
(1,193,831)
1,495,596
6.3%
2022
Change YoY
2,219,781
(976,686)
1,243,095
5.9%
21.2%
22.2%
20.3%
0.4 pp
84
85
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONFINANCIAL HIGHLIGHTSIncome statement Non-interest income
Total non-interest income amounted to GEL 636.5 million in 2023, decreasing by 9.5% YoY, primarily due to a
normalisation of FX revenues, offset by growth in fee and commission income.
In thousands of GEL
Non-interest income
2023
2022
Change YoY
Net fee and commission income
334,476
265,650
Net gains from currency derivatives, foreign currency
operations and translation
Other operating income
Total other non-interest income
Credit loss allowance
272,303
29,737
636,516
411,806
25,838
703,294
25.9%
-33.9%
15.1%
-9.5%
Credit loss allowance for loans in 2023 amounted to GEL 130.4 million, which translated into 0.7% cost of risk. The
increase in credit loss allowance for loans was mainly driven by strong loan book growth as well as normalisation of
cost of risk (CoR).
In thousands of GEL
Credit loss allowance for loans to customers
Credit loss allowance for other transactions
Total credit loss allowance
Operating income after expected credit and non-financial
asset impairment losses
Cost of risk
Operating expenses
2022
Change YoY
2023
(130,380)
(17,054)
(147,434)
(105,247)
(10,260)
(115,507)
1,984,678
1,830,882
0.7%
0.6%
23.9%
66.2%
27.6%
8.4%
0.1 pp
In thousands of GEL
Profit before tax
Income tax expense
Profit for the year
ROE
ROA
Funding and Liquidity
2023
1,302,916
(183,858)
1,119,058
25.4%
4.0%
2022
Change YoY
1,269,900
(246,825)
1,023,075
26.0%
4.0%
2.6%
-25.5%
9.4%
-0.6 pp
0.0 pp
As of 31 December 2023, the total liquidity coverage ratio (LCR), as defined by the NBG, was 115.3%, above the 100%
limit, while the LCR in GEL and foreign currency (FC) stood at 109.8% and 120.1%, accordingly, above the respective
limits of 75% and 100%.
Over the same period, the net stable funding ratio (NSFR), as defined by the NBG, stood at 119.9%, compared to the
regulatory limit of 100%.
Minimum net stable funding ratio, as defined by the NBG
Net stable funding ratio as defined by the NBG
Net loans to deposits + IFI funding
Leverage (Times)
Minimum total liquidity coverage ratio, as defined by the NBG
Minimum LCR in GEL, as defined by the NBG
Minimum LCR in FC, as defined by the NBG
Total liquidity coverage ratio, as defined by the NBG
LCR in GEL, as defined by the NBG
LCR in FC, as defined by the NBG
31-Dec-23
100.0%
119.9%
94.6%
6.7x
100.0%
75.0%
100.0%
115.3%
109.8%
120.1%
31-Dec-22*
100.0%
135.3%
87.7%
6.6x
100.0%
75.0%
100.0%
146.6%
164.2%
135.9%
In 2023, our operating expenses rose by 21.5% on a YoY basis, mainly related to the overall business growth.
* The capital ratios for 2022 are calculated based on the local accounting standards
In thousands of GEL
Operating expenses
Staff costs
Allowance of provision for liabilities and charges
Depreciation and amortisation
Administrative and other operating expenses
Total operating expenses
Cost to income
Profit
2023
2022
Change YoY
Regulatory Capital
(385,471)
(306,526)
-
(99,643)
(196,648)
(681,762)
32.0%
(2,000)
(85,108)
(167,348)
(560,982)
28.8%
25.8%
-100.0%
17.1%
17.5%
21.5%
3.2 pp
As of 31 December 2023, our capital ratios remained at a strong level and as a result, our CET1, Tier 1 and Total Capital
ratios stood at 17.4%, 19.6% and 22.1%, respectively, above the minimum regulatory requirements by 3.1 pp, 3.0 pp and
2.3 pp, accordingly. The QoQ decreases in all CET1, Tier 1 and Total capital adequacy ratios were largely driven by high
portfolio growth and annual operational RWA growth.
In FY 2023, we delivered strong profitability and generated GEL 1,119.1 million in profit, up by 9.4% YoY, driven by strong
core revenue growth and asset quality trends.
The YoY decrease in income tax expense is mainly driven by a one-off tax charge in 2022, due to changes in the
Georgian taxation model.
As a result, our ROE and ROA for full year 2023 were 25.4% and 4.0%, respectively.
86
87
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
In thousands of GEL
CET 1 capital
Tier 1 capital
Total capital
Total Risk-weighted assets
Minimum CET 1 ratio
CET 1 Capital adequacy ratio
Minimum Tier 1 ratio
Tier 1 Capital adequacy ratio
Minimum total capital adequacy ratio
Total Capital adequacy ratio
31-Dec-23
4,235,033
4,772,913
5,374,301
24,336,690
14.3%
17.4%
16.6%
19.6%
19.8%
22.1%
31-Dec-22*
3,333,039
3,873,439
4,516,525
21,508,072
11.6%
15.5%
13.8%
18.0%
17.3%
21.0%
* The capital ratios for 2022 are calculated based on the local accounting standards
Loan portfolio
As of 31 December 2023, the gross loan portfolio reached GEL 21,276.7 million, up by 19.1% YoY or 18.6% on a constant
currency basis.
In thousands of GEL
Gross loans and advances to customers
31-Dec-23
31-Dec-221
Change YoY
Retail Georgia
– GEL
– FC
CIB Georgia
– GEL
– FC
MSME Georgia
– GEL
– FC
Total loans and advances to customers*
* Total gross loans and advances to customers include Azerbaijan loan portfolio
Loan yields
– GEL
– FC
Total loan yields*
* Total loans yields include Azerbaijan
7,513,229
5,000,607
2,512,622
8,283,723
3,061,811
5,221,912
6,753,242
4,374,224
2,379,018
6,301,961
2,455,229
3,846,732
5,480,822
4,803,986
2,868,942
2,611,880
2,627,760
2,176,226
21,276,749
17,857,276
2023
11.8%
14.9%
8.5%
11.8%
20221
11.2%
15.5%
7.0%
11.2%
11.3%
14.3%
5.6%
31.4%
24.7%
35.7%
14.1%
9.2%
20.0%
19.1%
Loan portfolio quality
As of 31 December 2023, our asset quality metrics remained strong with NPL to gross loans at 2.0%, driven by strong
performance of the retail portfolio. Over the same period our PAR 90 improved by 0.1 pp driven by retail segment.
Par 90
– Retail Georgia
– CIB Georgia
– MSME Georgia
Total PAR 90*
* Total PAR 90 includes Azerbaijan
Non-performing Loans (NPL)
In thousands of GEL
– Retail Georgia
– CIB Georgia
– MSME Georgia
Total non-performing loans*
* Total non-performing loans include Azerbaijan NPLs
NPL to gross loans
– Retail Georgia
– CIB Georgia
– MSME Georgia
Total NPL to gross loans*
* Total NPL to gross loans include Azerbaijan NPLs
NPL Coverage
– Retail Georgia
– CIB Georgia
– MSME Georgia
31-Dec-23
31-Dec-22
Change YoY
0.8%
0.7%
2.2%
1.1%
1.2%
0.4%
2.2%
1.2%
-0.4 pp
0.3 pp
0.0 pp
-0.1 pp
31-Dec-23
31-Dec-221
Change YoY
127,102
114,130
183,829
425,743
146,167
80,307
162,111
390,651
-13.0%
42.1%
13.4%
9.0%
31-Dec-23
31-Dec-221
Change YoY
1.7%
1.4%
3.4%
2.0%
2.2%
1.3%
3.4%
2.2%
-0.5 pp
0.1 pp
0.0 pp
-0.2 pp
Provision
coverage
120.4%
46.9%
57.5%
74.7%
31-Dec-23
Total
coverage**
179.5%
110.6%
136.0%
143.6%
Provision
coverage
146.6%
57.9%
57.3%
92.1%
31-Dec-221
Total
coverage**
190.3%
119.9%
136.2%
155.1%
Change YoY
Total NPL coverage*
0.6 pp
-0.6 pp
1.5 pp
0.6 pp
** Total NPL coverage include Azerbaijan loans coverage
** Total NPL coverage ratio includes provision and collateral coverage
88
89
1 Segmental numbers of 2022 do not correspond to the numbers disclosed in 2022, due to the updated methodology. For detailed information, please
refer to Note 27.
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
Cost of risk
In 2023, our total cost of risk (CoR) was within the expected range at 0.7%. The main driver was MSME portfolio, while
we saw significant improvements in retail portfolio throughout the year.
Cost of risk (CoR)
– Retail Georgia
– CIB Georgia
– MSME Georgia
Total cost of risk*
* Total cost of risk includes Azerbaijan CoR
Deposit portfolio
2023
0.8%
0.1%
1.4%
0.7%
20221
Change YoY
1.4%
0.0%
0.5%
0.6%
-0.6 pp
0.1 pp
0.9 pp
0.1 pp
The total deposit portfolio amounted to GEL 19,942.5 million as of end 2023, increasing by 11.8% YoY or 11.6% on a
constant currency basis.
In thousands of GEL
Customer accounts
Retail Georgia
– GEL
– FC
CIB Georgia
– GEL
– FC
MSME Georgia
– GEL
– FC
MOF
– GEL
31-Dec-23
31-Dec-221
Change YoY
7,469,587
2,532,317
4,937,270
10,200,321
6,105,284
4,095,037
1,900,459
1,052,675
847,784
515,079
515,079
6,536,649
1,905,377
4,631,272
9,249,232
5,136,442
4,112,790
1,761,342
908,024
853,318
412,442
412,442
14.3%
32.9%
6.6%
10.3%
18.9%
-0.4%
7.9%
15.9%
-0.6%
24.9%
24.9%
11.8%
Total customer accounts*
19,942,516
17,841,357
* Total customer accounts are adjusted for eliminations
Deposit rates
– GEL
– FC
Total deposit rates*
* Total deposit rates include MOF deposits
2023
4.5%
8.4%
0.9%
4.5%
20221
3.6%
7.7%
0.9%
3.6%
Change YoY
0.9 pp
0.7 pp
0.0 pp
0.9 pp
APMs (based on monthly averages, where applicable)
2023
2022*
Profitability ratios:
ROE
ROA
Cost to income
NIM
Loan yields
Deposit rates
Cost of funding
Asset quality & portfolio concentration:
Cost of risk
PAR 90 to gross loans
NPLs to gross loans
NPL provision coverage
Total NPL coverage
Credit loss level to gross loans
Related party loans to gross loans
Top 10 Borrowers to total portfolio
Top 20 Borrowers to total portfolio
Capital & liquidity positions:
Net loans to deposits plus IFI funding
Net stable funding ratio (NSFR)
Liquidity coverage ratio (LCR)
Leverage
CET 1 CAR (Basel III)
Tier 1 CAR (Basel III)
Total 1 CAR (Basel III)
* Capital ratios for 2022 are calculated based on the local accounting standards
The detailed information about APMs is given on pages 286-290.
25.4%
4.0%
32.0%
6.3%
11.8%
4.5%
5.2%
0.7%
1.1%
2.0%
74.7%
143.6%
1.5%
0.1%
6.4%
9.5%
94.6%
119.9%
115.3%
6.7x
17.4%
19.6%
22.1%
26.0%
4.0%
28.8%
5.9%
11.2%
3.6%
4.6%
0.6%
1.2%
2.2%
92.1%
155.1%
2.0%
0.1%
5.4%
8.5%
87.7%
135.3%
146.6%
6.6x
15.5%
18.0%
21.0%
90
91
1 Segmental numbers of 2022 do not correspond to the numbers disclosed in 2022, due to the updated methodology. For detailed information, please
refer to Note 27.
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION RISK MANAGEMENT
Risk management
GOVERNANCE
The Group’s risk governance structure is crafted to ensure robust oversight and strategic decision-making within risk
management. At its core, risk-focused committees and risk functions assume pivotal roles in orchestrating effective
risk management practices within the Group as a whole and its individual subsidiaries.
At the Supervisory Board level, while the boards are responsible for overseeing risk management, in some instances,
activities within risk management and control are delegated to risk committees for effective handling. Responsibilities
encompass aligning risk practices with strategic goals, setting risk appetite, discussing and approving risk policies,
fostering a culture of responsible risk-taking, and monitoring risk identification and assessment processes. The
committees are tasked with overseeing regular assessments of emerging and principal risks that could impact the
business model, performance, solvency, and liquidity. Their leadership is critical for effective risk management and the
long-term viability of the Group.
At the management board level, committees assume a crucial role in steering effective risk management within
subsidiaries. Whether through a single risk committee or multiple committees with more granular scopes (e.g. financial
risks, reputational risk, or information security), their responsibilities include closely overseeing risk exposures and
making key decisions on risk mitigation and control. While specific duties may differ, the overall mission remains
consistent: aligning risk management practices with regulatory requirements and risk tolerance. In cases where Group
companies are of a smaller scale, risk committees may not be present, and the management board itself assumes
these responsibilities.
Risk culture and three lines of defense
At the core of the Group’s Risk Management Framework and practices is a robust risk culture that underscores
the institution’s commitment to prudent and strategic risk-taking. The Group expects its leaders to demonstrate
strong risk management behaviour, providing clarity on the desired level of risk taking, developing their respective
capabilities and frameworks, and motivating employees to ensure risk-minded decision making.
The key principles governing risk culture across all the Group’s subsidiaries include: Board leadership (the Board sets
the tone and establishes a foundation for a risk-aware culture throughout the organization); employee understanding
and accountability (the Group ensures that employees at every level understand the institution’s approach to risk
and there is a clear understanding that individuals are accountable for their actions concerning risk-taking behaviors
aligned with the Group’s standards); communication (open, transparent, and effective communication is fundamental
to the Group’s risk culture); and remuneration incentives (the Group reinforces its risk culture by aligning remuneration
incentives with sound risk management practices).
This holistic approach to risk culture ensures that the Group and its subsidiaries are equipped with a resilient and
proactive mindset, where risk management is ingrained in the organisational DNA.
To comprehensively manage risks, the Group ensures adherence to the three lines of defence model:
• First Line of Defence: Business lines, as frontline defenders, engage in risk-taking activities with awareness of their
impact on risks that may contribute to or hinder the achievement of the Group’s objectives. A well-established risk
culture is a foundation for risk-taking decisions.
• Second Line of Defence: Risk management functions ensure effective risk management and controls by
consolidating expertise, identifying, measuring, and monitoring risks, and assisting the first line. They act
independently from the business lines and provide frameworks and tools for effective risk management.
•
• Third Line of Defence: The internal audit function provides assurance to the Supervisory Board that the risk
management and control efforts of both the first and second lines of defence meet the expectations set by the
Supervisory Board..
Risk appetite
Risk appetite is defined as the set of acceptable limits that shape the combinatory level of risk that the Bank is
prepared to accept in pursuit of return and value creation consistent with the approved strategy. The Group’s Risk
Appetite Framework, which governs enterprise risk management, establishes the extent and process of permissible
risk-taking to guide the Group’s business outcomes.
Considering the ever-changing risk profile of the Group, the risk appetite frameworks of the Group and its key
subsidiaries are regularly reviewed, updated, and approved by the Supervisory Board to make sure they remain aligned
with the Group’s desired level of risk-taking.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR INVESTORS CONTINUEDOVERVIEWThe Group operates a strong, independent, business-minded risk management system. Its main objective is to safeguard the sustainable earnings capacity of the balance sheet on the basis of risk-adjusted returns through the implementation of an efficient risk management system. The Group has adopted four primary risk management principles to better accomplish its major objectives:• Govern risks transparently to ensure cross-functional, harmonised understanding and trust. Consistency and transparency in risk-related processes and policies are preconditions for gaining the trust of multiple stakeholders. Communicating risk goals and strategic priorities to governing bodies and providing a comprehensive follow-up in an accountable manner are key priorities for the staff responsible for risk management;• Manage risks prudently to promote sustainable earnings growth and resilience. Risk management acts as a backstop against unrewarded or even excessive risk-taking. Strong risk management with a well-established, forward-looking stress testing framework ensures the Group’s sustainability and resilience;• Ensure that risk management underpins the implementation of strategy. Staff responsible for risk management provide assurance on the feasibility of achieving objectives through risk identification and management. The risk management function provides a framework under which stakeholders are empowered to make risk-based decisions by identifying, quantifying, and adequately pricing risks. It also creates the conditions for formulating risk mitigation actions, thus supporting the long-term generation of desired returns and the achievement of planned targets;• Use risk management to gain a competitive advantage. Providing tools for faster decision-making and supporting business operations, ensuring the sustainability and resilience of the business model, establishes risk management as a core component of the Group’s competitive strategy.Risk management frameworkThe Group employs a comprehensive enterprise-wide Risk Management Framework, placing a strong emphasis on cultivating a robust risk culture throughout the organisation. This framework is strategically designed to ensure that effective governance capabilities and methodologies are in place, facilitating sound risk management and informed decision-making.Aligned with the Group’s overarching strategic objectives, the risk management framework establishes standards and objectives while delineating roles and responsibilities. The Group’s principal risks, as detailed in this section, are systematically controlled and managed within the framework, promoting consistency across the organisation and its subsidiaries.Led by the Chief Risk Officer and developed by the Group’s independent Risk function, the framework undergoes an annual review and approval process by the Supervisory Board. It encompasses risk governance through the Group’s three lines of defence operating model.The Group’s risk appetite, supported by a robust set of principles, policies, and practices, defines acceptable levels of tolerance for various risks. This structured approach guides risk-taking within established boundaries, ensuring a proactive and disciplined risk management stance.The Group operates under the principle that all teams share responsibility for managing risk, with a particular emphasis on those facing the client. However, the Risk function assumes a crucial role in overseeing and monitoring risk management activities. This includes development of the framework and ensuring adherence to supporting policies, standards, and operational procedures. The Chief Risk Officer regularly reports to the Supervisory Board Risk Committee on the Group’s risk profile and performance as well as on the effectiveness of the Group’s system of internal control.Moreover, the Group has instituted a rigorous process to identify and manage material and emerging threats. These threats, which are deemed to potentially adversely affect the Group’s ability to meet its strategic objectives, are regularly reported to the Supervisory Board. The Group’s applied, comprehensive approach considers the interdependence of material and emerging threats, enhancing the overall risk intelligence provided to stakeholders. Risk identification
Stress testing and contingency planning
It is essential for the Bank to examine its financial performance under conditions that diverge from baseline
expectations. For that reason, the Bank subjects itself to various stress scenarios with the intent to identify
vulnerabilities, quantify potential losses, and assess the sufficiency of risk mitigation measures. Currently, the Bank
has established its own comprehensive stress testing framework, which encompasses a range of scenarios to assess
its resilience. This includes scenarios related to capital, liquidity, credit, cyber and other risk factors relevant to the
prevailing risk environment. Stress testing is crucial to evaluate the ability to withstand adverse conditions, such as
economic downturns, market volatility, and unforeseen events. Regular reviews and adjustments are essential to
ensure the consistent relevance and effectiveness of the stress testing frameworks.
The Bank regularly performs stress test exercises. Stress tests are conducted either within predefined frameworks
such as ICAAP, ILAAP and Recovery Planning, or/and on an ad-hoc basis to assess the impact of certain system-
wide or idiosyncatic events on the Bank’s capital, liquidity, and financial positions. Although the overall stress testing
approach is consistent, the severity of the stress scenarios differs according to the relevant framework.
In addition to stress testing analysis, the Recovery Plan serves as a strategic blueprint for both the Supervisory Board
and the management to ensure readiness for specific stress conditions. The Recovery Plan provides clear recovery
options with specific steps to be undertaken including transparent and timely communication to internal and external
stakeholders. The framework is subject to regular reviews and adjustments to ensure its consistent relevance and
effectiveness.
The Bank also has a Business Continuity Plan in place. This plan ensures that the organisation is prepared to respond
effectively to disruptions. By outlining strategies to maintain revenue streams and minimize financial losses during
disruptions, these practices help to safeguard the organisation’s financial stability and long-term viability.
The identification of risks serves as the foundational step in the Group’s risk management process. This process
systematically recognises and documents any potential direct or indirect risks that could impact the achievement
of organizational objectives. It is imperative that this identification leverages input from the Group’s lines of defence
within the organisation as well as external stakeholders to ensure a comprehensive and anticipatory definition.
The risk identification process within the Group is governed by the Risk Registry Framework. Regular reviews and
adjustments of the Risk Registry are undertaken to ensure its consistent relevance and effectiveness.
Risk measurement
The Group places significant emphasis on a comprehensive approach to risk measurement, aligning with its
commitment towards proactive risk management practices. Each identified risk direction is accompanied by tools
for quantitative and qualitative measurement. The process is dynamic, continuously adapting to changes in the
financial landscape and regulatory environment. Regular reviews and assessments ensure the effectiveness of the risk
measurement tools and methodologies.
Risk mitigation
Risk mitigation is a proactive approach aimed at minimizing the potential negative consequences of risks. To
proactively approach every material risk, the Group develops and implements harmonised risk policies and
frameworks, which play a key role by:
• Setting standards and guidelines – risk policies outline the standards and guidelines for how risks should be
managed within the organisation and provide a structured approach to addressing risks, ensuring consistency and
compliance with regulatory and internal requirements.
• Defining roles and responsibilities – risk policies clarify the roles and responsibilities of different individuals and
departments in the risk mitigation process.
• Establishing procedures – risk policies provide a guiding framework for developing procedures for risk mitigation
activities.
• All policies are subject to regular reviews and updates to adapt to new challenges and refine its risk management
strategies over time.
Risk monitoring and reporting
Risk reporting stands as a cornerstone within the Group’s robust risk management framework. The Group and its
subsidiaries are mandated to establish robust risk reporting processes. These processes are designed to regularly
communicate material risk exposures and the overall risk profile to the Supervisory and Management Boards as well as
senior management.
Regular monitoring is essential to ensure compliance with established risk appetite and regulatory limits. It serves as
a proactive measure to observe the evolution of the prevailing risk environment. The Group emphasises a structured
approach to risk reporting, encompassing monitoring, to effectively capture, assess, and communicate risks. This
ensures the provision of clear and timely information, fostering accountability among stakeholders in managing and
addressing risks.
In addition to routine reporting, ad-hoc reporting can be triggered by key vulnerabilities, significant risk identification,
or deviations from the targeted risk profile. This agile approach ensures that the risk reporting mechanism remains
responsive to emerging risks and evolving circumstances.
Internal control
TBC Group is introducing its streamlined Integrated Control Assurance Framework, seamlessly aligning risk, control,
compliance, and internal audit functions for integrity, efficiency, and regulatory compliance. This comprehensive
framework ensures meticulous adherence to policies and procedures, catering to the diverse needs of our products
and services. The integrated view enables a collective audit asset database that is generated across first, second, and
third lines of defence as well as regulatory and legal, reflecting our commitment to transparency and accountability.
The Internal Control Framework extends to the evaluation, testing, and follow-up of high and critical-risk processes,
while simultaneously focusing on enhancing risk awareness and refining internal controls. Continuous monitoring and
improvement initiatives are integral components, enhancing operational effectiveness within the framework. This
approach fosters a culture of internal control, showcasing our dedication to excellence in managing internal controls
and risks.
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Material existing and
emerging risks
Historically, Georgia has enjoyed close business relations with Russia and Ukraine. The aggression launched by
the Russian Federation against Ukraine on the 24th of February 2022 resulted in a vigorous international response,
which included the imposition of tough economic sanctions by the US, the EU, the UK and other countries. As a
consequence, Russian and Belarusian members of legislative and government agencies, oligarchs, businessmen,
state-owned companies, financial institutions and other legal entities have been directly sanctioned, while numerous
economic restrictions and trade prohibitions have been enforced on specific sectors of activity and categories of
goods and services in Russia, Belarus, Crimea, and other occupied territories. Leading countries are tightening and
expanding the sanctions programme by extending some restrictions and adding new entities and individuals to their
list. Moreover, as a consequence of the conflict, many Russian citizens have relocated to Georgia. Considering the
level of interaction between the Group, Russia and Russian citizens, and the breadth of the sanctions’ prohibitions and
restrictions, the risk of being involved in attempts to circumvent sanctions has substantially increased.
In addition to the sanctions risk related to Russia, a significant increase in international shipping costs has exposed
Georgia to the risk of financing of transshipments via Iran for its import and export activities with Asian countries,
which is prohibited by the US government.
Breaches of the US, EU and UK sanctions regime would expose the Group to fines and regulatory actions by the local
regulator, the National Bank of Georgia, and by US, EU and UK authorities and enforcement agencies. In addition to the
regulatory risk, the Group also faces a reputational risk, mainly with its correspondent banks and other financial third-
party relationships.
Risk mitigation
The Group has a zero tolerance stance towards breaching or facilitating the breach or avoidance of UN, UK, US and
EU sanctions. The Group is committed to avoiding transactions with direct or indirect sanctioned parties or goods or
services.
The Group has adopted a Group-wide Financial Crime Policy that sets requirements in the following key risk areas:
money laundering, terrorist financing, bribery, corruption, and sanctions. The policy applies to all Group member
companies, business activities and employees. Employees receive trainings on financial crime risk management. The
employees are made aware of the Group’s appetite for and approach to financial crime management as well as the
potential consequences following the failure to comply with the financial crime policy.
The Group aims to protect its customers, shareholders, and society from financial crime and any resulting threat. The
Group is fully committed to complying with applicable international and domestic laws and regulations related to
financial crime as well as relevant legislation in other countries where Group member financial institutions operate. It
has a long-standing ambition to meet the respective industry best practice standards.
The Group has implemented internal policies, procedures and detailed instructions designed to prevent any
association with money laundering, financing of terrorism, or any other unlawful activities such as bribery, corruption,
sanctions or tax evasion. The Group’s AML/CTF compliance programme, as implemented, comprises written policies,
procedures, internal controls and systems including, but not limited to: policies and procedures to ensure compliance
with AML laws and regulations; KYC and customer due diligence procedures; a customer acceptance policy; customer
screening against a global list of terrorists, specially designated nationals, relevant financial and other sanctions lists;
regular staff training and awareness raising; and procedures for monitoring and reporting suspicious activities by the
Bank’s customers.
The Bank has dedicated material resources to sanctions risk management. It has:
• Purchased software and databases that assist the Bank on sanctions risk mitigation;
• Engaged external advisers to produce recommendations on improvements in sanctions risk management;
• Engaged external audits to assess internal policies and procedures; and
• Empowered dedicated staff with the relevant, specific knowledge
As part of the second line of defence, the Bank’s Compliance Department seeks to manage risk in accordance with
the risk appetite defined by the Group and promotes a strong risk culture throughout the organisation. The Group
has a sophisticated, artificial intelligence-based AML solution in place to enable AML Officers to monitor clients’
transactions and identify suspicious behaviour. Using data analytics and machine learning, the Group developed an
anomaly detection tool to bring very complex cases to the surface, using client network analysis to identify organized
money laundering cases and enriched pre-defined patterns to create an automated system. This approach has an
immense business value as it uncovers cases in ways that would otherwise be prohibitively expensive, since manual
analysis of these transactions is an extremely time-consuming process for AML officers. The tool compiles all these
incidents into dashboards and presents them to AML officers for further action.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR INVESTORS CONTINUEDRisk Management is a critical pillar of the Group’s strategy. It is essential to identify emerging risks and uncertainties that could adversely impact the Group’s performance, financial condition, and prospects. This section analyses the material principal and emerging risks and uncertainties that the Group faces. However, we cannot exclude the possibility of the Group’s performance being affected by risks and uncertainties other than those listed below.The Supervisory Board has undertaken a robust assessment of both the principal and emerging risks facing the Group and the long-term viability of the Group’s operations, in order to determine whether to adopt the going concern basis of accounting.PRINCIPAL RISKS AND UNCERTAINTIESSPECIFIC FOCUS IN 20231. The Group’s performance may be compromised by adverse developments in the region, in particular the war in Ukraine, the possible spread of the geopolitical crisis and/or the potential outflow of migrants from Georgia as well as further military escalation in the middle east, which could have a material impact on the operating environment in Georgia.Risk descriptionThe Group’s performance is highly vulnerable to geopolitical developments in Georgian market.Although inflows to the Georgian economy are quite diversified, the country is still vulnerable to geopolitical and economic developments in the region. In particular, the Russian invasion of Ukraine, the consequent sanctions imposed on Russia and specific Russian nationals and the resulting elevated uncertainties may have an adverse impact on the Georgian economy. The country is also exposed to renewed military conflicts in its breakaway regions occupied by Russia, while some relatively distant conflicts, such as the escalation in the middle east, might affect the Georgian economy through a stronger US$, higher oil prices, migration flows, etc.While the inbound migration effect continues to make an important contribution to economic activity, any sizeable outflow could lead to a deterioration in the business environment. The reverse would probably be the case in any rapid conflict resolution scenario, which would create positive economic spillovers as well, such as the likely stronger rebound of growth in Russia and Ukraine.Materialisation of these risks could severely hamper economic activity in Georgia, and negatively impact the business environment and client and customer base of the Group.Risk mitigationThe Group actively employs stress testing and other risk measurement and monitoring tools to ensure that early triggers are identified and translated into specific action plans to minimise any negative impact on the Bank’s capital adequacy, liquidity, and portfolio quality. In extreme stress cases, where regulatory requirements may be breached, the Bank has a Recovery Plan in place, which helps to guide the Supervisory Board and the management through the process of recovery of the capital and/or liquidity positions within a prescribed timeframe.2. The Group’s operating region introduces financial rime risk. Risk descriptionFinancial crime risk covers money laundering, terrorist financing, bribery and corruption, and sanctions risks. The risks associated with sanctions have increased, particularly in recent years. Therefore the Group’s specific focus in 2023 remained on managing sanctions risk. The Bank’s Compliance Department works on constantly improving the software to increase operational efficiency and
decrease false-positive alerts. The Bank performs an enterprise-wide AML Risk Assessment annually, in line with the
approved methodology. Overall, during the annual assessment, which took place in 2023, Group-wide residual risks for 2022
were assessed as medium. The Bank’s Compliance Department addresses areas of attention in a timely and proper manner.
FINANCIAL RISKS
1. The majority of the Group’s earnings capacity is generated via credit risk bearing asset side elements.
Risk description
Credit risk is the greatest material risk faced by the Bank, given that the Bank is principally engaged in traditional
lending activities. It is the risk of losses due to the failure of a customer or counterparty to meet their obligations to
settle outstanding amounts in accordance with agreed terms. The Bank’s customers include legal entities as well as
individual borrowers. Due to the high level of dollarisation in Georgia’s financial sector, currency-induced credit risk
is a component of credit risk, which relates to risks arising from foreign currency-denominated loans to unhedged
borrowers in the Bank’s portfolio. Credit risk also includes concentration risk, which is the risk related to credit
portfolio quality deterioration as a result of large exposures to single borrowers or groups of connected borrowers,
or loan concentration in certain economic industries. Losses incurred due to credit risk may be further aggravated by
unfavourable macroeconomic conditions.
Currency-induced credit risk (CICR) – The Bank has a significant credit portfolio in foreign currencies. A potential
material GEL depreciation is one of the most significant risks that could negatively impact credit portfolio quality.
As of 31 December 2023, 48.6% of the Bank’s total gross loans and advances to customers (before provision for loan
impairment) was denominated in foreign currencies. The income of many customers is directly linked to foreign
currencies via remittances, tourism or exports. Nevertheless, customers may not be protected against significant
fluctuations in the GEL exchange rate against the currency of the loan. The GEL remains in free float and is exposed to
a range of internal and external factors that, in some circumstances, could lead to its depreciation. In 2023, the average
US$/GEL currency exchange rate strengthened by 9.9% year-on-year.
Concentration risk – Although the Bank is exposed to single-name and sectoral concentration risks, the Bank’s
portfolio is well diversified both across sectors and single-name borrowers, resulting in only a moderate vulnerability
to concentration risks. However, should exposure to common risk drivers increase, the risks are expected to amplify
accordingly. At a consolidated level, the Bank’s maximum exposure to the single largest industry (real estate) stood at
9% of the loan portfolio as of 31 December 2023. At the same time, exposure to the 20 largest borrowers stood at 9.5%
of the loan portfolio.
In addition, credit risk also includes counterparty credit risk, as the Bank engages in various financial transactions
with both banking and non-banking financial institutions. Through performing banking services such as lending in
the interbank money market, settling a transaction in the interbank foreign exchange market, entering into interbank
transactions related to trade finance or investing in securities, the Bank is exposed to the risk of losses due to the
failure of a counterparty bank to meet its obligations.
Risk mitigation
A comprehensive Credit Risk Assessment Framework is in place with a clear division of duties among the parties
involved in the credit analysis and approval process. The credit assessment and monitoring processes differ by
segment and product type to reflect the diverse nature of these asset classes. The Bank’s credit portfolio is highly
diversified across customer types, product types and industry segments, which minimises credit risk at the Bank
level. As of 31 December 2023, the retail segment represented 35.3% of the total portfolio, which was comprised of
62.9% mortgage and 37.1% non-mortgage exposures. No single business sector represented more than 9% of the total
portfolio as of 31 December 2023.
Credit approval
The Bank focuses on robust credit-granting by establishing clear lending criteria and efficient credit risk assessment
processes, including CICR and concentration risk.
Credit assessments vary by segment and product, reflecting the characteristics of the different asset classes.
Decisions are either automated or manually assessed, following segment-specific guidelines. Automated decisions
use internal credit risk scorecards, aiming for increased automation to enhance decision speed and competitive
advantage. For loans needing manual review or unsuited to automation, credit committees decide, based on the
client’s indebtedness and risk profile, in legal compliance. These committees, structured in multiple tiers, review and
approve loans, differing by size and risk of the credit product.
To address the CICR, the client’s ability to withstand a certain amount of exchange rate depreciation is incorporated
into the credit underwriting standards, which also include significant currency depreciation buffers for unhedged
borrowers.
Credit monitoring
The Bank emphasizes proactive risk management, with credit risk monitoring as a core element. We use a robust
system to quickly respond to macro and micro changes, identifying vulnerabilities in our credit portfolio to make
informed decisions. Our risk resilience involves regular monitoring of concentration risk, CICR, and other credit risk
factors. We employ a portfolio supervision system to detect weaknesses in credit exposures, analyse risk trends,
and recommend actions against emerging risks. Particular attention is paid to currency-induced credit risk, due to
the high share of loans denominated in foreign currencies in the Bank’s portfolio. The vulnerability to exchange rate
depreciation is monitored in order to promptly implement an action plan, as and when needed. Given the experience
and knowledge built through recent currency volatility, the Bank is in a good position to promptly mitigate exchange
rate depreciation risks.
Tailoring monitoring to segment specifics, we focus on individual credit exposures, portfolio performance, and
external trends affecting risk profiles. Our vigilant stance includes early-warning systems to identify financial
deterioration or fraud in clients’ positions. These systems track signs like overdue days, refinancing, LTV changes, or
tax liens. Large overdue exposures receive individual monitoring to assess clients’ loan servicing capabilities.
In fraud prevention, we monitor first payment defaults across credit experts, bank branches, or companies employing
our clients. Our institutions have credit monitoring and reporting processes for their Supervisory and Management
Boards or risk committees, ensuring transparency and informed decision-making.
In addition to our underwriting and monitoring efforts, relevant buffers are built into our capital adequacy
requirements to ensure that our banks are sufficiently capitalised to cover CICR, concentration risk, and credit risk
in general. We utilize stress testing and sensitivity analysis to assess our credit portfolio’s resilience, preparing for
different economic conditions and evolving client needs.
Credit risk appetite
The credit risk appetite of the Bank is defined by the Risk Appetite Frameworks of the Group and its financial
institution subsidiaries, guiding credit risk-taking. These frameworks offer qualitative guidance and quantitative limits
to set acceptable credit risk levels. Key quantitative metrics include NPL proportion, cost of risk, and NPL coverage.
Risk appetite frameworks also set strict limits and ensure close monitoring of Currency-Induced Credit Risk and
Concentration Risk, covering sectoral and single-name concentrations.
Credit ratings are essential in determining credit risk tolerance. They provide a thorough assessment of a borrower’s
creditworthiness, which is crucial for understanding their ability to fulfill their financial commitments. These ratings
are fundamental in establishing guidelines for acceptable risk levels and are integrated into our risk management
framework. They enhance our ability to define and manage credit risk, allowing for a detailed understanding of
borrower creditworthiness, leading to informed decision-making and appropriate risk threshold setting.
We approach credit risk by combining comprehensive risk appetite frameworks with the strategic use of credit ratings.
This integrated approach enables the Bank to effectively navigate the changing credit risk landscape with resilience
and agility.
Collateral management
Collateral is a key factor in mitigating credit risk, forming a large part of loan portfolios. TBC Bank accepts diverse
collaterals like real estate, cash deposits, vehicles, equipment, inventory, precious metals, securities, and third-party
guarantees, according to credit product type and the borrower’s credit risk. A centralised unit of TBC Bank oversees
collateral management, ensuring its adequacy in credit risk mitigation.
The collateral management framework includes policy-making, independent valuation, a haircut system during
underwriting, monitoring (revaluations, statistical analysis) and portfolio analysis. Collateral Management & Appraisal
Department (CMAD) complies the draft documents: collateral management policy (approved by the SB of TBC Bank
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rules (approved by Risk Director of the Bank); purchases an appraisal service that must be in line with International
Valuation Standards (IVS), acting NBG regulations and internal rules; authorizes appraisal reports and manages the
collateral monitoring process (collaterals with high market value are revaluated annually, while statistical monitoring is
used for collaterals with low market value).
The CMAD quality checks for valuations involves internal employee reviews and external company assessments.
Collateral management activities are largely automated through a web-application.
Collections and recoveries
In managing credit risk, the Bank activates collection and recovery procedures when clients miss payments or
their financial standing deteriorates, threatening exposure coverage. This process begins after failed attempts at
restructuring non-performing exposures. Specialised teams in each segment handle overdue exposures, creating loan
recovery plans tailored to clients’ specific situations and adhering to our ethical code.
Our collections processes involve supporting clients struggling to meet their obligations. The strategies depend on
exposure size and type, with customised plans for different customer subgroups based on their risk levels. The goal
is to negotiate with clients to secure cash recoveries through revised payment schedules as the primary repayment
source. If acceptable terms are not reached, recovery may involve selling assets or repossessing collateral. Foreclosure
may be initiated through legal processes if negotiation fails. Additional recovery strategies include sale of the portfolio
and collaboration with external debt collection agencies.
These measures reflect our commitment to responsible credit risk management, safeguarding financial stability, and
maintaining ethical standards within the Bank.
Counterparty risk
To manage counterparty risk, the Bank defines limits on an individual basis for each counterparty, while on a portfolio
basis it limits the expected loss from both treasury and trade finance exposures. As of 31 December 2023, the Bank’s
interbank exposure was concentrated with banks that external agencies, such as Fitch, Moody’s and Standard and
Poor’s, have assigned high A-grade credit ratings.
Measurement of expected credit losses
The Bank’s provisioning methodology is in line with IFRS 9 requirements. The methodology, along with a
corresponding IT provisioning tool, was developed with support from Deloitte and representatives of the Bank’s risk,
finance and IT departments.
The IFRS 9 models are complex and make it possible to incorporate expectations of macro developments based on
predefined scenarios. The expected credit loss (ECL) measurement is based on four components used by the Bank: (i)
the probability of default (PD); (ii) exposure at default (EAD); (iii) loss given default (LGD); and (iv) the discount rate. The
Bank uses a three-stage model for ECL measurement and classifies its borrowers in three stages:
• Stage I – the Bank classifies its exposures as Stage I if no significant deterioration in credit quality has occurred
since the initial recognition, and the instrument was not credit-impaired when initially recognised;
• Stage II – the exposure is classified as Stage II if any significant deterioration in credit quality has been identified
since the initial recognition, but the financial instrument is not considered credit-impaired; and
• Stage III – the exposures for which credit-impaired indicators have been identified are classified as Stage III
instruments.
• The ECL amount differs depending on exposure allocation to one of the three stages:
• Stage I instruments – the ECL represents that portion of the lifetime ECL that can be attributed to default events
occurring within the subsequent 12 months from the reporting date;
• Stage II instruments – the ECL represents the lifetime ECL, i.e. credit losses that can be attributed to possible default
events during the whole lifetime of a financial instrument. Generally, lifetime is set equal to the remaining contractual
maturity of the financial instrument. Factors such as the existence of contractual repayment schedules, options for
the extension of repayment maturity and monitoring processes held by the Bank affect the lifetime determination;
• Stage III instruments – a default event has already occurred and the lifetime ECL is estimated based on the
expected recoveries.
The Bank actively reviews and monitors the results produced from the IFRS 9 models to ensure that the respective
results adequately capture the expected losses.
2. The Bank underwrites the responsibility to adhere at all times to minimum regulatory requirements on capital,
which may compromise growth and strategic targets. Additionally, adverse changes in FX rates may impact
capital adequacy ratios.
Risk description
Capital risk is a significant focus area for the Bank. Capital risk is the risk that a bank may not have a sufficient level
of capital to maintain its normal business activities, and to meet its regulatory capital requirements under normal
or stressed operating conditions. The management’s objectives in terms of capital management are to maintain
appropriate levels of capital to support the business strategy, meet regulatory and stress testing-related requirements,
and safeguard the Bank’s ability to continue as a going concern.
The Bank’s ability to comply with regulatory requirements can be affected by both internal and external factors. Some
key concerns include the deterioration of asset quality leading to losses, reductions in income, rising expenses, and
potential difficulties in raising capital.
Local currency volatility has been and remains a significant risk for the JSC TBC Bank’s capital adequacy. A 10% GEL
depreciation would translate into a 0.8 pp, 0.7 pp and 0.6 pp drop in JSC TBC Bank’s CET 1, Tier 1 and Total regulatory
capital adequacy ratios, respectively.
Risk mitigation
The Bank’s entities undertake stress testing and sensitivity analysis to quantify extra capital consumption under
different scenarios. Such analyses indicate that the Bank holds sufficient capital to meet the current minimum
regulatory requirements. Capital forecasts, as well as the results of stress testing and what-if scenarios, are actively
monitored with the involvement of the Bank’s Executive Management and the Risk Committee of the Supervisory
Board to help ensure prudent management and timely action, when needed. These analyses are used to set
appropriate risk appetite buffers internally, on top of the regulatory requirements.
The Bank regularly performs stress tests serving multiple purposes. They are performed routinely, either under the
frameworks listed or on an ad-hoc basis, to assess the magnitude of certain stressful environments. Stress tests are
performed for the Internal Capital Adequacy Assessment Process (ICAAP), regulatory stress tests and the Recovery
Plan, among other purposes.
The key objective of the regulatory stress test is to define the net stress test buffer under the capital adequacy
minimum requirement framework. Starting from 2018, regulatory stress tests are performed and submitted to the
regulator.
The purpose of the ICAAP is to identify all the material risks faced by the Bank and to have an internal view of the
capital needed to cover those risks. The objective of the ICAAP is to contribute to the Bank’s continuity from a capital
perspective by ensuring that it has sufficient capital to bear its risks, absorb losses and follow a sustainable strategy,
even during a stress period.
Stress testing under the Recovery Plan assumes more severe stress scenarios, specifically aimed at breaching
regulatory requirements and assessing the Bank’s ability to recover the capital position with the help of viable recovery
options within a reasonable timeframe.
Under the risk appetite and the capital planning process, the Bank sets aside capital as a buffer to withstand certain
amount of local currency fluctuation.
3. The Group inherently is exposed to funding and market liquidity risks.
Risk description
Liquidity risk is the risk that the Group either may not have sufficient financial resources available to meet all its
obligations and commitments as they fall due or may only be able to access those resources at a high cost.
Liquidity risk is categorised into two risk types: funding liquidity risk and market liquidity risk.
a. Funding liquidity risk is the risk that the Group will not be able to efficiently meet both expected and unexpected
current and future cash flows without affecting either its daily operations or its financial condition under both
normal conditions and during a crisis.
1 Excluding USD Mandatory reserves, where no interest is accrued from May, 2022 per NBG regulation.
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price because of inadequate market depth or market disruption.
While the Group currently has sufficient financial resources available to meet its obligations as they fall due, liquidity
risk is inherent in banking operations and can be heightened by numerous factors. These include an over-reliance on,
or an inability to access, a particular source of funding, as well as changes in credit ratings or market-wide phenomena.
Access to credit for companies in emerging markets is significantly influenced by the level of investor confidence
and, as such, any factors affecting investor confidence (e.g. a downgrade in credit ratings, central bank or state
interventions, or debt restructurings in a relevant industry) could influence the price or the ability to access the funding
necessary to make payments in respect of the Group’s future indebtedness.
Both funding and market liquidity risks can emerge from a number of factors that are beyond the Group’s control.
There is adequate liquidity to withstand significant withdrawals of customer deposits, but the unexpected and rapid
withdrawal of a substantial number of deposits could have a material adverse impact on the Group’s business, financial
condition, and results of operations and/or prospects.
Risk mitigation
The Group’s liquidity risk is managed though the Supervisory Board’s Group Liquidity Risk Management Policy. The
Assets and Liabilities Management Committee (ALCO) is the core asset-liability management body ensuring that
the principal objectives of the Group’s Liquidity Risk Management Policy are met on a daily basis. The approved
Liquidity Risk Management Framework ensures the Group meets it payment obligations under both normal and stress
situations.
To mitigate the liquidity risk, the Bank holds a solid liquidity position by maintaining comfortable buffers over the
regulatory minimum requirements. All regulatory ratios are monitored regularly, with an early-warning system in
place to detect potential adverse liquidity events. This is facilitated by the Risk Appetite Frameworks of the Bank’s
relevant financial institutions, which set buffers over the regulatory limits, ensuring early detection of potential liquidity
vulnerabilities. The liquidity risk position and compliance with internal limits are closely monitored by the ALCO of
JSC TBC Bank.
JSC TBC Bank’s liquidity risk is managed by the Balance Sheet Management division and Treasury department
and is monitored by the Management Board and the ALCO, within their pre-defined functions. The Financial Risk
Management (FRM) division is responsible for developing procedures and policy documents and setting risk
appetites on funding and market liquidity risk management. In addition, the FRM performs liquidity risk assessments
and communicates the results to the Management Board and the Risk Committee of the Supervisory Board on a
regular basis.
The Bank maintains a diversified funding structure to manage the respective liquidity risks. The Bank’s principal
sources of liquidity include customer deposits and accounts, borrowings from local and international banks and
financial institutions, subordinated loans from international financial institution investors, local interbank short-
duration term deposits and loans, proceeds from the sale of investment securities, principal repayments on loans,
interest income, and fee and commission income. The Bank relies on relatively stable deposits from Georgia as
its main source of funding. The Bank also monitors the deposit concentration for large deposits and sets limits for
deposits by non-Georgian residents in its deposit portfolio.
To maintain and further enhance its liability structure, the Bank sets targets for deposits and funds received from
international financial institution investors in its risk appetite via the respective ratios. The loan to deposit and IFI
funding ratio (defined as the total value of net loans divided by the sum of the total value of deposits and funds
received from international financial institutions) stood at 94.6%, 87.7% and 101.3%, as of 31 December 2023, 2022 and
2021, respectively.
The management believes that, in spite of a substantial portion of customers’ accounts being on demand, the
diversification of these deposits by the number and type of depositors, coupled with the Bank’s past experience,
indicates that these customer accounts provide a long-term and stable source of funding for the Bank. Moreover, the
Bank’s liquidity risk management includes the estimation of maturities for its current deposits. The estimate is based
on statistical methods applied to historic information about the fluctuations of customer account balances.
Stress testing is a major tool for managing liquidity risk. Stress testing exercises are performed within the ILAAP
and Recovery Plan Frameworks as well as on an ad hoc basis, when there is a significant change in the prevailing risk
environment. The former assesses the adequacy of the liquidity position and relevant buffers and whether they can
sustain plausible severe shocks, while the latter provides a set of possible actions that could be taken in the unlikely
event of regulatory requirement breaches to support a fast recovery in the liquidity position. The recovery plan
encompasses a Liquidity Contingency Funding Plan which, along with the risk indicators and mitigation actions,
outlines the roles and responsibilities of those involved in executing the plan. Both the ILAAP and the Recovery Plan
are performed by the Bank on an annual basis.
4. Market risk arises from optimising capital allocation and asset liability management operations.
Risk description
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in
market variables such as interest rates, foreign exchange rates, and equity prices.
Foreign exchange (FX) risk arises from the potential change in foreign currency exchange rates, which can affect
the value of a financial instrument. This risk stems from the open currency positions created due to mismatches in
foreign currency assets and liabilities. The Bank identifies, assesses, monitors, and communicates the risk arising from
exchange rate movements and the factors that influence this risk.
Interest rate risk arises from potential changes in market interest rates that can adversely affect the value of the Bank’s
financial assets and liabilities. This risk can arise from maturity mismatches between assets and liabilities, as well as
from the re-pricing characteristics of such assets and liabilities.
The majority of the deposits and loans offered by the Bank are at fixed interest rates, while a portion of the Bank’s
borrowing is based on a floating interest rate. Since the interest margins on those assets and liabilities have different
repricing characteristics, they may increase or decrease as a result of market interest rate changes.
Risk mitigation
The Bank’s market risk is governed through the Supervisory Board’s Bank FX Risk Management and Bank Interest Rate
Risk Management policies.
FX Risk: To mitigate FX Risk, the Bank sets risk appetite and operational limits on the level of exposure by currency as
well as on aggregate exposure positions that are more conservative than those set by the regulators. Compliance with
the limits is closely monitored by t ALCO of JSC TBC Bank. Compliance with these limits is also reported periodically
to the Management Board and to the Supervisory Board and its Risk Committee.
In addition, the heads of the treasury department and financial risk management division separately monitor JSC TBC
Bank’s compliance with the set limits daily. In order to safeguard against the inherent volatility in the foreign exchange
market, the Bank employs a risk management process aimed at mitigating FX risk. This involves the strategic use of
spot, forward, and swap transactions.
To assess currency risk, JSC TBC Bank performs a VAR sensitivity analysis on a regular basis. This analysis calculates the
effect on the Bank’s income determined by the worst possible movements of currency rates against the Georgian Lari,
with all other variables held constant. During the years ended 31 December 2023 and 2022, this sensitivity analysis did
not reveal any significant potential effect on the Bank’s equity: as of 31 December 2023, the maximum loss with a 99%
confidence interval was equal to GEL 10.2 million, compared to a maximum loss of GEL 6.0 million as of 31 December 2022).
Interest rate risk: To mitigate interest rate risk, JSC TBC Bank considers numerous stress scenarios, including
different yield curve shifts and behavioural adjustments to cash flows (such as deposit withdrawals or loan
prepayments), to calculate the impact on one year profitability and the enterprise value of equity. In addition,
appropriate limits on both net interest income (NII) and economic value of equity (EVE) sensitivities are set within
the Risk Appetite Framework approved by the Supervisory Board. Please see details in Interest Rate Risk in Note 35,
Financial and Other Risk Management on page 255.
Interest rate risk in JSC TBC Bank is managed by the Balance Sheet Management division and the Treasury
department and is monitored by the ALCO. The ALCO decides on actions that are necessary for effective interest
rate risk management and follows up on their implementation. The Financial Risk Management division is responsible
for developing guidelines and policy documents and setting the risk appetite for interest rate risk. The major
aspects of interest rate risk management development and the respective reporting are periodically provided to the
Management Board, the Supervisory Board, and the Risk Committee.
To minimize interest rate risk, the Bank regularly monitors interest rate (re-pricing) gaps by currencies and, in case of
need, decides to enter into interest rate derivatives contracts.
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case of adverse interest rate movements, thereby limiting exposure to interest rate risk. The management also believes
that the Bank’s interest rate margins provide a reasonable buffer to mitigate the effect of a possible adverse interest
rate movement.
5. Any decline in the Group’s net interest income or net interest margin (NIM) could lead to a reduction in
profitability, impacting the accumulation of organic capital.
Risk description
Net interest income accounts for most of the Group’s total income. Potential new regulations, along with a high level
of competition in Georgia, may negatively impact the Bank’s net interest margin. Additionally, downward trend of GEL
refinance rate and foreign currency benchmark rates will continue to have a negative pressure on NIM in 2024.
In 2023, the robust 0.4 pp YoY growth in NIM to 6.3% was mainly driven by the growth in loan yields in Georgia
influenced by high NBG Refinance and other foreign market rates.
Risk mitigation
The Group continues to focus on the growth of fee and commission income, driven by increased efforts towards
customer experience-related initiatives and innovative products in the Georgian market. This safeguards the Bank
from potential margin compressions on lending and deposit products in the future.
To meet its asset-liability objectives and manage the interest rate risk, the Bank uses a high-quality investment
securities portfolio, long-term funding, and derivative contracts.
6. The Group’s performance may be compromised by adverse developments in the economic environment.
Risk description
A potential slowdown in economic growth in Georgia will likely have an adverse impact on the repayment capacity of
borrowers, restraining their future investment and expansion plans. Negative macroeconomic developments could
compromise the Group’s performance in various ways, such as exchange rate depreciation, a sizable decline in gold
prices, a spike in interest rates, rising unemployment, a decrease in household disposable income, falling property
prices, worsening loan collateralisation, or falling debt service capabilities of companies as a result of decreasing sales.
Potential political and economic instability in Georgia’s neighbouring countries and main trading/economic partners
could negatively affect their economic outlook through worsening current and financial accounts in the balance of
payments (e.g. decreased exports, tourism inflows, remittances and foreign direct investments).
After two years of consecutive double-digit expansion, Georgian economic growth started to normalise, although
it still remained strong at 7.5% in 2023. Normalisation was driven by a moderation in trade flows and remittances,
which were affected by lower international commodity prices and broadly flat migrant inflows. At the same time,
conventional tourism and FDIs remained resilient. Disinflationary movement in consumer price dynamics, mainly
driven by the imports, led annual CPI growth to decelerate significantly, standing at 0.4% in December 2023. Resilient
inflows enabled the GEL to continue appreciating in the first half of the year. The second half was characterised by
normalisation towards the long-term trend. Accordingly, while the GEL exchange rate experienced some volatility
throughout the year, currency inflows aided by central bank interventions in the second half of the year were sufficient
to keep the rate broadly stable. The NBG remained hawkish and delivered only four cuts, reducing the monetary policy
rate from 11.0% to 9.5%. Moreover, the central bank accumulated a substantial number of reserves with a net purchase
of US$ 1,446 million in January-August 2023, causing gross international reserves to hit an all time high of US$5.3
billion. The NBG only switched to net sales in September, supplying US$ 169 million to the market in the last four
months of the year.
The credit market increased by 17.0% year on-year as of December 2023, at constant exchange rates, compared to
12.4% growth at the end of 2022, mainly on the back of business loans, while retail growth slightly moderated. Despite
the still strong economic growth and broadly stable GEL, credit penetration level in Georgia increased in 2023 due to
accelerated lending - domestic credit provided by the banking sector relative to GDP stands at 65.6%, up from 61.5%
in 2022, however, down from 71.5% in 2021. In contrast, asset quality still improved as non-performing loans declined
further to 1.5% per IMF definition.
Risk mitigation
To decrease its vulnerability to economic cycles, the Group identifies cyclical industries and proactively manages
its underwriting approach and clients within its Risk Appetite Framework. The Group has in place a macroeconomic
monitoring process that relies on close, recurrent observation of the economic developments in Georgia and
neighbouring countries to identify early warning signals indicating imminent economic risks. This system allows the
Group to promptly assess significant economic and political events and analyse their implications for the Group’s
performance. These implications are duly translated into specific action plans with regards to reviewing underwriting
standards, risk appetite metrics and limits, including the limits for each of the most vulnerable industries. Additionally,
the stress testing and scenario analysis conducted during the credit review and portfolio-monitoring processes
enable the Group to evaluate the impact of macroeconomic shocks on its business in advance. Resilience towards
a changing macroeconomic environment is incorporated into the Group’s credit underwriting standards. As such,
borrowers are expected to withstand certain adverse economic developments through prudent financials, debt-
servicing capabilities and conservative collateral coverage.
Taking into account the regional crisis, the Group adjusted its Risk Management Framework, leveraging its pre-existing
stress testing practices. This included more thorough and frequent monitoring of the portfolio as well as stress testing,
to ensure close control of changes in capital, liquidity, and portfolio quality in times of increased uncertainty.
For more details on the developments in the economies of the Group’s operations in 2023, please refer to the
Operating Environment section on pages 24-26.
NON-FINANCIAL RISKS
1. The Group is exposed to regulatory and enforcement action risk.
Risk description
The Group’s activities are highly regulated and thus face regulatory risk. In Georgia, the NBG sets lending limits and
other economic ratios (including, but not limited to, lending, liquidity, and investment ratios) along with the mandatory
capital adequacy ratio. In addition to complying with the minimum reserves and financial ratios, the Bank is required to
submit periodic reports. It is also subject to the Georgian tax code and other relevant laws.
Following the Company’s listing on the London Stock Exchange’s premium segment, the Group became subject to
increased regulations from the UK Financial Conduct Authority. In addition to its banking operations, the Group also
offers other regulated financial services products, including leasing, insurance, and brokerage services.
The Group is also subject to financial covenants in its debt agreements. For more information, see the Group’s Audited
Financial Statements.
Risk mitigation
The Group has established systems and processes to ensure full regulatory compliance, which are embedded in all
levels of the Group’s operations. The Group’s “three lines of defence” model defines the roles and responsibilities for
risk management.
The first line of defence is responsible for compliance risk, strongly supported by the Bank’s compliance department
as the second line of defence. The Chief Compliance Officer oversees compliance within the Bank and reports
quarterly to the relevant committee of the Supervisory Board, with a managerial reporting line to the CEO. The
Group’sBank’s Audit Committee is responsible for ensuring regulatory compliance at the Supervisory Board level.
The Bank’s compliance programme provides compliance policies, trainings, risk-based oversight and ensures
compliance with regulatory requirements.
The Bank’s Compliance Department seeks to manage regulatory risk by:
• Ensuring that applicable changes in laws and regulations are implemented by the process owners in a timely
manner;
• Participating in the new product/process risk approval process;
• Conducting analysis of customer complaints, the operational risk event database, internal audit findings and
litigation cases to proactively reveal process weaknesses; and
• Conducting an annual compliance risk assessment (RCSA) of internal processes.
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addressed in a timely and appropriate manner. Additionally, as a second line of defence the Compliance Department
defines the risk metrics and monitors them at the frequencies defined by the Bank’s Risk Appetite Framework. The
Compliance Department is responsible for escalating breaches of defined limits to the relevant boards.
2. The Group is exposed to legal risk.
Risk description
Legal risk refers to the potential for loss, whether financial or reputational, resulting from penalties, damages, fines,
or other forms of financial detriment, which impacts or could impact one or more entities of the Group and/or its
employees, business lines, operations, products and/or its services, and results from the failure of the Group to meet
its legal obligations, including regulatory, contractual or non-contractual requirements.
Risk mitigation
The legal function as a second line of defence is an independent function hierarchically integrated with all the Group’s
legal teams. The Group’s businesses and lines have responsibility for identifying and escalating legal risk in their area
to the legal function.
The legal function is entrusted with the responsibility of (a) managing (including prevention) legal risks; and (b)
interpreting the laws and regulations applicable to the Group’s activities and providing legal advice and guidance to
the Group. The management of the legal risks includes defining the relevant legal risk policies, developing Group-
wide risk appetite for legal risk, and oversight of the implementation of controls to manage and escalate legal risk. The
advisory responsibility of the legal function is to provide legal advice to Executive Officers and the Supervisory Board
in a manner that meets the highest standards.
The senior management of the legal function oversees, challenges and monitors the legal risk profile and
effectiveness of the legal risk control environment across the Group. The legal risk profile and control environment are
reviewed by management through business risk committees and control committees. The Group Risk Committee is
the most senior executive body responsible for reviewing and monitoring the effectiveness of legal risk management
across the Group.
3. The Group’s operational complexity generates risk that arises from inefficient and uncontrolled operations that
could in turn adversely impact profitability and reputation.
Risk description
One of the main risks that the Group faces is operational risk, which is the risk of loss resulting from internal and
external fraud events, inadequate processes or products, business disruptions and systems failures, human error or
damages to assets. Operational risk also implies losses driven by legal, compliance, or cybersecurity risks.
The Group is exposed to many types of operational risk, including fraudulent and other internal and external criminal
activities; breakdowns in processes, controls or procedures; and system failures or cyber-attacks from an external
party with the intention of making the Group’s services or supporting infrastructure unavailable to its intended
users, which in turn may jeopardize sensitive information and the financial transactions of the Group, its clients,
counterparties, or customers.
Moreover, the Group is subject to risks that cause disruption to systems performing critical functions or business
disruption arising from events wholly or partially beyond its control, such as natural disasters, transport or utility
failures, etc., which may result in losses or reductions in service to customers and/or economic losses to the Group.
The operational risks discussed above are also applicable where the Group relies on outsourcing services from third
parties. Considering the dynamic environment and sophistication of both banking services and possible fraudsters,
the importance of constantly improving processes, controls, procedures and systems is heightened to ensure risk
prevention and reduce the risk of loss to the Group.
The increased complexity and diversification of operations, coupled with the digitalisation of the banking sector, mean
that fraud risks are evolving. External fraud events may arise from the actions of third parties against the Group, most
frequently involving events related to banking cards, loans, and client phishing. Internal fraud events arise from actions
committed by the Group’s employees, although such events happen less frequently. During the reporting period, the
Group faced several instances of fraud, none of which had a material impact on the Group’s profit and loss statement.
The rapid growth in digital crime has exacerbated the threat of fraud, with fraudsters adopting new techniques and
approaches to obtain funds illegally. Therefore, unless properly monitored and managed, the potential impact could
become substantial.
Risk mitigation
To oversee and mitigate operational risk, the Group maintains an Operational Risk Management Framework, which is
an overarching document that outlines the general principles for effective operational risk management and defines
the roles and responsibilities of the various parties involved in the process. Policies and procedures enabling the
effective management of operational risks complement the framework. The Management Board ensures a strong
internal control culture within the Group, where control activities are an integral part of operations. The Board sets the
operational risk appetite and compliance with the established risk appetite limits is monitored regularly by the Risk
Committee of the Supervisory Board.
The Group utillises the three lines of defence principle, where the operational risk management department serves as
a second line of defence, responsible for implementing the framework and appropriate policies and methodologies to
enable the Group to manage operational risks.
The Group actively monitors, detects, and prevents risks arising from operational risk events and has permanent
monitoring processes in place to detect unusual activities or process weaknesses in a timely manner. The risk
and control self-assessment exercise (RCSA) focuses on identifying residual risks in key processes, subject to the
respective corrective actions. Through our continuous efforts to monitor and mitigate operational risks, coupled with
the high level of sophistication of our internal processes, the Group ensures the timely identification and control of
operational risk-related activities. Various policies, processes, and procedures are in place to control and mitigate
operational risks, including, but not limited to:
• The Group’s Risk Assessment Policy, which enables thorough risk evaluation prior to the adoption of new products,
services, or procedures;
• The Group’s Outsourcing Risk Management Policy, which enables the Group to control outsourcing (vendor) risk
arising from adverse events and risk concentrations due to failures in vendor selection, insufficient controls and
oversight over a vendor and/or services provided by a vendor, and other impacts on the vendor;
• The Risk and Control Self-Assessment (RCSA) Policy, which enables the Group to continuously evaluate existing
and potential risks, establish risk mitigation strategies and systematically monitor the progress of risk mitigation
plans. The completion of these plans is also part of the respective managers’ key performance indicators;
• The Group’s Operational Risk Event Identification Policy, which enables the Group to promptly report on operational
risk events, perform systematic root-cause analysis of such events, and take corrective measures to prevent the
recurrence of significant losses. A unified operational loss database enhances further quantitative and qualitative
analysis. The Operational Risk Event Identification Policy also oversees the occurrence of IT incidents and the
respective activities targeted at solving the identified problems;
• The Group’s Operational Risk Awareness Programme, which provides regular trainings to the Group’s employees
and strengthens the Group’s internal risk culture;
• The Group also utilises risk transfer strategies, including obtaining various insurance policies to transfer the risks of
critical operational losses.
The Operational Risk Management Department has reinforced its risk assessment teams and methodologies to
further fine-tune the existing control environment. The same applies to the set of actions aimed at homogenising
operational risk management processes throughout the Group’s member companies.
During the reporting period, one of the key operational risk management focus areas was the Risk and Control
Self- Assessment (RCSA) exercise, under which the Group’s top priority processes were reviewed and areas of
improvement were identified.
Moreover, to further mitigate operational risks driven by fraudulent activities, the Group has introduced a sophisticated
digital fraud prevention system, which analyses client behaviour to further minimise external fraud threats.
The Operational Risk Management Framework and its complementary policies were updated to ensure effective
execution of the operational risk management programme.
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description
The Group’s rising dependency on IT systems increases its exposure to potential cyberattacks. Given their increasing
sophistication, potential cyberattacks may lead to significant security breaches. Such risks change rapidly and require
continued focus and investment.
No material cyber-security breaches have happened at the Bank in recent years, however, one of the bank’s software
suppliers faced a ransomware attack. We received timely information about the incident and responded in accordance
with our incident response procedures. After conducting thorough analysis and investigations, we confirmed that
there was no risk to the Bank’s infrastructure, software, or production services. While we investigated and responded
to the incident, only some new feature development processes experienced delays. The development process was
reinstated once we ensured that the vendors had fully resolved the incident and its root causes.
Risk mitigation
The Group has in place a comprehensive system in place to mitigate the risk of cyberattacks, as described below.
Threat landscape
In order to adequately address the challenges posed by cyberattacks, we are continuously analysing the Group’s cyber
threat landscape and assessing all relevant threat scenarios and actors, considering their intentions and capabilities,
as well as the tactics, techniques, and procedures they are using or may use during their campaigns. Our focus is to
be prepared against Advanced Persistent Threats. Among the many different threat vectors we are covering and
monitoring, the top four are below:
• Attacks against internet facing applications and infrastructure;
• Software supply chain attacks;
• Phishing attacks against our customers; and
• Phishing attacks against our employees.
Our vision and strategic objectives
Information and cyber security are an integral part of the Group’s governance practices and strategic development.
The Group’s cyber security vision and strategy is fully aligned with its business vision and strategy and addresses all
the challenges identified during the threat landscape analysis.
Our vision is to strengthen our security in depth approach, enable secure and innovative businesses, and maintain a
continuous improvement cycle. Our strategic objectives are:
• To maintain our defence in depth approach by strengthening the team and implementing cutting-edge
technologies, in order to maintain resilience against Advanced Persistent Threats, which may come from state-
sponsored actors or organised cybercriminals;
• To maintain compliance with industry leading information and cyber security standards, sustain a continuous
improvement cycle for our information and business continuity management systems, and be one step ahead of
regulatory requirements; and
• To optimize and automate security processes and provide security services seamlessly to the Group’s business
(where possible).
Our security in depth approach and cyber-resilience program
In order to follow our vision and achieve our strategic objectives, we run effective information and cyber security
programmes, functions and systems, as follows:
• Layered preventive controls are in place, covering all relevant logical and physical segments and layers of the
organisation and infrastructure in order to minimise the likelihood of successful initial access:
– Data security controls
– Identity and access controls
– Endpoint security controls
– Infrastructure security controls
– Application security controls
– Internal and perimeter network security controls
– Physical security controls
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• A professional team is in charge of effectively implementing, assuring the effectiveness of, maintaining and
fine- tuning the preventive controls mentioned above. The number and level of expertise of the team members is
significant. Our team members hold industry leading certificates and work on a daily basis to strengthen and extend
their professional skill sets.
• Layers of preventive controls in conjunction with a comprehensive awareness programme provide the best
combination in order to minimise the likelihood of successful attacks. Our robust awareness programme helps
employees and customers to improve their cyber hygiene, understand the risks associated with their actions,
identify cyberattacks they might face during day-to-day operations, and improve the overall risk culture. Our
awareness program provides relevant materials to all key roles, from the Management Board to IT engineers and
developers. It covers annual trainings and attestations for all employees, newcomer trainings and attestations, social
engineering simulations, security tips and notifications for all employees, security awareness raising campaigns for
customers, and more.
• Since we believe that 100% prevention is not achievable, the Group has threat hunting capabilities and a security
operations centre in place that seeks to monitor every possible anomaly in near real-time that is identified across
the organisation’s network in order to detect potential incidents and respond in a timely and effective manner to
minimise the negative impact of possible attacks. To be up-to-date and track the techniques and tactics of our
adversaries, we are elaborating cyber threat intelligence procedures according to industry best practices and
following the MITRE ATTACK framework.
Information security governance and effective risk management processes ensure that the Bank has the
correct guidance, makes risk-informed decisions in compliance with its risk appetite, complies with regulatory
requirements and achieves a continuous improvement cycle. The Information Security Committee, which is
chaired by the CEO, has the ultimate responsibility to assure that an appropriate level of security is maintained, and
a continuous improvement cycle of management processes is achieved. The Bank is in compliance with the NIST
Cyber Security Management Framework, and its Information Security Management System is ISO 27001 certified.
• On top of all of the above, the Bank further strengthens its cyber resilience through an effective Business Continuity
•
Management System and cyber insurance policy, in order to manage contingencies and recover from serious
disruptions with minimum possible impact.
How we measure and assure an acceptable level of security
To assess and assure an acceptable level of information and cyber security, we rely on external/internal audit reports,
red teaming exercise reports, and the results of penetration tests, which are conducted by our high professional
internal team and reputable external third-party partners.
• On an annual basis we conduct:
– An external audit of SWIFT Customer Protection Framework;
– An external audit of the NBG’s Cyber Security Framework, which is based on the NIST Cyber Security
Management Framework;
– External surveillance audits of ISO 27001;
– Penetration tests against internet facing applications and critical infrastructure with help of our highly reputable
partners.
• Our internal team is in charge of continuous penetration tests of internal and external applications and
infrastructure.
• We conduct regular red and purple teaming exercises and assess our security capabilities against real world
advanced threat actors.
5. The Group identifies risk in its growing dependence on data.
Risk description
In the domain of data management and data governance within the Group, two prominent risks are noteworthy, each
presenting unique challenges to the preservation and efficacy of the Group’s information assets. The first risk centres
on the imperative need for data quality, a cornerstone for sound decision-making, regulatory compliance, and overall
risk management. This challenge emanates from diverse sources, encompassing errors during data entry, the lack
of standardised formats, and inconsistencies across data sources. The ramifications of compromised data quality
include financial losses, operational inefficiencies, regulatory non-compliance, and reputational damage.
The complexity is further heightened in dynamic market environments, necessitating robust mechanisms for data
validation and cleansing.
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infrastructure. Legacy systems, characterized by outdated hardware and software, present a formidable challenge by
impeding the seamless flow of data and obstructing the adoption of cutting-edge technologies. The risk
intensifies with the rapid pace of technological advancements, rendering legacy infrastructure susceptible to security
vulnerabilities and compliance issues. Moreover, the limited scalability of outdated systems constrains the Group ‘s
ability to process and analyse vast datasets efficiently, thereby impinging on the agility required for informed decision-
making in the fast-paced financial landscape.
Risk mitigation
Mitigating these data risks requires a holistic and strategic approach tailored to the Group. To address the challenge
of data quality, the Bank is adopting advanced data quality management systems, implementing data profiling
techniques, and enforces stringent data governance policies. Strategic investments in technologies like machine
learning and artificial intelligence can automate the detection and correction of data anomalies, fostering a proactive
stance towards maintaining accurate and consistent data. Cultivating a data-driven culture within the organisation,
along with clear data lineage and documentation practices, enhances transparency and traceability.
In tackling the risks associated with outdated infrastructure, the Group has embarked on a strategic and phased
modernization approach. Investing in state-of-the-art technologies such as cloud computing and virtualization is
imperative for increased flexibility, scalability, and security. A comprehensive assessment of the existing infrastructure,
coupled with a roadmap for migration and upgrades, enables a systematic transition without disrupting critical
operations. Embracing DevOps practices facilitates continuous integration and deployment, fostering a culture of
agility and adaptability. Through these proactive measures, the Group is positioning itself to capitalise on emerging
opportunities while effectively mitigating the risks associated with both compromised data quality and outdated
technological foundations.
6. The Group is exposed to Model Risk.
Risk description
Statistical, machine learning and artificial intelligence models are increasingly used in key business processes due to
the rapid adoption of big data technologies and advanced data modelling techniques. In line with regulatory guidance
and best practices, the Group defines a model as a quantitative method, system, or approach that applies statistical,
economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative
estimates. The Group has also developed model identification standards to operationalise the model definition.
Increasing reliance on models increases the need for proactive model risk management. The Group defines model
risk as a risk of adverse consequences (e.g., financial loss, reputational damage, etc.) arising from decisions based on
incorrectly developed, implemented, or used models.
Risk mitigation
The Model Risk Management (MRM) function is the second line of defence and is responsible for identifying,
measuring, and managing model risk in the Group. MRM is organized around two components – governance and
validation. The governance component of MRM develops and implements the policy, risk appetite and standards that
define the roles and responsibilities of the different stakeholders and encompass all phases of the model lifecycle,
from planning and development to initial model validation, model use, model monitoring, ongoing model validation
and model retirement. It is also responsible for managing the model inventory and keeping model risk within the risk
appetite. The validation component of the MRM is responsible for conceptual and technical model validations in line
with the policy and standards developed and implemented by the governance component.
To mitigate model risk, the MRM function uses a risk-based approach during model validation processes. Model risk is
identified during initial and ongoing model validations. Countermeasures to mitigate model risk and keep it within the
risk appetite depend on the nature of the identified risk and can include actions like increasing validation frequency
and/or depth, and calibration or redevelopment of the model.
7. The Group remains exposed to reputational risk.
Risk description
There are reputational risks to which the Group may be exposed, such as country risks related to international
sanctions imposed on Russia in response to the war in Ukraine, relations with correspondent banks and international
financial institutions. There are risks of phishing, other cybercrimes, and temporary service interruptions, which can
be viewed as reputational risks due to the increasing digitalisation of services that the Group provides. There may also
be isolated cases of anti-banking narratives in the mass media, which particularly intensify in the run-up to elections.
However, most of these risks are not unique to the Group as they apply to the entire banking sector.
Risk mitigation
To mitigate the possibility of reputational risks, the Group works continuously to maintain strong brand recognition
among its stakeholders. The Group follows all relevant external and internal policies and procedures and prevention
mechanisms to minimise the impact of direct and indirect reputational risks. The Group monitors its brand value
through public opinion studies and surveys and by receiving feedback from stakeholders on an ongoing basis.
Dedicated internal and external marketing and communications teams actively monitor mainstream media and social
media coverage on a daily basis. These teams monitor risks and develop prevention policies, risk scenarios, and
contingency plans. The Group tries to identify early warning signs of potential reputational or brand damage in order
to mitigate and elevate them to the attention of the Supervisory Board before they escalate. A special Task Force is in
place at the top management level, comprised of the management, strategic communications, marketing and legal
teams to manage reputational risks when they occur. Communications and cyber security teams conduct extensive
awareness- raising campaigns on cyber security and financial literacy, involving the media, the Banking Association of
Georgia and Edufin (TBC’s inhouse financial education platform), aimed at mitigating and preventing cyber threats and
phishing cases.
8. The Group faces the risk that its strategic initiatives do not translate into long-term sustainable value for its
stakeholders.
Risk description
The Group may face the risk of developing a business strategy that ensures sustained value creation, adapting to
evolving customer needs, heightened competition, and regulatory restrictions. Additionally, uncertainties from
economic and social disruptions, such as the ongoing war in Ukraine, may hinder the Group’s timely execution of its
strategy, potentially compromising its capacity for long-term value creation.
Risk mitigation
To mitigate the combined risks from a local and international perspective, the Group employs a multifaceted
approach.
The formation of our strategic portfolio is primarily driven by the Group’s strategy to broaden and diversify our
business revenue streams. Thorough curation is conducted in the execution of strategy involving the Supervisory
Board, the executive management, and middle management. These sessions serve as crucial checkpoints to ensure
alignment with our strategic long-term objectives and our company’s guiding principles that steer our course.
Moreover, monitoring of the performance of strategic projects extends to quarterly analyses and tracking of metrics
used to measure strategy execution. In cases of significant deviations, corrective or mitigation actions are promptly
implemented.
9. The Group is exposed to risks related to its ability to attract and retain highly qualified employees.
Risk description
As the Group becomes increasingly digitally focused, it requires more IT professionals in its various departments. This
shift accentuates the risk of potentially losing key personnel. In the highly competitive tech job market, this challenge
extends not only to retaining these valuable employees but also to attracting, developing, and keeping new skilled
workers. Ensuring these employees align with the Group’s objectives is vital. The situation calls for strategic planning in
human resources to effectively manage this risk while supporting the Group’s digital evolution.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR INVESTORS CONTINUED Risk mitigation
The aim of the Group is to adapt to the rapidly changing business environment, increase leadership capabilities,
achieve a high level of engagement among employees, and equip them with the necessary skills. To this end, the
Group actively monitors the labour market both in Georgia and abroad, proactively recruiting the best candidates
and expanding its networks of key personnel. We create a robust international talent pipeline by regularly engaging
with potential candidates, including passive job seekers with diverse profiles. We work on building an attractive
international hiring brand. The Group treats all employees equally and fairly, supporting and coaching them to
succeed.
We equip our people with the tools and frameworks for continuous learning, supported by a constant feedback loop.
We give our staff an opportunity to grow and expand internationally. We have a Succession Planning Framework
developed for senior positions in order to ensure a smooth transition and to offer promotion opportunities to
employees. In addition, we have launched a Talent Management Framework, ensuring the constant identification of
talented staff and monitoring their development within the Group.
Since 2019, our internal IT Academy has been a hub for tech education, offering courses in front-end and back-end
development, DevOps, and other topics. These courses are available to both our employees and potential candidates
at no cost. Led by experienced staff and industry professionals, the Academy has trained over 1,000 individuals from
outside the organization and 1,300 within it, bringing in 300 skilled professionals to Group.
In 2023, our IT Academy launched a project in partnership with USAID focused on women’s empowerment in the
regional areas of Georgia. The project aims to train more than 700 participants, through nine newly designed courses.
The IT Academy has also introduced an iOS Laboratory.
Candidates selected for courses have the opportunity to become highly paid professionals in the field of information
technology by working on bootcamps, practical lectures, mentorship sessions and real projects under the guidance
of leading specialists from JSC TBC Bank. Courses are updated through consultations with top management, which
allows us to integrate the latest trends in the field into the teaching process.
The IT academy also enables the Bank to ensure the development of technological skills of existing employees,
allowing them to transition into tech-based professions and digitize and automate their day-to-day work.
10. The Group is exposed to conduct risk.
Risk description
Conduct risk is defined as the risk of failing to achieve fair outcomes for customers and other stakeholders. The Bank’s
Code of Ethics serves as a moral compass for all staff and sets high ethical standards that each employee is required
to uphold. The Bank’s employees undertake and perform their responsibilities with honesty and integrity. They are
critical to maintaining trust and confidence in its operations and upholding important values of trust, loyalty, prudence
and care.
Additionally, the Bank’s management understands that it bears responsibility for a diversified group of domestic
and international investors, and needs to embrace the rules and mechanisms to protect customers and maintain the
confidence of investors and financial markets. The Group’s directors strive to establish the “tone from the top”, which
sets out the messages describing and illustrating the core components of good conduct.
Risk mitigation
In managing conduct risk, the Bank entrusts different departments and divisions with carrying out the task of
managing, mitigating, and eliminating conduct risk across all of the Bank’s operations with clients and other
stakeholders. The Compliance, Human Capital and Operational Risk departments cooperate to create a unified
conduct Risk Management Framework and assist business lines and departments, in the following ways:
3. Developing and maintaining policies and procedures to ensure that individual employees and departments comply
with regulatory provisions, best practices, the Code of Conduct, and the Code of Ethics;
4. Maintaining liaison with the Compliance Department, administering policies and procedures in conjunction with
the compliance department and investigating complaints about the conduct of the department, its manager, or its
employees;
5. The front-line employees of the organization should ensure that product information is accurate and complete, and
is conveyed both in writing and orally in a simple, understandable manner, regardless of the level of sophistication
of the client;
6. Keeping records of client interactions and emails containing sensitive and sales-related information, such as
information in relation to the acquisition of new clients and the formulation of complex product offers;
7. By providing periodic training to all employees regarding evolving compliance standards within the Group, we
ensure that new employees are educated regarding proper conduct;
8. By creating a culture of openness that encourages employees to speak out without fear of punishment, we are
preventing and detecting conflicts of interest, creating moral incentive programmes, creating bonuses, and
achieving a risk-adequate incentive and disciplinary policy for the Group;
9. Investing considerable time and effort in investigating, analysing, implementing, and monitoring sales and after-
sales activities, and putting proper conduct into the required job skills, which ensures that conduct risk is not just
managed by risk management units, including compliance departments.
EMERGING RISKS
The Group recognizes its exposure to risks arising from climate change.
Risk description
The risks associated with climate change have both a physical impact, arising from more frequent and severe weather
changes, and a transitional impact that may entail extensive policy, legal, and technological changes to reduce the
ecological footprint of households and businesses. For the Group, both risks could materialise through impaired
asset values and the deteriorating creditworthiness of our customers, which could result in a reduction of the Group’s
profitability. The Group may also become exposed to reputational risks because of its lending to, or other business
operations with, customers deemed to be contributing to climate change.
Risk mitigation
The Group has in place an Environmental and Climate Change Policy. The policy governs its Environmental
Management System (“EMS”) and ensures that the Group’s operations adhere to the applicable environmental, health,
safety, and labor regulations and practices. We take all reasonable steps to support our customers in fulfilling their
environmental and social responsibilities. The management of environmental and social risks is embedded in the
Group’s lending process through the application of the EMS. The Group has developed risk management procedures
to identify, assess, manage, and monitor environmental and social risks. These procedures are fully integrated in the
Group’s credit risk management process. To identify, assess and manage risks associated with climate change, the
Group introduced an overall climate risk assessment and conducted a general analysis to understand the maturity
level of the climate-related framework. The general analysis process covered assessment of the existing policies
and procedures, identification of areas for further development, and gap analysis. Based on the analysis, the main
focus areas were identified and reflected in the climate action strategy, considering the Group’s business strategy.
Furthermore, our Environmental and Climate Change Policy is fully compliant with local environmental legislation and
follows international best practices (the full policy is available at www.tbcbankgroup.com).
In order to increase our understanding of climate-related risks to the Bank’s loan portfolio, the Bank performed a
high-level sectoral risk assessment, since different sectors might be vulnerable to different climate-related risks over
different time horizons. In 2022, we advanced our TCFD framework further, especially in strategic planning and risk
management, and performed climate stress testing. In 2023, we reviewed our climate stress testing model in order to
consider new approaches, where available. Please see pages 118-141 for more details of our climate-related financial
disclosures.
The Bank aims to increase its understanding of climate-related risks and their longer-term impacts over the coming
years, which will enable it to further develop its approach to mitigation. Furthermore, the Bank’s portfolio has strong
collateral coverage, with around 79% of the loan book collateralised with cash, real estate, or gold. Since the collateral
evaluation procedure includes monitoring, any need to change collateral values arises from our regular collateral
monitoring process.
In June 2023, the Group released its full-scale sustainability report for 2022 in reference to Global Reporting Initiative
(GRI) standards. The Global Reporting Initiative (GRI) helps the private sector to understand and realise its role and
influence on sustainable development issues such as climate change, human rights and governance. The report
is designed for all interested parties and groups in Georgia and abroad and aims to give them clear, fact-based
information about the social, economic, and environmental impact of our activities in 2022. It presents our endeavours
to create value for our employees, clients, suppliers, partners, and society as a whole. The Sustainability Report 2022 is
available at www.tbcbankgroup.com.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR INVESTORS CONTINUED At the executive level, responsibility for ESG and climate-related matters is assigned to the ESG Steering Committee,
which was established by the Management Board in March 2021 and is responsible for implementing the ESG and
climate action strategy and approving detailed annual and other action plans for key projects. The ESG Committee
meets on a quarterly basis.
In January 2022, the Group established an Environmental, Social and Governance (ESG) and Ethics Committee at the
Board level, as well as at the Supervisory Board level in line with the Company’s “mirror boards” structure. This reflects
the importance of sustainability in TBC’s corporate governance and allows Board members to dedicate more time and
focus to ESG topics. The Committee provides strategic guidance on climate-related matters and reports to the Board,
which has overall oversight. For more details about the management of ESG matters, please see ESG strategy section
on pages 36-39.
SELECTED REGULATIONS ON FINANCIAL RISKS
CAPITAL ADEQUACY
The Group’s objectives in terms of capital management are to maintain appropriate levels of capital to support the
business strategy, meet regulatory and stress testing-related requirements, and safeguard the Group’s ability to
continue as a going concern.
The Group complied with all its internally and externally imposed capital requirements throughout 2023.
In December 2017, the NBG adopted amendments to the regulations relating to capital adequacy requirements. The
changes include amendments to the regulation on capital adequacy requirements for commercial banks, and the
introduction of new requirements (i) on additional capital buffer requirements for commercial banks within Pillar 2; (ii)
on the determination of the countercyclical buffer rate; and (iii) on the identification of systematically important banks
and determining systemic buffer requirements. The purpose of these amendments is to improve the quality of banks’
regulatory capital and achieve better compliance with the Basel III framework.
In 2020-2022, the NBG developed the concept and changes for the transition to IFRS. In January 2023, in line with
the finalisation of the IFRS transition process, the NBG adopted amendments to the regulations relating to capital
adequacy requirements. According to the new amendments, commercial banks must comply with supervisory
regulations with IFRS-based numbers and approaches. Under the IFRS transition process, the NBG introduced a credit
risk adjustment (CRA) buffer. The CRA buffer was implemented as a Pillar 2 requirement and was fully set on CET 1
capital.
In January 2023, the NBG made amendments to the systemic risk buffer calculation methodology. According to the
new methodology, the current systemic risk buffer for JSC TBC Bank amounts to 2.5% and can be increased by 0.5%
if the Bank’s non-banking deposits market share in the previous three-month period exceeds 40%. The Bank must
comply with the increased requirement in a 12-month period unless the average market share of the previous 12-month
period falls below 40%.
In March 2023, the Financial Stability Committee of the NBG decided to set the neutral (base) rate of the
countercyclical buffer at 1%. Banks are required to accumulate a countercyclical capital buffer according to a
predetermined schedule: 0.25% by March 2024, 0.50% by March 2025, 0.75% by March 2026 and fully phased-in 1%
by March 2027. The countercyclical buffer could be increased at times of strong credit activity and suspended during
periods of stress.
The following table presents the capital adequacy ratios and minimum requirements:
in thousands of GEL
CET 1 capital
Tier 1 capital
Tier 2 capital
Total regulatory capital
Risk-weighted exposures:
31-Dec-23
31-Dec-221
31-Dec-211
4,235,033
3,333,039
2,759,894
4,772,913
3,873,439
3,379,414
601,388
643,086
723,513
5,374,301
4,516,525
4,102,927
Credit risk-weighted exposures
Risk-weighted exposures for market risk
21,018,445
18,818,597
18,091,753
69,880
86,250
21,981
Risk-weighted exposures for operational risk
3,248,365
2,603,225
2,103,895
Total risk-weighted exposures
Minimum CET 1 ratio
CET 1 capital adequacy ratio
Minimum Tier 1 ratio
Tier 1 capital adequacy ratio
Minimum total capital adequacy ratio
Total capital adequacy ratio
24,336,690
21,508,072
20,217,629
14.3%
17.4%
16.6%
19.6%
19.8%
22.1%
11.6%
15.5%
13.8%
18.0%
17.3%
21.0%
11.7%
13.7%
14.0%
16.7%
18.4%
20.3%
GEL volatility has been and remains a significant risk to the Bank’s capital adequacy. A 10% GEL depreciation would
translate into a 0.8pp, 0.7pp and 0.6 pp drop in the Bank’s CET 1, Tier 1 and Total regulatory capital adequacy ratios,
respectively.
LIQUIDITY
The Bank’s objectives in terms of liquidity management are to maintain appropriate levels of liquidity to support
the business strategy, meet regulatory and stress testing-related requirements, and safeguard the Bank’s ability to
continue as a going concern.
The Bank complied with all its internally and externally imposed liquidity requirements throughout 2023.
The Bank assesses LCR and NSFR per NBG guidelines, whereby the ratios are implemented by the NBG have more
conservative approaches than those set by Basel III standards. The LCR enhances short-term resilience. In addition to
the total LCR limit set at 100%, the NBG defines limits per currency for the GEL and foreign currencies (FC). To promote
Larisation in Georgia, the NBG set a lower limit for the GEL LCR than that for the FC LCR.
The NSFR is used for long-term liquidity risk management to promote resilience over a longer time horizon by creating
additional incentives for JSC TBC Bank to rely on more stable sources of funding on a continuing basis. The regulatory
limit is set at 100%.
114
115
1
2022 and 2021 figures are shown in accordance with NBG accounting standards, as for this period local GAAP was in force.
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR INVESTORS CONTINUED As of 31 December 2023, the ratios were well above the prudential limits set by the NBG, as follows:
Minimum net stable funding ratio, as defined by the NBG
Net stable funding ratio as defined by the NBG
Minimum total liquidity coverage ratio, as defined by the NBG
Minimum LCR in GEL, as defined by the NBG
Minimum LCR in FC, as defined by the NBG
Total liquidity coverage ratio, as defined by the NBG
LCR in GEL, as defined by the NBG
LCR in FC, as defined by the NBG
MARKET RISK
31-Dec-23
31-Dec-22
31-Dec-21
100.0%
119.9%
100.0%
75.0%
100.0%
115.3%
109.8%
120.1%
100.0%
135.3%
100.0%
75.0%
100.0%
146.6%
164.2%
135.9%
100.0%
127.3%
100.0%
75.0%
100.0%
115.8%
107.7%
120.8%
The Bank’s objectives in terms of market risk management are to support the business strategy, meet regulatory and
stress testing-related requirements and safeguard the Bank’s ability to continue as a going concern.
The Bank complied with all its internally and externally imposed market risk requirements throughout 2023.
FX risk
JSC TBC Bank (Georgia) is required to maintain open currency positions in line with NBG’s limits: The NBG requires
the Bank to monitor both balance sheet and total aggregate (including off-balance sheet) open currency positions and
to maintain the later one within 20% of the Bank’s regulatory capital.
Interest rate risk
JSC TBC Bank assess interest rate risk from both the NII and Economic Value of Equity (EVE) perspectives. As per
regulatory requirements, the Bank assesses the impact of interest rate shock scenarios on EVE and NII. According to
NBG guidelines, the NII sensitivity under parallel shifts of interest rate scenarios is maintained for monitoring purposes,
while EVE sensitivity is calculated under six predefined stress scenarios of interest rate changes, with the limit applied
to the result of the worst case scenario. As of 31 December 2023, TBC Bank’s EVE ratio stood at 7.34%, comfortably
below the regulatory limit (15%).
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR INVESTORS CONTINUED
CLIMATE-RELATED FINANCIAL DISCLOSURES 2023
Climate-related financial
disclosures 2023
Recommended disclosure
– Short summary
Governance
a) Describe the organisation’s governance around climate-related risks and opportunities
Process, frequency,
and training
Committee
accountability
– The Supervisory Board approves and oversees the Group’s ESG Strategy
in order to address specifically the Group’s targets and initiatives that
relate to climate change, its direct and indirect environmental impact,
and sustainable development across the Group
– The ESG and Ethics Committee have been established at the
Supervisory Board level.
– The ESG and Ethics Committee met four times during 2023.
– The Supervisory Board has established a diverse and comprehensive
training agenda, which is reviewed annually.
– The Supervisory Board retains the primary responsibility for overseeing
the implementation of the strategy, as part of its commitment to having
direct oversight over the Group’s climate-related issues.
– The role of the ESG and Ethics Committee has been formalised to
support and advise the Supervisory Board in its oversight of the
implementation of: (i) strategy; (ii) policies; and (iii) programmes of
the Company and its subsidiaries in relation to ESG matters, ensuring
that the ESG strategy is implemented across all of the Group’s relevant
businesses.
Where to find
Page 122
Page 122
Recommended disclosure
Short summary
Where to find
Examples of the Board and
relevant Board committees
taking climate into account
– Key topics covered in 2023 by the ESG and Ethics Committee are as
Page 122
follows: the Group’s direct GHG emissions; a review of the Environmental
and Climate Change Policy; a review of the Exclusion List and ESG risk
appetite; and a review of the climate action strategy, including progress
reports on TCFD implementation.
b) Describe executive management’s role in assessing and managing climate-related risks and opportunities
Who is responsible for
climate-related risks and
opportunities
– Since March 2021, responsibility for climate change-related risks
and opportunities have been assigned to the executive level ESG
Committee.
How management reports
to the Board
– The ESG Committee’s responsibilities also include the review and
monitoring of climate-related risks and opportunities as well as the
establishment of an effective mitigation and control system to manage
identified (material) climate-related risks. The ESG Committee meets on
a quarterly basis.
Page 123
Page 123
Processes used to inform
management
– The implementation of the ESG strategy is supported by the various
Page 123
organisational functions responsible for ESG matters: the Environmental
and Social Risk Management Team, the ESG Department and the
ESG competences centre – a working group initiated in order to
support the enhancement of the TCFD framework. Furthermore, the
Environmental Committee oversees the implementation and operation
of the Environmental Management System. The ESG Department and
Environmental and Social Risk Management Team regularly report to the
Environmental Committee, which reports to the Chief Risk Officer.
Strategy
a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and
long term - Page
Short-, medium-,
and long-term time
horizons
Climate-related risks
– The time horizons considered in the assessment are short (0-3 years),
medium (4-8 years), and long (over eight years). The levels of possible
impact are classified as low, medium or high.
– As a summary of the potential impact of the various transition risks and
physical risks identified, the transitional risks in Georgia and on the TBC
Bank’s activities are low.
– The overall assessment of the potential impact of acute and chronic
physical risks on Georgia and on TBC Bank’s activities is medium in a
long-term perspective. Currently, there is no material impact on TBC
Bank’s activities observable.
Page 125
Page 125
Climate-related
opportunities
– The main opportunity directions are energy-efficiency and renewable
energy financing. However, we offer a wide range of other green and
climate-related financing to our customers.
Page 127
b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and
financial planning
118
119
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONINTRODUCTION We set out below our climate-related financial disclosures, which are consistent with the TCFD recommendations and recommended disclosures. The TCFD Recommendations are structured around four content pillars: (i) Governance; (ii) Strategy; (iii) Risk Management; and (iv) Metrics & Targets; and eleven recommendations to support effective disclosure under each pillar. In 2023, we focused on drafting the methodology to measure our Scope 3 emissions (financed emissions) in line with the PCAF methodology and included the respective GHG emissions calculation results in the Scope 3 emissions. In 2023, we reviewed the climate stress testing framework in order to incorporate the new information available. Furthermore, we defined our material Scope 3 components and calculated our financed emissions. As the sustainability landscape evolves with new information and greater standardisation, TBC will continue to refine and expand its disclosures to provide meaningful information to stakeholders.It should be noted that the data we have used provide the best available approach to reporting the progress made, notwithstanding the challenges that exist given the incompleteness and novelty of the data sets and the methodologies required for the Georgian environment, in which most of our activities occur. We expect the availability and reliability of the required data to improve over time, and we intend to integrate improved data into our reporting as it becomes available.Below is the disclosure prepared by the Group considering the implementation of TCFD recommendations. Recommended disclosure
Short summary
Impact on strategy,
business, and financial
planning
– In 2023, we continued to incorporate climate and broader ESG
considerations into our financial planning processes. The Group aligned
loan portfolio growth planning with risks and opportunities in different
business segments: retail, MSME and corporate. Furthermore, climate-
related opportunities were address by economic sectors, as well.
Impact on products and
services
– The main opportunity directions are energy-efficiency and renewable
energy financing. However, we offer a wide range of other green and
climate-related financing to our customers.
Page 130
Transition plan
– In 2024, we will focus on the development of detailed transitional plans,
Page 125
which will be based on the results of measurement of the Group’s
performance against the Paris Agreement targets for the reduction
of GHG emissions. We have contracted an international consultancy
company and have developed a detailed scope of work covering the
following: calculation of financed emissions, carbon reporting, Paris
Agreement alignment, a decarbonization action plan, a carbon impact
assessment methodology, carbon footprint assessments of selected
customers, and building institutional capacity.
c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
Scenarios used
– Multiple scenarios were used to explore different plausible scenarios
and trade-offs and to gain a more holistic view of the risks: Below 2 °C,
Net Zero 2050, Delayed Transition.
Page 131
Conclusions
– Even if the climate stress tests are not forecasting tools, they indicate
Page 132
the level of resilience towards climate shocks, especially in the short and
medium term. Longer-term effect cannot be observed sufficiently, as
the average maturity of the TBC's loan portfolio is shorter than the time
horizon of the climate stress testing which considers the period of the
following 30 years. Furthermore, the climate stress tests show that the
most vulnerable sectors are energy (non-renewable) and utilities and oil
and gas, if the transition risks materialise. However, transition risk is rather
low in Georgia.
Risk Management
a) Describe the organisation’s processes for identifying and assessing climate-related risks
Process
– TBC Bank has reviewed all of its operational activities, procured items
and outsourced services that it can control (present and planned), and
has identified all environmental aspects relevant to the business.
Page 133
Integration into policies
and procedures
– TBC has a comprehensive Environmental and Climate Change Policy in
Page 133
place, which governs our Environmental Management System (EMS) and
climate-related framework within the Group.
b) Describe the organisation’s processes for managing climate-related risks
Process
– TBC Bank has developed E&S risk management procedures to identify,
assess, manage, and monitor environmental and social risks which are
fully compliant with Georgian environmental legislation and follow
international best practices.
Page 135
Where to find
Page 128
Recommended disclosure
Short summary
Decision-making
– Projects that are to be financed are classified according to E&S
Where to find
Page 136
categories (low, medium, high and A category), based on analysis; where
necessary, deep-dive analysis and due diligence are performed. When
categorising the transaction in line with the E&S risk categories, priority
is given to the higher risk.
c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the
organisation’s overall risk management
Integration process
Metrics and Targets
– TBC Bank has developed E&S risk management procedures, which
are fully integrated into the credit risk management process and are
routinely applied to SMEs and corporate customers.
– In 2023, TBC Bank finalized a pilot project which tested the ESG Profile
Methodology on its top 20 corporate customers. The aim was to
incorporate the ESG Profile scorecard in the overall risk management
process.
Page 135
a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its
strategy and risk management process
Metrics used to assess
the direct environmental
performance
– GHG emissions, consumption of energy, water and paper
Page 138
Metrics used to assess
the indirect impact
– Financed emissions
– Sustainable portfolio
Page 140
Page 141
b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 GHG emissions and the related risks
Our own operations
– The summary of Scope 1, Scope 2, and Scope 3 GHG emissions
Page 139
(flights), 2023 targets versus actual results, as well as targets for 2024 are
disclosed.
Financed emissions
– Financed emissions - The Partnership for Carbon Accounting Financials
(PCAF) has developed methods for different asset classes, which can be
used to calculate the financed emissions (PCAF 2022).
Page 140
c) Describe the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets
Targets set and progress
– GHG emissions (Scope 1 and Scope 2), water and paper
– The total sustainable portfolio volume exceeded the 2023 target volume
GEL 1.0 bln by GEL 233 mln. The target for 2024 is set at GEL 1.4 billion
Page 139
Page 141
DEFINING MATERIAL TOPICS FOR CLIMATE-RELATED FINANCIAL DISCLOSURES
The materiality of topics covered in the climate-related financial disclosures is informed by different factors: a) the
climate-related topics which are included in the ESG Strategy of the Group; b) The stakeholder engagement results
which process provides information about the issues that are most important and relevant to our stakeholders (the
stakeholder engagement process is described in more detail on pp. 168); c) Furthermore, our disclosures are informed
by regulatory disclosure rules as well as the expectations of international financial institutions and external ESG rating
agencies. For certain topics as specified below, we also defined numeric materiality thresholds such as the share in
total assets (3%) or the share in GHG emissions (40%), which are referenced in the respective parts of the disclosure.
The ESG and Ethics Committee at board level and the ESG Committee at executive level, as well as the responsible
organizational departments – ESG Department, Environmental and Social Risk Management Team, Enterprise Risk
Management, Investors Relations and International Financial Markets Departments - regularly discuss emerging and
existing topics that matter to our stakeholders and consider them in our ESG and climate action strategy.
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1.2. Executive management’s role
1.1. The Supervisory Board’s oversight of climate-related risks and opportunities
The Supervisory Board approves and oversees the Group ESG Strategy in order to address the Group’s targets and
initiatives that relate to climate change, its direct and indirect environmental impact, and sustainable development
across the Group. The ESG Strategy also covers customers, employees, suppliers, wider society, financial inclusion,
employee relations and talent management, workplace diversity and inclusion. The Supervisory Board retains the
primary responsibility for overseeing the implementation of the strategy, as part of its commitment to having direct
oversight over the Group’s climate-related issues.
In January 2022, the Group established an Environmental, Social and Governance (ESG) and Ethics Committee at
the Supervisory Board level. This reflects the importance of sustainability in TBC’s corporate governance and allows
Board members to dedicate more time and attention to ESG topics.
The role of the Committee has been formalised to support and advise the Supervisory Board in its oversight of the
implementation of the: (i) strategy; (ii) policies; and (iii) programmes of the Company and its subsidiaries in relation
to ESG matters and ensuring that the ESG strategy is implemented across all of the Group’s relevant businesses.
Furthermore, the ESG and Ethics Committee supports the Supervisory Board in promoting its collective vision of
values, conduct and culture and overseeing the efforts of the executive management (the Executive Management of
Joint Stock Company TBC Bank) to foster: (i) a culture of ethics; (ii) appropriate conduct; and (iii) employee ethical
engagement within the Group. The Committee provides strategic guidance on climate-related matters and reports to
the Supervisory Board which has overall oversight.
The ESG and Ethics Committee met four times during 2023 and covered the following topics: a) a regular review of
and status update on the Group’s ESG strategy, including its climate action strategy, and implementation plans; b)
monitoring of their execution; and c) oversight and recommendations to the Supervisory Board for approval of the
Group’s disclosures on ESG matters, including reporting in line with the TCFD principles, in the Annual Report and
Accounts. Key topics covered in 2023 by the ESG and Ethics Committee are as follows: tracking progress against the
ESG Strategy’s targets such as the volume of the sustainable portfolio; the Group’s direct GHG emissions; review of
the Environmental and Climate Change Policy, Human Rights Policy and Diversity, Equality and Inclusion Policy; review
of the Exclusion List1 and ESG risk appetite; review of the climate action strategy, including the progress reports on
the TCFD implementation; the involvement of external consultants in the advancement of the climate-related topics;
review of the TCFD reporting for the Annual Report 2022 and the Sustainability Report 2022; the ESG and climate-
related training agenda for TBC staff; and the ESG Strategy 2024.
The Supervisory Board is supported by the Risk Committee. For example, progress against the reporting metrics, such
as the volume of the sustainable portfolio, is reported to the Risk Committee, which also received updates four times
a year through the Chief Risk Officers’ (CRO) report. In 2022, we elaborated on our ESG Risk Appetite and integrated
it into our Risk Appetite Framework (RAF). The reporting started in June 2023. Furthermore, the responsibilities of the
Audit Committee cover the review of annual reports, including TCFD reporting, as well as follow up on compliance
through policies, procedures, and regulations.
The Remuneration Committee covered the ESG-related Key Performance Indicators of the executive management.
Please see more details in the Annual Report of TBCBank Group PLC on the page 229.
The Supervisory Board has established a diverse and comprehensive training agenda, which is reviewed annually. The
Group’s Secretarial team creates a general training catalogue at the beginning of each year, which covers all relevant
areas of Risk, Audit, Remuneration and Governance. The catalogue includes an effective mix of publicly available
and client-tailored webinars, analytical materials, and opportunities for live discussion with industry participants. The
providers of these training opportunities include the Big Four accounting firms, external legal advisors, chartered
institutes (such as the Institute of Directors and the Governance Institute), and, where relevant, senior professionals
with specific subject matter expertise. Directors use the training catalogue in order to create their bespoke training
calendars and exchange knowledge during Supervisory Board meetings or via the Group’s dedicated Supervisory
Board platform. In February 2023, as part of a larger, one-year climate-related project, further topic-specific training
sessions on climate-related issues were delivered by the Frankfurt School of Finance and Management to equip
members of the Supervisory Board as well as the executive management of TBC Bank with detailed knowledge about
TCFD and climate change-related risks and opportunities and the operative tools available to implement the climate
action strategy.
At the executive level, responsibility for climate change-related risks and opportunities is assigned to the ESG
Committee, which was established by the executive management in March 2021 and is responsible for implementing
the ESG strategy and approving annual action plans and separate, detailed action plans for key projects. The progress
and implementation status of action plans are monitored at the ESG Committee’s meetings. In 2023, the ESG
Committee met four times and covered various climate-related topics: TCFD reporting; the TCFD implementation
action plan; the ESG risk appetite, progress against the ESG Strategy targets such as the volume of the sustainability
loan portfolio; the Environmental and Climate Change Policy; direct GHG emissions reports; ESG and climate-related
training agenda for the TBC staff; and the involvement of external international and local experts in the development
of climate-related approaches and methodologies. The ESG Committee’s responsibilities also include the review
and monitoring of climate-related risks and opportunities as well as the establishment of an effective mitigation and
control system to manage identified (material) climate-related risks. The ESG Committee meets on a quarterly basis.
The implementation of the ESG strategy is supported by the various organisational functions responsible for ESG
matters: a) the Environmental and Social Risk Management Team - responsible for the E&S risk assessment in lending,
b) the ESG Department - coordinating and supporting the implementation of the ESG Strategy , and c) the ESG
competences centre, which is a working group initiated in order to support the enhancement of the TCFD framework.
Furthermore, the Environmental Committee meets on a quarterly basis and oversees the implementation and
operation of the Environmental Management System, which includes addressing resource consumption and other
environmental impacts of TBC Bank’s daily operations. The ESG Department and Environmental and Social Risk
Management Team regularly report on the environmental management plans and results to the Environmental
Committee. The Environmental Committee reports directly to the Chief Risk Officer.
2. STRATEGY
The Group’s objective is to act responsibly and manage the environmental and social risks associated with its
operations. Furthermore, we aim to contribute and enable positive impacts on the environment. In order to achieve
this, the Group has clearly defined processes in place to identify and assess climate-related risks to our business.
This approach enables the Group to reduce our ecological footprint by using resources efficiently and promoting
environmentally friendly measures in order to mitigate climate change.
TBC Bank has reviewed all the operational activities, procured items and outsourced services that it can control
(present and planned), and has identified all environmental aspects relevant to the business. The direct environmental
impact of our business activity arises from energy, water, fuel and other resource usage, waste and emissions. The
Bank has established a comprehensive internal environmental system to manage its GHG emissions and is committed
to reducing them by closely monitoring its consumption of resources. In order to evaluate the significance of the
impact for each of the categories, we have developed a comprehensive evaluation methodology and applied it to the
whole Group. Based on this, annual goals are defined, and specific initiatives and programmes are developed to attain
them.
In 2020, TBC Bank obtained an ISO 14001:2015 certificate for its Environmental Management System. In 2021 and
2022, TBC completed the re-certification process successfully. The renewal of the certificate for 2023 was conducted
in December 2023 and was also completed successfully. More information about the Environmental Management
System can be found in the Risk Management section of this chapter on pages 133-138.
In 2021, the Group developed and approved its ESG Strategy. In 2023, we updated our ESG Strategy in order to reflect
the progress made during 2022 and adjust the targets and initiatives for future years.
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1 List of activities which are excluded from financing.
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implemented.
The table below contains a summary of potential transitional and physical risks identified by the Group for the
Georgian environment.
Summary table on ESG Strategy progress during 2023:
2021 ESG Strategy target / initiative
2022 status
2023 status
Establish an ESG governance
framework until the end of 2021
ESG governance framework
established at both Supervisory
Board and executive management
levels.
Enhanced ESG governance and
achieve a higher maturity level.
Set up a system for measuring impacts
on sustainability across the Group,
customers, employees, and society
Regular reports on key parameters
to the ESG-related Committees at
Supervisory Board and executive
management level established.
Increased granularity and automation
of reporting, regular reporting on
climate-related risks, scenario analysis,
stress testing, and ESG risk appetite.
Increase the sustainable portfolio
Target volume for 2022 was GEL 750
mln;
Volume of GEL 782 mln was achieved.
Target volume for 2023 was GEL 1.0 bln;
Volume of GEL 1.23 bln was achieved.
Group’s Policy on Climate Change
Climate Change Policy developed
and approved1.
Development of sectoral guidelines –
Climate Risk Radar of the NBG.
Green Taxonomy of the National Bank
of Georgia
The National Bank of Georgia
introduced the Green Taxonomy,
developed in line with the best
international taxonomies. The
implementation process has been
finalised.
Implementation of the green lending
framework
Green lending procedure
implemented.
Harmonisation of the green lending
procedure and the Green Taxonomy of
the National Bank of Georgia (NBG).
ESG profiles for corporate customers
The framework on ESG profiles for
corporate customers developed.
Implemented for the existing Top 20
corporate customers.
Incorporation of ESG matters in risk
appetite
Development of ESG risk appetite.
Increase customer loyalty, investor
confidence and employee motivation
Establishment of ESG training
framework for all TBC employees.
ESG strategies in material subsidiaries Separate ESG Strategies developed.
Net-zero target for direct
environmental performance
Develop a plan to enable our indirect
environmental impact to also reach net
zero.
A methodology to calculate financed
emissions defined and the availability
of necessary data analysed.
Regular reporting, monitoring and
review established.
Measure ESG awareness among
employees and customers. ESG Survey
for investors.
ESG Strategies implemented and
supporting ESG function at the Group
level established.
The Group’s direct performance has
been measured against the Paris
Agreement targets for the reduction of
GHG emissions.
A methodology to calculate financed
emissions based on the PCAF
approaches has been developed
and financed emissions have been
calculated for six asset classes.
The Group’s ambition is to be the leading supporter of ESG principles in Georgia and the wider region. We aspire
to make our direct environmental impact net zero (Scope 1 and Scope 2 GHG emissions) by 2025 and to continue to
develop our plan to enable our indirect environmental impact (Scope 3 emissions) to also reach net zero as soon as
practicable thereafter.
Our long-term aspirations are supported by the different measures outlined in the ESG Strategy. The key components
for 2024 and 2025 are listed below:
• Action plan for our direct net-zero target;
• Measure the Group’s indirect performance against the Paris Agreement targets for the reduction of GHG emissions;
• Development of a long-term transition plan;
• Forecasting methodology and tools for supporting medium and long-term targets for GHG emissions reduction;
• Excluding/limiting high-carbon activities (Please see our Exclusion List – www.tbcbankgroup.com);
•
Increase ESG awareness and knowledge of the risks and opportunities of climate change among employees,
customers and the wider public;
• ESG Academy - green financing training courses for employees and customers;
•
Implementation of IFRS S1 and IFRS S2.
TBC has several different initiatives underway that support the management of climate-related risks and the
realisation of opportunities:
• Advisory and product services for customers;
• Sectoral approach towards climate-related risks and opportunities;
• Climate-related training for TBC staff;
• Green taxonomy training and capacity building of TBC employees;
• Green mindset and green technology training for customers.
2.1. Climate-related risks and opportunities
Climate-related risks
The time horizons considered in the assessment are short (0-3 years), medium (4-8 years), and long (above eight
years). The levels of possible impact are classified as low, medium or high. The categories of low, medium and high
risk were applied to compare the relative risk of sectors and risk categories. They do not indicate the materiality
of the respective risk. The same is true of judgements of the riskiness of sub-categories of transitional or physical
risk compared to other sub-categories. Since these judgements are relative rather than absolute, they cannot be
compared to other countries or regions.
The overall assessment of transitional and physical risks is given below. The time horizon indicates, when the
respective risk will start to materialise, while the level of potential impacts gives the level of the risk. It is assumed that
the level of risks remains the same in the following periods.
1 Policy available at: www.tbcbankgroup.com
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Technology
Market
Transition risks
– Enhanced
regulatory
environmental
and mandated
requirements:
may introduce
minimum
standard or
expectations
on green
credentials of
product outputs
or business
operations,
enhanced
emissions-
reporting
obligations
– Changing
customer
behaviour
including
deliberate
move
to lower
carbon
footprint
products
– Increased
cost of raw
materials,
increased
volatility
and costs,
sourcing
restrictions
for carbon
heavy raw
materials
– Substitution
of existing
products
and services
with lower
emissions
options,
including
requirements
to replace
manufacturing
technology
to cleaner
alternatives
– Investment in
technology
to reduce
emissions
or improve
energy
efficiency of
operations
and
households.
Reputation
– Shifts in
consumer
preferences
to green
products
– Stigmatisation
of sector,
resulting
in reduced
revenue from
negative
impacts on
workforce
management
and planning
(e.g., employee
attraction and
retention)
– Increased
stakeholder
concern or
negative
stakeholder
feedback
Physical risks
Acute
Chronic
– Increased
severity of
extreme
weather
events
such as
floods
– Changes in
precipitation
patterns
and extreme
variability
in weather
patterns
affecting food
production
and living
environment
– Rising mean
temperatures
affecting
working
conditions,
living
conditions
and local
infrastructure
– Rising
sea levels
affecting local
ecosystems,
increasing
subsidence
and flood risks
Medium
Low
Long
Low
Medium
Long
Medium
Long
Low
Low
Medium
Medium
Types of
risks
Time
horizon
Level of
potential
impacts
affecting
customers
and TBC
Furthermore, we employ the Methodology of the Risk Radar for Climate-related Risks1, which was developed by the
National Bank of Georgia (NBG) and can be applicable to the local context. This scoring system of the Climate Risk
Radar has been applied for all sectors in Georgia classified as main sectors according to the NACE sector codes
(Eurostat 2008). For the time being the highest score is 7, so there are no critical sectors yet identified in Georgia.
However, some sectors (namely scores 7 and 6) need to be considered as potentially high risk and others (scores 4 and
5) render the portfolio vulnerable to climates risks2. The Risk Radar for Climate-related Risks gives a foundation for the
assessment of the climate-related risks on a sectoral and customer level. We consider the Climate Risk Radar scores
when addressing the risks and opportunities of climate-related activities. We developed our internal methodology of
ESG profiles based on the Climate Risk Radar. More details are given in the section on the overall risk management
process on pages 137. Furthermore, the opportunities related to climate-exposed sectors are given below in the
section on climate-related opportunities on pages 130.
The overall assessment of the impact of transitional policy and legal measures
Georgia’s 2030 Climate Change Strategy3 and Climate Strategy Action Plan4 lays out different policy measures on
which TBC Bank based its identification of the potential impact of the policy measures on the different economic
sectors that are financed by TBC. As a summary of the potential impact of the various transition risks identified, the
transitional risks in Georgia and on the TBC Bank’s activities are low. The assessment considers that trade and services
dominate the Georgian economy, and the policy measures outlined in Georgia’s 2030 Climate Change Strategy
will have a low overall impact on those economic sectors, especially in the short and medium term. Taking into
consideration Georgia’s status as a transitional and growing economy, Georgia’s 2030 Climate Change Strategy aims
not to impede GDP growth with policy measures but rather to support a smooth transition where necessary. It is worth
noting that the economic sectors most affected by transitional risks worldwide, such as mining, crude petroleum,
natural gas and metal ores, manufacturing coke and refined petroleum products5, are only present to a very limited
extent in Georgia, resulting in the transitional measures having a low overall impact on economic growth, if any.
Technology risk
Technology risk is a subcategory of transition risk. The technology risk related to climate change, unnecessary
investments in technological development, or missing investments in technological improvements are assessed to
be low in Georgia, as Georgian companies invest very little in the development of new green technologies; rather, they
benefit from technologies developed in other (technologically advanced) countries and deploy technologies which
are already tested and established. Therefore, failed investments are unlikely to occur.
Market risk and reputational risk
Market risk is low, as consumer behaviour in Georgia shows a very slow trend towards lower carbon footprint
products. For reputational risk, no material impact is expected, as TBC Bank has developed Environmental and
Social Risk Management Procedures to identify, assess, manage and monitor environmental and social risks which
are fully compliant with Georgian environmental legislation and follow international best practices. Please see more
information about the environmental management system on pages 133-138.
The overall assessment of the impact of the acute and chronic physical risks
Georgia’s geographical location and natural conditions, as a small country with a mountainous landscape, a Black Sea
coastal zone, and semi-arid areas in the Southeast, contribute to the country’s vulnerability to the physical risks of
climate change. The sectors that are thought to be most vulnerable to climate change in Georgia include agriculture,
forestry, tourism, and healthcare6.
The impact of acute and chronic physical risks on economic sectors which are financed by TBC Bank will materialise
over time. For the Group, the risks can materialise through the impairment of asset values and the deterioration in
the creditworthiness of customers operating in Georgia. Certain geographic areas and economic sectors, such as
winter resorts and agricultural land, are already partially affected and might deteriorate further in the medium term.
The overall assessment of the potential impact of acute and chronic risks on Georgia and on TBC Bank’s activities is
medium in a long-term perspective. Currently, there is no material impact on TBC Bank’s activities observable. It is
understood that climate change risks are largely associated with longer-term impacts; however, those longer-term
impacts are unclear, especially considering the shorter-term maturity structure of the Bank’s loan portfolio.
Climate-related opportunities
Climate-related opportunities are directly linked with climate risks and economic sectors which have significant
negative environmental impact and/or might be potentially affected by climate risks. The financing of mitigation
measures (reducing of GHG emissions) covers sectors such as transportation, building, energy generation and
transmission, agriculture and manufacturing.
The adaptation to climate change covers sectors of agriculture, infrastructure, tourism and water resources.
TBC’s approach corresponds with the Climate Action Plan of Georgia for the implementation of the Nationally
Determined Contribution targets:
1 www.nbg.gov.ge - The NBG, in cooperation with German Sparkassenstiftung for International Cooperation (DSIK), has prepared a report on the
Climate-related Risk Radar for Georgian Economic Sectors and its possible application for the Financial Sector. The report develops a climate
risk scorecard for Georgian economic sectors and assesses the financial sector’s exposure to the identified risky sectors.
2 Score 7 - A Agriculture, Forestry and Fishing, Growing of non-perennial Crops, Forestry and Logging, Manufacture of Food Products, Manufacture
of Chemicals and chemical Products, Electricity, Gas, Steam and Air Conditioning Supply, Water Supply, Sewerage, Waste Management and
Remediation Activities. Score 6 - Growing of perennial Crops, Animal Production, Fishing and Aquaculture, Manufacturing,
3 Georgia's 2023 Climate Change Strategy
4 2021-2023 Action Plan of Georgia’s 2030 Climate Strategy
5 Key elements of the 2021 Biennial Exploratory Scenario: Financial risks from climate change | Bank of England
6 Georgia's third National Communication to the UNFCCC
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION • We have started to use renewable energy and installed solar power plants in two locations with a total capacity of
130 kW. Total investments equal to GEL 23 000. The plan is to increase the share of renewable energy up to 50% of
our total electricity consumption in regions;
• We are gradually increasing the share of electric and hybrid cars in our car fleet, which is currently equal to 67%; total
investment equals to GEL 914 900.
• Starting from 2022, we are installing energy-efficient heating / cooling systems in all newly renovated branches;
total investments including construction works equal to GEL 2.15 million.
• During 2023, we renewed a part of the IT infrastructure and migration to the cloud with energy-efficient servers, that
will reduce the respective portion of the electricity consumption by 10-15%.
In 2024, we are going to install 36 electric charger stations at our head office and other premises; the planned
investments equal to GEL 450 000.
The total investments by end 2023 equal to GEL 3.54 million.
In order to support the path of greening our portfolio and reducing the financed emission (Scope 3), we enhance our
efforts in green financing
• We are increasing the volume of green financing every year;
•
In 2023, we exceeded our strategic target of GEL 1.0 billion for the sustainable portfolio volume by 23 % and reached
GEL 1.23 billion.
• Acquired green funding from various international financial institutions is increasing every year. As of 2023, it equals
to GEL 663 million.
The main opportunities lie in energy-efficiency and renewable energy financing. However, we offer a wide range of
other green and climate-related financing to our customers.
The table below provides a summary of climate-related opportunities by sector.
• To mitigate projected greenhouse gas emissions by 15% in the transport sector by 2030;
• To support the low carbon development of the building sector through encouraging the climate-goals oriented
energy efficient technologies and services;
• To mitigate projected greenhouse gas emissions by 15% in the energy generation and transmission sector by 2030;
• To support the low carbon development of the agriculture sector through encouraging the climate smart agriculture
technologies and services;
• To support the low carbon development of the industry sector through encouraging the climate-friendly innovative
technologies and services, in order to achieve 5% of emission limitations compared to emissions projected without
respective measures
• To support the low carbon development of the waste sector through encouraging the climate-friendly innovative
technologies and services.
We acknowledge the importance of sustainable lending and are actively implementing a standardised approach to
sustainable finance, including energy efficiency, renewable energy, and resource efficiency financing for our retail
and business clients. The largest part of our sustainable portfolio consists of energy efficiency, renewable energy, and
resource efficiency financing and equals GEL 847 million out of GEL 1.23 billion. The remaining part of the sustainable
portfolio consists of women and youth financing, affordable housing and start-up loans. The growth targets of the
sustainable portfolio are set in the ESG Strategy annually; the targets are defined after considering customer needs for
green financing and discussions with respective business departments of TBC Bank. For 2024, the target volume of
GEL 1.4 billion was approved by the Supervisory Board.
Considering the existing potential of renewable energy production, TBC became the leading partner in Georgia in
local renewable energy financing, including hydropower stations.
We actively cooperate with international partners to attract financing for sustainable lending:
• TBC Bank is actively mobilising green funds from partner international financial institutions to promote sustainable
economic growth, primarily by financing energy efficiency, resource efficiency, and renewable energy projects.
Those facilities will help local businesses and households to become more competitive by investing in high-
performance technologies and adopting energy-efficient practices. In addition, financing is coupled with technical
assistance programmes, providing know-how and technical expertise to borrowers and ensuring that their green
investments are successfully implemented. Several green facilities have grant incentives in place as well. As of 2023,
TBC attracted various green facilities from several long-standing international partners, such as EIB, EBRD, GGF,
GCPF, FMO, and ProParco, totaling up to GEL 663 million.
In addition, in 2022, after receiving accreditation from the Green Climate Fund (GCF) in 2021, TBC signed an
Accreditation Master Agreement (AMA), which is the central instrument setting out the basic terms and conditions
to work with the Green Climate Fund (GCF). This authorises TBC Bank to access and mobilise financial resources
from the GCF and formalises TBC’s accountability in carrying out GCF-approved projects appropriately.
•
• The Bank acknowledges the importance of addressing gender equality and the empowerment of women and
has in place several facilities that promote women’s entrepreneurship by supporting increased access to finance,
providing non-financial services as well as knowledge-sharing opportunities. In addition, the Bank has dedicated
funds supporting young borrowers and entrepreneurs, providing loans for education, mortgage loans, as well as
loans to start businesses.
• TBC Bank has in place several guarantee facilities with a special focus on start-ups, women, and regional
entrepreneurs. These risk-sharing instruments serve as a partial substitute for collateral and enable the Bank
to increase access to financing for underserved target groups, granting them better growth and development
opportunities.
2.2. Climate-related risks and opportunities on the businesses, strategy, and financial planning
In 2024, we will focus on the development of detailed transitional plans, which will be based on the results of
measuring the Group’s performance against the Paris Agreement targets for the reduction of GHG emissions. To
support the elaboration process, we contracted an international consultant company, local and international experts
and developed a detailed scope of work covering the following activities: calculation of financed emissions, carbon
reporting, Paris Agreement alignment, decarbonization action plan, carbon impact assessment methodology, carbon
footprint assessments of selected customers, and building institutional capacity. The technical assistance for the
project is provided by the Global Climate Partnership Fund (GCPF).
Nevertheless, even in the absence of a detailed, holistic transition plan, we have already implemented several different
measures to support our direct net-zero target:
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION Sector
% in standalone
Bank’s loan book
GHG-Emissions
Contribution1
Climate
Risk Score2 Product Catalogue
Agriculture
4.6%
Automotive
1.3%
Construction
6.9%
Energy & Utilities
4.7%
Food Industry
5.4%
Individuals
37.1%
Manufacturing
0.7%
Metals and Mining 0.8%
Oil and Gas
1.2%
Real Estate
9.5%
4
4
3
4
4
N/A
3.5
4
4
3
Transportation
1.4%
3.5
7
5
6
7
7
Energy-efficiency loans
Climate-smart technologies
New irrigation systems
Hybrid and electric cars,
Euro 5, Euro 6 and Euro 7 cars
Energy-efficiency loans
Industry autos
Energy-efficiency loans for construction
projects,
Production of energy-efficient building
materials.
Energy-efficiency loans for machinery /
appliances
Charging stations for electric cars
Renewable energy financing
Charging stations for electric cars
Energy-efficiency loans (warehouses, storage,
appliances, cars)
N/A
Energy-efficiency mortgages
Hybrid and electric car loans
6
5
7
5
6
Energy-efficiency loans (machinery,
appliances, buildings)
Carbon filtering
Energy-efficiency loans (machinery,
appliances, buildings)
Energy-efficiency loans for building charging
stations for electric cars
Energy-efficiency loans
Renewable energy financing (solar panels)
Hybrid and electric cars,
Euro 5, Euro 6 and Euro 7 cars, buses, trucks
In 2023, we continued to incorporate climate and broader ESG considerations into our financial planning processes.
Additional qualitative considerations related to climate and ESG matters were incorporated in the financial planning
cycle for 2023. In 2023, the Group aligned loan portfolio growth planning with the risks and opportunities in different
business segments: retail, MSME and corporate.
As of the end of 2023, the sustainable portfolio of TBC Bank (which equals to GEL 1.23 billion) includes exposures with
different purposes, such as: energy-efficiency loans, electric car loans, renewable energy financing for solar panels
and hydro power plants.
Sector
% in TBC Bank’s loan book Share in the sustainable portfolio
Focus areas for financing in 2024
Retail segment
35%
1.1%
MSME segment
26%
5.9%
Corporate
segment
39%
93%
Energy-efficiency
Electric and hybrid cars
Mortgages
Solar panels
Energy-efficiency
Renewable energy
Climate-smart technologies
Hybrid and electric cars
Industry autos
Energy-efficiency
Renewable energy
Climate-smart technologies
New irrigation systems
Industry autos
In 2024, we will focus on integrating tailored transitions plans and Paris Agreement alignment considerations into the
financial planning process and elaborating the respective methodologies and tools.
2.3. Climate-related scenarios
TBC Bank is taking significant steps to develop its scenario analysis capabilities to better understand and act on the
implications of climate-related risks and opportunities for our business and customers. The development of climate
related scenario analysis is a challenge, as the availability, accessibility, and suitability of climate data and subsector
information for financial risk analysis, as well as climate-related risk modelling capabilities, are very limited in Georgia
and still evolving. Despite these limitations, the scenario analysis allows us to test a range of possible future climate
pathways and understand the nature and magnitude of the risks they present. The purpose of scenario analysis is
not to forecast the future but to understand and prepare to manage the risks that could arise. In 2023, we continued
working with an external consultant and upgraded our stress testing model covering different economic sectors in
Georgia in order to capture the stress testing impact on the whole credit portfolio of TBC Bank.
Scenario Selection
Multiple scenarios were used to explore different plausible scenarios and trade-offs and to gain a more holistic view
of the risks: Below 2° C (B2C)3, Net Zero 2050 (NZ2050)4, and Delayed Transition (DT)5. The selected set of scenarios
spans across the timeframe from 2020 to 2050. The scenarios reflect different assumptions about the likelihood
and timing of government actions, technological developments, and their spill-over effects on productivity. Each
scenario combines assumptions related to: i) the introduction of a public policy measure (a higher carbon tax); and (ii)
productivity shocks resulting from the insufficient maturity of technological innovations (higher energy prices), and
1 The Climate Risk Radar assigns a GHG-emissions contribution score according to the National Greenhouse Gas Inventory Report of Georgia 1990-
2017.
2 The Climate Risk Radar defines 4 risk categories: 0-3 neglectable, 4-5 vulnerable, 6-7 high risk, 8-10 critical. There are no sectors with critical risk
profile.
3 This scenario “Below 2° C” gradually increases the stringency of climate policies, giving a 67% chance of limiting global warming to below 2° C. This
scenario assumes that climate policies are introduced immediately and become gradually more stringent, though not as high as in Net Zero 2050.
CDR (Carbon Dioxide Removal) deployment is relatively low. Net-zero CO₂ emissions are achieved after 2070. Physical and transition risks are both
relatively low.
4 Net Zero 2050 is an ambitious scenario that limits global warming to 1.5° C through stringent climate policies and innovation, reaching net zero
CO₂ emissions around 2050. Some jurisdictions such as the US, EU and Japan reach net zero for all greenhouse gases by this point. This scenario
assumes that ambitious climate policies are introduced immediately. CDR is used to accelerate the decarbonisation but kept to the minimum
possible and broadly in line with sustainable levels of bioenergy production. Net CO₂ emissions reach zero around 2050, giving at least a 50 %
chance of limiting global warming to below 1.5 °C by the end of the century, with no or low overshoot (< 0.1 °C) of 1.5 °C in earlier years. Physical risks
are relatively low, but transition risks are high.
5 Delayed Transition assumes that global annual emissions do not decrease until 2030. Strong policies are then needed to limit warming to below 2°
C. Negative emissions are limited. This scenario assumes new climate policies are not introduced until 2030 and the level of action differs across
countries and regions based on currently implemented policies. The availability of CDR technologies is assumed to be low, pushing carbon prices
higher than in Net Zero 2050. As a result, emissions exceed the carbon budget temporarily and decline more rapidly than in Well-below 2° C after
2030 to ensure a 67 % chance of limiting global warming to below 2° C. This leads to both higher transition and physical risks than the Net Zero 2050
and Below 2° C scenarios.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION the effects on investments in non-energy sectors. The input for scenario analysis comes from the GCAM model used
to derive the NGFS scenarios. The data was sourced from the NGFS Phase II database and the GCAM5.3 (GCAM-USA)
model – an Integrated Assessment Model for the evolution of energy and socio-economic systems.
Macroeconomic impacts from transition risks arise from a fundamental shift in energy and land use and affect every
sector of the economy. The GCAM model describes how supply, demand, and prices of energy evolve across the
different transition scenarios. The model also provides GDP trajectories, carbon prices, and GHG emissions for
Georgia.
Scenario Implementation
To complement the output from the GCAM model, three additional transition channels have been included:
1. Increased Capex - Transitioning towards a decarbonised economy requires the replacement of “traditional” or
carbon-intensive technology with sustainable technology1. These new technologies are more expensive, implying
higher Capital Expenditure / Leverage/ debt-servicing burden for TBC’s borrowers;
2. Direct Emissions - Energy prices are the main transition channel for a carbon tax, but direct emissions (own heating,
own fuel use, livestock emissions, etc.) might also be taxed. Direct emissions are not captured by the energy-based
IAMs;
3. Transition Winners - Certain sectors can be considered sector winners because they are likely to benefit
from higher and accelerated investment cycles. Some of these include Construction, Automotive, Trade, and
Manufacturing due to the move to carbon-light activities.
In terms of physical risk, the models and scenarios provided by NGFS were examined for physical risks. It was also
preferred to be compatible with scenarios in transition risks. The available data sources made it appropriate only to use
physical risk indicators for the REMIND-MAgPIE2 model under the three scenarios (Current Policies, Net Zero 2050,
and Delayed Transition). Next, two indicators of physical risk were chosen that were most relevant to Georgia, one of
which was acute and the other, chronic. The first, “Annual Expected Damage from River Floods”, was chosen as an
acute risk indicator because Georgia’s natural disaster history indicates that the most harmful, high risk physical event
is flooding. “Mean Air Temperature” was chosen as a fundamental indicator of chronic risk.
The shocks which are used in climate stress testing calculations are derived from long-term shocks: The average
shock between 2020 and 2050 (the shocks are defined for every 5-year period) was applied in order to calculate the
climate stress effects. Thus, shocks considered in the calculations are much higher than the shocks which are defined
for the following 10-15 years by stress testing model; it is to consider that the typical maturity of exposures at TBC is up
to 15 years.
The model output shows the long-term change in revenue due to transition and physical risk from 2020 to 2050. The
shocks to the revenue per sector are integrated into TBC’s baseline scenario parameters and applied to the different
portfolio segments: micro, SME, corporate and retail.
Conclusions
Scenarios Below 2° C and Net Zero 2050: The results by segments show that the impact of climate shocks on the
payment capacity of customers in the retail, Micro, SME and corporate segments is negligible.
In the Delayed Transition scenario, the results differ slightly: climate shocks only impact the payment capacity of
customers in the retail, Micro and SME segments insignificantly. Few corporate customers show negative trends, as
the collateral value was not initially considered; however, after considering the collateral value, the results become
negligible.
Even if the climate stress tests are not forecasting tools, they indicate the level of resilience towards climate shocks,
especially in the short and medium term. Longer-term effect cannot be observed sufficiently, as the average maturity
of the TBC's loan portfolio is shorter than the time horizon of the climate stress testing which considers the period of
the following 30 years. It is worth noting, that the maximum maturity of a loan is limited to 15 years (with few exceptions)
by the local regulator. Furthermore, the climate stress tests show that the most vulnerable sectors are energy (non-
renewable) and utilities and oil and gas, if the transition risks materialise. However, as mentioned above, transition risk is
rather low in Georgia.
3. Risk management
Processes for identifying and assessing climate-related risks
TBC has a comprehensive Environmental and Climate Change Policy in place, which governs our Environmental
Management System (“EMS”) and climate-related framework within the Group. Our Environmental and Climate
Change Policy ensures that we:
• Establish methodologies to advance climate action and integrate the respective approaches into the operations
and management processes of the Group;
• Comply with applicable environmental, health and safety, and labour regulations;
• Use sound environmental, health and safety, and labour practices;
• Take reasonable steps to make sure that our customers also fulfil their environmental and social responsibilities.
Our Environmental and Climate Change Policy is fully compliant with Georgian environmental legislation and follows
international best practices. The full policy is available at www.tbcbankgroup.com.
Our EMS is based on four pillars:
Internal environmental activities;
•
• Environmental and social risk management in lending;
• Sustainable finance; and
• External communications
INTERNAL ENVIRONMENTAL ACTIVITIES
Calculation of greenhouse gas (“GHG”) emissions
The implementation of an internal EMS addresses the Group’s consumption of resources. TBC Bank has reviewed
all its operational activities, procured items, and outsourced services that it can control (present and planned), and
has identified all environmental aspects relevant to the business. These are sub-categorised into indirect and direct
environmental aspects, analysed based on a comprehensive scorecard, and managed accordingly.
TBC Bank has established a comprehensive internal environmental system to manage and report on the Group’s
GHG emissions and is committed to reducing its GHG emissions by closely monitoring its consumption of energy,
water, and paper. The guidelines for documenting environmental data have been developed and responsible staff in
subsidiary companies have been assigned to collect and provide the required data. More details on the Group’s GHG
emissions and targets are given in the section on metrics and targets on page 139.
Lending operations
The risks associated with climate change have both a physical impact arising from more frequent and severe weather
changes, and a transitional impact that may entail extensive policy, legal, and technological changes to reduce the
ecological footprint of households and businesses. For the Group, both risks can materialise through the impairment
of asset values and a deterioration in the creditworthiness of customers, which could result in a reduction in the
Group’s profitability. The Group may also become exposed to reputational risks because of lending to, or other
business operations with, customers deemed to be contributing to climate change.
As mentioned above, climate risks can materialise through the impairment of asset values and the deteriorating cred-
itworthiness of customers. In order to increase its understanding of climate-related risks on the Bank's loan portfolio,
the Bank performed a high-level sectoral risk assessment, as different sectors might be vulnerable to different cli-
mate-related risks over different time horizons. The risk assessment process and content are based on TCFD rec-
ommendations, climate-related documents published by the Bank of England, the climate change assessments of
Georgia performed as part of the IPCC reports, the Climate Risk Radar of the NBG, and the targets and strategy 2030
defined by the Georgian Government to achieve the National Determined Contribution of Georgia3. The assessment
of levels and impacts might change in the future, based on further reviews of the methodology, deep-dive analysis,
and increased understanding of the impact of climate change risks.
1 According to the Sustainable Finance Taxonomy for Georgia.
2 The REMIND-MAgPIE framework couples the energy-economy model REMIND and the agricultural production model MAgPIE. The Integrated
Assessment Model REMIND (Regional Model of Investment and Development) represents the future evolution of the world economies with a
special focus on the development of the energy sector and its implications for our world climate. The Model of Agricultural Production and its
Impact on the Environment (MAgPIE) is a global land use allocation model. It takes into account regional economic conditions such as demand
for agricultural commodities, technological development, and production costs as well as spatially explicit data on potential crop yields, land,
and water constraints.
3 A nationally-determined contribution (NDC) is a national plan highlighting climate change mitigation, including climate-related targets
for greenhouse gas emission reductions, policies and measures governments aim to implement in response to climate change and as a
contribution to achieve the global targets set out in the Paris Agreement.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION The sectoral assessment was performed with the involvement of the business and credit risk specialists responsible
for the respective economic sectors in the Bank.
The sectoral distribution of the loan portfolio as of Q4 2023 is given in the table below.
Gross loans by sectors for standalone Bank
Individuals
Real Estate
Construction
Trade
Hospitality & Leisure
Food Industry
Energy & Utilities
Agriculture
Healthcare
Services
Financial Services
Transportation
Automotive
Oil and Gas
Pawn Shops
Metals and Mining
Manufacturing
Media & Publishing
Communication
NGOs and Public sector
Government sector
Other
Total exposure
(GEL in mln)
% of Gross
Portfolio
7900.4
37.1%
2020.0
1471.1
1340.6
1252.7
1154.9
996.9
988.5
623.3
499.9
345.4
302.0
282.8
245.6
208.2
179.5
150.9
104.7
55.0
1.3
0.1
1154.0
9.5%
6.9%
6.3%
5.9%
5.4%
4.7%
4.6%
2.9%
2.3%
1.6%
1.4%
1.3%
1.2%
1.0%
0.8%
0.7%
0.5%
0.3%
0.0%
0.0%
5.6%
Total Loans to Customers (Gross)
21277.8
100.0%
The maturity of assets is essential when defining the different time horizons for analysis and when assessing the
materiality of climate-related risks for the different sectors. The maturity structure of the loan portfolio shows that the
majority of assets are distributed in much shorter time horizons than the timeframe in which the impacts of climate
change, especially of physical risks, may arise in Georgia.
The maturity distribution of the loan portfolio as of Q4 2023 is given in the table below.
Client IFRS Sector Name
Healthcare
Individual
Hospitality & Leisure
Manufacturing
Metals and Mining
Government sector
Food Industry
Media & Publishing
Real Estate
Services
Transportation
Agriculture
Pawn Shops
Trade
Oil and Gas
Automotive
Communication
NGOs and Public sector
Construction
Other
Energy & Utilities
Financial Services
Total Loans to
Customers (Gross)
Total
Exposure (GEL
in mln)
623.3
7,900.4
1,252.7
150.9
179.5
0.1
1,154.9
104.7
2,020.0
499.9
302.0
988.5
208.2
1,340.6
245.6
282.8
55.0
1.3
1,471.1
1,154.0
996.9
345.4
%of Gross
Portfolio
2.9%
37.1%
5.9%
0.7%
0.8%
0.0%
5.4%
0.5%
9.5%
2.3%
1.4%
4.6%
1.0%
6.3%
1.2%
1.3%
0.3%
0.0%
6.9%
5.6%
4.7%
1.6%
Volume of
Loans <8y
459.8
3,742.6
564.2
122.5
147.1
0.1
1,080.5
98.0
1,328.1
294.2
281.2
834.1
208.2
1,165.0
243.1
252.9
54.6
1.3
1,279.8
842.1
453.4
342.1
Share of
Loans <8y
73.8%
47.4%
45.0%
81.2%
81.9%
100.0%
93.6%
93.6%
65.7%
58.9%
93.1%
84.4%
100.0%
86.9%
99.0%
89.4%
99.3%
100.0%
87.0%
73.0%
45.5%
99.0%
Volume of
Loans <15y
623.3
7,078.9
1,251.2
150.9
179.5
0.1
1,154.9
104.7
2,020.0
499.8
302.0
988.5
208.2
1,340.2
245.6
282.8
55.0
1.3
1,471.1
1,153.8
871.6
345.4
Share of
Loans <15y
100.0%
89.6%
99.9%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
87.4%
100.0%
21,277.8
100%
13,794.9
64.8%
20,328.8
95.5%
Processes for managing climate-related and environmental risks in lending
Since 2012, TBC Bank has had in place a process to consider environmental and social risk, which was established in
line with industry guidelines, that aims to mitigate climate change. TBC Bank has developed E&S risk management
procedures to identify, assess, manage, and monitor environmental and social risks that are fully compliant with
Georgian environmental legislation, follow international best practices, and incorporate appropriate consideration
of IFC Performance Standards, EBRD Performance Requirements (PRs), and ADB’s Safeguard Requirements (SRs).
These procedures are fully integrated into the credit risk management process and are routinely applied to SMEs
and corporate customers. In collaboration with partner IFIs, a clear Environmental and Social risk categorisation
matrix was developed. Projects that are to be financed are classified according to E&S categories (low, medium,
high and A category) based on analysis; where necessary, deep-dive analysis and due diligence are performed.
When categorising the transaction according to E&S risk category, priority is given to the higher risk. Additionally,
external specialised companies are involved in the detailed assessment of E&S risks for A category projects, such as
hydroelectric plants.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION The table depicts the business loan portfolio breakdown by E&S categories, by shares.
ESG profiles for corporate customers
BUSINESS LOAN PORTFOLIO BREAKDOWN BY E&S CATEGORIES (BY SHARES)
Category A
1%
1%
High
Medium
Low
30%
28%
17%
17%
52%
55%
2023
2022
0.0%
10%
20%
30%
40%
50%
60%
70%
Low Risk – transactions with minimal or no adverse social or environmental impacts, which are not generally subject
to further assessment (beyond their identification as such) and require customer’s (assent/certification/disclosure)
compliance with local and national environmental, health and safety and labour laws and regulations.
Medium Risk – transactions with limited potential for adverse social or environmental impacts that are few in number,
generally site-specific, largely reversible, clearly evident at the time of the assessment and readily addressable
through mitigation measures, which typically require a limited or focused environmental and/or social assessment, or
straightforward application of environmental siting, pollution standards, design criteria, or construction standards.
High Risk – transactions with potentially highly significant, negative and/or long-term environmental and/or social
impacts, the magnitude of which may be difficult to determine at the loan application stage. These typically require
analysis of environmental and social risks and impacts in the context of the total area of influence of the customer’s
operations. As part of the risk assessment, the client will identify individuals and groups that may be differentially or
disproportionately affected by its operations.
Category A – transactions with potentially significant adverse social or environmental impacts that may be diverse,
irreversible, or unprecedented, the assessment of which usually requires inputs from independent external experts
and may require the involvement of IFI E&S specialists in the due diligence assessment process.
In addition, we strive to make a positive contribution to the development of private companies and assist them in the
proper management of environmental and social risks related to their business activities. In cases where we identify
any non-compliance with local legislative requirements and/or TBC’s standards, we develop Environmental and
Social Action Plans (ESAP) for our clients to assist them in enhancing their environmental performance and we closely
monitor their implementation.
Starting in April 2022, TBC received support from the Technical Assistance Trust Fund (EPTATF)1 through its Climate
Action Support Facility (CASF) for Promoting Climate Action for SMEs in Georgia. The support from EPTATF
comprised one year of consultancy services for the implementation of TBC’s climate action strategy, provided by the
Frankfurt School of Finance and Management, covering:
• The climate action strategy, monitoring and reporting;
• Stress testing and sensitivity analysis; and
• Climate-related training.
This process was supported by climate-related training to strengthen the Bank’s capacity, knowledge, and capabilities
to manage climate-related risks across the business. In 2022, eight different training sessions and workshops were
conducted, covering topics such as climate-related risk management, financial planning, and climate stress testing.
In 2023, we continued working with external consultants on following topics: financed emissions, our climate stress
testing model, and measurement of Group’s direct performance against the Paris Agreements targets.
In 2023, TBC Bank finalized a pilot project which tested the ESG Profile Methodology on its top 20 corporate
customers. The aim was to incorporate an ESG Profile scorecard in the overall risk management process. ESG factors
such as climate adaptation, transition to low-carbon activities, implementation of green technologies, diversity and
inclusion, and good corporate governance are considered during the assessment and the respective scores are
assigned based on expert judgment.
The ESG profile consists of four main components:
1. Climate change – covering physical and transitional risks;
2. Environmental – covering environmental and social risks;
3. Social – covering diversity, employee benefits and equal/fair pay;
4. Governance – covering ESG governance, the Company’s disclosures, and diversity at Board and executive
management levels.
The results of the assessment will be useful for the development of decarbonization and transition plans. The ESG
Profile Methodology is considered as being at an initial stage and will evolve in the future as far as knowledge,
expertise within the Group, and the local regulatory framework for climate-related topics advance.
Other risk categories
Climate risk might impact other, more traditional risk categories for banking such as: market risk, operational risk, liquidity
risk, and reputational risk. A summary of the assessment is given in the table below. Certain risk factors, which were
identified for operational and reputational risks, are already covered under the existing risk management framework.
Banking risk types
Impact from Physical Risk
Market risk
Liquidity risk
No material impact expected
No material impact expected
Impact from Transition Risk
No material impact expected
No material impact expected
Operational risk
Extreme events that would cause damage to
the Group's own sites could affect its ability
to provide services to its clients (e.g., lack of
electricity supply, inability for employees to
work in premises).
No material impact expected
Reputational risk
No material impact expected
No material impact expected
Financing to high-emitting borrowers
could affect brand image, as perceived
by stakeholders.
No material impact expected
Supply chain monitoring
As one of the largest purchasers in the country, we acknowledge and understand the social, economic, and nvironmental
impact of our procurement decisions and operations. In 2019, we developed an Environmental and Social Risk
Management Questionnaire in order to screen suppliers. We also regularly assess our long-term contractor companies’
environmental and social risks. In case we identify any non-compliance with our E&S standards, our ESRM team develops
implementation Environmental and Social Action Plans (ESAPs) for each company and monitors their implementation.
1 These services are financed through financial support from the EPTATF Trust Fund. Information given to the press or to any third parties, all
related publicity material, official notices, reports, and publications shall acknowledge that the services are delivered “with funding by the
Eastern Partnership Technical Assistance Trust Fund (EPTATF).” The Fund was established in 2010 with a view to enhancing the quality and
development impact of the Bank’s Eastern Partnership operations through the financing of pre-feasibility and feasibility studies, institutional
and legal appraisals, Environmental and Social Impact Assessments for potential investments, project management support and capacity
building for the beneficiaries during the implementation of investment projects, as well as of other upstream studies and horizontal activities.
It focuses on four priority sectors: energy, environment, transport, and telecommunications with climate change and urban development as
cross-cutting issues.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION Raising environmental awareness among our employees
We believe that raising environmental awareness among our employees is vital for the effective implementation of EMS
and to encourage new eco-friendly ideas and initiatives within the organisation.
For this purpose, we actively run various Environmental and Social training programmes, which include:
• Training on environmental and climate change topics for new employees;
• Climate change and green Lending training for credit and front office staff;
• An annual mandatory online EMS e-learning course for all staff, followed by a self-evaluation test;
In 2023, 98% of all staff, including senior management, successfully passed an online course and a self-evaluation test
about TBC’s EMS.
To ensure effective communication, training materials were created that briefly describe TBC’s environmental
management system.
EXTERNAL COMMUNICATION
The Group pays significant attention to the external communication of E&S matters with existing and potential
customers and other stakeholders. The feedback and recommendations received from our stakeholders and other
interested parties enable us to continuously improve our E&S performance.
Our grievance mechanism enables any interested party to register complaints with regards to E&S issues via our website
www.tbcbank.com.ge. All complaints are thoroughly analysed and addressed in a timely manner.
TBC Bank has successfully passed the third-year surveillance audit of the Environmental Management System, ISO
14001:2015. This means that TBC’s Environmental System is managed in accordance with international standards
and requirements. The renewal of the certificate for 2023 was conducted in December 2023 and was also completed
successfully.
TBC Bank annually discloses its Environmental and Social Performance Annual Report to all its partner International
Financial Institutions. The report includes detailed information about Environmental and Social Risk Management in
Lending, the distribution of the Bank’s business portfolio in terms of environmental and social risk, a breakdown of its
sustainable portfolio, and respective procedure updates etc.
Since 2019, TBC Bank released its third full-scale Sustainability Report, which was prepared in accordance with Global
Reporting Initiative (GRI) standards. The Sustainability Report helps the Company to understand its role and influence on
sustainable development issues such as climate change, human rights, and social welfare. The report is available at www.
tbcbankgroup.com.
4. Metrics and targets
The metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk
management process
The metrics related to the Group’s own operations
TBC Bank has established a comprehensive internal environmental system to manage and report on the Bank’s
GHG emissions and is committed to reducing its GHG emissions by closely monitoring its consumption of energy,
water, and paper. The guidelines for documenting environmental data have been developed and responsible staff in
subsidiary companies have been assigned to collect and provide the required data. TBC Bank also commissioned
G&L Management LTD, an independent Health, Safety, and Environment (HSE) consulting company, to verify the
measurements of its GHG emissions. The company provided a limited assurance, covering historical data and
information.
Below is a summary of Scope 1, Scope 2, and Scope 3 (flights) GHG emissions, water and paper consumption, 2023
targets versus actual results, as well as targets for 2024.
Total GHG emissions (CO2) (tonnes) and KPIs
Scope 1*
Fuel Combustion (heating, vehicles, generators)
Scope 2
(Electricity consumption)
Scope 3
(International flights)
Total emissions (tCO2)
Total emissions per full time employee (tCO2/pp)
Water consumption per employee (m3/pp)
Printing paper per person in reams
Actual
2021
Actual
2022
Actual
2023
2023
target
increase
Future
target
for 2024
3,102
3,175
3,042
Below 3% Increase below 5%
1,499
1,489
1,470
Below 7% Increase below 4%
18
506
1591
----
Decrease -44%
4,619
0.6
9.54
13.50
5,170
0.62
8.90
12.67
6,103
0.70
8.62
12.24
Below 4%
Decrease -8%
Below 4%
Decrease -8%
Below 2% Increase below 3%
Below 4% Increase below 1%
Scope 1 - In 2023, this indicator decreased by 4% compared to 2022 and remained significantly below the target level
of an increase of 3%. The decrease was mainly related to the measures implemented by TBC Bank which are listed on
the page 129 of the chapter.
Scope 2 – In 2023, total electricity consumption decreased by 1% compared to 2022 and remained significantly below
the target level of an increase of 7%. The decrease was mainly related to the measures implemented by TBC Bank
which are listed on the page 129 of the chapter.
Scope 3 – In 2023, business flights increase by 214%. The main contribution comes from an one-off marketing project
which considered supporting the Georgian National Rugby team at the Rugby World Championship 2023 in Paris.
Overall, total emissions increased by 18% in 2023 compared to 2022 levels, while total emissions per full time employee
increased by 13% over the same period.
In 2023, water consumption per employee decreased by 3% year-on-year, while usage of printing paper went down by
3%.
Calculation methodology
To calculate the GHG inventory, we took the following steps: we set the organisational boundaries, established the
operational scope, and developed a structured approach for data collection and the calculation of carbon dioxide
(CO2) equivalent. This report describes all emission sources required under the Companies Act 2006 (Management
report) Regulations 2013 (Scope 1 and 2) and, additionally, the emissions under Scope 3 that are applicable to the
business. In preparing emissions data, the UK Government’s Greenhouse Gas Conversion Factors for Company
Reporting 2017 and National IPCC emission factors for electricity (tCO2*/MWhe) were used. The required data were
collected, and a report was generated for TBC Bank’s main activities, as follows:
Scope 1 (the combustion of fuel and operation of facilities) includes emissions from the combustion of natural gas,
diesel and/or petrol in equipment at TBC Bank’s owned and controlled sites, including the combustion of petrol, diesel
fuel, natural gas etc. in TBC Bank-owned transportation vehicles.
Scope 2 (purchased electricity for own use, such as lighting, office appliances, cooling, etc.) includes emissions from
the use of electricity at TBC Bank-owned and controlled sites. To calculate the emissions, the conversion factor for
National IPCC emission factors for electricity (tCO2*/MWhe) was used.
Scope 3 includes emissions from all air business travel (short/medium/long and international haul). It should be noted
that information on the travel class was considered and an “economy class” conversion factor has been used for the
emissions calculation from the following link: www.atmosfair.de.
Financed emissions (Scope 3)
We have a direct or indirect impact on the environment throughout our activities. However, in the case of financial
institutions, the main source of Greenhouse Gas (GHG) emissions is not the emissions produced directly via operating
our business processes or their own energy consumption, but GHG emissions produced by other sectors that are
financed by us. These types of emissions are known as financed emissions.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION The table below depicts, which of the 15 categories of Scope 3 emissions have been included and which are
considered to be immaterial or irrelevant to the business.
#
1
Scope 3 category
Purchased goods and services
2 Capital goods
3
Fuel- and energy-related activities
(not included in scope 1 or scope 2)
4 Upstream transportation and distribution
5 Waste generated in operations
6 Business travel
7
Employee commuting
8 Upstream leased assets
9 Downstream transportation and distribution
10 Processing of sold products
11 Use of sold products
12 End-of-life treatment of sold products
13 Downstream leased assets
14 Franchises
15 Investments
GHG calculation approach
Not material
Not relevant
Not relevant
Not relevant
Not material
Included (flights)
Not material
Not material
Not material
Not relevant
Not material
Not relevant
Not relevant
Not relevant
Included - financed emissions: debt investments
(with known use of proceeds) and project finance
7 categories are considered to be not relevant, as TBC Bank does not engage in these activities; other 6 categories
are assessed to be not material, as those activities does not constitute typical activities for TBC Bank as a financial
institution. We consider two categories – business travel and investments – to be material: financed emissions
constitute more than 40% of the total GHG emissions (indirect impact), while business travels are considered to be
material due to their increasing share since 2021, which was above 30% in 2023.
Financed emissions (Scope 3)
The Partnership for Carbon Accounting Financials (PCAF) has developed methods for different asset classes, which
can be used to calculate the financed emissions (PCAF 2022). In total, seven asset classes are considered. Below you
can see the financed emissions by asset class as of December 2023.
N.
Asset Type
Financed GHG Emissions GgCO2e/y
1
2
3
4
5
6
7
TOTAL
Listed Equity and Corporate Bonds
Business Loans and Unlisted Equity
Project Finance
Commercial Real Estate
Mortgages
Motor Vehicle Loans
Sovereign Debt
Calculation methodology
3,166.70
61.3
2,856.60
-15.1
2.3
30.4
0.9
230.3
• Listed Equity and Corporate Bonds - consists of securities for which verified emissions data are available
• Business loans1 -consists of business Loans and unlisted equity asset class
• Project finance - consists of projects for which verified project emissions / reductions data are available
• Retail mortgages -consists of all retail mortgages
• Commercial real estate - consists of all commercial l mortgages
• Motor vehicles - consists of all car loans
• Sovereign debts2 - consists of all sovereign papers which are on the balance of TBC Bank SA.
It should be noted that the data we have used for calculation of financed emissions is the best available at the current
stage, notwithstanding the challenges that exist given the incompleteness and novelty of the data sets and the
methodologies required for the Georgian environment, which most of our activities occur. The most of the data are of
Score 4 and Score 5 quality. We expect the availability and reliability of the required data to improve over time, and we
intend to integrate improved data into our calculations as it becomes available and reliable.
Sustainable portfolio
The climate action initiatives are part of the overall ESG strategy, which is reviewed and approved by the Supervisory
Board annually. The ESG strategy sets aspirational targets, such as net-zero GHG emissions3 (Scope 1 and Scope 2
GHG emissions) related to the direct environmental impact by 2025 and an increase in the sustainable portfolio, which
consists of renewable energy loans, energy efficiency loans, and financing with social components, etc. As of Q4 2023,
the total sustainable portfolio4 stood at GEL 1.23 billion, which exceeds the 2023 target volume of GEL 1.0 billion by GEL
233 mln. The target for 2024 has been set at GEL 1.4 billion.
Sustainable portfolio development as of December 2023
50%
16%
1.9%
1.9%
1.6%
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55
12
6
141
50
11
14
142
71
10
30
144
86
10
571
555
549
551
32
42
202
181
144
143
9
482
Renewable Energy
Energy Efficiency
WiB
Youth Support
NBG Green Taxonomy
NBG Social Taxonomy
Green Bonds
Social Guarantees
Total Fx Adj. Growth Rate
Q4
2022
Q1
2023
Q2
2023
Q3
2023
Q4
2023
During 2023, our renewable energy portfolio impact (avoided GHG emissions) amounted to 7 681.18 tCO2/a according
to the electricity generation data and estimates of the external consultant under the Green for Growth Fund (GGF)
Technical Assistance Facility represented by Finance in Motion GmbH financed by the European Union under the
EU4Energy Initiative.
From 2022 onwards, ESG-related KPIs are included in the long-term incentive plans for executive remuneration. The
executive management KPIs are linked to the target volumes of the sustainable portfolio and other sustainable assets.
For more details, please see the Remuneration Committee Report in the Annual Report of TBCBank Group PLC, page
229.
1 www.nbg.gov.ge - The calculation methodology for business loans was developed by the National Bank of Georgia within the project
“Promotion of Rural Finance for Sustainable MSE Development in the South Caucasus and Ukraine”, implemented by DSIK and funded by the
German Ministry for Economic Cooperation and Development (BMZ).
2 The calculation methodologies for the other six asset classes were developed by TBC in cooperation with the consultant company RINA,
supported by the Global Climate Partnership Fund. The calculation methodologies consider the PCAF approach.
3 Please refer to the definitions of Scope 1, Scope 2 and Scope 3 on the page 139.
4 Our sustainable loan portfolio includes a) energy efficiency, youth support, and women in business loans financed by special purpose funds
received from IFIs; b) loans financing renewable energy, which include all hydro power plants financed by the Bank; c) financing of startup
companies and affordable housing which are categorized based on the Social Taxonomy of the National Bank of Georgia, d) green loans which
are assessed based on criteria defined by the Green Taxonomy of the National Bank of Georgia (www.nbg.gov.ge).
140
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023HOW WE CREATE VALUE FOR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION r
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2 Governance
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Corporate Governance
The Bank recognises the importance of ensuring diversity and sees significant benefit to our business in having the
Supervisory Board and management team that is drawn from a diverse range of backgrounds, since this brings the
required expertise, cultural diversity and different perspectives to the board discussions and helps to improve the
quality of decision making.
As at the date of this Annual Report, three (38%) of the eight members of the Supervisory Board are female, and there
are a number of talented women in key positions, who report directly to the CEO of the Bank and other members of the
management board within the Bank. The Bank will continue to ensure that consideration of all future appointments to
the Supervisory Board and management board supports the diversity aims.
General meeting of shareholders (the “General Meeting”) is the supreme governing body of the Bank. The
shareholders of the Bank, among other things, are entitled to attend the General Meetings and participate in voting,
receive the dividends and demand explanations from the members of the Management Board of the Bank2 and the
Supervisory Board on the issues included in the agenda of the meeting. The General Meeting by a simple majority of
votes presented or represented, decides on the different matters, including (but not limited to) election and dismissal
of the members of the Supervisory Board, approval of the reports of the Management Board and Supervisory Board,
approval of annual financial statement, setting the compensation of the members of the Supervisory Board, approval
or rejection of the profit (dividend) distribution proposal. In addition, subject to requirements of the laws of Georgia,
the General Meeting may make a decision with a majority of more than 75% of the votes presented or represented
on amending the charter of the Bank, approval of reduction of share capital of the Bank, taking action for liquidation,
commencement of a general assignment to creditors or voluntary winding up under applicable bankruptcy, insolvency
or similar laws and on approving a merger (except for the merger of the subsidiary with the Bank, in which Bank owns
75% of the voting rights, in which case – the decision is made by a simple majority of votes presented or represented),
division or other reorganisation.
Responsibility statement
The Management Report and Financial Statements have been prepared in accordance with applicable laws and
regulations.
We confirm that to the best of our knowledge that:
• The Group’s and the Bank’s Financial Statements, which have been prepared in accordance with the IFRS standards,
give a true and fair view of the assets, liabilities, financial position and profit or loss of the Bank and the undertakings
included in the consolidation taken as a whole;
• The Management Report includes a fair review of the development and performance of the business and of the
position of the Bank and the Group, together with a description of the principal risks and uncertainties they face; and
• The Management Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and
provide the information necessary for the shareholders to assess the Bank’s and Group’s position, performance,
business and strategy.
This responsibility statement was approved by the Supervisory Board and Management Board:
Vakhtang Butskhrikidze
CEO
2 April 2024
Arne Berggren
Chairman
2 April 2024
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1 The Chief Executive Officer is not a member of the supervisory board of JSC TBC Bank, in accordance with the requirements of Georgian
legislation.
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023Joint Stock Company TBC Bank (the “Bank”) is the main subsidiary of TBC Bank Group PLC, a company incorporated in England and Wales and listed on the premium segment of the London Stock Exchange. The Bank’s Corporate Governance is in compliance with the requirements of the National Bank of Georgia’s Code on Corporate Governance for Commercial Banks, dated 26 September 2018, as amended from time to time (the “Code”). At the same time, the Bank also complies with the highest standards of corporate governance as prescribed by the UK Corporate Governance Code. In addition, the Bank has in place an effective internal control system in order to ensure accurate and reliable financial reporting. The Bank has a well-defined framework of accountability and delegation of authority, as well as policies and procedures that include financial planning and reporting; preparation of monthly management accounts; project governance; information security; and review of the disclosures within the annual report and accounts from the respective leads, to appropriately disclose all relevant developments in the year and to meet the requirements of a true and fair presentation. The Bank’s Supervisory Board (“Supervisory Board”) ensures that the Bank’s governance structure enables adequate oversight and accountability, as well as a clear segregation of duties. The involvement of all governance levels in risk management, the clear segregation of authority, and effective communications between different entities facilitate clarity regarding the strategic and risk objectives, adherence to the established risk appetite, risk budget and sound risk management. The centralised Enterprise Risk Management (ERM) function ensures effective development, communication and implementation of risk strategy and risk appetite across the Bank and its subsidiaries (“Group”). The main shareholder of the Bank is TBC Bank Group PLC, which holds 99.9% of the Bank’s share capital. The rights of the shareholders are governed by the Law of Georgia on Entrepreneurs and the Law on the Activities of Commercial Banks and also set out in the Charter of the Bank publicly available at www.tbcbank.ge. The Board of Directors of TBC Bank Group PLC (the “PLC Board”) is the principal decision-making body of the Group and is responsible for promoting the Group’s purpose, culture, values and long-term success strategy and the delivery of sustainable value to stakeholders by. The PLC Board is responsible for establishing and overseeing the strategic direction of the Group. The affairs of the Bank are supervised by a Supervisory Board. TBC Bank Group PLC operates a "mirror board" policy approach to its main subsidiary, the Bank. Composition of PLC Board and the Supervisory Board of the Bank including respective committees mirror at both levels in terms of non-executive membership1. There is also equivalent committee structure of the Supervisory Board as the PLC Board’s committees. The work of the PLC Board, the Supervisory Board and their respective committees is carefully balanced, dividing functions according to whether they are supervising the matters that affect the Group or those concerning solely the Bank. As a result, the Group’s governance structure ensures adequate oversight and accountability, as well as clear segregation of duties. At the date of this report, in line with the “independence” criteria set by the Code, the Supervisory Board comprises eight independent members: Arne Berggren (Chairman), Tsira Kemularia (Senior Independent Member), Per Anders Fasth, Thymios P. Kyriakopoulos, Eran Klein, Nino Suknidze, Rajeev Sawhney and Janet Heckman.The Supervisory Board has established six Committees: • The Risk Committee focuses on the possible risks and capital issues of the Bank. • The Audit Committee deals with the external auditors, internal controls and financial reporting, as well as communication with the market and with the regulators. • The Remuneration Committee leads the remuneration-related issues, such as the right level of compensation to attract and retain people and balancing this with the level of compensation that is acceptable for our stakeholders. • The Corporate Governance and Nomination Committee is response for talent management and nomination and succession planning for the Supervisory Board and the executive team.• The Technology and Data Committee started operating in 2022 and supports the Supervisory Board in its oversight of key enablers of the strategy, data and cyber issues, and the Bank’s IT resources. • The ESG and Ethics Committee started operating in 2022 and ensures that the Bank stays focused on the ESG issues that are key for all our stakeholders. FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION SUPERVISORY BOARD BIOGRAPHIES
Supervisory Board biographies
ARNE BERGGREN
TSIRA KEMULARIA
PER ANDERS FASTH
JANET HECKMAN
POSITION
Chair
Senior Independent Supervisory Board Member
Independent Supervisory Board Member
Independent Supervisory Board Member
COMMITTEE Chair of CGN, Member of RemCo
Member of AC, CGN and RemCo
Chair of AC, Member of RC and RemCo
Chair of RemCo, Member of ESGE and RC
APPOINTED
Board: 18 July 2019, Chair: 1 March 2021
Board: 10 September 2018, Senior Independent Director:
15 September 2021
BORN
1958
NATIONALITY
Swedish
1977
British
1 July 2021
1960
Swedish
26 June 2023
1954
American
CAREER
Arne has worked in the financial services industry for more than 30
years. He has held several senior leadership and advisory positions
at prominent financial institutions, including the IMF, World Bank,
Swedbank, Carnegie Investment Bank AB and the Swedish Ministry
of Finance and Bank Support Authority. Arne played a leading role in
the handling of the Swedish banking crisis in 1991-93 and assisted the
FRA in Thailand and FSC/ KAMCO in South Korea during the Asian
crisis. Arne has also served as an independent Non-Executive Director
in asset management companies in Turkey and Slovenia, and, until
recently, in Greece at Piraeus Bank.
SKILLS &
EXPERIENCE
Over 25 years of experience in the financial services industry
internationally including advisory roles for a range of governmental
and supranational bodies and institutions.
CONTRIBUTION
TO THE COMPANY
He has held various roles within UK listed banks and has a breadth of
corporate governance expertise.
Experience in investment banking activities and in leading bank
restructurings;
Deep understanding of strategic planning and implementation.
With more than 25 years of international banking experience,
coupled with his background and broad experience, Arne provides
a valuable perspective as Chair to the Board. Arne plays a pivotal
role in supporting the Company’s relationship with its major
shareholders, and, through his extensive experience in navigating
economic uncertainty, is invaluable in meeting the challenges
facing the Company and the wider sector. As Chair of the Corporate
Governance and Nominations Committee, Arne has secured high
calibre appointments in the last year. This has been instrumental in
ensuring the composition of the Board matches the culture, strategy
and leadership needs of the Company.
Throughout her career, Tsira has held various roles covering market risk
management and commodity trading at companies including Dynegy
Inc. in the US and UK and at Shell International Trading and Shipping Ltd
(STASCO) in London, Russia CIS, and Caribbean operations. Between
2005 and 2016, she served in a broad range of managerial roles covering
M&A and Commercial Finance, Group Treasury and Trading and
Supply in the UK, Moscow and Barbados. Tsira was previously the
Head of Group Pensions Strategy and Standards at Shell International
Ltd based in London. From 2019 to mid-2022, Tsira held the position
of Head of Internal Audit and Investigations for Shell’s global Trading
and Supply organisation, the world’s biggest commodity trading and
supply business. In July 2022, Tsira was appointed as a Vice President of
Corporate and UK Country Controller responsible for the Shell Group’s
financial management of the corporate segment. Tsira is a member of
the Shell UK Management Board, and a member of Shell UK Country
Coordination Team, Chief of Staff for UK Crises Management
More than 23 years of in-depth experience across the energy sector
including regulated commodity trading and financial services;
Chartered Director and Fellow with the Institute of Directors in London,
UK; *
Former member of the British-Georgian Society and former Chair of
the Georgian Community in the UK;
Relevant experience and expertise in information security risk
management.
Tsira’s specialist knowledge in the areas of financial services, risk
management and internal audit enables her to contribute to, and
constructively challenge on, a wide range of Board matters. As a
Chartered Director, Tsira’s leadership qualities ensure she can act as
a sound advisor to the Chair and represent the interests of the other
Directors. Tsira brings significant regulatory, strategic and international
financial services expertise and knowledge of financial markets to the
Board.
Over the past 25 years, Per Anders has served as CEO in several companies
such as at SBAB Bank, Hoist Finance and European Resolution Capital as well
as CFO and other senior executive positions at the leading North-European
bank SEB. He has also gained extensive strategic consulting experience having
spent 10 years at top-tier consultancies McKinsey & Company and QVARTZ
(now Bain & Company).
Janet was previously the Managing Director for the Southern and Eastern
Mediterranean(SEMED) Region at the European Bank for Reconstruction and
Development (EBRD). Based in Cairo, she was also the Country Head for Egypt.
During her long career at Citigroup, she spent time as EMEA Corporate and
Investment Managing Director and held a number of field roles across EMEA,
and was responsible for Global Relationship Banking across CEMEA.
Per Anders has been a non-executive director of more than 15 financial
institutions in Europe. In addition, he has extensive professional
experience from having worked in more than 20 European countries as a
non-executive director, senior executive and advisor to corporations and
governments.
Extensive CEO and senior executive experience, having spent more than 20
years at leading banks and other financial institutions;
Over 30 years of accumulated experience as an independent non-executive
director;
Strong listed corporate governance, leadership and strategic advisory skills;
Significant financial reporting, investor relations and internal controls
experience;
Relevant experience from the financial information technologies (fintech) and
credit management industries across Europe.
Over 30 years experience in corporate, investment and development banking.
Extensive expertise in global relationship banking. 15 years experience in
operations management.
Relevant experience of developing and delivering business plans and strategic
change in a wide range of jurisdictions, including across Central and Eastern
Europe, North Africa, the Middle East and Central Asia. This included the
establishment of key partnerships with national governments.
Per Anders is regarded as a financial expert in the context of audit and risk
committee work. He has extensive experience of banking and financial services
and operating in regulatory environments. Per Anders’s broad financial and
global executive experience brings a wide perspective to his role as Chair of
the Audit Committee and in Board discussions and decision-making.
Janet brings her extensive knowledge of financial services and corporate
banking to the Board, with her past experiences in the formulation and delivery
of strategy for regional operations at the EBRD.
EXTERNAL
APPOINTMENTS
Chairman of Hoting Innovations AB
Trustee Director of the British Gas Trustee Solutions Ltd, a closed
pension fund (post British Gas acquisition by Shell)
Trustee Director of Shell Trustee Solutions Ltd
Chairman of Lyra Financial Wealth, a privately held wealth management
company
Board member of Atle Investment Management/Services, a privately held
investment management company
Board member and audit committee chair of Ukrgasbank, a Ukrainian
corporate bank
Board member and audit committee chair of Astana International Exchange
Board member of Air Astana, Kazakhstan
Board member of Citibank Kazakhstan
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
ERAN KLEIN
THYMIOS P. KYRIAKOPOULOS
RAJEEV SAWHNEY
NINO SUKNIDZE
POSITION
Independent Supervisory Board Member
Independent Supervisory Board Member
Independent Supervisory Board Member
Independent Supervisory Board Member
COMMITTEE Chair of ESGE, Member of TD and RC
Chair of RC, Member of AC and TD
Chair of TD, Member of ESGE and CGN
APPOINTED
1 July 2021
BORN
1965
NATIONALITY
British
1 July 2021
1975
Greek
CAREER
Eran is an experienced international banker and lawyer. Over a period
spanning more than two decades, he held senior roles in leading
financial institutions, such as Commerzbank, Citibank, ING Financial
Markets and Deutsche Bank. Covering both developed and emerging
markets, Eran has accumulated valuable knowledge in capital markets,
SME finance, retail lending, corporate governance, liquidity and
balance sheet management, as well as in risk management, audit and
strategy implementation. He previously served as a Non-Executive
Director and risk committee chair at Privatbank, the largest bank in
Ukraine.
Thymios is a senior banking executive with considerable international
experience. He specialises in operational transformation, balance
sheet optimisation, risk management, financial engineering and
portfolio management. Thymios was executive general manager
and chief risk officer of Piraeus Bank S.A, a leading listed Greek
Bank, Managing Director at Goldman Sachs Inc. in the fixed income
currencies and commodities trading division, and has held board and
executive roles in insurtech, fintech, financial services and advisory
sectors.
SKILLS &
EXPERIENCE
Extensive experience in banking, credit, capital markets and legal;
Significant risk, corporate governance, strategy and structuring
expertise;
Strong Emerging Markets banking and stakeholder management
experience;
Relevant experience and expertise in information security risk
management.
CONTRIBUTION
TO THE COMPANY
Eran brings to the Board extensive and varied risk, governance and
strategy experience that he has gained at large financial institutions
and consulting fields in both developed and developing markets,
making him an ideal fit to spearhead the ESG and Ethics Committee
agenda, on behalf of the Group.
EXTERNAL
APPOINTMENTS
No current additional Board appointments
Extensive experience in global capital markets, regional banking and
supervised entities;
Expert risk manager, investor, investment banker and balance sheet
optimiser;
Operational transformation leadership and crisis management
spanning systemic banks and fintech;
Strong governance, risk and asset management oversight skills for
both listed and quasi-governmental entities.
Thymios brings extensive governance, financial and operational
experience. His deep knowledge allows him to support and contribute
to the strategic direction of the Company while controlling the path
used in its implementation. Having led investment and risk functions
in internationally listed banks and currently acting as chair of the
risk committee of a national wealth fund, Thymios’s broad multi-
jurisdictional risk expertise enables him to bring innovative and
positive insights to his role as Chair of the Risk Committee.
Board member and chair of the investment committees of the
Growthfund, the National Fund of Greece
Board member of Attica Bank the Greek listed bank
Board member of Agreed Payments SA the newly llicensed fintech
business
29 November 2021
1957
Indian
Rajeev has 40 years’ experience as a senior corporate growth executive. He
specialises in digital technologies and has served in financial services and
various other industry sectors in Europe, North America and Asia. Previously ,
Rajeev held the positions of Executive Chairman and Non-Executive Director
of OXSIGHT Ltd, a medical technology innovation company, and an Oxford
University spin off. He was formerly a senior advisor to the CEO at global
IT services firm Zensar Ltd in the UK and a member of the advisory board
at Garble Cloud Inc., a cybersecurity company in Silicon Valley, USA. Prior
to that, Rajeev gained strong operational experience as President of HCL
Technologies and at the IT services firm focussed on the Banking and Finance
sector, Mphasis, a Hewlett Packard company. Rajeev has been on the World
Economic Forum expert Task Force on Low-Carbon Economic Prosperity and
contributed at the World Economic Forum Summer Davos on climate change
deliberations.
Strong global corporate leadership experience of more than 40 years;
Significant advisory and executive experience with technology and
cybersecurity companies in financial services and other industry sectors;
Extensive expertise in Human Resource management;
Relevant experience and expertise in information security risk management.
Member of AC and CGN
29 November 2021
1979
Georgian
Nino is a business lawyer with over 20 years’ experience in the Georgian market.
She has a deep understanding of, and expertise in, various areas of practice
including banking, finance, corporate, regulation, competition and capital
markets. Previously, Nino served as general counsel at JSC Bank of Georgia.
Before joining TBC Bank Group plc, she held various positions at the Georgian
offices of international law firms Dentons and DLA Piper over a period of more
than 11 years. Currently Nino is the managing partner of the law firm Suknidze &
Partners LLC.
Strong financial services background;
Extensive experience as a leading legal counsel in major financial services
sector transactions and listings;
Considerable governance, regulatory and risk management experience,
including at an LSE-listed company;
Experience in advising companies across a range of sectors, including
telecommunications, pharmaceuticals, energy and commerce.
Rajeev brings the extensive international leadership and general management
perspective that he has gained from the technology and fintech sectors to the
Board. He provides valuable insights into the Company’s increasingly important
technological evolution. In line with this, he has been appointed Chair of
the Technology and Data Committee, where he provides key support and
leadership in these areas.
Nino is an experienced domestic and international lawyer with particular
expertise in regulated sectors, where she has counselled on a wide range
of legal, regulatory and business issues. Nino’s valuable experience brings a
considered perspective to the Board and enriches discussion and strategic
thought.
No current additional board appointments
Vice President at Georgian Chamber of Commerce and Industry
Board member at Care Caucasus, a charity organisation in Georgia
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Statement
INDEPENDENT AUDITORS’ REPORT
Independent Auditor’s Report
To the Shareholders and Management of JSC TBC Bank
PricewaterhouseCoopers Georgia LLC, I/C 405220611
King David Business Centre, 7th floor, #12 M. Aleksidze Street, Tbilisi 0171, Georgia
Tel: +995 (32) 250 80 50, www.pwc.com/ge
Our audit approach
Overview
Materiality
Group
scoping
Key audit
matters
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
consolidated and separate financial statements. In particular, we considered where management made subjective
judgements; for example, in respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of
management override of internal controls, including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable
assurance whether the consolidated and separate financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated and
separate financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall Group and Bank materiality for the consolidated and separate financial statements as a whole as set out in the
table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually
and in aggregate on the consolidated and separate financial statements as a whole.
Overall Group and Bank
materiality
Group: GEL 65.2 million (2022: GEL 63.0 million)
Bank: GEL 63.1 million (2022: GEL 61.4 million)
How we
determined it
Rationale for
the materiality
benchmark applied
5% of profit before tax
Profit before tax is a primary measure used by the shareholder in assessing the
performance of the Group and the Bank and is a generally accepted benchmark for
determining audit materiality.
152
153
Our opinion In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of JSC TBC Bank (the “Bank”) and its subsidiaries (together – the “Group”) as at 31 December 2023, and the Group’s and the Bank’s consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, with the requirements of the order N284/04 of the President of the National Bank of Georgia dated 26 December 2018, and with the requirements of the Law of Georgia on Accounting, Reporting and Auditing.What we have auditedThe Group’s and the Bank’s consolidated and separate financial statements comprise:• the consolidated and separate statements of financial position as at 31 December 2023;• the consolidated and separate statements of profit or loss and other comprehensive income for the year then ended;• the consolidated and separate statements of changes in equity for the year then ended;• the consolidated and separate statements of cash flows for the year then ended; and• the notes to the consolidated and separate financial statements, comprising material accounting policy information and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. IndependenceWe are independent of the Group and the Bank in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.• Overall Group materiality: GEL 65.2 million, which represents 5% of the Group’s profit before tax.• Overall Bank materiality: GEL 63.1 million, which represents 5% of the Bank’s profit before tax.• Our scoping was determined based on a legal entity contribution to profit before tax and other key line items in the financial statements.• Expected credit loss allowance for loans and advances to customers. .TBC BANK ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTSTBC BANK ANNUAL REPORT AND ACCOUNTS 2023 Key audit matters
How we tailored our Group and Bank audit scope
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated and separate financial statements of the current period. These matters were addressed in the context of
our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Expected credit loss allowance on loans and advances to
customers (Group and Bank)
Refer to Note 2 - Material Accounting Policy information,
Note 3 - Critical Accounting Estimates and Judgements in
Applying Accounting Policies, Note 9 - Loans and Advances to
Customers, and Note 38 -Financial and Other Risk Management
in the consolidated and separate financial statements.
We focused on this area as the management’s estimates
regarding the expected credit loss (‘ECL’) allowance on loans
and advances to customers are complex, require a significant
degree of judgement and are subject to high degree of
estimation uncertainty.
Under IFRS 9, Financial Instruments, management is required
to determine the ECL allowance expected to occur over either
a 12-month period or the remaining life of an asset, depending
on the stage allocation of the individual asset. This staging
is determined by assessing whether or not there has been
a significant increase in credit risk (‘SICR’) or default of the
borrower since loan origination.
Management has designed and developed a number of models
to achieve compliance with the requirements of IFRS 9 and
implemented an IT system for ECL estimation. Among others,
management applies judgement to the models in situations
where past experience is not considered to be reflective of
future outcomes due to limited or incomplete data.
We consider the appropriateness of the model methodologies
and the following judgements used in the determination of the
modelled ECL allowance to be significant:
• Judgemental criteria applied for identification of
SICR, involving qualitative assessment of borrowers’
creditworthiness (relevant to Corporate and SME portfolios);
• Critical assumptions applied in the determination of loss
given default (‘LGD’) and probability of default (‘PD’); and
• Assessment of the key assumptions related to forward-
looking information (‘FLI’) including the appropriateness of
scenario weightings and macroeconomic variables.
We gained an understanding and evaluated the design and
implementation of the key controls over the determination of
ECL allowance and tested their operating effectiveness. These
controls included among others:
• Controls over model performance monitoring, including
periodic reviews of the policy and models, testing model
estimates against actual outcomes and approval of model
methodology changes
• Controls over governance of independent validation unit;
• Review and approval of the key judgements and
assumptions used for determining LGDs, PDs and FLI;
• Controls over the accuracy of key parameters (such as PD,
LGD) used by the calculation engine;
• Controls over regular monitoring of the financial standing of
the borrowers;
• Controls over the automated ECL calculation by the relevant
IT system; and
• The Management Risk Committee’s review and approval of
key assumptions and assessment of ECL modelled outputs.
We noted no exceptions in the design or operating
effectiveness of the above controls. In addition, we performed
the substantive procedures described below.
We assessed whether the ECL model methodologies
developed by management comply with IFRS 9. We performed
an evaluation and reviewed the application of the judgemental
criteria set by management for determining whether there had
been a SICR (applicable to Corporate and SME portfolios).
We assessed the reasonableness of the critical assumptions
applied in determination of LGDs, PDs and FLI. We involved
our credit risk modelling specialists in performing the above
procedures. We concluded that management’s judgements in
deriving SICR, LGDs, PDs and FLI were reasonable.
We reperformed the calculation of ECL for selected portfolios
and assessed whether management’s ECL calculations were
consistent with the approved model methodologies.
We critically evaluated key aspects of model monitoring and
validation (“backtesting” of projected ECL) performed by
management relating to model performance and stability.
We critically assessed the monitoring results and challenged
explanations for deviations from the expectation. We evaluated
whether model methodologies were updated to address the
results of backtesting, where relevant.
We assessed the appropriateness of the macroeconomic
models and assumptions as well as weightings applied
to each macroeconomic scenario. We are satisfied that
macroeconomic assumptions and scenario weightings used by
management are reasonable.
We evaluated adequacy of the disclosures related to ECL
allowance on loans and advances to customers.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the
consolidated and separate financial statements as a whole, taking into account the structure of the Group and the
Bank, the accounting processes and controls, and the industry in which the Group and the Bank operate.
The Group’s banking activities are primarily carried out in Georgia, with small subsidiary operations in two other
countries. The Group’s business activities comprise of four segments for which it manages and reports its operating
results and financial position, namely Retail Banking, Corporate and Investment Banking, Micro Small and Medium
Enterprises (‘MSME’) and Corporate Centre.
The Bank is the largest component of the Group. Its main operations are Retail and Commercial banking, with all
significant operations based in Georgia. The accounting function and management of the Bank are primarily based in
Georgia, and represents 94.4% of the Group’s total assets and 94.6% of profit before tax.
Our audit approach and composition of our team were tailored to the structure of the Group. We did not use
component auditors for audit of in-scope areas. We performed a full scope audit of the only significant component
of the Group – the Bank. We also performed an audit of the material financial statement line items of one insignificant
component of the Group. Based on the procedures we performed over the reporting units, our audit scoping
accounted for 99.7% of revenue (comprising interest income and fee and commission income) and 98% of total assets
of the Group. We also performed other audit procedures including testing information technology general controls
and other relevant controls related to financial reporting, to mitigate the risk of material misstatement.
Other information
Management is responsible for the other information. The other information comprises the Management Report (but
does not include the consolidated and separate financial statements and our auditor’s report thereon.
Our opinion on the consolidated and separate financial statements does not cover the Management Report.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the
Management Report and, in doing so, consider whether the Management Report is materially inconsistent with the
consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the
Management Report, we are required to report that fact. We have nothing to report in this regard.
In addition, we are required by the Law of Georgia on Accounting, Reporting and Auditing to express an opinion
whether certain parts of the Management Report comply with the respective regulatory normative acts and to
consider whether the Management Report includes the information required by the Law of Georgia on Accounting,
Reporting and Auditing.
Based on the work undertaken in the course of our audit, in our opinion:
•
•
•
the information given in the Management Report for the financial year for which the consolidated and separate
financial statements are prepared is consistent with the consolidated and separate financial statements;
the information given in the Management Report complies with the requirements of paragraph 6 and paragraph 7
(c), (g) of article 7 of the Law of Georgia on Accounting, Reporting and Auditing;
the information given in the Management Report includes the information required by paragraph 7 (a), (b), (d) – (f)
and paragraph 8 of article 7 of the Law of Georgia on Accounting, Reporting and Auditing.
Responsibilities of management and those charged with governance for the consolidated and
separate financial statements
Management is responsible for the preparation and fair presentation of the consolidated and separate financial
statements in accordance with International Financial Reporting Standards, with the requirements of the order
N284/04 of the President of the National Bank of Georgia dated 26 December 2018 , and with the requirements of the
Law of Georgia on Accounting, Reporting and Auditing, and for such internal control as management determines is
necessary to enable the preparation of the consolidated and separate financial statements that are free from material
misstatement, whether due to fraud or error.
154
155
INDEPENDENT AUDITORS’ REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTSTBC BANK ANNUAL REPORT AND ACCOUNTS 2023 From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated and separate financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Levan Kankava.
PricewaterhouseCoopers Georgia LLC (Reg.# SARAS-F-775813)
Levan Kankava (Reg.# SARAS-A-592839)
2 April 2024
Tbilisi, Georgia
In preparing the consolidated and separate financial statements, management is responsible for assessing the Group’s
and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Group or the Bank or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s and the Bank’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated and separate financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated and separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism
throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated and separate financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s and the Bank’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s and the Bank’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events
or conditions may cause the Group or Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements,
including the disclosures, and whether the consolidated and separate financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
156
157
INDEPENDENT AUDITORS’ REPORT CONTINUEDTBC BANK ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTSTBC BANK ANNUAL REPORT AND ACCOUNTS 2023 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
in thousands of GEL
ASSETS
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through other comprehensive
income
Repurchase receivables
Finance lease receivables
Investment properties
Investments in associates
Current income tax prepayment
Deferred income tax asset
Other financial assets
Other assets
Premises and equipment
Right of use assets
Intangible assets
Goodwill
TOTAL ASSETS
LIABILITIES
Due to credit institutions
Customer accounts
Other financial liabilities
Current income tax liability
Deferred income tax liability
Debt securities in issue
Provision for liabilities and charges
Other liabilities
Lease liabilities
Subordinated debt
TOTAL LIABILITIES
EQUITY
Share capital
Share premium
Retained earnings
Share based payment reserve
Fair value reserve for investment securities measured at fair value through other
comprehensive income
Cumulative currency translation reserve
Net assets attributable to owners
Non-controlling interest
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Note
31 December
2023
31 December
2022
6
7
8
9
10
11
13
33
12
14
15
16
15
17
18
19
22
33
33
20
21
23
34
24
25
26
37
3,691,232
11,135
1,572,506
20,958,532
3,786,098
6,298
2,047,564
17,497,442
3,475,461
2,884,728
-
370,795
15,235
4,204
53
395
281,861
405,493
491,324
111,991
352,722
28,197
267,495
288,886
22,154
3,721
27
2,064
246,998
411,727
424,252
100,209
311,150
28,197
31,771,136
28,329,010
4,346,951
19,942,516
276,496
66,703
50,957
1,264,085
21,060
102,519
83,410
868,730
3,885,360
17,841,357
250,518
601
112,877
1,209,813
19,908
80,386
72,240
590,148
27,023,427
24,063,208
21,014
521,190
4,285,662
(85,614)
12,345
(7,085)
4,747,512
197
4,747,709
31,771,136
21,014
521,190
3,783,180
(57,556)
5,467
(7,657)
4,265,638
164
4,265,802
28,329,010
The consolidated and the separate financial statements on pages 158 to 280 were approved for issue by the
Supervisory Board on 2 April 2024 and signed on its behalf by:
Vakhtang Butskhrikidze
Chief Executive Officer
Giorgi Megrelishvili
Chief Financial Officer
in thousands of GEL
Interest income
Interest income calculated using effective interest rate method
Other interest income
Interest expense
Net interest gains on currency swaps
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains from currency derivatives, foreign currency operations and translation
Net gains from disposal of investment securities measured at fair value through other
comprehensive income
Other operating income
Share of profit of associates
Other operating non-interest income
Credit loss allowance for loans to customers
Credit loss (allowance)/recovery for finance lease receivables
Credit loss allowance for performance guarantees
Credit loss recovery for credit related commitments
Credit loss allowance for other financial assets
Credit loss (allowance)/recovery for financial assets measured at fair value through other
comprehensive income
Net impairment of non-financial assets
Operating income after expected credit and non-financial asset impairment losses
Staff costs
Depreciation and amortization
Allowance for provision for liabilities and charges
Administrative and other operating expenses
Operating expenses
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income for the year, net of tax
Items that may be reclassified subsequently to profit or loss:
Net gains reclassified to profit or loss upon disposal of investment securities
Movement in fair value reserve for investment securities measured
at fair value through other comprehensive income, net of tax
Exchange differences on translation to presentation currency
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit is attributable to:
– Shareholders of the Group
– Non-controlling interest
Profit for the year
Total comprehensive income is attributable to:
– Shareholders of the Group
– Non-controlling interest
Total comprehensive income for the year
Note
2023
2022
28
28
28
28
28
29
29
30
9
13
21
21
31
15,16
21
32
33
10
10
2,689,427
2,614,687
74,740
(1,276,932)
83,101
1,495,596
571,391
(236,915)
334,476
272,303
5,880
23,200
657
2,219,781
2,159,567
60,214
(1,011,397)
34,711
1,243,095
477,613
(211,963)
265,650
411,806
5,811
19,675
352
302,040
437,644
(130,380)
(105,247)
(1,996)
(1,381)
477
(9,573)
(1,006)
(3,575)
1,984,678
(385,471)
(99,643)
-
(196,648)
(681,762)
1,302,916
(183,858)
781
(2,931)
210
(9,160)
862
(22)
1,830,882
(306,526)
(85,108)
(2,000)
(167,348)
(560,982)
1,269,900
(246,825)
1,119,058
1,023,075
(5,327)
12,205
572
7,450
1,126,508
1,119,025
33
1,119,058
1,126,475
33
1,126,508
(1,853)
18,182
(1,719)
14,610
1,037,685
1,023,050
25
1,023,075
1,037,660
25
1,037,685
The notes set out on pages 166 to 280 form an integral part of these consolidated and separate financial statements.
The notes set out on pages 166 to 280 form an integral part of these consolidated and separate financial statements.
158
159
FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED SSATEMENT OF CASH FLOWS
in thousands of GEL
Share
Capital
Share
premium
Note
Fair value
reserve
for invest-
ment
securities
at FVTOCI
Cumulative
currency
translation
reserve
Share
based
payments
reserve
Total
equity
excluding
non-
controlling
interest
Non-
con-
trolling
interest
Retained
earnings
Total
Equity
Balance as of 1 January 2022
21,014 521,190 (52,521) (10,862)
(5,938) 3,117,079 3,589,962
93 3,590,055
Profit for the year
Other comprehensive income for 2022:
Disposal of investment securities
measured
at fair value through other
comprehensive income
Other effects during the period
Total comprehensive income for 2022
Share based payment expense
Dividends declared
Tax effect for delivery of SBP shares to
employees
Share based payment recharge by
parent company
Other movements
Balance as of 31 December 2022
Profit for the year
Other comprehensive income for 2023:
Disposal of investment securities
measured
at fair value through other
comprehensive Income
Other effects during the period
Total comprehensive income for 2023
Share based payment expense
Dividends declared
Tax effect for delivery of SBP shares to
employees
Share based payment recharge by
parent company
Other movements
-
26
26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,388
-
(3,621)
- (24,802)
-
-
21,014 521,190 (57,556)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,397
-
-
(3,715)
- (50,740)
-
-
-
- 1,023,050 1,023,050
25 1,023,075
16,329
(1,719)
(1,853)
-
-
-
14,610
(1,853)
-
-
14,610
(1,853)
18,182
16,329
-
-
-
-
-
5,467
-
6,878
-
(1,719)
16,463
(1,719) 1,023,050 1,037,660
23,388
(356,798) (356,798)
-
-
-
-
16,463
25 1,037,685
23,388
(356,798)
-
-
-
-
-
-
(3,621)
(24,802)
-
-
(3,621)
(24,802)
-
(151)
(151)
(7,657) 3,783,180 4,265,638
1,119,025
1,119,025
7,450
572
-
-
46
(105)
164 4,265,802
33
1,119,058
7,450
-
(5,327)
-
-
(5,327)
-
(5,327)
12,205
6,878
-
-
-
-
-
572
572
-
-
-
-
-
-
12,777
1,119,025 1,126,475
26,397
(616,065) (616,065)
-
-
(3,715)
-
(50,740)
(478)
(478)
4,747,512
-
12,777
33 1,126,508
-
26,397
-
(616,065)
-
-
-
197
(3,715)
(50,740)
(478)
4,747,709
Balance as of 31 December 2023
21,014 521,190 (85,614)
12,345
(7,085) 4,285,662
in thousands of GEL
Cash flows from operating activities
Interest received
Interest received on currency swaps
Interest paid
Fees and commissions received
Fees and commissions paid
Cash received from trading in foreign currencies
Other operating income received
Staff costs paid
Administrative and other operating expenses paid
Income tax paid
Cash flows from operating activities before changes in operating assets and liabilities
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia
Loans and advances to customers
Finance lease receivables
Other financial assets
Other assets
Net change in operating liabilities
Due to other banks
Customer accounts
Other financial liabilities
Other liabilities and provision for liabilities and charges
Net cash flows from operating activities
Cash flows (used in)/from investing activities
Acquisition of investment securities measured at fair value through other comprehensive
income
Proceeds from disposal of investment securities measured at fair value through other
comprehensive income
Proceeds from redemption at maturity of investment securities measured at fair value
through other comprehensive income
Acquisition of premises, equipment and intangible assets
Proceeds from disposal of premises, equipment and intangible assets
Proceeds from disposal of investment properties
Proceeds from disposal of subsidiary, net of disposed cash
Dividend received
Net cash flows used in investing activities
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds
Redemption of other borrowed funds
Repayment of principal of lease liabilities
Proceeds from subordinated debt
Redemption of subordinated debt
Share based payment recharge paid
Proceeds from debt securities in issue
Redemption of debt securities in issue
Dividends paid
Net cash flows (used in)/from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
2023
2022
2,611,910
83,101
(1,250,007)
570,656
(235,436)
219,711
28,502
(355,553)
(178,079)
(180,137)
2,177,765
34,711
(1,031,195)
476,575
(240,044)
338,167
18,448
(280,682)
(172,303)
(230,563)
1,314,668
1,090,879
472,792
(3,494,277)
(25,568)
(131,449)
105,407
249,415
2,079,384
32,257
2,092
(226,175)
(2,491,519)
5,273
54,871
59,318
390,402
4,797,211
24,934
4,672
604,721
3,709,866
(1,563,326)
(2,412,783)
383,122
816,417
854,540
391,341
(202,645)
4,672
7,220
1,527
696
(198,371)
17,454
5,472
-
-
(514,194)
(1,380,470)
1,894,337
(1,698,671)
(12,999)
287,589
(15,867)
(50,740)
95,820
(43,058)
(616,065)
(159,654)
(25,739)
(94,866)
3,786,098
3,691,232
2,501,875
(1,731,699)
(13,099)
62,578
(13,710)
(24,802)
3,504
(205,898)
(356,365)
222,384
(361,142)
2,190,638
1,595,460
3,786,098
28
10
10
10
34
34
34
34
34
34
34
6
6
The notes set out on pages 166 to 280 form an integral part of these consolidated and separate financial statements.
The notes set out on pages 166 to 280 form an integral part of these consolidated and separate financial statements.
160
161
FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
SEPARATE STATEMENT OF FINANCIAL POSITION
SEPARATE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
in thousands of GEL
ASSETS
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through other comprehensive income
Repurchase receivables
Investment properties
Investments in subsidiaries and associates
Other financial assets
Other assets
Premises and equipment
Right of use assets
Intangible assets
Goodwill
TOTAL ASSETS
LIABILITIES
Due to credit institutions
Customer accounts
Other financial liabilities
Current income tax liability
Deferred income tax liability
Debt securities in issue
Provisions for liabilities and charges
Other liabilities
Lease liabilities
Subordinated debt
TOTAL LIABILITIES
EQUITY
Share Capital
Share premium
Retained earnings
Share based payment reserve
Fair value reserve for investment securities measured at fair value through other
comprehensive income
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Note
31 December
2023
31 December
2022
6
7
8
9
10
11
12
14
15
16
15
17
18
19
22
33
20
21
23
34
24
25
26
3,633,314
3,747,594
1,107
6,269
1,572,506
2,047,564
20,965,695
17,505,605
3,498,655
2,904,714
-
15,235
34,460
350,086
358,737
462,570
111,560
318,744
27,502
267,495
21,292
34,041
299,720
349,885
398,964
98,228
285,884
27,502
31,350,171
27,994,757
4,099,700
3,669,727
20,115,103
17,976,594
208,254
67,556
50,957
1,181,792
21,060
94,557
82,908
826,546
187,464
1,576
112,877
1,163,116
19,908
73,393
70,280
560,278
26,748,433
23,835,213
21,014
521,190
4,133,317
(86,143)
21,014
521,190
3,669,480
(57,556)
12,360
5,416
4,601,738
4,159,544
31,350,171
27,994,757
in thousands of GEL
Interest income
Interest expense
Net interest gains on currency swaps
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains from currency derivatives, foreign currency operations and translation
Net gains from disposal of Investment securities measured at fair value through other
comprehensive income
Other operating income
Share of profit of associates
Other operating non-interest income
Credit loss allowance for loans to customers
Credit loss allowance for performance guarantees
Credit loss recovery for credit related commitments
Credit loss allowance for other financial assets
Credit loss recovery for financial assets measured at fair value through other
comprehensive income
Net recovery/(impairment) of non-financial assets
Operating income after expected credit and non-financial asset impairment losses
Staff costs
Depreciation and amortization
Allowance for provision for liabilities and charges
Administrative and other operating expenses
Operating expenses
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income/(expense) for the year, net of tax:
Items that may be reclassified subsequently to profit or loss:
Net gains reclassified to profit or loss upon disposal of investment securities
Movement in fair value reserve for investment securities measured at fair value
through other comprehensive income, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Note
2023
28
28
28
29
29
30
9
21
21
12
10
31
21
32
33
2,612,787
(1,257,002)
83,101
1,438,886
532,339
(279,491)
252,848
273,591
5,880
35,765
657
315,893
(131,465)
(1,381)
477
(4,983)
(974)
(1,562)
1,867,739
(349,513)
(89,224)
-
(166,894)
(605,631)
1,262,108
(182,243)
1,079,865
(5,327)
12,271
6,944
1,086,809
2022
2,158,813
(994,169)
34,711
1,199,355
443,437
(240,901)
202,536
412,975
5,811
18,456
584
437,826
(108,446)
(2,931)
210
(4,374)
868
1,223
1,726,267
(279,273)
(76,766)
(2,000)
(139,143)
(497,182)
1,229,085
(246,294)
982,791
(1,853)
18,091
16,238
999,029
The consolidated and the separate financial statements on pages 158 to 280 were approved for issue by the Supervisory Board on 2 April 2024 and
signed on its behalf by
Vakhtang Butskhrikidze
Chief Executive Officer
Giorgi Megrelishvili
Chief Financial Officer
The notes set out on pages 166 to 280 form an integral part of these consolidated and separate financial statements.
The notes set out on pages 166 to 280 form an integral part of these consolidated and separate financial statements.
162
163
FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 SEPARATE STATEMENT OF CHANGES IN EQUITY
SEPARATE STATEMENT OF CASH FLOWS
in thousands of GEL
Note
Share
Capital
Share
premium
Fair value
reserve of
investment
securities
measured at
FVOCI
Share
based
payment
reserve
Retained
earnings
Total
Balance as of 1 January 2022
21,014
521,190
(52,521)
(10,822)
3,043,459
3,522,320
Profit for the year
Other comprehensive income for 2022
Disposal of investment securities
measured at fair value through other
comprehensive income
Other effects during the period
Total comprehensive income for 2022
Share based payment expense
26
Dividends declared
Share based payment recharge by
parent company
Tax effect for delivery of SBP shares to
employees
Other movement
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,388
-
(24,802)
(3,621)
-
-
982,791
982,791
16,238
(1,853)
18,091
16,238
-
-
-
-
-
-
-
-
16,238
(1,853)
18,091
982,791
999,029
-
23,388
(356,798)
(356,798)
-
-
28
(24,802)
(3,621)
28
Balance as of 31 December 2022
21,014
521,190
(57,556)
5,416
3,669,480
4,159,544
Profit for the year
Other comprehensive income for 2023:
Disposal of investment securities
measured at fair value through other
comprehensive income
Other effects during the period
Total comprehensive income for 2023:
Share based payment expense
26
Dividends declared
Share based payment recharge by
parent company
Tax effect for delivery of SBP shares to
employees
Other movement
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,868
-
(50,740)
(3,715)
-
-
1,079,865
1,079,865
6,944
(5,327)
12,271
-
-
-
6,944
(5,327)
12,271
6,944
1,079,865
1,086,809
-
-
-
-
-
-
25,868
(616,065)
(616,065)
-
-
37
(50,740)
(3,715)
37
Balance as of 31 December 2023
21,014
521,190
(86,143)
12,360
4,133,317
4,601,738
in thousands of GEL
Note
2023
2022
Cash flows from operating activities
Interest received
Interest received on currency swaps
Interest paid
Fees and commissions received
Fees and commissions paid
Cash received from trading in foreign currencies
Other operating income received
Staff costs paid
Administrative and other operating expenses paid
Income tax paid
Cash flows from operating activities before changes in operating assets and liabilities
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia
Loans and advances to customers
Other financial assets
Other assets
Net change in operating liabilities
Due to other banks
Customer accounts
Other financial liabilities
Other liabilities and provision for liabilities and charges
Net cash flows from operating activities
Cash flows (used in)/from investing activities
Acquisition of investment securities measured at fair value through other comprehensive
income
Proceeds from disposal of investment securities measured at fair value through other
comprehensive income
Proceeds from redemption at maturity of investment securities measured at fair value
through other comprehensive income
Dividends received
Proceeds from disposal of subsidiary
Acquisition of premises, equipment and intangible assets
Proceeds from disposal of premises, equipment and intangible assets
Proceeds from disposal of investment properties
Capital injection in subsidiaries
Net cash flows (used in)/ from investing activities
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds
Redemption of other borrowed funds
Repayment of principal of lease liabilities
Proceeds from subordinated debt
Redemption of subordinated debt
Proceeds from debt securities in issue
Redemption of debt securities in issue
Dividends paid
Share based payment recharge paid
Net cash flows (used in)/from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
28
2,534,237
83,101
(1,228,477)
531,606
(278,000)
219,729
19,485
(321,550)
(150,332)
(178,468)
1,231,331
482,791
(3,494,058)
(85,096)
91,174
248,764
2,119,973
27,026
3,800
625,705
2,118,976
34,711
(1,013,784)
442,406
(268,982)
341,465
11,358
(252,817)
(145,066)
(229,501)
1,038,766
(250,716)
(2,497,954)
40,347
67,426
390,307
4,885,904
21,892
5,277
3,701,249
10
10
10
(1,591,596)
(2,411,395)
387,887
815,083
874,540
391,341
20,656
1,540
(180,309)
3,581
4,746
-
5,959
-
(178,404)
12,859
5,472
(1,006)
(478,955)
(1,360,091)
1,721,055
(1,553,680)
(12,145)
262,582
(2,618)
17,011
-
(616,065)
(50,740)
(234,600)
(26,430)
(114,280)
3,747,594
3,633,314
6
6
2,407,703
(1,652,197)
(11,716)
46,258
-
-
(205,898)
(356,365)
(24,802)
202,983
(361,947)
2,182,194
1,565,400
3,747,594
The notes set out on pages 166 to 280 form an integral part of these consolidated and separate financial statements.
The notes set out on pages 166 to 280 form an integral part of these consolidated and separate financial statements.
164
165
FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
1. INTRODUCTION
1. INTRODUCTION CONTINIUED
Principal activity. JSC TBC Bank (hereafter the “Bank”) was incorporated on 17 December 1992 and is domiciled in
Georgia. The Bank is a joint stock company limited by shares and was set up in accordance with Georgian regulations.
The Bank’s principal business activity is universal banking operations that include corporate, small and medium
enterprises (“SME”), retail and micro-operations within Georgia. The Bank is a parent of a group of companies
(hereafter the “Group”) incorporated in Georgia and Azerbaijan; their primary business activities include providing
banking, leasing, brokerage and card processing services to corporate and individual customers. The Bank has been
operating since 20 January 1993 under a general banking license issued by the National Bank of the Georgia (“NBG”).
The Bank’s registered address and place of business is 7 Marjanishvili Street, 0102 Tbilisi, Georgia. The Bank was
registered by District Court of Vake and the registration number is 204854595.
The Bank has 123 (2022:129) branches1 within Georgia.
TBC Bank Group PLC (“TBCG”) is a public limited by shares company, incorporated in the United Kingdom. TBCG
held 99.88% of the share capital of JSC TBC Bank (hereafter the “Bank”) as at 31 December 2023 (2022: 99.88%), thus
representing the Bank’s ultimate and direct parent company. TBC Bank Group PLC’s registered legal address is
100 Bishopsgate, C/O Law Debenture, London, England, EC2N 4AG. Registered number of TBC Bank Group PLC is
10029943.
As of 31 December 2023 and 2022 the Group shareholder structure was as follows:
Shareholders
TBC Bank Group PLC
Other
Total
% of ownership interest held as of 31 December
2023
99.88%
0.12%
100.00%
2022
99.88%
0.12%
100.00%
As of 31 December 2023 and 31 December 2022, the shareholder structure of TBC Bank Group PLC by beneficiary
ownership interest was as follows:
% of ownership interest held as of 31 December
Shareholders
Dunross & Co.
Allan Gray Investment Management
BlackRock
Vanguard Group
Fidelity International
JPMorgan Asset Management
European Bank for Reconstruction and Development
Schroder Investment Management
Founders*
Other**
Total
* Founders include direct and indirect ownerships of Mamuka Khazaradze, Badri Japaridze.
** Other includes individual as well as corporate shareholders.
2023
6.50%
3.88%
4.72%
4.39%
3.02%
3.81%
2.99%
3.18%
15.83%
51.68%
100.00%
2022
6.58%
5.66%
3.99%
3.91%
3.88%
3.86%
3.54%
1.96%
16.04%
50.58%
100.00%
Subsidiaries and associates. The consolidated financial statements include the following principal subsidiaries:
Proportion of voting rights
and ordinary share
capital held as of
31 December
Subsidiary name
2023
2022
Principal place
of business or
incorporation
Year of
incorp-
oration
United Financial Corporation JSC
99.53%
99.53% Tbilisi, Georgia
TBC Capital LLC
TBC Leasing JSC
100.00%
100.00% Tbilisi, Georgia
100.00%
100.00% Tbilisi, Georgia
2001
1999
2003
TBC Kredit LLC
100.00%
100.00% Baku, Azerbaijan
1999
Principal activities
Card processing
Brokerage
Leasing
Non-banking '
credit institution
TBC Pay LLC
100.00%
100.00% Tbilisi, Georgia
2008
Payment Processing
TBC Invest-Georgia LLC
100.00%
100.00% Ramat Gan, Israel
Index LLC2
N/A
100.00% Tbilisi, Georgia
TBC Asset Management LLC
100.00%
100.00% Tbilisi, Georgia
2011
2009
2021
Financial services
Ecosystem
Asset management
The Group has investments in the following associates:
Proportion of voting rights
and ordinary share
capital held as of
31 December
Principal place
of business or
incorporation
Year of
incorp-
oration
2022
Principal
activities
21.08%
Tbilisi, Georgia
2005
Financial intermediation
Associate name
CreditInfo Georgia JSC
Tbilisi Stock Exchange JSC
Georgian Central Securities
Depository JSC
2023
21.08%
28.87%
28.87%
Tbilisi, Georgia
22.87%
22.87%
Tbilisi, Georgia
Georgian Stock Exchange JSC3
Kavkasreestri JSC3
17.33%
10.03%
17.33%
Tbilisi, Georgia
10.03%
Tbilisi, Georgia
2015
1999
1999
1998
Finance, Service
Finance, Service
Finance, Service
Finance, Service
The country of incorporation is also the principal area of operation of each of the above subsidiaries and associates.
The Group’s corporate structure consists of a number of related undertakings, comprising subsidiaries and associates,
which are not consolidated or equity accounted due to immateriality. A full list of these undertakings, the country of
incorporation and the ownership of each share class is set out below.
1
2
3
Excluding pawnshop units.
Index LLC was sold in 2023 to the TBCG Group member company T Net LLC.
The Group has a significant influence on Georgian Stock Exchange JSC and Kavkasreestri JSC with representatives in management board.
166
167
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 1. INTRODUCTION CONTINIUED
2. MATERIAL ACCOUNTING POLICY INFORMATION
Proportion of voting rights
and ordinary share
capital held as of
31 December
Company name
2023
2022
Principal place
of business or
incorporation
Year of
incorp-
oration
TBC Invest International LLC1
100.00%
100.00%
Tbilisi, Georgia
University Development Fund1
Natural Products of Georgia LLC1
33.33%
25.00%
33.33%
Tbilisi, Georgia
25.00%
Tbilisi, Georgia
TBC Trade LLC1
100.00%
100.00%
Tbilisi, Georgia
Diversified Credit Portfolio JSC
100.00%
100.00%
Tbilisi, Georgia
Globally Diversified bond fund JSC
100.00%
N/A
Tbilisi, Georgia
2016
2007
2001
2008
2021
2023
Principal activities
Investment Vehicle
Education
Trade, Service
Trade, Service
Asset Management
Asset Management
Operating environment of the Group. Georgia, where most of the Group’s activities are located, displays certain
characteristics of an emerging market. The legal, tax and regulatory frameworks continue to develop and are subject
to frequent changes and varying interpretations (Note 33). In 2022, despite the adverse impact of Russia’s invasion
of Ukraine, Georgia’s economic expansion exceeded initial expectations with the real GDP increasing by 11.0%
mainly on the back of the recovery of inflows, as well as stronger domestic demand. In 2023, the growth started to
normalize though remained still strong, averaging to 7.5% at the end of the year. Normalization was driven by the lower
international commodity prices negatively affecting both exports and imports, while FDIs remained resilient, and
tourism and remittances maintained strong growth when adjusted for one-offs related to Russia and the migration
effect.
While inflows to the Georgian economy are quite diversified, the country is still vulnerable to geopolitical and
economic developments in its region and beyond. In particular, uncertainties related to the Russian-Ukrainian conflict
and consequent developments may have an adverse impact on the Georgian economy. The country is also exposed to
a lower though still tangible risk of resurged military conflicts in its breakaway regions occupied by Russia, while some
relatively distant conflicts, such as the escalation in the middle east, might affect the Georgian economy through the
stronger USD, higher oil prices, migration flows, etc.
At the same time, while the migration effect continued to make an important contribution to economic growth in 2023,
any sizeable outflow could lead to a deterioration in the business environment. The reverse would probably be the
case in any rapid conflict resolution scenario, which would create positive economic spill-overs as well, such as the
likely stronger rebound of growth in Russia and Ukraine.
However, the baseline strongly depends on the global developments. While the Georgian economy is so far resilient
against recently elevated global slowdown risks and adverse economic impacts of Russia’s invasion of Ukraine, there
is a probability of more severe spill-over effects, as well as risks of other global disruptions provoked by regional
conflicts, supply chain obstructions, potential global health issues such as pandemics, etc. The materialization of these
risks could severely hamper economic activity in Georgia, and negatively impact the business environment and clients
of the Group.
For the purpose of measurement of expected credit losses (“ECL”), the Group uses supportable forward-looking
information, including forecasts of macroeconomic variables. As with any economic forecast, however, the projections
and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and therefore the actual
outcomes may be significantly different from those projected.
Climate Impact
The Group has reviewed its exposure to climate-related risks, but has not identified any risks that could significantly
impact the financial performance or position of the Group as at 31 December 2023. See more details outlined in risk
management disclosures in note 35.
Basis of preparation. These consolidated and separate financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRSs”) under the historical cost convention as modified by the initial
recognition of financial instruments based on fair value, and by the revaluation of financial instruments categorised at
fair value through profit or loss (“FVTPL”) and at fair value through other comprehensive income (“FVOCI”), with the
requirements of the order N284/04 of the President of the National Bank of Georgia dated 26 December 2018, and with
the requirements of the Law of Georgia on Accounting, Reporting and Auditing. The principal accounting policies
applied in the preparation of these consolidated and separate financial statements are set out below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
Going Concern. The Board has fully reviewed the available information pertaining to the principal existing and
emerging risks strategy, financial health, profitability of operations, liquidity, and solvency of the Banks and the
Group as a whole, and determined that the Group’s subsidiaries’ business remains a going concern. The Directors
have not identified any material uncertainties that could threaten the going concern assumption and have a
reasonable expectation that the Group’s subsidiaries have adequate resources to remain operational and solvent for
the foreseeable future (which is, for this purpose, a period of 12 months from the date of approval of these financial
statements).
In reaching this assessment, the Directors have specifically considered the implications of political instability in the
region and the war in Ukraine on the Group’s subsidiaries performance and projected funding and capital position and
also taken into account the impact of further stress scenarios. Accordingly, the accompanying financial statements are
prepared in line with the going concern basis of accounting.
Presentation currency. These consolidated financial statements are presented in thousands of Georgian Lari (“GEL
thousands”), unless otherwise indicated.
Consolidated financial statements. Subsidiaries are those investees that the Group controls. The Group may have
power over an investee even when it holds less than the majority of voting power in it. In such a case, the Group
assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to
determine if it has de-facto power over the investee. Subsidiaries are consolidated from the date on which control is
transferred to the Group and are deconsolidated from the date on which control ceases.
Separate financial statements. Investments in subsidiaries - The Company accounts investments at the original cost
of the investment until the investment is de-recognised or impaired for its separate financial statements. The carrying
amounts of the investments are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, the assets’ recoverable amounts are estimated. Value in use is determined by
the present value of expected future cash flows discounted to present value. An impairment loss is recognised when
the carrying amount of the investments exceeds its recoverable amount. Impairment losses are recognised in profit or
loss. Policies in the consolidated and separate financial statements are consistent unless otherwise stated.
Business combinations and goodwill accounting. Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured at the fair value of the consideration, including contingent
consideration, given at the acquisition date. Acquisition-related costs are recognised as an expense in the profit
or loss in the period in which they are incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured at their fair values at the acquisition date, irrespective of the extent
of any non-controlling interest.
The Group measures the non-controlling interest that represents the current ownership’s interest and entitles the
holder to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis, either
at: (a) fair value, or (b) the non-controlling interest’s proportionate share of net assets of the acquired entity. Non-
controlling interests that are not present ownership interests are measured at fair value.
Goodwill is measured by deducting the acquiree’s net assets from the aggregate of the consideration transferred for
the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held
immediately before the acquisition date. Any negative amount (“negative goodwill”) is recognised in profit or loss, after
the management reassesses whether it identified all the assets acquired and all liabilities and contingent liabilities
assumed, and reviews appropriateness of their measurement.
1
Dormant.
168
169
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 2. MATERIAL ACCOUNTING POLICY INFORMATION CONTINIUED
2. MATERIAL ACCOUNTING POLICY INFORMATION CONTINIUED
The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity instruments
issued and liabilities incurred or assumed, including fair value of assets or liabilities from contingent consideration
arrangements, but excludes acquisition related costs such as advisory, legal, valuation and similar professional
services.
Transaction costs incurred for issuing equity instruments are deducted from the equity; transaction costs incurred for
issuing debt are deducted from its carrying amount and all other transaction costs associated with the acquisition are
expensed.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated;
unrealised losses are also eliminated unless the cost cannot be recovered. The Bank and all of its subsidiaries use
uniform accounting policies consistent with the Group’s policies.
Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests that are
not owned, directly or indirectly, by the Bank. Non-controlling interest forms a separate component of the Group’s
equity.
Associates. Associates are entities over which the Group has significant influence (directly or indirectly), but not
control, generally accompanying a shareholding of between 20 and 50 per cent of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are initially recognised at cost. The carrying
amount of associates includes goodwill identified on acquisition less accumulated impairment losses, if any. Dividends
received from associates reduce the carrying value of the investments in associates. Other post-acquisition changes
in Group’s share of net assets of an associate are recognised as follows: (i) the Group’s share of profits or losses of
associates is recorded in the consolidated profit or loss for the year as share of result of associates, (ii) the Group’s
share of other comprehensive income is recognised in other comprehensive income and presented separately, (iii);
all other changes in the Group’s share of the carrying value of net assets of associates are recognised in profit or loss
within the share of result of associates. However, when the Group’s share of losses in an associate equals or exceeds
its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses,
unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s
interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
Purchases and sales of non-controlling interests. The Group applies the economic entity model to account for
transactions with owners of non-controlling interest. Any difference between the purchase consideration and the
carrying amount of non-controlling interest acquired is recorded as a capital transaction directly in equity. The Group
recognises the difference between sales consideration and carrying amount of non-controlling interest sold as a
capital transaction in the statement of changes in equity.
Initial recognition of financial instruments. Financial instruments at FVTPL are initially recorded at fair value. All other
financial instruments are initially recorded at fair value adjusted for transaction costs.
Financial assets – classification and subsequent measurement – measurement categories. The Group classifies
financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent
measurement of debt financial assets depends on: (i) the Group’s business model for managing the related assets
portfolio and (ii) the cash flow characteristics of the asset. The line items Financial Assets and Financial Liabilities in
the statement of financial position include those assets and liabilities that are in the scope of IFRS 17 for disclosure
purposes.
Financial assets – reclassification. Financial instruments are reclassified only when the business model for managing
the portfolio, as a whole, changes. The reclassification has a prospective effect and takes place from the beginning of
the first reporting period that follows after the change in the business model.
Financial assets impairment – expected credit loss (ECL) allowance. The Group assesses, on a forward-looking
basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising from loan commitments
and financial guarantee contracts. The Group measures ECL and recognises credit loss allowance at each reporting
date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by
evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information
that is available without undue cost and effort at the end of each reporting period about past events, current
conditions and forecasts of future conditions.
The Group applies a three-stage model for impairment, based on changes in credit quality since initial recognition:
•
•
•
Stage 1: A financial instrument that is not defaulted on initial recognition is classified in Stage 1. Financial assets in
Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events
possible within the next 12 months or until contractual maturity, if shorter (“12 Months ECL”);
Stage 2: If the Group identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is
transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis (“Lifetime ECL”). If a SICR is no
longer observed, instrument will move back to Stage 1. Financial instrument moves back from stage 2 to stage 1
with 6-month cure period in case of loans previously having default flag, while restructured loans remain in stage
2 until the restructured status is removed. In order to remove restructured status, borrower should make at least
12 consecutive payments, unless financial monitoring is performed. Refer to Note 38 for a description of how the
Group determines, on a forward-looking basis, when a SICR has occurred;
Stage 3: Defaulted assets are transferred to Stage 3 and allowance for Lifetime ECL is recognized. The Group’s
definition of defaulted assets and definition of default is based on the occurrence of one or more loss events,
described further in Note 35.
Change in ECL is recognized in the statement of profit or loss with a corresponding allowance reported as a decrease
in carrying value of the financial asset on the statement of financial position. For financial guarantees and credit
commitments, provision for ECL is reported as a liability in Provisions for Liabilities and Charges.
Financial assets- derecognition and modification. The Group derecognises financial assets when (a) the assets
are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Group has transferred the
rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i)
also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining
substantially all risks and rewards of ownership, but not retaining control. Control is retained if the counterparty does
not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose
restrictions on the sale. The Group sometimes renegotiates or otherwise modifies the contractual terms of the
financial assets.
The Group assesses whether the modification of contractual cash flows is substantial, in which it considers certain
qualitative and quantitative factors combined. Based on below shown internally developed methodology there are
certain qualitative triggers which lead to asset derecognition with no further quantitative testing required. These
qualitative criteria are included in the list below:
• Change in contract currency;
• Consolidation of two or more loans into one new loan;
• Change in counterparty;
•
• Change in contractual interest rate due to market environment changes.
Loan with no predetermined payment schedule is changed with loan with schedule or vice versa;
The Group compares the original and revised expected cash flows to assets whether the risks and rewards of the
asset are substantially different as a result of the contractual modification. It should be assessed whether change
in contractual cash flow is substantial (significance defined as 10% change). If the test result is above 10% threshold,
loan should be derecognized, whereas if the test is passed and result is below or equal to 10%, financial asset can be
assessed as modified.
If above mentioned qualitative and quantitative criteria are not met, then modification does not result in derecognition.
The Group recalculates the gross carrying amount by discounting the modified contractual cash flows by the original
effective interest rate and recognises a modification gain or loss in profit or loss. Any costs or fees incurred adjust the
carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial
asset.
Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured at AC,
except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading
(e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination
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2. MATERIAL ACCOUNTING POLICY INFORMATION CONTINIUED
and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan
commitments.
increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The estimated future cash
flows reflect the cash flows that may result from obtaining and selling the assets subject to the lease.
Mandatory cash balances with the National Bank of Georgia. Mandatory cash balances with National Bank of
Georgia are carried at AC and represent mandatory reserve deposits that are not available to finance the Group’s
day to day operations. Hence, they are not considered as part of cash and cash equivalents for the purposes of the
consolidated statement of cash flows.
Due from other banks. Amounts due from other banks are recorded when the Group advances money to counterparty
banks. Amounts due from other banks are carried at AC when: (i) they are held for the purposes of collecting
contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at fair value through profit
or loss (FVTPL). Otherwise, they are carried at fair value (FV).
Investments in debt securities. Based on the business model and the cash flow characteristics, the Group classifies
investments in debt securities as carried at AC, fair value through other comprehensive income (FVOCI) or FVTPL.
Debt securities are carried at AC if they are held for collection of contractual cash flows and where those cash flows
represent SPPI, and if they are not voluntarily designated at FVTPL in order to significantly reduce an accounting
mismatch.
Investments in equity securities. Financial assets that meet the definition of equity from the issuer’s perspective,
i.e. instruments that do not contain a contractual obligation to pay cash and that evidence a residual interest in the
issuer’s net assets, are considered as investments in equity securities by the Group. Investments in equity securities
are measured at FVTPL, except where the Group elects at initial recognition to irrevocably designate an equity
investments at FVOCI. The Group’s policy is to designate equity investments as FVOCI when those investments are
held for strategic purposes other than solely to generate investment returns.
The Group normally structures its finance lease contracts so that the lessee makes a minimum prepayment of 20% of
the equipment purchase price at the inception of the lease term. The Group holds title to the leased assets during the
lease term. The title to the asset under the finance lease contract is transferred to the lessees at the end of the contract
terms, including full repayment of lease payments. Generally, the lease terms are up to five years.
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. The main
types of collateral obtained are:
Leased assets (inventory and equipment);
•
• Down payment;
•
•
Real estate properties;
Third party guarantees.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets where
collateral and other credit enhancements are equal to or exceed the assets’ carrying value (“over-collateralised assets”)
and (ii) those assets where collateral and other credit enhancements are less than the assets’ carrying value (“under-
collateralised assets”).
The Group classifies its portfolio into three stages:
•
•
•
Stage 1 – assets for which no significant increase of credit risk since initial recognition is identified;
Stage 2 – assets for which significant increase in credit risk since initial recognition is identified;
Stage 3 – defaulted exposures.
Loans and advances to customers. Loans and advances to customers are recorded when the Group advances money
to purchase or originate a loan due from a customer.
For stage 1 exposures the Group creates 12 months expected credit losses, whereas for stage 2 and stage 3 lifetime
expected credit losses are created.
Impairment allowances are determined based on the forward-looking ECL models. Note 35 provides information
about inputs, assumptions and estimation techniques used in measuring ECL, including an explanation of how the
Group incorporates forward-looking information in the ECL models.
Repossessed collateral. Repossessed collateral represents non-financial assets acquired by the Group to settle
overdue loans. The assets are initially recognised at fair value when acquired and included in premises and equipment,
investment property or repossessed collateral within other assets depending on their nature and the Group’s intention
in respect of recovery of these assets and are subsequently re-measured and accounted for in accordance with
the accounting policies for these categories of assets. Repossessed assets are recorded at the lower of cost or net
realisable value.
Finance lease receivables. Where the Group is a lessor in a lease that substantially transfers all risks and rewards
incidental to ownership to the lessee, the assets leased out are presented as finance lease receivables and carried at
the present value of the future lease payments. Finance lease receivables are initially recognised at commencement
(when the lease term begins) using a discount rate determined at inception (the early date of the lease agreement and
the date of commitment by the parties to the principal provisions of the lease).
The difference between the gross receivable and the present value represents unearned finance income. This
income is recognised over the term of the lease using the net investment method (before tax), which reflects a
constant periodic rate of return. The interest income on stage 3 exposures is recognized on a carrying amount after
deducting ECL. Incremental costs directly attributable to negotiating and arranging the lease are included in the initial
measurement of the finance lease receivables and reduce the amount of income recognised over the lease term.
Finance income from leases is recorded within interest income in the profit or loss.
The ECL is determined in the same way as for loans and advances measured at AC and recognised through an
allowance account to write down the receivables’ net carrying amount to the present value of expected cash flows
discounted at the interest rates implicit in the lease investments. There is a ‘three stage’ approach which is based
on the change in credit quality of financial lease receivables since initial recognition. Immediate loss that is equal to
the 12-month ECL is recorded on initial recognition of financial leases that are not defaulted. In case of a significant
For the Stage 2 classification purposes the Group applies both quantitative and the qualitative criteria including, but
not limited to:
30 days past due (DPD) overdue;
•
• Downgrade of the risk category of the borrower since initial recognition;
Default definition includes criteria such as: (i) 90 DPD overdue (ii) distressed restructuring and (iii) other criteria
indicating the borrower’s unlikeness to repay the liabilities.
The Group incorporates forward looking information (FLI) for both individual and collective assessment. For FLI
purposes the Group defines three scenarios, which are:
Baseline (most likely);
•
• Upside (better than most likely);
• Downside (worse than most likely).
The Group derives the baseline macro scenario and takes into account projections from various external sources –
the National Bank of Georgia, Ministry of Finance, IMF as well as other IFIs- to ensure the alignment to the consensus
market expectations. Refer to Note 35 for the description of how the Group incorporates FLI in ECL calculations.
Upside and downside scenarios are defined based on the framework developed by the Bank’s macroeconomic unit.
The Group calculates expected impairment losses for each scenario. In order to come up with the final expected credit
loss figures the bank applies probability weighted average approach where probabilities of each scenario are used as
weights.
Customer accounts. Customer accounts are non-derivative financial liabilities to individuals, state or corporate
customers and are carried at AC.
Subordinated debt. Subordinated debt can only be paid in the event of a liquidation after the claims of other higher
priority creditors have been met and is included in the Bank’s “tier 2” capital. Subordinated debt is carried at AC.
Debt securities in issue. Debt securities in issue include promissory notes, bonds and debentures issued by the
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2. MATERIAL ACCOUNTING POLICY INFORMATION CONTINIUED
Group. Debt securities are stated at AC. If the Group purchases its own debt securities in issue, they are removed from
the consolidated statement of financial position and the difference between the carrying amount of the liability and
the consideration paid is included in gains arising from retirement of debt.
Derivative financial instruments. Derivative financial instruments, including foreign exchange contracts, interest rate
futures, forward rate agreements, currency and interest rate swaps, currency and interest rate options are recognized
at their fair value. The Group also enters into offsetting deposits with its counterparty banks to exchange currencies.
Such deposits, while legally separate, are aggregated and accounted for as a single derivative financial instrument
(currency swap) on a net basis where (i) the deposits are entered into at the same time and in contemplation of one
another, (ii) they have the same counterparty, (iii) they relate to the same risk and (iv) there is no apparent business
purpose for structuring the transactions separately that could not also have been accomplished in a single transaction.
All derivative instruments are carried as assets when fair value is positive and as liabilities when fair value is negative.
The Group does not apply hedge accounting in respect of majority of its hedging strategies. However, the Group
applies fair value hedge accounting from time to time in respect of certain transactions, such as foreign exchange
risk hedges on monetary positions hedged by foreign exchange forwards and swaps. The Group applies IFRS 9
requirements for hedge accounting. Total amount of transactions for which fair value hedge accounting is applied is
immaterial in 2023.
When derivative instruments are entered into with a view to decrease cost of funding, respective interest effect is
presented as a separate line of statement of comprehensive income, within net interest income.
Goodwill. The Group tests goodwill for impairment at least annually and whenever there are indications that goodwill
may be impaired. Goodwill is allocated to the cash-generating units, or groups of cash-generating units, that are
expected to benefit from the synergies of the business combination. Such units or group of units represent the lowest
level at which the Group monitors goodwill and are not larger than an operating segment. Gains or losses on disposal
of an operation within a cash generating unit to which goodwill has been allocated include the carrying amount of
goodwill associated with the disposed operation. This is generally measured on the basis of the relative values of the
disposed operation and the portion of the cash-generating unit which is retained.
Premises and equipment. Premises and equipment are stated at cost, less accumulated depreciation and provision
for impairment, where required. Cost of premises and equipment of acquired subsidiaries is the estimated fair value at
the date of acquisition.
At the end of each reporting period management assesses whether there is any indication of impairment of premises
and equipment. If any such indication exists, management estimates the recoverable amount,
Depreciation. Land and construction in progress are not depreciated. Depreciation on other items of premises and
equipment and right-of-use assets is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives as follows:
Asset
Premises
Furniture and fixtures
Computers and office equipment
Motor vehicles
Other equipment
Right-of-use assets
Intangible assets
Useful life
40 – 110 years;
5 – 8 years;
3 – 8 years;
4 – 5 years;
2 – 10 years;
term of the underlying lease;
1 – 20 years;
The residual value of an asset is nil if the Group expects to use the asset until the end of its physical life. The assets’
residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Investment property. Investment property is stated at cost less accumulated depreciation and provision for
impairment, where required. It is amortised on a straight-line basis over an expected useful lives of 30 to 50 years. Land
included in investment property is not depreciated. Residual values of investment properties are estimated to be nil. In
case of any indication that the investment properties may be impaired, the Group estimates the recoverable amount as
the higher of value in use and fair value less costs to sell.
Earned rental income is recorded in profit or loss for the year within other operating income.
Intangible assets. The Group’s intangible assets other than goodwill have definite useful lives and primarily include
capitalised computer software. Capitalised computer software is amortised on a straight line basis over expected
useful lives of 1 to 20 years.
Accounting for leases by the Group as a lessee. The Group leases office, branches and service centre premises.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset is recognised at cost and depreciated over the shorter of
the asset's useful life and the lease term on a straight-line basis.
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of the following lease payments:
•
•
•
•
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payment that are based on an index or a rate;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined,
the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
As an exception to the above, the Group accounts for short-term leases and leases of low value assets by recognising
the lease payments as an operating expense on a straight line basis.
In determining the lease term, management of the Group considers all facts and circumstances that create an
economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or
periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended
(or not terminated).
Income taxes. Income taxes are provided in the consolidated financial statements in accordance with the legislation
enacted or substantively enacted by the end of reporting period in the respective territories that the Bank and its
subsidiaries operate. The income tax charge/credit comprises of current tax and deferred tax and is recognised in
profit or loss except if it is recognised directly in other comprehensive income because it relates to transactions that
are also recognised, in the same or a different period, directly in other comprehensive income.
Current tax is the amount expected-to-be-paid to or recovered from the tax authorities in respect of taxable profits
or losses for the current and prior periods. Taxable profits or losses are based on estimates if consolidated financial
statements are authorised prior to filing relevant tax returns. Taxes, other than on income, are recorded within
administrative and other operating expenses.
Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred tax balances are measured at tax rates enacted or substantively enacted at the end of reporting
period that are expected to apply to the extent of time when the temporary differences will reverse or the tax loss carry
forwards will be utilised.
Deferred incom e tax is provided on post-acquisition retained earnings of subsidiaries, except where the Group
controls the subsidiary’s dividend policy and it is probable that the difference will not reverse through dividends or
otherwise in the foreseeable future.
Share capital. Ordinary shares with discretionary dividends are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Any
excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in
equity.
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2. MATERIAL ACCOUNTING POLICY INFORMATION CONTINIUED
Dividends. Dividends are recorded in equity in the period in which they are declared. Any dividends declared after the
end of the reporting period and before the consolidated financial statements are authorised for issue, are disclosed in
the subsequent events note.
Income and expense recognition. Interest income and expense are recorded for all debt instruments, other than
those at FVTPL, using the effective interest method. As part of interest income or expense this method defers all fees
paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction
costs and all other premiums or discounts. The group does not have Interest income on debt instruments at FVTPL.
Fees integral to the effective interest rate include origination fees received or paid by the entity relating to the creation
or acquisition of a financial asset or issuance of a financial liability, for example fees for evaluating creditworthiness,
evaluating and recording guarantees or collateral, negotiating the terms of the instrument and for processing
transaction documents. Commitment fees received by the Group to originate loans at market interest rates are integral
to the effective interest rate if it is probable that the Group will enter into a specific lending arrangement and does not
expect to sell the resulting loan shortly after origination. The Group does not designate loan commitments as financial
liabilities at FVTPL.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets,
except for (i) financial assets that have become defaulted (Stage 3), for which interest income is calculated by applying
the effective interest rate to their AC, net of the ECL provision, and (ii) financial assets that are purchased or originated
defaulted, for which the original credit-adjusted effective interest rate is applied to the AC.
All other fees, commissions and other income and expense items are generally recorded when earned by reference to
completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total
services to be provided.
For cross currency basis swaps interest component calculation, notional amount is multiplied by contractual interest
rate for respective period. While making allocation of an interest income/(expense) from FX Swaps transactions,
annualized spread earned interest income/(expense) is calculated and distributed linearly throughout the lifetime of
the contract.
Fee and commission income. Fee and commission income is recognised over time on a straight line basis as the
services are rendered, when the customer simultaneously receives and consumes the benefits provided by the
Group’s performance. Such income includes recurring fees for account maintenance, account servicing fees, account
subscription fees, annual plastic card fees etc. Variable fees are recognised only to the extent that management
determines that it is highly probable that a significant reversal will not occur.
Other fee and commission income is recognised at a point in time when the Group satisfies its performance
obligation, usually upon execution of the underlying transaction. The amount of fee or commission received or
receivable represents the transaction price for the services identified as distinct performance obligations. Such
income includes fees for arranging a sale or purchase of foreign currencies on behalf of a customer, fees for
processing payment transactions, plastic card transactions, merchant fees, fees for cash settlements, collection or
cash disbursements, etc.
Foreign currency translation. The Group’s presentation currency is the Georgian Lari. TBCG’s and the Bank’s
presentation currency is the Georgian Lari. The functional currency of each of the Group’s consolidated entities is the
currency of the primary economic environment in which the entity operates. Transactions in foreign currencies are
initially recorded in the functional currency, converted at the rate of exchange ruling at the date of the transaction.
The results and financial position of each group entity (the functional currency of none of which is a currency of a
hyperinflationary economy) are translated into the presentation currency as follows:
(i)
(ii)
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the
end of the respective reporting period;
Income and expenses are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions);
(iii) Components of equity are translated at the historic rate; and
(iv)
All resulting exchange differences are recognised in other comprehensive income.
After losing control over a foreign operation, the exchange differences previously recognised in other comprehensive
income are reclassified to profit or loss for the year as part of the gain or loss on disposal. On partial disposal of a
subsidiary without loss of control, the related portion of accumulated currency translation differences is reclassified to
non-controlling interest within equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the closing rate. The closing rates of exchange used for translating foreign currency
balances for the year 2023 and 2022 were as follows:
GBP/GEL
USD/GEL
EUR/GEL
AZN/GEL
31 December 2023
31 December 2022
3.4228
2.6894
2.9753
1.5806
3.2581
2.7020
2.8844
1.5924
Staff costs and related contributions. Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary
benefits as well as the cash settled part of the share-based payment schemes are accrued in the year in which the
associated services are rendered by the Group’s employees.
Segment reporting. Operating segments are reported in a manner consistent with the internal reporting provided to
the Group’s chief operating decision maker. Segments whose revenue, result or assets are ten percent or more of all
the segments are reported separately.
Share based payments. A share-based payment arrangement is an agreement between the entity and another
party (including an employee) that entitles the other party to receive cash or other assets of the entity for amounts
that are based on the price (or value) of equity instruments (including shares) of the entity or another group entity, or
equity instruments (including shares or share options) of the entity or another group entity, provided the specified
vesting conditions, if any, are met. Under the share-based compensation plan the Group receives services from the
management as consideration for equity instruments of the Group. The fair value of the employee services received
in exchange for the grant of the equity instruments is recognised as an expense. The total amount to be expensed
is determined by the reference to the fair value of the equity instruments granted, excluding the impact of any non-
market service and performance vesting conditions. Non-market vesting conditions are included in the assumptions
about the number of equity instruments that are expected to vest. The total amount expensed is recognised over
the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At each
balance sheet date, the Group revises its estimates of the number of equity instruments that are expected to vest
based on the non-marketing vesting conditions. It recognises the impact of the revision of original estimates, if any,
in profit or loss, with a corresponding adjustment to equity. Increase in equity on accrued shares resulting from the
equity settled scheme is accounted for under share based payment reserve. The Bank pays recharge amount to the
TBC Bank Group PLC and the share based reserve is debited correspondingly. This takes place when treasury shares
are purchased by employee benefit trust (EBT) on TBC Bank Group PLC level. When portions of a single grant vest
on two or more dates the entity applies graded vesting for accounting of share based payment arrangement. Vesting
period of each tranche of the grant ends when the employee owns the shares with no further service restrictions.
Under graded vesting scheme the expense for earlier years is higher than for later years. Each tranche is expensed over
its own service period with a credit entry being equity.
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3.CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
CONTINUED
Critical Judgements and Estimates
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and
judgements are continually evaluated and are based on the management’s experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. The management also
makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies.
Judgements and estimates that have the most significant effect on the amounts recognised in the consolidated
financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and
liabilities are the following:
Judgements and estimates related to ECL measurement. Measurement of ECLs is a significant estimate that
involves determination of methodology, development of models and preparation of data inputs. Expert management
judgement is also an essential part of estimating expected credit losses.
Management considers management judgements and estimates in calculating ECL as follows:
Judgements used to define criteria used in definition of default. The Bank defines default using both quantitative
and qualitative criteria. Borrower is classified as defaulted if:
•
•
any amount of contractual repayments is past due more than 90 days; or
factors indicating the borrower’s unlikeliness-to-pay.
In addition, default exit criteria is defined using judgement as well as whether default should be applied on a borrower
or exposure level. For more details on the methodology please see Note 35.
Judgements used to define criteria for assessing, if there has been a significant increase in credit risk (SICR) which
is defined using both quantitative and qualitative criteria.
Qualitative factors usually include judgements around delinquency period of more than 30 days on contractual
repayments; exposure is restructured, but is not defaulted; borrower is classified as “watch”.
The Bank evaluates the change in the probability of default parameter for each specific exposure on a quantitative
basis, comparing it to a predefined threshold since its initial recognition. When the absolute change in the probability
of default surpasses the specified threshold, it is considered a Significant Increase in Credit Risk (SICR), leading to
the transfer of the exposure to Stage 2. The quantitative indicator for SICR is utilized in retail and micro segments,
provided there is a substantial number of observations for accurate assessment. Refer to note 35 for more details of
SICR thresholds.
Judgements used for calculation of credit risk parameters namely probability of default (PD) and loss given default
(LGD). The judgements include and are not limited by:
(i)
(ii)
(iii)
(iv)
definition of the segmentation for risk parameters estimation purposes,
decision whether simplified or more complex models can be used,
time since default date after which no material recoveries are expected,
collateral haircuts from market value as well as the average workout period for collateral discounting.
The table below describes sensitivity on 10% increase of PD and LGD estimates. For sensitivity calculation purposes,
the staging has been maintained unchanged:
In thousands of GEL
31 December 2023
31 December 2022
10% increase (decrease) in
PD estimates
Increase (decrease) credit loss allowance
on loans and advances by GEL 16,177 (GEL
15,210).
Increase (decrease) credit loss allowance
on loans and advances by GEL 19,891 (GEL
18,843).
10% increase (decrease) in
LGD estimates
Increase (decrease) credit loss allowance
on loans and advances by
GEL 24,778 (GEL 26,679).
Increase (decrease) credit loss allowance on
loans and advances by
GEL 31,635 (GEL 31,770).
Estimates used for forward-looking macroeconomic scenarios and judgements made for their probability
weightings.
For forward-looking information purposes, the Bank defines three macro scenarios. The scenarios are defined as
baseline (most likely), upside (better than most likely) and downside (worse than most likely) scenarios of the state of
the Georgian economy.
Estimates applied in differentiating between these three scenarios represent GDP, USD/GEL rate, RE price,
employment levels, monetary policy rate and other macro variables. Under usual conditions, the scenario weights
applied are 50%, 25% and 25% for the base case, upside and downside scenarios respectively. As at 31 December
2023 the weights remained the same as at 31 December 2022 - 50%, 25% and 25% for the base, upside and downside
scenarios respectively. Based on the changes of the macro environment the Bank may modify the weightings based
on expert judgement.
The table below describes the unweighted ECL for each economic scenario as at 31 December 2023:
In thousands of GEL
Corporate
MSME
Consumer
Mortgage
Total
Baseline
49,321
108,614
128,700
27,224
313,859
Upside
49,321
106,830
128,259
27,047
311,457
Downside
Weighted
66,060
110,964
129,162
27,528
333,714
53,505
108,740
128,715
27,257
318,217
The table below describes the unweighted ECL for each economic scenario as at 31 December 2022:
In thousands of GEL
Corporate
MSME
Consumer
Mortgage
Total
Baseline
45,775
95,991
183,342
33,856
358,964
Upside
45,456
94,270
182,366
33,519
355,611
Downside
Weighted
48,827
98,169
184,396
34,421
365,813
46,458
96,112
183,352
33,912
359,834
The following table describes the key macroeconomic variables under each scenario for future 3-year period as at 31
December 2023:
Growth rates YoY, %
2024
2025
2026
Baseline
GDP
USD/GEL rate (EOP)
RE Price (in USD)
Employment (EOP)
4.8%
2.80
-2.4%
0.3%
Monetary policy rate (EOP, Level)
8.5%
5.4%
2.70
0.8%
0.4%
7.8%
5.2%
2.70
0.9%
0.3%
7.5%
Upside
2025
7.9%
2.39
Downside
2026
8.3%
2.36
2024
2025
3.0%
2.7%
3.01
2.95
2026
1.9%
2.97
11.0%
10.4%
-14.5% -9.2% -6.3%
1.0%
6.7%
1.1%
6.3%
-0.2% -0.2% -0.4%
9.6%
9.2%
9.3%
2024
6.5%
2.50
9.0%
0.8%
7.8%
178
179
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 3.CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
CONTINUED
4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
The following amended standards became effective from 1 January 2023
The following table describes the key macroeconomic variables under each scenario for future 3-year period as at 31
December 2022:
Baseline
Upside
Downside
Growth rates YoY, %
GDP
USD/GEL rate (EOP)
RE Price (in USD)
Employment (EOP)
2023
3.5%
2.80
2024
5.4%
2.65
2025
5.2%
2.60
2023
5.2%
2.47
19.8%
-2.0%
-1.3%
24.2%
1.9%
-0.8%
-0.2%
2.5%
8.4%
2024
7.9%
2.31
4.1%
-0.1%
7.0%
2025
8.4%
2.24
4.8%
0.6%
6.8%
2023
1.7%
3.06
2024
2.7%
2.92
2025
1.9%
2.90
11.6% -13.1% -12.5%
1.5%
-1.3% -0.9%
10.1%
9.3%
9.6%
Monetary policy rate (EOP, Level)
9.0%
7.8%
7.8%
The Bank assessed the impact of changes in GDP growth, unemployment and monetary policy rate variables on ECL
as estimates applied in ECL assessment.
The sensitivity analysis was performed separately for each of the variable to show their significant in ECL assessment,
but changes in those variables may not happen in isolation as various economic factors tend to be correlated across
the scenarios. The variables were adjusted in all three macroeconomic. From the assessment of forward-looking
scenarios, management is comfortable with the scenarios capturing the non-linearity of the losses.
The table below shows the impact of +/-20% change in GDP growth, unemployment and monetary policy variables
across all scenarios on the Bank’s ECL as at 31 December 2023:
In thousands of GEL
20% increase
20% decrease
20% increase
20% decrease
20% increase
20% decrease
Impact on ECL
(905)
1,031
555
(561)
221
(195)
Change in GDP growth
Change in unemployment
Change in Monetary Policy
The table below shows the impact of +/-20% change in GDP growth and unemployment variables across all scenarios
on the Bank’s ECL as at 31 December 2022:
In thousands of GEL
20% increase
20% decrease
20% increase
20% decrease
20% increase
20% decrease
Impact on ECL
(987)
1,038
1,341
(1,231)
710
(616)
Change in GDP growth
Change in unemployment
Change in Monetary Policy
In May 2017, the IASB issued IFRS 17, Insurance Contracts. IFRS 17 replaces IFRS 4 and sets out principles for the
recognition, measurement, presentation and disclosure of insurance contracts that are in the scope of IFRS 17. In
June 2020, the IASB issued Amendments to IFRS 17, introducing various changes to assist entities implementing the
Standard, and moving an effective date to 1 January 2023.
Classification of performance guarantee contracts
The Group analysed the issued performance guarantee contracts to assess whether they would meet the definition of
insurance contracts in the scope of IFRS 17. The Group has concluded that performance guarantee contracts expose
the Group primarily to credit risk of the applicant because (i) all the contracts require the customers who apply for a
guarantee to fully collateralise their obligations to indemnify the Group as the issuer and (ii) there are no scenarios
with commercial substance where the Group would have to pay significant additional amounts to the holders of such
guarantees. Accordingly, the Group accounts for these contracts in accordance with IFRS 9.
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February
2021 and effective for annual periods beginning on or after 1 January 2023). IAS 1 was amended to require
companies to disclose their material accounting policy information rather than their significant accounting policies.
The amendment provided the definition of material accounting policy information. The amendment also clarified that
accounting policy information is expected to be material if, without it, the users of the financial statements would be
unable to understand other material information in the financial statements. The amendment provided illustrative
examples of accounting policy information that is likely to be considered material to the entity’s financial statements.
Further, the amendment to IAS 1 clarified that immaterial accounting policy information need not be disclosed.
However, if it is disclosed, it should not obscure material accounting policy information. To support this amendment,
IFRS Practice Statement 2, ‘Making Materiality Judgements’ was also amended to provide guidance on how to apply
the concept of materiality to accounting policy disclosures.
The amendments have had an impact on the Group’s disclosures of accounting policies, but not on the measurement,
recognition or presentation of any items in the Group’s financial statements.
Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual
periods beginning on or after 1 January 2023). The amendment to IAS 8 clarified how companies should distinguish
changes in accounting policies from changes in accounting estimates.
The amendments had no impact on the Group’s consolidated financial statements.
Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued
on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023). The amendments to IAS 12
specify how to account for deferred tax on transactions such as leases and decommissioning obligations. In specified
circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the
first time. Previously, there had been some uncertainty about whether the exemption applied to transactions such
as leases and decommissioning obligations – transactions for which both an asset and a liability are recognised.
The amendments clarify that the exemption does not apply and that entities are required to recognise deferred tax
on such transactions. The amendments require companies to recognise deferred tax on transactions that, on initial
recognition, give rise to equal amounts of taxable and deductible temporary differences.
The amendments had no impact on the Group’s consolidated financial statements.
Amendments to IAS 12 Income taxes: International Tax Reform – Pillar Two Model Rules (issued 23 May 2023). In
May 2023, the IASB issued narrow-scope amendments to IAS 12, ‘Income Taxes’. This amendment was introduced in
response to the imminent implementation of the Pillar Two model rules released by the Organisation for Economic
Co-operation and Development's (OECD) as a result of international tax reform. The amendments provide a temporary
exception from the requirement to recognise and disclose deferred taxes arising from enacted or substantively
enacted tax law that implements the Pillar Two model rules. Companies may apply the exception immediately, but
disclosure requirements are required for annual periods commencing on or after 1 January 2023.
The amendments had no impact on the Group’s consolidated financial statements.
180
181
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 5. NEW ACCOUNTING PRONOUNCEMENTS
6. CASH AND CASH EQUIVALENTS
The Group has not early adopted any of the amendments effective after 31 December 2023. The Group expects the
amendments will have an insignificant effect, when adopted, or is in the process of assessment of the scale of any
potential impact on the consolidated financial statements of the Group and the separate financial statements of
Bank.
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (issued on 22 September 2022 and
effective for annual periods beginning on or after 1 January 2024). The amendments relate to the sale and
leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale. The amendments
require the seller-lessee to subsequently measure liabilities arising from the transaction and in a way that it does not
recognise any gain or loss related to the right of use that it retained. This means deferral of such a gain even if the
obligation is to make variable payments that do not depend on an index or a rate.
Classification of liabilities as current or non-current – Amendments to IAS 1 (originally issued on 23 January
2020 and subsequently amended on 15 July 2020 and 31 October 2022, ultimately effective for annual periods
beginning on or after 1 January 2024). These amendments clarify that liabilities are classified as either current or
non-current, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the
entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The
guidance no longer requires such a right to be unconditional. The October 2022 amendment established that loan
covenants to be complied with after the reporting date do not affect the classification of debt as current or non-
current at the reporting date. Management’s expectations whether they will subsequently exercise the right to defer
settlement do not affect classification of liabilities. A liability is classified as current if a condition is breached at or
before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting
period. Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date.
In addition, the amendments include clarifying the classification requirements for debt a company might settle
by converting it into equity. ‘Settlement’ is defined as the extinguishment of a liability with cash, other resources
embodying economic benefits or an entity’s own equity instruments. There is an exception for convertible
instruments that might be converted into equity, but only for those instruments where the conversion option is
classified as an equity instrument as a separate component of a compound financial instrument.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance
Arrangements (Issued on 25 May 2023). In response to concerns of the users of financial statements about
inadequate or misleading disclosure of financing arrangements, in May 2023, the IASB issued amendments to IAS
7 and IFRS 7 to require disclosure about entity’s supplier finance arrangements (SFAs). These amendments require
the disclosures of the entity’s supplier finance arrangements that would enable the users of financial statements
to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to
liquidity risk. The purpose of the additional disclosure requirements is to enhance the transparency of the supplier
finance arrangements. The amendments do not affect recognition or measurement principles but only disclosure
requirements. The new disclosure requirements will be effective for the annual reporting periods beginning on or
after 1 January 2024.
Amendments to IAS 21 Lack of Exchangeability (Issued on 15 August 2023). In August 2023, the IASB issued
amendments to IAS 21 to help entities assess exchangeability between two currencies and determine the spot
exchange rate, when exchangeability is lacking. An entity is impacted by the amendments when it has a transaction
or an operation in a foreign currency that is not exchangeable into another currency at a measurement date for a
specified purpose. The amendments to IAS 21 do not provide detailed requirements on how to estimate the spot
exchange rate. Instead, they set out a framework under which an entity can determine the spot exchange rate at the
measurement date. When applying the new requirements, it is not permitted to restate comparative information. It
is required to translate the affected amounts at estimated spot exchange rates at the date of initial application, with
an adjustment to retained earnings or to the reserve for cumulative translation differences.
In thousands of GEL
Cash on hand
Cash balances with the National Bank of Georgia (other than mandatory reserve deposits)
Correspondent accounts and overnight placements with other banks
Placements with and receivables from other banks with original maturities of less than
three months
Reverse sale and repurchase agreements with other banks with original maturities of less
than three months
Total gross amount of cash and cash equivalents
Less: credit loss allowance by stages
Stage 1
Total cash and cash equivalents
31 December
2023
31 December
2022
936,988
1,224,264
707,183
1,019,684
315,253
1,442,961
1,027,493
434,027
-
370,022
3,691,348
3,786,527
(116)
(429)
3,691,232
3,786,098
As of 31 December 2023, 93% of the correspondent accounts and overnight placements with other banks was
placed with OECD (Organization for Economic Co-operation and Development) banking institutions (31 December
2022: 96%).
As of 31 December 2023, GEL 1,020,150 thousand was placed on interbank term deposits with one OECD bank and
none with non-OECD (as at 31 December 2022 GEL 303,206 thousand was placed on interbank term deposits with
two non-OECD banks and none with OECD bank).
Interest rate analysis of cash and cash equivalents is disclosed in Note 35.
The credit-ratings of correspondent accounts and overnight placements with other banks are as follows:
in thousands of GEL
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
31 December
2023
31 December
2022
317,762
280,732
1,162
207,873
532,414
705,316
250
-
96,294
86,538
814
102,814
1,598
2,360
409
-
11,050
647
4,483
5,457
5,180
23,600
47,272 26,888
734
42
262
694
Total correspondent accounts and overnight placements with other banks
1,019,684 1,442,961
182
183
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 6. CASH AND CASH EQUIVALENTS CONTINUED
8. MANDATORY CASH BALANCES WITH NATIONAL BANK OF GEORGIA
Mandatory cash balances with the National Bank of Georgia (“NBG”) represent amounts deposited with the NBG.
Resident financial institutions are required to maintain an interest-earning obligatory reserve with the NBG, the
amount of which depends on the level of funds attracted by the financial institutions. The Bank earned up to 10.48%,
0% and 0% annual interest in GEL, USD and EUR, respectively, on mandatory reserve with NBG during the year 2023
(2022: 10.88%, 2.17% and (0.7%) in GEL, USD and EUR, respectively).
In July 2023, Fitch Ratings has affirmed Georgia’s Long-Term Foreign and Local Currency Issuer Default Rating
(IDRs) at ‘BB’, with the positive outlook. The country ceiling is affirmed at ’BBB-‘, while short-term foreign and local-
currency IDRs are kept at ‘B’.
The credit rating of placements with and receivables from other banks with original maturities of less than three
months stands as follows:
In thousands of GEL
AAA
A-
BBB+
BBB
BB
BB-
31 December
2023
31 December
2022
158,810
296,785
1,085
-
348,308
303,364
223,590
-
-
-
9,541
120,037
Total placements with and receivables from other banks with original maturities of less
than three months
1,027,493
434,027
The table illustrates the ratings by international agencies Standard & Poor’s and Fitch Ratings. When different
credit ratings are designated by the agencies, the highest designated rating for this asset is used, for those financial
institutions which are not assigned credit ratings country ratings are used.
As at 31 December 2022 credit rating of reverse sale and repurchase agreements with other banks with original
maturities of less than three months is rated at BB-.
7. DUE FROM OTHER BANKS
Amounts due from other banks include placements with and receivables from other banks with original maturities
of more than three months that are not collateralised and represent neither past due nor impaired amounts at 31
December 2023 and 2022.
Credit ratings of placements with and receivables from other banks with original maturities of more than three
months and restricted cash were as follows:
in thousands of GEL
BBB
BB
B+
Total placements with and receivables from other banks with original maturities of
more than three months and restricted cash
31 December
2023
31 December
2022
446
-
10,689
1,298
4,326
674
11,135
6,298
As at 31 December 2023 the Group had one placements, with original maturities of more than three months and with
aggregated amounts above GEL 5,000 thousand (2022: nil).
The total aggregated amount of placements with and receivables from other banks with original maturities of more
than three months was GEL 10,446 thousand (2022: GEL 5,623 thousand) or 93.8% of the total amount due from other
banks (2022: 89.3%).
As at 31 December 2023 GEL 693 thousand (2022: GEL 693 thousand) were kept on deposits as restricted cash under
an arrangement with a credit card company or credit card related services with other banks.
For the estimated fair values of due from other bank balances please refer to Note 40.
For the purpose of ECL measurement due from other banks balances are included in Stage 1. The ECL for these
balances as at 31 December 2023 is GEL 3.8 thousand (2022: GEL 18.9 thousand).
184
185
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 9. LOANS AND ADVANCES TO CUSTOMERS
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
in thousands of GEL
Corporate loans
Loans to micro, small and medium enterprises
Consumer loans
Mortgage loans
Total gross loans and advances to customers at amortised cost (AC)
Less: credit loss allowance
Stage 1
Stage 2
Stage 3
31 December
2023
31 December
2022
8,263,605
6,282,469
5,486,788
4,809,415
2,796,622
2,512,220
4,729,734
4,253,172
21,276,749
17,857,276
(318,217)
(359,834)
(87,734)
(101,747)
(82,019)
(96,993)
(148,464)
(161,094)
Total loans and advances to customers at amortised cost (AC)
20,958,532
17,497,442
As at 31 December 2023 loans and advances to customers carried at GEL 701,285 thousand have been pledged
to local banks or other financial institutions as collateral with respect to other borrowed funds (2022: GEL 958,530
thousand).
No post model overlays has been processed as of 31 December 2023 (PMAs amounted to GEL 2,340 thousand for YE
2022.
The following tables disclose the changes in the credit loss allowance and gross carrying amount for loans and
advances to customers carried at amortised cost between the beginning and the end of the reporting period. Below
main movements in the table are described:
•
Transfers occur between Stage 1, 2 and 3, due to significant increases (or decreases) of credit risk or exposures
becoming defaulted in the period, and the consequent “step up” (or “step down”) between 12-month and
Lifetime ECL. It should be noted, that:
- For loans, which existed at the beginning of the period, opening exposures are disclosed as transfer amounts;
- For newly issued loans, exposures upon issuance are disclosed as transfer amounts;
• New originated or purchased gives us information regarding gross loans issued and corresponding credit loss
allowance created during the period (however, exposures which were issued and repaid during the period and
issued to refinance existing loans are excluded);
• Derecognised during the period refers to the balance of loans and credit loss allowance at the beginning of the
period, which were fully repaid during the period. Exposures which were issued and not fully repaid during the
period, written off or refinanced by other loans, are excluded;
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
Total loans
in thousands of GEL
At 1 January 2023
16,065,731
1,401,961
389,584
17,857,276
101,747
96,993
161,094
359,834
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(2,401,874) 2,453,776 (51,902)
-
(72,440)
89,871
(17,431)
(42,694) (403,372) 446,066
-
(4,110)
(84,615)
88,725
1,776,304 (1,775,676)
(628)
-
120,613 (120,502)
(111)
-
-
-
12,302,923
-
-
12,302,923
173,184
-
-
173,184
(5,902,762)
(220,021)
(102,823) (6,225,606)
(82,258)
(14,507)
(25,152)
(121,917)
Net repayments
(2,363,801)
(182,730)
(69,388)
(2,615,919)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments1
-
-
-
-
(149,021)
114,521
154,983
120,483
Movements without impact on credit loss allowance charge for the period:
• Net repayments refers to the net changes in gross carrying amounts, which is loan disbursements less
Write-offs
-
-
(214,676)
(214,676)
repayments, excluding loans that were fully repaid;
• Write-offs refer to write off of loans during the period;
•
Foreign exchange movements refers to the translation of assets denominated in foreign currencies and effect to
translation in presentational currency for foreign subsidiary;
• Net re-measurement due to stage transfers and risk parameters changes refers to the movements in ECL as a
result of transfer of exposure between stages or changes in risk parameters and forward-looking expectations;
• Modification refers to changes in terms that do not result in derecognition;
•
Re-segmentation refers to the transfer of loans from one reporting segment to another. For presentation
purposes, amounts are rounded to the nearest thousands of GEL, which in certain cases is disclosed as nil.
Changes in accrued
interest
29,106
14,581
2,159
45,846
Modification
1,457
116
167
1,740
-
-
-
-
-
-
(214,676)
(214,676)
-
-
-
-
Foreign exchange
movements
At 31 December
2023
118,167
5,682
1,316
125,165
19
258
1,032
1,309
19,582,557
1,294,317
399,875 21,276,749
87,734
82,019
148,464
318,217
1 Movements with impact on credit loss allowance charge for the period differs from statement of profit or loss with amount of recoveries of GEL
41,371 thousand in 2023 (2022: GEL 50,231 thousand). The amount of recoveries include recoveries from sale of written off portfolio in the amount of
GEL 22,023 thousand sold in 2023 (2022: GEL 18,634 thousand).
186
187
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total loans
in thousands of GEL
Total
Corporate loans
in thousands of GEL
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2022
14,512,165
1,933,530 508,858
16,954,553
101,972
120,417
184,979
407,368
At 1 January 2023
5,741,400
458,334
82,735
6,282,469
18,930
1,214
26,314
46,458
Movements with impact on credit loss allowance charge for the period:
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(2,241,877) 2,377,744 (135,867)
-
(80,875)
131,871
(50,996)
-
(64,005) (363,664)
427,669
-
(9,832) (109,393)
119,225
-
1,991,879 (1,979,138)
(12,741)
-
138,471
(137,647)
(824)
-
9,824,500
-
-
9,824,500
169,303
-
-
169,303
(4,745,259)
(173,137)
(116,526) (5,034,922)
(50,872)
(14,164)
(38,873)
(103,909)
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(249,739)
257,551
(7,812)
-
(1,577)
2,489
(912)
-
(19,441)
(52,600)
72,041
-
(1,827)
(1,479)
3,306
-
143,209 (143,209)
-
-
387
(387)
-
-
5,772,067
-
-
5,772,067
55,225
-
-
55,225
(3,610,212)
(82,079)
(23,742)
(3,716,033)
(49,056)
(147)
(1,184)
(50,387)
Net repayments
(2,037,641)
(219,172)
(55,873)
(2,312,686)
-
-
-
-
Net repayments
(375,006)
(39,646)
(8,327)
(422,979)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(165,382)
107,892
147,574
90,084
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(4,449)
737
8,487
4,775
Movements without impact on credit loss allowance charge for the period:
Movements without impact on credit loss allowance charge for the period:
Write-offs
-
-
(194,012)
(194,012)
Changes in accrued
interest
(26,737)
5,690
3,631
(17,416)
Modification
4,016
834
732
5,582
-
-
-
-
(194,012)
(194,012)
-
-
-
-
-
-
Foreign exchange
movements
At 31 December
2022
(1,151,310)
(180,726)
(36,287)
(1,368,323)
(1,038)
(1,983)
(5,979)
(9,000)
16,065,731
1,401,961
389,584
17,857,276
101,747
96,993
161,094
359,834
Re-segmentation
259,557
Write-offs
-
-
-
(468)
259,089
794
(3,184)
(3,184)
Changes in accrued
interest
19,587
9,492
2,039
31,118
Modification
286
(158)
49
177
-
-
-
-
-
-
-
(236)
(3,184)
558
(3,184)
-
-
15
-
-
60
57,393
2,681
807
60,881
27
18
7,739,101
410,366
114,138
8,263,605
18,454
2,445
32,606
53,505
Foreign exchange
movements
At 31 December
2023
188
189
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
Corporate loans
in thousands of GEL
Gross carrying amount
Loans to micro,
small and medium
enterprises
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
At 1 January 2022
5,743,444
712,548
91,749
6,547,741
24,404
1,310
25,017
50,731
At 1 January 2023
4,327,742
317,830
163,843
4,809,415
24,938
23,961
47,213
Total
96,112
Movements with impact on credit loss allowance charge for the period:
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(167,429)
171,531
(4,102)
-
(770)
1,550
(780)
(13,861)
(21,457)
35,318
-
(1,428)
(160)
1,588
219,373 (207,522)
(11,851)
-
1,113
(738)
(375)
-
-
-
3,659,826
-
-
3,659,826
51,203
-
-
51,203
(2,805,071)
(35,641)
(13,318) (2,854,030)
(18,621)
(188)
(1,383)
(20,192)
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(802,913)
819,936
(17,023)
-
(20,758)
25,443
(4,685)
-
(3,870) (178,452)
182,322
-
(481)
(28,153)
28,634
-
515,803 (515,799)
(4)
-
33,285
(33,285)
-
-
2,842,810
-
-
2,842,810
50,094
-
-
50,094
(847,740)
(58,116)
(37,221)
(943,077)
(7,066)
(5,102)
(8,977)
(21,145)
Net repayments
(378,989)
(68,653)
(8,529)
(456,171)
-
-
-
-
Net repayments
(841,731)
(64,387)
(42,853)
(948,971)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(36,022)
(494)
4,210
(32,306)
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(55,121)
49,770
57,130
51,779
Movements without impact on credit loss allowance charge for the period:
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
64,980
16,622
-
81,602
139
Write-offs
-
-
(1,126)
(1,126)
Changes in accrued
interest
(40,308)
(563)
242
(40,629)
Modification
1,520
62
74
1,656
-
-
-
16
-
-
-
-
155
(1,126)
(1,126)
-
-
-
-
Foreign exchange
movements
At 31 December
2022
(542,085)
(108,593)
(5,722)
(656,400)
(1,088)
(82)
(837)
(2,007)
5,741,400
458,334
82,735
6,282,469
18,930
1,214
26,314
46,458
Re-segmentation
(250,327)
(192)
-
(250,519)
(753)
(27)
-
(780)
Write-offs
-
-
(67,981)
(67,981)
Changes in accrued
interest
8,768
1,968
(3,361)
7,375
Modification
241
144
10
395
-
-
-
-
-
-
(67,981)
(67,981)
-
-
-
-
Foreign exchange
movements
At 31 December
2023
34,195
2,351
795
37,341
20
178
463
661
4,982,978
325,283
178,527
5,486,788
24,158
32,785
51,797
108,740
190
191
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Loans to micro,
small and medium
enterprises
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
Consumer loans
in thousands of GEL
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2022
3,519,842
413,339
208,124
4,141,305
20,487
32,234
60,380
113,101
At 1 January 2023
2,192,423
229,992
89,805
2,512,220
55,579
62,118
65,655
183,352
Movements with impact on credit loss allowance charge for the period:
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(596,643)
649,360
(52,717)
-
(12,887)
30,360
(17,473)
(3,607)
(131,785)
135,392
470,443 (469,705)
(738)
-
-
(785)
(22,920)
23,705
31,196
(30,853)
(343)
-
-
-
2,732,945
-
-
2,732,945
30,670
-
-
30,670
(799,199)
(49,055)
(32,100)
(880,354)
(10,514)
(3,232)
(9,333)
(23,079)
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(565,976)
574,754
(8,778)
-
(47,921)
52,925
(5,004)
(15,056)
(138,941)
153,997
-
(1,311)
(53,302)
54,613
397,663
(397,137)
(526)
-
77,556
(77,452)
(104)
-
-
-
2,298,090
-
- 2,298,090
66,479
-
-
66,479
(1,066,323)
(36,625)
(30,583)
(1,133,531)
(25,903)
(8,003)
(11,134)
(45,040)
Net repayments
(680,252)
(58,076)
(27,557)
(765,885)
-
-
-
-
Net repayments
(708,525)
(44,736)
(7,413)
(760,674)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(33,027)
18,867
39,156
24,996
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(81,173)
62,833
79,475
61,135
Movements without impact on credit loss allowance charge for the period:
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(56,707)
(15,755)
-
(72,462)
(70)
74
-
4
Re-segmentation
5,124
1,021
(27)
6,118
(17)
82
(6)
59
Write-offs
-
-
(46,258)
(46,258)
Changes in accrued
interest
13,981
3,054
(716)
16,319
Modification
546
255
353
1,154
-
-
-
-
-
-
(46,258)
(46,258)
-
-
-
-
Foreign exchange
movements
At 31 December
2022
(273,607)
(23,802)
(19,940)
(317,349)
(132)
(569)
(2,621)
(3,322)
4,327,742
317,830
163,843
4,809,415
24,938
23,961
47,213
96,112
Write-offs
Changes in accrued
interest
Modification
Foreign exchange
movements
At 31 December
2023
-
883
405
-
(137,900)
(137,900)
3,538
4,122
8,543
39
45
489
-
-
-
-
-
-
(137,900)
(137,900)
-
-
-
-
3,081
307
(121)
3,267
(40)
42
628
630
2,541,789
192,212
62,621
2,796,622
43,249
39,243
46,223
128,715
192
193
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Consumer loans
in thousands of GEL
Total
Mortgage loans
in thousands of GEL
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2022
1,829,908
237,400
85,758
2,153,066
54,279
64,793
60,978
180,050
At 1 January 2023
3,804,166
395,805
53,201
4,253,172
2,300
9,700
21,912
33,912
Movements with impact on credit loss allowance charge for the period:
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(650,136)
668,563
(18,427)
-
(64,388)
76,190
(11,802)
-
(34,514)
(177,854)
212,368
-
(5,980)
(84,055)
90,035
-
409,926 (409,774)
(152)
-
88,788
(88,682)
(106)
-
2,080,841
-
-
2,080,841
85,603
-
-
85,603
(818,914)
(41,409)
(47,920)
(908,243)
(21,501)
(8,971)
(19,551)
(50,023)
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(783,246)
801,535 (18,289)
-
(2,184)
9,014
(6,830)
-
(4,327)
(33,379)
37,706
-
(491)
(1,681)
2,172
-
719,629
(719,531)
(98)
-
9,385
(9,378)
(7)
-
1,389,956
-
-
1,389,956
1,386
-
-
1,386
(378,487)
(43,201)
(11,277)
(432,965)
(233)
(1,255)
(3,857)
(5,345)
Net repayments
(600,668)
(49,488)
(2,136)
(652,292)
-
-
-
-
Net repayments
(438,539)
(33,961)
(10,795)
(483,295)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(81,011)
103,143
89,322
111,454
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(8,278)
1,181
9,891
2,794
Movements without impact on credit loss allowance charge for the period:
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
3,580
(34)
-
3,546
(77)
(39)
-
(116)
Re-segmentation
(14,354)
(829)
495
(14,688)
(24)
(55)
242
163
Write-offs
-
-
(142,912)
(142,912)
Changes in accrued
interest
3,110
5,105
5,345
13,560
Modification
1,076
260
101
1,437
-
-
-
-
-
-
(142,912)
(142,912)
Write-offs
-
-
(5,611)
(5,611)
-
-
-
-
Changes in accrued
interest
(132)
(417)
(641)
(1,190)
Modification
525
91
63
679
-
-
-
-
-
-
(5,611)
(5,611)
-
-
-
-
Foreign exchange
movements
At 31 December
2022
(31,786)
(2,777)
(2,220)
(36,783)
(134)
(261)
(309)
(704)
2,192,423
229,992
89,805
2,512,220
55,579
62,118
65,655
183,352
Foreign exchange
movements
At 31 December
2023
23,498
343
(165)
23,676
12
20
(74)
(42)
4,318,689
366,456
44,589
4,729,734
1,873
7,546
17,838
27,257
194
195
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
Mortgage loans
in thousands of GEL
At 1 January 2022
3,418,971
570,243
123,227
4,112,441
2,802
22,080
38,604
63,486
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(827,669)
888,290
(60,621)
-
(2,830)
23,771
(20,941)
(12,023)
(32,568)
44,591
-
(1,639)
(2,258)
3,897
892,137
(892,137)
-
-
17,374
(17,374)
1,350,888
-
-
1,350,888
1,827
-
-
-
-
-
-
1,827
(322,075)
(47,032)
(23,188)
(392,295)
(236)
(1,773)
(8,606)
(10,615)
Net repayments
(377,732)
(42,955)
(17,651)
(438,338)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(15,322)
(13,624)
14,886
(14,060)
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(11,853)
(833)
-
(12,686)
Write-offs
-
-
(3,716)
(3,716)
Changes in accrued
interest
(3,520)
(1,906)
(1,240)
(6,666)
Modification
874
257
204
1,335
8
-
-
-
(51)
-
(43)
-
-
-
(3,716)
(3,716)
-
-
-
-
Foreign exchange
movements
At 31 December
2022
(303,832)
(45,554)
(8,405)
(357,791)
316
(1,071)
(2,212)
(2,967)
3,804,166
395,805
53,201
4,253,172
2,300
9,700
21,912
33,912
The credit quality of loans to customers carried at amortised cost at 31 December 2023 is as follows:
in thousands of GEL
Corporate loans risk category
- Very low
- Low
- Moderate
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Loans to MSME risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Consumer loans risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Mortgage loans risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2023
Stage 1
(12months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
7,590,132
147,609
1,360
-
7,739,101
(18,454)
7,720,647
4,400,875
562,589
19,514
-
-
4,982,978
(24,158)
4,958,820
1,681,233
730,098
130,458
-
-
2,541,789
(43,249)
2,498,540
3,776,199
518,078
24,412
-
-
4,318,689
(1,873)
4,316,816
3,358
400,886
6,122
-
410,366
(2,445)
407,921
-
-
-
114,138
114,138
(32,606)
81,532
20,477
-
88,843 -
-
159,257
-
56,706
- 178,527
178,527
325,283
(32,785)
292,498
7,155
24,492
126,245
34,320
-
192,212
(39,243)
152,969
(51,797)
126,730
-
-
-
-
62,621
62,621
(46,223)
16,398
17,893
176,355
146,396
25,812
-
-
-
-
-
366,456
(7,546)
358,910
44,589
44,589
(17,838)
26,751
Total
7,593,490
548,495
7,482
114,138
8,263,605
(53,505)
8,210,100
4,421,352
651,432
178,771
56,706
178,527
5,486,788
(108,740)
5,378,048
1,688,388
754,590
256,703
34,320
62,621
2,796,622
(128,715)
2,667,907
3,794,092
694,433
170,808
25,812
44,589
4,729,734
(27,257)
4,702,477
196
197
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The credit quality of loans to customers carried at amortised cost at 31 December 2022 is as follows:
Economic sector risk concentrations within the customer loan portfolio are as follows:
in thousands of GEL
Corporate loans risk category
- Very low
- Low
- Moderate
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Loans to MSME risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Consumer loans risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Mortgage loans risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2022
Stage 1
(12months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
5,605,060
136,070
270
-
5,741,400
(18,930)
5,722,470
3,437,333
876,548
13,741
120
-
4,327,742
(24,938)
-
427,830
30,504
-
458,334
(1,214)
457,120
24,043
177,178
85,733
30,876
-
317,830
(23,961)
4,302,804
293,869
1,432,943
643,378
116,102
-
-
2,192,423
(55,579)
2,136,844
3,349,388
433,913
20,865
-
-
3,804,166
(2,300)
3,801,866
6,988
40,120
141,735
41,149
-
229,992
(62,118)
167,874
38,732
205,328
125,898
25,847
-
395,805
(9,700)
386,105
-
-
-
82,735
82,735
(26,314)
56,421
-
-
-
-
163,843
163,843
(47,213)
116,630
-
-
-
-
89,805
89,805
(65,655)
24,150
-
-
-
-
53,201
53,201
(21,912)
31,289
Total
5,605,060
563,900
30,774
82,735
6,282,469
(46,458)
6,236,011
3,461,376
1,053,726
99,474
30,996
163,843
4,809,415
(96,112)
4,713,303
1,439,931
683,498
257,837
41,149
89,805
2,512,220
(183,352)
2,328,868
3,388,120
639,241
146,763
25,847
53,201
4,253,172
(33,912)
4,219,260
The contractual amounts outstanding on loans to customers that have been written off during the period partially or
fully, but are still subject to enforcement activity was principal amount GEL 45,163 thousand (31 December 2022: GEL
22,535 thousand) and accrued interest GEL 6,323 thousand (31 December 2022: GEL 4,160 thousand).
31 December 2023
31 December 2022
in thousands of GEL
Individual
Real Estate
Construction
Trade
Hospitality, Restaurants & Leisure
Food Industry
Energy & Utilities
Agriculture
Healthcare
Services
Financial Services
Transportation
Automotive
Pawn Shops
Metals and Mining
Communication
Other
Total gross loans and
advances to customers
Amount
7,912,653
2,020,022
1,471,145
1,340,622
1,252,741
1,154,925
997,117
988,519
623,301
506,086
325,356
302,072
282,777
208,236
179,519
55,000
1,656,658
21,276,749
%
37%
9%
7%
6%
6%
5%
5%
5%
3%
2%
2%
1%
1%
1%
1%
0%
9%
Amount
6,851,397
1,564,352
1,073,761
1,054,958
1,147,098
1,060,058
947,441
822,779
451,304
388,517
262,675
240,535
297,558
196,489
179,365
30,758
1,288,231
%
38%
9%
6%
6%
7%
6%
5%
5%
3%
2%
1%
1%
2%
1%
1%
0%
7%
100%
17,857,276
100%
As of 31 December 2023, the Group had 7 borrowers (2022: 4 borrowers) with aggregated gross loan amounts above
GEL 100,000 thousand. The total aggregated amount of these loans was GEL 1,111,275 thousand (2022: GEL 520,913
thousand) or 5.2% of the gross loan portfolio (2022: 2.9%).
The amount and type of collateral required depend on an assessment of the credit risk of the counterparty. There are
three key types of collateral:
Real estate;
•
• Movable property including fixed assets, inventory and precious metals;
•
Financial assets including deposits, shares, and third party guarantees.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets where
collateral and other credit enhancements are equal to or exceed the assets’ carrying value (“over-collateralised
assets”) and (ii) those assets where collateral and other credit enhancements are less than the assets’ carrying value
(“under-collateralised assets”).
198
199
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The effect of collateral as at 31 December 2023:
The effect of collateral by types as at 31 December 2022:
31 December 2023
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium
enterprises
4,716,371
1,156,883
4,407,048
4,261,346
12,729,581
2,817,061
12,190,665
9,594,104
Total
14,541,648
37,331,411
The effect of collateral as at 31 December 2022:
3,547,234
1,639,739
322,686
1,225,442
6,735,101
1,224,531
41,741
156,424
435,223
1,857,919
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium
enterprises
31 December 2022
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
3,534,635
793,141
3,729,421
3,439,685
Fair value
of collateral
9,524,073
1,932,508
10,695,687
7,566,047
Carrying value
of the assets
Fair value
of collateral
2,747,834
1,719,079
523,751
1,369,730
1,135,017
60,642
238,075
523,237
Total
11,496,882
29,718,315
6,360,394
1,956,971
As at 31 December 2023 loans and advances to customers which were 1. over-collateralised and 2. credit loss
allowance was nil, amounted to GEL 1,770,547 thousand (2022: GEL 1,525,046 thousand).
The effect of collateral by types as at 31 December 2023:
Over-collateralised Assets
Under-collateralised Assets
31 December 2022
in thousands of GEL
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
304,408
147,485
407,338
10,637,651
336,311
186,835
2,061,199
27,133,970
164,437
40,777
258,222
2,554,711
-
-
3,342,247
128,474
40,181
150,724
1,637,592
-
Total
11,496,882
29,718,315
6,360,394
1,956,971
The financial effect of collateral is determined by comparing the fair value of collateral to outstanding gross loans and
advances in the reporting date.
Stage 3 loans presented by segments and collateral classes as at 31 December 2023 are the following:
31 December 2023
in thousands of GEL
Corporate
Consumer
Mortgage
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
Total
267
-
12,445
94,767
6,659
114,138
3
1,015
-
18,592
43,011
62,621
-
-
-
43,486
1,103
44,589
31 December 2023
Stage 3 loans presented by segments and collateral classes as at 31 December 2022 are the following:
in thousands of GEL
Cash Cover
Gold
Inventory
Real Estate
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
669,592
171,256
367,392
13,333,408
Fair value
of collateral
713,715
222,339
3,078,135
33,317,222
Carrying value
of the assets
89,559
31,283
365,947
2,472,023
Fair value
of collateral
70,797
30,609
158,663
1,597,850
Unsecured and secured solely by
third party guarantees
-
-
3,776,289
-
Total
14,541,648
37,331,411
6,735,101
1,857,919
31 December 2022
in thousands of GEL
Corporate
Consumer
Mortgage
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
Total
21
-
8,913
59,302
14,499
82,735
9
991
-
19,931
68,874
89,805
-
-
-
50,539
2,662
53,201
Loans to micro,
small and medium
enterprises
169
271
1,238
155,409
21,440
178,527
Loans to micro,
small and medium
enterprises
47
308
1,131
143,285
19,072
163,843
200
201
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUED
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
10. INVESTMENT SECURITIES MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The gross carrying amount of loans by stages that have been modified since initial recognition at a time when the loss
allowance was measured at an amount equal to lifetime expected credit losses and for which the loss allowance has
changed during the reporting period to an amount equal to 12-month expected credit losses loans are the following:
in thousands of GEL
31 December 2023
31 December 2022
Stage 1
Stage 2
Stage 3
Total
243,759
191,879
50,160
485,798
354,308
184,044
49,975
588,327
At the central level a specific unit manages collateral to ensure that they serve as an adequate mitigation for credit
risk management purposes. In line with the Group's internal policies, collateral provided to loans are evaluated by
the Internal Appraisal Group (external reviewers are used in case of loans to related parties or specific cases when
complex objects are appraised). The Internal Appraisal Group is part of the collateral management unit and, in order
to ensure adequate and objective appraisal procedures, it is independent from the loan granting process. Real estate
collateral of significant value is re-evaluated annually by internal appraisers. Statistical methods are used to monitor
the value of real estate collateral that are of non-significant value and other types of collateral such as movable assets
and precious metals.
In some instances, where the discounted recovery from the liquidation of collateral (adjusted for the liquidity haircut
and discounted for the period of expected workout time) is larger than the estimated exposure at default, no credit
loss allowance is recognised. Collateral values include the contractual price of third-party guarantees, which, due to
their nature, are capped at the loan’s carrying value. The values of third-party guarantees in the tables above amounted
to GEL 62,610 thousand and GEL 387,356 thousand as of 31 December 2023 and 2022, respectively. These third-party
guarantees are not taken into consideration when assessing the impairment allowance. Refer to Note 40 for the
estimated fair value of each class of loans and advances to customers. Interest rate analysis of loans and advances to
customers is disclosed in Note 35. Information on related party balances is disclosed in Note 42.
For the year ended 31 December 2023 amortised cost of loans with lifetime ECL immediately before contractual
modification that was not a derecognition event was GEL 891,977 thousand (31 December 2022: GEL 1,796,668
thousand). During 2023, gains less losses recognised in profit or loss on modifications of loans with lifetime ECL that
did not lead to derecognition was GEL (1) thousand (2022: GEL (14) thousand).
For the year ended 31 December 2023 gross carrying amount of loans that were contractually modified (without
derecognition) in the past when measured at lifetime ECL and which were reclassified to Stage 1 (12 months ECL)
during the current year was GEL 513,241thousand (31 December 2022: GEL 1,063,796 thousand).
in thousands of GEL
Corporate bonds
Gross carrying amount
Fair value correction
Stage 1
Corporate bonds measured at FTOCI
Ministry of Finance of Georgia treasury bills
Gross carrying amount
Fair value correction
Stage 1
Ministry of Finance of Georgia treasury bills at FTOCI
Foreign government treasury bills
Gross carrying amount
Fair value correction
Stage 1
Foreign government treasury bills at FTOCI
Total investment securities measured at fair value through other comprehensive
income excluding corporate shares
Corporate shares – unquoted
Total investment securities measured at fair value through other comprehensive
income
31 December
2023
31 December
2022
1,225,537
(114)
1,296,095
(4,376)
(422)
(334)
1,225,001
1,291,385
1,934,373
1,548,832
13,466
(3,707)
11,035
(2,772)
1,944,132
1,557,095
304,881
36,319
(1,015)
(16)
(702)
(34)
303,850
35,583
3,472,983
2,884,063
2,478
665
3,475,461
2,884,728
All debt securities in 2023 and 2022 except for corporate bonds and foreign government treasury bills are issued by the
Government of Georgia and National Bank of Georgia. Country rating for Georgia stands at BB with positive outlook
(as assigned by Fitch rating agency in July 2023). 80.6% of corporate bonds are issued by triple A rated international
financial institutions, 16.1% of corporate bonds are issued by BB rating and 3.3% by B+ rating. Information includes
credit ratings assigned by the international rating agencies (Standard & Poor’s, Fitch), for those financial institutions
which are not assigned credit ratings, country ratings are used.
The Group designated investments in corporate shares disclosed in the above table as equity securities at FVOCI. The
FVOCI designation was made because the investments are expected to be held primarily for liquidity management or
medium-term investment purposes instead of short-term profit making from subsequent sales.
As at 31 December 2023 investment securities measured at fair value through other comprehensive income carried at
GEL 970,019 thousand have been pledged with local banks or financial institutions as a collateral for other borrowed
funds (2022: GEL 475,259 thousand).
202
203
FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
10. INVESTMENT SECURITIES MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
CONTINUED
The movements in investment securities measured at fair value through other comprehensive income are as follows:
in thousands of GEL
Carrying amount as of 1 January
Purchases
Disposals
Redemption at maturity
Revaluation
Interest income accrued
Interest income received
Effect of translation to presentation currency
Transfer to repurchase receivables
Changes in credit loss allowance
Carrying amount as of 31 December
11. REPURCHASE RECEIVABLES
2023
2,884,728
1,563,326
(383,122)
2022
1,938,196
2,412,783
(816,417)
(854,540)
(391,341)
6,878
284,495
16,329
196,114
(275,820)
(178,112)
(16,975)
(25,007)
267,495
(267,495)
(1,004)
(322)
3,475,461
2,884,728
Repurchase receivables represent securities sold under sale and repurchase agreements which the counterparty has
the right, by contract or custom, to sell or repledge.
in thousands of GEL
Investment securities measured at FVOCI sold under sale and repurchase agreements
Total repurchase receivables
31 December
2023
31 December
2022
-
-
267,495
267,495
As at 31 December 2023 credit loss allowance for Investment securities measured at FVOCI sold under sale and
repurchase agreements was nil (2022: nil). Meanwhile credit risk category of total portfolio is classified as very low.
Refer to Note 18 for liability leg of sale and repurchase agreements with other banks.
12. OTHER FINANCIAL ASSETS
Other financial assets of the Group comprise the following:
in thousands of GEL
Receivables on credit card services and money transfers
Receivable on terminated leases
Derivative financial assets
Receivables on guarantees and letters of credit
Receivables from plastic card service providers
Derivatives margin
Advances paid to promotional service provider
Receivable from insurance service provides
Trade receivables
Investment held at fair value through profit or loss
Government subsidy related receivables
Prepayments for purchase of leasing assets
Receivables for rental income
Receivables from sales of non-financial assets
Other
Total gross amount of other financial assets
Less: credit loss allowance
Total other financial assets
31 December
2023
73,056
61,639
41,038
31 December
2022
46,724
40,103
69,921
32,347
26,591
20,762
19,774
13,965
4,009
8,062
4,565
1,405
652
400
23,140
28,081
2,837
19,733
21,194
3,892
9,704
3,981
2,794
666
657
30,057
27,986
338,322
301,413
(56,461)
(54,415)
281,861
246,998
For the year end of 2023 other financial asset gross portfolio with related credit loss allowance represented: stage
1 - GEL 245,665 thousand and GEL 4,776 thousand (2022: GEL 236,923 thousand and GEL 9,899 thousand); stage 2 -
GEL 3,931 thousand and GEL 1,260 thousand (2022: GEL 412 thousand and GEL 66 thousand); stage 3 - GEL 88,725
thousand and GEL 50,425 thousand (2022: GEL 64,078 thousand and GEL 44,450 thousand). GEL 61,639 thousand of
receivable on terminated leases represents stage 3 financial instruments (2022: GEL 40,103 thousand).
204
205
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 12. OTHER FINANCIAL ASSETS CONTINUED
Other financial assets of the Bank comprise the following:
in thousands of GEL
Receivables on credit card services and money transfers
Derivative financial assets
Receivables on guarantees and letters of credit
Receivables from plastic card service providers
Derivatives margin
Advances paid to promotional service provider
Receivable from insurance service provides
Trade receivables
Investment held at fair value through profit or loss
Government subsidy related receivables
Receivables for rental income
Receivables from sales of non-financial assets
Other
Total gross amount of other financial assets
Less: credit loss allowance
Total other financial assets
31 December
2023
72,260
40,919
32,347
31 December
2022
46,105
69,553
23,140
26,591
20,762
19,774
13,965
779
9,659
4,565
652
400
10,731
2,837
19,733
21,194
2,959
9,704
3,981
666
-
125,989
110,146
368,663
320,749
(18,576)
(21,029)
350,086
299,720
13. FINANCE LEASE RECEIVABLES
As at 31 December 2023 finance lease receivables of GEL 370,795 thousand (2022: GEL 288,886 thousand) are
represented by leases of fixed assets excluding land and buildings.
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. The main
types of collateral obtained are:
• Leased assets (inventory and equipment);
•
Down payment;
• Real estate properties.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets where
collateral and other credit enhancements are equal to or exceed the assets’ carrying value (“over-collateralized
assets”) and (ii) those assets where collateral and other credit enhancements are less than the assets’ carrying value
(“undercollateralized assets”).
Finance lease payments receivable and their present values as of 31 December 2023 are as follows:
in thousands of GEL
Due
in 1 year
Due
between 1
and 2 year
Due
between 2
and 3 year
Due
between 3
and 4 year
Due
between 4
and 5 year
Due
in 5 year or
more
Total
Lease payments receivable
172,834
121,230
70,102
46,185
28,990
77,249
516,590
Unearned finance income
(44,846)
(30,807)
(18,991)
(12,424)
(7,964)
(22,059)
(137,091)
Credit loss allowance
(3,041)
(2,101)
(1,182)
(718)
(512)
(1,150)
(8,704)
Present value of lease payments
receivable
124,947
88,322
49,929
33,043
20,514
54,040
370,795
Finance lease payments receivable and their present values as of 31 December 2022 are as follows:
in thousands of GEL
Due
in 1 year
Due
between 1
and 2 year
Due
between 2
and 3 year
Due
between 3
and 4 year
Due
between 4
and 5 year
Due
in 5 year or
more
Total
Lease payments receivable
143,900
89,898
60,931
35,399
24,306
42,693
397,127
Unearned finance income
(36,763)
(23,306)
(13,885)
(7,758)
(4,454)
(13,475)
(99,641)
Credit loss allowance
(2,791)
(1,795)
(1,339)
(951)
(973)
(751)
(8,600)
Present value of lease payments
receivable
For fair values refer to Note 40.
104,346
64,797
45,707
26,690
18,879
28,467
288,886
206
207
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 13. FINANCE LEASE RECEIVABLES CONTINUED
13. FINANCE LEASE RECEIVABLES CONTINUED
The following table discloses the changes in the credit loss allowance and gross carrying amount for finance lease
receivables between the beginning and the end of the reporting period:
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
242,914
36,718
17,854
297,486
4,122
2,173
2,305
8,600
(50,476)
53,033
(2,557)
(16,357)
(5,018)
21,375
4,109
(3,459)
(650)
-
-
-
(1,209)
1,248
(39)
(966)
(354)
1,320
255
(157)
(98)
-
-
-
in thousands of GEL
At 1 January 2023
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (from Stage 1
and Stage 2 to Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
New originated or purchased
214,299
-
- 214,299
2,916
-
-
2,916
(60,814)
(12,998)
(9,868)
(83,680)
(1,169)
(653)
(1,515)
(3,337)
(35,522)
(10,161)
(5,405)
(51,088)
(158)
(61)
(7)
(226)
948
142
306
184
52
1,306
850
1,176
9
-
9
-
10
-
28
-
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
190,697
43,732
27,694
262,123
2,712
3,422
3,649
9,783
(23,095)
29,847
(6,752)
(13,873)
(4,680)
18,553
7,688
(7,653)
(35)
-
-
-
(961)
1,385
(424)
(733)
(128)
861
199
(195)
(4)
-
-
-
in thousands of GEL
At 1 January 2022
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (from Stage 1
and Stage 2 to Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
New originated or purchased
178,718
-
-
178,718
3,933
-
-
3,933
Derecognised or fully repaid
during the period
Net repayments
Foreign exchange
movements
Other movements
Net re-measurement due
to stage transfers, changes
in risk parameters and
repayments
(51,936)
(18,430)
(17,459)
(87,825)
(813)
(2,024)
(2,855)
(5,692)
(36,184)
(5,121)
(3,723)
(45,028)
-
-
-
-
(8,228)
(954)
(1,217)
(10,399)
(85)
(26)
(141)
(252)
(873)
(23)
793
(103)
-
-
-
-
-
-
-
-
(130)
(261)
1,219
828
-
-
-
-
(972)
828
867
723
At 31 December 2022
242,914
36,718
17,854 297,486
4,122
2,173
2,305
8,600
299,243
58,605
21,651 379,499
2,828
3,033
2,843
8,704
As at 31 December 2023, credit quality of finance lease receivables is analysed below:
in thousands of GEL
Finance lease receivables risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2023
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for
SICR)
Stage 3
(lifetime ECL for
defaulted)
250,267
48,976
-
-
-
299,243
(2,828)
296,415
6,785
10,194
30,065
11,561
-
58,605
(3,033)
55,572
-
-
-
-
21,651
21,651
(2,843)
18,808
Total
257,052
59,170
30,065
11,561
21,651
379,499
(8,704)
370,795
209
Derecognised or fully repaid
during the period
Net repayments
Foreign exchange
movements
Other movements
Net re-measurement due
to stage transfers, changes
in risk parameters and
repayments
At 31 December 2023
208
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
13. FINANCE LEASE RECEIVABLES CONTINUED
As at 31 December 2022, credit quality of finance lease receivables is analysed below:
in thousands of GEL
Finance lease receivables risk
category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2022
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
216,763
26,063
88
-
-
242,914
(4,122)
238,792
-
6,982
9,780
19,956
-
36,718
(2,173)
34,545
Total
216,763
33,045
9,868
19,956
17,854
297,486
(8,600)
-
-
-
-
17,854
17,854
(2,305)
15,549
288,886
The effect of collateral as at 31 December 2023:
in thousands of GEL
Finance lease receivables
Total
31 December 2023
Over-collateralised Assets
Under-collateralised Assets
Gross carrying value
of the assets
290,573
Fair value of
collateral
435,885
Gross carrying value of
the assets
88,926
Fair value of
collateral
72,935
290,573
435,885
88,926
72,935
The effect of collateral as at 31 December 2022:
in thousands of GEL
Finance lease receivables
Total
31 December 2022
Over-collateralised Assets
Under-collateralised Assets
Gross carrying value
of the assets
226,389
Fair value of
collateral
397,377
Gross carrying value of
the assets
71,097
Fair value of
collateral
57,456
226,389
397,377
71,097
57,456
14. OTHER ASSETS
in thousands of GEL
Current other assets
Repossessed collateral
Prepayments for other assets
Prepayments for purchase of leasing assets
Other inventories
Prepaid taxes other than income tax
Total current other assets
Non-current other assets
Assets repossessed from terminated leases
Prepayments for construction in progress
Prepaid insurance of leasing assets
Assets purchased for leasing purposes
Other
Total non-current other assets
Total other assets
31 December
2023
31 December
2022
277,332
34,729
28,900
12,458
5,301
269,006
47,859
28,595
14,741
5,860
358,720
366,061
3,543
37,713
2,961
923
1,633
46,773
405,493
16,531
22,460
2,364
1,049
3,262
45,666
411,727
Repossessed collateral represents tangible assets acquired by the Group in settlement of defaulted loans, which is
expected to be disposed in a foreseeable future. The assets do not meet the definition of non-current assets held for
sale and are classified as inventories in accordance with IAS 2 “Inventories”. The assets were initially recognised at the
lower of cost and net realisable value when acquired. In 2023, collaterals repossessed for settlement of defaulted loans
amounted to GEL 97,602 thousand (2022: GEL 98,289 thousand).
For certain repossessed collateral, the Group has granted previous owners a right to repurchase the repossessed
collateral at prices equal to or higher than the carrying value of the loan at the date of repossession. This right is
usually effective for a period of 6 to 24 months from the repossession date, during this time the repossessed collateral
may not be disposed to third parties. In some cases, prolongation of repurchase right is offered to the owners of the
property. As at 31 December 2023, the carrying value of the repossessed collaterals subjected to the repurchase
agreement was GEL 116,087 thousand (2022: GEL 143,780 thousand).
210
211
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
15. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS
16. RIGHT OF USE ASSETS
in thousands of GEL
At cost
1 January 2022
Additions
Transfers within premises and equipment
Disposals
Land, premises
and leasehold
improvements
Office and
other
equipment*
Construction
in progress
Total
premises and
equipment
Intangible
assets
Total
203,363
11,814
4,704
279,130
54,565
(274)
(3,082)
(19,867)
109,027
27,559
(4,430)
(2,958)
591,520
391,334 982,854
93,938
89,345
183,283
-
-
-
(25,907)
(4,770)
(30,677)
Reclassification to right of use assets
(20,813)
Impairment (charge)/reversal
Effect of translation to presentation
currency
746
(107)
-
349
(148)
-
-
-
(20,813)
1,095
(255)
-
-
(20,813)
1,095
(53)
(308)
31 December 2022
Additions
Disposals
Impairment reversal/(charge)
Effect of translation to presentation
currency
196,625
313,755
6,624
(2,534)
52,662
(6,437)
519
(5)
256
(10)
129,198
46,222
(248)
(474)
-
639,578
475,856 1,115,434
105,508
91,995
197,503
(9,219)
(583)
(9,802)
301
(15)
-
(3)
301
(18)
31 December 2023
201,229
360,226
174,698
736,153
567,265 1,303,418
Accumulated depreciation /
amortisation
1 January 2022
(44,895)
(167,968)
Depreciation / amortisation charge
(5,102)
(19,377)
Elimination of accumulated depreciation
of reclassification to right of use assets
Elimination of accumulated depreciation /
amortisation on disposals
Effect of translation to presentation
currency
9,249
-
943
11,612
107
105
31 December 2022
(39,698)
(175,628)
Depreciation / amortisation charge
(2,754)
(21,047)
Reversal of elimination of accumulated
depreciation
Elimination of accumulated depreciation /
amortisation on disposals
Effect of translation to presentation
currency
31 December 2023
Carrying amount
31 December 2022
31 December 2023
(3,299)
(8,083)
524
5,144
5
7
(45,222)
(199,607)
-
-
-
-
-
-
-
-
-
-
-
(212,863) (123,928) (336,791)
(24,479)
(42,910)
(67,389)
9,249
-
9,249
12,555
2,084
14,639
212
48
260
(215,326) (164,706) (380,032)
(23,801)
(51,664) (75,465)
(11,382)
1,845
(9,537)
5,668
27
5,695
12
(45)
(33)
(244,829) (214,543) (459,372)
156,927
138,127
129,198
424,252
311,150 735,402
156,007
160,619
174,698
491,324
352,722 844,046
The Group leases offices, branches and service centres. Rental contracts are typically made for fixed periods of 1 to 14
years.
Leases are recognised as a right-of-use asset and a corresponding liability from the date when the leased asset
becomes available for use by the Group.
The movements in right of use of assets are as follows:
in thousands of GEL
Carrying amount at 1 January
Additions of new contracts
Increases in value from substantial changes in contractual terms
Reclassification from premises and equipment
Disposals
Depreciation charge
Elimination of depreciation
Carrying amount at 31 December
2023
100,209
30,450
(3,160)
-
(3,470)
(23,606)
2022
58,001
30,062
5,199
11,564
(1,830)
(17,277)
11,568
14,490
111,991
100,209
The lease agreements do not impose any covenants, other than the security interests in the leased assets that are held
by the lessor. Leased assets cannot be used as collateral for borrowings.
Expenses relating to short-term leases amounted GEL 814 thousand during 2023 (2022: GEL 2,385 thousand) and
expenses relating to leases of low-value assets amounted GEL 6,961 thousand during 2023 (2022: GEL 6,769 thousand).
These expenses are included in administrative and other operating expenses.
17. GOODWILL
As at 31 December 2023 the carrying amount of Goodwill represented GEL 28,197 thousand (2022: GEL 28,197
thousand).
Goodwill Impairment Test
Goodwill is allocated to cash-generating units (CGUs, which represent the lowest level within the Group at which the
goodwill is monitored by the Management and which are not larger than a segment) as follows:
in thousands of GEL
Bank Republic JSC
Bank Republic Retail
Bank Republic Corporate
Bank Republic MSME
Bank Republic Other
Other
Total carrying amount of goodwill
31 December
2023
24,166
11,088
31 December
2022
24,166
11,088
7,491
4,791
796
4,031
7,491
4,791
796
4,031
28,197
28,197
*Office and other equipment include furniture and fixtures, computer and office equipment, motor vehicles as well as other equipment.
As of 31 December 2023 GEL 462,570 thousand of premises and equipment and GEL 318,744 thousand of intangible
assets were attributable to the Bank (2022: GEL 398,964 thousand and GEL 285,884 thousand).
Construction in progress consists of construction and refurbishment of branch premises and the Bank’s new
headquarter, that will be transferred to premises upon completion.
The recoverable amount of each CGU was determined based on value-in-use calculations. These calculations use
cash flow projections based on financial budgets covering a three-year period. Cash flows beyond the three-year
period are extrapolated using the estimated growth rates stated below, which is relevant for the market, where CGU is
operating.
212
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 17. GOODWILL CONTINUED
18. DUE TO CREDIT INSTITUTIONS
Key assumptions used for value-in-use calculations is following:
Due to credit institutions of the Group are as follows:
in thousands of GEL
Bank Republic JSC
Growth rate applied to free cash flow to equity beyond three years
Pre-tax discount rate
31 December
2023
31 December
2022
5.2% p.a.
5.2% p.a.
14.0% p.a.
14.7% p.a.
Pre-tax discount rate used for value-in-use calculations is the assumption to which the recoverable amount is most
sensitive. The management determined the budgeted gross margin based on past performance and its market
expectations. The weighted average long term growth rates used are consistent with the forecasts included in the
industry reports. The discount rates reflect specific risks related to the relevant CGUs.
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic Retail had
been 10% higher than the management’s estimates or growth rate beyond three years of free cash flow to equity had
been 10% lower, the Group would not need to reduce the carrying value of goodwill or carrying value of net assets of
the CGU. Recoverable amount of Bank Republic Retail CGU exceeds its carrying amount by GEL 4,014,022 thousand
(2022: 3,253,314 GEL thousand). The CGU’s carrying amount would equal its value in use at a discount rate of 36.77%
p.a. (2022: 35.72% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic Corporate
had been 10% higher than the management’s estimates or growth rate beyond three years of free cash flow to equity
had been 10% lower, the Group would not need to reduce the carrying value of goodwill or carrying value of net assets
of the CGU. Recoverable amount of Bank Republic Corporate CGU exceeds its carrying amount by GEL 5,264,087
thousand (2022: GEL 3,793,123 thousand). The CGU’s carrying amount would equal its value in use at a discount rate of
36.29% p.a. (2022: 34.99% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic MSME had
been 10% higher than the management’s estimates or growth rate beyond three years of free cash flow to equity had
been 10% lower, the Group would not need to reduce the carrying value of goodwill or carrying value of net assets of
the CGU. Recoverable amount of Bank Republic MSME CGU exceeds its carrying amount by GEL 1,465,722 thousand
(2022: GEL 1,073,190 thousand). The CGU’s carrying amount would equal its value in use at a discount rate of 25.62% p.a.
(2022: 25.00% p.a.).
in thousands of GEL
Due to other banks
Correspondent accounts and overnight placements
Deposits from banks
Sale and repurchase agreements with other banks
Total due to other banks
Other borrowed funds
Borrowings from foreign banks and international financial institutions
Borrowings from other local banks and financial institutions
Borrowings from National Bank of Georgia
Total other borrowed funds
Total amounts due to credit institutions
31 December 2023
31 December 2022
263,600
629,252
-
892,852
2,286,371
46,973
1,120,755
3,454,099
4,346,951
334,081
38,469
262,415
634,965
2,185,622
34,239
1,030,534
3,250,395
3,885,360
Refer to Note 35 for the disclosure of the maturity analysis of Due to credit institutions
Refer to Note 11 for Investment securities measured at FVOCI sold under sale and repurchase agreements.
Due to credit institutions of the Bank are as follows:
in thousands of GEL
Due to other banks
Correspondent accounts and overnight placements
Deposits from banks
Sale and repurchase agreements with other banks
Total due to other banks
Other borrowed funds
Borrowings from foreign banks and international financial institutions
Borrowings from National Bank of Georgia
Total other borrowed funds
Total amounts due to credit institutions
31 December 2023
31 December 2022
263,600
629,252
-
892,852
2,086,093
1,120,755
3,206,848
4,099,700
334,081
38,468
262,415
634,964
2,004,229
1,030,534
3,034,763
3,669,727
214
215
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
19. СUSTOMER ACCOUNTS
19. СUSTOMER ACCOUNTS CONTINUED
Customer Accounts of the Group are as follows:
Refer to Note 40 for the disclosure of the fair value of each class of customer accounts. Information on related party
balances is disclosed in Note 42.
31 December 2023
31 December 2022
Customer Accounts of the Bank are as follows:
in thousands of GEL
State and public organisations
Current/settlement accounts
Term deposits
Other legal entities
Current/settlement accounts
Term deposits
Individuals
Current/settlement accounts
Term deposits
Total customer accounts
1,129,559
556,672
7,228,054
1,183,946
5,270,799
4,573,486
19,942,516
1,053,255
553,743
5,859,281
1,265,154
5,329,038
3,780,886
17,841,357
in thousands of GEL
State and public organisations
Current/settlement accounts
Term deposits
Other legal entities
Current/settlement accounts
Term deposits
Individuals
Current/settlement accounts
Term deposits
Total customer accounts
31 December 2023
31 December 2022
1,129,559
556,672
7,387,472
1,197,115
5,270,799
4,573,486
20,115,103
1,053,255
553,743
5,993,520
1,266,152
5,329,038
3,780,886
17,976,594
State and public organisations include government owned profit orientated businesses.
Economic sector concentrations within customer accounts are as follows:
in thousands of GEL
Individuals
Trade
Financial services
Energy & utilities
Government sector
Construction
Services
Transportation
Real estate
Hospitality & leisure
Healthcare
Agriculture
Metals and mining
Other
31 December 2023
31 December 2022
Amount
9,842,452
1,805,484
1,828,336
920,555
823,516
755,125
754,889
708,925
545,278
228,611
206,274
77,871
23,321
1,421,879
%
49%
9%
9%
5%
4%
4%
4%
4%
3%
1%
1%
0%
0%
7%
Amount
9,101,046
1,568,181
1,296,593
1,073,229
623,953
773,603
830,207
452,229
545,959
223,906
169,611
77,068
26,514
1,079,258
%
51%
9%
7%
6%
3%
4%
5%
3%
3%
1%
1%
1%
0%
6%
Total customer accounts
19,942,516
100% 17,841,357
100%
As of 31 December 2023, the Group had 154 customers (2022: 156 customers) with balances above GEL 10,000
thousand. Their aggregate balance was GEL 7,281,004 thousand (2022: GEL 6,404,397 thousand) or 36.5% of total
customer accounts (2022: 35.9%).
As of 31 December 2023, included in customer accounts are deposits of GEL 146,550 thousand and GEL 208,214
thousand (2022: GEL 72,591 thousand and GEL 188,699 thousand) held as collateral for irrevocable commitments
under letters of credit and guarantees issued, respectively. The latter is discussed in Note 36. As of 31 December 2023,
deposits held as collateral for loans to customers amounted to GEL 784,512 thousand (2022: GEL 478,295 thousand).
216
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
20. DEBT SECURITIES IN ISSUE
20. DEBT SECURITIES IN ISSUE CONTINUED
Carrying amount as
of 31 December
2023
615,450
343,641
Maturity
Date
6/19/2024
10/3/2024
204,643
2/4/2027
18,214 4/29/2030
Coupon
rate
5.8%
10.8%
8.9%
8.0%
Effective
interest
rate
6.5%
11.4%
9.9%
8.5%
68,710 3/20/2026 3M TIBR + 2.75%
14.17%
10,171
6/27/2026 3M TIBR + 2.75%
14.08%
1,593
6/6/2024
1,663
7/15/2024
12.0%
12.0%
12.4%
12.4%
1,264,085
Carrying amount as
of 31 December
2022
614,748
343,891
Maturity
Date
6/19/2024
10/3/2024
Coupon
rate
5.80%
10.80%
Effective
interest
rate
6.40%
11.40%
204,477
2/4/2027
8.90%
9.90%
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Private placement
Bonds issued on Georgian Stock Exchange
Bonds issued on Georgian Stock Exchange
Baku Stock Exchange CJSC
Baku Stock Exchange CJSC
Total debt securities in issue
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Georgian Stock Exchange JSC
Baku Stock Exchange CJSC
Baku Stock Exchange CJSC
Baku Stock Exchange CJSC
Total debt securities in issue
Currency
USD
USD
USD
USD
GEL
GEL
AZN
AZN
Currency
USD
USD
USD
GEL
AZN
AZN
AZN
On 23 September 2021 the TBC Kredit LLC issued interest-baring paperless unsecured bond in the amount of AZN 3
million, with 2 year maturity at 12%.
On 3 July 2019 the Bank completed the transaction of a debut inaugural USD 125 million 10.75% yield Additional
Tier 1 Capital Perpetual Subordinated Notes issue (“AT1 Notes”). The AT1 Notes are listed on the regulated market of
Euronext Dublin and are rated B- by Fitch. The AT1 Notes have been simultaneously listed on JSC Georgian Stock
Exchange, making it the first dual-listed international offering of additional Tier 1 Capital Notes from Georgia.
On 19 June 2019 the Bank completed the transaction of a debut USD 300 million 5-year 5.75% senior unsecured
bonds issue. The Notes are listed on the regulated market of Euronext Dublin and are rated Ba2 by Moody’s and BB-
by Fitch. The Notes have been simultaneously listed on JSC Georgian Stock Exchange, making it the first dual-listed
international offering of senior unsecured Notes from Georgia.
21. PROVISION FOR LIABILITIES AND CHARGES
Movements in credit loss allowance for performance guarantees, credit related commitment and liabilities and
charges are as follows:
in thousands of GEL
Carrying amount as of 1 January 2022
Charges/(releases) recorded in profit or loss
Performance
guarantees
4,620
2,931
Credit
related
commitments
3,624
(210)
Provision for
other liabilities
and charges
7,601
2,000
38,550
3/20/2023 TIBR 3M+3.25%
12.50%
Foreign exchange movements
4,904
9/23/2023
12.00%
12.40%
1,652
6/6/2024
12.00%
12.40%
1,591
7/15/2024
12.00%
12.40%
1,209,813
Carrying amount as of 31 December 2022
Charges less releases recorded in profit or loss
Foreign exchange movements
Carrying amount at 31 December 2023
(345)
7,206
1,381
8
8,595
(237)
3,177
(477)
(2)
2,698
9,767
21,060
Total
15,845
4,721
(658)
(76)
9,525
19,908
-
242
904
248
On 20 March 2023, TBC Leasing JSC placed senior secured bonds of amount GEL 100 million on the Georgian Stock
Exchange JSC out of which as of 30 June 2023 GEL 88.71 million was sold to investors. The coupon rate of securities is
variable, 2.75% added to the 3-month Tbilisi Interbank Interest rate. Fitch rates the bonds ‘BB-‘.
On 27 April 2023, the Bank has issued USD 30 million 7-year, 8% Subordinated notes, through the private placement,
out of which as of 30 June 2023 USD 6.7 million was sold to investors.
On 28 June 2023, TBC Leasing JSC issued Green Bonds of amount GEL 15 million on the Georgian Stock Exchange
JSC. The coupon rate of securities is variable, 2.75% added to the 3-month Tbilisi Interbank Interest rate. Fitch rates the
bonds ‘BB-‘.
On 14 July 2022 the TBC Kredit LLC issued interest-baring paperless unsecured bond in the amount of AZN 1 million,
with 2 year maturity at 12%.
On 7 June 2022 the TBC Kredit LLC issued interest-baring paperless unsecured bond in the amount of AZN 1 million,
with 2 year maturity at 12%.
On 6 April 2022 the Bank completed the partial redemption of 2019 issued senior bond in the amount of USD 55
million. Consideration paid amounted to USD 52 million. The difference between amount paid and amortised cost of
the bond adjusted with transaction fee was accounted as a gain on extinguishment of debt in the amount of USD 2
million recognized within other operating income.
On 28 October 2021, the Bank completed the transaction of USD 75 million 8.894% yield Additional Tier 1 Capital
Perpetual Subordinated Notes issue (“AT1 Notes”) and successfully returned to the international capital markets. The
AT1 Notes are listed on the regulated market of Euronext Dublin and are rated B- by Fitch.
Credit related commitments and performance guarantees: Impairment allowance estimation methods differ for (i)
letter of credits and guarantees and (ii) undrawn credit lines. For letter of credits and guarantees allowance estimation
purposes the Group applies the staged approach and classifies them in stage 1, stage 2 or stage 3. Significant stage
2 and 3 guarantees are assessed individually. Non-significant stage 3 as well as all stage 1 and stage 2 guarantees and
letter of credits are assessed collectively using exposure, marginal probability of conversion, loss given default and
discount factor. Amount of the expected allowance differs based on the classification of the facility in the respective
stage.
For impairment allowance assessment purposes for undrawn exposures the Group distinguishes between revocable
and irrevocable loan commitments. For revocable commitments the Group does not create impairment allowance. As
for the irrevocable undisbursed exposures the Group estimates utilization parameter (which represents expected limit
utilization percentage conditional on the default event) in order to convert off-balance part of the exposure to on-
balance.
218
219
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 22. OTHER FINANCIAL LIABILITIES
24. SUBORDINATED DEBT
Other financial liabilities of the Group comprise the following::
As of 31 December 2023, subordinated debt comprised of:
in thousands of GEL
Trade payables
Derivative financial liabilities
Payables to plastic card service providers
Liabilities for leasing activities
Transfers in transit
Payable to deposit insurance agency
Prepayments related to guarantees
Security deposits for finance lease receivables
Liabilities related to co-financing of hotels and restaurants sectors
Other accrued liabilities
Total other financial liabilities
Refer to Note 40 for disclosure of the fair value of other financial liabilities.
Other financial liabilities of the Bank comprise the following:
in thousands of GEL
Derivative financial liabilities
Trade payables
Transfers in transit
Payables to plastic card service providers
Payable to deposit insurance agency
Prepayments related to guarantees
Liabilities related to co-financing of hotels and restaurants sectors
Other accrued liabilities
Total other financial liabilities
23. OTHER LIABILITIES
Other liabilities comprise the following:
in thousands of GEL
Accrued employee benefit costs
Advances received
Taxes payable other than on income
Other
Total other liabilities
31 December 2023
75,630
62,474
31 December 2022
49,210
73,102
34,628
28,428
15,424
1,385
471
467
-
57,589
276,496
22,785
38,747
43,905
1,365
804
137
550
19,913
250,518
31 December 2023
62,447
35,207
31 December 2022
72,945
24,974
15,424
35,818
1,385
471
1
57,500
208,254
43,905
22,992
1,365
804
550
19,918
187,453
31 December 2023
61,334
31 December 2022
52,060
15,670
15,978
9,537
102,519
15,164
4,101
9,061
80,386
All of the above liabilities are expected to be settled within twelve months after the year-end.
220
in thousands of GEL
Asian Development Bank
DEG
EBRD London
Global Climate Partnership
Fund
European Fund for Southeast
Europe
BlueOrchard Microfinance
Fund
Grant
Date
10/18/2016
9/26/2023
11/20/2023
Maturity
Date Currency
USD
12/31/2026
Agreement
interest
rate
10.1%
Outstanding
amount
in original
currency
50,841
Outstanding
amount
in GEL
136,732
9/26/2033
11/21/2033
EUR
USD
9.7%
11.4%
30,474
30,068
90,669
80,864
11/20/2018
11/20/2028
USD
11.8%
25,127
67,576
12/21/2018
12/21/2028
USD
8.8%
20,079
53,999
06/09/2023
06/09/2033
USD
11.5%
19,931
53,604
Green for Growth Fund
12/18/2015
12/16/2030
USD
11.8%
15,458
41,572
BlueOrchard Microfinance
Fund
BlueOrchard Microfinance
Fund
European Fund for Southeast
Europe
European Fund for Southeast
Europe
ResponsAbility SICAV (Lux) -
Micro and SME Finance Fund
ResponsAbility SICAV (Lux) -
Micro and SME Finance Fund
ResponsAbility SICAV (Lux)
- Micro and SME Finance
Leaders
ResponsAbility SICAV (Lux) -
Financial Inclusion Fund
ResponsAbility SICAV (Lux) -
Financial Inclusion Fund
12/14/2018
12/15/2025
USD
9.3%
15,008
40,363
12/14/2018
12/14/2028
USD
9.3%
14,983
40,296
12/18/2015
12/16/2030
USD
11.8%
7,728
20,785
3/15/2016
3/17/2031
USD
11.8%
7,727
20,780
11/30/2018
11/30/2028
USD
11.9%
5,958
16,025
04/07/2022
04/07/2032
USD
11.4%
5,184
13,943
04/07/2022
04/07/2032
USD
11.4%
4,168
11,209
04/07/2022
04/07/2032
USD
11.4%
3,965
10,662
11/30/2018
11/30/2028
USD
11.9%
3,130
8,418
Triple Jump Innovation Fund
3/14/2023
4/15/2028
USD
9.0%
3,097
8,330
ResponsAbility SICAV (Lux)
- Micro and SME Finance
Leaders
ResponsAbility SICAV (Lux) -
Microfinance Leaders
Private Lenders
Total subordinated debt
04/07/2022
04/07/2032
USD
11.4%
1,931
5,194
11/30/2018
11/30/2028
USD
11.9%
1,010
2,716
06/08/2017-
08/08/2023
11/18/2024-
08/08/2031
USD
8-9.5%
53,913
144,993
868,730
221
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 24. SUBORDINATED DEBT CONTINUED
As of 31 December 2022, subordinated debt comprised of:
in thousands of GEL
Asian Developement Bank
Grant
Date
10/18/2016
Maturity
Date Currency
USD
12/31/2026
Agreement
interest
rate
12.2%
Outstanding
amount
in original
currency
51,001
Outstanding
amount
in GEL
137,804
Private lenders
6/8/2017-12/6/2022 1/25/2023-3/31/2028
USD
8-9.5%
36,271
98,008
Global Climate Partnership
Fund
European Fund for Southeast
Europe
11/20/2018
11/20/2028
USD
9.2%
25,097
67,813
12/21/2018
12/21/2028
USD
8.8%
20,079
54,252
Green for Growth Fund
12/18/2015
12/16/2030
USD
12/14/2018
12/15/2025
USD
9.7%
9.3%
15,359
41,501
14,986
40,492
12/14/2018
12/14/2028
USD
9.3%
14,968
40,443
BlueOrchard Microfinance
Fund
BlueOrchard Microfinance
Fund
European Fund for Southeast
Europe
European Fund for Southeast
Europe
ResponsAbility SICAV (Lux)
Micro and SME Finance
Leaders
ResponsAbility SICAV (Lux)
Micro and SME Finance Fund
ResponsAbility SICAV (Lux)
Micro and SME Finance Fund
ResponsAbility SICAV (Lux) -
Financial Inclusion Fund
ResponsAbility SICAV (Lux) -
Financial Inclusion Fund
ResponsAbility SICAV (Lux) -
Microfinance Leaders
Total subordinated debt
3/15/2016
3/17/2031
USD
9.7%
7,678
20,745
4/7/2022
4/7/2032
USD
9.9%
6,080
16,428
11/30/2018
11/30/2028
USD
11.3%
5,955
16,091
4/7/2022
4/7/2032
USD
9.9%
5,168
13,964
4/7/2022
4/7/2032
USD
9.9%
3,952
10,679
11/30/2018
11/30/2028
USD
11.3%
3,128
8,453
11/30/2018
11/30/2028
USD
11.3%
1,009
2,726
590,148
25. EQUITY
Share capital
in thousands of GEL, unless otherwise indicated
As of 31 December 2022
As of 31 December 2023
Number of
ordinary shares
52,539,769
Share Capital
21,014
52,539,769
21,014
Each share has a nominal value of GEL 0.4 (31 December 2022: GEL 0.4 per share). All issued ordinary shares are fully
paid and entitled to dividends.
Dividends
in thousands of GEL
Dividends payable at 1 January
Interim dividend:
Dividends declared during the year
Dividends paid during the year:
Dividends declared during the year
Dividends paid during the year:
Dividends payable at 31 December
2023
747
2022
314
220,398
238,000
(220,398)
(237,711)
395,667
118,798
(395,667)
(118,654)
747
747
On 11 August 2023, JSC TBC Bank’s shareholders agreed on an interim dividend of GEL 4.20 per share. The dividend
was paid on 4 October 2023.
On 27 March 2023, JSC TBC Bank’s shareholders passed a resolution to declare a final dividend of GEL 7.54 per share.
The dividend was paid on 5 May 2023.
On 11 August 2022, JSC TBC Bank’s shareholders agreed on an interim dividend of GEL 4.53 per share. The dividend
was paid on 4 October 2022.
On 13 May 2022, JSC TBC Bank’s shareholders passed a resolution to declare a final dividend of GEL 2.26 per share.
The dividend was paid on 8 July 2022.
12/18/2015
12/16/2030
USD
9.7%
7,679
20,749
Prior year final dividend:
The debt ranks after all other creditors in case of liquidation, except AT1 Notes listed in note 21.
Refer to Note 40 for the disclosure of the fair value of subordinated debt. Information on related party balances is
disclosed in Note 42.
222
223
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 26. SHARE BASED PAYMENTS
2022-2024 remuneration scheme:
The current compensation system was approved by shareholders at the TBC Bank Group PLC’s Annual General
Meeting in June 2021 and came into effect on 1 January 2022. It covers the period 2022-2024 inclusive.
Share salary 2022-2024
The base salary of the executive management board members of the Bank is determined based on market practice
and provides with a competitive fixed income to efficiently retain and reward TBC’s leadership.
For the CEO of the Bank the base salary comprises cash salary payable in GEL on a monthly basis and share salary.
Salary shares are delivered during the first quarter of the second year (i.e. the year after the performance year). The
number of shares is calculated based on the average share price of the last 10 days preceding the Remuneration
Committee decision date. Shares do not have deferral period, are not subject to malus and claw back or any other
restrictions and are vested immediately upon delivery.
The Deputy CEOs’ base salary comprises only cash and is payable in GEL on a monthly basis.
Variable Remuneration
Variable remuneration of the Top Management consists of the annual bonus delivered in shares (the “Annual Bonus”)
and the share awards under Long Term Incentive Plan (the “LTIP Award”). 60% of variable remuneration is LTIP Award
and the remaining 40% constitutes the Annual Bonus.
Variable remuneration (Annual Bonus and LTIP Awards) are subject to meeting eligibility “gate KPIs”, which, based on
the Remuneration Committee’s recommendation, can be amended every year by the Board, and will only be paid if the
“gate KPIs” are met.
(a) Annual Bonus under Deferred Share plan 2022-2024
Annual Bonus is delivered in TBC PLC shares. The Top Management receives annual bonus entirely in TBC PLC shares
and it does not comprise any cash component. The Annual Bonus KPIs are set at the beginning of each year in relation
to that year by the Remuneration Committee.
The maximum opportunity of the Annual Bonus for each member of the Top Management is fixed at 135% of fixed
salary. For achieving target performance, no more than 50% of the maximum Annual Bonus opportunity is payable.
For threshold performance, no Annual Bonus is paid. The number of Shares to be allocated is calculated based on the
average share price of the last 10 days preceding the Remuneration Committee’s decision date. Annual Bonus share
awards are governed by the Deferred Share Plan of TBC PLC as amended from time to time (the “Deferred Share
Plan”).
The Top Management’s Annual Bonus awards are subject to a holding period (but not continued employment) over 2
years period with 50% being released after one year and remaining 50% being released at the end of second year. The
Annual Bonus is subject to malus and claw back provisions as described in the Deferred Share Plan. During the holding
period, participants are entitled to vote at the shareholder meetings and receive dividends.
(b) Long Term Incentive Plan (LTIP) 2022-2024
Long term incentive plan is used to provide a strong motivational tool to achieve long term performance conditions
and to provide rewards to the extent those performance conditions are achieved. Performance conditions are chosen
to align the Group’s and the Bank’s executive directors’ interests with strategic objectives of the Group over multi-year
periods and encourage a long-term view.
The level of LTIP Award grant is determined pro rata from the LTIP maximum opportunity based on the assessment
of the base i.e., prior year’s Annual Bonus corporate KPIs performance. LTIP Awards granted will then be subject to
3-year LTIP forward-looking performance conditions and will vest at the end of 5-year period following the grant. LTIP
Award forward-looking KPIs are set at the beginning of each year in relation to that year’s cycle by the Remuneration
Committee.
The maximum opportunity of the LTIP Award in any given year is 161% of salary. 100% of the award will crystalize for
achieving the maximum performance set for each measure. At threshold level of performance, for each measure, 25%
of the award will crystalize.
26. SHARE BASED PAYMENTS CONTINUED
The Remuneration Committee has the discretion, any time after an award has been granted, to reduce (including
to zero) an award if the Remuneration Committee considers that either the underlying financial performance of the
Bank or the performance of the individual is such that the level of vesting cannot be justified. The Participants are not
entitled to any dividend or voting rights until the LTIP Award vests.
Tabular information on the schemes is given below:
Number of unvested shares at the beginning of the period
Number of shares granted
Change in estimates of number of shares expected to be granted
Change in number of shares awarded for 2022 based on actual share price,
exchange rate and KPI accomplishment
Number of shares vested
Number of unvested shares at the end of the period
31 December 2023
31 December 2022
2,044,604
248,306
(764,037)
(95,653)
(239,096)
1,194,124
2,125,246
747,074
-
(35,879)
(791,837)
2,044,604
*The maximum amount is fixed share compensations for deferred for top management, the exact number will be calculated as per policy.
Expense recognised as staff cost during the period was GEL 24,682 thousand (31 December 2022: GEL 21,672
thousand).
The fair value of the employee services received in exchange for the grant of the equity instruments is determined
by the nature the award. Currently there are several types of share based award schemes as described above. The
deferred share salary and deferred share bonus are the grants of the possible bonus pool amount, which will be based
on the performance conditions. The fair value of the award is determined by the present value of the amount as at
grant date and probable performance conditions accomplishment. The LTIP is the award of potential maximum share
numbers also up to performance conditions. The fair value of the award as at grant date is determined by the grant
date share price and probable performance conditions accomplishment. The fair value amount of 2023 performance
related grants is GEL 26,938 thousand.
Tax part of the existing bonus system is accounted for on an equity settled basis.
Staff costs related to equity settled part of the share-based payment schemes are recognised in the income statement
on a straight line basis over the vesting period of each relevant tranche and corresponding entry is credited to share
based payment reserve in equity.
224
225
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 27. SEGMENT ANALYSIS
27. SEGMENT ANALYSIS CONTINUED
The Management Board (the “Board”) is the chief operating decision maker (CODM) and it reviews the Group’s internal
reporting in order to assess the performance and to allocate resources.
Following changes to the Group’s strategic focus, the management has reconsidered the existing segmentation
of the Group by disclosing Georgian financial services and other relatively immaterial business directions, which is
in line with how CODM analyses the Group results and make group level decisions. The segments are aggregated
considering the similarity of business nature, geography and other economic characteristics:
According to the updated segment definition starting from 1 January 2023, the operating segments are defined as
follows:
Georgian financial services include JSC TBC Bank with its Georgian subsidiaries. The Georgia financial service
segment consist of three major business sub-segments, while treasury and leasing businesses are combined into
corporate and other sub-segment:
• Corporate – a legal entity/group of affiliated entities with an annual revenue exceeding GEL 20 million or which
has been granted facilities of more than GEL 7.5 million. Some other business customers may also be assigned to
the CIB segment or transferred to the micro, small and medium enterprises segment on a discretionary basis. In
addition, CIB includes Wealth Management private banking services to high-net-worth individuals with a threshold
of US$ 250,000 on assets under management (AUM), as well as on discretionary basis;
• Retail – non-business individual customers;
• Micro, small and medium enterprises – business customers who are not included in the CIB segment;
• Corporate center, other and sub-segment eliminations - comprises the treasury operations, TBC Leasing and sub-
segment eliminations
• Other operations and eliminations – includes non-material or non-financial subsidiaries of the group and intra-
group eliminations.
Apart from strategical re-segmentation changes mentioned above, the Group has standard annual re-segmentations,
after which some of the clients are reallocated between micro, small and medium enterprises and corporate segments.
The Board of Directors assesses the performance of the operating segments based on a measure of profit before
income tax.
The reportable segments are the same as the operating segments.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s
total revenue in 2023 and 2022.
The vast majority of the Group’s revenues are attributable to Georgia. A geographic analysis of origination of the
Group’s assets and liabilities is given in Note 35.
Allocation of indirect expenses is performed based on drivers identified for each type of cost where possible. If there
is no identifiable driver for any type of expense/overhead cost, those expenses are allocated between segments based
on the same logic as applied for the expenses with similar nature (e.g. other operating expenses would follow the
pattern of closest category of operating expenses).
The intersegment transfer pricing methodology is an internally developed tool founded on matched maturity logics.
It is used to effectively manage liquidity and mitigate interest rate risks within the Group. The process entails the
corporate centre borrowing monetary amounts (deposits) from different business segments. Compensation for
each deposit is based on its specific currency, duration, type, liquidity and capital requirements, ensuring equitable
treatment for each segment. In turn, business segments borrow funds from the corporate centre to finance loans and
other assets. The pricing for each borrowing transaction is determined based on factors such as the currency, loan
type (fixed, floating, mixed interest rates), loan duration, and capital requirement.
A summary of the Group’s reportable segments for the years ended 31 December 2023 and 2022 is provided below:
Segment disclosure below for 2023 is prepared with the effect of 2023 re-segmentations as described above:
in thousands of GEL
Interest income
Interest expense
Micro,
small and
medium
enterprises
Corporate
Center,
other and sub-
segment
eliminations*
Other
operations
and
intersegment
eliminations*
Georgian
financial
services
Total
Corporate
Retail
792,698
879,106
584,108
426,797
2,682,709
6,718
2,689,427
(554,873)
(172,430)
(14,039)
(535,338)
(1,276,680)
(252)
(1,276,932)
Net interest gains on currency swaps
4,805
644
41
77,611
83,101
Inter-segment interest income/
(expense)
310,127
(197,526)
(236,024)
123,423
-
-
-
83,101
-
Net interest income
552,757
509,794
334,086
92,493
1,489,130
6,466
1,495,596
Fee and commission income
105,418
379,799
87,206
(1,056)
571,367
24
571,391
Fee and commission expense
(17,578)
(161,999)
(52,859)
(4,424)
(236,860)
Net fee and commission income
87,840
217,800
34,347
(5,480)
334,507
(55)
(31)
(236,915)
334,476
Net gains/(losses) from derivatives,
foreign currency operations and
translation
Net gains from disposal of investment
securities measured at fair value through
other comprehensive income
110,127
85,214
48,535
28,521
272,397
(94)
272,303
-
-
-
5,880
5,880
-
5,880
Other operating income
7,887
6,289
3,237
Share of profit of associate
-
-
-
5,626
657
23,039
657
Other operating non-interest income
118,014
91,503
51,772
40,684
301,973
161
-
67
23,200
657
302,040
Credit loss (allowance)/recovery for
loans to customers
Credit loss (allowance)/recovery for
finance lease receivables
Credit loss (allowance)/recovery for
performance guarantees
Credit loss recovery/(allowance) for
credit related commitments
Credit loss allowance for other financial
assets
Credit loss recovery for financial assets
measured at fair value through other
comprehensive income
Net (impairment)/recovery of non-
financial assets
Operating income after expected
credit and non-financial asset
impairment losses
(7,980)
(52,911)
(70,574)
(67)
(131,532)
1,152
(130,380)
-
(1,501)
-
-
263
242
(6,435)
(83)
(62)
-
-
(2,167)
(2,167)
171
(1,996)
120
(28)
-
-
-
-
(1,381)
477
(3,055)
(9,573)
(944)
(1,006)
-
-
-
-
(1,381)
477
(9,573)
(1,006)
(987)
(879)
(276)
(1,447)
(3,589)
14
(3,575)
741,909
765,466
349,447
120,017
1,976,839
7,839
1,984,678
Staff costs
(72,796)
(202,752)
(86,321)
(19,566)
(381,435)
(4,036)
(385,471)
Depreciation and amortization
(12,173)
(65,897)
(19,317)
(2,010)
(99,397)
(246)
(99,643)
Administrative and other operating
expenses
(22,013)
(125,580)
(33,178)
(14,358)
(195,129)
(1,519)
(196,648)
Operating expenses
(106,982) (394,229)
(138,816)
(35,934)
(675,961)
(5,801)
(681,762)
Profit before tax
Income tax expense
Profit for the year
634,927
371,237
210,631
84,083
1,300,878
2,038
1,302,916
(90,565)
(49,322)
(31,361)
(12,500)
(183,748)
(110)
(183,858)
544,362
321,915
179,270
71,583
1,117,130
1,928
1,119,058
*The Group has not separated eliminations separately considering their immateriality. Meanwhile other operating income includes intergroup
dividends of GEL 20,000 thousand.
226
227
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 27. SEGMENT ANALYSIS CONTINUED
27. SEGMENT ANALYSIS CONTINUED
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
center,
other
Eliminations
between
Georgian
financial
service
companies
Other
operations
and
intersegment
eliminations
Georgian
financial
services
Total
Total gross loans and advances
to customers reported
Total customer accounts
reported
Total credit related
commitments and
performance guarantees
8,283,723
7,513,229
5,480,822
-
(20,082)
21,257,692
19,057
21,276,749
10,200,321
7,469,587
1,900,459
515,079
(142,922)
19,942,524
(8)
19,942,516
2,831,610
161,874
486,756
-
(939)
3,479,301
-
3,479,301
For comparison purposes segment disclosure below for 2022 is prepared with the effect of 2023 re-segmentations as
described above:
in thousands of GEL
Interest income
Interest expense
Net interest gains on currency swaps
Corporate
Retail
643,567
(375,691)
1,126
816,689
(122,998)
98
Micro,
small and
medium
enterprises
Corporate
Center,
other and sub-
segment
eliminations*
474,468
(10,476)
79
278,700
(502,170)
33,408
Georgian
financial
services
2,213,424
(1,011,335)
34,711
Inter-segment interest income/
(expense)
Net interest income
Fee and commission income
137,991
(254,943)
(231,110)
348,062
-
406,993
89,290
438,846
359,949
232,961
31,627
158,000
(3,251)
1,236,800
477,615
Fee and commission expense
(15,434)
(175,863)
(13,820)
(6,801)
(211,918)
Net fee and commission income
73,856
184,086
17,807
(10,052)
265,697
Other
operations
and
intersegment
eliminations*
Total
6,357
(62)
-
2,219,781
(1,011,397)
34,711
-
6,295
(2)
(45)
(47)
-
1,243,095
477,613
(211,963)
265,650
Net gains/(losses) from derivatives,
foreign currency operations and
translation
Net gains from disposal of investment
securities measured at fair value through
other comprehensive income
128,150
91,188
53,425
139,046
411,809
(3)
411,806
3,573
-
-
2,238
5,811
-
5,811
Other operating income
Share of profit of associate
1,703
(232)
6,180
-
1,230
-
10,303
584
19,416
352
Other operating non-interest income
133,194
97,368
54,655
152,171
437,388
259
-
256
19,675
352
437,644
Credit loss (allowance)/recovery for
loans to customers
Credit loss (allowance)/recovery for
finance lease receivables
Credit loss (allowance)/recovery for
performance guarantees
Credit loss recovery/(allowance) for
credit related commitments
Credit loss allowance for other financial
assets
Credit loss recovery for financial assets
measured at fair value through other
comprehensive income
Net recovery/(impairment) of non-
financial assets
Operating income after expected
credit and non-financial asset
impairment losses
Staff costs
2,024
(89,197)
(21,273)
(10)
(108,456)
3,209
(105,247)
-
(226)
(226)
1,007
781
-
(2,831)
-
(4)
(59)
345
(96)
(76)
-
-
(2,931)
210
(1,423)
(1,601)
(416)
(5,720)
(9,160)
84
-
-
778
862
-
-
-
-
(2,931)
210
(9,160)
862
432
(64)
104
(828)
(356)
334
(22)
612,270
629,779
283,666
294,113
1,819,828
11,054
1,830,882
(58,944)
(164,777)
(65,784)
(12,663)
(302,168)
(4,358)
(306,526)
228
Depreciation and amortization
(6,664)
(61,531)
(14,377)
(2,331)
(84,903)
(205)
(85,108)
Provision for liabilities and charges
-
-
-
(2,000)
(2,000)
-
(2,000)
Administrative and other operating
expenses
(23,954)
(102,268)
(27,486)
(11,922)
(165,630)
(1,718)
(167,348)
Operating expenses
(89,562)
(328,576)
(107,647)
(28,916)
(554,701)
(6,281)
(560,982)
Profit before tax
Income tax expense
Profit for the year
522,708
301,203
176,019
265,197
1,265,127
4,773
1,269,900
(54,273)
(31,275)
(20,037)
(141,057)
(246,642)
(183)
(246,825)
468,435
269,928
155,982
124,140
1,018,485
4,590
1,023,075
*The Group has not separated eliminations separately considering their immateriality. Meanwhile other operating income includes intergroup
dividends of GEL 5,959 thousand.
229
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 27. SEGMENT ANALYSIS CONTINUED
27. SEGMENT ANALYSIS CONTINUED
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
center,
other
Eliminations
between
Georgian
financial
service
companies
Other
operations
and
intersegment
eliminations
Georgian
financial
services
Total
Total gross loans and advances
to customers reported
Total customer accounts
reported
Total credit related
commitments and
performance guarantees
6,459,584
6,753,242
4,646,363
-
(19,492)
17,839,697
17,579
17,857,276
9,313,612 6,536,649
1,696,962
412,442
(118,300)
17,841,365
(8)
17,841,357
2,636,033
165,807
407,145
-
(910)
3,208,075
-
3,208,075
For comparison purposes segment disclosure below for 2022 is prepared without the effect of 2023 standard re-
segmentation as described above:
in thousands of GEL
Interest income
Interest expense
Net interest gains on currency swaps
Corporate
Retail
630,350
(374,424)
1,205
816,689
(122,998)
98
Micro,
small and
medium
enterprises
Corporate
Center,
other and sub-
segment
eliminations*
487,685
(11,743)
-
278,700
(502,170)
33,408
Georgian
financial
services
2,213,424
(1,011,335)
34,711
Inter-segment interest income/
(expense)
Net interest income
Fee and commission income
140,947
(254,943)
(234,066)
348,062
-
398,078
87,510
438,846
359,949
241,876
33,407
158,000
(3,251)
1,236,800
477,615
Fee and commission expense
(15,434)
(175,863)
(13,820)
(6,801)
(211,918)
Net fee and commission income
72,076
184,086
19,587
(10,052)
265,697
Other
operations
and
intersegment
eliminations*
Total
6,357
(62)
-
2,219,781
(1,011,397)
34,711
-
6,295
(2)
(45)
(47)
-
1,243,095
477,613
(211,963)
265,650
Net gains/(losses) from derivatives,
foreign currency operations and
translation
Net gains from disposal of investment
securities measured at fair value through
other comprehensive income
126,900
91,188
54,675
139,046
411,809
(3)
411,806
3,573
-
-
2,238
5,811
-
5,811
Other operating income
Share of (loss)/profit of associate
1,703
(232)
6,180
-
1,230
-
10,303
584
19,416
352
Other operating non-interest income
131,944
97,368
55,905
152,171
437,388
259
-
256
19,675
352
437,644
Credit loss (allowance)/recovery for
loans to customers
Credit loss (allowance)/recovery for
finance lease receivables
Credit loss (allowance)/recovery for
performance guarantees
Credit loss recovery/(allowance) for
credit related commitments
Credit loss allowance for other financial
assets
Credit loss recovery for financial assets
measured at fair value through other
comprehensive income
Net (impairment)/recovery of non-
financial assets
Operating income after expected
credit and non-financial asset
impairment losses
Staff costs
2,773
(89,197)
(22,022)
(10)
(108,456)
3,209
(105,247)
-
(226)
(226)
1,007
781
-
(2,831)
-
(4)
(59)
345
(96)
(76)
-
-
(2,931)
210
(1,423)
(1,601)
(416)
(5,720)
(9,160)
84
-
-
778
862
-
-
-
-
(2,931)
210
(9,160)
862
432
(64)
104
(828)
(356)
334
(22)
601,074
629,779
294,862
294,113
1,819,828
11,054
1,830,882
(58,944)
(164,777)
(65,784)
(12,663)
(302,168)
(4,358)
(306,526)
230
Depreciation and amortization
(6,664)
(61,531)
(14,377)
(2,331)
(84,903)
(205)
(85,108)
Provision for liabilities and charges
-
-
-
(2,000)
(2,000)
-
(2,000)
Administrative and other operating
expenses
(23,954)
(102,268)
(27,486)
(11,922)
(165,630)
(1,718)
(167,348)
Operating expenses
(89,562)
(328,576)
(107,647)
(28,916)
(554,701)
(6,281)
(560,982)
Profit before tax
Income tax expense
Profit for the year
511,512
301,203
187,215
265,197
1,265,127
4,773
1,269,900
(54,273)
(31,275)
(20,037)
(141,057)
(246,642)
(183)
(246,825)
457,239
269,928
167,178
124,140
1,018,485
4,590
1,023,075
*The Group has not separated eliminations separately considering their immateriality. Meanwhile other operating income includes intergroup
dividends of GEL 5,959 thousand.
231
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 27. SEGMENT ANALYSIS CONTINUED
27. SEGMENT ANALYSIS CONTINUED
in thousands of GEL
Corporate
Retail
Micro, small
and medium
enterprises
Corporate
center,
other
Eliminations
between
Georgian
financial
service
companies
Other
operations
and
intersegment
eliminations
Georgian
financial
services
Total
6,301,961
6,753,242
4,803,986
-
(19,492)
17,839,697
17,579
17,857,276
9,249,232 6,536,649
1,761,342
412,442
(118,300)
17,841,365
(8)
17,841,357
Total gross loans and advances
to customers reported
Total customer accounts
reported
Total credit related
commitments and
performance guarantees
Segment disclosure below for 2022 is prepared without the effect of 2023 re-segmentations as described above:
in thousands of GEL
Interest income
Interest expense
Corporate
Retail
Micro,
small and
medium
enterprises
Corporate
centre
and other
operations
Total
626,782
816,448
488,629
287,922
2,219,781
(368,195)
(120,248)
(11,632)
(511,322)
(1,011,397)
2,574,861
165,807
468,317
-
(910)
3,208,075
-
3,208,075
Inter-segment interest income /(expense)
140,947
(254,944)
(234,065)
348,062
-
Net interest gains on currency swaps
1,205
98
-
33,408
34,711
Net interest income
Fee and commission income
Fee and commission expense
400,739
441,354
242,932
158,070
1,243,095
87,399
356,829
33,385
-
477,613
(12,868)
(175,988)
(13,275)
(9,832)
(211,963)
Net fee and commission income/(expense)
74,531
180,841
20,110
(9,832)
265,650
Net gains from derivatives, foreign currency operations and
translation
Net gains from disposal of investment securities measured at
fair value through other comprehensive income
Other operating income
Share of profit of associate
126,900
91,187
54,674
139,045
411,806
3,573
1,702
(232)
-
-
2,238
5,811
6,579
1,417
9,977
19,675
-
-
584
352
Other operating non-interest income
131,943
97,766
56,091
151,844
437,644
Credit loss recovery/(allowance) for loans to customers
2,763
(88,185)
(19,825)
Credit loss recovery for performance guarantees and credit
related commitments
Credit loss recovery for finance lease receivables
(2,889)
-
341
-
(173)
-
-
-
(105,247)
(2,721)
781
781
Credit loss allowance for other financial assets
(1,423)
(1,602)
(416)
(5,719)
(9,160)
Credit loss recovery for financial assets measured at fair value
through other comprehensive income
Net recovery/(impairment) of non-financial assets
Operating income after expected credit and non-financial
asset impairment losses
79
432
-
(64)
-
783
105
(495)
862
(22)
606,175
630,451
298,824
295,432
1,830,882
Staff costs
(59,710)
(165,527)
(65,904)
(15,385)
(306,526)
Depreciation and amortization
(6,668)
(61,535)
(14,378)
(2,527)
(85,108)
Recovery for provision for liabilities and charges
-
-
-
(2,000)
(2,000)
Administrative and other operating expenses
(23,371)
(102,131)
(26,258)
(15,588)
(167,348)
Operating expenses
Profit before tax
Income tax expense
Profit for the year
(89,749)
(329,193)
(106,540)
(35,500)
(560,982)
516,426
301,258
192,284
259,932
1,269,900
(54,289)
(31,274)
(20,038)
(141,224)
(246,825)
462,137
269,984
172,246
118,708
1,023,075
Total gross loans and advances to customers reported
6,282,469
6,765,392
4,809,415
-
17,857,276
Total customer accounts reported
9,133,452
6,536,649
1,758,814
412,442
17,841,357
Total credit related commitments and performance guarantees
2,573,935
165,807
468,333
-
3,208,075
232
233
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 27. SEGMENT ANALYSIS CONTINUED
28. INTEREST INCOME AND EXPENSE
Segment disclosure below for 2023 is prepared with the effect of 2023 re-segmentations as described above:
Interest income and expense of the Group are as follows:
in thousands of GEL
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
Micro,
small and
medium
enterprises
87,206
3,237
90,443
Corporate
Center,
other and sub-
segment
eliminations
(1,057)
5,626
4,569
Other
operations
and
intersegment
eliminations
25
161
186
Georgian
financial
services
571,366
23,039
594,405
Total
571,391
23,200
594,591
Corporate
105,418
7,887
Retail
379,799
6,289
113,305 386,088
113,176
129
385,333
755
90,421
22
4,569
-
593,499
906
186
-
593,685
906
*The Group has not separated eliminations separately considering their immateriality. Meanwhile other operating income includes intergroup
dividends of GEL 20,000 thousand.
For comparison purposes segment disclosure below for 2022 is prepared with the effect of 2023 re-segmentations as
described above:
Micro,
small and
medium
enterprises
31,627
1,230
32,857
Corporate
Center,
other and sub-
segment
eliminations
(3,251)
10,305
7,054
Other
operations
and
intersegment
eliminations
(2)
258
256
Georgian
financial
services
477,615
19,417
497,032
Total
477,613
19,675
497,288
Corporate
89,290
1,702
90,992
Retail
359,949
6,180
366,129
in thousands of GEL
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
in thousands of GEL
Interest income calculated using effective interest method
Loans and advances to customers
Investment securities measured at fair value through other comprehensive income
Due from other banks
Repurchase receivables
Other financial assets
Other interest income
Finance lease receivables
Total interest income
Interest expense
Customer accounts
Due to credit institutions
Debt securities in issue
Subordinated debt
Other interest expense
Lease Liabilities
Total interest expense
2023
2022
2,224,514
1,911,782
284,495
99,777
3,077
2,824
196,114
45,577
2,449
3,645
74,740
60,214
2,689,427
2,219,781
(813,715)
(571,575)
(288,250)
(266,280)
(104,147)
(116,654)
(67,539)
(53,889)
(3,281)
(2,999)
(1,276,932)
(1,011,397)
83,101
34,711
1,495,596
1,243,095
90,588
404
365,017
1,112
32,804
53
7,054
-
495,463
1,569
256
-
495,719
1,569
Net interest gains on currency swaps
Net interest income
*The Group has not separated eliminations separately considering their immateriality. Meanwhile other operating income includes intergroup
dividends of GEL 5,959 thousand.
During 2023 interest accrued on defaulted loans amounted to GEL 36,161 thousand (2022: 31,739 GEL thousand).
During 2023 capitalized interest expense in the amount of GEL 2,391 thousand (2022: GEL 1,794 thousand) was
attributable to the development of the Group’s headquarter. The capitalisation rate used to determine the amount of
borrowing costs eligible for capitalisation is weighted average of interest-bearing liabilities by currencies: 9.0% in GEL,
2.1% in USD and 1.0% in EUR. (2022: 8.7% in GEL, 2.3% in USD and 0.6% in EUR). For details of construction in progress
please refer to Note 15.
234
235
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
28. INTEREST INCOME AND EXPENSE CONTINUED
29. FEE AND COMMISSION INCOME AND EXPENSE
Interest income and expense of the Bank are as follows:
in thousands of GEL
Interest income calculated using effective interest method
Loans and advances to customers
2023
2022
2,221,832
1,908,843
2023
Investment securities measured at fair value through other comprehensive income
287,835
198,918
in thousands of GEL
Retail
Due from other banks
Repurchase receivables
Other financial assets
Total interest income
Interest expense
Customer accounts
Due to credit institutions
Debt securities in issue
Subordinated debt
Other interest expense
Lease Liabilities
Total interest expense
Net interest gains on currency swaps
Net interest income
97,677
44,959
3,077
2,366
2,449
3,644
2,612,787
2,158,813
(821,549)
(578,062)
(273,545)
(251,637)
(94,321)
(110,346)
(64,632)
(51,358)
(2,955)
(2,766)
(1,257,002)
(994,169)
83,101
34,711
1,438,886
1,199,355
Below tables disclose fee and commission income and expense by segments. For the definition of the segments refer
to note 27.
Micro
small and
medium
enterprises
Corporate
Corporate
center, other
and sub-
segment
eliminations
Other
operations
and
intersegment
eliminations
Georgian
financial
services
Total
310,450
9
310,459
Fee and commission income in respect of financial instruments not at fair value through profit or loss:
– Card operations
257,211
53,245
– Settlement transactions
110,055
– Guarantees issued
– Cash transactions
– Issuance of letters of credit
– Foreign exchange operations
25
4,010
1
114
17,785
6,059
4,935
120
783
8
14,214
38,608
8,039
8,013
4,546
– Other
8,383
4,279
31,990
(14)
(92)
-
-
(31)
(8)
(912)
141,962
44,692
16,984
8,103
5,435
43,740
Total fee and commission income
379,799
87,206
105,418
(1,057)
571,366
Fee and commission expense in respect of financial instruments not at fair value through profit or loss:
– Card operations
(141,793)
(33,468)
-
– Settlement transactions
– Cash transactions
– Guarantees received
– Letters of credit
– Foreign exchange operations
(6,826)
(5,514)
-
-
(8)
(9,251)
(2,584)
(276)
(38)
(5,571)
(6,347)
(1,706)
(2,517)
-
-
14
(37)
(3,143)
-
(3)
8
(175,247)
(21,685)
(17,588)
(1,982)
(2,558)
-
– Other
(7,857)
(7,241)
(1,439)
(1,263)
(17,800)
-
-
-
-
-
16
25
-
-
-
-
-
(10)
(45)
141,962
44,692
16,984
8,103
5,435
43,756
571,391
(175,247)
(21,685)
(17,588)
(1,982)
(2,558)
(10)
(17,845)
Total fee and commission expense
(161,998)
(52,858)
(17,580)
(4,424)
(236,860)
(55)
(236,915)
Net fee and commission income
217,801
34,348
87,838
(5,481)
334,506
(30)
334,476
236
237
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
29. FEE AND COMMISSION INCOME AND EXPENSE CONTINUED
30. NET GAINS FROM CURRENCY DERIVATIVES, FOREIGN CURRENCY OPERATIONS AND TRANSLATION
2022*
in thousands of GEL
Micro,
small and
medium
enterprise
Retail
Corporate
Corporate
center, other
and sub-
segment
eliminations
Other
operations
and
intersegment
eliminations
Georgian
financial
services
Total
Fee and commission income in respect of financial instruments not at fair value through profit or loss:
– Card operations
– Settlement transactions
– Guarantees issued
– Cash transactions
– Issuance of letters of credit
– Foreign exchange operations
252,734
94,987
49
6,024
-
153
-
16,163
5,438
5,792
82
757
-
13,195
35,069
5,403
6,779
5,243
– Other
6,002
3,395
23,600
(3,124)
(103)
3
-
(45)
18
1
249,610
124,242
40,559
17,219
6,816
6,171
32,998
(2)
249,608
-
-
-
-
-
-
124,242
40,559
17,219
6,816
6,171
32,998
Total fee and commission income
359,949
31,627
89,289
(3,250)
477,615
(2)
477,613
Fee and commission expense in respect of financial instruments not at fair value through profit or loss:
– Card operations
(155,581)
-
-
– Settlement transactions
– Cash transactions
– Guarantees received
– Letters of credit
– Foreign exchange operations
– Other
(6,886)
(9,534)
(4,163)
(3,554)
(9)
-
(39)
(9,185)
(590)
(19)
(107)
(16)
(5,738)
(1,052)
(3,115)
(1,240)
(897)
(3,392)
3,124
(19)
(9,691)
-
3
2
(152,457)
(22,177)
(18,460)
(3,714)
(1,256)
(1,041)
(220)
(12,813)
Total fee and commission expense
(175,863)
(13,820)
(15,434)
(6,801)
(211,918)
Net fee and commission income
184,086
17,807
73,855
(10,051)
265,697
-
-
-
-
-
(7)
(38)
(45)
(47)
(152,457)
(22,177)
(18,460)
(3,714)
(1,256)
(1,048)
(12,851)
(211,963)
265,650
*Starting from 2023 fee and commission income and expense are presented by segments.
Net gains from currency derivatives, foreign currency operations and translation for the following years are as follows:
in thousands of GEL
Net gains from trading in foreign currencies
Net gains/(losses) from foreign exchange translation
2023
201,457
2022
145,969
71,179
265,702
Net gains from derivative financial instruments other than derivatives on foreign currency
(333)
135
Total net gains from currency derivatives, foreign currency operations and translation
272,303
411,806
31. STAFF COSTS
Staff costs of the Group are as follows:
in thousands of GEL
Wages and salaries
Salaries and bonuses
Share based compensation
Pension contributions
Other compensation cost
Salaries and other employee benefits
Staff costs of the Bank are as follows:
in thousands of GEL
Wages and salaries
Salaries and bonuses
Share based compensation
Pension contributions
Other compensation cost
Salaries and other employee benefits
2023
2022
332,848
269,245
24,682
6,882
21,059
21,672
5,450
10,159
385,471
306,526
2023
2022
300,517
244,225
24,153
6,222
18,621
21,672
4,944
8,432
349,513
279,273
Share based compensation represents remuneration paid in shares and is excluded as non-cash in the consolidated
and separate statement of cash flows.
Breakdown of monthly average number of employees by categories is as follows:
238
239
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 31. STAFF COSTS CONTINUED
32. ADMINISTRATIVE AND OTHER OPERATING EXPENSES
Number of employees of the Group are as follows:
Administrative and other operating expenses of the Group are as follows:
Position
Top Management
Middle Management
Other Employees
Total
Number of employees of the Bank are as follows:
Position
Top Management
Middle Management
Other Employees
Total
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
2023
2022
-
5
-
289
1,000
7,443
8,737
-
6
-
286
1,105
6,965
8,362
2023
2022
-
5
-
243
938
6,669
7,855
-
6
-
237
1,038
6,252
7,533
in thousands of GEL
Advertising and marketing services
Intangible asset maintenance
Professional services
Taxes other than on income
Premises and equipment maintenance
Utilities services
Insurance
Occupancy and rent*
Communications and supply
Personnel training and recruitment
Stationery and other office expenses
Representative expenses
Transportation and vehicle maintenance
Business trip expenses
Security services
Charity
Loss on disposal of repossessed collateral
Loss on disposal of premises and equipment
Other
Total administrative and other operating expenses
*Includes short-term leases, low value leases not recognised under IFRS 16 scope.
2023
46,464
25,982
25,408
12,859
9,405
9,368
8,707
7,774
6,457
5,562
5,304
4,310
2,865
2,027
1,956
1,110
661
599
2022
30,592
21,071
23,230
11,515
8,227
8,662
7,945
9,154
6,010
4,178
5,485
5,956
2,939
1,674
1,572
854
1,505
1,138
19,830
15,641
196,648
167,348
240
241
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 32. ADMINISTRATIVE AND OTHER OPERATING EXPENSES CONTINUED
32. ADMINISTRATIVE AND OTHER OPERATING EXPENSES CONTINUED
Administrative and other operating expenses of the Bank are as follows:
Auditors’ remuneration is included within professional services expenses above and comprises:
Audit
Audit Related
Other Services
Total
in thousands of GEL
Advertising and marketing services
Professional services
Intangible asset maintenance
Utilities services
Premises and equipment maintenance
Taxes other than on income
Occupancy and rent*
Personnel training and recruitment
Communications and supply
Stationery and other office expenses
Representative expenses
Insurance
Business trip expenses
Security services
Charity
Transportation and vehicle maintenance
Loss on disposal of repossessed collateral
Loss on disposal of premises and equipment
Other
2023
45,369
23,981
22,332
8,959
8,231
6,985
5,604
5,374
5,317
4,943
4,268
2,495
1,859
1,739
1,094
749
579
539
16,477
2022
29,591
21,888
17,632
8,303
7,740
6,201
6,810
4,017
4,919
5,167
5,910
2,583
1,515
1,406
749
905
1,297
983
11,527
Total administrative and other operating expenses
166,894
139,143
*Includes short-term leases, low value leases not recognised under IFRS 16 scope.
in thousands of GEL
2023
Audit of TBC Bank Group and
subsidiaries annual financial
statements
Review of TBC Bank Group and
subsidiaries interim financial
statements
Other assurance services*
Total auditors’ remuneration
2022
Audit of TBC Bank Group and
subsidiaries annual financial
statements
Review of TBC Bank Group and
subsidiaries interim financial
statements
Other assurance services*
Total auditors’ remuneration
2,191
-
-
2,191
1,894
-
-
1,894
-
237
-
237
-
201
-
201
* Other assurance services include services provided by audit firms other than of the group auditor.
33. INCOME TAXES
Income tax credit/(expense) comprise of the following:
in thousands of GEL
Current tax charge
Effect of change in tax legislation
Deferred tax credit
Total income tax expense for the year
-
-
1,218
1,218
-
-
984
984
2,191
237
1,218
3,646
1,894
201
984
3,079
2023
246,196
-
(62,338)
2022
144,919
112,877
(10,971)
183,858
246,825
242
243
In 2022 the Government of Georgia has approved the changes to the current corporate tax model in Georgia for
financial institutions applicable from 2023.
According to the announced changes, the financial sector will no longer switch to the Estonian tax model, which was
expected to exempt banks from paying corporate taxes on retained earnings and only required a payment of 15%
corporate tax rate on distributed earnings.
The change to the corporate taxation model has an immediate impact on deferred tax balances and a corresponding
income tax expense, attributable to temporary differences between financial and tax accounting balances, arising
from prior periods. In addition to above changes, tax authorities require the banks to reimburse the tax reliefs obtained
through previous provisioning and interest income/expense calculation differences caused by differences in tax and
IFRS bases.
As a result of these changes, in 2022 the Group has recognized net deferred tax liabilities and corresponding deferred
tax expense in the amount of GEL 112,877 thousand in the statement of profit and loss.
In addition, with the effect from 2023, the existing corporate tax rate for banks has been increased from 15% to 20%,
while dividends will no longer be taxed with 5% dividend tax.
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
33. INCOME TAXES CONTINUED
33. INCOME TAXES CONTINUED
Current income tax liability to the regulatory authorities is generally paid on a quarterly basis. The amount is calculated
by dividing previous year current income tax amount by 4 equal portions. The liability is settled in the following year,
based on current income tax liability amount as at year end.
The weighted average income tax rate is 2023: 20% (2022: 15%), when the income tax rate applicable to the majority of
subsidiaries income ranged from 15% - 20% (2022: 15% - 20%).
Reconciliation between the expected and the actual taxation (credit)/expense is provided below:
in thousands of GEL
Statutory rate
Profit before tax
2023
20%
2022
15%
1,302,916
1,269,900
Theoretical tax charge at weighted average applicable tax rate of 20% (2022: 15%)
259,595
190,594
Tax effect of items which are not deductible or assessable for taxation purposes:
Income which is exempt from taxation
Non-deductible expenses
Effects of changes in tax legislation
Other differences
(70,860)
(38,636)
654
(5,146)
(385)
187
94,716
(36)
Total income tax expense for the year
183,858
246,825
Differences between financial reporting framework and statutory taxation regulations in Georgia and Azerbaijan give
rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes
and their tax bases. The tax effect of the movements in these temporary differences is detailed below and is recorded
at the rate of 20% (2022: 15%) for Georgia and 20% (2022: 20%) for Azerbaijan.
Income which is exempt from taxation includes interest income from placements in NBG, Georgian Government
Treasury bills and IFI securities. Non-deductible expenses include penalties paid and charity expenses towards
beneficiary which are not registered charity organizations.
Deferred tax assets/liabilities as of 31 December 2023 and 31 December 2022 are the following:
in thousands of GEL
Tax effect of (taxable)/deductible
temporary differences and tax loss carry
forwards
1
January
2023
Credited/
(charged) to
profit or loss
Credited/
(charged) to other
comprehensive
income
Effect of
currency
translation
31
December
2023
Premises and equipment and intangibles
(50,887)
Loans and advances to customers
Other financial assets
Other assets
Other financial liabilities
Other liabilities
Share based payment
Goodwill
Investments in associates
One off reimbursement for different tax and
IFRS bases
Net deferred tax asset/(liability)
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax asset/(liability)
1,847
4,754
329
(724)
(923)
4,302
(4,987)
(423)
(64,101)
(110,813)
2,064
(112,877)
(110,813)
(5,906)
(1,847)
1,076
(70)
418
1,346
1,636
1,584
-
64,101*
62,338
158
62,180
62,338
-
-
(260)
-
-
-
-
-
-
-
(1,827)
(58,620)
-
-
-
-
-
-
-
-
-
-
5,570
259
(306)
423
5,938
(3,403)
(423)
-
(260)
(1,827)
(50,562)
-
(1,827)
395
(260)
(260)
-
(50,957)
(1,827)
(50,562)
* The amount had no effect on the consolidated statement of profit and loss and other comprehensive income, as far as, one off deferred tax
reimbursements required due to the changes in tax legislation in 2022, has been recorded to current income tax of 2023, leaving no effect on tax
expenses.
244
245
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
33. INCOME TAXES CONTINUED
34. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
1
January
2022
Credited/
(charged) to
profit or loss
Effect of
change in tax
legislation
Effect of
currency
translation
31
December
2022
The table below sets out movements in the Group’s liabilities from financing activities for each of the periods
presented. The items of these liabilities are those that are reported as financing activities in the statement of cash
flows.
in thousands of GEL
Tax effect of (taxable)/deductible temporary
differences and tax loss carry forwards
Premises and equipment
Loans and advances to customers
Other financial assets
Other assets
Due to credit institutions
Other financial liabilities
Other liabilities
Share based payment
Goodwill
Investments in associates
One off reimbursement for different tax and IFRS
bases
Net deferred tax asset/(liability)
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax asset/(liability)
(1,162)
(13,399)
4,110
-
(368)
123
(922)
2,695
-
-
-
(8,923)
2,056
(10,979)
(8,923)
1,157
(50,882)
-
(50,887)
15,230
(4,092)
265
368
(128)
866
(2,695)
-
-
-
-
4,736
64
-
(719)
(867)
4,302
(4,987)
(423)
(64,101)
16
-
-
-
-
-
-
-
-
-
1,847
4,754
329
-
(724)
(923)
4,302
(4,987)
(423)
(64,101)
10,971
(112,877)
16 (110,813)
(8)
-
16
2,064
10,979
(112,877)
10,971
(112,877)
-
(112,877)
16 (110,813)
In the context of the Group’s current structure and Georgian tax legislation, tax losses and current tax assets of
different group companies may not be offset against current tax liabilities and taxable profits of other group
companies. Therefore, deferred tax assets and liabilities are offset only when they relate to the same taxable entity and
the same taxation authority.
in thousands of GEL
Liabilities from financing activities at
1 January 2022
Proceeds from principal
Redemption of principal
Net interest movement**
Other non-cash movements*
Foreign exchange adjustments
Liabilities from financing activities at
31 December 2022
Proceeds from principal
Redemption of principal
Net interest movement**
Other non-cash movements*
Foreign exchange adjustments
Liabilities from financing activities at
31 December 2023
Other
borrowed
funds
Debt
securities
in Issue
Subordinated
debt
Lease
Liabilities
Total
2,659,418
1,583,699
623,647
56,522 4,923,286
2,501,875
3,504
62,578
- 2,567,957
(1,731,699)
(205,898)
(13,710)
(13,099) (1,964,406)
5,318
-
13,765
(6,951)
2,921
284
22,288
-
36,553
29,602
(184,517)
(178,306)
(85,288)
(8,020)
(456,131)
3,250,395
1,209,813
590,148
72,240
5,122,596
1,894,337
95,820
287,589
-
2,277,746
(1,698,671)
(43,058)
(15,867)
(12,999) (1,770,595)
3,169
(4,287)
-
-
4,869
5,797
4,355
-
2,505
(270)
24,519
(80)
2,967
24,519
13,091
3,454,099
1,264,085
868,730
83,410 5,670,324
* Other non-cash movements represent additions less terminations for finance lease contracts and gain on extinguishment of debt securities in issue.
**Net interest movement includes interest accrued and interest paid. Interest paid on other borrowed funds, debt securities in issue, subordinated debt
and lease liabilities is included in operating cash flow interest paid caption.
35. FINANCIAL AND OTHER RISK MANAGEMENT
Credit Quality
Depending on the type of financial asset the Group may utilize different sources of asset credit quality information
including credit ratings assigned by the international rating agencies (Standard & Poor’s, Fitch), credit scoring
information from credit bureau and internally developed credit ratings. Financial assets are classified in an internally
developed credit quality grades by taking into account the internal and external credit quality information in
combination with other indicators specific to the particular exposure (e.g. delinquency). The Group defines following
credit quality grades:
• Very low risk – exposures demonstrate strong ability to meet financial obligations;
• Low risk – exposures demonstrate adequate ability to meet financial obligations;
• Moderate risk – exposures demonstrate satisfactory ability to meet financial obligations;
• High risk – exposures that require closer monitoring, and
• Default – exposures in default, with observed credit impairment.
246
247
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The table below shows internal and external grades used in ECL calculation.
Exposures which are moved to stage 2 from default state are kept there for certain period before transferring to Stage 1
and classified as fully performing instruments again.
Credit
quality
grade
Very low
Low
Moderate
High
Internal rating grades
External ratings
Rating for
consumer loans
Ratings for Loans to
micro, small and
medium enterprises
Rating for
corporate
loans
Credit bureau
(when applicable)
International credit agency
ratings (when applicable)
1-10
11-21
22-35
36-44
1-2
3-5
6-9
1-10
A; B; C1; C2; C3 A1.3; A1.4; A1.5; A2; A3; B1; B2
11-18 A; B; C1; C2; C3; D1; D2; D3
A2; A3; B1; B2; B3; C1
19-31
A; B; C1; C2; C3; D1; D2; D3;
E1; E2; E3
A1.3; A1.4; A1.5; A2; A3; B1; B2;
B3; C1; C2; C3
10-16
32-56
D1; D2; D3; E1; E2; E3
A1.3; A1.4; A1.5; A2; A3; B1; B2;
B3; C1; C2; C3; D1; D2; D3
Expected credit loss (ECL) measurement
ECL is a probability-weighted estimate of the present value of future cash shortfalls. An ECL measurement is unbiased
and is determined by evaluating a range of possible outcomes. ECL measurement is based on four components used
by the Group: Probability of Default (“PD”), Exposure at Default (“EAD”), Loss Given Default (“LGD”) and Discount Rate.
The estimates consider forward looking information, that is, ECLs reflect probability weighted development of key
macroeconomic variables that have an impact on credit risk.
The Group uses is a three-stage model for ECL measurement and classifies its borrowers across three stages:
The Group classifies its exposures as Stage 1 if no significant deterioration in credit quality occurred since initial
recognition and the instrument was not defaulted when initially recognized. The exposure is classified to Stage 2
if the significant deterioration in credit quality was identified since initial recognition but the financial instrument
is not considered defaulted. The exposures for which the defaulted indicators have been identified are classified
as Stage 3 instruments. The Expected Credit Loss (ECL) amount differs depending on exposure allocation to one
of the Stages. In the case of Stage 1 instruments, the ECL represents that portion of the lifetime ECL that can be
attributed to default events potentially occurring within the next 12 months from the reporting date. In case of Stage
2 instruments, the ECL represents the lifetime ECL, i.e. credit losses that can be attributed to possible default events
during the whole lifetime of a financial instrument. Generally, lifetime is set equal to the remaining contractual maturity
of the financial instrument. Factors such as existence of contractual repayment schedules, options for extension of
repayment maturity and monitoring processes held by The Group affect the lifetime determination. In case of Stage 3
instruments, default event has already incurred and the lifetime ECL is estimated based on the expected recoveries.
Definition of default
Financial assets for which the Group observed occurrence of one or more loss events are classified in Stage 3.
The Group uses both quantitative and qualitative criteria for the definition of default. The borrower is classified as
defaulted if at least one of the following occurred:
• Any amount of contractual repayments is past due more than 90 days;
• Factors indicating the borrower’s unlikeliness-to-pay.
In case of individually significant borrowers The Group additionally applies criteria including but not limited to:
bankruptcy proceedings, significant fraud in the borrower’s business that significantly affected its financial condition,
breach of the contract terms etc. For SME and corporate borrowers, default is identified on the counterparty level,
meaning that all the claims against the borrower are treated as defaulted. As for retail and micro exposures, facility level
default definition is applied considering additional pulling effect criteria. If the amount of defaulted exposure exceeds
predefined threshold, all the claims against the borrower are classified as defaulted. Once financial instrument is
classified as defaulted, it remains as such until it no longer meets any of the default criteria for a consecutive period of
six months, in which case exposure is considered to no longer be in default (i.e. to have cured). Probation period of six
months has been determined on analysis of likelihood of a financial instrument returning to default status after curing.
Significant increase in credit risk (“SICR”)
Financial assets for which the Group identifies significant increase in credit risk since its origination are classified in
Stage 2. SICR indicators are recognized at financial instrument level even though some of them refer to the borrower’s
characteristics. The Group uses both quantitative and qualitative indicators of SICR.
Quantitative criteria
On a quantitative basis the Group assesses change in probability of default parameter for each particular exposure
since initial recognition and compares it to the predefined threshold. When absolute change in probability of default
exceeds the applicable threshold, SICR is deemed to have occurred and exposure is transferred to Stage 2. While
defining and applying SICR thresholds, the Bank considers product type, age of the contracts and rating at origination,
therefore, SICR threshold for each particular sub segment vary. Below we disclose the threshold ranges across the
relevant sub groups in percentage points triggering contract to move to stage 2:
Mortgage
Consumer (further divided into subgroups to apply thresholds)
Micro (further divided into subgroups to apply thresholds)
Qualitative criteria
0% - 10.4%
0% - 28.2%
0% - 28.7%
Financial asset is transferred to Stage 2 and lifetime ECLs is measured if at least one of the following SICR qualitative
criteria is observed:
• delinquency period of more than 30 days on contractual repayments;
• exposure is restructured, but is not defaulted;
• borrower is classified as “watch”.
The Group has not rebutted the presumption that there has been significant increase in credit risk since origination
when financial asset becomes more than 30 days past due. This qualitative indicator of SICR together with debt
restructuring is applied to all segments. Particularly for corporate and SME segment the Group uses downgrade of
risk category since origination of the financial instrument as a qualitative indicator of SICR. Based on the results of the
monitoring, borrowers are classified across different risk categories. In case there are certain weaknesses present,
which if materialized may lead to loan repayment problems, borrowers are classified as “watch” category. Although
watch borrowers’ financial standing is sufficient to repay obligations, these borrowers are closely monitored and
specific actions are undertaken to mitigate potential weaknesses. Once the borrower is classified as “watch” category,
it is transferred to Stage 2. If any of the SICR indicators described above occur financial instrument is transferred to
Stage 2. Financial asset may be moved back to Stage 1, if SICR indicators are no longer observed.
ECL measurement
The Group utilizes two approaches for ECL measurement – individual assessment and collective assessment.
Individual assessment is mainly used for stage 2 and stage 3 individually significant borrowers. For selecting
individually significant exposures, the management uses the following estimated thresholds above which exposures1
are selected for individual review: for stage 2 - to GEL 10 million and for stage 3 - GEL 4 million. Additionally, the Group
may arbitrarily designate selected exposures to individual measurement of ECL based on the Group’s credit risk
management or underwriting departments’ decision. The individual assessment takes into account latest available
information in order to define ECL under baseline, upside and downside scenarios.
The Group uses the discounted cash flow (DCF) method for the determination of recovery amount under individual
assessment. In order to ensure the accurate estimation of recoverable amount the Group utilizes scenario analysis
approach. Scenarios may be defined considering the specifics and future outlook of individual borrower, sector the
1 Total exposure of the bank toward the borrower or group of interconnected borrowers
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35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
borrower operates in or changes in values of collateral. In case of scenario analysis, The Group forecasts recoverable
amount for each scenario and estimates respective losses. Ultimate ECL is calculated as the weighted average of
losses expected in each scenario, weighted by the probability of scenario occurring.
As for the non-significant and non-impaired significant borrowers The Group estimates expected credit losses
collectively. For the collective assessment and risk parameters estimation purposes the exposures are grouped into
a homogenous risk pools based on similar credit risk characteristics. Common credit risk characteristics of the group
include but are not limited to: Stage (Stage 1, Stage 2 or Stage 3), type of counterparty (individual vs business), type
of product, rating (external or internal), overdue status, restructuring status, months in default category or any other
characteristics that may differentiate certain sub-segments for risk parameter’s estimation purposes. Number of pools
differs for different products/ segments considering specifics of portfolio and availability of data within each pool.
Collective ECL is the sum of the multiplications of the following credit risk parameters: EAD, PD and LGD, that are
defined as explained below, and discounted to present value using the instrument’s effective interest rate.
The key principles of calculating the credit risk parameters:
Exposure at default (EAD)
The EAD represents estimation of exposure to credit risk at the time of default occurring during the life of financial
instrument. The EAD parameter used for the purpose of the ECL calculation is time-dependent, i.e. the Group allows
for various values of the parameter to be applied to subsequent time periods during the lifetime of an exposure.
Such structure of the EAD is applied to all Stage 1 and Stage 2 financial instruments. In case of Stage 3 financial
instruments and defaulted POCI assets, the EAD vector is one-element with current EAD as the only value. EAD is
determined differently for amortising financial instruments with contractual repayment schedules and for revolving
facilities. For amortising products EAD is calculated considering the contractual repayments of principal and interest
over the 12-month period for facilities classified in Stage 1 and over lifetime period for remaining instruments. It is
additionally adjusted to include effect of reduction in exposure due to prepayments - Namely full prepayment ratio.
Full Prepayment Ratio (FPR) parameter represents the probability that a financial instrument will be fully prepaid during
the particular period to maturity. For the purpose of calculating Full Prepayment Ratio, the Group make the analysis of
the historical data of the contracts fully prepaid until the maturity. For revolving facilities, the Bank calculates the EAD
based on the expected limit utilisation percentage conditional on the default event.
Probability of default (PD)
Probability of default parameter reflects the likelihood of a default of a facility over a particular time horizon. It provides
an estimate of the likelihood that a borrower will be unable to meet its contractual debt obligations. The PD parameter
is time-dependent (i.e. has a specific term structure) and is applied to all non-defaulted contracts. Taking into account
specific nature of different segments of clients for which the PD is estimated as well as unique characteristics that
drive their default propensity, the PD is modelled differently for Retail and Micro segments and Corporate and SME
segments. PD assessment approach is also differentiated for different time horizons and is further adjusted due to
expected influence of macroeconomic variables as forecasted for the period (see ‘Forward Looking Information”
section for further details on incorporation of macroeconomic expectations in ECL calculation). FLI adjustment is
applied on PD for the three-year period, given the uncertainty involved in the macroeconomic forecasts for the longer
time horizon. Two types of PDs are used for calculating ECLs: 12-month and lifetime PD. Lifetime PDs represent the
estimated probability of a default occurring over the remaining life of the financial instrument and it is a sum of the 12
months marginal PDs over the life of the instrument. The Group generally uses number based approach of PD model
construction, however for the nonhomogeneous portfolios exposure-weighted approach is utilised. The Group uses
different statistical approaches such as the extrapolation of 12-month PDs based on migration matrixes, developing
lifetime PD curves based on the historical default data and gradual convergence of long-term PD with the long-term
default rate.
Loss given default (LGD)
The LGD parameter represents the share of an exposure that would be irretrievably lost if a borrower defaults. For
Stage 1 and Stage 2 financial instruments, the LGD is estimated for each period in the instrument’s lifetime and reflects
the share of the expected EAD for that period that will not be recovered over the remaining lifetime of the instrument
after the default date. For Stage 3 financial instruments, the LGD represents the share of the EAD as of reporting
date that will not be recovered over the remaining life of that instrument. Assessment of LGD varies by the type of
counterparty, segment, type of product, securitization level, availability of historical observations and portfolio sale.
The general LGD estimation process employed by the Group is based on the assumption that after the default of the
exposure, two mutually exclusive scenarios are possible. Non-sold scenario-The exposure either leaves the default
state (cure scenario) or does not leave the default state and will be subject to recovery process (non-cure scenario);
Sold scenario- exposure is sold. The probability that an exposure is sold, probability of a cure and the probability that
a cured exposure defaults again are all determined in the estimation process. Risk parameters applicable to both
sub-scenarios, i.e. cure rates and recovery rates, are estimated by means of migration matrices approach, whereas the
probability of sale is determined by expert judgement until enough data is gather to allow for statistical estimation.
For each LGD portfolio the Group defines the recovery horizon for non-sold exposures and maximum period for
an exposure to be sold (which is set at the average time-to-sale), after which no material recoveries are assumed.
Recovery horizon is defined by data analytics and expert judgment. For certain portfolios based on the limitations of
observations alternative versions of the general approach may be applied. For significant corporate exposures, the
Group uses the LGD modelling approach that is based on realized recoveries from historical defaults, adjusted with
approximation of future recoveries from individually assessed defaulted exposures. In order to model LGD for SME
and non-significant corporate borrowers, the Group is estimating recoverable amount from the collateral and assumes
that no recoveries from cash is expected. In order to estimate recoverable amount from the collateral the Group is
applying respective haircuts defined for different types of collateral and discounts them using effective interest rate
over the realization period. In addition, at each reporting date, the Group makes the decision which historical data
horizon should be used in order to model recoveries.
Forward-looking information
The measurement of unbiased, probability weighted ECL requires inclusion of forward-looking information obtainable
without undue cost or effort. For forward-looking information purposes, the Group defines three macro scenarios. The
scenarios are defined as baseline (most likely), upside (better than most likely) and downside (worse than most likely)
scenarios of the state of the economy. To derive the baseline macro-economic scenario, the Group takes into account
forecasts from various external sources – the National Bank of Georgia, Ministry of Finance, International Monetary
Fund (“IMF”) as well as other International Financial Institutions (“IFI”’s) – in order to ensure the to the consensus
market expectations. Upside and downside scenarios are defined based on the framework developed by the Group’s
macroeconomic unit.
The Group uses statistical models and historical relationship between the various macroeconomic factors and default
observations to derive forward-looking adjustments. In case these models do not provide reasonable results either
from statistical or business perspective, the Group may apply expert judgment or use alternative approach. As at 31
December 2023, the Group employs statistical models to derive forward looking adjustment in all segments except
for corporate. In corporate segment, due to the insignificance of the statistical models, the Group does not apply FLI
adjustment. The baseline, upside and downside scenarios were assigned probability weighing of 50%, 25% and 25%,
respectively.
The forward-looking information is incorporated in collective assessment of expected credit losses of Retail and
MSME portfolios and individually assessed exposures.
Model maintenance and validation
The Group regularly reviews its methodology and assumptions to reduce any difference between the estimates and
the actual credit loss. Such back-testing (including back-casting) is performed at least once a year. As part of the back-
testing process, the Group evaluates actual realization of the risk parameters and their consistency with the model
estimates. Additionally staging criteria are also analysed within the back-testing process. The results of back-testing
the ECL measurement methodology are communicated to the Group Management and further actions for tuning the
models and assumptions are defined after discussions between authorised persons.
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35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
Risk governance
ECL impairment models were developed by internal credit risk governance division with the involvement of external
consultants. The division runs the models to calculate ECL each month. They are also responsible for model back-
testing, analytics and governance.
Economic scenarios and probability weights are prepared by macro-financial analysis unit.
All the assumptions, including PMAs and PMOs used in the ECL measurement go through of review and approval
process:
• Chief Economist reviews and approves the forward-looking scenarios and respective weights;
•
Internal allowance committee reviews and approves appropriateness of the estimates and judgements as well as
PMAs and PMOs used in ECL measurement on a regular basis; internal committee includes Head of ERM, Heads
of Portfolio Credit Risk Management divisions and CRO, who ultimately approves ECL results as of each reporting
date.
• Models used in calculation, as well as back-testing process is also validated by the model risk management division.
Climate risk. The Group’s largest operations are located in Georgia hence the climate risk overview is done by the
management from Georgian perspective. The Georgia’s 2030 Climate Change Strategy and Climate Action Plan
lays out different policy measures on which TBC Bank based its identification of the potential impact of the policy
measures on different economic sectors. As a summary of the potential impact of the various transition risks and
physical risks identified, the transitional risks in Georgia are low, considering, that trade and services dominate the
Georgian economy, the policy measures outlined in the Georgia’s 2030 Climate Change Strategy will have overall
low impact on the economic sectors, especially in short and medium term. The Georgia’s 2030 Climate Change
Strategy takes into consideration that Georgia is a transitional and growing economy, and therefore the government
strategy is not to impede the growth of the GDP with policy measures and rather to support a smooth transition where
necessary. It is worth noting, that the economic sectors most affected by transitional risks world-wide such as mining
crude petroleum, natural gas and metal ores, manufacturing coke and refined petroleum products are present to the
very limited extend in Georgia, resulting in a low overall impact of transitional measures on economic growth, if any.
In order to increase the understanding of climate-related risks on its loan portfolio, the Bank performed a high-level
sectoral risk assessment, as different sectors might be vulnerable to different climate-related risks over different time
horizons; furthermore, the Bank performed climate stress testing of the credit portfolio. The maturity structure of the
loan portfolio shows that the largest part of assets is distributed in the time horizons that are much shorter than the
impacts of climate change, especially of physical risks, can be materialized in Georgia. Therefore, the bank has not
made any adjustment to the level of provisions purely related to climate risk. On the other hand, the understanding of
climate related risks, which have longer-term impacts need to be increased in coming years, therefore, when the bank
has a more definitive analysis, it will further develop the approach, how to consider climate risks in provisioning. No
post model adjustments (PMAs) or Post model overlays (PMOs) have been posted for 2023 in this regard.
Geographical risk concentrations
Assets, liabilities, credit related commitments and performance guarantees have generally been attributed to
geographic regions based on the country in which the counterparty is located. Balances legally outstanding to/from
off-shore companies which are closely related to Georgian counterparties are allocated to the caption “Georgia”. Cash
on hand and premises and equipment have been allocated based on the country in which they are physically held.
Tables below includes geographical concentration by country of incorporation. Loans and advances to OECD and
Non-OECD resident customers, as well as to Georgian customers, are issued to the entities most of which are based
and performing in Georgia.
The geographical concentration of the Group’s assets and liabilities as of 31 December 2023 is set out below by
country of incorporation:
in thousands of GEL
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measured at fair
value through FVTOCI
Finance lease receivables
Other financial assets
Total financial assets
Non-financial assets
Total assets
Liabilities
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Non-financial liabilities
Total liabilities
Net balance sheet position
Performance guarantees
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Georgia
OECD
Non-OECD
Total
1,685,000
10,661
1,572,506
20,328,591
2,184,130
363,303
254,599
1,968,167
38,065
3,691,232
446
-
338,835
695,552
-
25,236
28
-
11,135
1,572,506
291,106
20,958,532
595,779
3,475,461
7,492
2,026
370,795
281,861
26,398,790
3,028,236
934,496
30,361,522
1,407,504
201
1,909
1,409,614
27,806,294
3,028,437
936,405
31,771,136
1,696,854
16,934,364
1,260,830
214,346
82,482
153,323
20,342,199
237,602
20,579,801
7,226,493
1,134,832
1,045,632
282,757
509,855
1,997,341
933,114
-
61,882
-
578,675
3,571,012
683
3,571,695
(543,258)
439,939
787
-
1,065
652,756
4,346,951
2,075,038
19,942,516
3,255
1,264,085
268
928
276,496
83,410
136,732
868,730
2,868,977
26,782,188
2,954
241,239
2,871,931
27,023,427
(1,935,526)
4,747,709
60,147
1,634,918
2,596
1,049,015
914
777
283,671
511,697
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35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The geographical concentration of the Group’s assets and liabilities as of 31 December 2022 is set out below by
country of incorporation:
in thousands of GEL
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measured at fair
value through OCI
Repurchase receivables
Finance lease receivables
Other financial assets
Total financial assets
Non-financial assets
Total assets
Liabilities
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Non-financial liabilities
Total liabilities
Net balance sheet position
Performance guarantees
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Georgia
OECD
Non-OECD
Total
2,074,615
5,001
2,047,564
17,094,888
1,712,616
-
282,300
246,866
23,463,850
1,299,611
24,763,461
1,363,669
15,090,636
1,201,666
250,085
72,219
98,008
18,076,283
208,519
18,284,802
6,478,659
901,320
1,045,975
224,789
400,006
1,683,849
27,634
3,786,098
1,297
-
151,750
596,009
267,495
-
-
-
-
6,298
2,047,564
250,804
17,497,442
576,103
2,884,728
-
6,586
132
267,495
288,886
246,998
2,700,400
861,259
27,025,509
257
3,633
1,303,501
2,700,657
864,892
28,329,010
1,930,394
1,034,409
-
433
-
354,336
3,319,572
1,168
3,320,740
(620,083)
565,669
2,021
-
876
591,297
3,885,360
1,716,312
17,841,357
8,147
1,209,813
-
21
137,804
250,518
72,240
590,148
2,453,581
23,849,436
4,085
213,772
2,457,666
24,063,208
(1,592,774)
4,265,802
56,881
1,523,870
3,229
7,277
1,051,225
232,066
32
400,914
Market risk. Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to
changes in market variables such as interest rates, foreign exchange rates and equity prices. Management sets risk
appetite limits on the value of risk that may be accepted, which is monitored on a regular basis. These limits provide
buffers over regulatory limits, ensuring early detection of potential losses in the event of more significant market
movements.
Currency risk. Foreign exchange rate risk arises from the potential change in foreign currency exchange rates,
which can affect the value of a financial instrument. This risk stems from the open currency positions created due to
mismatches in foreign currency assets and liabilities. The NBG requires the Bank to monitor both balance sheet and
total aggregate (including off-balance sheet) open currency positions and to maintain the later one within 20% of the
Bank’s regulatory capital. The Asset-Liability Management Committee (“ALCO”) has set limits on the level of exposure
by currency as well as on aggregate exposure positions which are more conservative than those set by the NBG. The
Bank’s compliance with such limits is monitored daily by the heads of the Treasury department and Financial Risk
Management division.
Currency risk management framework is governed through the Market Risk Management Policy. The table below
summarises the Group’s exposure to foreign currency exchange rate risk at the balance sheet date. While managing
open currency position the Group considers part of the provisions to be denominated in the USD, Euro and other
currencies. Gross amount of currency swap deposits is included in Derivatives. Therefore, total financial assets and
liabilities below are not traceable with either balance sheet or liquidity risk management tables, where net amount of
gross currency swaps is presented.
As of 31 December 2023
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
As of 31 December 2022
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
Monetary
financial
assets
15,308,291
10,221,224
4,671,064
160,943
Monetary
financial
liabilities
Derivatives
Net position
13,003,203
1,404,462
3,709,550
11,037,953
2,585,038
177,054
684,157
(132,572)
(2,114,187)
(28,161)
27,257
11,146
30,361,522
26,803,248
1,689
3,559,963
Monetary
financial
assets
13,454,240
9,116,276
4,210,065
244,928
Monetary
financial
liabilities
10,906,671
10,829,585
1,934,556
198,532
Derivatives
Net position
672,019
3,219,588
1,696,253
(17,056)
(2,322,418)
(46,909)
(31,929)
14,467
27,025,509
23,869,344
13,925
3,170,090
US Dollar strengthening by 20% (weakening 20%) would decrease Group’s profit or loss and equity in 2023 by GEL
26,514 thousand (increase by GEL 26,514 thousand). Euro strengthening by 20% (weakening 20%) would decrease
Group’s profit or loss and equity in 2023 by GEL 5,632 thousand (increase by GEL 5,632 thousand).
US Dollar strengthening by 20% (weakening 20%) would decrease Group’s profit or loss and equity in 2022 by GEL 3,411
thousand (increase by GEL 3,411 thousand). Euro strengthening by 20% (weakening 20%) would decrease Group’s profit
or loss and equity in 2022 by GEL 9,382 thousand (increase by GEL 9,382 thousand).
Interest rate risk. Interest rate risk arises from potential changes in the market interest rates that can adversely affect
the fair value or future cash flows of the financial instrument. This risk can arise from maturity mismatches of assets and
liabilities, as well as from the re-pricing characteristics of such assets and liabilities.
The biggest share of the Bank’s deposits and loans are at fixed interest rates, while major part of the Bank’s borrowings
is at a floating interest rate. In addition, the Bank actively uses floating and combined1 interest rate structures in its loan
portfolio. In case of need, the Bank also applies for interest rate risk hedging instruments in order to mitigate interest
rate risk. Furthermore, many of the Bank’s loans to customers contain a clause allowing it to adjust the interest rate
on the loan in case of adverse interest rate movements, thereby limiting the Bank’s exposure to interest rate risk. The
management also believes that the Bank’s interest rate margins provide a reasonable buffer to mitigate the effect of
possible adverse interest rate movements.
1 In case of combined interest rates, interest rate is fixed for a pre-agreed term, and switches to floating interest rate after the term passes.
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35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The Net Stable Funding ratio is used for long-term liquidity risk management to promote resilience over a longer time
horizon by creating additional incentives for TBC Bank to rely on more stable sources of funding on a continuous
basis. The Bank also monitors deposit concentration for large deposits and sets the limits for non-Georgian residents’
deposits share in total deposit portfolio.
The Bank relies on relatively stable deposits from Georgia as the main source of funding. In order to maintain and
further enhance the liability structure TBC Bank sets the targets for deposits and IFI funding within the Bank’s risk
appetite.
The Bank’s liquidity position was strong as of 31 December 2023, both LCR and NSFR ratios above the NBG minimum
requirements of 100%.
Maturity analysis. The table below summarizes the maturity analysis of the Group’s financial liabilities, based on
remaining undiscounted contractual obligations as of 31 December 2023 subject-to-notice repayments are treated as
if notice were to be given immediately. However, the Group expects that many customers will not request repayment
on the earliest date the Group could be required to pay and the table does not reflect the expected cash flows
indicated by the Group’s deposit retention history.
The Group employs an advanced framework for the management of interest rate risk by establishing appropriate
Risk Appetite limits, monitoring compliance with them and preparing forecasts. From September, 2020 the NBG
introduced regulation on interest rate risk and set the limit for Economic Value of Equity (EVE) sensitivity at 15% of
NBG Tier 1 Capital. The main principles and assumptions of NBG IRR methodology are in line with Basel standards
developed for IRR management purposes.
According to NBG guidelines the net interest income sensitivity under parallel shifts of interest rate scenarios is
maintained for monitoring purposes, while EVE sensitivity is calculated under 6 predefined stress scenarios of interest
rate changes and the limit is applied to the worst case scenario result.
Interest rate risk is managed by the Balance Sheet Management division and is monitored by the ALCO, which decides
on actions that are necessary for effective interest rate risk management and follows up on their implementation.
Financial Risk Management division is responsible for developing procedures, policy document and setting risk
appetite for interest rate risk. The major aspects of interest rate risk management development and the respective
reporting are periodically provided to the Management Board, the Supervisory Board’s Risk Committee.
Following main assumptions under NBG IRR Regulation and Basel 2016 guidelines, at 31 December, 2023, if market
interest rates for each currency had been 200 basis points higher, with all other variables held constant, profit would
have been equivalent GEL 24 million higher, mainly as a result of higher interest income on variable interest assets
(2022: GEL 84 million). If market interest rates for each currency at 31 December, 2023 had been 200 basis points lower
with all other variables held constant, profit for the year would have been equivalent GEL 42 million lower, mainly as a
result of lower interest income on variable interest assets (2022: GEL 78 million). Compared to the last year, in 2023 in
both of the scenarios the effects have been muted due to the reduction of variable interest assets over the year.
At 31 December, 2023, if interest rates had been 200 basis points lower, with all other variables held constant, other
comprehensive income would have been GEL 47.3 million higher (2022: GEL 35.6 million), as a result of an increase in
the fair value of fixed rate financial assets measured at fair value through other comprehensive income and repurchase
receivables. If interest rates at 31 December, 2023 had been 200 basis points higher with all other variables held
constant, Other comprehensive income would have been GEL 47.3 million lower (2022: GEL 35.6 million), as a result of
decrease in the fair value of fixed rate financial assets measured at fair value through other comprehensive income.
Liquidity Risk. The liquidity risk is the risk that TBC Bank either does not have sufficient financial resources available
to meet all of its obligations and commitments as they fall due or can access those resources only at a high cost.
The risk is managed by the Balance Sheet Management division and Treasury Department and is monitored by the
ALCO, within their pre-defined functions. Financial Risk Management (FRM) division is responsible for developing
procedures, policy document and setting risk appetite on funding and market liquidity risk management. In addition,
FRM performs liquidity risk assessment and communicates the results to the MB and Risk Committee of the
Supervisory Board on a regular basis.
The principal objectives of the TBC Bank’s liquidity risk management policy are to: (i) ensure the availability of funds in
order to meet claims arising from total liabilities and off-balance sheet commitments, both actual and contingent, at an
economic price; (ii) recognise any structural mismatch existing within TBC Bank’s statement of financial position and
set monitoring ratios to manage funding in line with well-balanced growth; and (iii) monitor liquidity and funding on an
on-going basis to ensure that approved business targets are met without compromising the risk profile of the Bank.
The liquidity risk is categorised into two risk types: the funding liquidity risk and the market liquidity risk.
Funding liquidity risk is the risk that TBC will not be able to efficiently meet both expected and unexpected current
and future cash flow and collateral needs without affecting either its daily operations or its financial condition. To
manage funding liquidity risk TBC Bank uses the Liquidity Coverage ratio and the Net Stable Funding ratio set, forth
under Basel III, and defined further by the NBG. In addition, the Bank performs stress tests and “what-if” scenario
analysis. For NBG LCR the limits are set by currency (GEL, FC, Total). TBC monitors compliance with NBG LCR limits on
a daily basis. On a monthly basis the Bank also monitors compliance with the set limit for NBG NSFR.
The Liquidity Coverage Ratio is used to help manage short-term liquidity risks. The Bank’s liquidity risk management
framework is designed to comprehensively project cash flows arising from assets, liabilities and off-balance sheet
items over certain time buckets and ensure that NBG LCR limits, are met on a daily basis.
256
257
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The maturity analysis of undiscounted financial liabilities as of 31 December 2023 is as follows:
in thousands of GEL
Due to credit institutions
Less than
3 months
From 3 to
12 months
From 1 to
5 Years
Over
5 years
Total
2,025,151
614,741
2,111,466
158,151
4,909,509
Customer accounts – individuals
6,837,847
2,316,324
770,225
94,784
10,019,180
Customer accounts – other
Other financial liabilities
Lease liabilities
Subordinated debt
Debt securities in issue
Gross settled swaps and forwards:
– Inflows
– Outflows
Performance guarantees
Financial guarantees
Letters of credit
Undrawn credit lines
8,502,324
519,089
1,121,045
190,490
10,332,948
249,622
10,108
15,219
9,957
23,951
71,053
16,917
-
276,496
80,264
22,019
136,342
618,564
696,276
1,401,112
11,972
1,024,816
346,658
20,147
1,403,593
(2,636,719)
(165,372)
(213,640)
2,681,271
167,390
229,544
1,692,739
516,119
-
-
135,347
164,018
1,049,014
-
-
-
11,118
-
-
-
-
-
-
-
(3,015,731)
3,078,205
1,692,739
516,119
310,483
1,049,014
Total potential future payments for financial
obligations
21,090,014
4,745,967
5,092,161
1,181,867
32,110,009
The maturity analysis of undiscounted financial liabilities as of 31 December 2022 is as follows:
in thousands of GEL
Due to credit institutions
Less than
3 months
From 3 to
12 months
From 1 to
5 Years
Over
5 years
Total
1,814,831
548,857
1,983,019
183,256
4,529,963
The undiscounted financial liability analysis gap does not reflect the historical stability of the current accounts. Their
liquidation has historically taken place over a longer period than the one indicated in the tables above. These balances
are included in amounts due in less than three months in the tables above.
Term deposits included in the customer accounts are classified based on remaining contractual maturities, however,
according to the Georgian Civil Code, individuals have the right to withdraw their deposits prior to maturity, if
they partially or fully forfeit their right to accrued interest and the Group is obliged to repay such deposits upon
the depositor’s demand. Based on the Bank’s deposit retention history, the Management does not expect that
many customers will require repayment on the earliest possible date. Accordingly, the table does not reflect the
Management’s expectations as to actual cash outflows.
The Group does not use the above undiscounted maturity analysis to manage liquidity as it shows contractual terms
purely and disregard the actual expected behaviour of the instruments. Instead, the Group monitors the liquidity
gap analysis based on the expected maturities. In particular, expected maturities disclosure include customers’
deposits and contingent liabilities according to their behavioural analysis, while for undiscounted cash flow disclosure
purposes, demand deposits are put in on demand bucket.
As at 31 December 2023 the analysis by expected maturities is as follows:
in thousands of GEL
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Less than
3 months
From 3 to
12 months
From 1 to
5 Years
Over
5 years
Total
3,691,232
10,029
1,572,506
-
446
-
-
-
-
-
3,691,232
660
11,135
-
1,572,506
Loans and advances to customers
1,901,522
4,065,620
8,610,524
6,380,866
20,958,532
Investment securities measures at fair value
through OCI
Finance lease receivables
Other financial assets
Total financial assets
3,475,461
-
-
-
3,475,461
48,516
242,829
75,836
36,720
192,381
54,062
370,795
2,312
-
281,861
10,942,095
4,178,622
8,805,217
6,435,588
30,361,522
Customer accounts – individuals
6,156,427
2,025,734
1,015,495
67,368
9,265,024
As at 31 December 2022 the analysis by expected maturities is as follows:
Customer accounts – other
Other financial liabilities
Lease liabilities
Subordinated debt
Debt securities in issue
Gross settled swaps and forwards:
– Inflows
– Outflows
Performance guarantees
Financial guarantees
Letters of credit
Undrawn credit lines
6,861,142
683,448
1,008,931
446,341
8,999,862
188,538
6,297
18,824
49,511
51,176
17,219
10,804
63,265
-
250,518
18,526
105,307
111,605
421,704
286,247
838,380
86,259
1,280,365
-
1,416,135
(2,599,378)
(279,912)
(58,148)
-
(2,937,438)
2,615,037
328,255
67,248
-
3,010,540
1,552,134
406,456
-
-
-
-
53,556
112,016
90,158
1,051,216
-
-
-
-
-
-
1,552,134
406,456
255,730
1,051,216
Total potential future payments for financial
obligations
18,174,591
3,684,657
5,882,841
1,001,738
28,743,827
in thousands of GEL
Cash and cash equivalents
Due from other banks
Less than
3 months
From 3 to
12 months
From 1 to
5 Years
Over
5 years
Total
3,786,098
-
-
4,326
-
1,327
-
-
3,786,098
645
6,298
-
2,047,564
Mandatory Cash Balances with NBG
2,047,564
-
Loans and advances to customers
1,637,240
3,108,636
7,189,586
5,561,980
17,497,442
Investment securities measures at fair value
through OCI
Repurchase receivables
Finance lease receivables
Other financial assets
Total financial assets
2,884,728
267,495
32,027
186,864
-
-
75,455
58,326
-
-
-
-
2,884,728
267,495
152,937
1,808
28,467
288,886
-
246,998
10,842,016
3,246,743
7,345,658
5,591,092 27,025,509
258
259
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
In alignment with internal liquidity management principles, the Group changed the presentation of expected
maturities for financial assets and liabilities, consolidating them into a single category spanning over 1 year.
As at 31 December 2023 the analysis by expected maturities is as follows:
in thousands of GEL
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measures at fair value through OCI
Finance lease receivables
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Less than
3 months
From 3 to
12 months
Over
1 years
Total
3,691,232
10,029
1,572,506
-
446
-
-
3,691,232
660
11,135
-
1,572,506
1,901,522
4,065,620
14,991,390
20,958,532
3,475,461
48,516
242,829
-
75,836
36,720
-
3,475,461
246,443
370,795
2,312
281,861
10,942,095
4,178,622
15,240,805
30,361,522
2,002,664
461,016
1,883,271
4,346,951
1,651,240
257,259
18,034,017
19,942,516
11,819
976,109
276,157
1,264,085
249,622
6,944
7,164
9,956
14,539
8,298
16,918
276,496
61,927
83,410
853,268
868,730
3,929,453
1,727,177
21,125,558
26,782,188
Net liquidity gap as of 31 December 2023
7,012,642
2,451,445
(5,884,753)
3,579,334
Cumulative gap as of 31 December 2023
7,012,642
9,464,087
3,579,334
As at 31 December 2022 the analysis by expected maturities is as follows:
in thousands of GEL
Cash and cash equivalents
Due from other banks
Mandatory Cash Balances with NBG
Loans and advances to customers
Less than
3 months
From 3 to
12 months
Over
1 years
Total
3,786,098
-
-
3,786,098
-
4,326
1,972
6,298
2,047,564
-
-
2,047,564
1,637,240
3,108,636
12,751,566
17,497,442
Investment securities measures at fair value through OCI
2,884,728
Repurchase receivables
Finance lease receivables
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
267,495
32,027
186,864
-
-
-
-
2,884,728
267,495
75,455
58,326
181,404
288,886
1,808
246,998
10,842,016
3,246,743
12,936,750
27,025,509
1,787,320
392,818
1,705,222
3,885,360
1,405,899
176,629
16,258,829
17,841,357
47,661
81,779
1,080,373
1,209,813
188,538
4,531
16,171
51,176
11,862
10,804
250,518
55,847
72,240
70,244
503,733
590,148
3,450,120
784,508
19,614,808
23,849,436
Net liquidity gap as of 31 December 2022
7,391,896
2,462,235
(6,678,058)
3,176,073
Cumulative gap as of 31 December 2022
7,391,896
9,854,131
3,176,073
-
The Management believes that the Group has sufficient liquidity to meet its current on- and off-balance sheet
obligations.
260
261
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
36. CONTINGENCIES AND COMMITMENTS
36. CONTINGENCIES AND COMMITMENTS CONTINUED
Legal and regulatory matters. When determining the level of provision to be set up with regards to such matters,
or the amount (not subject to provisioning) to be disclosed in the financial statements, the management seeks both
internal and external professional advice. The management believes that the provision recorded in these consolidated
financial statements is adequate and the amount (not subject to provisioning) need not be disclosed as it will not have
a material adverse effect on the financial condition or the results of future operations of the Group.
Tax legislation. Georgian and Azerbaijanian tax and customs legislation is subject to varying interpretations, and
changes, which can occur frequently. The management’s interpretation of the legislation as applied to the Group’s
transactions and activity may be challenged by the relevant authorities. In Azerbaijan, the tax review periods for the
five preceding calendar years remain open to review by authorities. In Georgia, the period of limitation for tax review
is three years. To respond to the risks, the Group has engaged external tax specialists to carry out periodic reviews
of Group’s taxation policies and tax filings. The Group’s management believes that its interpretation of the relevant
legislation is appropriate, and the Group’s tax and customs positions will be substantially sustained.
Compliance with covenants. The Group is subject to certain financial and non-financial covenants primarily related
to its debt. Non-compliance with such covenants may result in negative consequences for the Group including
mandatory prepayment and declaration of default. The Group was in compliance with all covenants as of 31 December
2023 and 31 December 2022.
Group’s financial covenants mainly consist of three major sub-categories. Key covenants within each category and
their compliance status are disclosed below:
Covenant Description
Liquidity
Net Stable Funding Ratio (NSFR)
Liquidity Coverage Ratio (LCR)
Net loan to deposit and funding ratio
Capital Adequacy
Tier 1 capital ratio
Total capital ratio
Asset Quality
Net problem loans to total capital
Status
Complied
Complied
Complied
Complied
Complied
Complied
For all financial covenants the Group has sufficient headroom for any potential violation risks to materialise.
Management of Capital. The Bank manages capital requirements under regulatory rules. The Bank complied with
all its imposed capital requirements for the year 2023 and 2022. Based on information provided internally to key
management personnel, the amount of capital that the Bank managed was GEL 4,235,033 thousand as of 31 December
2023 (2022: GEL 3,333,039 thousand), regulatory Tier 1 capital amounts to GEL 4,772,913 thousand (2022: GEL 3,873,439
thousand), total regulatory capital amounts to GEL 5,374,301 thousand (2022: GEL 4,561,525 thousand).
Credit related commitments and financial guarantees. The primary purpose of these instruments is to ensure that
funds are available to a customer as required. Financial guarantees and standby letters of credit, which represent the
irrevocable assurances that the Group will make payments in the event that a customer cannot meet its obligations to
third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, that are underwritten
by the Group on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount
under specific terms and conditions, are collateralised by the underlying shipments of goods to which they relate or
cash deposits and therefore carry less risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to prolong credit in the form of loans,
guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially
exposed to a loss in an amount equal to the total unused commitments. However, the likely amount of loss is lower than
the total unused commitments since most commitments to extend credit are contingent upon customers maintaining
specific credit standards. The Group monitors the term to maturity of credit related commitments because longer-
term commitments generally have a greater degree of credit risk than shorter-term ones.
As of 31 December 2023, outstanding credit related commitments presented by stages are as follows:
in thousands of GEL
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Total credit related commitments (before provision)
Credit loss allowance for credit related commitments
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Stage 1
1,031,588
283,671
509,835
1,825,094
(1,268)
(428)
(783)
(2,479)
Stage 2
13,388
-
1,139
14,527
(219)
-
-
(219)
Stage 3
4,039
-
723
4,762
-
-
-
-
Total credit related commitments
1,822,615
14,308
4,762
As of 31 December 2022, outstanding credit related commitments presented by stages are as follows:
in thousands of GEL
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Total credit related commitments (before provision)
Credit loss allowance for credit related commitments
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Total credit related commitments
Stage 1
1,008,262
232,066
399,820
1,640,148
(1,531)
(436)
(799)
(2,766)
1,637,382
Stage 2
40,296
-
1,044
41,340
(364)
-
-
(364)
40,976
Stage 3
2,667
-
50
2,717
(47)
-
-
(47)
2,670
262
263
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023 36. CONTINGENCIES AND COMMITMENTS CONTINUED
36. CONTINGENCIES AND COMMITMENTS CONTINUED
The credit quality of contingencies and commitments is as follows at 31 December 2023:
The credit quality of contingencies and commitments is as follows at 31 December 2022:
31 December 2023
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for defaulted)
Total
in thousands of GEL
Undrawn credit lines risk category
31 December 2022
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for defaulted)
in thousands of GEL
Undrawn credit lines risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Letters of credit issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Financial guarantees issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
978,851
48,596
4,140
1
-
1,031,588
(1,268)
1,030,320
283,671
-
-
-
-
283,671
(428)
283,243
508,916
891
28
-
-
509,835
(783)
509,052
3,999
4,454
3,895
1,040
-
13,388
(219)
13,169
-
-
-
-
-
-
-
-
-
1,139
-
-
-
1,139
-
1,139
-
-
-
-
4,039
4,039
982,850
53,050
8,035
1,041
4,039
1,049,015
-
(1,487)
4,039
1,047,528
-
-
-
-
-
-
-
-
-
-
-
-
723
723
-
723
283,671
-
-
-
-
283,671
(428)
283,243
508,916
2,030
28
-
723
511,697
(783)
510,914
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Letters of credit issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Financial guarantees issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
935,349
68,729
4,181
3
-
1,008,262
(1,531)
1,006,731
232,066
-
-
-
-
232,066
(436)
231,630
397,358
2,462
-
-
-
399,820
(799)
399,021
870
32,329
6,104
993
-
40,296
(364)
39,932
-
-
-
-
-
-
-
-
-
1,044
-
-
-
1,044
-
1,044
Total
936,219
101,058
10,285
996
2,667
1,051,225
(1,942)
-
-
-
-
2,667
2,667
(47)
2,620
1,049,283
-
-
-
-
-
-
-
-
-
-
-
-
50
50
-
50
232,066
-
-
-
-
232,066
(436)
231,630
397,358
3,506
-
-
50
400,914
(799)
400,115
264
265
The total outstanding contractual amount of undrawn credit lines, letters of credit, and guarantees does not
necessarily represent future cash requirements, as these financial instruments may expire or terminate without being
funded. Non-cancellable commitments as of 31 December 2023 were 293,278 GEL thousand (2022: 313,199 GEL
thousand).
Performance guarantees. Performance guarantees are contracts that provide compensation in case of another party
fails to perform a contractual obligation.
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
36. CONTINGENCIES AND COMMITMENTS CONTINUED
36. CONTINGENCIES AND COMMITMENTS CONTINUED
As of 31 December 2023, outstanding performance guarantees presented by stages are as follows:
Fair value of credit related commitments was GEL 2,698 thousand as of 31 December 2023 (2022: GEL 3,177 thousand).
Total credit related commitments and performance guarantees are denominated in currencies as follows:
in thousands of GEL
Outstanding amount
Credit loss allowance
Total performance guarantees
Stage 1
1,602,884
(2,462)
1,600,422
Stage 2
2,804
(7)
2,797
As of 31 December 2022, outstanding performance guarantees presented by stages are as follows:
in thousands of GEL
Outstanding amount
Credit loss allowance
Total performance guarantees
Stage 1
1,495,335
(2,997)
1,492,338
Stage 2
12,704
(4)
12,700
The credit quality of performance guarantees is as follows at 31 December 2023:
in thousands of GEL
Performance guarantees risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for defaulted)
1,584,657
18,152
75
-
-
1,602,884
(2,462)
1,600,422
-
1,411
1,393
-
-
2,804
(7)
2,797
-
-
-
-
29,230
29,230
29,230
1,634,918
(6,126)
(8,595)
23,104
1,626,323
Stage 3
29,230
(6,126)
23,104
Stage 3
15,831
(4,204)
11,627
Total
1,584,657
19,563
1,468
-
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
2023
2022
1,681,587
1,457,633
1,138,414
1,195,206
569,022
484,040
90,278
71,196
3,479,301
3,208,075
Capital expenditure commitments. As of 31 December 2023, the Group has contractual capital expenditure
commitments amounting to GEL 91,056 thousand (2022: GEL 131,983 thousand). Out of total amount as at 31 December
2023, contractual commitments related to the head office construction amounted GEL 54,348 thousand (2022: GEL
105,623 thousand).
37. NON-CONTROLLING INTEREST
The following table provides information for each subsidiary with a non-controlling interest as of 31 December 2023:
in thousands of GEL
Proportion of non-controlling
interest’s voting rights held
Profit attributable to
non-controlling interest
Accumulated non-controlling
interest in the subsidiary
United Financial Corporation JSC
0.47%
33
197
The summarised financial information of these subsidiaries for the year ended 31 December 2023 was:
in thousands of GEL
United Financial
Corporation JSC
Current
assets
Non-
current
assets
Current
liabilities
Non-
current
liabilities Revenue
Profit
Total
comprehensive
income
Net cash
flows
2,972
31,507
3,736
1,155
21,653
9,549
9,549
106
The credit quality of performance guarantees is as follows at 31 December 2022:
The following table provides information for each subsidiary with a non-controlling interest as of 31 December 2022:
in thousands of GEL
Performance guarantees risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
266
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for defaulted)
1,466,676
21,143
7,495
21
-
1,495,335
(2,997)
1,492,338
-
2,749
9,955
-
-
12,704
(4)
12,700
-
-
-
-
15,831
15,831
(4,204)
11,627
Total
1,466,676
23,892
17,450
21
15,831
1,523,870
(7,205)
1,516,665
in thousands of GEL
Proportion of non-controlling
interest’s voting rights held
Profit attributable to
non-controlling interest
Accumulated non-controlling
interest in the subsidiary
United Financial Corporation JSC
0.47%
25
164
The summarised financial information of these subsidiaries for the year ended 31 December 2022 was:
in thousands of GEL
United Financial
Corporation JSC
Current
assets
Non-
current
assets
Current
liabilities
Non-
current
liabilities Revenue
Profit
Total
comprehensive
income
Net cash
flows
2,284
22,314
3,429
1,178
14,886
3,400
3,400
(457)
267
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
38. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
38. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES CONTINUED
As of 31 December 2023, financial instruments subject to offsetting, enforceable master netting and similar
arrangements were as follows:
As of 31 December 2022, financial instruments subject to offsetting, enforceable master netting and similar
arrangements were as follows:
Gross amounts
before
offsetting in
the statement
of financial
position
(a)
Gross
amounts set
off in the
statement
of financial
position
(b)
Net
amount after
offsetting in
the statement
of financial
position
(c)=(a)-(b)
Amounts subject to
master netting and similar
arrangements not set off
in the statement of
financial position
Cash collateral
received
(e)
Financial
instruments
(d)
Net amount of
exposure
(c)-(d)-(e)
73,056
73,056
34,628
34,628
-
-
-
-
73,056
34,628
73,056
34,628
34,628
34,628
34,628
34,628
-
-
-
-
38,428
38,428
-
-
in thousands of GEL
Assets
Other financial assets
– Receivables on credit
card services and money
transfers*
Assets subject to
offsetting, master netting
and similar arrangement
Other financial liabilities
– Payables on credit card
services and money
transfers*
Liabilities subject to
offsetting, master netting
and similar arrangement
Gross amounts
before
offsetting in
the statement
of financial
position
(a)
Gross
amounts set
off in the
statement
of financial
position
(b)
Net
amount after
offsetting in
the statement
of financial
position
(c)=(a)-(b)
Amounts subject to
master netting and similar
arrangements not set off
in the statement of
financial position
Cash collateral
received
(e)
Financial
instruments
(d)
Net amount of
exposure
(c)-(d)-(e)
267,495
-
267,495
262,415
370,022
-
370,022
370,022
-
-
5,080
-
46,724
-
46,724
22,785*
-
23,939*
684,241
-
684,241
655,222* - 29,019*
262,415
-
262,415
262,415
-
22,785
-
22,785
22,785*
285,200
-
285,200
285,200*
-
-
-
-*
-*
in thousands of GEL
Assets
Investment securities
measured at FVOCI sold
under sale and repurchase
agreements
Reverse sale and
repurchase agreements
with other banks with
original maturities of less
than three months
Other financial assets
-Receivables on credit
card services and money
transfers
Assets subject to
offsetting, master netting
and similar arrangement
Liabilities
Sales and repurchase
agreements
Other financial liabilities
- Payables on credit card
services and money
transfers
Liabilities subject to
offsetting, master netting
and similar arrangement
* Starting from 2023 the management decided to change the presentation of financial instruments subject to offsetting for receivables and payables on
credit card services and money transfers and showed net amount of exposure. As the Group currently does not have a legally enforceable right to set off
the recognised amounts, however amounts are settled on a net basis in practice.
The amount set off in the statement of financial position reported in column (b) is the lower of (i) the gross amount
before offsetting reported in column (a) and (ii) the amount of the related instrument that is eligible for offsetting.
Similarly, the amounts in columns (d) and (e) are limited to the exposure reported in column (c) for each individual
instrument in order not to understate the ultimate net exposure.
Deposits placed with other banks and deposits received from other banks as part of gross settled currency swap
arrangements have been netted-off in these financial statements and the instrument has been presented as either
asset or liability at a fair value.
The disclosure does not apply to loans and advances to customers and related customer deposits unless they are
netted-off in the statement of financial position.
268
269
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTMANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023
39. DERIVATIVE FINANCIAL INSTRUMENTS
40. FAIR VALUE DISCLOSURES
In the normal course of business, the Group enters into various derivative financial instruments, to manage currency,
(a) Recurring fair value measurements
in thousands of GEL
Fair value of foreign exchange forwards and gross settled currency swaps, included in
other financial assets or due from other banks
Fair value of foreign exchange forwards and gross settled currency swaps, included in
other financial liabilities
Total
2023
2022
41,038
69,921
(62,474)
(73,102)
(21,436)
(3,181)
liquidity and interest rate risks and for trading purposes.
Foreign Exchange Forwards and gross settled currency swaps. Foreign exchange derivative financial instruments the
Group entered are generally traded in an over-the-counter market with professional counterparties on standardised
contractual terms and conditions. Derivatives have potentially favourable (assets) or unfavourable (liabilities)
conditions as a result of fluctuations in market interest rates, foreign exchange rates or other variables relative to their
terms. The aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to
time.
The table below sets out fair values, at the balance sheet date, of currencies receivable or payable under foreign
exchange forwards contracts and gross settled currency swaps the Group entered. The table reflects gross positions
before the netting of any counterparty positions (and payments) and covers the contracts with settlement dates after
the respective balance sheet date.
in thousands of GEL
Foreign exchange forwards and gross settled currency swaps: fair
values, at the balance sheet date, of
– USD payable on settlement (-)
– USD receivable on settlement (+)
– GEL payable on settlement (-)
– GEL receivable on settlement (+)
– EUR payable on settlement (-)
– EUR receivable on settlement (+)
– Other payable on settlement (-)
– Other receivable on settlement (+)
Fair value of foreign exchange forwards and gross settled currency
swaps
Net fair value of foreign exchange forwards and gross settled
currency swaps
2023
Contracts
with
positive
fair value
Contracts
with
negative
fair value
Contracts
with
positive
fair value
2022
Contracts
with
negative
fair value
(1,191,584)
(559,424) (1,043,758)
(103,669)
68,788 2,345,437
69,042
2,758,993
(47,973)
(181,665)
(53,019)
(408,702)
1,084,087
549,659 1,002,936
130,514
(33,344)
(2,309,183)
(16,534)
(2,489,689)
132,593
93,920
142,774
39,931
(45,828)
(40,093)
(35,729)
74,299
38,875
4,209
(913)
433
41,038
(62,474)
69,921
(73,102)
(21,436)
(3,181)
Recurring fair value measurements are those that the accounting standards require or permit in the statement of
financial position at the end of each reporting period. The level in the fair value hierarchy into which the recurring fair
value measurements are categorised as follows:
in thousands of GEL
Level 1
Level 2 Level 3
Total fair
Value
Carrying
value Level 1
Level 2 Level 3
Total fair
value
Carrying
value
31-Dec-23
31-Dec-22
Assets carried at fair value
Financial assets
Investment securities measured at fair value through other comprehensive income
– Corporate Bonds
40,466
1,184,535
-
1,225,001
1,225,001 36,630
1,254,755
- 1,291,385 1,291,385
– Foreign government
treasury bills
– Ministry of Finance of
Georgia Treasury Bills
– Repurchase receivables
– Corporate shares
303,850
1,944,132
-
-
-
-
-
-
-
-
-
303,850
303,850 35,583
-
-
35,583
35,583
1,944,132
1,944,132
4,420
1,552,675
- 1,557,095 1,557,095
-
- 267,495
2,478
2,478
2,478
-
-
-
-
267,495
267,495
665
665
665
Investment securities measured at fair value through profit and loss
– Foreign exchange
forwards and gross
settled currency swaps,
included in other
financial assets or due
from banks
– Investment held at fair
value through profit or
loss
Total assets recurring fair
value measurements
Liabilities carried at fair
value
Financial liabilities
Foreign exchange forwards
and gross settled currency
swaps, included in other
financial liabilities
Total liabilities recurring
fair value measurements
-
41,038
-
41,038
41,038
-
69,921
-
69,921
69,921
-
-
8,062
8,062
8,062
-
-
9,704
9,704
9,704
2,288,448 1,225,573 10,540
3,524,561
3,524,561 344,128 2,877,351 10,369 3,231,848 3,231,848
-
62,474
-
62,474
62,474
-
73,102
-
73,102
73,102
-
62,474
-
62,474
62,474
-
73,102
-
73,102
73,102
270
271
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
40. FAIR VALUE DISCLOSURES CONTINUED
40. FAIR VALUE DISCLOSURES CONTINUED
There were no transfers between levels 1 , 2 and 3 during the year ended 31 December 2023 (2022 none).
(b) Assets and liabilities not measured at fair value but for which fair value is disclosed
The description of the valuation technique and the description of inputs used in the fair value measurement for level 2
measurements:
Fair values analysed by level in the fair value hierarchy and carrying value of assets not measured at fair value are as
follows:
in thousands of GEL
Assets carried at fair value
– Ministry of Finance of Georgia
Treasury Bills, foreign government
treasury bills, corporate bonds
– Foreign exchange forwards and
gross settled currency swaps,
included in due from banks
Total assets recurring fair value
measurements at level 2
Liabilities carried at fair value
– Foreign exchange forwards
included in other financial liabilities
Total liabilities recurring fair value
measurements at level 2
Fair value at 31 December
2023
2022
Valuation technique
Inputs used
1,184,535
2,807,430
Discounted cash flows
(“DCF”)
Government bonds
yield curve
41,038
69,921
1,225,573
2,877,351
62,474
73,102
62,474
73,102
Forward pricing
using present value
calculations
Official exchange
rate, risk-free rate
Forward pricing
using present value
calculations
Official exchange
rate, risk-free rate
The description of the valuation technique and the description of inputs used in the fair value measurement for level 3
measurements:
Fair value at 31
December
in thousands of GEL
2023
2022
Valuation technique
Inputs used
Unobservable
inputs
Assets carried at fair value
– Investment held at fair value
through profit or loss
8,062
9,704
Discounted cash flows
(“DCF”)
Weighted average
borrowing interest
rate
Cash flow
– Corporate shares
2,478
665
Discounted cash flows
(“DCF”)
Government bonds
yield curve
Cash flow
Total assets recurring fair value
measurements at level 3
10,540
10,369
There were no changes in the valuation technique for the level 2 and level 3 recurring fair value measurements during
the year ended 31 December 2023 (2022: none).
Sensitivity of the input to fair value – increase/(decrease) in projected cash flows by 10% would result in increase/
(decrease) in fair value by GEL 292 thousand/ (GEL 292 thousand).
Fair value measurement analysis by level in the fair value hierarchy is disclosed in Note 2.
in thousands of GEL
Financial assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers:
– Corporate loans
– Consumer loans
– Mortgage loans
– Loans to micro, small and medium
enterprises
Finance lease receivables
Other financial assets
Non-financial assets
Investment properties, at cost
Total assets (excluding assets with no fair
value hierarchy)
Financial liabilities
Customer accounts
Debt securities in issue
Due to credit institutions
Other financial liabilities
Subordinated debt
Total liabilities (excluding liability with no
fair value hierarchy)
Performance guarantees
Financial guarantees
Credit related commitments
Total credit related commitments and
performance guarantees
Level 1
Level 2
Level 3 Total fair Value Carrying value
31 December 2023
936,988
2,754,244
11,135
1,572,506
-
-
-
3,691,232
3,691,232
11,135
11,135
1,572,506
1,572,506
-
-
-
-
-
-
8,312,499
2,925,207
5,156,836
8,312,499
8,210,100
2,925,207
2,667,907
5,156,836
4,702,477
5,489,839
5,489,839
5,378,048
354,884
232,761
354,884
232,761
370,795
232,761
-
-
-
-
-
-
-
-
936,988
4,337,885
22,493,929
27,768,802
26,852,196
21,903
21,903
15,235
-
13,628,412
6,312,485
19,940,897
19,942,516
1,250,981
-
-
-
-
-
-
-
-
1,250,981
1,264,085
4,345,484
4,345,484
4,346,951
297,432
860,433
297,432
860,433
297,432
868,730
1,250,981
13,628,412
11,815,834
26,695,227
26,719,714
-
-
-
-
-
-
-
-
8,595
783
1,915
8,595
783
1,915
8,595
783
1,915
11,293
11,293
11,293
272
273
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
40. FAIR VALUE DISCLOSURES CONTINUED
41. PRESENTATION OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY
Level 1
Level 2
Level 3 Total fair Value Carrying value
31 December 2022
The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31
December 2023:
1,224,265
4,615,695
19,052,623
24,892,583
23,815,815
The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31
December 2022:
Cash and cash equivalents
1,224,265
2,561,833
in thousands of GEL
Financial assets
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers:
– Corporate loans
– Consumer loans
– Mortgage loans
– Loans to micro, small and medium
enterprises
Finance lease receivables
Other financial assets
Non-financial assets
Investment properties, at cost
Total assets (excluding assets with no fair
value hierarchy)
Financial liabilities
Customer accounts
Debt securities in issue
Due to credit institutions
Other financial liabilities
Subordinated debt
Total liabilities (excluding liability with no
fair value hierarchy)
Performance guarantees
Financial guarantees
Credit related commitments
Total credit related commitments and
performance guarantees
-
-
6,298
2,047,564
-
-
-
3,786,098
3,786,098
6,298
6,298
2,047,564
2,047,564
-
-
-
-
-
-
-
-
-
-
-
-
6,336,111
2,662,334
4,863,317
6,336,111
6,236,011
2,662,334
2,328,868
4,863,317
4,219,260
4,708,953
4,708,953
4,713,303
288,852
167,373
288,852
167,373
288,886
167,373
25,683
25,683
22,154
-
12,241,574
5,585,966
17,827,540
17,841,357
1,188,684
-
-
-
-
-
-
-
-
1,188,684
1,209,813
3,880,943
3,880,943
3,885,360
249,656
587,218
249,656
587,218
249,656
590,148
1,188,684
12,241,574
10,303,783
23,734,041
23,776,334
-
-
-
-
-
-
-
-
7,205
799
2,378
7,205
799
2,378
7,205
799
2,378
10,382
10,382
10,382
The fair values in the level 2 and the level 3 of fair value hierarchy were estimated using the discounted cash flows
valuation technique. The fair value of unquoted fixed interest rate instruments was calculated based on estimated
future cash flows expected to be received discounted at current interest rates for new instruments with similar credit
risk and remaining maturity. The fair value of investment properties was estimated using market comparatives.
Amounts due to credit institutions were discounted at the Group’s own incremental borrowing rate. Liabilities due
on demand were discounted from the first date that the Group could be required to pay the amount. Amounts due to
credit institutions, subordinated debt and other financial liabilities were moved from level 2 to level 3. There were no
changes in the valuation technique for the level 2 and level 3 measurements of assets and liabilities not measured at
fair values in the year ended 31 December 2023 (2022: none).
in thousands of GEL
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measured at FVOCI
Other financial assets
Total financial assets subject to IFRS
9 measurement categories
Finance lease receivables
Non-financial assets
Total assets
Amortised
cost
Fair value through other
comprehensive income
Fair value through
profit or loss
Total
3,691,232
11,135
1,572,506
20,958,532
-
232,761
-
-
-
-
3,475,461
-
-
-
-
-
3,691,232
11,135
1,572,506
20,958,532
3,475,461
-
49,100
281,861
26,466,166
3,475,461
49,100
29,990,727
-
-
-
-
-
-
370,795
1,409,614
26,466,166
3,475,461
49,100
31,771,136
in thousands of GEL
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measured at FVOCI
Repurchase receivable
Other financial assets
Total financial assets subject to IFRS 9
measurement categories
Finance lease receivables
Non-financial assets
Total assets
Amortised
cost
Fair value through other
comprehensive income
Fair value through
profit or loss
Total
3,786,098
6,298
2,047,564
17,497,442
-
-
167,373
-
-
-
-
2,884,728
267,495
-
-
-
-
-
-
-
79,625
3,786,098
6,298
2,047,564
17,497,442
2,884,728
267,495
246,998
23,504,775
3,152,223
79,625
26,736,623
-
-
-
-
-
-
288,886
1,303,501
23,504,775
3,152,223
79,625
28,329,010
For the measurement purposes, IFRS 9, classifies financial assets into the categories discussed in Note 2.
As of 31 December 2023 and 2022 all of the Group’s financial liabilities except for derivatives are carried at amortised
cost. Derivatives belong to the assets fair value through profit or loss measurement category under IFRS 9.
274
275
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
42. RELATED PARTY TRANSACTIONS
42. RELATED PARTY TRANSACTIONS CONTINUED
Pursuant to IAS 24 “Related Party Disclosures”, parties are generally considered to be related if the parties are under
common control or one party has the ability to control the other or it can exercise significant influence over the other
party in taking financial or operational decisions. In considering each possible related party relationship, attention is
directed to the substance of the relationship, not merely the legal form:
• Parties with material ownership stake (more than 5% beneficial ownership stake for 2023 and 2022) in the Group or
with representatives in the Board of Directors are considered as Significant Shareholders.
• The key management personnel includes the Management Board of the Bank.
• Related parties not included in significant shareholders and key management personnel are presented in other
related parties.
Transactions between Group and its subsidiaries also meet the definition of related party transactions.
As at 31 December 2023 and 2022 the Group’s outstanding balances with related parties were as follows:
Contractual
interest rate
Significant
shareholders
Key
management
personnel
Other
related
parties
Associates
Immediate
parent
Companies
under
common
control
in thousands of GEL
2023
Gross amount of
loans and advances to
customers
Credit loss allowance
for loans and advances
to customers
Guarantees
2022
Gross amount of
loans and advances to
customers
Credit loss allowance
for loans and advances
to customers
3.9%-36.0%
–
–
–
169
–
5,655
1,461
–
1
–
–
–
–
–
–
6,693
26,425
4,386
99,075
47,791
Customer accounts
0%-12.4%
–
–
–
4.4%-36.0%
–
6,097
1,135
–
–
3
–
–
–
–
–
–
–
223
–
–
Customer accounts
0%-12.5%
1,248
25,106
51,490
4,341
90,358
45,442
Guarantees
–
–
–
–
–
–
357
The Group’s income and expense items with related parties except from key management compensation for the year
2023 and 2022 were as follows:
Significant
shareholders
Key
management
personnel
Other related
parties
Associates
Immediate
parent
Companies
under
common
control
in thousands of GEL
2023
Interest income - loans and
advances to customers
Interest expense
Fee and commission income
Administrative and other
operating expenses (excluding
staff costs)
2022
Interest income - loans and
advances to customers
Interest expense
Fee and commission income
Administrative and other
operating expenses (excluding
staff costs)
-
24
8
-
-
10
6
–
248
348
18
727
287
359
21
443
109
610
148
795
93
948
134
400
-
183
2
-
–
140
2
-
-
9,280
8
-
-
2,568
482
-
The aggregate loan amounts disbursed to and repaid by related parties during 2023 and 2022 were as follows:
in thousands of GEL
Significant shareholders
Key management
personnel
2023
Amounts disbursed to related parties during
the year
Amounts repaid by related parties during
the year
2022
Amounts disbursed to related parties during
the year
Amounts repaid by related parties during
the year
218
(218)
43
(59)
2,081
(2,882)
2,007
(2,233)
-
5,060
1,625
-
-
3,691
747
-
Other
related
parties
2,543
(2,337)
934
(1,197)
276
277
MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
42. RELATED PARTY TRANSACTIONS CONTINUED
42. RELATED PARTY TRANSACTIONS CONTINUED
As of 31 December 2023 and 2022 transactions and balances of JSC TBC Bank with its subsidiaries were as follows:
Compensation of the key management personnel and Supervisory Board members is presented below:
in thousands of GEL
Salaries and short-term bonuses
Equity-settled share-based compensation
Total
2023
2022
Expense
Accrued liability
Expense Accrued liability
10,666
11,695
22,361
–
–
–
12,340
16,888
29,228
–
–
–
in thousands of GEL
31 December 2023
31 December 2022
Gross amount of loans and advances granted to subsidiaries
Customer accounts of subsidiaries
Other Financial Assets
Other Financial Liabilities
Investment in subsidiaries
20,082
172,587
101,945
6,681
31,453
19,492
135,236
66,276
4,761
31,513
The income and expense items for JSC TBC Bank with its subsidiaries were as follows:
in thousands of GEL
Interest income
Interest expense
Fee and commission income
Fee and commission expense
Other operating income
Administrative and other operating expense
2023
4,908
7,885
11,761
2022
3,705
6,487
8,792
48,347
32,593
21,311
3,974
5,876
5,466
As of 31 December 2023 and 2022 detailed breakdown of TBC Bank’s investment in subsidiaries and associates is as
follows:
in thousands of GEL
TBC Kredit LLC
TBC Leasing JSC
CreditInfo Georgia JSC
United Financial Corporation JSC
TBC Invest-Georgia LLC
TBC Capital LLC
TBC Asset Management LLC
TBC Pay LLC
Index LLC
2023
12,760
11,777
3,007
2,275
1,883
1,838
850
70
-
2022
12,760
11,777
2,528
2,275
1,883
1,938
750
70
60
Investment in subsidiaries and associates*
34,460
34,041
*Considering the immaterial movement between the years no detailed disclosure is made for changes compared to the prior year.
As of 31 December 2023 and 2022 detailed breakdown of the Group’s investment in associates is as follows:
in thousands of GEL
Creditinfo Georgia JSC
Georgian Stock Exchange JSC
Tbilisi Stock Exchange JSC
Investment in associates*
2023
3,007
202
995
4,204
2022
2,528
202
991
3,721
*Considering the immaterial movement between the years no detailed disclosure is made for changes compared to the prior year.
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION 43. EVENTS AFTER REPORTING PERIOD
On 15 February 2024 TBC Bank JSC has declared a final dividend for the year 2023 of GEL 7.46 per TBC Bank JSC
share.
A FULL LIST OF RELATED UNDERTAKINGS AND THE COUNTRY OF INCORPORATION IS SET OUT BELOW.
Company Name
JSC TBC Bank
7 Marjanishvili Street, 0102, Tbilisi, Georgia
Country of incorporation
United Financial Corporation JSC
154 Agmashenebeli Avenue, 0112, Tbilisi, Georgia
TBC Capital LLC
TBC Leasing JSC
TBC Kredit LLC
TBC Pay LLC
TBC Invest LLC
TBC Invest International Ltd
University Development Fund
CreditInfo Georgia JSC
Natural Products of Georgia LLC
Mobi Plus JSC
Mineral Oil Distribution Corporation JSC
Georgian Card JSC
11 Chavchavadze Avenue, 0179, Tbilisi, Georgia
76 Chavchavadze Avenue, 0162,, Tbilisi, Georgia
71-77, 28 May Street, AZ1010, Baku, Azerbaijan
7 Marjanishvili Street, 0102, Tbilisi, Georgia
7 Jabonitsky street, , 52520, Tel Aviv, Israel
7 Marjanishvili Street, 0102, Tbilisi, Georgia
1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
2 Tarkhnishvili street, 0179, Tbilisi, Georgia
1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
45 Vazha Pshavela Street, 0177, Tbilisi, Georgia
11 Tskalsadeni Street, 0153, Tbilisi, Georgia
106 Beliashvili Street, 0159, Tbilisi Georgia
Georgian Central Securities Depositor JSC
74 Chavchavadze Avenue, 0162, Tbilisi, Georgia
Givi Zaldastanishvili American Academy In Georgia JSC
37 Chavchavadze Avenue, 0162, Tbilisi Georgia
United Clearing Centre
5 Sulkhan Saba Street, 0105, Tbilisi, Georgia
Banking and Finance Academy of Georgia
123, Agmashenebeli Avenue, 0112, Tbilisi, Georgia
Tbilisi's City JSC
TBC Trade LLC
Tbilisi Stock Exchange JSC
Georgian Stock Exchange JSC
Kavkasreestri JSC
TBC Asset Management LLC
Swift
Diversified Credit Portfolio JSC
Globally Diversified bond fund JSC
15 Rustaveli Avenue, 0108, Tbilisi Georgia
11A Chavchavadze Ave, 0179, Tbilisi, Georgia
floor 2th block 8, 71 Vazha Pshavela Ave, Tbilisi, Georgia
74a chavchavadzis avenue, vake-saburtalo, Tbilisi, Georgia
74a chavchavadzis avenue, vake-saburtalo, Tbilisi, Georgia
7 Marjanishvili Street, 0102, Tbilisi, Georgia
1 Adele Avenue, B-1310, La Hulpe, Belgium
7 Marjanishvili Street, 0102, Tbilisi, Georgia
7 Marjanishvili Street, 0102, Tbilisi, Georgia
280
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION r
e
t
p
a
h
C
4 Additional
Information
TBC Bank Group PLC
TBC Capital
TBC Invest
TBC JSC
TBC Leasing
TBC Pay
TBC PLC
TBCG
A public limited company registered in England and Wales. It is the parent company
of JSC TBC Bank (the Bank) and a group of companies that principally operate in
Georgia in the financial sector. It also offers non-financial services via TNET, the
largest digital ecosystem in Georgia. Since 2019, It has expanded its operations into
Uzbekistan by operating fast growing retail digital financial services in the country.
TBC Bank Group PLC is listed on the London Stock Exchange under the symbol
TBCG
TBC Capital LLC
TBC Invest LLC
TBC Bank JSC
TBC Leasing JSC
TBC Pay LLC
TBC Bank Group PLC
TBC Bank Group PLC
GLOSSARY
Bank
Chairman
Code
Company
Joint Stock Company TBC Bank
Chairman of Supervisory Board of TBC Bank JSC
The UK Corporate Governance Code
TBC Bank Group JSC
Conversion rate
Number of loans disbursed from generated leads
Corporate and Investment Banking (CIB)
segment
DAU/MAU
A legal entity/group of affiliated entities with an annual revenue exceeding GEL 15.0
million or which has been granted facilities of more than GEL 6.0 million. Some other
business customers may also be assigned to the CIB segment or transferred to the
micro, small and medium enterprises (MSME) segment on a discretionary basis.
In addition, CIB includes wealth management (WM) private banking services to
high-net-worth individuals (HNWI) with a threshold of US$ 250,000 on assets under
management (AUM), as well as on discretionary basis
Average daily active digital users divided by monthly active digital users. DAU/MAU is
calculated for the Bank internet and mobile banking only
Digital daily active users (DAU)
Monthly average number of individual digital users who logged into our digital
channels at least once per day
Digital monthly active users (MAU)
An individual user who logged into the digital application at least once during the
month
ENPS (Employee Net Promoter Score)
The employee net promoter score measures employee loyalty and reflects the
likelihood of our colleagues recommending their workplace to their friends and family
ESG and Ethics Committee
ESG Committee
Committee at the Board level to support and advise the Supervisory Board in its
oversight of the ESG and climate-related matters
Committee at the executive management level to support and advise the
management of TBC Bank in its oversight of the ESG and climate-related matters
Executive Management
Executive Management of Joint Stock Company TBC Bank
Group
TBC Bank JSC and its subsidiary companies
Growth at constant currency basis
Refers to growth at fixed exchange rate of the starting period
Lead
A potential client who has expressed interest in the product
Monthly active cardholder (MACH)
Number of retail customers who made at least one transaction with a TBC card at
least once a month
Micro loans
Includes collateralised business and agri loans up to GEL 1 million, as well as micro
businesses with a maximum turnover of GEL 2 million
MSME (Micro, Small and Medium) segment Business customers (legal entities and private individual customers that generate
income from business activities) who are not included in the CIB segment
MSME monthly active customers
NPS (Net Promoter Score)
MSME legal entity that used Business mBank or iBank at least once, or had at least
one active credit product, or performed at least one debit transaction, or had any type
of deposit with a balance above a certain threshold
Net promoter score measures how willing customers are to recommend our products
and services to others
Retail monthly active customers
For Georgian business, an individual user who has at least one active product as of the
reporting date or performed at least one transaction during the past month.
Retail segment
Supervisory Board
Non-business individual customers
Supervisory Board of Joint Stock Company TBC Bank
TBC Asset Management
TBC Asset Management JSC
TBC Bank
TBC Bank Group JSC and its subsidiary companies
284
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTS ALTERNATIVE PERFORMANCE MEASURES
The Group utilises a wide range of alternative performance measures (APMs) to assess the Group’s performance.
These measures can be grouped under the following headings:
• Profitability
• Asset quality & portfolio concentration
• Capital & liquidity positions
Certain performance measures are calculated on standalone basis for the Bank only in order to highlight the
performance of the Bank, which is the major subsidiary of the Group, as well as facilitate peer comparison.
The regulatory performance measures are calculated in accordance with NBG’s requirements for the Bank only based
on local accounting standards.
Term
#
Type
Definition
Profitability
ROE
ROA
Cost to income
1
2
3
IFRS based
IFRS based
IFRS based
NIM
4
IFRS based
Loan yields
Deposit rates
Cost of funding
5
6
7
IFRS based
IFRS based
IFRS based
Asset quality & portfolio concetration
Cost of risk
PAR 90
to gross loans
NPLs
to gross loans
8
9
IFRS based
IFRS based
10 IFRS based
Return on average total equity (ROE) equals profit attributable to owners divided by the
monthly average of total shareholders’ equity attributable to the PLC’s equity holders for
the same period; annualised where applicable.
Return on average total assets (ROA) equals profit of the period divided by monthly
average total assets for the same period; annualised where applicable.
Cost to income ratio equals total operating expenses for the period divided by the total
revenue for the same period. (Revenue represents the sum of net interest income, net fee
and commission income and other non-interest income).
Net interest margin (NIM) is net interest income divided by monthly average interest-
earning assets; annualised where applicable. Interest-earning assets include investment
securities (excluding CIB shares), net investment in finance lease, net loans, and amounts
due from credit institutions.
Loan yields equal interest income on loans and advances to customers divided by monthly
average gross loans and advances to customers; annualised where applicable.
Deposit rates equal interest expense on customer accounts divided by monthly average
total customer deposits; annualised where applicable.
Cost of funding equals sum of the total interest expense and net interest gains on currency
swaps (entered for funding management purposes), divided by monthly average interest
bearing liabilities; annualised where applicable.
Cost of risk equals credit loss allowance for loans to customers divided by monthly
average gross loans and advances to customers; annualised where applicable.
PAR 90 to gross loans ratio equals loans for which principal or interest repayment is
overdue for more than 90 days divided by the gross loan portfolio for the same period.
NPLs to gross loans equals loans with 90 days past due on principal or interest payments,
and loans with a well-defined weakness, regardless of the existence of any past-due
amount or of the number of days past due divided by the gross loan portfolio for the same
period.
NPL provision
coverage
Total NPL
coverage
11
IFRS based
12
IFRS based
Credit loss level
to gross loans
Related party loans
to gross loans
Top 10 Borrowers
to total portfolio
Top 20 Borrowers
to total portfolio
13
IFRS based
14
IFRS based
15
IFRS based
16
IFRS based
Capital & liquidity positions
NPL provision coverage equals total credit loss allowance for loans to customers divided
by the NPL loans.
Total NPL coverage equals total credit loss allowance plus the minimum of collateral
amount of the respective NPL loan (after applying haircuts in the range of 0%-50% for
cash, gold, real estate and PPE) and its gross loan exposure divided by the gross exposure
of total NPL loans.
Credit loss level to gross loans equals credit loss allowance for loans to customers divided
by the gross loan portfolio for the same period.
Related party loans to total loans equals related party loans divided by the gross loan
portfolio.
Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers
divided by the gross loan portfolio.
Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers
divided by the gross loan portfolio.
Net loans to
deposits plus
IFI funding
17
IFRS based
Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus
borrowings received from international financial institutions.
Net stable
funding ratio (NSFR)
Regulatory
based
Net stable funding ratio equals the available amount of stable funding divided by the
required amount of stable funding as defined by NBG in line with Basel III guidelines.
Calculations are made for the Bank only.
Liquidity
coverage ratio (LCR)
Regulatory
based
Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash
outflow amount as defined by the NBG. Calculations are made for the Bank only.
Leverage
CET 1 CAR
(Basel III)
Tier 1 CAR
(Basel III)
Total CAR
(Basel III)
18
IFRS based
Leverage equals total assets to total equity.
Regulatory
based
Regulatory
based
Regulatory
based
CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in
accordance with requirements of the NBG Basel III standards. Calculations are made for
the Bank only.
Tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in
accordance with the requirements of the NBG Basel III standards. Calculations are made
for the Bank only.
Total CAR equals total capital divided by total risk weighted assets, both calculated in
accordance with the requirements of the NBG Basel III standards. Calculations are made
for the Bank only.
These tables provide the reconciliation of the Group’s IFRS based alternative performance measures with Financial
Statements.
1
Reference to financial statements
2023
2022
Profit attributable to owners
Consolidated statement of profit and loss
and other comprehensive income
1,119,025
1,023,050
Total shareholders’ equity attributable to owners
Consolidated statement of financial position
Adjusted to arrive at monthly balances
Monthly averages of total shareholders’ equity
attributable to owners
Return on average total equity (ROE)
4,747,512
4,265,638
-339,338
-328,851
4,408,174
3,936,787
25.4%
26.0%
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTS
2
3
4
5
Profit attributable to owners
Reference to financial statements
2023
2022
Consolidated statement of profit and loss
and other comprehensive income
1,119,025
1,023,050
Total assets
Consolidated statement of financial position
31,771,136
28,329,010
Adjusted to arrive at monthly balances
Monthly averages of total assets
Return on average total assets (ROA)
-3,668,625
-2,903,705
28,102,511
25,425,305
4.0%
4.0%
Total operating expenses
Total revenue
Cost to income
Net interest income
Reference to financial statements
2023
2022
Consolidated statement of profit and loss
and other comprehensive income
Consolidated statement of profit and loss
and other comprehensive income
681,762
560,982
2,132,112
1,946,389
32.0%
28.8%
Reference to financial statements
2023
2022
Consolidated statement of profit and loss
and other comprehensive income
1,495,596
1,243,095
Total interest earning assets
Consolidated statement of financial position
– Investment securities measured at fair value
through other comprehensive income
– Net investment in finance lease
– Net loans
– Mandatory cash balances with National Bank of
Georgia
– Due from other banks
Adjusted to arrive at monthly balances
Monthly average interest earning assets
Net interest margin (NIM)
26,388,429
22,724,918
3,475,461
2,884,728
370,795
288,886
20,958,532 17,497,442
1,572,506
2,047,564
11,135 6,298
-2,622,249
-1,607,434
23,766,180
21,117,484
6.3%
5.9%
Interest income from loans
Note 28. Interest income and expense
2,224,514 1,911,782
Total loan portfolio
Note 9. Loans and advances to customers
21,276,749
17,857,276
Reference to financial statements
2023
2022
Adjusted to arrive at monthly balances
Total monthly average loan portfolio
Loan yields
6 Returns
(2,417,621)
(771,572)
18,859,128
17,085,704
11.8%
11.2%
Reference to financial statements
2023
2022
Interest expense from customer accounts
Note 28. Interest income and expense
(813,715)
(571,575)
Total deposits portfolio
Note 19. Customer accounts
19,942,516
17,841,357
Adjusted to arrive at monthly balances
Total monthly average deposits portfolio
Deposit rates
288
(1,831,730)
(2,096,195)
18,110,786
15,745,162
4.5%
3.6%
7
8
9
10
11
Total Interest expense
Reference to financial statements
2023
2022
Consolidated statement of profit and loss
and other comprehensive income
(1,193,831)
(976,686)
Total interest bearing liabilities
Consolidated statement of financial position
26,505,692
23,598,918
– Customer accounts
– Due to credit institutions
– Subordinated debt
– Debt securities in issue
– Lease Liabilities
Adjusted to arrive at monthly balances
Monthly average interest bearing liabilities
Cost of fund
19,942,516
17,841,357
4,346,951
3,885,360
868,730
590,148
1,264,085
1,209,813
83,410
72,240
(3,409,376)
(2,472,069)
23,096,316
21,126,849
5.2%
4.6%
Credit loss allowance for loans
Reference to financial statements
2023
2022
Consolidated statement of profit and loss
and other comprehensive income
(130,380)
(105,247)
Total loan portfolio
Note 9. Loans and advances to customers
21,276,749
17,857,276
Adjusted to arrive at monthly balances
Total monthly average loan portfolio
Cost of risks
(2,417,621)
(771,572)
18,859,128
17,085,704
0.7%
0.6%
Reference to financial statements
2023
2022
Total principal or interest repayment is overdue
for more than 90 days
Not available
236,052
217,596
Total gross loan portfolio
Par 90 to gross loans
Note 9. Loans and advances to customers
21,276,749
17,857,276
1.1%
1.2%
NPLs to gross loans equals loans with 90 days past
due on principal
Not available
425,743
390,651
Reference to financial statements
2023
2022
Note 9. Loans and advances to customers
21,276,749
17,857,276
Total gross loan portfolio
NPLs to gross loans
Total credit loss allowance for loans to customers
Note 9. Loans and advances to customers
Reference to financial statements
NPL provision coverage
NPL provision coverage
Not available
2.0%
2.2%
2023
318,217
425,743
74.7%
2022
359,834
390,651
92.1%
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023ALTERNATIVE PERFORMANCE MEASURES CONTINUEDMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTS
Reference to financial statements
2023
2022
NPL collatetal
Not available
NPL provision coverage
Note 9. Loans and advances to customers
Total
Total NPL exposure
Total NPL coverage
Not available
293,239
318,217
611,456
425,743
143.6%
246,242
359,834
606,076
390,651
155.1%
Total credit loss allowance for loans to customers
Note 9. Loans and advances to customers
318,217
359,834
Total gross loan portfolio
Note 9. Loans and advances to customers
21,276,749
17,857,276
Credit loss level to gross loans
1.5%
2.0%
Reference to financial statements
2023
2022
Related party loans
Total gross loan portfolio
Related party loans to gross loans
Reference to financial statements
Note 42. Related party transactions
2023
27,198
2022
26,717
Note 9. Loans and advances to customers
21,276,749
17,857,276
0.1%
0.1%
Top 10 borrowers
Not available
1,359,734
967,960
Total gross loan portfolio
Note 9. Loans and advances to customers
21,276,749
17,857,276
Top 10 borrowers
6.4%
5.4%
Reference to financial statements
2023
2022
Top 20 borrowers
Not available
2,013,974
1,511,447
Total gross loan portfolio
Note 9. Loans and advances to customers
21,276,749
17,857,276
Top 20 borrowers
9.5%
8.5%
Reference to financial statements
2023
2022
Net loans
Consolidated statement of financial position
20,958,532
17,497,442
Total Deposits portfolio
Note 19. Customer accounts
19,942,516
17,841,357
Reference to financial statements
2023
2022
IFI funding
Deposits + IFI funding
Net loans to deposits + IFI funding
Not available
2,222,611
2,115,335
22,165,127
19,956,692
94.6%
87.7%
12
13
14
15
16
17
18
Reference to financial statements
2023
2022
Consolidated statement of financial position
31,771,136
28,329,010
Consolidated statement of financial position
4,747,709
4,265,802
6.7x
6.6x
Total assets
Total equity
Leverage
290
ABBREVIATIONS
ACCA
ALCO
APM
ATM
CAGR
CAR
CEO
CFA
CFO
CGU
CIB
CIS
COR
CRO
CSR
DCF
EBRD
ECL
EMEA
EMS
ENPS
ERM
ESG
ESRM
EU
EUR
FC
FDI
FVOCI
GBP
GDP
GEL
GHG
NMF
HNWI
HR
IAS
ICAAP
ILAAP
IFC
IFI
IFRS
IMF
IPCC
IT
Association of chartered certified
accountants
Asset-liability management committee
Alternative performance measure
Automated teller machine
Compounded annual growth rate
Capital adequacy ratio
Chief executive officer
Chartered financial analyst
Chief financial officer
Cash generating unit
Corporate investment banking
The Commonwealth of Independent States
Cost of risk
Chief risk officer
Corporate social responsibility
Discounted cash flows
European Bank for Reconstruction and
Development
Expected credit losses
Europe, Middle East and Africa
Environmental management system
Employee Net Promoter Score
Enterprise risk management
Environmental, social and governance
Environmental and social risk management
European Union
Euro
Foreign currency
Foreign direct investment
Fair value through other comprehensive
income
Great British pound, national currency of the UK
Gross domestic product
Georgian lari, national currency of Georgia
Greenhouse gas
Not meaningful figure
High-net-worth individuals
Human resources
International Accounting Standards
Internal capital adequacy assessment process
Internal liquidity adequacy assessment
process
International Finance Corporation
International financial institution
International Financial Reporting Standards
International Monetary Fund
Intergovernmental Panel on Climate Change
Information technology
JSC
KPI
LSE
LTIP
LTV
MBA
MSME
NBG
NCI
NIM
NPL
NPS
OCI
OECD
PLC
POS
P2P
PWC
ROA
ROE
SME
SPPI
STEM
TCFD
UK
US$
VAR
WM
Joint stock company
Key performance indicators
London Stock Exchange
Long-term incentive plan
Loan to value
Master of business administration
Micro, small and medium-sized enterprises
National Bank of Georgia
Non-controlling interest
Net interest margin
Non-performing loans
Net promoter score
Other comprehensive income
Organisation for Economic Cooperation and
Development
Public limited company
Point of sale
Peer-to-peer
PricewaterhouseCoopers
Return on average assets
Return on average equity
Small and medium-sized enterprises
Solely payments of principal and interest
Science, technology, engineering and
mathematics
Force on climate-related financial
disclosures
United Kingdom of Great Britain and Northern Ireland
The US dollar, national currency of the United States
Value-at-risk
Wealth management
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MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023ALTERNATIVE PERFORMANCE MEASURES CONTINUEDMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTS MANAGEMENT REPORT AND FINANCIAL STATEMENTS 2023