Liberty Bank reported Q1 2014 results with net income of GEL 3.6 million, down 69.2% quarter-over-quarter but up 1870.9% year-over-year. Total operating income was GEL 32 million, up 14.2% quarter-over-quarter and 83.7% year-over-year, driven by increases in net interest and non-interest income. Total assets grew 5.8% quarter-over-quarter to GEL 1.37 billion as of March 31, 2014. The bank expects to improve its balance sheet structure and forecasts 2014 net income of GEL 20.7 million.

1. Georgia | Banks | Company Update
7 May 2014
GEL/US$ 1.7598
Liberty Bank Q1 2014 Results
GSE: BANK | BLOOMBERG: BANK GG | ISIN: GE1100000300
RESEARCHALERTRESEARCHALERTRESEARCHALERTRESEARCHALERTRESEARCH
ALERTRESEARCHALERTRESEARCHALERTRESEARCHALERT
RESEARCHALERT
Not Rated
Market Data
Current Price (GEL) 0.0160
52 Week High (02/05/2014) 0.0160
52 Week Low (29/04/2013) 0.0085
1M Change 0.0%
3M Change 6.7%
12M Change 79.8%
Ordinary Shares Outstanding (bn) 5.5
MCap (GEL mln) 88.0
MCap (US$ mln) 50.0
Free Float (Including ESOP) 19.6%
Free Float (US$ mln) 9.8
% Of Free Float Traded in 2010 46.9%*
% Of Free Float Traded in 2011 59.5%*
% Of Free Float Traded in 2012 0.95%*
% Of Free Float Traded in 2013 2.55%*
Average Weekly Traded Volume in 2010-2013 (GEL '000) 111.8
% Of Free Float Traded YTD 2.34%*
Average Weekly Traded Volume YTD (GEL '000) 19.4
Major Shareholder - Liberty Holdings Georgia Ltd** 70.8%
GDR: Reg S & 144A
Common Shares/GDR 500:1
GDRs Fully Fungible? Yes
Current GDR Programme Ceiling (% Of Shares Outstanding) 30%
% Of Shares Outstanding Currently Converted Into GDRs 11.9%
Dividend Yield (Ordinary Shares) 0%
Convertible Preferred Shares Outstanding (mln) 5.2
Placement Price Per Convertible Preferred Share (GEL) 1.00
Convertible Preferred Dividend Yield/Placement Price 17.0%
* By parties other than JSC Liberty Capital and Liberty Holdings Georgia
**Formerly Liberty Capital LLC; renamed to Liberty Holdings Georgia in July 2012
Share Price Performance YTD
Source: GSE, Bloomberg
Key Financials & Ratios
GEL mln, unless otherwise noted Unaudited d Audited d Unaudited d
Consolidated, IFRS-based Q1 2014 Q4 2013 Q1 2013
Growth
q-o-q
Growth
y-o-y
Total Assets 1,369 1,294 958 5.8% 42.9%
Net Loans 644 590 393 9.2% 63.9%
Total Liabilities 1,251 1,180 856 6.1% 46.2%
Client Balances & Deposits 1,196 1,143 825 4.6% 44.8%
Shareholders’ Equity 118 114 102 3.1% 15.2%
Revenue 32.0* 28.0* 17.4* 14.2% 83.7%
Net Income/(Loss) 3.6* 11.6* 0.2* -69.2% 1870.9%
EPS Basic 0.0006 0.0012 0.00003
EPS Fully Diluted 0.0006 0.0011 0.00003
ROAA 0.98%** 1.94%** 0.08%**
ROAE 11.77%** 24.43%** 0.74%**
CAR (NBG) 13.13% 13.53% 12.78%
RWA/TA (NBG) 68.26% 66.97% 63.22%
*Unaudited
** Annualised
Valuation Metrics
2012A 2013A 2014F
P/E 7.96 5.94 4.47**
P/B 0.42 0.71 0.68
BV Per Share 0.018* 0.020* 0.024*
P/Diluted EPS 4.48
P/Diluted Book Value 0.68
Diluted BV Per Share 0.023*
* Excluding Treasury Shares
** Net Income less the preferred dividend used in the calculation
Liberty Bank (GSE: BANK, not rated) announced its Q1 2014 consolidated
financial results, reporting Net Income of GEL 3.6 mln (down 69.2% q-o-q
and up 1,870.9% y-o-y).
Total Operating Income in Q1 2014 reached GEL 32.0 mln, an increase of
14.2% q-o-q and 83.7% y-o-y.
Recurring Operating Costs decreased by 5.1% q-o-q and increased by
23.2% y-o-y to GEL 20.8 mln, resulting in the positive Operating Leverage
of 60.5% in Q1 2014. Normalised Cost/Income Ratio decreased to 67.3% in
Q1 2014 from 85.4% in Q4 2013 and from 97.1% in Q1 2013. BANK
reported Normalised Net Operating Income of GEL 11.2 mln in Q1 2014,
an increase of 84.0% q-o-q and 2092.4% y-o-y.
Pre-Provision Operating Profit increased by 82.4% q-o-q and 2245.0% y-o-
y to GEL 11.2 mln in Q1 2014. Net provision expense in Q1 2014 reached
GEL 6.7 mln as compared to net provision recoveries of GEL 3.5 mln in Q4
2013 and net provision expense of GEL 0.3 mln in Q1 2013, as BANK
continued to build up its loan loss coverage ratio. Pre-Tax Profit decreased
by 50.6% q-o-q and increased by 1677.4% y-o-y to GEL 3.9 mln in Q1 2014.
BANK is the third largest bank in Georgia (by Total Assets), with the
consolidated Total Assets reaching GEL 1,368.7 mln, up 5.8% q-o-q and
42.9% y-o-y. The Liquidity Ratio (Liquid Assets divided by Total Assets)
stood at 39.8% as at 31 March 2014, down from 40.7% as at 31 December
2013 and from 41.6% as at 31 March 2013. Gross Loans grew by 9.2% q-o-
q and 67.8% y-o-y to GEL 718.1 mln, driven by an increase in retail
lending. Net Loans increased by 9.2% q-o-q and 63.9% y-o-y to GEL 643.9
mln as at 31 March 2014. Client Balances & Deposits reached GEL 1,195.7
mln as at 31 March 2014, up 4.6% q-o-q and 44.8% y-o-y. Consolidated
Shareholders’ Equity as at 31 March 2014 equalled GEL 117.7 mln, up
3.1% q-o-q and 15.2% y-o-y. BANK’s market share reached 8.0% by Total
Assets as of 31 March 2014 (up from 7.7% as of 31 December 2013).
Market share in Gross Loans and Client Balances & Deposits reached 6.7%
and 12.4% as of 31 March 2014, respectively (up from 6.2% and 11.8% as
of 31 December 2013, respectively).
BANK’s BIS (Basel I) CAR stood at 15.2% as of 31 March 2014 as compared
to BIS CAR of 15.7% as at YE 2013.
The Capital Adequacy Ratio (as per the current NBG methodology)
reached 13.1% as at 31 March 2014. BANK was compliant, as of 31 March
2014, with the prudential capital adequacy ratios.
BANK’s Net Loans/Total Assets ratio increased to 47.0% as at 31 March
2014 from 45.6% as at 31 December 2013. Looking ahead, we expect
BANK to remain focused on the further improvement of its balance sheet
structure. We believe BANK could reach Net Loans/Total Assets of 50% by
YE 2014, with the annual balance sheet growth reaching or exceeding
11%.
We forecast the overall Cost of Risk to reach 3.3% in 2014.
We forecast 2014 Net Income to reach GEL 20.7 mln, implying that ROAE
(attributable to the ordinary shares) and ROAA will reach 16.4% and 1.5%,
respectively.
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BANK Closing Price (Rebased)
GSE Index (Rebased)
MSCI Emerging Markets Banks Index (Rebased)

2. Liberty Bank Q1 2014 Results
GSE: BANK | BLOOMBERG: BANK.GG | ISIN: GE1100000300
2
RESEARCHALERTRESEARCHALERTRESEARCHALERTRESEARCHALERTRESEARCHALERT
Income Statement
Consolidated, IFRS-based Unaudited Unaudited Unaudited Unaudited Audited
GEL '000, unless otherwise noted Q1 2014 Q4 2013 Q1 2013 Growth q-o-q Growth y-o-y 2013 2012 Growth y-o-y
Interest Income 50,521 47,303 33,139 6.8% 52.5% 159,697 126,848 25.9%
Interest Expense 25,999 27,564 21,767 -5.7% 19.4% 99,076 72,274 37.1%
Net Interest Income 24,522 19,739 11,372 24.2% 115.6% 60,622 54,574 11.1%
Fee And Commission Income 6,718 6,772 4,962 -0.8% 35.4% 24,078 31,939 -24.6%
Fee And Commission Expenses 879 852 674 3.1% 30.3% 3,067 2,748 11.6%
Net Fee And Commission Income 5,839 5,920 4,287 -1.4% 36.2% 21,012 29,192 -28.0%
Net Income From Documentary Operations 105 131 111 -19.8% -5.1% 494 1,070 -53.8%
Net Other Non-Interest Income 238 333 267 -28.6% -11.0% 1,163 1,059 9.9%
Net Income From FX And Translation Operations 1,316 1,910 1,394 -31.1% -5.6% 6,823 5,981 14.1%
Net Non-Interest Income 7,498 8,294 6,059 -9.6% 23.8% 29,492 37,301 -20.9%
Total Operating Income 32,020 28,034 17,430 14.2% 83.7% 90,113 91,875 -1.9%
Recurring Operating Costs 20,840 21,956 16,920 -5.1% 23.2% 73,742 66,863 10.3%
Normalised Net Operating Income 11,181 6,077 510 84.0% 2092.4% 16,371 25,012 -34.5%
Non-Recurring Costs/(Income) (48) (80) 31 -40.4% NMF 64 (639) NMF
Pre-Provision Operating Profit 11,229 6,157 479 82.4% 2245.0% 16,307 25,651 -36.4%
Net Provisions 6,669 (3,550) 304 NMF 2092.6% (80) 14,193 NMF
Pre-Bonus Result 4,555 9,845 206 -53.7% 2115.1% 16,628 12,227 36.0%
Discretionary Bonus Pool 698 1,991 - -65.0% NMF 2,515 2,379 5.7%
Share Of Associates' Net Profit 11 (30) 12 NMF -4.7% 12 (63) NMF
Pre-Tax Profit 3,869 7,825 218 -50.6% 1677.4% 14,126 9,785 44.4%
Accrued Or Paid Income Tax Benefit/(Expense) (593) (1,322) (36) -55.2% 1536.4% (2,137) (66) NMF
Impairment Of Deferred Tax Asset - - - NMF NMF - (4,534) NMF
Current Deferred Tax Benefit 300 5,093 - -94.1% NMF 5,093 - NMF
Net Income 3,576 11,595 181 -69.2% 1870.9% 17,081 5,185 229.4%
Balance Sheet
Consolidated, IFRS-based Unaudited Audited Unaudited
GEL '000, unless otherwise noted Q1 2014 2013 Q1 2013 Growth q-o-q Growth y-o-y
Cash And Due From Banks 389,538 395,482 324,758 -1.50% 19.95%
Treasuries & CDs 154,604 131,123 73,572 17.9% 110.1%
Other Fixed Income Instruments - - - NMF NMF
Net Loans 643,890 589,828 392,787 9.2% 63.9%
Net Investments 334 306 196 9.3% 70.8%
Investment Property 4,986 4,986 4,793 0.0% 4.0%
Net Property, Plant And Equipment 129,470 128,325 124,710 0.9% 3.8%
Net Other Assets 22,630 20,398 20,586 10.9% 9.9%
Total Assets 1,368,744 1,293,614 957,784 5.8% 42.9%
Total Balances & Deposits 1,208,824 1,145,475 826,769 5.5% 46.2%
Borrowed Funds - - - NMF NMF
Other Liabilities 28,099 18,332 17,510 53.3% 60.5%
Total Liabilities 1,251,051 1,179,505 855,662 6.1% 46.2%
Shareholders' Equity 117,693 114,108 102,163 3.1% 15.2%
Total Liabilities And Shareholders' Equity 1,368,744 1,293,614 957,825 5.8% 42.9%
Selected Ratios
Consolidated, IFRS-based
%, unless otherwise noted Q1 2014 Q4 2013 Q1 2013 2013 2012 2011 2010 2009
ROAA 0.98% 1.94% 0.08% 1.14% 0.62% 1.06% 1.11% -1.70%
ROAE 11.77% 24.43% 0.74% 12.75% 6.46% 13.29% 21.58% -45.86%
Net Interest Margin 10.01% 8.05% 7.84% 7.96% 9.03% 9.44% 11.89% 3.16%
Net Spread 11.00% 8.86% 10.90% 9.89% 8.88% 9.78% 18.08% 8.15%
Net Non-Interest Income/Total Operating Income 23.42% 21.68% 34.76% 32.75% 40.60% 50.95% 62.43% 89.85%
Net Income (Loss)/Total Operating Income 11.17% 23.20% 1.04% 14.40% 5.64% 9.15% 7.39% -13.21%
Net Fee & Commission Income/Total Operating Income 18.24% 21.12% 24.60% 23.33% 31.77% 42.80% 51.29% 71.49%
Net Fee & Commission Income/Average Total Assets 1.74% 1.77% 1.87% 1.85% 3.48% 4.96% 7.64% 9.21%
Cost/Income Ratio (Normalised) 67.26% 85.42% 97.07% 85.70% 75.37% 70.78% 73.16% 103.44%
Costs/Average Total Assets (Normalised) 6.42% 7.15% 7.61% 6.80% 8.25% 8.21% 10.90% 13.33%
Personnel Costs/Total Operating Income 35.21% 46.55% 51.42% 46.45% 40.85% 37.11% 40.12% 48.99%
Personnel Costs/Average Total Assets 3.36% 3.90% 3.91% 3.68% 4.47% 4.30% 5.97% 6.31%
Personnel Costs/Total Recurring Operating Costs 54.09% 59.43% 52.97% 56.01% 56.14% 54.10% 54.83% 47.36%
Net Loans/Total Assets 47.04% 45.60% 41.01% 45.60% 44.58% 43.74% 29.49% 25.14%
Total Deposits/Total Liabilities 96.62% 97.11% 96.62% 97.11% 93.37% 93.86% 80.52% 81.38%
Net Loans/Total Deposits 53.27% 51.49% 47.51% 51.49% 54.11% 51.73% 39.19% 31.81%
Net Loans/Total Liabilities 51.47% 51.60% 45.90% 50.01% 50.52% 48.56% 31.54% 25.88%
Liquid Assets/Total Assets 39.75% 40.71% 41.59% 40.71% 34.93% 35.35% 42.00% 35.06%
Leverage (Total Liabilities/Equity), Times 10.63 10.34 8.38 10.34 7.50 9.08 15.25 33.80
Shareholders' Equity/Total Assets 8.60% 8.82% 10.67% 8.82% 11.76% 9.36% 6.15% 2.87%
Average Shareholders' Equity/Average Total Assets 8.68% 8.29% 11.01% 9.32% 9.59% 7.99% 7.04% 3.71%
Loan Loss Reserves/Gross Loans 4.81% 4.28% 4.04% 4.28% 5.22% 9.69% 12.67% 22.38%
NPLs/Gross Loans 5.18% 4.74% 5.99% 4.74% 4.29% 11.66% 18.55% 35.46%
LLR Coverage Ratio 92.73% 90.18% 84.76% 90.18% 121.56% 86.30% 59.84% 60.35%
Cost of Risk 3.57% -2.55% 0.25% -0.73% 3.03% 6.21% 7.01% 14.01%
Quarterly ratios are annualised, where applicable

3. Liberty Bank Q1 2014 Results
GSE: BANK | BLOOMBERG: BANK.GG | ISIN: GE1100000300
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Liberty Securities
Liberty Tower
74 I. Chavchavadze Ave
Tbilisi, Georgia 0162
Tel: + 995 32 2555 500
research@libertysecurities.ge
www.libertysecurities.ge
Skype: liberty.securities
Temur Iremashvili
Director
Liberty Securities
+995 591 158 877
temur.iremashvili@libertysecurities.ge
Skype: temur_75
Victor Meskhi
Director of Research
Liberty Securities
+995 593 551 506
victor.meskhi@libertysecurities.ge
Skype: v.meskhi
Tengiz Lashkhi
Asset Management Director
Liberty Securities
+995 591 709 280
tengiz.lashkhi@libertysecurities.ge