Liberty Bank Research Note - Q2 2013 and 1H 2013 Results

1. Georgia | Banks | Company Update
RESEARCH ALERT
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RESEARCH
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7 August 2013
GEL/US$ 1.6670
Liberty Bank Q2 2013 and 1H 2013 Results
GSE: BANK | BLOOMBERG: BANK GG | ISIN: GE1100000300
Not Rated
Liberty Bank (GSE: BANK, not rated) announced its Q2 2013 and 1H 2013
consolidated financial results, reporting Net Income of GEL 1.3 mln in Q2 2013
(up 624.5% q-o-q) and Net Income of GEL 1.5 mln in 1H 2013 (up 0.3% y-o-y).
Market Data
Current Price (GEL)
52 Week High (12/10/2012)
52 Week Low (09/01/2013)
1M Change
3M Change
12M Change
Shares Outstanding (bn)
MCap (GEL mln)
MCap (US$ mln)
Free Float (Including ESOP)
Free Float (US$ mln)
% Of Free Float Traded in 2010
% Of Free Float Traded in 2011
% Of Free Float Traded in 2012
Average Weekly Traded Volume in 2010-2012 (GEL '000)
% Of Free Float Traded YTD
Average Weekly Traded Volume YTD (GEL '000)
Major Shareholder - Liberty Holding Georgia Ltd**
Common Shares/GDR
GDRs Fully Fungible?
Current GDR Programme Ceiling (% Of Shares Outstanding)
% Of Shares Outstanding Currently Converted Into GDRs
Dividend Yield
0.0099
0.0170
0.0055
-1.0%
11.2%
-38.1%
5.5
54.5
32.7
19.6%
6.4
46.9%*
59.5%*
0.95%*
136.2
1.99%*
46.0
72.4%
500:1
Yes
30%
11.7%
0%
* By parties other than JSC Liberty Capital and Liberty Holding Georgia
**Formerly Liberty Capital LLC; renamed to Liberty Holding Georgia in July 2012
150.00
130.00
110.00
90.00
70.00
50.00
BANK’s BIS (Basel I) CAR stood at 17.4% as of 30 June 2013 as compared to BIS
CAR of 18.3% as at YE 2012.
30.00
Nov-10
Dec-10
Dec-10
Jan-11
Mar-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
10.00
BANK Closing Price (Rebased)
GSE Index (Rebased)
MSCI Emerging Markets Banks Index (Rebased)
Source: GSE, Bloomberg
Key Financials & Ratios
GEL mln, unless otherwise noted
Consolidated, IFRS-based
RESEARCH ALERT
Recurring Operating Costs increased in Q2 2013 by 0.6% q-o-q and 3.7% y-o-y
to GEL 17.0 mln. BANK’s Normalised Cost/Income Ratio decreased to 79.6% in
Q2 2013 as compared to 97.1% in Q1 2013 and increased from 66.9% in Q2
2012. BANK reported quarterly Normalised Net Operating Income of GEL 4.4
mln in Q2 2013, up 754.3% q-o-q and down 16.7% y-o-y on the like-for-like
basis (normalised for the discontinued state fees). Recurring Operating Costs
increased by 7.1% y-o-y to GEL 33.9 million in 1H 2013. Normalised
Cost/Income Ratio increased to 87.5% in 1H 2013 as compared to 68.9 % in 1H
2012. BANK reported Normalised Net Operating Income of GEL 4.9 million in
1H 2013, down 44.1% y-o-y on the like-for-like basis (normalised for the
discontinued state fees).
BANK is the third largest bank in Georgia (by Total Assets), with the
consolidated Total Assets reaching GEL 1,136.6 mln, up 18.7% q-o-q and 35.9%
y-o-y. BANK continued to gain market share, reaching 7.7% market share by
Total Assets as of 30 June 2013 (up from 6.3% as of 31 December 2012).
Market share in Net Loans and Client Balances & Deposits reached 5.4% and
11.7% as of 30 June 2013, respectively (up from 4.7% and 9.0% as of 31
December 2012, respectively).
Share Price Performance
Total Assets
Net Loans
Total Liabilities
Client Balances & Deposits
Shareholders’ Equity
Revenue
Net Income/(Loss)
EPS Basic
EPS Fully Diluted
ROAA
ROAE
CAR (NBG)
RWA/TA (NBG)
Unaudited d Unaudited d Unaudited d
Q2 2013
1,137
448
1,033
997
103
21.4
1.3
0.0002
0.0002
0.49%*
5.12%*
12.07%
60.78%
Q1 2013
958
393
856
825
102
17.4
0.2
0.00003
0.00003
0.08%*
0.72%*
12.78%
63.22%
Q2 2012
837
386
762
679
74
25.2
(1.4)
NMF
NMF
-0.67%*
-7.28%*
9.05%
75.81%
Growth
q-o-q
18.7%
14.0%
20.7%
20.7%
1.3%
22.7%
624.5%
Growth
y-o-y
35.9%
16.1%
35.5%
46.7%
39.3%
-15.3%
NMF
* Annualised
ALERT
RESEARCH ALERT
Total Operating Income in Q2 2013 reached GEL 21.4 mln, up 22.7% q-o-q and
up 1.8% y-o-y on a like-for-like basis (i.e. normalised for the GEL 4.2 mln
quarterly fees received from the state that were discontinued after Q2 2012).
Total Operating Income in 1H 2013 reached GEL 38.8 million, down 18.5% y-oy. Total Operating Income normalised for the loss of state fees decreased only
by 0.8% y-o-y in 1H 2013, reflecting the high negative carry in the first few
months of 2013.
Valuation Metrics
P/E
P/B
BV Per Share
* Excluding Treasury Shares
2012A
7.96
0.42
0.018*
2013F
3.93
0.49
0.020*
Capital Adequacy Ratio (as per the NBG methodology) reached 12.1% as at 30
June 2013. BANK was compliant, as of 30 June 2013, with the prudential
capital adequacy ratios.
BANK’s Net Loans/Total Assets decreased to 39.4% as at Q2 2013 as compared
to 44.6% as at YE 2012, reflecting the surge in Client Balances & Deposits in 1H
2013 However, 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 52% by YE 2013, with the annual balance
sheet growth reaching or exceeding 31%.
We forecast the overall Cost of Risk to reach 0.2% in 2013, due to the
expected recoveries on large legacy loans to be made in 2H 2013.
We forecast 2013 Net Income to reach GEL 14.0 mln, implying that ROAE and
ROAA will reach 12.8% and 1.4%, respectively.

2. Liberty Bank Q2 2013 and 1H 2013 Results
GSE: BANK | BLOOMBERG: BANK.GG | ISIN: GE1100000300
RESEARCH ALERT
RESEARCH ALERT
RESEARCH ALERT
RESEARCH ALERT
RESEARCH ALERT
Income Statement
Consolidated, IFRS-based
GEL '000, unless otherwise noted
Interest Income
Interest Expense
Net Interest Income
Fee And Commission Income
Fee And Commission Expenses
Net Fee And Commission Income
Net Income From Documentary Operations
Net Other Non-Interest Income
Net Income From FX And Translation Operations
Net Non-Interest Income
Total Operating Income
Recurring Operating Costs
Normalised Net Operating Income
Non-Recurring Costs/(Income)
Profit (Pre-Bonus) Before Provisions
Net Provisions
Pre-Bonus Result
Discretionary Bonus Pool
Share Of Associates' Net Profit
Pre-Tax Profit
Accrued Or Paid Income Tax Benefit/(Expense)
Impairment Of Deferred Tax Asset
Net Income
Balance Sheet
Consolidated, IFRS-based
GEL '000, unless otherwise noted
Cash And Due From Banks
Treasuries
Other Fixed Income Instruments
Net Loans
Net Investments
Investment Property
Net Property, Plant And Equipment
Net Other Assets
Total Assets
Total Balances & Deposits
Borrowed Funds
Other Liabilities
Contingent Capital Participation Note
Total Liabilities
Shareholders' Equity
Total Liabilities And Shareholders' Equity
Selected Ratios
Consolidated, IFRS-based
%, unless otherwise noted
ROAA
ROAE
Net Interest Margin
Net Spread
Net Non-Interest Income/Total Operating Income
Net Income/Total Operating Income
Net Fee & Commission Income/Total Operating Income
Net Fee & Commission Income/Average Total Assets
Cost/Income Ratio (Normalised)
Costs/Average Total Assets (Normalised)
Personnel Costs/Total Operating Income
Personnel Costs/Average Total Assets
Personnel Costs/Total Recurring Operating Costs
Net Loans/Total Assets
Total Balances & Deposits/Total Liabilities
Net Loans/Total Balances & Deposits
Net Loans/Total Liabilities
Liquid Assets/Total Assets
Leverage (Total Liabilities/Equity), Times
Shareholders' Equity/Total Assets
Average Shareholders' Equity/Average Total Assets
Loan Loss Reserves/Gross Loans
NPLs/Gross Loans
LLR Coverage Ratio
Cost of Risk (Standalone)
Unaudited
Q2 2013
37,427
23,768
13,659
6,522
718
5,804
116
315
1,486
7,721
21,380
17,023
4,357
114
4,242
2,761
1,543
6
1,549
(235)
1,314
Unaudited
Q1 2013
32,830
21,767
11,063
5,270
674
4,596
111
267
1,394
6,367
17,430
16,920
510
31
479
304
206
12
218
(36)
181
Unaudited
Q2 2012
32,006
17,980
14,026
10,146
727
9,419
284
232
1,287
11,222
25,248
16,417
8,831
(51)
8,882
5,806
3,152
476
(43)
2,633
(4,019)
(1,386)
Unaudited
Q2 2013
412,809
104,172
447,780
244
4,793
125,240
23,404
1,136,604
997,896
20,132
1,033,123
103,481
1,136,604
Q2 2013
0.49%
5.12%
8.09%
10.70%
36.11%
6.15%
27.15%
2.18%
79.62%
6.38%
42.18%
3.38%
52.97%
39.40%
96.59%
44.87%
43.34%
45.48%
9.98
9.10%
9.62%
3.94%
6.67%
74.81%
2.06%
Q1 2013
0.08%
0.72%
7.63%
10.69%
36.53%
1.04%
26.37%
2.01%
97.07%
7.39%
51.42%
3.91%
52.97%
41.01%
96.62%
47.51%
45.91%
41.59%
8.38
10.67%
11.01%
4.04%
6.72%
75.54%
0.26%
Unaudited
Q1 2013
324,758
73,572
392,828
196
4,793
124,710
20,586
957,825
826,769
17,510
855,662
102,163
957,825
Q2 2012
-0.67%
-7.28%
9.53%
9.44%
44.45%
-5.49%
37.31%
4.58%
66.91%
8.21%
36.07%
4.42%
55.47%
46.12%
90.60%
55.86%
50.61%
33.28%
10.27
8.88%
9.25%
7.95%
10.92%
93.69%
5.17%
Growth q-o-q
14.0%
9.2%
23.5%
23.8%
6.5%
26.3%
4.8%
18.0%
6.6%
21.3%
22.7%
0.6%
754.3%
266.9%
786.0%
807.8%
650.5%
0.0%
-52.9%
611.6%
547.3%
0.0%
624.5%
Audited
2012
235,533
57,497
374,003
173
4,793
126,095
24,820
838,932
691,177
26,667
15,491
740,270
98,661
838,932
1H 2013
0.30%
2.94%
7.9%
10.69%
36.30%
3.85%
26.80%
2.10%
87.46%
6.85%
46.33%
3.63%
52.97%
39.40%
96.59%
44.87%
43.34%
45.48%
9.98
9.10%
10.26%
3.94%
6.67%
74.81%
1.22%
Growth y-o-y
16.9%
32.2%
-2.6%
-35.7%
-1.3%
-38.4%
-59.1%
35.6%
15.5%
-31.2%
-15.3%
3.7%
-50.7%
NMF
-52.2%
-52.4%
-51.0%
-100.0%
NMF
-41.2%
NMF
NMF
NMF
Unaudited
1H 2013
70,257
45,535
24,722
11,792
1,393
10,400
226
582
2,880
14,088
38,810
33,943
4,867
146
4,721
3,065
1,749
18
1,767
(271)
1,496
Unaudited
1H 2012
61,172
35,248
25,924
19,550
1,351
18,199
560
454
2,473
21,687
47,611
31,704
15,907
(176)
16,082
9,085
7,146
1,082
(39)
6,026
(4,534)
1,492
Unaudited
Q2 2012
160,527
117,911
385,823
347
25,021
98,940
33,936
836,642
690,717
20,096
24,162
18,615
762,375
74,267
836,642
Growth q-o-q
27.1%
41.6%
NMF
14.0%
24.5%
0.0%
0.4%
13.7%
18.7%
20.7%
NMF
15.0%
NMF
20.7%
1.3%
18.7%
Growth YTD
75.3%
81.2%
NMF
19.7%
41.1%
0.0%
-0.7%
-5.7%
35.5%
44.4%
-100.0%
30.0%
NMF
39.6%
4.9%
35.5%
1H2012
0.36%
3.96%
8.7%
8.47%
45.55%
3.13%
38.22%
4.45%
68.86%
8.01%
37.82%
4.40%
56.80%
46.12%
90.60%
55.86%
50.61%
33.28%
10.27
8.88%
9.21%
7.95%
10.92%
93.69%
4.31%
2012
0.62%
6.44%
9.03%
8.88%
40.60%
5.64%
31.77%
3.48%
75.37%
8.25%
40.85%
4.47%
56.14%
44.58%
93.37%
54.11%
50.52%
34.93%
7.50
11.76%
9.59%
4.33%
5.27%
98.99%
3.03%
2011
1.06%
13.29%
9.44%
9.78%
50.95%
9.15%
42.80%
4.96%
70.78%
8.21%
37.11%
4.30%
54.10%
43.74%
93.86%
51.73%
48.56%
35.35%
9.08
9.36%
7.99%
7.80%
11.66%
86.30%
6.21%
2010
1.11%
21.58%
11.89%
18.08%
62.43%
7.39%
51.29%
7.64%
73.16%
10.90%
40.12%
5.97%
54.83%
29.49%
80.52%
39.19%
31.54%
42.00%
15.25
6.15%
7.04%
11.02%
18.55%
59.84%
7.01%
Growth y-o-y
14.9%
29.2%
-4.6%
-39.7%
3.1%
-42.9%
-59.6%
28.1%
16.4%
-35.0%
-18.5%
7.1%
-69.4%
NMF
-70.6%
-66.3%
-75.5%
-100.0%
NMF
-70.7%
NMF
-100.0%
0.3%
Growth y-o-y
157.2%
-11.7%
NMF
16.1%
-29.7%
-80.8%
26.6%
-31.0%
35.9%
44.5%
-100.0%
-16.7%
-100.0%
35.5%
39.3%
35.9%
2009
-1.70%
-45.86%
3.16%
8.15%
89.85%
-13.21%
71.49%
9.21%
103.44%
13.33%
48.99%
6.31%
47.36%
25.14%
81.38%
31.81%
25.88%
35.06%
33.80
2.87%
3.71%
20.34%
35.46%
60.35%
14.01%
Quarterly ratios are annualised, where applicable
2

3. Liberty Bank Q2 2013 and 1H 2013 Results
GSE: BANK | BLOOMBERG: BANK.GG | ISIN: GE1100000300
Liberty Securities
Liberty Tower
74 I. Chavchavadze Ave
Tbilisi, Georgia 0162
Tel: + 995 32 2555 500
research@libertysecurities.ge
www.libertysecurities.ge
Skype: liberty.securities
Temur Iremashvili
Director
Liberty Securities
+995 591 158 877
temur.iremashvili@libertysecurities.ge
Skype: Temur Iremashvili
Victor Meskhi
Director of Research
Liberty Securities
+995 593 551 506
victor.meskhi@libertysecurities.ge
Skype: v.meskhi
Liberty Capital & Liberty Bank
Tengiz Lashkhi
Asset Management Director
Liberty Securities
+995 591 709 280
tengiz.lashkhi@libertysecurities.ge
This document has been produced by Liberty Securities Ltd (“Liberty Securities”). Liberty Securities is a full-service broker-dealer wholly-owned by JSC Liberty Bank and licensed and regulated by the
National Bank of Georgia. Liberty Bank is a significant client of Liberty Securities. Liberty Securities and/or persons connected with it may effect or may have effected a transaction or transactions for
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representatives may have a position in the Securities and/or any related investment and may make a purchase and/or sale, or offer to make a purchase and/or sale, of the Securities and/or any
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