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September 2012
Asset and Wealth Management
Speaker: Vasil Revishvili, Deputy CEO
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
Client funds growth
Page 2
GEL mln
8 Private Bankers, 7 senior sales professionals, 10 support staff
Tel-Aviv office established in February 2009; UK office in October 2010; Hungary office will officially open in
September 2012 (activities started in 2010)
Dedicated officers coordinate activities on CIS market, and MENA ex Israel market
147.1 152.5 166.3 185.9 184.2 190.9 190.5 235.3
303.2 316.7 338.8 14.6 25.2
41.3 29.1 42.1 48.2 57.5
63.1
74.3 74.8
72.8
--
- -23.0
35.6 37.0
38.5
36.4 40.1 40.3
--
- -
5.3 7.0 7.1
8.2
10.6 13.6
14.8
161.7 177.7
207.6 215.0
256.7 284.6 297.1
353.4
444.2
481.1
517.0
0
100
200
300
400
500
600
Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12
CIS Activities
UK Office
MENA Activities
EE Office*
Israel Office
Georgia Office
CAGR 59.2%
* Budapest office to be officially opened in September 2012
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
Client funds geographical distribution, 30 June 2012
Page 3
Total number of WM Clients: 925
Average AUM per client: c. GEL 560K
Funds Distribution per product: 79.2% Term deposits and investment deposits, 20.8% call and card accounts, demand
deposits
Funds Distribution by currencies: 53.8% USD, 31.0% EUR, 9.7% GBP, 2.3% GEL, 3.2% Other Currencies
Georgia
40.5%
Israel
20.4%
Hungary
7.1%
USA
7.1%
Germany
5.9%
Russia
3.6%
UK
2.4%
Lebanon
2.2%
Other
11.0%
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
Worldwide presence
Page 4
Existing AWM office
To be considered
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
Cost of client funds
Page 5
Historically, cost of client funds has been high due to additional costs related to “Franchise Building” (sales network
building, new client attraction); Our target is to reduce AWM cost of client funds to the level of consolidated cost of
funds
Cost of Client Deposits decreased by 1.7% y-o-y, and will continue to decrease as the effect of steep cut in contracted
rates on deposits kicks in
11.1% 11.0%11.3%
9.9%
10.9%
9.5%
10.6%10.4%
9.5%
9.0% 8.9%
8.0%
8.8% 8.8%
7.3%
8.2%
7.7%7.9% 7.8%
8.4% 8.3%
7.5%
7%
8%
9%
10%
11%
12%
Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12
Cost of client deposits, (AWM) Cost of funds (Consolidated)
1H 2012 Cost to Income
Ratio of 26.7%
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
Reduced interest rates on new deposits
Page 6
Contracted interest rates on new time deposits decreased y-o-y by over 2.0% (and 2.5% from the peak in December
2011), to the level below current cost of funds of the bank, while maintaining broadly the same currency structure and
weighted average maturity
55.859.4
84.7
130.6
90.3
101.4
70.3
9.9%
9.5%
9.2%
9.5%
9.1%
8.6%
7.1%
0
20
40
60
80
100
120
140
7%
8%
9%
10%
11%
Q1'2011 Q2'2011 Q3'2011 Q4'2011 Q1'2012 Q2'2012 2mos of Q3'12
New and Renewed Deposits Contracted Interest Rate
GEL mln.
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir Page 7
Asset management at Bank of Georgia
Regional Fixed Income
Fund
Rationale
Benefits
Capacity
Deposit yields going down,
prompting the need to offer new
products to our clients
Pending pension reform
Region undiscovered and under-
researched resulting in attractive
risk/return profile
Investors underweight the region due
to limited investment opportunities
Capability to build asset management
business upon existing distribution
channels and WM client base
Proven expertise (evidenced by the
track record)
Existing customer and sales network
Regional research capacity
Increased fee and commission income
Investment banking capacity building
Expanded research activities (both buy
and sell side)
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
According to preliminary estimates the system liquidity will allow allocation of US$1.0
bln equivalent by the end of 2016
“Regional Fixed Income Fund” to invest local and foreign currency fixed income
instruments in Georgia, Azerbaijan and Armenia
We are envisaging running both captive asset management company (Bank of
Georgia branded fund) as well as allying with reputable Asset Management
Company to run co-branded Fund(s)
Broadly, the strategy will replicate allocations of Bank of Georgia Treasury Department
(with adjusted weightings of countries, currencies and instruments)
Bank of Georgia fund will be managed by an “EU passported” Investment Management
company, adhering to best practices of the industry (execution, risk management and
compliance)
Co-branded fund to attract asset managers, “underweight” on the region due to a limited
expertise
Growing interest in frontier markets is expected to result in considerable flows into the
region
Building and growing asset management business at Bank of Georgia
Page 8
Launch of a
flagship product
Bank of Georgia
branded fund
Action plan Rationale
Co-branded
fund
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir Page 9
Track record of Treasury Department
3.3%
9.0%
-1.3% 0.2%
5.5% 4.1%
4.1%
5.4%
0.5% 0.5%
3.7%1.6%
4.2%
6.4%
5.1% 3.5%
3.5%
3.5%
11.7%
20.8%
4.3% 4.3%
12.7%
9.2%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2007 2008 2009 2010 2011 H1'2012
Georgia - Government Bonds and Notes Georgia - Interbank placements Azerbaijan - Interbank placements
Real allocations of Bank of Georgia Treasury Department are used
For the purposes returns calculation, simple average of all instruments returns is taken
All returns are in USD terms
Average annual return of 10.6% (at equal weighting of instruments) over the period of 2007-2011
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
The objective of the fund is to achieve attractive returns through short duration high yielding bonds,
deposits and other short term fixed income instruments
The portfolio to consist of 10 to 20 different instruments from Regional Issuers
Target Return (in USD Terms): 8-10%
Target Volatility: 5% (ex ante)
Currency: Investments will be done in both Local Currency and USD instruments
Country coverage
Armenia, Azerbaijan, Georgia
Instruments (short to medium term fixed income)
Bank Instruments: Call and Term Deposits; Certificates of Deposit / Promissory Notes
Sovereign Issuers: T-Bills and Treasury Bonds, structures on National Bank notes & CDs
Regional fixed income fund
Page 10
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
Tentative asset allocation
Page 11
According to preliminary estimations of depth on focus markets, we estimate we target to allocate up to USD
1.0B in regional fixed income securities within the next 4 years
Total size of the target market (as at July 2012) is US$16B equivalent (of which bank deposits: US$15B)
Tentative breakdown and sales timetable is as follows (All figures in USD mln equivalent):
US$ mln or equivalent Yr 1 Yr 2 Yr 3 Yr 4
LC Deposits 60 125 175 300
FX Deposits 60 125 175 300
T-Bills and Central Bank Notes 30 100 150 250
Private Placements - 25 100 150
Total: 150 375 600 1,000
Estimates do not include the possible effect of Pension Reform
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
Simplified modelling of portfolio returns*
* For calculation purposes we used average LC Deposit rates over the last 11 years for relevant countries, returns converted into USD (Source: WB Development Indicators)
** ELMI+ tracks total returns for local-currency-denominated money market instruments in 24 emerging markets countries (Source: JP Morgan)
Annualised
Return
Volatility
12mo LIBOR 3.05% -
JP Morgan ELMI+ Index Returns 5.61% 8.63%
Passive Allocation to LC 1mo deposits 9.54% 3.76%
Passive Allocation to USD 1mo deposits 5.48% -
• For the sake of simplification (and avoidance of
“knowledge of hindsight” effect) equally weighted
basket of 1 month local currency deposits is analysed
• Even passive investment in LC deposits gives a very
attractive risk/return profile
• Hypothetical Portfolio strongly outperforms JP Morgan
ELMI+** (Emerging Markets Local Currency Money
Market Instruments) Index with lower levels of volatility
100
120
140
160
180
200
220
Passive Allocation to 1 month USD Deposits Passive Allocation to 1 Month LC Deposits
1 Month USD LIBOR Returns JPM ELMI+ Returns
Page 12
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir Page 13
Summary of strategic goals
Decrease deposit costs
Continue to expand distribution network
Focus on fee income business on the back of decreasing deposit yields
Cross-sell asset management products to WM clients and CB clients
Build asset management business targeting US$1 bln AUM in four years
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir Page 14
Q&A
September 2012www.bogh.co.uk www.bankofgeorgia.ge/ir
Forward looking statements
Page 15
This presentation contains forward-looking statements that are based on current beliefs or expectations, as well as
assumptions about future events. These forward-looking statements can be identified by the fact that they do not
relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target,
expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning.
Undue reliance should not be placed on any such statements because, by their very nature, they are subject to
known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and
JSC Bank of Georgia and/or the Bank of Georgia Holdings’ plans and objectives, to differ materially from those
expressed or implied in the forward-looking statements.
There are various factors which could cause actual results to differ materially from those expressed or implied in
forward-looking statements. Among the factors that could cause actual results to differ materially from those
described in the forward-looking statements are changes in the global, political, economic, legal, business and
social environment. The forward-looking statements in this presentation speak only as of the date of this
presentation. JSC Bank of Georgia and Bank of Georgia Holdings undertake no obligation to revise or update any
forward-looking statement contained within this presentation, regardless of whether those statements are affected as
a result of new information, future events or otherwise.
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