ProCredit Bank Annual Report 2009

Strategy for 2010 and future plans

2009 was a very successful year for ProCredit Bank Georgia, with steadily growing business volumes, strong increase in the number of customers, and with an after-tax IFRS profit of GEL 19.8 million.

Loan Portfolio: Despite the challenging economic environment in 2009, ProCredit Bank's loan portfolio showed modest growth, increasing by 2.3% to GEL 534 million. During the first half of 2009, the portfolio declined due to tow demand for loans and high rejection rates, but in the last two quarters, the lending picked up, as the economic environment began to stabilize. Despite the economic challenges in Georgia and the drop in sales that many clients faced, the loan portfolio quality remained at very high levels, with the portfolio at risk over 30 days amounting to only 1.76% of the total portfolio at the end of the year.

Deposits: In 2009, total deposits increased by 30.9% to GEL 384 million, which was significantly higher than the pre-crisis volume in July 2008 (GEL 301 million). Total term deposits grew by 24.1% to GEL 191 million, while savings accounts increased by 26.4% to GEL 105 million. Such increase in deposits during the year demonstrates the trust the bank has gained from the population.

Liquidity: Throughout 2009, liquidity levels remained extremely high: ProCredit Bank consistently had an average liquidity ratio of 34.3%, well above the 20% minimum required by the National Bank.

Financial results: ProCredit Bank closed the year 2009 with an after-tax IFRS profit of GEL 19.8 million (USD 11.8 million), a 46% increase compared to the year 2008. It is the best result ever achieved by ProCredit Bank Georgia, which is especially remarkable against the backdrop of impairment caused by the military conflict with Russia in 2008 and the consequences of the global economic recession in 2009.

Branch network: Unlike the double-digit expansion of its branch network in 2008, last year ProCredit Bank focused on further improving the quality of existing branches to offer the most possible convenient service to its clients. As a result, only three new branches started operations in 2009, bringing the total number of branches to 59. A service centre operating 24/7 was opened at Tbilisi International Airport and one other branch opened in Tbilisi - close to the main train station. At the end of the year, a newly constructed branch opened its doors in Tsnori, a region with a large agricultural potential.

New head office: The construction of ProCredit Bank's new head office commenced in 2009. The bank plans to invest USD 20 million in this major project. The head office will be a 12 000 sq. m. facility on Kazbegi Avenue, intended for 500 people, including a branch and a training centre. The construction is expected to be completed by 2012.

New Training Centre: As a development-oriented institution, ProCredit Bank continued supporting its staff development goals in 2009 by opening a new training centre in Digomi, where middle management is being trained in English and managerial skills.

Strategy for 2010 and future plans: As in the past, in 2010, ProCredit Bank will keep supporting sustainable businesses for a renewed growth, with a strong focus on local production companies to foster economic development. The year 2009 proved to be very challenging for very small borrowers as they were most affected by the economic downturn due to a lack of savings or cushions to draw upon and over-indebtedness caused by the boom in consumer finance in previous years. In ProCredit Bank the portfolio of very small loans continued declining in the last two years. Therefore in 2010 the bank will be even more focused on financing businesses that can generate growth and thereby contribute to economic development, and that are not very vulnerable to volatilities in the economy. In order to support these businesses in a professional way and truly be their banking partner, ProCredit will try to further strengthen its position as a "house-bank" for small businesses. As in 2009, no large-scale expansion of the branch network is envisaged for 2010. New branches will be opened in the cities where the bank is not yet present and service centres in the cities where it already operates, in order to offer the best possible convenience to its clients.

Maya Meredova, Director of ProCredit Bank Georgia:

"Despite the economic challenges faced by Georgia in 2009, ProCredit Bank has maintained its strong position in the Georgian market. Throughout the year, the number of clients kept steadily increasing, with a significant growth in deposits, a stable loan portfolio and a record profit. Overall, 2009 was the year when ProCredit Bank Georgia proved that it is a professionally competent and a reliable partner for its clients not only in times of stability and strong economic growth, but also - and more importantly - in times of change and uncertainty."

ProCredit Bank is one of the leading banks in Georgia, focused on lending to very small, small and medium-sized enterprises and offering a full scale of banking services to private individuals and legal entities.