10/10/2017 TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress B…

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PRESS RELEASES TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress Bank, creating the largest Georgian bank by both loans and deposits

12 Sep 2016

TBC Bank Group PLC (“TBC Bank”) announces that, together with its subsidiary, JSC TBC Bank, it has entered into a definitive agreement with Societe Generale S.A. (“Societe Generale”) to acquire its 93.64% stake in its Georgian subsidiary, JSC Bank Republic ("Bank Republic"), one of the leading universal banks in Georgia, for GEL 315 million (the "Transaction"). The Transaction represents a key milestone in the consolidation of the Georgian banking sector.  The acquisition of Bank Republic, one of the leading banks in Georgia with a Top-5 position across most major metrics and with a focus on the consumer and mortgage lending markets, is highly complementary to TBC’s existing operations and provides an opportunity for significant synergies. Key Transaction Features 

Acquisition of a large and financially sound institution with Bank Republic having maintained an RoAE of over 18% in each year since 2013 and exceeding 21% in 2015

https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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10/10/2017 TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress B… 

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 Creation of the largest bank in Georgia by both loans and deposits, with TBC Bank’s loan market share increasing by 7.3% to 35.7% and the deposit market share increasing by 5.3% to 34.5% Reinforces TBC Bank’s position in all operating segments with special strengths in retail banking, including among affluent customers Further strengthens TBC Bank with highly qualified staff, with deep product knowledge and established customer relationships Transaction structure minimizes shareholder dilution with potential to increase the free float The GEL 336 million valuation (approximately £110 million) for 100% of the equity capital of Bank Republic represents an estimated Price / Book Value multiple of approximately 1.1x at completion and a Price / Earnings 2015[1] [#_ftn1] multiple of 6.9x; subject to customary confirmatory due diligence Once fully achieved, pre-tax cost synergies from the acquisition have been estimated at approximately GEL 21 million, being derived primarily from marketing, consulting costs, streamlining of other administrative expenses as well as from moderate branch network optimization 

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The capital impact of the acquisition has been estimated as approximately 2% driven primarily by the consolidation of Bank Republic’s risk weighted assets onto TBC Bank’s balance sheet 

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Integration costs are expected to be approximately GEL 23 million (approximately 114% of annual pre-tax synergies)

The pro forma capital position (based on TBC Bank’s Q3 2016 financials and including effect of the Transaction) of TBC Bank is expected to be approximately between 10-11% and will remain well above the regulatory minimum Tier 1 level of 8.5% as required by the National Bank of Georgia

EPS accretive from 2017

The Transaction The valuation of Bank Republic is approximately GEL 336 million for 100% of its shareholders’ equity, thereby valuing Societe Generale’s 93.64% stake at GEL 315 million. The consideration ultimately payable may be subject to closing adjustments following confirmatory due diligence. The consideration is 70% payable in cash from own funds and 30% in newly issued TBC Bank shares. As a result of the Transaction, Societe Generale will become a 5.4% shareholder in in TBC Bank with a holding period (lock-up) of 1 year, which can be waived by TBC Bank at its discretion. https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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10/10/2017 TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress B…

The parties have also agreed to explore future partnering opportunities within Georgia. TBC Bank has already entered into preliminary negotiations to acquire the remaining 6.36% stake owned by the European Bank for Reconstruction and Development. The Transaction is expected to close before the end of 2016, following the completion of confirmatory due diligence and the satisfaction of all relevant condition precedents. J.P. Morgan is acting as exclusive financial adviser, and Baker & McKenzie LLP as international legal adviser, to TBC Bank in relation to this transaction. Vakhtang Butskhrikidze, Chief Executive Officer of TBC Bank said today “We believe that the acquisition of Bank Republic is a critical step in delivering on TBC Bank’s strategy and represents a major step forward in TBC Bank's ambition to build the leading banking group in Georgia and the broader Caucasus region. Bank Republic is an excellent strategic fit for TBC Bank given its focus on the mortgage and consumer lending segments, complemented by an attractive product offering for large multinationals operating in Georgia. The TBC Bank management team has extensive integration experience and expertise and we will ensure a smooth integration of the two businesses while remaining committed to delivering the highest level of service to customers of both institutions. Finally, we very much look forward to welcoming the Bank Republic employees into TBC Bank and helping us successfully operate and serve the clients of the largest bank in Georgia. We share similar ambitions and together we are excited by the opportunity to grow and develop the combined entity.” Antoine Gabizon, Chief Executive Officer of Bank Republic added “TBC Bank’s consolidation of Bank Republic’s operations has strong industrial logic and will bring significant benefits in terms of market leadership and customer servicing. We are delighted to transact with such a motivated and professional management team and believe that we have selected the best partner for our subsidiary in Georgia. We are looking forward to successful completion of the transaction and will closely collaborate to achieve smooth transition process. Following the sale of Bank Republic, Societe Generale's outlook for the Georgian banking https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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10/10/2017 TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress B…

sector remains strong, well run, well regulated and transparent, as also highlighted by its ongoing interest in TBC Bank Group Plc.” Side by side comparison of operating KPIs (December 2015)

 

TBC Bank

Bank REpublic

Total # of Clients (k)

>1,600

333

# of Branches

128

41

# of ATMs

358

159

# of Employees

4,765

972

Side by side comparison of key financials (December 2015)

GEL million

TBC Bank

Bank Republic

Gross assets

6,935

1,661

Net loans

4,445

1,184

Customer deposits

4,178

729

Shareholders’ equity

1,211

257

Net interest income

412

93

Total operating income

577

131

Operating expenses

253

58

https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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10/10/2017 TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress B…

Profit before tax

248

56

Net Income

219

49

Overview of Bank Republic Bank Republic is the third largest bank in Georgia by total loans and fourth largest by deposits offering private and corporate customers a wide range of banking services and products. It serves 333 thousand customers through 41 branches and 159 ATMs. Bank Republic is universal bank with a focus on unsecured consumer and mortgage lending and employing c. 972 full time employees. As at December 2015 Bank Republic had GEL 1.7 billion of gross assets, net loans of GEL 1.2 billion, customer deposits of GEL 0.7 billion and total equity of GEL 0.3 billion. The total operating income for the bank for the financial year ending December 2015 was GEL 131 million with profit before tax of GEL 56 million and net income of GEL 49 million. Acquisition of selected assets and liabilities of JSC Progress Bank TBC Bank also announces that it has reached an agreement to acquire selected assets and liabilities of JSC Progress Bank, a small local Georgian bank.  The acquisition consists of GEL 108 million of assets and GEL 108 million of liabilities post fair value adjustments.  The transaction is immaterial from a TBC Bank perspective as it accounts for only 1.6% of gross assets, excluding the impact of the Bank Republic acquisition. The European Union Market Abuse Regulation EU 596/2014 requires TBC Bank to disclose that this announcement contains inside information, as defined in that Regulation. TBC Bank would like to invite you to the conference call dedicated to the discussion of the Transaction for investors and analysts. Date & time: Monday, 12 September at 15.30 (BST) / 16.30 (CEST) / 10.30 (EDT) Summary of the Transaction will be presented by: Vakhtang Butskhrikidze, Chief Executive Officer

https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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10/10/2017 TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress B…

Giorgi Shagidze, Deputy CEO, Chief Financial Officer Please dial-in approximately 5 minutes before the start of the call quoting the password 'TBC Bank':

Password:

TBC Bank

UK Toll Free:

0808 109 0700

Standard International Access:

+44 (0) 20 3003 2666

USA Toll Free:

1 866 966 5335

New York New York:

+1 212 999 6659

Russia Toll Free:

8 10 8002 4902044

Moscow:

+7 (8) 495 249 9843

Replay Numbers

Replay Passcode:

8831391

UK Toll Free:

0800 633 8453

Standard International Access:

+44 (0) 20 8196 1998

USA Toll Free:

1 866 583 1035

Russia Toll Free:

8 10 8002 4832044

Moscow:

+7 (8) 495 249 9840

The presentation can be found at our IR website the following link. [http://tbcbankgroup.com/?site-lang=en&site-path=relations/cmd/] https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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10/10/2017 TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress B…

If you have any questions, please contact: Director of International Media and IR Sean Wade [email protected] [mailto:[email protected]] For Reference: Vakhtang Butskhrikidze, Chief Executive Officer, TBC Bank Giorgi Shagidze, Deputy CEO, Chief Financial Officer, TBC Bank George Tkhelidze, Deputy CEO, Chief Risk Officer, TBC Bank Sean Wade, Director of International Media and IR, TBC Bank Tel:   +44 (0) 7464 609025 I E-mail: [email protected] [mailto:[email protected]] I web: http://tbcbankgroup.com/ [http://tbcbankgroup.com/]

J.P. Morgan Salma Kalisvaart / Igor Perekolski Telephone: +44 20 7742 4000 About TBC Bank TBC Bank is one of the leading universal banking groups in Georgia and provides a wide range of services across retail, corporate, SME and micro banking to over 1.7 million clients. The Group has a diversified multichannel platform that comprises 128 branches, one of the largest networks of ATMs and POS terminals in Georgia as well as internet and mobile banking. TBC Bank employs over 4,765 people. TBC Bank holds the number one position in retail deposits, the number two position in loans (both to individuals and to legal entities) and in corporate deposits, according to NBG data, and has particular expertise in the fast-growing SME and micro sectors, where TBC Bank considers itself a market leader. https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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10/10/2017 TBC Bank agrees to acquire 93.64% stake in JSC Bank Republic for GEL 315 million (£103 million) and selected assets and liabilities of JSC Progress B…

TBC Bank management team has a strong track record of integrating acquired assets within the group perimeter and extracting synergies including acquisition of micro loans portfolio from ProCredit Bank in 2015, acquisition of Bank Constanta in 2014 and acquisition of SOA Kredit in 2007. As at 30 June 2016, TBC Bank had gross assets of GEL 6.8 billion, gross loans and customer deposits of GEL 4.7 billion and GEL 4.3 billion, respectively, and total equity of GEL 1,315 million. TBC’s profit was GEL 139.2 million for the six months ended 30 June 2016 and GEL 218.7 million for the year ended 31 December 2015. IMPORTANT NOTICE

This announcement may include statements that are, or may be deemed to be, “forwardlooking statements”. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond TBC Bank's control and all of which are based on its respective directors’ current beliefs and expectations about future events. These forward-looking statements may be identified by the use of forwardlooking terminology, including the terms “believes”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect TBC Bank’s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to TBC Bank’s business, results of operations, financial position, liquidity, prospects, growth and strategies. Forward-looking statements speak only as of the date of this announcement and cannot be relied upon as a guide to future performance. Each of TBC Bank, and JSC TBC Bank and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise, unless required to do so by applicable law or regulation. You can read the full RNS announcement for TBC Bank Group PLC here [http://www.londonstockexchange.com/exchange/news/market-news/market-newsdetail/TBCG/12961596.html] . You can read the full RNS announcement for JSC TBC Bank here [http://www.londonstockexchange.com/exchange/news/market-news/market-newsdetail/TBCB/12961597.html] . https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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[1] [#_ftnref1] Based on audited Bank Republic accounts prepared under IFRS

https://www.tbcbankgroup.com/news-and-media/press-releases/news/2016/tbc-bank-agrees-to-acquire-9364-stake-in-jsc-bank-republic-for-gel-315-million-103-…

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