TBC Bank

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26802
Company name	TBC Bank
Country	Georgia
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Pending Signing

Date SPI disclosed	March 4, 2008
Projected board date	April 3, 2008
Previous Events	Approved: August 15, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

IFC is a shareholder of TBC Bank (TBC or the Bank), Georgia’s second-largest with over $1 billion in total assets. This project (involving a potential IFC investment of up to $70 million) presents a significant opportunity for IFC to help ensure TBC’s more sustainable growth and, indirectly, support the development of the banking system in Georgia (an IDA country) by:

- helping to strengthen TBC’s capital base and to meet its liquidity needs in the current difficult market;
- working with TBC to implement a solution for its longer term funding needs; and
- introducing resourceful strategic partnerships which would support TBC’s growth with stable sources of long-term funding and operational excellence.

Project sponsor and major shareholders of project company

The project sponsor is TBC.

TBC was established in 1992 to serve the needs of the TBC Group, a diversified industrial group controlled by two reputable Georgian businessmen with diverse interests, Mr. Mamuka Khazaradze (the Group’s founder and current Chairman) and Mr Badri Japaridze (Deputy Chairman).

The Bank has increasingly diversified its business from the TBC Group over time and has expanded to become the second-largest bank in Georgia. TBC retains a strong position in the Georgian banking sector with 29% to 30% of total assets, loans and deposits. TBC Bank enjoys an excellent reputation locally for professionalism and focus on customer service. TBC has a long term rating of B+ by FitchRatings.

TBC continues to focus on SMEs and retail lending (including mortgages, personal and car loans and point of sale loans), which have proved to be quickly-developing market segments, in addition to doing business with multinational and local companies.

TBC has promoted Georgia’s financial sector development through pioneering non-bank financial subsidiaries and affiliates. TBC Leasing (established in 2003) is the first and largest leasing company in Georgia with a 70% market share. TBC Broker is the leading Georgian brokerage institution. GPI Holding is the first private pension & insurance company in Georgia with a 21% market share. Credit Info Georgia is a credit bureau created in 2005. UFC is a credit cards processing center, founded in 2001 with other Georgian banks.

The Bank is owned 78.4% by Messrs. Khazaradze and Japaridze and their affiliates, 11.95% by IFC and 9.65% by DEG (the German development bank).

Total project cost and amount and nature of IFC's investment

TBC requires total funding of up to $1 billion (including IFC’s contribution) to support its projected growth over the next three years. IFC proposes to provide up to $70 million for its own account in a suitable combination of Tier I capital (as defined by the Central Bank of Georgia), subordinated debt, and senior debt.

Location of project and description of site

TBC is headquartered in Tbilisi, Georgia, and has 30 branches across the country. The IFC investment will be made in TBC to support its growth nationally.

Anticipated development impact of the project

The proposed investment has the following anticipated outcomes:

- Continue to contribute to the development of one of Georgia’s leading banks by assisting TBC in meeting the increased demand for SME and consumer loans.

By improving the SME access to financing from a well-managed local bank, the project will facilitate the sustainable development of the private sector across the country that will result in improved economic development, employment creation and poverty reduction.

- Strengthen the Georgian banking sector by introducing strategic partnerships capable of promoting global banking best practice and providing liquidity during a period of global market difficulties.

As one of Georgia’s top banks, TBC plays an important role in strengthening public confidence in the banking sector in general, providing financial intermediation in the economy, contributing to increased competition in the financial sector and serving as a role model for other banking institutions in the market. Instilling market confidence at this juncture will help stimulate future access to international markets.

- Support the efforts of one of the leading Georgian banks to diversify and to increase the volume of its funding, and to strengthen its asset and liability position and its capital adequacy.

IFC's expected development contribution

IFC will help introduce strategic partnerships (providing long-term capital and operational expertise) to TBC. IFC will also provide funding for its own account. Furthermore, through its membership of the TBC Supervisory Board, IFC will continue to be a valuable sounding board for TBC in setting its strategic priorities.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. During appraisal, IFC will analyze the Bank’s portfolio and the activities proposed to be supported with IFC financing for types of transactions, size, tenor and industry sectors and determine the Applicable Requirements, if any, that would include a combination of:

- The IFC FI Exclusion List
- The applicable National Environmental and Social Laws and regulations and/or
- The IFC Performance Standards

As an existing IFC client, TBC Bank was required to establish an environmental management system. As this project will follow IFC’s revised Environmental and Social Review Procedure, IFC will review the Bank’s existing systems and suggest Supplemental Actions to address any gaps. Based on the review, the Bank will be required to:

- Upgrade, if necessary, its existing Social & Environmental Management System (SEMS), prior to disbursement to the satisfaction of IFC
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Requirements
- Continue to submit a periodic report to IFC as per a format to be provided by IFC

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