Bank Republic - Housing Loan and Subordinated Debt

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	27154
Company name	JSC Bank Republic
Country	Georgia
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	May 22, 2008
Projected board date	June 23, 2008
Previous Events	Invested: June 30, 2008 Signed: June 27, 2008 Approved: June 26, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Bank Republic (the Bank), an existing IFC Client, is one of the leading banks in Georgia, serving small and medium enterprises and retail customers. Member of the Societe Generale Group, Bank Republic is one of the Georgia's oldest privately owned banks, founded in 1991. Bank Republic is very active in mortgage credit market, in consumer finance segment and is well represented in micro financing, providing considerable assistance to small entrepreneurs not only in Tbilisi, but throughout Georgia. As of March 31, 2008, the Bank’s total assets reached 599 million Georgian Lari ($405 million equivalent), representing 7.3% of the total assets of the Georgian banking sector. Bank Republic’s equity exceeded 80 million Georgian Lari ($54 million equivalent) as the same date. The Bank holds 8.6% share of total deposits and 9.6% share of retail deposits in the country.
The proposed transaction with Bank Republic includes the following:
- subordinated Debt of $7 million to support the Bank’s capital base over the six years; and
- a ten-year senior loan of $15.0 million to finance the Bank’s mortgage program.

Anticipated development impact of the project

The expected development impact of this project is high, because of achieving the following objectives in an IDA country:

- Building on IFC’s successful history, this project would contribute further to the development of the mortgage lending in Georgia, an IDA country, through providing much needed long term funding to a local bank. This investment is to be the first IFC loan with 10 year tenor provided to a Georgian bank.
- Increasing an access to long-term mortgages for local borrowers that otherwise are not able to afford better housing. Bank Republic plays an important role in terms of strengthening public confidence in the banking sector in general, providing financial intermediation in the Georgian economy and playing a role model for other banking institutions in the market.
- Supporting efforts of one of the leading Georgian banks to diversify and to increase the maturity of its liabilities and therefore, better manage its asset and liability position. Longer tenor financing from IFC would support Bank Republic and, therefore, would affect the fragile banking system of Georgia in times of tight liquidity and absence of long term funds.

IFC's expected development contribution

IFC’s main role in the project is to:

- support the banking sector in an IDA country in difficult times of liquidity crisis by providing much needed financial support;
- further contribute to the development of the mortgage market in Georgia through providing long term funds to local banks; and
- provide long tenor funding to Bank Republic for further on-lending to the Georgian retail customers.

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.

As an existing IFC client, Bank Republic has nominated an SEMS Officer and established a Social & Environmental Management System (SEMS) to screen investments against the IFC FI Exclusion List and applicable Georgian social and environmental laws.

During appraisal, IFC will analyze the activities proposed to be supported and determine additional Applicable Performance Requirements, if any, that would include a combination of:

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

The Bank will be required to:

- Maintain or upgrade if necessary its SEMS;
- Continue to ensure that responsible, qualified persons are appointed to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Performance Requirements;
- Continue to submit a periodic report to IFC as per a format to be provided by IFC.

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