The Bank of Georgia is expanding its operations in cooperation with a number of stakeholders, including insurance companies and financial service providers - the insurance company BCI, the company Georgian Card and the brokerage company Galt & Taggart, which is linked with Tbiluniversalbank and its leasing company, Sakartvelos Salizingo (Georgian leasing) for some time now. Therefore first time in the history of the banking sector in Georgia two successful banks were united. Lado Gurgenidze, a native-born Georgian returned four months from London, and upon the recommendation of the Board of Directors of the Bank of Georgia, he took over duties as the General Director.

Lado Gurgenidze – age 33, but with 10 years of in the trenches experience in the world of investment banking. Already he has been involved in more than 25 high-level acquisitions, merger and major deals in the field of investment banking, not only in the UK but also in Europe, the United States and the emerging markets Eastern Europe Before assuming the General Director’s position with the Bank of Georgia, he had worked as Executive Director an European Regional Manager at Putnam Lovell, a leading investment bank to the global financial services community, which also involves acquisitions of whole companies, and asset deals.

He returns to Georgia with an impressive CV. He also was an Executive Director of one of the largest banks of Europe ABN Amro. He was a Consultant of many world scale global companies (the leading programming, financial information and financial communications companies SWIFT, Radianz, Reuters and Telerate among them). During 1997 – 1998 he was heading the department of corporative finances at ABN Amro in Russia and the CIS countries, then in 1998-2000 after moving to London he headed the entire department of mergers and unifications of ABN Amro in the Eastern Europe. During this period under Lado Gurgenidze’s leadership ABN Amro negotiated many contracts with the clients such are: Marconi, Global One, Golden Telecom, UPC, Wirtualna Polska, Merloni Elettrodomestici, SNAM, News Corp and Andrew Corporation. In 2000 as a result of Lado Gurgenidze’s and his team’s activity ABN Amro gained the leading position in the Russian market.

Lado Gurgenidze answers the questions of 24 Saati (Hours)

Q: What goals and concepts do you as the new General Director of the Bank of Georgia plan to realize? Will the Bank of Georgia become a leader of the Georgian banking sector and for what kind of help average Georgians expect from the Bank of Georgia?

A: The main objective under the new management is that 2007, or even earlier, that stockholders will be able to realize expected returns and allow for the liquidity of their stocks, and at a very high margin, as a result of working properly, reforming bank operations, increasing its level and spheres of operation, which also means that we will need to increase both local and international interests in our operations. Naturally what is said here is very general – the main and paramount ask of management “our team” of any publicly traded Joint Stock Company is to do what is necessary to maintain the share price of stock and a return on that investment. This is an axiom – the price of a stock must be high and it must become as liquid as possible. People must be able to freely buy and sell stocks and options in an as open and free process as possible

Q: “Our team” – what team do you mean – those working when you arrived or the persons that you put together afterwards?

A: By that I mean the team that is an amalgamation of the very large and intelligent collective of staff of the Bank of Georgia, which also includes the nucleus of the employees of Tbiluniversalbank. Too, those are several people who can be best described as “imported”.

Q: Regarding to Tbiluniversalbank – first time in the history of existence of the banking sector in Georgia two successful banks were unified – Tbiluniversalbank, that was staffed with the best cadres based on local knowledge, and then these people merged with the Bank of Georgia. Why was it necessary and what will happen next?

A: Any merger is very important and the Bank of Georgia will continue in this direction. I have experience in realizing such contracts, however, as in our case; things were different in this merger than what is usual in the European financial services market.

It was the best that the process of merging the banks in Georgia began with Tbiluniversalbank, because our computer systems are synchronizing, and what is the most important, Tbiluniversalbank is known as a bank that is transparent, clean, and progressive. Moreover, the organization must be staffed with well-qualified and intelligent human resources.

Q: What is the new management of the Bank of Georgia going to change?

A: The strategy of the bank is obvious and we can talk about it openly. The reforms are already underway in the bank; we are growing an exceedingly rapid and aggressive rate, which is organically spurred at an expense of consolidation. We are determining and establishing the maximally diversified spectrum of our products, which, again at an expense of purchasing other companies, covers the complete insurance services, the leasing service, the brokering and investment services, the service of managing the actives and so forth and so on. We are interested in getting involved with all aspects of financial services.

Q: The insurance company BCI, the leasing company Sakartvelos Salizingo, Tbiluniversalbank, the company Georgian Card, the brokering company Galt & Taggart – this is the complete list of the structural units of the Bank of Georgia at the moment. What else will be added to the structure of the bank and what is all of this done for?

A: Restructuring of a bank is for the goal to increase the potential sale price, between now and 2007, or perhaps earlier. Being saleable does not unambiguously mean that athe intention is to sell but nonetheless it is appropriate to raise the issue of changing the main owners, sooner or later, at any publicly traded company (JSC). Furthermore, as in our case with the Bank of Georgia, it is only one of the companies listed that has a truly liquid share price; we are very proud of this achievement.

It is important that the very significant growth of liquidity has happened during the recent months, because the growth of capitalization that we achieved in the end of 2004 and still continues at the moment is not the success that is only written on the paper. This means that a shareholder of the Bank of Georgia can buy stocks sell stocks as freely as he can buy them. Last year the bank traded with the stocks valued at more than 21 million lari, which is a phenomenal result, moreover when it happened against the background of growing stock rates – The price of a bank stock was two lari in the beginning of last year, and it reached up to five lari and 60 tetri by the end of the year. I repeat that all of this did not only happen on the paper, the people really sold and bought the stocks. This is our main accomplishment.

The reforms continue in the bank and the similar processes will naturally proceed in a positive direction. The bank should be saleable which means it should be open, transparent and management built on modern systems, and it should be of a scale that makes it attractive to foreign investors, European, or even Turkish, Russian, or Ukrainian. It does not matter, only that it puts itself in the position that other banks would be interested in buying the bank. As a result (if it happens in this direction), on the one hand, then the Georgian banking sector will gain a new stable “foreign player” in the market, which in turn will drastically improve the financial service sector for the people based on its economy of scales, stability. As a result all will benefit, shareholders, the clients and even those that actually work in the bank. By being part of a strong bank with foreign investments will provide for professional growth opportunities and job security. It is estimated that these goals are achievable with in the plan worked out by us over the next three years.

Q: What sorts of help can a regular citizen address the Bank of Georgia for?

A: Generally a bank and in this case the Bank of Georgia must be and is an integral part of everyday life of average citizen and on an individual level as well, which contains several factors:

1. We must offer such products and services to the people, that they actually need based and are based on existing circumstances in a market.

2. We must achieve such level of service where the relationship with a bank, or even with insurance or a leasing company will not be viewed as something extraordinary or out of reach, it must be comfortable and understandable, which implies flexible forms of services.

The main instrument is the effective use of the necessary network of the ATM machines. The network of the Bank of Georgia is the largest at the moment – we have 17 ATM machines, 15 of them are located in Tbilisi. We are planning to replace all of the existing ATM machines with the up-to-date technology in May, and by the end of this year we plan to activate 40 ATM machines in the network, that means that the network will double in fact.

Q: What else can the Bank of Georgia “brag about”?

A: We have one of the best and competitive internet-banking products, which will be additionally improved over time. We have a quite interesting service of communicating by a mobile phone with out bank – this is the real time service and one of the effective forms of communicating with people. The spectrum of several of our products is at a developing stage, which are improving more and widening. In one word, we are approaching the critical point where a bank and its financial service realistically are merging as an object that can be used in daily life. By the way when you withdraw cash from ATM machines, it is also a point of contact with the bank as well. The contact with the people is valuable for us, because even with the message written on the screen of the ATM machine we can tall you or dictate you something new. But... there is one but – in order for this contact to be frequent and as numerous as possible, it is necessary for our service to remain competitive, that means that the number of ATM machines must be as many as possible, the cards must not stuck etc.

One more important reality – all commercial banks in Georgia, including the Bank of Georgia, also our main competitor, are very small sized and therefore, objectively, it is essential and obligatory to invest money to make this sphere grow. This year the Bank of Georgia plans to attract an additional 14-million lari investment in order to modernize our networks, and the platform of the information technologies. 14 million lari is more than the entire capital of many banks in Georgia. I think that even this amount of money is not enough, but this is the maximum that the management and the Board of Supervisors thought was possible to provide at this stage. This is a necessary decision and there was no other way, otherwise we will not be able to develop and will not be able to proved clients with the products that they need and deserve in the 21st century.

Q: How would you assess the policy of the National Bank of Georgia)?

A: The policy of the NBG has been very correct, modest and deliberate in the field of sustainable development and ways to improve the banking sector. The quality of the policy of any national banks should be determined according to fundamental parameters – the currency exchange rate, the inflation levels in country, and the stability and sustainability of the banking sector. I think that the task is being well executed based on all three parameters in Georgia. Now the phase comes when it is necessary for the banks to seriously consolidate for their subsequent growth, and this process should come about in a very short period of time. Generally there are not more than three or four banks in small countries the size of Georgia. There is a competition as a result, and this competition is strong, but on the other hand larger banks in size can mean more financial services. The policy of the NBG is very healthy and liberal in this direction as well. Thus my personal vision about the consolidation of the sector unequivocally matches the strategies of the National Bank of Georgia.

Q: As I see the program maximum for the management of the Bank of Georgia is to lay the groundwork for the sale of the bank. Or, if we say more clearly, the banks must become more attractive for investors. Will the Bank of Georgia become a bank on a universal standard?

A: The universal bank is exactly the kind that we are trying to develop with a full range of services. This type of bank provides for the entire spectrum of commercial clients – the largest, small and average size companies, foreign organizations and regular citizens as well. The Bank of Georgia remains as one of the strong banks in the field of retail sales, also in the direction of investments, in the field of insurance services, it has the services required for every fields of society, which are the characterizing marks for a bank on the international level.

P.S. After the 10 years of having a successful career abroad, Lado Gurgenidze returned to Georgia for three years this time (this is the time period indicated in the contract signed with the Board of Supervisors of the Bank of Georgia). Lado Gurgenidze added in his comments on having returned from Georgia, “London will not be able to do without me and won’t be destroyed in my absence. Meanwhile, I will be able to do much in Tbilisi.”