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high cost of risk
Georgia’s TBC all set for move into Uzbekistan as officials grant banking licence
GEL157mn. The difference came about after the bank built up provisions to prepare for the impact of the coronavirus (COVID-19) pandemic.
Operating income rose 1.1%y/y to GEL 169mn.
The bank, one of the two major lenders in Georgia, said operating income during the first three months of the year was driven by “stable” net interest income and net fees and commissions. It also reported “strong” net foreign currency gains.
Cost of risk, however, rose six times from GEL43mn in the first quarter last year to GEL241mn in the same period this year.
The cost of credit risk ratio increased to 7.4% in the first quarter of this year, up from 1.7% in the first quarter of 2019 and up from 0.2% in the last quarter of 2019.
The higher cost of credit risk was primary driven by the increase of GEL220mn in the bank’s ECL provision, created for the full economic cycle in both the retail and corporate and investment banking segments during the first quarter of 2020 and related to the adverse macro-economic environment and expected negative impact on the creditworthiness of borrowers as a result of the COVID-19 pandemic
Under local Georgian accounting methodology, Bank of Georgia reported a GEL276mn loss in Q1 on even higher provisions.
Bank of Georgia Group announced that, further to the announcement on 3 April relating to the National Bank of Georgia's updated supervisory plan for the Georgian banking sector, it has agreed that Bank of Georgia will create a general provision of GEL400mn on the bank's local accounting basis.
This represented approximately 3.3% of the bank's lending book, and the general provision was taken in the first quarter of 2020.
LSE-listed TBC Bank Group on April 21 confirmed that its subsidiary TBC Bank has been granted a banking licence by Uzbekistan and added that the unit intends to launch banking operations in the Central Asian country in June.
TBC, a FTSE 250 company and one of Georgia’s two major bank groups, said in a press release: “TBC PLC’s strategy is to establish a greenfield, next-generation banking ecosystem for retail and MSME customers in Uzbekistan with a primary focus on digital and partnership-driven channels. Given the current operating environment and impact from Covid-19, we have further optimised our business model with the enhanced emphasis on asset-light and cost-efficient operations.”
TBC added: “TBC PLC has already invested USD 12.6 million into the charter capital of the Bank and expects to invest an additional USD 9.4 million by the end of 2020. An additional capital increase is planned for later this year. Potential new shareholders, including the European Bank for Reconstruction and Development [EBRD], the International Finance Corporation [IFC] and the Uzbek-Oman Investment Company, have expressed their interest to participate subject to their internal approvals. TBC PLC will remain the majority shareholder with 51% interest.”
8.2 Central Bank policy rate
Gerogia’s central bank opts for cautious 25bp rate cut to 8.25%
The National Bank of Georgia (NBG) has cut its refinancing rate by 25bp to 8.25% in a visible attempt at balancing the deterioration in Georgia’s current account outlook, which has worsened because of delays in resuming tourism activity caused by the situation with the coronavirus (COVID-19) pandemic, and support provided amid the economic slowdown.
41 GEORGIA Country Report July 2020 www.intellinews.com
