Page 33 - GEORptAug19

Bank of Georgia’s earnings rise 10% y/y boosted by lending in robust economy
Georgian banks’ achieve high profitability in 2018
One of Georgia’s two largest lenders, London-listed Bank of Georgia, on May 14 announced that its first-quarter adjusted earnings rose by 10.4% y/y as lending advanced supported by a robust economy. However, the bank’s net interest margin shrunk as new rules hit unsecured consumer lending.
The bank said adjusted net profit rose to GEL112.2mn (€36.7mn) in Q1, up from GEL101.7mn reported a year earlier. Reported profit, edged up by only 0.3%, hit by one-off costs related to executive terminations.
Bank of Georgia’s net interest margin dropped to 5.8% from 7% due to a sharper focus on lending in the mortgage segment and to lower-margin corporate and small and medium sized enterprise clients on the back of tighter rules applied to unsecured consumer lending.
The aggregate net profits of Georgia’s banks rose by 5.3% y/y to GEL915mn (€340mn) in 2018, resulting in a return on assets (ROA) ratio of 2.5% and a return on equity (ROE) ratio of 20%, according to central banks reports.
The banks’ incomes increased by 16.4% y/y to GEL4.2bn driven by a 19% rise in interest incomes to GEL3.29bn. Expenses rose as well, moving up by 17.4% y/y to GEL3.06bn.
Provisions for asset losses climbed 45% y/y to a still moderate level of GEL396mn. Provisions for loan losses surged by 87% y/y to GEL377mn.
The Georgian banking sector is dominated by TBC Bank and Bank of Georgia, two lenders that are listed on the London Stock Exchange and that, together, account for two thirds of total banking assets. In total, 16 commercial banks operate in the country, after TBC Bank merged with Bank Republic, the country's fifth largest lender, last October. The sector has performed well in recent years, but financial services penetration in the market remains modest.
Georgian banks constantly posted rising profits from 2010 to 2017, following the losses incurred in 2009. But their profitability stagnated in 2017 and the lenders have struggled in 2018.
33 GEORGIA Country Report August 2019 www.intellinews.com