Page 46 - GEORptOct21

It should be noted that, given the existing capital buffers in the banks and expected profitability, the recovery of buffer demand will not have a significant impact on credit activity, other things being equal. At the same time, the current forecasts allow the banks to restore these buffers ahead of schedule, in which case restrictions on the distribution of capital (dividends, redemption of shares, equity investments and the creation of variable payout obligations for the management of bonuses) will be removed, the NBG also confirmed.
At the end of April, the annual growth of loans, filtering out the exchange rate effect, was 9.8% y/y - largely due to corporate lending - and the ratio of loans to GDP outperformed the long-term trend, reflecting the effects of high credit growth and exchange rates in previous periods, NBG conceded. The ratio of loans to GDP has outperformed the long-term trend since the end of 2018, according to the central bank's chart included in the statement.
However, the national lender argued that the growth of the loan portfolio this year should be commensurate with nominal economic growth. Consequently, there would be no need to activate countercyclical macroprudential instruments during this period, the central bank concluded.
NBG anticipated that the country’s banking system would end with significant profits this year.
If the current profit trend from the beginning of the year continued, banks would be expected to end up with solid profits in 2021, NBG said. Increased profitability would be helped by robust lending activity and low reserve requirements.
It is noteworthy that currently, 10% of the loan portfolio is still under a repayment moratorium.
The assessment of asset quality continues, although a material increase in the rate of non-performing loans (NPLs) was not expected.
In the first four months of 2021, the Georgian banking system generated a net profit of GEL584mn ($175mn). The data submitted to the NBG showed that the profitability of the banking system improved in January-April. The highest net profit, GEL173mn, was recorded in April.
46 GEORGIA Country Report October 2021 www.intellinews.com