Page 45 - GEORptMay21

8.1.5 Bank news
Fitch upgrades outlook for Georgia's leading banks to stable
Bank of Georgia obtains €25mn in financing from EIB
Fitch Ratings has revised its outlooks on Georgia’s leading lenders TBC Bank (TBC), Bank of Georgia (BOG) and Liberty Bank (LB) to stable from negative while affirming their respective long-term issuer default ratings (IDRs).
The ratings agency also affirmed the long-term IDRs of ProCredit Bank, Georgia (PCBG) with a negative outlook, which mirrors the outlook on the sovereign rating (which was changed to negative in April 2020).
The revision of the outlooks to stable reflects reduced pressure on the banks' credit profiles from the coronavirus pandemic and contraction of the Georgian economy, Fitch explained.
The aggregate net profit of Georgia’s banking system reached Georgian lari (GEL) 99mn ($30mn) in 2020, resulting in a slim 0.17% return on assets (ROA) ratio. But the performances of the three lenders under review were rather divergent.
While the performances of the big banks TBC and BOG, particularly when it came to TBC, were well are well above average (TBC’s ROA was 0.57%, while that of BOG was 0.28%), Liberty Bank posted losses and a negative ROA ratio of 0.51% under national accounting standards.
All Georgian banks' financial results were hit by provisions set up at the request of the central bank at the end of March 2020, ahead of the expected deterioration in the quality of their loan portfolios amid the economic disruption caused by the pandemic. In total, the commercial banks placed GEL1.22bn ($370mn, or over 2.4% of their assets at that time) in the "possible losses of assets" buffer, reflecting the size of possible losses on loans due to the ongoing crisis. Prior to the provisioning, 14 of the 15 banks were in profit.
Fitch said that it expected Georgian banks’ pre-impairment profits to be sufficient to absorb additional credit losses from the pandemic without jeopardising their financial profiles.
Banks entered the crisis with healthy capital cushions and sound performance metrics and Fitch said it believed the ratings of BOG, TBC and LB could tolerate further moderate deteriorations of asset quality.
The rating affirmation of PCBG reflected the limited changes in the ability and propensity of its parent, ProCredit Holding ( BBB/Stable), to provide support to its Georgian subsidiary, in case of need, Fitch said.
The LSE-listed Bank of Georgia Group has announced that its subsidiary, Bank of Georgia, has signed a €25mn loan agreement with the European Investment Bank (EIB) with the aim of increasing its financing capacity to support small and medium sized companies.
The facility has a maturity of up to seven years.
It represents a top-up on the existing €50mn multicurrency loan facility signed with EIB in December 2019.
The facility can be drawn in euros, dollars or made available in local currency. Part of the local currency tranche is also supported by the Neighbourhood Investment Facility of the European Union.
The purpose of the credit is to aid the recovery of micro, small and medium sized enterprises (MSMEs) and mid-capitalisation enterprises (MidCaps) in Georgia from the coronavirus (COVID-19) crisis, and to finance investment projects important for local private sector development.
The financing operation is part of Team Europe's COVID-19 emergency response to help sustain jobs, maintain liquidity and operations and fuel the economic recovery of Georgia.
45 GEORGIA Country Report May 2021 www.intellinews.com