Page 32 - GEORptApr20

The monetary board will likely meet again on March 29, in an extraordinary meeting, to further assess the situation, Gvenetadze said.
On March 18, the lari lost another 3.1% on the day after the central bank announced its key rate would remain at 9%, resulting in a 13% depreciation over the past couple of weeks. The exchange rate was officially announced at 3.18 GEL to USD.
To address the bout of depreciation, the NBG ​said​ that it would sell $40mn on the forex market on March 19. A $20mn sales intervention earlier this month stopped the GEL from undergoing further weakening for only a couple of days.
In talks with commercial banks, NBG officials​ ​have reportedly explored​ ​ways to help the local financial system, including by cutting required reserve ratios for foreign currency liabilities.
The NBG has presented a number of initiatives it is implementing with the aim of helping the financial sector face problems caused by the coronavirus crisis, major Georgia-based lender TBC Bank​ ​announced​.
In relation to liquidity requirements, if necessary, the central bank will consider decreasing liquid coverage ratio (LCR) limits; decreasing FX mandatory reserve requirements; and updating criteria for security or repo pledging to support GEL liquidity.
In relation to capital adequacy requirements, the NBG is considering postponing the phasing in of additional capital requirements planned in March with a 0.44pp effect on CET 1 and allowing banks to use the conservation buffer (currently at 2.5pp on CET1) if necessary. However, in this case, the banks would not be allowed to distribute any capital (including dividend payments), leaving open the possibility of releasing all pillar 2 buffers (CICR, HHI and Net Grape buffers).
8.1.1​Earnings
Georgia’s banks post steady and robust profits
Georgia’s banking system reported an aggregated net profit of Georgian lari (GEL) 954mn ($344mn) in 2019, up 4.3% y/y. Profitability metrics have not improved, but they remain robust.
In real terms or expressed in foreign currency, the banking system’s profits have slightly narrowed. The local currency weakened by some 10% on average terms in 2019 compared to 2018 and consumer price inflation hit 9% y/y in the last few months of 2019.
However, the profitability ratios are high—although not as high as they were in the year before. The return on assets was 2.2% and the return on equity was 17.9% in 2019, according to ​bne IntelliNews​ calculations based on data as of end-November (latest data available).
The LSE-traded lenders dominate the Georgian financial market: TBC and Bank of Georgia account for more than two-thirds of total banking sector assets in the small country, and hold similar shares when it comes to income and net profit.
32​ GEORGIA Country Report ​April 2020 ​ ​www.intellinews.com