Page 37 - GEORptMay20

created a provision for possible losses of GEL1.2bn, and this represented only a potential (and not realised) loss, the monetary authority stressed.
The banking system’s net operating profit was GEL286mn (€120mn), or 0.8% of the banks’ average assets in the quarter.
The reserve itself, if this loss actually becomes a reality, will allow the banks to avoid financial sustainability risks, the central bank added.
The operating profitability of the banks has slightly deteriorated compared to the first quarter of last year, although it remains positive and robust. Thus, the banks’ incomes increased by 15.8% y/y to GEL1.2bn, but the expenditures, other than the provisions, rose by 23.4% y/y to GEL844mn. At the same time, the banking system’s assets surged by 18.8% y/y to GEL46.2bn (€15bn, as of February), as the stock of non-government loans advanced by 21% y/y to GEL31.6bn (€10.3bn).
The Georgian banks’ gross profit excluding the loan loss provisions accounted for some GEL356mn, a mere 0.9% up y/y, and some 0.8% of their assets—slightly down from 0.9% in the same quarter of last year.
8.1.2​ Loans
Major Georgian banks take 3.0-3.3% of loan book provisions for coming losses
Georgia’s major banks, the LSE-listed Bank of Georgia and TBC, have announced that they have both taken provisions in the amount of 3.0-3.3% of their loan books, in agreement with the National Bank of Georgia (NBG) and on the banks’ local accounting basis, used for the calculation of the banks' capital ratios.
The size of the provisions indicate anticipated losses incurred in the whole economic cycle prompted by effects of the coronavirus (COVID-19) pandemic.
The provisions will affect the CET1capital adequacy ratios, which, however, remain above or close to the 7.0% revised estimated minimum requirement (6.9% for the Bank of Georgia and 8.7% for TBC) even after the provisioning.
Furthermore, the central bank NBG has allowed banks to use part of their supplementary, conservative buffers under a decision issued on April 3. The supplementary resources released under this decision are more than enough to cover provisions taken for covering future losses, according to data included in the two banks’ press releases, but at the same time the release of the
37​ GEORGIA Country Report ​May 2020 ​​www.intellinews.com