Page 37 - GEORptAug20

Major Georgian banks take 3.0-3.3% of loan book provisions for coming losses
on loans to our citizens. At yesterday's meeting, we made a joint, agreed decision to allow those who have lost their jobs or whose incomes have been reduced amid the pandemic to benefit from another 3-month grace period on loans," the PM said.
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 supplementary buffers is a temporary, one-year, measure.
“Our understanding is that the specific quantum of the provision reflects the NBG's current expectation of estimated credit losses on the Bank's lending book for the whole economic cycle, given current economic expectations,” Bank of Georgia said in a press release sent to LSE, referring to the provision taken.
Bank of Georgia Group announced that, further to the announcement on 3 April, relating to the NBG’s updated supervisory plan for the Georgian banking sector, it has agreed with the NBG that JSC Bank of Georgia will create a general provision of Georgian lari (GEL) 400mn on the bank's local accounting basis.
This represents approximately 3.3% of the Bank's lending book, and the general provision is expected to be taken in the first quarter of 2020.
TBC Bank decided to book additional provisions in accordance with local standards, at the end of March, at 3.0-3.3% of the loan book, according to a press release issued April 3.
The global and thus Georgian economic environment is difficult and uncertain, TBC said in its press release. Bank economists' latest analyses forecast that the Georgian economy will contract in 2020, which will have a negative impact on many businesses and individuals in the country.
Therefore, in close co-ordination with the NBG, TBC has decided to create an "extra loan loss provision buffer" to prepare for the potential impact of the COVID-19 pandemic on the Georgian economy. As of 31 March 2020, TBC Bank decided to book additional provisions in accordance with local standards, at 3.0-3.3% of the loan book and resulting in an estimated up to 2.44% decrease in the CET1 capital adequacy ratio, according to the bank's press release.
37​ GEORGIA Country Report ​August 2020 ​ ​www.intellinews.com