Page 43 - GEORptAug21

Profits of Georgia’s banking system shrink eightfold in 2020
The gross profit plus provisioning cost - a metric that indicates the operational profit of banks not impacted by the cost of provisioning - increased by 27% y/y to GEL450mn ($140mn) in Q1 this year and by 115% to GEL590mn ($180mn) in Q2.
The banks' profits are also in line with the forecast of the National Bank of Georgia (NBG), as Papuna Lezhava, NBG vice president said in June that the Georgian banking system was expected to make a “pretty solid profit" this year.
The banking system remains adequately capitalised and liquid, the International Monetary Fund (IMF) said in its Concluding Remarks after Article IV Consultations with the country.
Stress tests conducted in the recent Financial Sector Assessment Program (FSAP) mission confirmed that banks have sufficient capital to absorb credit losses stemming from the pandemic under a conservative baseline scenario over the next three years. Under the stress scenario of an extended pandemic and an adverse external financial environment, capital shortfalls are not deemed substantial and are assessed to be manageable from a systemic perspective.
Nevertheless, the IMF recommends that financial sector policies should now aim to maintain adequate buffers and provisions in the banking sector, amidst signs of recovery.
The NBG should ask banks to preserve sufficient retained earnings until significant downside risks to the economy recede and identifying effective ways to resolve non-performing loans (NPLs) remains important - even though they appear to be falling from a peak of 8.5% in March 2021 and have been significantly provisioned.
In 2020, eight banks posted a loss. The biggest loss was registered by Cartu Bank, which suffered a loss of GEL24.7mn. TBC Bank had the highest net profit, posting GEL123mn.
VTB Bank recorded a loss according to the Georgian financial standards. "We had a loss according to the Georgian standard, but we are profitable according to the international standard; which standard is more correct, decide for yourself," said Archil Kontselidze, CEO of VTB Bank, in response to questions
43 GEORGIA Country Report August 2021 www.intellinews.com