Page 32 - bne IntelliNews George country report Sept 2017

8.1.4 Banks specific issues
Georgian central bank to up minimum regulatory capital requirement fourfold
The Georgian central bank will gradually increase the minimum capital requirement for lenders from GEL12mn (€4.5mn) to GEL50mn by the end of 2018, the regulator announced on May 5. The reason for the move is to strengthen the financial sector and prevent institutions with insufficient capitalisation from entering it.
The increase will be implemented in three stages. Banks will be asked to increase their regulatory capital to GEL30mn by end-2017, to GEL40mn by June 2018 and by GEL50mn by end-2018.
The decision will likely affect small lenders, and may result in increased activity on the Georgian Stock Exchange, with banks seeking to raise financing by issuing debt.
Georgia's banking sector is dominated by TBC Bank and Bank of Georgia, which together hold over two- thirds of banking sector assets, and is comprised of 19 lenders in total.
8.1.5 Bank news
TBC Bank, Georgia's largest lender, reported a 27.6% y/y increase in net profit to GEL176.4mn (€62.2mn) in the first half of the year, a 36.4% y/y increase in operating income to GEL410.6mn, a decrease on return on assets from 4.2% in H1/2016 to 3.3% this year and a decrease in the net interest margin to 6.7%, from 7.8% a year earlier.
Its integrated balance sheet following the acquisition of Bank Republic in 2016 posted a 66.6% y/y growth in assets to GEL11.2bn, a 56.8% y/y increase in gross loans and a 56.1% rise in deposits to GEL6.6bn. Even without the Bank Republic acquisition, loan growth stood at 30.8% y/y to GEL6.1bn, the bank said in its presentation of its second quarter financial results.
TBC Bank is one of Georgia's landmark companies. After acquiring a premium listing on the London Stock Exchange, on which it had been listed since 2012, the bank last year merged with the country's fourth largest lender, Bank Republic, to become the largest bank in Georgia. A frequent recipient of funds from international financial institutions, the bank has worked on increasing the share of small and medium sized enterprises in its portfolio in recent years. The European Bank for Reconstruction and Development, the International Finance Corporation and JPMorgan are among its shareholders; the Dutch development bank FMO and Societe Generale sold their shares in the bank earlier this year.
Nevertheless, on a quarterly basis results proved somewhat weaker, with net profit dropping from TEL96.6mn to GEL79.9mn between Q1 and Q2, the return on equity from 24.2% to 18.9% and the cost to income increasing from 40.8% in Q1 to 44.9% in Q2.
Vakhtang Butskhrikidze, the lender's CEO, said that the country's accelerated economic growth and stable currency continue to underpin the growth of the banking sector and that the overall macroeconomic outlook is encouraging.
32 GEORGIA Country Report September 2017 www.intellinews.com