Page 33 - bne IntelliNews George country report Sept 2017

BGEO Group, the holding company of Bank of Georgia, on August 17 reported a 175.6% y/y hike in second-quarter pre-tax profit to GEL128mn (€45.4mn). For the banking business alone, pre-tax profits were up by 154.4% y/y to GEL90.6mn. Bank of Georgia, overtaken as number one by TBC Bank last year, is Georgia's second largest lender. It also constitutes the majority of BGEO Group's operations, which also include an investment arm focused on healthcare, utilities and real estate, as well as a beverage producing and distributing company. Revenues for the banking business were up by 19.5% y/y to GEL212mn, while the retail loan portfolio increased by 20% y/y. After-tax profit for the banking arm stood at GEL87.3mn, up by 21.7% y/y and by 5.1% q/q; for the first half-year, after-tax profit stood at GEL170mn, a 23.2% y/y increase.
The lender, which was the first Georgian company to become listed on the London Stock Exchange, anticipates strong growth in the banking sector in coming years thanks to good economic prospects overall and the large share of unbanked people among Georgia's population. Bank of Georgia is rated as 'BB-' with a stable outlook by Fitch Ratings and 'B1/Ba3' by Moody's, on par with the country's sovereign rating and similar to the ratings of TBC Bank.
Wood & Company investment bank analysts saw the second-quarter result as "decent" and the risks from the reshuffling of the bank's portfolio as low.The bank's loan portfolio appears to have been shifting from the corporate to the retail side, with the former incurring an 8% contraction in the half-year. On the retail side, loan growth was mainly driven by lari-denominated loans, spurred by the Georgian central bank's efforts to de-dollarise the banking sector earlier this year.
Societe Generale sold its minority equity stake of 5.3% in Georgia's TBC Bank to a group of institutional investors for €52.3mn on June 28, the Georgian lender announced in a press release. The French bank became a minority stakeholder in Georgia's largest bank after the latter acquired Bank Republic, formerly owned by Societe Generale, in 2016. Societe Generale's move follows that of the European Bank for Reconstruction and Development (EBRD), which sold a third of its shares in TBC Bank earlier in June. In a report on June 28, Wood & Company investment bank deemed the sale "neutral" and continued to advise investors to buy TBC Bank shares. "The accelerated bookbuild is likely to involve a discount to the market price, in our view, but we believe it should remove a considerable investment negative related to the potential overhang," its analysis said.
8.2 Central Bank policy rate
Georgia’s central bank keeps key rate unchanged at 7% despite June inflation hike
Georgia's central bank decided to keep its key rate unchanged at 7%, the regulator said in a statement on July 26, despite an increase in inflation in June to 7.1%. According to the statement , the hike in consumer prices last month is believed to be temporary and is set to reverse in the second half of the year.
The central bank previously eased monetary policy by reducing its key rate from 8% to 6.5% in 2016, when the Georgian lari appeared to have stabilised following a steep depreciation in 2014-2015. However, the exchange rate
33 GEORGIA Country Report September 2017 www.intellinews.com