Page 30 - GEORptMay18

Azerbaijan’s embattled IBA to close down subsidiaries in Georgia and Russia
Georgia’s TBC Bank posts 35% y/y profitability growth to €121.5mn in 2017
International Bank of Azerbaijan (IBA), the largest Azerbaijani lender,
decided to close down its subsidiaries in Russia and Georgia during a management meeting on March 14. In 2017, the embattled bank, which accounts for a third of banking assets in Azerbaijan, indicated that it would move to sell its foreign subsidiaries in Dubai, Russia and Georgia as part of a restructuring process. IBA's ongoing problems first surfaced in March 2015, less than a month after a steep depreciation of the Azerbaijani manat, which aggravated pre-existing problems related to the bank's business model (it used to borrow externally in foreign currency and lend domestically in manats) and a lack of due diligence when it came to lending decisions, with large loans given out to politically connected individuals.
TBC Bank, Georgia's largest lender, posted a 35.1% y/y increase in underlying net profit to GEL369.2mn (€121.5mn) in 2017, according to its yearly financial report published on February 22. The lender overtook its main competitor, Bank of Georgia, in 2016 by acquiring the fourth largest bank in the country at the time, Bank Republic, from France's SocGen and the European Bank for Reconstruction and Development (EBRD).
According to CEO Vakhtang Butskhirikidze, “profitability was supported by an increased fee and commission income, which helped to offset the effect of an anticipated drop in net interest margin, good performance in operating expenses, and prudent management of cost of risk”.
The bank's stock, listed on the London Stock Exchange, delivered an underlying return on equity of 21.4%. TBC’s loan book expanded by 16.2% y/y across all of its customer segments, and the bank now accounts for a 38.2% market share of lending in Georgia. Similarly, deposits rose by 21.1% y/y, a rate above that of the market, and the bank's deposits now account for a 39.8% share of the deposit market. TBC’s medium-term targets are similar to the past financial year - a 20% return on investment, a cost to income ratio lower than 40%, a dividend payout ranging 25-35% and a loan book growth of over 15%.
8.2 Central Bank policy rate
Georgia’s central bank raises key rate by 25bps to stave off inflation
Georgia's central bank decided to keep the country's key refinancing rate unchanged at 7.25% since December last year, the central bank reported on May 1. The reason behind the decision was the fact that the Georgian lari had appreciated slightly since the regulator's last monthly meeting, although it remained susceptible to pressure from high inflation.
In recent years, as the lari began to depreciate, the regulator stepped in frequently to alter the exchange rate in order to boost the local currency. In early 2016, the rate was as high as 8%, though the central bank gradually eased it to 6.5% over the following year, only to increase it again in three consecutive interventions due to inflation that was above its target of 5%.
In December last year, annual consumer price inflation stood at 6.7%, according to the country's statistics agency. It has decreased to 2.8% in March and is expected level off in the coming months.
30 GEORGIA Country Report May 2018 www.intellinews.com