Page 32 - GEORptMar20

8.0​ Financial & capital markets
Georgia - Commercial banks lead 2019 2018 2017 2016 indicators (end of period)
Interest income (GEL mn)
339.9 296.86 275.70 227.44
Net profit / loss (GEL mn)
953.64 914.72 869.80 679.11
Bank assets (GEL mn)
47,183.37 39,682.98 34,593.50 30,149.32
Bank deposits (GEL mn)
21,364.22 18,273.92 15,717.54 13,662.0
Bank loans (GEL mn)
31,078.64 25,918.14 21,761.90 18,512.30
ROA (%)
2.5% 3.0% 3.1% 3.1%
ROE (%)
20.3% 23.3% 23.3% 22.1%
CAR (%)
19.0% 18.4% 19.1% 15.1%
NPL to total gross loans (%)
2.6% 2.6% 2.8% 3.4%
Source: National Bank of Georgia
8.1​ Bank sector overview
Dollarisation and households’ high indebtedness main risks to Georgia’s financial system says think tank
Georgia’s high level of dollarisation and excessive debt faced by households remain vulnerabilities of the country’s financial system and constrain its monetary and exchange rate policies,​ ​according to a report from the Berlin Economics think tank.​ The report also highlights the ongoing enactment of institutional improvements in Georgia’s banking and capital markets.
Berlin Economics also drew attention to the highly concentrated banking system, with just two banks controlling 73% of sector assets. In principle, such concentration may undermine incentives for sound risk management.
Georgia’s banking sector is seen as having expanded rapidly and as highly profitable, meaning it is highly capitalised—but a low level of bad loans is typical for banking at this stage of development and potential problems with credit quality would only surface later, the think tank cautioned. Berlin Economics further speaks of a recent expansion of bank credit that resulted in credit to the real sector (65% of GDP) exceeding levels seen in Central and Eastern Europe. The situation forced the central bank to enforce a "responsible regulation act" in January.
The report draws attention to a large number of very small individual loans in default which were transferred from Georgia’s banks to a private foundation. It is a reference to the transfer of small-sized bad loans to the Cartu Foundation of Bidzina Ivanishvili, the oligarch who chairs the country’s ruling Georgia Dream party. Cartu reached a deal with the banks to absorb the loans in advance of last year’s presidential election. It allowed relieved households to enter into fresh borrowing.
32​ GEORGIA Country Report​ March 2020 ​​www.intellinews.com