Page 44 - GEORptJul22

Fitch revises outlook on Terabank to negative noting higher risks in Georgia’s operating environment
TBC Bank announces $76mnn net income for Q1
holds 100% of Type 2 preference shares of the bank. The aggregate stake of the Russian Federation (through the Federal Agency for State Property Management and the Ministry of Finance), and the Deposit Insurance Agency is 92.23% of the bank’s share capital. The State Oil Fund of the Republic of Azerbaijan (SOFAZ) owns a 2.95% share in VTB Bank.
Fitch Ratings has revised the Outlook on Terabank's Long-Term Issuer Default Rating (IDR) to Negative from Stable and affirmed the IDR at 'B+' and Viability Rating (VR) at 'b+', with the Outlook revision primarily reflecting its view “that increased downside risks coming from the Georgian operating environment has reduced Terabank's rating headroom, given its limited franchise, focus on riskier customers and only moderate capital buffers”.
Fitch has withdrawn Terabank's Support Rating and Support Rating Floor as they are no longer relevant to the agency's coverage following the publication of its updated Bank Rating Criteria on 12 November 2021. In line with the updated criteria, it has assigned Terabank a Government Support Rating (GSR) of 'ns'.
Fitch said: “Terabank's 'B+' IDR is driven by the bank's standalone profile, as captured by its VR. The affirmation of the VR at 'b+' reflects the bank's reasonable financial metrics and moderate capital buffers. It also considers the bank's highly dollarised balance sheet and narrow, but growing franchise in the SME and micro-lending segments. Its Short-Term IDR of 'B' maps to the Long-Term IDR.”
Looking at operating environment risks, the ratings agency said: “Georgia's operating environment is sensitive to external shocks given the economy's reliance on commodity exports and remittances (particularly from Russia). The war in Ukraine and resultant international sanctions on Russia will cause the Russian economy to contract, putting pressure on Georgia's economy through trade, remittances and tourism channels.
“Fitch has revised Georgia's GDP growth estimates for 2022 to 3.2% from 5.8%. In addition, dollarisation in the banking sector is high, as is Georgia's external debt (albeit largely comprising long-standing support from official creditors). A robust regulatory and legal framework adds to the Georgian banking sector's resistance to operating environment pressure.”
Terabank's business profile is vulnerable to a deterioration in the operating environment given its small size, lack of revenue diversification, focus on smaller businesses and limited pricing power, Fitch observed, adding: “Terabank's market shares are low in the concentrated Georgian banking sector with 2.3% of total sector loans at end-2021, although slightly higher in SME banking (5.1%).”
TBC Bank in Georgia announced its 1Q22 results on 18 May, showing the bank's net income amounted to GEL224mn ($76mn), up by 46% y/y, while the return on equity stood at 24.3%, compared to 20.3% in 2021. Operating income was GEL413mn because of the low base in 2021, caused by the partial lock-down in January and mid-February 2021.
"Our strong capital generation enables the board to recommend a final dividend for 2021 of GEL2.16/share at the upcoming 2022 AGM, which together with the interim dividend paid in September 2021, will equal a total dividend of GEL3.66/share", the bank said. The total dividend pay-out ratio for 2021 will be 25% in line with mid-term guidance of 25-35%.
44 GEORGIA Country Report July 2022 www.intellinews.com