Page 43 - GEORptJun22

system’s loan portfolio.
According to NBG forecast, the NPL ratio in the banking system is expected to reach 10% in the first half of 2021.
Silk Road bank also posts a high NPL ratio of 26.7% after a 7.2pp rise over the past 12 months.
As for the highest annual growth, Pasha Bank and Silk Road Bank are the first place with the annual rise of their NPL ratios at 7.2pp.
The NPL ratios have increased by 4.8pp and 4.6pp in 2020 at the systemic banks, Bank of Georgia and TBC Bank, respectively. Their NPL ratios were 8.4% and 7.7% respectively.
According to the official classification in Georgia, "non-performing loans" are loans of "non-standard, doubtful and loss category".
8.1.5 Bank news
Fitch revises outlook on Terabank to negative noting higher risks in Georgia’s operating environment
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Fitch has withdrawn Terabank's Support Rating and Support Rating Floor as they are no longer relevant to the agency's coverage following the publication of its updated Bank Rating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%).”
43 GEORGIA Country Report June 2022 www.intellinews.com