Banking sector is meeting the New Year of 2017 with new merged and amalgamated companies. TBC Bank has become a hero company in 2016 with 315 million GEL transaction. TBC Bank has paid the mentioned amount to Societe Generale for bank assets. TBC paid 360 million GEL for acquisition and integration of Bank Republic. The year of 2016 was important for the French banking group too. The 10-year performance was finished by a successful deal. Societe Generale holds a 5% ratio in TBC Bank and controls shares of about 40 million GBP that are listed at London Stock Exchange (LSE).
TBC Bank CEO Vakhtang Butskhrikidze named London Premium Listing and acquisition of Bank Republic as main events of 2016.
«It is very important to be a major banking institute in Georgia, the country with less than 4 million residents. We should follow large scales to be a more efficient institute and we should offer new services to our clients, new technologies and better conditions. I mean better conditions for both technological products and loan and deposit products. Borrowers have already seen the effect. TBC Bank was the first that introduced an entirely new credit product onto the market», Vakhtang Butskhrikidze said.
Merger of two commercial banks with major assets (TBC – 6.5 billion; Bank Republic – 1.8 billion) was included into the list of positive events of 2016 that was named by Zurab Gvasalia, president of Association of Banks of Georgia.
Zurab Gvasalia: “The merger caused various rumors, but the fact was appraised positively finally. There are new opportunities. Confidence of international financial organizations and institutional investors grow and this positive tendency refers to not only TBC Bank, but also the whole banking sector.
Like previous years, the year of 2016 has also proved that commercial banks play a key role in financing the real sector. The sector’s steadiness is a certain guarantee for the country and all indicators have increased, coefficients are high, ratio of bad loans in total loans portfolio has decreased, ROA and ROE profitability has increased, negative indicators of return on capital and assets was recorded for only two commercial banks, among 16 ones. Assets of commercial banks reached 29 billion GEL (25 billion in 2015: +16% year on year); loans portfolio marked 18 billion GEL (16 billion GEL in 2015; +12.5% year on year); Deposits portfolio exceeds 16 billion GEL (14.2 billion GEL in 2015; +14% year on year). The amount of nonperforming loans is about 665 million GEL and holds 3.7-4% in total portfolio.
International ratings also prove stable growth in the sector. In 2016 Fitch Ratings has approved ratings to Georgian commercial banks with the outlook of Stable. Long-term ratings: Bank of Georgia (BB; Stable); TBC Bank (BB; Stable); ProCredit Bank (BB; Stable); Basisbank (B; Stable); Cartu Bank (B+; Stable) and Halyk Bank Georgia (BB-; Stable); Liberty Bank rating increased to the level of B+ from B and it was also granted the outlook of Stable.
The Agency has applied coefficient of improved profitability of commercial banks, capitalization and quality of assets. Approval of ratings reflects strong franchising of commercial banks (in case of Bank of Georgia and TBC Bank), as well as solid capitalization in Cartu Bank.
Key lobbyist and supervisor over commercial banks positively appraises the supervisory body changes in 2016. In the reporting year the national bank’s supervisory board was reshuffled and Larization campaign received large-scale forms along with imposition of certain obligations on commercial banks.
Starting January 2017 loans of about 100 000 USD will be issued in GEL. Moreover, loans of about 40 000 USD will be converted through budget subsidies under preferential exchange rate. This model of state co-subsidization always generates risks of careless spending, but this is an important process, because the best components bolster crystallizing process.
The banking sector considers small and medium business sectors as locomotives of state economy. All bankers agree that Dedollarization is a key challenge and Larization campaign is useful for both banks and clients.
“Larization measures should become of campaign character in region and we will reap results in long-term perspective definitely”, Gvasalia said.
The Georgian banking sector registered 16 commercial banks in 2016, including Bank Republic. Its integration into TBC Bank will be finished at the beginning of 2017. The year of 2016 should be appraised as a period of crystallization. Several commercial banks disappeared in 2016. Progress Bank was absorbed by TBC Bank. Caucasus Development Bank moved to liquidation regime after the parent bank went bankrupt in Azerbaijan. National Bank sent Capital Bank to liquidation regime too and abolished its banking license on charge of ignoring legislative requirements for prevention of legalization of illegal revenues.
The year of 2016 brought surprises to top bank managers too. Bank of Georgia CEO Murtaz Kikoria jointly with Archil Mestvirishvili and Robert Singlert were elected as members of the National Bank board for a period of 7 years. This is an unprecedented fact of return to supervisory structure from the private sector. Kikoria has returned to the National Bank, from where he had gone several years before.
The NBG board consists of 7 members. It is chaired by the NBG President Koba Gvenetadze, who replaced Giorgi Kadagidze in 2016.
Irreplaceable employee of Bank Republic has also returned. Bank of Georgia has enticed competitor bank’s manager Ramaz Kukuladze, as well as TBC Bank’s investment banker David Tsikaluri. The latter will work as Bank of Georgia deputy director general.
TBC Bank and Bank of Georgia will remain key players and competitors on the market in 2017 too.
The competition will proceed in business crediting segment. The last acquisition by Bank of Georgia serves the same objective. Namely, Bank of Georgia has bought 45 million USD (120 million GEL) portfolio of micro and small business loans from ProCredit Bank, the case of loans of about 100 000 USD.
The German bank group explained the decision for sales of micro portfolio by a new strategy that calls for making focus on major loan borrowers. A year earlier before restriction of loans of about 100 000 USD, ProCredit Bank introduced 10 000 EUR margin. And now the bank announced about restriction of the target group. A part of Georgian society perceived this decision as a signal for withdrawal from Georgia. However, the bank management assures they have never through similar things.
“The new deal with Bank of Georgia proves ProCredit Bank follows long-term plans in Georgia and the bank does not intend to withdraw from the market”.
ProCredit Bank is recorded among billionaire banks with assets of more than 1 billion. Total ratio of billionaire banks exceeds 92%.
Bank of Georgia is leader in terms of assets (9.3 billion GEL), while Cartu Bank leads in terms of Return on Assets (ROA – 3.5%). Highest Return on Equity (ROE – 3.5%) is recorded for Bank Republic. Major net profits are recorded for TBC Bank (192.7 million GEL).