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Georgia’s Commercial Banks Reap Record Profits

According to the National Bank of Georgia (NBG), net profits of Georgia-based commercial banks in 2015 marked 537 million GEL, up 63 million GEL compared to 2014 (475 million GEL).

In December 2015, commercial banks reaped 84.5 million GEL more profits compared to November 2015.

In 2015 the Georgian bank sector reaped record profits thanks to the GEL exchange rate volatility. Georgian based commercial banks have issued about 70% loans in USD. Therefore, the national currency depreciation increased their revenues. The increased credits portfolio proves this consideration.

In 2015 the loans portfolio annual growth rate marked 33.7%, but the loans annual upturn was only 10.4% without the exchange rate effect.

Total assets of commercial banks in 2015 rose by 24.7% and constituted 24.4 billion GEL, while the annual real growth in GDP in 2015, according to preliminary estimations, made up 2.8%. To put simply, the annual growth in Georgian economy has not marked even 3%, while the bank sector growth constituted about 25%.

Today, our economy is attached to the bank sector that follows short-term visions. Today the bank system is oriented on withdrawing money from the economy, while the economy cannot produce such volume of wealth that would satisfy the bank sector’s interests and, on the other hand, nourish the whole country.

According to the September 2015 report, the bank sector recorded 155 million GEL seized properties. This signifies that commercial banks in Georgia follow the strategy  of withdrawing, not developing. Consequently, similar approaches will bring problems within the bank sector too, as the field is facing liquidity problems that are curbed thanks to open support from the National Bank of Georgia (NBG)”, Zurab Kukuladze, editor-in-chief of the Banks&Finances newspaper, noted.

Revenues of commercial banks increased by about 1 billion GEL to 3.148 billion GEL, including interest returns made up 1.980 billion GEL, up 400 million GEL compared to the previous year’s interest return.

According to the report, commercial banks received more than 1 billion USD revenues from physical bodies (up 188 million GEL compared to 2014), while the indicator of corporate loans marked 730 million GEL (up 150 million GEL year on year).

The individual sector remains the main source from where commercial banks draw huge profits. Consumer loans bring largest yield to commercial banks thanks to high interest rates and short maturity periods.

The consumer loans portfolio has increased by 0.5 billion GEL year on year.

Commercial banks receive huge profits from commission fees. The year of 2015 was not exception. The sector’s revenues from bank service commission fees reached 247 million GEL.

The bank sector’s high profitability clarifies why bankers have highest salaries in the country. According to Geostat, the national statistics service of Georgia, highest salaries are recorded in the finance sector. The commercial banks’ ratio in Georgia’s total finance sector is 93%.

According to Geostat, the highest salary in the third quarter of 2015 was recorded in the finance sector (1500 GEL), the housing sector ranks second with 1413 GEL and the state governance is third with 1313 GEL. The lowest salaries are recorded in the education field – 470 GEL.

By Merab Janiashvili
Economic Analyst
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