Second quarter strength underpins Bank of Georgia's first half

Bank of Georgia reported “outstanding” quarterly performance in its half-year results on Tuesday, which it put down to the rebound in economic activity.

The London-listed company said it generated “strong” operating income before cost of risk of GEL 208.9m (£49.03m) in the second quarter - up 55.2% year-on-year - and GEL 405.3m in the first half - up 33.6%.

It described profitability as “robust”, with return on average equity coming in at 29.4% in the second quarter and 25.6% for the six month period ended 30 June.

The company’s net interest margin stood flat year-on-year at 4.6% in the first half, while net fee and commission income rose 45.0% over the prior year, on the back strong fee and commission income generation in settlement operations following a “significant” rebound in economic activity during the second quarter, and an increase in fees generated from guarantees and letters of credit issued by the corporate and investment banking business.

Its loan book was up 17.4% year-on-year at period end, with growth on a constant-currency basis coming in at 13.7%.

Client deposits and notes were ahead 20.4%, or 17.4% at constant exchange rates, with that growth reflecting a “consistent stability” in deposit balances of both the bank’s individual and business customers, the board said.

The cost of credit risk ratio was 0.1% in the first half, improving from 3.5% a year earlier and swinging to a small net gain in the second quarter.

Bank of Georgia said it was in a “strong” capital adequacy position, having confirmed to the National Bank of Georgia that it was no longer using, or expected to use, any of the Pillar 2 or conservation buffers that were waived last year.

As a result, there was no longer any regulatory restriction on the company making any capital distributions.

The bank said its capital adequacy ratios continued to be “robust”, and “comfortably above” the minimum regulatory requirements.

As at 30 June, its Basel III Common Equity Tier 1, Tier 1 and total capital adequacy ratios stood at 12.5%, 14.4% and 19.1%, respectively, all well above the minimum required levels of 11.1%, 13.4% and 17.7%.

At the end of the first half, after successfully deploying some excess liquidity during the second quarter, the company said its liquidity coverage ratio was 124.5%, and its net stable funding ratio 136.8%, still “comfortably above” the 100% minimum required level.

The firm said it was continuing to maintain excess liquidity at that level, primarily for risk mitigation purposes on the back of the ongoing Covid-19 pandemic pressures.

“Considering Georgia's recent strong economic recovery, we have revised our expectations for full year 2021 economic growth upwards to 8.6%,” said chief executive officer Archil Gachechiladze.

“Challenges remain, however, including political uncertainty, high inflation, which we believe is temporary, and the epidemiological situation, which we hope will improve as the vaccination rate picks up given the government's plan to vaccinate around 60% of the adult population by the end of year.”

Gachechiladze said the bank did not expect further broad lockdown measures.

“Given the improving operating environment, the strength of our franchise and the capabilities we have put in place, we expect to maintain our recent business momentum going forward.”

At 0825 BST, shares in Bank of Georgia Group were up 0.13% at 1,526p.