February 19, 2019 / 7:59 AM / 6 months ago

UPDATE 1-Bank of Georgia profits rise on lending boost

(Adds details on background, regulatory changes, adds graphic)

Feb 19 (Reuters) - Bank of Georgia Group Plc reported an 11.8 percent jump in annual profit on higher lending thanks to a growing Georgian economy, but warned that growth of unsecured consumer loans would moderate on the back of some newer rules.

The bank, one of the former Russian republic’s two main lenders, also said that it may explore the issue of additional tier one capital, normally debt instruments convertible into equity, in dollars this year.

Georgia’s economy slowed marginally in 2018 but still grew 4.8 percent, helping the Tbilisi-based bank, which offers retail, corporate and investment banking, and wealth management, to report 22.2 percent growth in its loan book to 9.40 billion laris ($3.57 billion).

Pretax profit rose to 437.5 million laris ($166.10 million), for the 12 months ended Dec. 31, from 391.3 million laris ($148.56 million) a year earlier, the FTSE 250 lender said.

But the company flagged that recent regulatory changes on retail lending guidelines would see growth of unsecured consumer loans ease. It said it still expected solid growth in mortgages and lending to small and medium-sized enterprises (SME).

The changes included updated caps on payment-to-income and loan-to-value ratios and the introduction of Basel III capital adequacy requirements, said the bank.

It added that this would lead to banks seeing a shift towards lending to corporates, SMEs and the mortgage sector and that it now expects lending growth over the next 12 months to be closer to 15 percent, which is at the lower end of its 15-20 percent medium- to long-term target.

FTSE 250 firm’s net interest margin - a key measure of financial strength - slipped 130 basis points to 6 percent in the last quarter of the year as it shifts to a higher quality, finer-margin product mix due to tighter rules on unsecured consumer lending.

The bank’s main competitor TBC Bank Group is scheduled to report its results later this week.

The former Soviet republic, home to pipelines that carry oil and gas from the Caspian region to Europe, saw its economy expand by 4.8 percent in 2018, slowly slightly from 5 percent in 2017.

“The Government’s prudent macroeconomic policies continue to serve the country well, and the economy has remained extremely resilient to pressures in neighbouring countries, and some volatility in regional financial markets,” newly-appointed Chief Executive Officer Archil Gachechiladze said. ($1 = 2.6340 laris)

Reporting by Muvija M in Bengaluru; editing by Patrick Graham

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