Bank of Georgia expects further growth in profit, lending

TBILISI, April 22 (Reuters) - Bank of Georgia Group Plc expects around 15 percent growth both in profit and lending in the medium term and feels confident in its capital adequacy position, the bank’s chief executive said.

The bank, one of the leading banking groups in the country, reported 14.5 percent growth in revenue in 2018 and 25.1 percent growth in profit before non-recurring items and tax. Net profit was up 5.5 percent.

“Our profit should be growing a bit more than our revenue line ... We believe that medium-term growth (in net profit) will be about 15 percent,” Archil Gachechiladze, who became the bank’s chief executive three months ago, told Reuters.

“We also believe that medium-term loan book growth will be above 15 percent,” he said in an interview.

Gachechiladze said recent regulatory changes in retail lending guidelines would lead to an easing in growth of unsecured consumer lending. The changes include tighter rules on how much banks can lend and consumers can borrow.

“In the shorter term it (the tighter regulation) does mean less growth for us, or in some cases not being able to lend to customers that we would like to,” Gachechiladze said, adding that the new rules were “extremely beneficial for the country as they reduce risks.”

He said the bank still expected solid growth in mortgages and lending to corporates, as well as to small- and medium-sized enterprises (SMEs).

“On average we will be growing at around 15-plus percent ... There will be a bit less growth in consumer lending, a bit more growth in corporate, SMEs, mortgages,” the 39-year-old Gachechiladze said.

Gachechiladze was named CEO in January after the departure of predecessor Kakha Kiknavelidze the previous month, when the bank - whose shares fell 40 percent in 2018 - said the time was right for a new chief to take the business to its next phase.

The bank’s shares have risen some 21 percent this year.

The recent issuance of $100 million of additional Tier 1 capital notes enabled the bank to add around 230 basis points to its Tier 1 capital adequacy ratio, which stood at 12.2 percent as of Dec. 31 2018.

The issue was two times oversubscribed and Gachechiladze said the high demand “demonstrated that investors are comfortable with Georgia, its macroeconomy and regulatory environment in the banking sector.”

Georgia saw its economy expand by 4.7 percent in 2018. The government expects it to grow by around 5 percent this year.

$1=2.6 lari Editing by David Holmes