Bank of Georgia reports strong rise in first-quarter income

Bank of Georgia Group reported a significant increase in first-quarter operating income on Wednesday, as well as robust bottom-line growth, and strong asset quality.

The FTSE 250 company said its operating income, before the cost of risk, soared 55.2% year-on-year to reach GEL 399.6m (£126.06m).

Its overall operating income rose 42.4% to GEL 563.5m, with the growth driven by strong performance across core revenue lines, with net interest income increasing 37% and net fee and commission income surging 90.9%.

The firm’s net interest margin also experienced an upward trend, rising by 70-basis points quarter-on-quarter, and 110-basis points year-on-year, reaching 6.4%.

It put the increase down to higher loan yields across the lending portfolio.

The bank reported strong asset quality, with the cost of credit risk ratio at 1.0% in the first quarter, in line with the bank's normalised through-the-cycle level.

Non-performing loans (NPLs) to gross loans decreased to 2.4% as at 31 March, driven by reduced NPLs in the corporate and investment banking (CIB) segment.

Bank of Georgia said it achieved robust bottom-line growth, with a profit of GEL 301.3m in the first quarter, marking a 25.3% year-on-year increase.

However, profit was down 7.5% on the quarter compared to the adjusted profit for one-off items.

Profit before income tax expense remained flat quarter-on-quarter, but the income tax expense nearly doubled on the quarter due to tax rate changes announced in December.

As a result, the bank's profit for the first quarter decreased compared to the prior quarter, while its return on average equity (ROAE) stood at 27.9% for the period.

Loan growth picked up, with the loan book expanding by 4.3% year-on-year, and by 15.1% on a constant currency basis.

Additionally, client deposits and notes grew by 26.1% on the year, and by 42.4% at constant exchange rates.

Bank of Georgia said it maintained a strong capital and liquidity position, with its capital adequacy ratios comfortably exceeding minimum regulatory requirements.

As at 31 March, the bank's Basel III common equity tier 1, tier 1, and total capital adequacy ratios stood at 19.5%, 21.4%, and 23.3%, respectively.

The bank's IFRS-based NBG liquidity coverage ratio also exceeded the 100% minimum requirement, reaching 129.8%.

In terms of capital distribution, the board announced an increase in its share buyback and cancellation programme.

Since the programme's announcement in June last year, the bank had repurchased 2,684,436 shares, with 2,501,936 shares already cancelled by 11 May.

“I have mentioned previously that we believe Georgia's role in the region will continue to strengthen, bringing in additional investments and economic activity in the energy, transport, and logistics sectors over the next few years,” said chief executive officer Archil Gachechiladze.

“We now see increased resilience of the economy, with reduced leverage, high levels of reserves, GEL strength and declining inflation.

“We continue to expect strong and profitable growth of our business and are on track to deliver a good performance in 2023.”

At 1039 BST, shares in Bank of Georgia Group were up 1.48% at 3,425p.

Reporting by Josh White for Sharecast.com.