http://www.finchannel.com2 April, 2012 News Making MoneyGeorGian website http://www.financial.ge
Supported by the NatioNal baNk of GeorGia aNd the aSSociatioN of baNkS of GeorGia
The highest annual interest rate on savings
IFC ANd ebRd CoNveRTed TheIR LoANs INTo bANk oF geoRgIA shARes see on p. 10
Top 10 WAys geoRgIAN bANks CAN gRoW IN 2012 see on p. 30
The MosT popuLAR geoRgIAN bANkINg pRoduCTs see on p. 10
oFFICIAL ReseRve AsseTs INCReAsed by 100.7 MILLIoN us doLLARs see on p. 21
khAChApuRI INdex see on p. 2
bANks beINg RIsk AveRse ToWARds sMes IN geoRgIA see on p. 28
SponSorS:Golden SponSor:General SponSor:
GEORGIAN BANKSBEST
2012 Will be a Successful Year for Georgian Banking SectorZuRAb gvAsALIA, president of the association of banks of Georgia see on p. 11
Georgian Banking System in 2012gIoRgI kAdAgIdZe, Governor of the national bank of Georgia see on p. 3
“Georgia is Over-banked for a Small Economy”, Fitch analysis of Georgia’s banking sector by JAMes WATsoN, fitch ratings see on p. 22
Other Georgian banks to follow Bank of Georgia’s IPO path?ANdReW CoxshALL, managing partner kpmG, southern caucasus see on p. 2
HEADLINE NEWS & ANALYSIS2 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banks
2 april, 2012
64 (291)
CopYRIghT aNDINTEllECTUal pRopERTY polICY
The finAnciAl respects the intellectual property of others, and we ask our
colleagues to do the same. The material published in The finAnciAl may not be reproduced without the written consent
of the publisher. All material in The finAnciAl is protected by Georgian and international laws. The views expressed in The finAnciAl are not necessarily
the views of the publisher nor does the publisher carry any responsibility for
those views.
pERmISSIoNS
if you are seeking permission to use The finAnciAl trademarks, logos, service marks, trade dress, slogans, screen shots, copyrighted designs,
combination of headline fonts, or other brand features, please contact publisher. “&” is the copyrighted symbol used by
The finAnciAl
finAnciAl (The finAnciAl) is regis-tered trade mark of intelligence Group ltd in Georgia and Ukraine. Trade mark registration by Sakpatenti - registration
date: october 24, 2007; registration n: 85764; Trade mark registratrion by Ukrainian State register body - regis-
tration date: november 14, 2007.
aDVERTISINg
All Advertisements are accepted subject to the publisher’s standard conditions of insertion. copies may be obtained from advertisement and marketing
Euro Super 2.40Efix Euro Premium 2.35Euro Regular 93 2.22Efix Euro Diesel 2.45Euro Diesel 2.30
current prices on Gasoline and diesel 2 april, 2012, GeorGia
Gasoline prices presented by BusinessTravelComHotel and airticket bookinG: 2 999 662 | sky.Ge
KhachapuriIndex
KhachapurI Index Is exclusIvely provIded to The FINANCIAL by IseT
aprIl 2012
The cost of cooking one stan-dard Imeretian khachapuri in March 2012 was in the [2.6 – 3.5] GEL price range,
with the average at 3.05 GEL. Thus, Kh-Index was about 9% lower compared to 3.35 GEL recorded in February 2012. This “negative” dynamic is mainly a result of the continuing seasonal decline in the price of all dairy ingredients: cheese, milk and butter. The price of cheese decreased by 12%, vary-ing between 6 and 7 GEL in Tbilisi markets. The prices of butter and milk lost 5% and 9%, respectively.
During the last two months, Kh-Index is also down in year-on-year terms. In February and March 2012 it was 2.5% and 2.1% below its level for the respective months of 2011.
econoMIc lesson oF the WeeK:
no neWs Is not Good neWs For GeorGIan
FarMersAs the price of khachapuri is
mainly affected by the price of cheese, a simple comparison of Kh-Index dynamics over a 12-month cycle (see above) sug-gests that nothing terribly excit-ing is happening in the Georgian
dairy farming sector. For much of 2011, Kh-Index stayed well above 2010 levels due to the higher price of imported wheat and flour. However, the prices of imported commodities have come down towards late fall and winter, and so did Kh-Index. At present, Kh-Index is back to its usual seasonal price pattern, hovering slightly below the 2010 curve.
No news is not good news for Georgia’s dairy farming. The sec-tor continues to be dominated by subsistence or smallholder cattle keeping. A typical herd size is 2 cows per farmer, mainly for milk production. About 50% of herds are dairy cows of Caucasian breeds, with little breed improve-ment but adapted to harsh hus-bandry conditions.
Anybody who travelled around Georgia would guess that “harsh husbandry conditions” is a eu-phemism for letting the cows feed themselves. As a result of almost exclusive reliance on pasture
grass feeding, the quality of forage declines dramatically in fall and winter, causing milk production to decline. Instead of investing in the quality of forage and better storage facilities to be able to pro-duce in low season, most Geor-gian farmers have their cows dry off in December and calve around February, further amplifying the ups and downs of the seasonal production cycle.
The policy prescriptions are well known, and yet, despite their availability and the massive infu-sion of donor funding and know-how, the Georgian agriculture has so far remained resilient to change. Swiss or Swedish cows imported in 2007 and 2008 could not adapt to “harsh husbandry conditions”. Natural mating on pastures is still the dominant form of cattle breeding in Georgia, car-rying the risk of degeneration. Lo-cal milk production remains frag-mented, highly inefficient, and seasonally unstable. The result is
continuing reliance on imports to provide high quality final goods (including milk and cheese) and inputs (e.g. milk powder) for the few large-scale dairy processing plants operating in Georgia.
Given the current state of Geor-gia’s agriculture, the imports of dairy sector-related products have recently exceeded their pre-war level of about 17mln USD. One thing to note though: in 2011 this aggregate figure includes more fish (milk and milk products) and less fishing rods (cows).
the Iset KhachapurI
IndexThe ISET Policy Institute (IS-
ET-PI, www.iset-pi.ge) is an in-dependent think-tank associated with the International School of Economics at TSU (ISET). ISET-PI designed a simple and robust way of tracking inflation and the differences in the cost of living across Georgia’s major cities. Un-like traditional “consumer bas-kets” used for monitoring price in-flation, our “basket” includes only those ingredients that are needed to cook one Imeretian khachapuri (cheese, butter, flour, yeast, eggs, and milk) and energy inputs (gas and electricity). We conduct a monthly survey of the major mar-kets in Tbilisi, Kutaisi, Batumi and Telavi to measure the differ-ences in the cost of living across Georgia and to track the monthly fluctuations in the prices of all rel-evant ingredients.
Other Georgian banks to follow Bank of Georgia’s IPO path?
andrew CoxshallManaging Partner KPMG,
southern Caucasus
2011 will be viewed as a good year for most Georgian banks and the sector as a whole. During 2011 total assets increased by $1 billion (18%) and profits by $83 million (104%), while loan provisions decreased by $11 million (3%). The dominance of the five largest banks (accounting for nearly 80% of total assets) has driven the overall positive perfor-mance and there remain more op-portunities for growth through tap-ping the “un-banked” population; increased efficiency either through economies of scale from consolida-tion or from organic improvements; increased use of various banking products by existing customers; increased use of social media and integrated marketing communica-tions to reach new customers; lower delivery costs through technology, staff training and development im-provements and finally improved geographical coverage.
These good results may encour-age both TBC Bank and Liberty Bank to go ahead with the IPOs
they proposed in 2011 and follow Bank of Georgia into the club of listed Georgian Banks.
However growth in this sector faces threats, especially if interest margins or currently high levels of banking fees come under pressure from competition.
From Reforming to performing
Georgia launched the reform of its banking sector in 1994. Based on the recommendations of the International Monetary Fund and implemented with technical as-sistance from international finan-cial organizations, the objectives of these reforms were to raise the level of financial stability; improve the security and soundness of the banking system; implement a mod-ern bank supervision policy and practice; introduce International Accounting Standards; upgrade qualifications of banking personnel and improve the financial sustain-ability of commercial banks. The reforms also envisaged the devel-opment of a legislative basis for the banking system.
Banking total assets have in-creased from $0.4 billion in 2001 to $11.9 billion at Q3 2011, an im-pressive 33% compound growth rate. However this represents only 70% of GDP compared to a figure of 121% for the Czech Republic and 494% for the Netherlands.
Georgia’s relatively low percent-age could be attributed to the large “un-banked” population in the country’s rural areas, so further growth can be expected in the years ahead.
Results and standings
Georgia’s banking sector has de-veloped dynamically during the last 10 years. Interrupted by declines during the financial crisis in 2008-2009, in 2010 the economy started recovering and there are positive trends from Q4 2010 through to Q3 2011. For instance, total assets of the Georgian banking sector increased by 18%, while the total net loan portfolio and deposits in-creased by 20% and 13% respec-tively. This was primarily due to the government’s stimulus packag-es for various business sectors and the support of international donors and financial institutions as well as economic growth in general.
Having successfully overcome the global economic crisis, the
Continued on p. 31
“Georgia is Over-banked for a Small Economy”, Fitch
Read the Analysis of Georgia’s Banking Sector by James Watson, Fitch Ratings
on page 22
HEADLINE NEWS & ANALYSIS 3FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
best georgian banksBanking System Expected to Maintain
Acceptable Profitability on More Moderate Level in 2012 compared to 2011
the FinanCiaLby nana MGhebrishviLi
In 2011 net profits of the banking system (323 million GEL) more than doubled relative to 2010 (156 million GEL), resulting in a 2.85
percent return on assets and a 17.3 per-cent return on equity.
“Decreasing asset yields which ac-counted for a negative 43 percent in-crease in net profits were compensated by improved credit quality accounting for 56 percent of the increase in net profits,” said Giorgi Kadagidze, Gov-ernor of the National Bank of Georgia.
Change in the composition of liq-uid assets towards higher yield local currency instruments and improved cost efficiency, contributed to by loan portfolio growth, part of which was driven by decreasing overall liquidity, had a relatively smaller noticeable ef-fect of 30 and 34 percent respectively on profit increase.
Q. How would you assess the banking sector in 2011? Which were the main sectors financed by the banking industry?
A. The Georgian banking sector that emerged from the global financial crisis and the impact of the Russian invasion is in a largely good condition, which was due to the solid pre-crisis capital and li-quidity positions of banks, the support of international financial institutions as well as the countercyclical fiscal, mon-etary and supervisory policies.
Following recovery in 2010 of banking activity and asset quality the banking system overall had balanced healthy growth in 2011. Despite in-tensified competition, recovery of as-set quality and improved efficiency resulted in acceptable profitability fig-ures. The banking system was offering customers competitive products. This drew interest rates on loans down un-til the end of the first half of 2011 when turmoil in Europe intensified and the cost of funds increased.
In 2011 the highest growth rate was observed in retail credit portfolio, mainly through consum-er loans, credit cards and mort-gages. Increase in lending was also observed in the service industry, including healthcare, hotel and tourism business and trading of consumer goods.
Q. What was the biggest achievement and challenge for Georgian banks last year?
A. In terms of challenges, the first half of 2011 was marked by intense competition and decreasing interest rates on credits that diminished banks’ margins significantly. The prices of as-sets and cost of funds were hardly bal-anced at that time. In the second half of the year the European turmoil had a negative impact on available external funding of Georgian banks that led to the halt of interest rate decreases on credit products.
Q. High interest rates on depos-its make it attractive for foreign-ers to open deposits in Georgia. How has the volume of inflow of foreign deposits increased and what tendencies will it cause in the Georgian banking sector?
A. Confidence in the Georgian bank-ing system as well as high yields repre-sent the main reasons why foreigners open deposits in Georgia. Nonresident deposits are important to diversify funding sources. It is important how-ever to avoid overreliance on any particular source of funding includ-ing non-resident deposits. At the end of December 2011 the share of non-resident deposits in nonbank deposits reached 11.7%, with almost half of it attracted via so-called wealth manage-ment channels. So far such deposits did not really exhibit high volatility during
the last recession. On the contrary, it somewhat substituted local deposits and provided some diversification of funding during downturns.
Q. Bank of Georgia is already in the premium listing of the London Stock Exchange. How important is this fact and what will it change in the Georgian banking sector?
A. Listing of Bank of Georgia shares in the LSE premium segment brings important strengths to the Bank. This fact also brings benefits to the Geor-gian banking sector. More investors
will have a close eye on the Geor-gian economy and financial system. The high rate of coverage from investment banks usually an-alyzing competi-tors, as well as macro and finan-cial environment, will spur more investor interest towards Geor-gia. The Bank of Georgia as a first mover sets a good example to other
local players to raise capital on inter-national financial markets and diver-sify their capital base.
It should be noted that the FT con-siders BOG the least risky FTSE bank and one of the reasons behind that is supervisory quality. “We are reassured by the presence of a strong central bank, with enhanced credibility following the financial crisis,” said the FT.
Q. In your opinion what has resulted from the exit of HSBC Bank from the market? How has it affected the Georgian banking sector?
A. The well-known HSBC strat-egy was to become “The World’s Local Bank”. However, following the world-wide financial distress HSBC has aban-doned this costly business model. The global change in the strategy was to fo-cus its business on the UK, fast develop-ing large countries and small countries where it had a leading market share. HSBC Georgia which just started its op-erations in 2007 was unfortunately too small to fall in to this category. It should be noted that the Bank closed its opera-tions in many countries. For example it exited Poland and Russia’s retail mar-kets completely as well as sold around 200 branches in the USA. Neverthe-less, the HSBC presence had a positive impact on the banking sector as it con-tributed to the shaping of a competitive banking market.
Q. How would you evaluate the facts related to the incident with Cartu Bank last year?
A. One of the most important goals of National Bank of Georgia is to se-
cure a healthy financial environment. In pursuing these goals, the national bank carries out effective supervision of commercial banks. We need to be confident that the Bank has the abil-ity to mitigate risks and fulfil its ob-ligations towards depositors. NBG’s responsibility is to react to emerg-ing risks in the banks and maintain a vigilant view on the bank in any con-tingency. Loss of customers and other regretful facts already evidenced this.
NBG is strongly against banks’ in-volvement in politics ownership prac-tices as international best practice and empirical literature shows that single ownership results in higher risk-taking in the bank and in most countries, di-rectly or indirectly, such type of owner-ship is not allowed.
Q. What was the total financial aid received by NBG in 2011 for developing the banking sector, and what activities were con-ducted within its framework?
A. NBG received no financial aid throughout 2011 to support banking supervision, however it did benefit from technical assistance of Asian De-velopment Bank and De Nederland-sche Bank to finance external consul-tants on banking supervision and the European Fund for Southeast Europe in the field of customer protection.
Q. Larization was one of the main goals of NBG over the last two years. Currently loans is-sued in the national currency are quite high compared to in previous years. What is the exact share of loans issued in local and foreign currencies? Is this result satisfactory to you? What addi-tional steps are you planning in this direction?
A. De-dollarization is a by-product of the development of financial mar-kets and mac-r o e c o n o m i c stability. Due to NBG’s forward-looking policy and prudent reforms, dur-ing the last year the monetary policy transmis-sion channel has strengthened, FX was floating but stable in the medium run, in-flation was suc-cessfully kept under control and liquidity on the interbank money market has increased. Financial market development al-lowed the Government to issue longer term treasury notes in GEL; the first ten year note was successfully issued in March 2012. Increased efficiency of the monetary policy, flexible exchange
rate and deepened financial markets in local currency, all had a positive effect on the degree of dollarization.
As a result of the reforms more GEL loans have become available for bor-rowers, including for long term loans. In 2011 it was the first time that a few IFI’s and nonresident investors sup-plied significant funds to Georgian banks in GEL. Compared to the year before, the degree of loan dollarization has declined by 6 percentage points to
68% and improvement was larger for household loans.
As of the end of February, 57 percent of deposits were in foreign currencies, which is ten percentage points less compared to a year ago. Dollarization is declining, and the current level is be-low the 2008 pre-crisis level (exclud-ing exchange rate effects). In general NBG is satisfied with the magnitude of decrease, but 60-percent dollariza-tion still represents a very high figure. Therefore we will continue supporting the further de-dollarization process. In close collaboration with the com-mercial banks we will support develop-ment of a FX hedging market and con-tinue our efforts towards increasing
financial literacy that should fos-ter FX loans with the loans in GEL. As for the deposit side, we will help development of retail Certificates of Deposits (CD) market in GEL. CDs are tradable, i.e. they are more liquid for the de-positors and at the same time a stable source of funding for the banks, this again should increase preference to-wards deposits in GEL compared
to other currencies.Q. What is the perspective of
micro-financing organizations, which are rapidly developing?
A. Well-managed MFIs maintain ex-cellent repayment performance as the
borrower’s main incentive to repay a microloan is the expectation of access to future loans.
Currently the non-banking sector is only a small portion of the total finan-cial sector besides they mostly rely on concentrated wholesale funding. As a result, at its early stage of development NBG so far has maintained “light touch supervision”.
“Microfinance” business in Geor-gia which as of the end of 2011 counts 443,917,326 GEL assets and 43% in-crease of assets in comparison with 2010 is considered an effective means of the provision of financial/banking services to low income and rural cli-ents who have previously not had ac-cess to such services. The clients are not just micro entrepreneurs seeking to finance their businesses, but a whole range of clients who also use financial services to manage emergencies, ac-quire household assets, improve their homes, smooth consumption, and fund social obligations.
In the future, NBG plans to update regulations on non-banking financial institutions as some of them are signifi-cantly increasing the scales of their activ-ities. One of the priorities of NBG should be to ensure that a clear message is sent to relevant potential individual lenders and investors that the investment risk is solely borne by the lender when microfi-nance institutions are not subject to pru-dential regulation.
Q. In your opinion, how at-tractive is the Georgian bank-ing sector for potential investors and what makes it attractive? Are there any new banks plan-ning to enter Georgia?
A. The Georgian banking sector has been demonstrating outstanding
and solid growth for the last couple of years and with the prospect of favour-able macroeconomic conditions we are reiterating our bullish view on the in-dustry. A sound commercial banking system generates high return for both debt and equity investors, while low level of financial penetration and small leverage of institutions indicates clear further opportunities.
Strategic investors, including Europe-an and regional banking institutions, as well as IFIs are well-represented share-holders in the banking system of Geor-gia. The country’s two largest banks have foreign shareholders, Bank of Georgia, which is listed on the London Stock Ex-change, and TBC Bank, which is owned by IFIs (EBRD, IFC and DEG). Other foreign equity-holders in the Georgian banking sector are international and regional strategic investors, such as Pro-credit Group, Societe Generale, Liberty Investments Holding, HSBC, Bank VTB, Dhabi Group, PrivatBank, BTA Bank, International Bank of Azerbaijan, Halyk Bank of Kazakhstan and Ziraat Bank and others. Overall, increasing international ownership has been a supporting factor in shaping a competitive and resilient lo-cal banking market.
Several banks have expressed inter-est in entering the Georgian market and we are in intensive pre-licensing discussions with a few of them.
One of NBG’s key priorities is to en-sure maximum transparency of finan-cial institutions’ communication and interaction with customers. A newly-formed consumer protection division monitors protection of consumer rights, collects statistics in this area and pro-vides recommendations. NBG believes that information disclosure and finan-cial literacy are key factors for the opti-mal allocation of risk and capital.
Giorgi kadagidze, Governor of the national bank of Georgia
“The Banking system is expected to maintain acceptable profitability in 2012 but probably on a somewhat more moderate level”
The last local bank in Georgia’s closing was in 2009. “First British Bank”, one of the smallest local banks, based completely on its own decision, applied for revocation of its banking license.
The increase in online transactions is here to stay and will last for some time to come, which is in line with the overall global trend of increasing transactions associated particularly with the fast-paced growth of e-commerce.
HEADLINE NEWS & ANALYSIS4 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banks
the FinanCiaLby MariaM PaPidze
“At the moment we are the most active bank in financ-ing micro business that oper-ates in the regions of Georgia. Of course we will try to keep this up in 2012 as well,” Levan Lebanidze, the General Direc-tor of Bank Constanta, told The FINANCIAL. The Bank is go-ing to add another 15 branches in different regions of Georgia and maintain its activity in the regions.
Q. 2011 was a successful year for Bank Constanta. How do you plan to con-tinue?
A. Significant contribution to the country’s financial sec-tor for economic development; caring about raising the living standard; reasonable funding for the lower income segments of society; to provide affordable financial services for society; and to improve and develop credit service are the main com-ponents of this plan.
Throughout 2011 Bank Con-stanta witnessed 77% growth in its assets and 71% growth in its credit portfolio. The amount of loans issued by Bank Constanta in 2011 exceeded 168 million GEL, an 89% increase com-pared to the same parameter of the previous year.
Q. What about the finan-cial conditions of Constan-ta in 2011?
A. The Bank has grown fi-nancially, disbursing more than 52 million GEL. In 2011 total assets amounted to 151,132,17 GEL, total liabilities and equity capital - 151,132,17 GEL, total interest income - 26,489,85 GEL, total interest expense - 8,221,40 GEL, net interest income - 18,268,45 GEL, and total non-interest income - 3,507,86 GEL.
Q. How many clients does the Bank have?
A. The number of Bank Constanta clients has grown by about 23 percent, reaching about 28,000 clients.
Q. Which new products has Bank Constanta of-
fered its customers?A. We offered many new
products and services to our customers in the last year out of which I would single out con-sumer loans and micro savings. The Bank has introduced a new deposit system. The Bank of-fered its customers the highest deposit interests in the bank-ing sector which is 17 percent. The Bank has also attracted 456 percent more deposits than it expected.
We’re working on various new products as well as re-vamping the older ones at our bank. As our main focus is micro-credits we want to be a prime solution for businesses
which are in need of money. In a month’s time we’ll have
plastic cards for our clients which will be of high quality and with great functionality. There are already many ATM stations in each of our branches. So any cardholder of our bank can take out money.
Bank Constanta introduced new banking products in 2011 such as consumer deposits, the portfolio of which had reached 14 million GEL as of the end of 2011. On top of that Bank Constanta introduced a plastic cards system, equipping its out-lets with ATMs.
Q. So far how successful has your cooperation with
TBC Bank proven to be?A. I can say that it is very suc-
cessful cooperation. TBC be-came a new shareholder of Bank Constanta, and all systems on which we have been working for years showed positive results in 2011. TBC Bank is a very reli-able and strong partner for us. The Bank is taking a stronghold of the Georgian financial mar-ket by adjoining TBC Bank as its 83% shareholder. TBC Bank has supported Constanta’s rap-id growth.
Our financial capabilities have grown drastically as well as having other technical sup-port from TBC Bank. It gives us the ambition to better serve
people willing to take out mi-cro-credits.
TBC Bank is 83% sharehold-er at Bank Constanta. Besides TBC Bank, OikoCredit has 11% of the shares whilst 7% is owned by individual persons.
Q. Some experts say that the reason why you decid-ed to cooperate with TBC Bank was due to problems that you had. How would you explain the reason for your cooperation?
A. I would not say that we had some problems. Of course transforming from micro fi-nancing organization to bank was not easy for Constanta. The market increase and key finan-
cial indicators were not as high as today, but this happened be-cause the transformation need-ed time.
It was not only a unilateral decision of Constanta. This cooperation was profitable for TBC Bank as well. Our strategy is linked to TBC Bank’s interest to operate in the regions as well.
Q. Constanta as a micro financing organization was a leader on the mar-ket. How would you assess the position of Constanta as a bank?
A. Constanta is a very strong bank and is as successful nowa-days as it was as a financing or-ganization. Constanta got into the ten most successful banks list of 2011.
Constanta was the first micro finance organization and has been working in Georgia since 1997. None of the companies have the same profile as us.
Q. What is the strategy and future plan of Bank Constanta?
A. We have 30 branches at present. 9 of them are new and were opened in the first quar-ter of 2012. We plan to open 15 more branches in the regions of Georgia in 2012. We will try to expand our branches and reach all areas where there is demand for micro loans but the service is not yet offered.
The bank is going to intensify in the agro direction. The agri-culture sector is very important for us and we regularly increase crediting to the segment. We see that demand is increasing from customers.
Our goal is to get closer to our customers and offer them a wide range of financial services.
The strategy and future plans of the Bank are based on our customers’ needs first of all. Ac-cording to the company’s main goal, its service should be af-fordable for those customers who cannot use credit service. We choose such regions where financial institutions are not available for customers. Also, we go where the shortage has not already been filled; where there is demand which is not supplied.
levan lebanidze, the General director of bank constanta
Bank Constanta to Open 15 Branches in the Regions in 2012
shARehoLdeRsBank Constanta is originated from
the NGO "Constanta Foundation" which was established in 1997 by the small group of individuals with the headship of Ms Tamar Lebanidze.
In December, 2007 Constanta started its operations as Joint Stock Company (JSC); following this im-portant change, on July 3, 2008 Constanta received the banking li-cense from the National Bank of Georgia (NBG) and started to con-duct commercial banking operations under the brand new name JSC Bank Constanta.
At that time, 67.8% of banking shares was hold by "Constanta +", and 32.2% - by the private share-holders. In July 2010, Oikocredit, Ecumenical Development Co-opera-tive Society U.A., came in as the first foreign shareholder of the Bank.
In May 2011, another important investment was made into Bank Constanta's share capital - TBC Bank purchased "Constanta +" equity and acquired total 80% of bank's share capital. Oikocredit maintained its 13% stake in the bank and the pri-vate shareholders retained 7% bank-ing shares.
After capital increase in Novem-ber 2011 TBC Bank became 83% shareholder of Bank Constanta.
agencies. We have favorable rating as shown below.
Agency YearLong term rating
Outlook
M-Cril 2011 A positive
M-Cril 2010 A- positive
M-Cril 2008 B+ neutral
Planet Rating 2006 B+ stable
Planet Rating 2003 B+ stable
Number of branches: 30Customer groups: Small and micro businesses
LATesT deveLopMeNTs:
Changes in shareholders:In May 2011, another important
investment was made into Bank Constanta's share capital - TBC Bank purchased "Constanta +" equi-ty and acquired total 80% of bank's share capital. Oikocredit maintained its 13% stake in the bank and the pri-vate shareholders retained 7% bank-ing shares.
After capital increase in Novem-ber 2011 TBC Bank became 83% shareholder of Bank Constanta.
• 5.77% - Individual ShareholdersChanges in management: New
head of HR department introduced in 2011. www.bc.ge
Received awards and partici-pation:
Bank Constanta was awarded for “Promotion of small and medium-sized businesses”
The Contest "Bank of Year in CIS, Baltic Countries and Georgia" was held by KBS-Publishing and the par-ticipants were 1220 financial institu-tions of stated countries. The contest intended to reveal the winner banks in 12 different categories.
Bank Constanta was named as the best bank regarding the "Promotion
of small and medium-sized busi-nesses" nomination. Hence,the bank became the only Georgian bank between the banks revealed in the framework of the competition.
According to the organizers, due to the methodology, the main cri-teria of revealing the winners was based on the qualitative indicators of the banks' activity, such as a trust, reputation, transparency, responsi-bility.
New branches: 9 new branches in Q1 2012. planned 15 more during 2012
New services or products of-fered: Consumer Loans, Micro Sav-ings
Public campaigns and char-ity:
• Art Gene 2011, 2012. • Georgian Folk Festival 2011. • internet Campaign – “Discover
Georgia”
pRoduCTs ANd seRvICes
Deposits and payment:Savings accounts: term and on call
depositsLoans:SME Loan, Express Loan, Busi-
ness Loan, Agricultural Loan, Sea-sonal Loan, Mini Loan, Pawn Loan
Banking: internet banking, direct debit, for-
eign exchange Insurance: N/A
HEADLINE NEWS & ANALYSIS 5FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
Advertiser: Bank Constanta. Contact FINANCIAL Ad Dep at [email protected]
best georgian banks
HEADLINE NEWS & ANALYSIS6 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banks“Bank Republic Has Never Lost the Loyalty of its Customers,”
Ramaz Kukuladze BR Commercial Director
the FinanCiaLby nana MGhebrishviLi
B ank Republic is aiming to become
the “Refferance Bank” by 2015. “Bank Republic has never lost the loyalty of its customers,” said Ramaz Kukuladze, Commercial Director of Bank Republic. “The Bank has always been and still continues to provide various products and high quality service to its customers. Most importantly, the rate of reliability and credibility of the Bank has never fallen.”
“According to the quite am-bitious strategy of the Bank, we have already started in-tensive marketing communi-cation. We have successfully launched unique new prod-ucts, implemented advertis-ing campaigns and various special offer events , as well as participated in different activities. All these are direct-ed at increasing our brand awareness and brand value.
Apart from this, the Bank continues to intensively im-plement CSR projects aiming to develop prioritized aspects of Georgian society.
Long-lasting commitment to work in the field of CSR will remain one of the strate-gic points for BR in 2012. The Bank will continue to imple-ment in its daily business the three principal pillars of commercial development for Bank Republic in Georgia: network expansion (staying closer to customers), innova-tive and tailor-made products and solutions and superior quality of service.”
Q. According to the strategy of Bank Repub-lic, it has to be the “Ref-ferance Bank” in Geor-gia. What is your current position in the Georgian Banking sector?
A. Currently Bank Republic is one of the leading inter-national banks on the mar-ket. The Bank is continuing to strengthen its position on the market in 2012 and is of-fering lots of innovations in
service as well as products. 2015 is an important date for the entire group. This is the benchmark, when member banks of the group will be-come successful examples of teamwork, innovativeness, collegiality and professional-ism for themselves as well as for the environment where they work.
Q. How will demand for different products change in 2012?
A.2012 started very ac-tively and successfully for Bank Republic. We are sat-isfying various requirements of our customers with our new offers and products. We predict increased demand for business loans as well as mortgage loans. Demand for deposits has already risen significantly and continues to grow in 2012.
We launched a new product – the deposit ‘More’, at the be-ginning of 2012. This is a com-bination of high profitability and flexibility. Thanks to the interesting offer, adequate communication and attractive advertising this new product has already gained high inter-est amongst customers.
Apart from these, we offer SMEs loans from 12 percent and a grace period of up to 12 months. Entrepreneurs can make their own sched-ules of payment themselves. People who get credits dur-ing this special offer will get free seminars from Bank Re-public. Issues including busi-ness administration, financial governance and marketing will be discussed during this one-month seminar. Interest in this is quite high.
During the whole year the Bank takes into consideration lifestyle, vacations, holidays of the Georgian population and we try to offer new ac-tions and attractive proposals to suit these. Due to such an attitude our long-term and useful relations with our cus-tomers become stronger.
Q. In your opinion, what has been the result of the exit of internation-al bank HSBC from Geor-gia?
A. HSBC Bank left Georgia because of changes in HSBC Group’s global strategy. Bank Republic purchased the re-tail portfolio of HSBC. It was important for HSBC to find a
suitable candidate who would continue providing clients with excellent service and en-sure their smooth transition to a new provider. The deal with BR, a member of inter-national Société Générale Group, was the perfect op-portunity for HSBC.
Q. In your opinion, what are customers’ ex-pectations of Bank Re-public and how much does the Bank satisfy these expectations?
A. Our customers expect lots of novelties from us, new offers that meet their require-ments and high quality ser-vice. We plan exactly such activities.
We are shifting to market oriented strategy - we are matching our products and services to market needs and not vice versa. BR is an ex-pert and we want to educate and advise our existing and potential customers. An in-novative approach, full sup-port and maximum respon-siveness - that is what’s to be expected.
Q. What novelties is BR planning for both corpo-rate and retail clients’
directions? Which direc-tion is more important to the Bank at present?
A. We are constantly re-searching the market. Ac-cording to the results we then offer new products. We have relations with member banks of Société Générale Group all over the world. Their consul-tations are important while developing and implement-ing novelties.
Both of the directions, re-tail as well corporate, are very important for us and we are working actively in both directions. Thanks to its uni-versal business model Bank Republic is a reliable and long-term financial partner for individuals, micro, small and medium entrepreneurs, organizations and large cor-porations.
Q. Which sector has the biggest share of BR credits out of the whole corporate portfolio?
A. The energy sector has the biggest share of our cor-porate portfolio. This sector is a large and growing part of the Georgian economy. As one of the most active banks on the market, Bank Republic
is presented in all the fast-growing economic sectors of Georgia.
Q. Does BR intend to ex-pand the chain in 2012? How many branches and service centres does the Bank currently have?
A. Bank Republic currently has 38 branches and more than 130 ATMs across the country. We plan to expand the chain this year in the cap-ital as well as in the regions. We opened our 38th branch a short while ago. Several of our branches in Tbilisi and Batumi are open 24 hours a day, which is additional com-fort for our customers.
Q. How is the number of online transactions increasing? How much money was transacted online in 2011? How im-portant is an increase of online transaction for BR?
A. Demand for online transactions is increasing significantly. Development of online transactions is part of our strategy. Exactly now we are working on a new inter-net banking system. We will launch it in the near future.
Q. SMEs worry that their main problem is difficult access to loans and high interest rates. What kind of activities is BR implementing to sim-plify access to loans?
A. Our goal is implement-ing and strengthening two-sided and long-term rela-tions with this segment. We are ready to satisfy their business and private needs. Procedures of issuing small business loans have further simplified recently. Small loans without collateral are issued in a day. The process of simplification hasn’t fin-ished yet and we will con-tinue working intensively in this direction in order to keep on providing consistent high quality service. Our interest rates are really competitive. We are always presenting special offers to our custom-ers as well.
Q. How does BR care for the development of its employees? How many employees does the Bank currently have?
A. Bank Republic is an ac-tive and popular employer. Being a popular employer is very important. This con-firms the strength of our cor-porate brand.
We constantly care for the development of our employ-ees’ careers. We have our own training centre. This gives us the possibility to train each of our employees and increase their qualifications. The de-velopment of their careers is also supported by Société Générale Group with its pro-grams for employees of its member organizations.
We currently employ more than 1,000 profession-als. Their number will grow alongside the growth of the Bank continue
HEADLINE NEWS & ANALYSIS 7FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
best georgian banks
Advertiser: Bank Republic. Contact FINANCIAL Ad Dep at [email protected]
HEADLINE NEWS & ANALYSIS8 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banks
According to the growth of financial highlights,
TBC Bank overtook the country’s banking sector growth last year. The net profit of 2011 totaled the sum of 91.6 million GEL which exceeds the same figures of 2010 by 42.2 million GEL (84 percent). The net profit of 2010 totaled the sum of 49.4 million GEL.
the FinanCiaLby MariaM PaPidze
“For that reason the Bank’s mar-ket shares have been increased as well,” Vakhtang Butskhrikidze, General Director of TBC Bank, told The FINANCIAL. “We succeeded in the side of Cost-to-Income co-efficient which was reduced from 54% to 50% last year in compari-son with 2010. This is a good trend indicator,” he added.
Q. What were the capital changes in TBC Bank?
A. The capital of TBC Group in-creased by 91.5 million GEL, which means growth of 24 percent which amounted to 469 million GEL. The increase of capital was caused by the growth of retained earnings which had increased by 78.4 mil-lion GEL (by 64 percent) during the year. Increased capital affected the tier I capital and the total capital adequacy ratio which totaled 17.9 percent and 23.8 percent.
All of this has been achieved un-der difficult circumstances such as the financial crisis in the West and difficulties in attracting finan-cial resources from foreign capital markets. In such conditions we aimed to set our vision and strat-egy according to environmental factors. We have emphasized more on attracting local deposits and achieved quiet ambitious plans in this direction. In particular, our deposit portfolio increased by 45 percent, meaning it increased by 615 million GEL and had reached 2 billion GEL at the end of the year. As for the loan portfolio, it increased by 530 million GEL (36 percent). The total amount of the loan portfolio reached 2 billion GEL by the end of 2011. During the year, the assets of TBC Bank increased by 43 percent and to-taled 3.3 billion GEL at the end of the year.
Q. How much has the mar-ket share increased?
A. It is very important for us that TBC Bank historically owns the largest market share on the retail deposits market. Last year we rein-forced this position and our market share increased by 34 percent. As for other rates, our market share of assets amounted to 26.6 percent and in loans - 27.6 percent.
Q. What are the achieve-ments and recognitions of TBC Bank on the internation-al market?
A. The successful activities of the Bank did not remain without at-tention. TBC Bank was named the most successful bank in Georgia by Euromoney. Financial Times Group and its magazine The Bank-er, which calculates banks’ rank-ings worldwide, recognized TBC Bank as the Best Bank in Georgia.
Global rating agency Fitch ratings improved the sustainability rating of TBC Bank from B- up to B+.
TBC Bank is the “Best Georgian Bank by Monetary Transfers” ac-cording to the data of Deutsche Bank and Commerzbank as well.
These are very important in-ternational recognitions and I am glad that such recognitions have increased in recent years. This demonstrates the Bank’s successful development process.
Q. How successful was the year 2011 for other compa-nies in TBC Group?
A. 2011 was a success for TBC Bank’s other subsidiary companies including TBC Leasing. TBC Leas-ing increased its market share by 18.7 percent in 2011. Today it holds 61 percent of the leasing market.
TBC Credit, which operates in Azerbaijan, increased its activities by 35 percent and its credit portfo-lio by 31 percent last year.
TBC Invest’s deposit portfolio grew by 15 million USD in 2011. It is represented in Israel by TBC Bank.
Q. What are the bank’s fu-ture plans for corporate cli-ents?
A. The department of corporate banking service in TBC Bank is ori-ented at serving large companies and state and international organi-zations. Experienced senior bank-ers hold various industrial sector portfolios. They promote universal service and give professional ad-vice to the corporate clients in this field.
Last year the corporate deposit portfolio increased by 74.5 percent. The Bank’s market share in this di-rection amounted to 24.9 percent. The volume of corporate loans in-creased by 40.8 percent and mar-ket share reached to 27.5 percent. The corporate sector will continue to actively lend in 2012. The Bank is going to use the opportunities in healthcare, agriculture, food prod-ucts, energy, and consumer sectors.
Q. Why did you decide to enter the micro business field and purchase Bank Constan-ta’s shares?
A. One of the main achievements of TBC Bank was purchasing an 80 percent controlling stake of Bank Constanta. It was a strategically important decision for us. As a re-sult we hold a strong position in the market of crediting micro business. Micro business is quite an interest-ing and prospective direction.
Bank Constanta is the fastest growing financial institute in Geor-gia. It operates successfully in the whole of Georgia including the regions and is one of the leading banks in the small business lending market. It has considerable expe-rience and tradition in agriculture lending. Besides corporate, middle business and private sectors TBC Bank now operates in micro busi-ness as well. In cooperation with Bank Constanta, we are expand-ing retail financing in those regions where TBC Bank was not repre-sented before.
As a result of this transaction, Constanta increased its banking as-sets by 78 percent and credit port-folio by 71 percent.
Q. What is your strategy for 2012?
A. Our main focus will be on our new strategy in 2012. By of-fering new products we try to sat-isfy the increased requirements of our clients and provide them with maximum comfort by using our products and services. We plan to implement new technological and high quality products. We will fo-cus on electronic products this year. These products will be sold remotely, by using high technolo-gies.
We have already implemented a new internet banking system. This is a totally new development in the Georgian banking system. The new internet banking will be on a level of that of any western banks.
This is the first part of our project concerning a multichannel service and the best model of sales in the regions. As a result of the project the multichannel service of TBC Bank will be the best one in the re-gion, including Turkey. It will be the best in terms of function and design. It will include internet and mobile banking, call centre, ATM and quick service terminals. And this will result in the Bank being even closer to its clients.
TBC Bank to Focus on Electronic Products This YearvAkhTANg buTskhRIkIdZe, General director of tbc bank
HEADLINE NEWS & ANALYSIS 9FINANCIALfinchAnnel.com | 2 April, 2012
HEADLINE NEWS & ANALYSIS10 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banksIFC and EBRD Converted their Loans
into Bank of Georgia Sharesthe FinanCiaL
by nana MGhebrishviLi
International Finance Cor-poration (IFC) and the European Bank for Re-construction and Develop-
ment (EBRD) are converting some of their loans to Bank of Georgia’s equity aiming to help the Bank strengthen its capital base, increase com-petitiveness and expand op-erations. All this will support the financial sector in the country, investors believe.
The two convertible sub-ordinated loans, 26 million USD each from IFC and EBRD, were part of a 200 million USD financing pack-age that these international finance institutions provided to Bank of Georgia in Decem-ber 2008. As a result of loan conversion each of them, IFC and EBRD, became 4.58 - 4.58 percent shareholders of the Bank.
The three sides claim that this conversion was signifi-cantly led and supported by Bank of Georgia’s recent move to the premium list-ing on the London Stock Ex-change.
“Bank of Georgia’s place-ment on the premium list-ing on the London Stock Ex-change was met with strong support from our long-stand-ing partners IFC and EBRD,” said Irakli Gilauri, CEO of Bank of Georgia. “This means
that Bank of Georgia offers investors high transparency combined with access to the rapidly growing and well-regulated financial services market of Georgia.”
“IFC and EBRD becoming our shareholders will cause an increase of the liquidity of our stock as well as sta-bility and strength of our equality,” added Archil Ga-chechiladze, Deputy General Director of Bank of Georgia. “This was led by our place-ment on the London Stock
Exchange which means that Bank of Georgia is meeting the UK’s standards of regu-lation and corporate gover-nance. This gives the possi-bility to enjoy a lower cost of capital through greater trans-parency and through building investor confidence.”
According to EBRD Direc-tor for the Caucasus, Moldova and Belarus, Paul-Henri For-estier, they support the suc-cessful premium listing of Bank of Georgia on the Lon-don Stock Exchange.
“In the past we partici-pated in the equity of Bank of Georgia and now we are glad that we are again sharehold-ers of the Bank,” said Paul-Henri Forestier. “We have quite diversified cooperation with Bank of Georgia, which will continue in the future as well. Bank of Georgia is a re-ally successful example of our support of Georgia. It is the first Georgian company to re-ceive such recognition on the international capital market. This provides excellent vis-
ibility not only for the Bank but for Georgia as well.”
The cooperation of IFC and Bank of Georgia started in 1999 with a loan of only three million USD. Over these years their cooperation has deepened. IFC claims that they support Bank of Geor-gia both in the most success-ful, and challenging, times in order to create a stable and strong financial institution.
“By entering the share capi-tal of the Bank we are helping improve access to financial
resources for the Bank’s cli-ents, which is very important for employment generation and economic development of the country,” said Tomaz Telma, IFC Director for Eu-rope and Central Asia. “We support making the Georgian banking system stronger. Bank of Georgia was a small financial institution at the time we started cooperation. We are glad that they man-aged to become a powerful bank. But we are assisting not only the banking sector,” he added.
IFC entered Georgia in 1995 and they have invested more than 600 million USD in 40 projects. The main strategy of IFC in Georgia is to support SMEs, create easy access to finances for them, develop infrastructure, and help the Government to at-tract more investments. IFC also works on the develop-ment of renewable energies and the export of hydropow-er.
“We have invested about 100 million USD annually in Georgia over the last sev-eral years and we are trying to continue this trend,” said Tomaz Telma.
At the same time EBRD invested 180 million EUR in 22 projects in Georgia in 2011 and they plan to provide about the same amount of investments in 2012 as well. They are working intensively on the development of agri-culture.
The Most Popular Georgian Banking Productsthe FinanCiaL
by Madona Gasanova
Business loans, consumer loans and deposits are the most in-demand prod-ucts available at Georgian banks. It is the flexibility of the deposit that most attracts Georgian customers, while a lower interest rate is the main deter-miner for loan borrowers.
The net profit of Georgia’s banking sector rose to 323 million GEL in 2011, up from the 156.3 million GEL posted a year earlier, according to the Georgian central bank. There were 19 banks op-erating in Georgia during the reported period with their total assets increasing to 12.7 billion GEL by the end of 2011, according to the National Bank of Geor-gia (NBG).
Total lending volume reached 7.7 bil-lion GEL by the end of the year, up from 6.3 billion GEL at the end of 2010, ac-cording to the central bank.
As of the second half of 2011 Georgia has been leading in the region in terms of the number of ATMs, POS terminals and bank cards that it has. The number of POS terminals in the country totalled 10,286 units, ATM stations - 1,512, and bank cards - about three million.
The total volume of deposits at-tracted by commercial banks in 2011 reached 7,206,344 thousand which is twice more than in the previous year. In 2010 the volume of deposits in the na-tional currency was 3,709,251 thousand GEL. The volume of deposits in foreign currencies has also increased. The vol-ume of deposits in a foreign currency is 6,731,813 thousand, while in 2010 it was 4,449,924 thousand.
bANk oF geoRgIAIn 2011 the net loan book of Bank of
Georgia increased by 435.4 million GEL reaching 2,635.4 million GEL in total.
“Our consumer loan and SMS loan are the most popular credit products at Bank of Georgia,” said Khatuna Kak-abadze, News Coverage Manager of the Branding Department at Bank of Geor-gia. “There is huge demand for Ameri-
can Express credit cards. By the end of 2011 we had issued almost 100,000 AmEx cards,” she noted.
In 2011 the deposit portfolio of Bank of Georgia’s customers reached 2,545.3 million GEL.
“The most popular deposit products are our Term and On-call deposits,” Kakabadze said.
TbC bANk The TBC Prime Card is the most pop-
ular credit product of TBC Bank.“TBC Prime Card is unique because
it suits all users’ individual demands,” said Maia Dzirkvelishvili, Head of the Public Relations department at TBC Bank.
“Users of this product are allowed to take out a loan with a zero interest rate for three months. Customers can choose the design of their card from the TBC photo gallery or use one of their own photos. Cardholders also choose the tariffs that suit them: Prime Shop - if customers prefer to pay by card with merchants, and Prime Cash - for those who prefer to withdraw money,” Dzirkvelishvili told The FINANCIAL.
“To get a TBC Prime Card custom-ers have to be a citizen of Georgia, be at least 20 years old and have a minimum salary of 400 GEL for a VISA Classic, or 1,000 GEL for the Visa Gold,” Dzirkvel-ishvili explained.
After the end of the three month zero interest rate period, credit card holders can benefit from a privileged period of 55 days with a low interest rate. Card-holders are offered discounts at differ-ent shops, beauty salons and sports and health centres in Georgia. TBC Prime Card holders are also able to collect Smart points.
“TBC Prime Card constantly presents new offers to its holders. At present we are offering all cardholders the chance to participate in a prize draw. They could be eligible to win a tour package for two. Five such prizes are available: one to the Venice carnival in Italy; one to the final match at the European Championship in Ukraine; the Monaco formula 1 grand prix in Monaco; Rotterdam’s north sea
jazz festival in Holland; and attendance at a George Michael concert in France,” Dzirkvelishvili revealed.
“Customers will automatically get a ticket for the prize draw after putting through a transaction via POS terminal to the amount of 10 GEL, or after with-drawing 50 GEL from an ATM,” she said.
Dzirkvelishvili said that TBC Bank is maintaining its stable leadership on the deposits market. “This is due to the va-riety of our deposit products. As well as standard products we also offer special deposit products: Gold Deposit, Bonus Deposit, My Safe and others. Besides the competitive interest rates on de-posits we regularly have special offers as well.”
“In 2011 we offered the interactive games “Find 10,000 USD” and “Win 20,000 USD”. More than 12,000 cus-tomers got involved in the campaign to win 10,000 USD. And more than 5,000 new deposit holders got involved in the intellectual campaign to win 20,000 USD. It is an integrated marketing campaign based on mythology. Deposit holders who get involved in the cam-paign become participants in history. At the end of the game we reveal the win-ners and participants get gifts from the Bank,” Dzirkvelishvili said.
“This integrated campaign was one distinguishing advantage of TBC Bank on the local market. The fact is proved by the financial figures that we reached by this campaign. At the same time this marketing campaign was awarded at different authorized international com-petitions.”
“We are continuing in this direc-tion in 2012 too. We launched the spe-cial project Adventures with Edmond Abashidze. Our offers and prizes change every month,” she said.
bANk RepubLIC, soCIeTe geNeRALe
gRoupThe top five most popular current
credit products at Bank Republic are: business loans, auto loans, instalment
loans, credit cards and consumer loans.The top five deposit products include
the More Deposit, Megobari Deposit, Child Deposit, Cumulative Deposit and Term Deposit.
“Trading is one of the most dynamic and fastest-growing business sectors in Georgia. That is why banks prefer to finance this sector,” said Dea Gegelia, representative of Bank Republic.
The most popular credit products in 2011 were our mortgage loan, business loan, instalment loan, consumer loan and credit cards.
As for deposit products, the most popular in 2011 were the Megobari De-posit, Child Deposit, Cumulative Depos-it, Term Deposit and Privileged Deposit.
Gegelia said that the majority of cus-tomers prefer to save money in USD. “The volume of deposits in GEL is in-creasing steadily however,” she added.
The most popular deposits are the More, Megobari and Cumulative depos-its. “The terms of the More Deposit are unique. Upon opening an ordinary de-posit, it is difficult to define in advance the rate of interest that will accrue to the deposit after its prolongation. In the event of opening a More Deposit customers will know in advance the rate by which the deposit’s interest will in-crease each time the deposit term is ex-tended,” Gegelia said.
“While opening a three, six or twelve month More Deposit, customers can prolong its term several times and get more and more benefits each time it is extended. As for the Megobari and Cu-mulative deposits, they are attracting depositors with their flexibility. More than 50% of our depositors prefer these deposits,” Gegelia told The FINAN-CIAL.
JsC pRoCRedIT bANk, geoRgIA
“The most highly demanded credit products at JSC ProCredit Bank in 2012 like in the previous year are business and agro credits. The number of credits issued by Procredit Bank Georgia in the two months of 2012 is approximately 5,300,” Natalia Bochorishvili, Coordi-
nator of the Small Business Develop-ment division at ProCredit Bank, told The FINANCIAL.
Bochorishvili explained that Pro-Credit Bank gives out loans according to demand. As the largest demand is cur-rently for financing trade, banks prefer to finance this sector. “This tendency is due to the development of the trade sec-tor,” she said.
In 2011 ProCredit Bank issued 34,000 credits. 18,000 were business credits and 5,300 agro credits.
“The number of depositors at ProCred-it Bank is more than 140,000. As of Janu-ary 2012 the deposit portfolio has reached 215 million USD. As of February 2012 58% of our depositors are saving money in USD, 26% in GEL and 15% in EUR,” said Tamar Tkhelidze, Head of the Retail department at ProCredit Bank Georgia.
“The most popular deposit product with our customers is the Savings Ac-count. 80% of our depositors choose this product. An advantage of the Sav-ings Account is flexible access to money. Access to the deposit account is possible without physically visiting the bank, but via its Internet Banking service. The Savings Account deposit has a favour-able method of interest accrual. The rate of interest is accrued on a daily ac-count balance with capitalization once every three months. The conditions are: Initial minimum deposit requirement of 5 GEL, USD or EUR. The minimum amount on which the interest accrues is 5 GEL, USD, or EUR. The maximum amount on which the interest accrues is 200,000 GEL or 100,000 USD/EUR. The deposit time period is unlimited. The interest rate is accrued on the Sav-ings Account at the end of every three-month period from the date of the de-posit account. Interest will be added to the principal amount and then to the increased amount in the subsequent pe-riod,” Tkhelidze said.
ProCredit Bank has attracted 11,900 new depositors in 2012 as of March 27.
“The interest rates on deposits vary according to the type of the deposit, terms and currency. The interest rate on a termed deposit for 24 months in the national currency is 13%, and in USD and EUR - 8.75%,” Tkhelidze said.
HEADLINE NEWS & ANALYSIS 11FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
best georgian banks
the FinanCiaLby nana MGhebrishviLi
Record profit data of 300 million was de-tected in the bank-ing sector in 2011.
Positive economic tenden-cies have been developing in the country and in the bank-ing sector including offering new products and better ser-vice, and expanding service centres, according to Zurab Gvasalia, President of the As-sociation of Banks of Georgia.
“In my view 2012, like 2011, will be successful for the banking sector,” Gvasalia told The FINANCIAL in an exclu-sive interview.
The Georgian banking sec-tor faced several significant challenges in 2011. One of them was to continue the positive tendencies started in 2010 and I consider inflation to be the second challenge. To overcome the trend of losses fixed in 2008-2009, which resulted in loss of 65 million by the end of 2009, was defi-nitely not an easy job. 2009 was one of the most difficult years for the banking sec-
tor because of the recessive problems that happened in 2008. The country got quite solid international aid but the trend of increasing overdue loans significantly affected the banking sector. As well as this, amortization of prob-lematic loans and expenses of restructuring caused a big loss for the system. After this profit of 152 million by the end of 2010 was an important success for the system and this needed to be continued
and developed in 2011 as well.The second serious chal-
lenge was inflation, which was linked to economic cata-clysms around the world. This challenge is linked to increased costs of energy and staple household products as well as political upheavals in oil rich countries. All these of course affected our customer market.
But the reality remains quite optimistic as in 2010-2011 some commercial banks as well as the Georgian Na-tional Bank successfully over-came many large-scale and acute challenges.
In 2011 the rule about “Pro-viding Necessary Information to the Customer while Offer-ing Banking Service” went into force. This rule was prepared by National Bank of Georgia with the intensive support and assistance of the Associa-tion of Banks of Georgia. This is a part of the reform, which was started to protect bank-ing sector customers’ rights by the country’s major bank last year. This rule brings us nearer to European banking judicial space. According to this rule banks are obliged to
include all financial expenses related to the use of credit or deposit in the contract.
Leading Georgian banks, following their increased profit, started to increase the number of new service centres and branches in the capital as well as in the regions. Finan-cial service makes up one of the biggest parts of tourist infrastructure. The expansion of branches directly relates to spreading economic activities from Tbilisi to the regions in-
cluding to the cities of Batumi and Kutaisi, and Kakheti and Svaneti regions. This in turn supports the modernization of the country’s economy.
Q. How would you evaluate banks’ crediting politics? Trade and Man-ufacturing were the main sectors where the biggest amount of loans went in 2011. How will this ten-dency change in 2012?
A. 49.9 percent of the cor-porate credit portfolio is for trade, which isn’t too high. Financing of manufactur-ing is increasing from year to year. Whereas 17.3 percent of the credit portfolio used to be made up by the manufactur-ing sector, this number has now grown to 19.6 percent.
11.5 percent comprises building out of the entire cor-porate credit portfolio. This is quite remarkable as after the business failure in 2008-2009 the construction busi-ness started booming once again. So 81 percent of the portfolio goes to three sectors which are: trade, manufactur-ing and building.
Trade financing by the banking sector is not acciden-tal. When financing sectors
commercial banks take two factors into consideration, these being profitability and risks. A developing country’s trade has high profitability and lower risks compared to agriculture and manufactur-ing.
In my opinion banking in-dicators will grow more in terms of financing the econo-my in 3-4 years time and will become nearer the average European rate.
Capital goes where the business environment is at-tractive and energy resources are cheaper and more afford-able. All these are in the end reflected in banking service. Therefore moving accents from trade to manufacturing will be more conspicuous.
Q. BOG is already in the premium listing of the London Stock Exchange. How important is this and what will it change in the Georgian banking sector?
A. Bank of Georgia is the biggest Georgian banking in-stitute, which plays the role of a kind of bridge in terms of integrating the local market with international markets. Bank of Georgia was the first
Georgian bank that placed its shares on an international market, namely on the Lon-don Stock Exchange in 2006. Therefore the Bank created growing international de-mand from investors for the shares of the Georgian com-pany.
This has resulted in the placement of its shares on the premium listing. It’s notable that only one thirds of shares placed on the London Stock Exchange are on the premium listing. Bank of Georgia is the only company from the Cau-casus region on this listing.
This fact is important be-cause Bank of Georgia satis-fied the requirements of the regulator including transpar-ency and high standards of corporate governance. As a result demand for shares of BOG will now grow. In the end this will cause an in-crease of capital of the Bank and expand the volume and geographical area of foreign investments.
B. In your opinion what has resulted from the exit of HSBC Bank from the market? Why did they leave Georgia while stay-ing in Armenia? How has it affected the Georgian banking sector?
A. I believe that HSBC Bank left Georgia because of the competition. The Bank was oriented on corporate clients and mainly financed trade op-erations. Such types of clients need huge investments. As time passes and the business becomes bigger, the alterna-tives to financing increase. If the Bank didn’t want to stay on the market, they wouldn’t have twice increased their credit portfolio over the last year. This means that their
profit wasn’t low. Profit of up to 2 million GEL toward as-sets is 6.5 percent, which is quite a good indicator. If they wanted to continue operating successfully and competing with leading Georgian banks, they had to increase their fi-nancial resources. In my view, this was the main reason for their leaving the market.
Since 2008 lots of big bank-ing and non-banking corpora-tions have closed their inter-national branches including within the EU.
Q. Larization was one of the main goals of NBG over the last several years. In your opinion is increasing use of the national currency very important for develop-ing the sector? How do you evaluate the results of activities implemented by NBG in this direction?
A. One of the main goals of NBG in 2011 was lariza-tion. But nobody said that
this could be achieved in a short period of time. This is calculated for a longer period. Several important steps have already been implemented in this direction. Minimal re-serves on financial resources attracted from abroad have gradually grown up to 15 per-cent.
The strategy of larization is aimed to reduce the pres-sure of USD on the currency and at the same time stimu-late demand for GEL. I think that the strategy of larization is working. This is proven by the stabilizing of the currency rate. What’s more the banking sector played a significant role in strengthening the national currency by offering loans in GEL.
2012 Will be a Successful Year for Georgian Banking Sector
Zurab gvasalia, president of the Association of banks of georgia
Interest rates of loans will reduce further. First of all this concerns collateralized loans including business and mortgage loans. As for deposits, a fast reduction is not expected in the first half of the year, but in the second half interest rates will start decreasing on accumulated resources as well.
“In Georgia micro financial organizations are limited by 5,000 GEL per borrower. Therefore they are oriented on the smaller segment. So they can’t compete with commercial banks.”
VTB Bank GeorgiaSC VTB Bank (Georgia) (VTBG) is 96.31%-owned by Bank VTB (JSC) (VTB, ‘BBB’/Stable) VTB Group is holding financial and credit institutions in 20 coun-tries in Europe, Asia and Africa,
offering vast range of financial and banking services.
According to Fitch Ratings, VTB Georgia has the highest interna-tional ratings among the banks op-erating in Georgia and these ratings are as follows:
Forecast: stableLong-Term Credit Rating in For-
eign Currency: BBThe Bank is broadening the net-
work in the country. As of Decem-ber, 2011 VTB had 16 branches in Georgia, in 2012 it opened new branches and is planning to open branches in all the districts of Tbili-
si, as well as in the regions of Geor-gia in 2012-2013. VTB Georgia has 8 branches in Tbilisi and 10 branch-es outside the capital.
The Bank has investment, corpo-rate and retail businesses.
Total equities and liabilities of the Bank equals to GEL 428,979,091.
The trends and tendencies are that VTB Bank Georgia’s total assets increased by 26.6% and reached GEL 429 million in 2011.
The credit portfolio increased by 31.2% and amounted to GEL 304 million, among them personal loans increased most rapidly, by 47.2%: mortgage loans by 241.6%. Small business loans grew by 37%, and agro-business – by 111% and corpo-rate business loans grew by 26%.
The operating profit of VTB has grown by 53.2% and exceeded GEL
19 million. The net profit of the Bank made GEL 10.2 million. ROA amounted to 2.7% and ROE – 15.6% in 2011.
The total number of both in-dividual and corporate clients is 128,863.
The Bank has decided to expand in retail banking resulting in im-portant growth in 2011. The lead-ing new products were mortgage and auto loans. VTB Bank has in-troduced very versatile and flexible mortgage products, offering one of the most competitive rates. There were two types of mortgage loans, introduced by VTB Bank, which are unique for the Georgian mar-ket. The Universal Mortgage bears no obligation to use proceeds of the loan to buy or repair property. Money can be used for any purpose.
This product is very convenient for our clients and therefore sold quite well during 2011. The Express Mortgage is a loan that can get ap-proved in a day. Proof of income isn’t necessary, and customer can apply for it right at the real estate dealer or developer. This very sim-ple and comfortable product was quite demanded too.
The second most popular product is ‘auto loan’ – the service the Bank launched in 2011 and achieved sig-nificant growth in a very short pe-riod of time. VTB Georgia is now one of the leaders in this segment. VTB has two types of auto loans. The customers have the possibility to get an auto loan from the Bank in twenty minutes at certain car deal-erships and collect their new car in as little as an hour. As well as be-
ing so conveniently fast, the loans are provided at fairly low interest rates. ‘The Used Auto Loan’ covers both new and used cars on sale at auto markets. The procedures are as simple: loans get approved in 20 minutes and customers can take the cars within an hour.
The Bank has a special branch which is conveniently located at Rustavi Auto Market which works solely for auto loans.
Small and Medium business fi-nancing was another business line where VTB Georgia had experi-enced significant growth in 2011. The Bank has made a special offer titled 12/12/12, launched in spring of 2011, whereby it gave out loans with a 12 percent interest rate in any currency.
HEADLINE NEWS & ANALYSIS12 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banks
Zara Starting a Fashion Revolution in Georgia
the FinanCiaLby MariaM PaPidze
Six of the world-famous fashion brands of Spanish company In-ditex Group, including Zara, are entering the Georgian market.
The extremely popular Spanish store will be opening in Tbilisi Mall in April. Together with Pull and Bear, Mas-simo Dutti, Bershka, Stradivarius and Oysho, Zara promises to make a fash-ion revolution in Georgia.
“The Georgian market is modern,” said Yassine Sibari, Executive General Director Saudi Arabia, Central Asia and Caucasus at Zara and Inditex. “Now the opportunity has arisen here, in Georgia. We decided to enter Geor-gia because I think that now is the right time,” he said.
Zara stores will be opened on Rustaveli Street in Tbilisi and in the centre of Batumi by the end of the year.
“Despite the fact that several en-trepreneurs have already represented Zara non-officially in Georgia, I can say that this is the first and only Zara to have entered Georgia. This is happen-ing now because of the high demand for Zara from the country’s consum-ers. The country’s consumers are be-ing offered old and limited products in stores. It is also possible for customers not to be able to find sizes that fit in these stores,” he added.
“Such entrepreneurs have made a very traditional business model. This business is about opening a shop, go-ing abroad, buying leftover clothes from Zara, bringing them here to the country and then selling them on. But Zara means the latest collection avail-able right here in the country; at least 2,000 sq. meters of store renewing its collections every week. This is what Zara means and no one can compete with that,” he stated.
Q. What about the whole as-sortment, stock, service and concept, will they be identical to European branches of the shop? Will they be strictly regulated by the brand’s head office?
A. The same collections that peo-ple can find in Zara’s stores in Paris, Barcelona, Madrid, London and the world’s other major cities will be avail-able from now on right here in Tbilisi as well. The designers are the same. Our stores are copy-pasted worldwide. Accordingly the whole assortment will
of course be strictly regulated by Zara’s head office.
Q. Concerning the prices of the goods, will there be a significant difference between Zara stores represented in different coun-tries and those in Georgia? Is it possible to change the prices depending on customs, tax, and transport costs?
A. The prices will be the same as in Europe. The goods will need some extra transportation but customs are very good in Georgia. The Government is doing what it can at its end. I mean to attract foreign investments here in Georgia, to encourage businessmen to come and invest in the market. Imag-ine if we had to pay big customs du-ties, the prices of the collections would not be the same as in Europe. We can afford however for them to be at the same level as European prices.
Q. What about sales and dis-counts, how often will you be offering special sales prices to customers?
A. When the collections become old and new ones come in, the store will discount the prices of the older col-lection of course. This is a standard global practice of offering discounts to customers. This is fashion. Collec-tions need to be renewed in very short
periods of time. The store has a regu-lar season and then comes the sale’s period. The sale’s period signals the impending launch of a new season, and therefore is getting rid of the old season. Discounts will be offered twice a year. Otherwise it would not be prof-itable for us to operate.
Q. Who are Zara’s customers in Georgia?
A. The Zara customer in Georgia is from the middle and upper middle classes of society. There is no specific age or type of Zara customer. Design-ers adapt trends and styles differently for each range, and also for each coun-try, to provide as much choice and variety as possible. With fresh stock arriving twice a week there is always something new and different available.
Q. What are the needs of Geor-gian customers?
A. It is not about what the custom-er’s needs are. It is about what fashion we provide for the customer. We offer the latest fashion trends.
The thing which might make a cer-tain country’s customers need a cus-tomized collection usually depends on weather and local traditions. With tra-ditions you have no problem here. And weather conditions are very normal in Georgia as well. When it is winter here, it is also winter in Europe. That means
that we will be selling the same prod-ucts here as we sell in Europe. Zara col-lections are made in many countries in the world and a large part is made in Spain. So the whole collection in Zara’s store in Tbilisi will be imported from Spain. In Zara stores customers can always find new products as they are so frequently being updated. But there will be limited supply. This process enables Zara to meet customers’ needs.
Q. In as much detail as possi-ble, could you explain the sup-ply chain for Zara from the raw materials to the customer’s pur-chase?
A. the supply chain starts with the design. The designer is capturing an idea, a trend. We have hundreds of designers. After capturing an idea they make a design, they make samples in our own factories which are in Laco-nia, Spain. When we see the model, if it is OK, then we start its production. If we need the collection to be ready very quickly, this can be provided by our factories. The factories are next to our offices. The entire process could take one week. After the week we need to add the logistics time, transportation time. It depends on the country. The whole process in general could take twelve days within Spain and roughly two weeks to arrive in other countries
from the day the designer first has the idea for a design.
Q. Does the Georgian market show substantial growth poten-tial for Zara fashion?
A. The Georgian market is modern. What is happening today is that Geor-gians are travelling outside the country and doing their shopping abroad. What we are doing now is to bring everything to the country. So Georgian people will not need to travel outside the country and will not spend more money than they have to. We will bring all the main brands to Georgia. It will be a fashion revolution in Georgia because we are opening together with other major gi-ants. At the same time we are opening Pull and Bear, Massimo Dutti, Ber-shka, Stradivarius, and Oysho stores. These stores will be located together in one mall. All these brands belong to Alhokair Group. The Group is the franchise of Inditex and all the brands I just named. The stores will be opened in the same mall. Tbilisi Mall is the big-gest in the region, not just in Georgia. It will offer the opportunity for a real shopping experience to Georgians.
Q. Zara is expanding through-out Asia and the Middle East to reduce its dependence on West-ern Europe which has suffered from weak economic growth in recent years. Do you think the Asian, Eastern markets along with Georgia’s new market could somehow successfully replace the European one?
A. The concept of our brand is not suffering. It is in fact the opposite. We are taking profit from Europe because we are oriented on the middle classes of society. Many people are not rich and our brands are for them. We took the opportunity. High-end brands might be suffering but not ours. Our segment is not suffering at all. This is obvious in the results of our group.
We do not think that any brands are competing with our model of business. We compete with each other within our group actually. We bring in two collec-tions every week. Other brands renew their collections once every month. So those brands’ customers will not be visiting the brand’s store more than once a month. When you have a brand which has new collections brought in twice a week you have the desire to vis-it the store frequently to check out the new stock. We have two planes coming to Tbilisi every week. This is extremely fast fashion, and will suit the Georgian market perfectly.
yAssINe sIbARI, executive General director saudi arabia, central asia and caucasus at Zara and inditex
Name of the bank: JSC ProCredit BankShareholders (updated): 100% ProCredit Holding AG & Co KGaA,Current Int. rating & awards: ProCredit Bank has a BB rating from the international agency Fitch Ratings, which is the best and highest possible rating in Georgia.Number of branches: 62Customer groups: Small and medium-sized enterprises, Private Clients
bANk Ceo's commentary:
ProCredit Bank is the leading commercial bank in Georgia, the house bank for SMEs. For over a decade, the bank has maintained a strong market po-sition and continues to provide reliable banking services to businesses and private house-holds in a responsible manner. The bank is known for its
commitment to serving its core target group: very small, small, medium-sized and agricultural businesses that have potential for growth and that contribute to the economic development of Georgia. Today ProCredit Bank Georgia has 62 branches all over Georgia, 334 thousand satisfied clients, USD 549 mil-lion in total assets and USD 11.8 million in profits.
The positive results achieved over the past years serve as the basis for further investment and expansion in Georgia. In addition to the construction of a new head office building, which will be completed in summer 2012, the bank has invested in a new core banking system to make customer ser-vice more efficient, and a new branch design allowing clients to be served in a comfortable and pleasant environment.
Significant ongoing invest-ments are also being made in the professional development of the staff. Enhancing employ-ees’ competence and knowl-edge ensures that they will be
able to consistently provide high-quality customer service and will also enable them to grow in the institution in the coming years.
In December, 2011, Fitch Ratings upgraded the rating of ProCredit Bank Georgia to ‘BB’ with positive outlook. ProCred-it Bank Georgia continues to carry the best and the highest possible rating in Georgia.
The fact that our bank carries the highest and the best possible rating among all Georgian banks is a clear indi-cation of our strong position and stable development and performance.
Latest developments:
Received awards and participation:
• Quality Recognition Award from Citibank (STP Excellence)
• Quality Recognition Award from Deutsche Bank (STP Excellence)
New branches: • Samtredia branch• Akhaltsikhe branch• Batumi Rustaveli Service
Centre, • Marjanishvili Service
Centre
New services or products offered:
• One-stop-banking system
• Internet Banking with SMS code
• Business Overdraft Public campaigns and charity:
Being a socially responsible institution, ProCredit Bank was involved in a number of local environmental projects in 2011. Within the framework of one of these projects, USD 20,000 were donated to the Agency of Protected Areas in order to help maintain the infrastruc-ture of Lagodekhi Natural Reserve. With the same aim USD 10 000 were donated in March, 2012.
pRoduCTs,
seRvICes and RATes deposits: For business and private Clients
• Internet banking (Standard and Full Packages with SMS code and Digipass)
• SMS service• Standing Order
Treasury operations:
• Money transfers• Foreign exchange
Cash collectionDocumentary Operations: Bank Guarantees, Letters of Credit
other: Business advisor –
Contact person in the bank for Small business clients. Specially trained, dedicated employee of the bank, who chooses the banking products and services that are best tai-lored to customer’s needs and advise them on various banking issues. The Business Adviser serves as an intermediary be-tween client and the various departments of the bank, thus making the banking experience for the client as convenient and fast as possible. The service is free of charge.
According to Audited Financial Statements IFRS
31-Dec-11
Total Assets 971 846Gross Loan Portfolio 682 379Liabilities to Customers 513 420Total Liabilities 840 218Total Equity 131 628Operating income 81 776Operating Expense 58 955Profit before tax 22 821net profit 19 674
HEADLINE NEWS & ANALYSIS 13FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
best georgian banks
Advertiser: BasisBank. Contact FINANCIAL Ad Dep at [email protected]
Commerzbank opened a credit line for Basisbank for Trade
Commerzbank has opened a credit line for Basisbank to boost trade opera-
tions. This line will support and greatly simplify the re-lationship between partners and clients involving into trade operations.
Throughout 19 years of its operation in the market, the Bank stands out for its strong image of being one of the most stable and progres-sive financial institutions in Georgia. Its flexibility, trans-parency and proper man-agement has awoken great interest among investors.BB accumulates many years of successful cooperation with
foreign financial institutions. Collaboration with the Euro-pean Bank for Reconstruc-tion and Development, one of foresaid institutions, started in the year 2007, right after the EBRD opened a 6 million dollar credit line for the BB to finance SME sector. In May 2008, the European Bank en-hanced partner relations with the Bank and bought 15% of its equity stake. The EBRD has also invested 2 million USD of its resources in TFP project of the Bank, aiming at trade business development in Georgia. Owing to a number of transactions implemented by specially trained team of the BB, the latter was named
as one of the most active TFP program participants.
It is worth mentioning co-operation with the OPIC (The Overseas Private Investment Corporation) started at the end of 2009 and finished with signing 5 million USD credit line Agreement, aiming at fi-nance SME loans within Geor-gia. Based on the first suc-cessful cooperation, the OPIC increased credit line for the Bank so the BB received ad-ditional 5 million USD invest-ment pack for SME financing.
Basisbank was the first bank in Georgia that the United States Agency for International Development started a joint project with.
Under the Agreement signed between the parties, the US-AID provided 50% guarantee for the Bank’s 6 million USD loan portfolio. The project has been intended to facilitate development of small and me-dium sized businesses as well.
The Bank has been actively cooperating with the follow-ing pre-eminent financial in-stitutions in Europe and Asia: the World Bank (WB), The International Fund for Agri-cultural Development (IFAD), The Black Sea Trade and De-velopment Bank (BSTDB), The Asian Development Bank (ADB), the Entrepreneurial Development Bank of the Netherlands (FMO) etc.
Date: 31-Dec-11
in Gel
N assets GEL FX Total 1 Cash 4 990 700 6 756 323 11 747 023 2 Due from NBG 3 456 189 9 671 873 13 128 062 3 Due from Banks 3 248 887 6 652 289 9 901 176 4 Dealing Securities 0 0 0 5 Investment Securities 19 525 888 0 19 525 888 6,1 Loans 18 276 007 56 831 248 75 107 256
BasisBank won the nomination “Best Bank for bank product quality, service and client programs” at the international contest “Best Banks of GUAM 2011”
Contest holds among 107 banks of GUAM countries. Its pur-pose is to define
those best banks which oper-
ates on the territory of GUAM countries (Georgia, Ukraine, Azerbaijan, Moldova) accord-ing to their different activities. In 2011 winners were awarded
in different nominations. “Ba-sisBank” has become the win-ner in nomination “ Best Bank for bank product quality, ser-vice and client programs”.
It is worth noting that last year BasisBank won the nom-ination “Most Reliable Bank” at the international contest “ Best Banks of GUAM 2010”.
International Ratings Agency Fitch affirmed Ratings of Basisbank
International Ratings Agency Fitch has af-firmed Basisbank’s rat-ings. Agency experts
affirmed the Bank’s Long-term Issuer Default Ratings (IDR) at “B-” with a Stable Outlook. Basisbank’s ratings
reflect that currently capi-talization is adequate and non performing loans are low. Throughout the year the
Bank made progress in di-versifying the funding base – Fitch Ratings said in the statement.
HEADLINE NEWS & ANALYSIS14 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banksGrant Thornton Helping
Dynamic Organizations Unlock their Potential for Growth
the FinanCiaLby Madona Gasanova
Grant Thornton targets dy-namic organisations that want to grow, that are go-ing through change and
that need its help. “Dynamic organ-isations vary in size and industry sector but they show some or all of the following characteristics: they are growing or have the potential to grow, they have an international capability or plans for cross border expansion, they have the ability to adapt to different market conditions, they are dealing with complex events or transactions such as raising capi-tal for mergers and acquisitions (M&A), restructuring or tax plan-ning, they are open to and value in-tegrated service solutions. To put it in other words, we focus on helping dynamic organizations navigate the complexity in their business opera-tions,” Nelson Petrosyan, the Direc-tor and Partner of Grant Thornton LLC, told The FINANCIAL.
According to Mr. Petrosyan, in or-der to maintain this market and ser-vice focus they unite the right people who can offer the right service to the right organisations. “That is why at Grant Thornton we create an envi-ronment that attracts, retains and inspires the best people – people who want to make a difference every day,” he said.
Grant Thornton is one of the world's leading organizations of in-dependent assurance, tax and ad-visory firms. Over 31,000 people in 500 offices across 100 countries are focused on making a difference to clients, colleagues and the commu-nities in which they live and work.
Grant Thornton has being work-ing in the Georgian market since 2001. In 2005 company established Grant Thornton Georgia and in 2010 it became a full-fledged firm staffed with professionals having in-depth local expertise and profound inter-national experience.
In an exclusive interview with The FINANCIAL, Nelson Petrosyan, the Director and Partner of Grant Thornton LLC, talked about the mis-sion and values of the company and shared the lessons that financial cri-sis has taught markets.
Q. What is your mission and what are your values?
A. Everyone at Grant Thornton shares 6 global values which we call CLEARR – Collaboration, Leader-ship, Excellence, Agility, Respect and Responsibility. These values are the foundation for the way we behave towards our clients, our col-leagues and our communities.
Q. As we know, it is already a couple of years since the Eu-ropean Commission launched large-scale discussions on the policy changes related to the audit industry - the so-called Green Paper. These discus-sions were aimed at focus-ing on the lessons learnt from the losses incurred due to the global financial crisis. At what stage are these discussions to-day and what is Grant Thorn-ton’s standpoint on the Green Paper?
A. Grant Thornton welcomes the Green Paper. I think it’s good to look at not just the auditing profession on the audit market but all the stake-holders which are involved in finan-cial reporting, in capital markets, in regulation. So we welcome the de-bate, we take a fresh look in terms of the positions which are in the Green Paper, we welcome stronger dia-
logue and communication between the auditor and all other stakehold-ers, particularly, between the audi-tor and shareholder, for example. This way the auditor can answer questions of the shareholders and improve communication between auditors and the audit committee of the audited entity, and certainly im-prove communication between audi-tors and regulators.
Another area that needs to be changed is restrictive governance where we have certain shareholder requirements or loan arrangements which require that only the largest accounting firms to be the auditors of the entities which have received the loan.
Q. In your practice, have you come across such situations in Georgia?
A. I have to admit, unfortunately, yes. Often times in the banking sec-tor. Management and shareholders may tell you about ‘requirements’ for audits by large firms. Curiously, sometimes clients find it difficult to tell apart the large firms that they
‘require’.Obviously, the market forgoes
the opportunity to benefit from the value for money that the mid-sized audit and advisory firms offer. For example, in the post-soviet regions, Grant Thornton has extensive expe-rience of auditing financial institu-tions - over 20 commercial banks, 2 national banks, large number of insurance companies and micro-fi-nance organizations. And this is not even taking into account our opera-tions in the Russian market.
Q. One of the markets where Grant Thornton expected to see significant growth was the post-soviet region. Although, for many foreign investors this region still remains politically unstable. Could you underline the main factors which make you remain optimistic towards the post soviet region?
A. You are right that political sta-bility and democratic processes are important factors affecting investor confidence and business optimism. I would make a general comment
about the post-soviet region and then will be more specific about Georgia.
Post-soviet economies are still emerging markets and, often times, investors seek opportunities which may not be available in more devel-oped economies with saturated mar-kets.
When we talk about Georgia, I think a key factor attracting foreign investment is the overall direction of the government policy on economic development, monetary and fiscal policies. I don’t want to sound naïve and say that everything is perfect and flawless. There is certainly room for improvements, especially at the level of policy implementation, where further progress and clarity may be achieved in commercial, tax and customs legislation.
I am optimistic about this prog-ress in Georgia because of the ongo-ing constructive dialogue between public and private sectors, where business associations and chambers of the commerce raise their view-points and propose improvements.
Legislative changes need to be bal-anced and rational. I understand that in an emerging economy such as Georgia legislative acts are living documents, sort of like a work-in-progress, which undergo continu-ous improvements. However, on the other hand, too frequent changes in legislation may also make future in-vestment decisions difficult.
Q. In your opinion what procedures should guide busi-nesses in today’s conditions in order for them to operate properly? What should busi-nesses consider while prepar-ing financial information?
A. There are two lessons learned from the financial crisis. The in-formation being made available by reporting entities is not necessar-ily meeting investor expectations. Investors are seeking more trans-parency among the business model observing the risks and opportuni-ties as well. The big question is to what extent the auditor can provide the same level of assurance for the kind of information we can give in financial statements. So it’s about financial reporting which investors are looking at. Financial statements are mostly looking backwards and capturing the conditions as they are as of the balance sheet date but the decision making is based on future expectations - where the business is going in the future.
The second thing is: measure-ments. We have a lot of volatil-ity when it comes to pure fair value measurements applied in financial statements.
Q. What makes Grant Thorn-ton different from other com-panies?
A. I think Grant Thornton is dif-ferent in the way we provide pro-fessional services and meaningful, actionable advice in the areas of as-surance, tax and advisory. First of all, these services are delivered through approachable partners, supported by proactive teams with genuine in-terest in the client. Secondly, we use business discussions to offer acumen and instinct to solve complex client situations. In other words, we bring clarity and insights to client issues.
Grant Thornton people are agile and responsive to changing situa-tions. Respectful, responsible and collaborative, we focus on what matters most to our clients, our col-leagues and our communities.
Let me try to put all this into more plainer words. Our professional standards and ethical rules may pro-hibit us from doing certain things or performing certain services, but they can never restrict us from think-ing about our clients. If there is one thing we do not compromise on, it’s our service quality. Quality is not negotiable. We are not about doing a ‘not bad’ job, we are about doing a great job. All this could be summa-rized into Grant Thornton’s brand promise.
Q. So now, according to you, what is Grant Thornton’s brand promise?
A. Let me take a step back and then I will come to this. All People make decisions for both rational and emotional reasons, don’t they? These are two factors that affect many of our decisions. Often times these two factors go side by side and are intertwined. An instinct for growth is our way of recognizing the legitimate role of both rational and emotional factors in business deci-sions. So “Instinct for growth” is our brand promise. We do our work to help dynamic organisations unlock their potential for growth.
nelson petrosyan, the director and partner of Grant thornton llc
HEADLINE NEWS & ANALYSIS 15FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
Advertiser: Grant Thornton. Contact FINANCIAL Ad Dep at [email protected]
best georgian banks
HEADLINE NEWS & ANALYSIS16 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banksRadisson Blu Hotel Soon to
Open in Tsinandalithe FinanCiaL
by taKo KheLaia
Within the next eighteen months another Radisson Blu hotel will be
opened in Georgia, this time in Tsinandali. According to Atakan Turhan, General Man-ager of Radisson Blu Iveria Hotel, the Tsinandali hotel will be another fantastic Radisson project. The hotel will have different facilities including a large spa and other leisure at-tractions.
As Mr. Turhan says, the year 2012 started quite successfully for the Radisson Blu Iveria ho-tel. There are high expectations of the upcoming months of May and June as well as there have already been plenty of bookings for this period.
“The year 2012 started quite well for our hotel. January was an excellent month and exceed-ed our expectations. February and March have been in line with our targets. The start was really good, it has since slowed down a little bit, but anyway has remained in line with our expectations. For the first three month of 2012 hotel occupancy has increased compared to last year,” Turhan said.
“For the first three month of 2012 the increased guest ratio figure was around 20% higher compared to last year. Most of our guests are foreigners. The nation that we see a majority of guests coming from is the USA. We host many guests from neighbour countries like Turkey, Azerbaijan, Armenia, Ukraine and also some Euro-
pean countries. The list of the most common nationalities of guests at our hotel remains quite stable and doesn’t really change much,” Turhan said.
“Hotel occupancy over New Year was the same as a year ago. The first week of January however was better this year because we saw many check-ins even after the New Year. The first week was 10% better than last year but overall New Year’s night was the same as last year. We held several events on the night; one in our Filini restau-rant, a ‘DJ night’ in our Oxygen bar and a private event in the Ballroom,” Turhan said.
Radisson often hosts differ-ent celebrities from around the globe. According to Turhan the hotel recently hosted famous band A Studio as well as the famous football player Andriy Shevchenko.
“We have hosted many ce-lebrities since our hotel first opened. Our celebrity guests are looking for something dif-ferent, something exclusive and the best. They often choose our hotel and we are always proud to host them,” Turhan added.
“Our well known Anne Se-monin Spa is highly in demand amongst guests. Even nowa-days we are having to limit membership as we are close to capacity, especially at our spa. Our Oxygen bar is also very popular and is nearly al-ways full. The roof bar is one of the best locations for business meetings and our Terrace is really popular during the sum-mer. Filini’s quick lunch, Rapi-do menu is also very popular. Our hotel is well positioned
and demand for its different outlets is quite high,” Turhan said.
Radisson pays great atten-tion to Green business and environment protection. The hotel takes part in different ac-tivities in line with this.
“Environment protection activities are coordinated with our head office. As a chain we pay much attention to this is-sue and we are a very environ-mentally friendly company.
We have an overall target of reducing utility costs by 5% this year. We have recycling programmes. We have joined World Clean Up Days and take part in the celebration of Earth Hour. We are spending energy and resources on working on environment protection issues. We are training our staff on re-sponsible business topics and one of those topics is environ-ment protection,” Turhan said.
“According to our standards
the breakfast service at our hotel is non-smoking. We do have special separate zones for smokers and non-smokers at the bar and for lunch and dinner. Of course if smoking were to be banned in build-ings throughout the country it would be better for everyone. We would have that much cleaner air,” said Turhan.
“Our hotel focuses on a val-ue for money policy. Value for money is a good offer for most of our guests. We actually focus on service rather than fighting against price competition. We are really proud of our guest satisfaction results. Our result is 9.1 out of 10 in terms of guest satisfaction and has been quite a stable indicator since the ho-tel’s opening. We are one of the top in the chain of the Radis-son Blu network,” Turhan said.
“We pay great attention to guest satisfaction. In the event that something bad happens by accident we always work hard and focus on resolving the is-sue. We do our best to satisfy our guests and we thereby en-sure that our guests will return to the hotel,” Turhan said.
According to the General Manager the Radisson Blu Iveria hotel has a programme called MEDALLIA which is an online questionnaire. With the help of this programme the ho-tel receives information about guest complaints and satisfac-tion rates.
“We collect the email ad-dresses of our guests during the check-in process and the sys-tem sends questions to people randomly. The guests can then reply to these questionnaires and based on their comments
we follow up on whether we can do anything to improve guest satisfaction. I wouldn’t say that we have complaints very fre-quently at all. The expectations of a guest might be different sometimes however so we al-ways try to meet all their expec-tations,” Turhan said.
“We change our restaurant menu twice a year. Filini is a chain restaurant brand and twice a year we hold trainings for the new menu. We send our head chef abroad for this. This time our chef is going to Mi-lan. Next month a new menu will be taught there and we will then implement it. The bar menus are also updated twice a year, based on what is popular and which new dishes we are adding. We keep the popular dishes which are well-liked by our guests on the menu. Ev-ery year we come up with new dishes for the terrace menu. Now we are working on new grill items to include in our Terrace menu,” Turhan said.
Radisson Blu Iveria has two main traffic hours, the first from 2 a.m. to 4 a.m. and the second in the morning due to flight schedules. The hotel of-fers discounts for groups, and prices depend on the season.
“We have special weekend prices and special offers for staying two or three nights which saves one 10%. We also have a couple of offers on at the moment. On special occasions like Valentine’s Day or at New Year we come up with specific offers for the respective period. We saw a real impact on book-ings as a result of our Valen-tine’s Day and New Year’s of-fers,” Turhan said.
Radisson Blu Hotel Batumi Expecting Higher Number of Guests this Summer
the FinanCiaLby taKo KheLaia
A ccording to Fikret Yuksel, General Man-ager of the Radisson Blu Batumi Hotel, the
Georgian National Tourism Agency is strongly advertising the Batumi region at the mo-ment. He believes that this will increase the number of tour-ists this year in comparison to last Summer. Yuksel hopes that the weather will be bet-ter this year as well and that guests will enjoy the hotel’s lovely outside pool and Ozone bar with its hotel terrace.
Radisson Blu Hotel Batumi opened on August 10, 2011, and gained popularity on the market in a very short time. Because of its unique archi-tecture the hotel is a landmark in the heart of Batumi and has been recognized as one of the most stunning monuments in the beautiful city of Batumi. According to Radisson Ba-tumi representatives the hotel boasts a perfect location as it is proudly overlooking the Black Sea and at the same time is within walking distance of the business district of the city. As Yuksel notes the hotel is often called the Pearl of Batumi and needless to say, is very popular among visitors to the city.
“Due to our special winter activities we managed to keep up the hotel’s occupancy even during the offseason. We host-ed various summits, conferenc-
es, meetings, exhibitions and other events. We had guests from Georgia, Turkey and oth-er neighbouring countries, as well as guests from the United States of America,” Yuksel said.
“The hotel was a favourite destination of Georgian travel-lers, as it is always warm and sunny in Batumi compared to the other regions of Georgia. Thus a lot of our country’s citizens ended up travelling to the region and staying at our beautiful hotel, especially at the weekends. Specially for the quiet season we have created four different types of packag-es that satisfy all kinds of cus-tomer needs. The packages are created for families, for hon-eymoons, friends and couples, which include additional ben-efits all at reasonable prices. In addition we have a conference package at an offseason price which has attracted a number of events,” Yuksel said.
Yuksel says that the hotel welcomes the competition that exists on the local market, as this is a powerful tool to keep up standards of service and seek for ways to maintain a better product than one’s com-petitors.
“All this results in overall improvement of quality. The Radisson Blu Batumi Hotel is offering a totally unique product and service concept to customers, it is up to guests to make the final choice which is what makes the competition fair,” Yuksel said.
“Our hotel offers all day din-
ing at Medea Restaurant, as well as the Medea Bar, Rooftop Clouds Bar and Restaurant, poolside bar Ozone, French-branded spa and wellness centre Anne Semonin, business centre, meeting room facilities and high tech business equipment, and casino,” Yuksel noted.
“It is hugely important that the management directs its efforts towards recruiting, hiring, motivating and de-veloping highly skilled and customer-oriented staff in the hotel. In order to be successful in the selection process, one of our hiring criteria is to be per-
ceived by our employees as the industry employer of choice - the company that engages the individual and is determined to develop and grow talent from within. Therefore it is our goal to fill vacancies with employees already working within the company, as they are familiar with our company, our products, services, values and priorities,” Yuksel said.
“One of the main objectives of the Rezidor Hotel Group is the continued focus on Yes I Can! And its associated ac-tivities, including training pro-grammes from the Corporate Training Portfolio to practical skills training, language train-ing, computer training etc based on the hotel’s training needs analysis,” Yuksel said.
According to Yuksel guests are very happy with their stays at the Radisson Blu Batumi Hotel. According to each of the brand’s surveys, the guest satisfaction rate is always very high. “We can say that Radis-son Blu Batumi is proudly leading a group of 311 hotels in Europe and Asia with its out-standing results,” he added.
“Every guest that stays at our hotel is looking for out-standing service and comfort. We as a team are always trying to keep up the brand’s stan-dards and achieve total guest satisfaction. One of the most important tools for us is our brand’s image and philoso-phy ‘Yes I Can’ which means that each and every single colleague regardless of their
position level is empowered to make any decision in order to make a guest happy and satis-fied,” Yuksel said.
“Coming out of the Yes I Can philosophy and 100% Guest Satisfaction principle, any complaint that reaches a hotel representative is fol-lowed up and handled imme-diately at the earliest stage. Thus we can proudly say that our guests have never experi-enced any serious problems with us. In all our outlets we are offering both international and local cuisine. Our outlets are extremely popular with the residents of Batumi as well as among tourists and visitors to the area,” Yuksel said.
Radisson Batumi has cel-ebrated its first New Year. The hotel hosted world famous singer Julio Iglesias for three days. For its New Year’s event the hotel offered a special pro-gramme at its rooftop bar where famous Georgian pianist Dini Virsaladze and her jazz quintet performed for two nights.
“Offering one of the best conference facilities in Geor-gia, Radisson Blu Batumi is quite popular for organizing successful business meetings and events at. We have already hosted many international and government conferences, sum-mits, exhibitions and dinners. We are receiving many enqui-ries on a regular basis for the near future and have already confirmed a number of events for the coming summer,” Yuk-sel told The FINANCIAL.
atakan turhan, General manager of radisson blu iveria Hotel
fikret yuksel, General manager of the radisson blu batumi Hotel
HEADLINE NEWS & ANALYSIS 17FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
best georgian banks
Advertiser: Radisson Blu Hotel Batumi. Contact FINANCIAL Ad Dep at [email protected]
Advertiser: Radisson Blu Iveria Hotel. Contact FINANCIAL Ad Dep at [email protected]
HEADLINE NEWS & ANALYSIS18 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
Advertiser: Georgia Palace Hotel. Contact FINANCIAL Ad Dep at [email protected]
best georgian banks
HEADLINE NEWS & ANALYSIS 19FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
best georgian banksGeorgian Palace Hotel to Add
Entertainment Facilities this Summerthe FinanCiaL
by taKo KheLaia
GPH, one of the leading
hotels in the Adjara region, plans to add entertainment facilities to its list of services this summer. According to Lela Tsulukidze, GPH Vice Executive Director, the hotel is going to open internation-al standard tennis courts, a beach volleyball field and other sports facilities. A new exotic menu will be offered to GPH guests this summer as well.
“GPH is the first 5 star ho-tel brand which has existed on the market for five years already. Since then the hotel has remained quite success-ful and very popular with tourists. We made a big step in developing the hospitality business by creating a five star service, resort line of international quality. Last year was really interesting for GPH. The hotel was 60% booked and during peak season it was 80% booked,” said Tsulukidze.
“During wintertime most of our guests are local, but we do have some visitors from Ukraine and other dif-ferent parts of the world. In the off season we are more
oriented at business con-ferences. Our hotel is very popular in terms of arrang-ing business meetings and forums. This year for the first time we were presented at the international tour-ism exhibition in Barcelona. We are now presented in Ukraine’s tourism exhibi-tion and we are expecting more guests this year as a result,” Tsulukidze added.
“We created flexible pric-es and packages for business and conference meetings during the winter season. Our acceptable prices and comfortable environment attract visitors to the ho-tel. During the off season a single room’s price comes to 109 USD, equivalent in GEL. This price includes breakfast and VAT,” Tsu-lukidze stated.
As Tsulukidze said, many hotels have been built in Ba-tumi recently. She says that competition should definite-ly exist on the market but GPH holds a different and very individual niche.
“Kobuleti is a resort zone historically. Situated on Kolkheti Plain and 25 km north of Batumi Kobuleti is distinguished by a unique microclimate which benefits cardiovascular, respiratory and nervous systems un-like any other on Georgia’s
Black Sea coastline. We of-fer our guests an exciting recreational spa centre, in-side pool and fitness centre. People really enjoy their holidays while staying at
GPH,” Tsulukidze noted.“We always search for
hardworking staff. We em-ploy local young people. We hold trainings and cooper-ate with high level tour-
ism institutions. We have a very high rate of guest sat-isfaction. Our friends enjoy warm smiles, a nice atmo-sphere and friendly reliance at our hotel,” she adds.
“People are on the whole really content with our ho-tel. We don’t get complaints often. Generally people only complain about rainy weather,” Tsulukidze said.
“Our hotel is exceptional in terms of its design and ar-chitecture. You can feel the influence of Italian style in each of the details. Guests are always excited by the design of our hotel. Before becoming the hotel business owner of GPH Mr. Temur Chkhonia had relations with Italians. He and his wife fell in love with Italian architec-ture and design. Because of that they tried to bring some elements here and fulfil
their wishes together with their partners, to mix Italian culture with Georgian,” Tsu-lukidze said.
“The architect, head chef, restaurant and banquet manager of the hotel are Italian. All of the hotel’s equipment is bought from Italy as well. The mixed Eu-ropean and Georgian cui-sine at GPH is one of the best things about the hotel for our guests and also for Batumi residents,” Tsu-lukidze noted.
As Tsulukidze said, the hotel has long term experi-ence in event organizing and GPH arranges many differ-ent events periodically.
A pleasant subtropical climate, fresh air, plenty of sunshine, warm sea and Adjaran Mountains near the hotel create one of the most desirable holiday destina-tions in Georgia.
156 elegantly designed and spacious rooms, all with private balconies, open on to wonderful views of the sea, the surrounding mountains or our beautiful garden. A modern decor with soft, pastel coloured furnishings create a warm, welcoming feeling. All the guest rooms offer air-conditioning, cable internet, hairdryers, a TV with satellite channels, mini bar and safe-boxes.
Georgia Palace Hotel is the perfect choice for discerning guest, seeking to relax in a luxurious atmosphere with all modern conveniences
and extensive range of health and wellness facilities.
Situated on a Kolkheti Plain and 25 km north of Batumi Kobuleti is distinguished by a unique microclimate which benefits cardiovascular, respiratory and nervous system unlike any other on Georgia's Black Sea coast.
A pleasant subtropical climate, fresh air, plenty of sunshine, warm sea and Adjarian Mountains nearby create one of the most desirable holiday destinations in Georgia.
156 elegantly designed and spacious rooms, all with private balconies, open the wonderful views of the sea, the surrounding mountains or our beautiful garden. A modern decor with soft, pastel colored furnishings create a warm, welcoming feeling.
All the guest rooms offer air-conditioning, cable internet, and hair-dryer, TV with satellite channels, mini bar and safe- boxes.
lela tsulukidze, GpH Vice executive directo
HEADLINE NEWS & ANALYSIS20 FINANCIAL2 April, 2012 | finchAnnel.com
In 2010, Georgians were hap-pier with the way democracy was developing in their country than most other CIS or soviet
bloc countries polled; 40% of those asked said they were satisfied with their democracy. Not surprisingly, they were still much less satisfied than the rest of the established de-mocracies in Europe, who had an average satisfaction of 62%. Geor-gians were, however, the most likely of all countries in this analysis to fa-vor gradual societal change through reforms, and the least likely to favor radical change through revolution-ary action.
As part of the last European Val-ues Survey wave, GORBI polled 1500 Georgians on their attitudes
toward democracy and political action. Respondents in Georgia and elsewhere were asked, “On the whole, are you satisfied […] with the way democracy is developing in our country?” Predictably, citizens of the ex-soviet countries included in this analysis were all less likely to express satisfaction than their west-ern counterparts.
uNIque CAses
There was one outlier, Kosovo, that was far more satisfied than even most established democracies, with a full 70% saying they were ei-ther very or rather satisfied. Only one country, Luxembourg, had a more satisfied democracy (75% sat-isfied). There are a couple of pos-sible explanations for this. First, Kosovo only very recently won its independence, in 2008; the people of the country may still be experi-
encing a nationalistic bump in ap-proval. Alternatively, this recent independence may mean that Kos-ovars, who certainly have had their share of troubles in recent history, have not yet experienced the grow-ing pains that seem inseparable from, and most easily attributable to, being a developing democracy. Finally, Yugoslavia’s relationship to the USSR was quite different from the other countries included in this analysis. This may have played a role as well, but I was unable to get access to EVS polls conducted in the rest of the Yugosphere at the time of this article’s writing, so these ex-planations cannot be discussed in depth.
The other notable case in this data is Greece. The economic cri-ses of the early 2000s and of 2008, and subsequent austerity measures, have affected this country’s charac-ter greatly. Of those established democracies included, Greece was by far the least happy with their democracy. Their satisfaction rat-ings in these polls were virtually the same as Georgia’s, the varia-tion falling within the margin of error. This survey was conducted
in Greece between April and June of 2010, and the first of the most recent major strikes and demon-strations began May 5th. This un-doubtedly colored the respondents’ opinions on civic engagement; Greeks were the least likely to pre-fer gradual change through reforms (66%), and were the most likely to say that their “present society must be valiantly defended against all changes (20%)”
There were 1500 Georgians in-cluded in this analysis. The error margins for studies of this kind are +- 3.5% at a 95% confidence inter-val. This summary is exclusively provided to The FINANCIAL. Visit our website at gorbi.com
This report is exclusively provided to The FINANCIAL. Crediting The FINANCIAL is obligatory.Visit GORBI website at gorbi.com
oFFICIAL ReseRve AsseTs INCReAsed by 100.7 MILLIoN us doLLARs
Current account deficit amount-ed to 525.4 million US dollars (872.0 million GEL) in the fourth quarter of 2011. It was 14.9 per-
cent more compared to the preceding quarter.
During the accounting period, as com-pared to the previous quarter, export of goods increased by 167.9 million US dol-lars and import of goods increased by 232.6 million US dollars. As a result trade deficit increased totaling 1.0 billion US dollars (1.7 billion GEL). That is 6.7 per-cent more than the previous quarter figure and 33.5 percent more compared to the same quarter of 2010.
Within the fourth quarter, balance of services account was positive and equaled to 162.4 million US dollars (269.6 million GEL). The export of services was 508.4 million US dollars (843.9 million GEL) 16.5 percent less than in the previous quarter and 13.6 percent greater than the figure in the same quarter of 2010. Import of services amounted to 346.0 million US dollars (574.3 million GEL). That is 10.4 percent increase as compared to the fourth quarter of 2010 and by 0.2 million US dollars less than the figure in preceding quarter.
From services account travel had the most significant positive balance (181.1 million US dollars or 300.5 million GEL). It has decreased by 29.8 percent com-pared to the previous quarter figure, while increased by 34.7 percent compared to the figure of the same period of 2010. The second positive component was transpor-tation services constituting 7.2 million US dollars (11.9 million GEL). The export of this item has decreased by 6.7 percent compared to the previous quarter, while increased by 10.2 percent compared to the same quarter of 2010. As for imports, it has increased by 4.7 percent and 20.2 per-cent as compared to preceding quarter and the fourth quarter of 2010 respectively.
Balance of income was negative equal-ing -58.8 million US dollars (-97.5 million GEL) in the fourth quarter of 2011. Income credit amounted to 204.6 million US dol-lars (339.6 million GEL) 5.9 percent less than figure of the previous quarter and 28.6 percent higher than the figure for the same quarter of 2010. Income debit totaled -263.3 million US dollars (-437.1 million GEL) was 10.6 less than the pre-vious quarter and 26.8 percent more than the figure of the same quarter of 2010.
Current transfers was the largest posi-tive component of the current account and amounted to 398.1 million US dol-lars (660.8 million GEL). The quarterly and annual growth of this component was 24.6 percent and 28.6 percent respectively. Inflow of current transfers equaled 460.6 million US dollars (763.5 million GEL), while outflow made up 61.9 million US dol-lars (102.7 million GEL). Annual decrease of net current transfers of public sector was 25.3 percent, while other sectors current transfers increase was 39.3 percent.
Net capital transfers in the reporting period equaled to 21.5 million US dollars (35.7 million GEL). That is 23.8 percent less than the previous quarter figure and 74.9 percent decrease compared to the same period of 2010. Capital transfers of general government made up 17.5 million US dollars (29.1 million GEL). That is 28.9 and 78.4 percent decrease compared to the figures of the previous quarter and the same period of 2010 respectively.
Net foreign direct investments amount-ed to 225.3 million US dollars (374.0 mil-lion GEL) in the fourth quarter of 2011. Foreign direct investment to Georgia made up 337.5 million US dollars (560.2 million GEL), that is 27.4 percent increase as compared to the previous quarter and 57.7 percent increase as compared to the same quarter of 2010. Out of total foreign direct investments to Georgia investment in equity capital amounted to 178.4 million US dollars (296.1 million GEL), reinvested earnings – 112.5 million US dollars (186.7 million GEL), and other capital – 46.6 mil-lion US dollars (77.4 million GEL).
A positive balance of other investments amounted to 404.8 million US dollars (671.9 million GEL) in the reporting pe-riod. This item is increased 2.2 times com-pared to the previous quarter and by 39.1 percent on annual bases. Assets of other investments have decreased by 26.9 mil-lion US dollars (by 44.7 million GEL) in the fourth quarter of 2011. At the same time the liabilities grew by 377.9 million US dollars (627.2 million GEL) in the re-porting period.
Official reserve assets increased by 100.7 million US dollars (167.2 million GEL) due to operational changes during the fourth quarter of 2011.
JSC "Halyk Bank Georgia"
HEADLINE NEWS & ANALYSIS22 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banks
Georgia is Over-banked for a Small Economy, Fitch
Predictions and Analysis of Georgia's Banking Sector
the FinanCiaLby nana MGhebrishviLi
In 2012, Fitch ratings expects the banking system to remain broadly on the same growth trajectory as in 2011, support-
ed by the still expanding econo-my, and banks’ quite comfortable liquidity positions. Loans and de-posits are likely to both expand by around 20%, which is slightly lower than in 2011, when growth was 24% and 21%, respectively, (and would have been higher still, adjusting for GEL apprecia-tion).
“Our expectation of a moderate slowdown in 2012 reflects greater mar-ket saturation and base effects”, James Watson, CFA, Managing Director, Fi-nancial Institutions, Fitch Ratings told The FINANCIAL in an exclusive inter-view.
“Georgia is over-banked for a small economy, with 18 credit institutions currently registered. Put simply, there is just not enough banking business in the country to sustain that many banks. At the same time, most of the country’s lenders have relatively strong foreign owners, and smaller, less profitable in-stitutions are for the most part under limited near-term pressure to deliver improved performance”.
“We view the Georgian banking sec-tor quite favourably for what is still a relatively small emerging market banking system. Overall, the sector is well capitalized and comfortably liq-uid, pre-impairment performance is strong and asset quality is stable. The banks are benefiting from a growing economy and improvements in politi-cal and economic governance. The sec-tor’s main vulnerabilities arise from potential volatility in the performance of the Georgian economy and the high level of foreign currency lending.”
Q. What do you consider to be the main challenges for the bank-ing sector in 2012?
A. Challenges will include, firstly, maintaining loan underwriting stan-dards as credit penetration increases; secondly, attracting further customer deposits to prevent a build up in reli-
ance on wholesale funding as credit portfolios expand; and, thirdly avoid-ing a sharp contraction of margins and profitability as competition continues to increase.
Q. What are long-term predic-tions about ratings of Georgian banks?
A. The medium- to long-term di-rection of Georgian banks’ ratings is highly dependent on the overall eco-nomic development of the country, the absence of adverse shocks, whether external or internal, and the sovereign credit profile. A reduction in foreign currency lending risks and continued sound financial metrics in terms of capital, liquidity, performance and as-set quality would also be important for banks to attain higher ratings.
Q. What were the main reasons and factors that resulted in im-provement of Georgian Banks' rating?
A. The upgrades of Bank of Georgia and TBC reflected their strong per-formance as they emerged from the crisis, still comfortable capital and li-quidity positions and the reduction in Georgian country risks, as reflected in the upgrade of the sovereign to ‘BB-‘/Stable.
The ratings of Procredit Bank Geor-gia and VTB Bank Georgia are driven by potential support from their parent organizations. The upgrades of these two banks were driven by the reduc-tion in sovereign risks, and hence the more remote probability that Georgia would at some time introduce trans-fer or convertibility restrictions which could impede the ability of banks to service their debt obligations.
Q. Does strained relation be-tween Georgia and Russia in-
fluence on the development of banking sector? Is this additional risk for banking?
A. The strained relations between Georgia and Russia have not had a sig-nificant, direct impact in the banking sector, although they increase the risk of adverse shocks which could be nega-tive for both the economy as a whole and the banking system in particular. The negative impact on bank asset quality from restrictions on the import of certain Georgian goods into Russia has been moderate.
Q. Popularity of GEL in depos-its and loans vs. USD is increas-ing in Georgia. How would you estimate this fact?
A. We view positively the gradual reduction in the proportions of for-
eign currency lending and deposits. The share of FX deposits fell to 65% at end-2011 from 81% at end-2008, and in absolute terms the increase in lo-cal currency deposits during the three years was slightly higher than the vol-ume of new foreign currency deposits. On the asset side of the balance sheet, progress has been more moderate, but the share of FX loans nevertheless fell to 70% at end-2011 from 77% at end-2009. Notwithstanding recent prog-
ress, however, the banking system and the broader economy remain highly dollarized, representing a key risk for the sector.
Q. Georgian banks still remain quite cautious about lending for SME and start ups. Please, could you comment on this?
A. As the corporate and retail mar-kets have become more saturated, and competition is starting to push mar-gins down – in particular in the large corporate segment – we see banks focusing more on SME lending. Al-though Procredit remains the pioneer in this area, all the major banks now have dedicated small business lending programmes. At the same tine, lender caution in extending credit to start ups with sometimes questionable busi-ness prospects is inevitable, and is not something specific to Georgia.
Q. How would you evaluate the market for private individuals and corporate customers in the Georgian banking sector?
A. The large corporate segment is relatively small in terms of the number of companies, in particular as a grow-ing number of Georgian corporates can access finance from foreign own-ers, international financial institutions or other non-Georgian lenders. In 2011 we saw increasing competition for corporate lending business and sig-nificant refinancing of loans on other banks’ books at lower rates. The retail market continues to grow rapidly, with lending to households up by 30% in 2011 in GEL terms, notwithstanding the appreciation of the local currency in the first half of the year.
Q. Real GDP growth by 6, 4 per-cent in 2011. Please, comment on
this.A. In Fitch’s view, GDP is set to con-
tinue to grow strongly in 2012-2013, by an average of 5.5%. Exports are diversified by product and by market, affording some resilience to slower global growth. Georgia is investing in infrastructure that will enable it to take full advantage of its role as a transit country for the region. Other growth areas include hydroelectric power and tourism.
bANk oF geoRgIA – bb-, bAsIs bANk – b-, LIbeRTy bANk – b, vTb bANk – bb, pRoCRedIT bANk – bb, TbC bANk – b+. latest fitch ratings of Georgian banks upgraded on January 25, 2012
geoRgIAN bANkINg seCToR vs. oTheR eMeRgINg MARkeTsA. The sector remains very small, with the lowest asset base of 41 global emerging market banking systems included in our latest comparative study. However, on a relative basis, the sector stands out for its strong capitalization (third highest equity/assets ratio at end-H111 behind Azerbaijan and UAE), high reserve coverage of impaired loans (fourth highest after Colombia, Peru and Taiwan) and strong lending margins (second after Venezuela, where inflation is much higher). Credit penetration is broadly in line with the country’s level of economic development. A key weakness remains the proportion of foreign currency lending (third in our study, behind Latvia and Croatia).
Fitch Ratings upgraded Georgia‘s Foreign- and Local-Currency IDRs to BB− ‘with a Stable Outlook, from B+/Positive. The government has reined in the fiscal deficit more quickly than expected, and debt dynamics are positive, according to the Fitchratngs. The economy is growing briskly, while inflation is falling. The current account deficit remains wide, with little adjustment in prospect, but growth in reserves reduces external vulnerability.
INTeRNATIoNAL INvesTMeNT posITIoN oF geoRgIA
Net international investment posi-tion (IIP) of Geor-gia by the end of
the fourth quarter of 2011 amounted to -13.4 billion of USD (-22.4 billion GEL) that is -1.8 billion USD (-3.0 billion GEL) increase on yearly base. Of total growth, 86.7 percent was due to operational changes; 2.8 percent – due to exchange rate changes; 0.9 percent – due to price changes, and 9.5 percent – due to other changes. Total internation-al assets amounted to 4.7 billion of USD (8.0 billion GEL), of which 59.2 percent consists of reserve assets; 16.1 percent – currency and deposits; 6.7 percent – trade credits; 2.0 percent – loans; and 15.6 percent – direct in-vestments and 0.5 percent portfolio investments and fi-nancial derivatives. Reserve assets increased by 554.3 million of USD (920.1 mil-lion GEL), that is 24.5 per-cent growth on yearly basis. Reserve assets amounted to 2.8 billion of USD (4.7 bil-lion GEL) by the end of the reporting period, of which 572.4 million of USD (950.1 million GEL) was due to op-erational changes; -17.7 mil-lion of USD (-29.4 million GEL)– due to exchange rate changes, and -0.4 million of USD -0.6 million GEL) – due to price changes.
As for liabilities, for the same period, total liabilities amounted to 18.2 billion of USD (30.4 billion GEL), that is 2.2 billion USD (3.6 bil-lion GEL) increase on yearly base. Liabilities to direct investors increased by 13.9 percent and amounted to 9.3 billion of USD (15.5 bil-lion GEL). Portfolio invest-ment liabilities grew by 7.8 percent yearly, and amount-ed to 1.2 billion of USD (2.1 billion GEL), of which 596.5 million of USD (996.4 mil-lion GEL) is government Eurobonds and 266.4 mil-lion of USD (445.0 million GEL) - Eurobonds of Geor-gian railway.
By the end of the report-ing period, as compared to the preceding year, other investments liabilities in-creased by 14.0 percent and amounted to 7.6 bil-lion of USD (12.7 billion GEL). From that amount loans comprised 6.3 billion of USD (10.4 billion GEL). Monetary authorities’ loans decreased by 9.3 percent as compared to the third quarter of and amounted to 594.0 million of USD (992.1 million GEL). External lia-bilities of public sector grew by 9.2 percent due to other long term liabilities. Bank-ing sector loans increased by 19.2 percentage points, of which long term liabili-ties increased by 7.3 percent while short-term liabilities increased 2.4 times and amounted to 273.6 million USD (457.0 million GEL). Cash and deposits liabilities increased by 56.1 percent-age points compared to the previous year and reached 510.6 million USD (852.8 million GEL).
By the end of the third quarter of 2011, the other long term liabilities of the National Bank of Georgia reached 221.1 million of USD (369.3 million GEL), which is the allocation of Special Drawing Rights (SDR).
HEADLINE NEWS & ANALYSIS 23FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
best georgian banksJapan Tobacco International Opens Caucasus Regional Office in Georgia
the FinanCiaLby nana MGhebrishviLi
apan Tobacco International (JTI) has opened its office for the Cauca-sus region in Georgia. The market in the region is growing quite rap-
idly and the company needs their management team to be close to the market, according to Martin Brad-dock, JTI Regional President for the CIS+, Romania and Adriatic Region.
“There were several reasons for this decision,” Braddock said. “First of all, the investment and business climate here in Georgia is quite attractive and perspective. We see lots of talented people in Georgia and this is another important reason for opening a re-gional office in Georgia. The quality of resources available in the country in terms of office, people, and profes-sional skills is quite high.”
JTI was working on opening a re-gional office in Georgia for a year with the intensive assistance of the Georgian Government. Mikheil Janelidze, Dep-uty Minister of Economy and Sustain-able Developmen,t attended the open-ing ceremony of the regional office.
“We are glad that JTI will be serving the region from Georgia,” Janelidze said. “This is one of the results of our activities aiming to develop the busi-ness climate in the country. Nowadays the Georgian business environment is more than acceptable for international companies including JTI. JTI is one of the fastest-growing companies and we expect them to continue growing in the country and region as well.”
“I’m glad that they have already em-ployed more than 80 individuals. This means that Georgia is not only attrac-tive for its business environment but as an intellectual capital as well,” he added.
Ambassador of Japan to Georgia Mr. Masayoshi Kamohara also positively appreciated the opening of the JTI re-gional office in Georgia. The Embassy of Japan in Georgia and JTI have been cooperating for three years since the Embassy first opened in Georgia. Mr. Masayoshi Kamohara thanked JTI for their support of some cultural projects as well.
“I am glad that JTI is developing so rapidly in Georgia,” Mr. Masayoshi Kamohara said. “This is already their third office and consequently the num-ber of employees is rising also. I con-sider this quite a big success. I hope
that other Japanese companies will set up their businesses in Georgia thanks to the attractive business environment of the country.”
JTI business in the region is increas-ing quite fast as all sides have men-tioned. Sales in Georgia increased by 4 percent last year, in Azerbaijan - by 63 percent, and in Armenia - by 28 per-cent.
“As of the end of the first quarter of 2012 we have sold 24 percent more products in Georgia compared to the same period of 2011,” Braddock said. We expect quite a high rise in the fu-ture. Therefore opening a regional of-
fice was a good move. Now we will able to better meet our customers’ needs and requirements.”
In 2010 JTI increased business in Georgia by 50% compared to 2009. They significantly increased Camel and Winston business.
“We are increasing quite fast and hold quite a large share of the market. We needed our management here to continue this trend of growth,” Brad-dock explained.
JTI entered the Georgia market in 2000. Currently they hold a 26.5 per-cent share of the Georgian market. In Azerbaijan they hold 20 percent of the
market and in Armenia - 11 percent. Braddock assesses these three markets differently.
“There are four main players in the Azerbaijan market which are Impe-rial Tobacco, BAT, JTI and European Tobacco. Each of them holds quite a big part of the market. In Armenia the market is totally different. Almost all in-ternational tobacco brands are present and many local ones too. The situation is quite tough and the competition there is high. Georgia is somewhere in the middle in terms of its market situation. There are lots of international brands here, but not as many as in Armenia.”
Eliz Group Ltd is the official distrib-utor of JTI in Georgia. They contrib-uted 102.4 million GEL to the budget as excise tax in 2011. Since 2006 they have added more than 400 million GEL to the budget.
“Eliz Group is not only our partner in Georgia, but a successful Georgian company as well. They manage to gen-erate quite high profit,” he added.
The prices of tobacco in Georgia are lower compared to the European coun-tries. Braddock predicts rising tobacco prices in the future throughout the whole world, but the company doesn’t have any concrete plan in this direc-tion. The increasing process is because of two reasons including rising price of excises and governmental policies.
JTI is the international tobacco divi-sion of Japan Tobacco Inc., a leading international tobacco product manu-facturer, with a global market share of almost 10 percent. The company was formed in 1999 when Japan Tobacco Inc. purchased, for 7.8 billion USD, the international tobacco operations of the US multinational R.J. Reynolds. They employ up to 25,000 employees all over the world. JTI brands are sold in 120 countries. The company has 24 factories producing cigarettes.
The bank is in the premium list-ing on the London Stock Exchange.
Standard & Poor’s ‘BB-/B’FitchRatings ‘BB-/B’Moody’s ‘B1/NP’ (FC) & ‘Ba3/NP’
(LC)
Year 2011 financial data (Bank of Georgia standalone, IFRS based):
Total assets: GEL 4,531.6 mlnClient deposits: GEL 2,545.3 mlnNet loans: GEL 2,635.4 mlnNet profit: GEL 143.7 mln
Bank of Georgia showed an ex-cellent business performance in 2011, demonstrating strong profit-ability and further efficiency im-provements, prudent asset quality with further strengthening of the Bank’s Balance Sheet, and reshap-ing the business with taking a strong focus on growing the Bank’s strategic businesses in Georgia – Corporate Banking, Retail Banking and Wealth Management as well as showing further progress in devel-oping growth opportunities offered by the Bank’s synergistic business-es: Insurance and Healthcare and Affordable Housing.
Commenting on JSC Bank of Georgia Q4 2001 and Full Year 2011 results, Bank of Georgia CEO, Irakli Gilauri said: “I am very pleased to report a strong set of results for 2011 reflecting an excellent perfor-mance in all of our core businesses. Revenue growth of 27.3% substan-tially exceeded expense growth of 8.9% which, when combined with significantly improved asset qual-
ity, led to a 74.8% increase in profit before income tax from the continu-ing operations. A prudent approach to growing our balance sheet has resulted in the Bank’s 41.2% stand-alone client deposit growth signifi-cantly exceeding customer lending growth of 19.8% and reducing our Loan to Client Deposit ratio to close to one hundred percent. Net loans to Customer Funds declined even further to less than 96%. Profitabil-ity has continued to remain strong with a post-tax Return on Average Equity of 20.4% and Earnings per Share growing by 78.1% to GEL 4.95.
At the end of December 2011, the Bank’s NBG Tier 1 capital ratio was 10.5% (BIS 19.9%), and as of 29 February 2012, this was further increased to approximately 15.3% (BIS 22.1% on a pro-forma basis) as a result of the inclusion of 2011 profit in the Tier I capital as of 1 January 2012 as per National Bank of Georgia requirement and previ-ously announced conversion of the convertible loans in February 2012.
The Bank is well positioned to further improve its performance in 2012 and this, combined with both, Georgia’s robust macroeconomic outlook and the Bank’s strong mo-mentum, profitability and capital ratios, has led the Board to review the Bank’s dividend payment. As a result of the Bank’s strong finan-cial performance and condition, the BGH Board of Directors intend to recommend to the next Annual General Meeting of Shareholders of
BGH, to be held in May/June 2012, annual dividends in the amount of GEL 0.70 per share payable in Brit-ish Sterling at the then prevailing exchange rate. This proposed divi-dend payment is the continuation of the Bank’s progressive dividend policy and represents a substantial increase from the GEL 0.30 per share paid for 2010 performance. As part of this progressive dividend policy, the Board of BGH will aim to continue to increase the GEL 0.70 annual dividend per share over-time.
In December 2011, Bank of Geor-gia Holdings plc., the UK-incor-porated holding company of the Bank made a tender offer to Bank of Georgia shareholders. Follow-ing the successful completion of the tender offer, BGH was admitted to trading on the premium segment of the UKLA and to trading on the Main Market of the LSE on 28 Feb-ruary 2012. We are delighted with the very high level of participation and would like to thank our share-holders for their strong support for the move to the premium listing aimed at enhancing investor profile and broadening shareholder base.”
Some of the highlights of 2011 across the Strategic Business Seg-ments:
• Launch of Express Banking - small-format service points in December 2011.
• Issued 263,143 debit cards in 2011 bringing the total debit cards outstanding to 535,385.
• Issued 61,980 credit cards of
which 48,382 were American Express cards in 2011. A total of 105,132 American Express cards have been issued since the launch in November 2009. The total number of credit cards outstanding amounted to 127,820.
• Signed merchant and ATM ac-quiring agreement with Din-ers Club International in April 2011. Bank of Georgia became an exclusive partner for Din-ers Club International acquir-ing business in Georgia and an ATM processer for Diners Club International and Discover card transactions.
• Outstanding number of Re-tail Banking clients reached 888,794.
• Acquired 1,726 new clients in SOLO business line, the Bank’s mass affluent sub-brand, in 2011. As of 31 December 2011, the number of SOLO clients reached 3,728.
• Increased Point of Sales (POS) footprint: as of 31 December 2011, 179 desks at 369 con-tracted merchants. POS loans outstanding amounted to GEL 24.7 million.
• POS terminals outstand-ing reach 2,828. The volume of transactions through the Banks’ POS terminals amount-ed to GEL 246.6 million, and number of POS transactions to 3.0 million in 2011.
• Consumer loan originations of GEL 425.3million.
• Micro and SME loan origina-tions of GEL 449.0 million.
• Mortgage loans originations of GEL 168.1 million.
• Opening of the new Headquar-ters to meet the growing needs of the Bank’s business and provide professional facilities to the Bank’s clients and em-ployees. Approximately 600 employees of the Bank, includ-ing back-office staff previously spread across 12 offices rented by the Bank, have relocated to the new HQ.
• Standard & Poor’s and Fitch Ratings raised their respective long-term ratings on Bank of Georgia to ‘BB-‘, noting Bank’s business position, capitaliza-tion, liquidity, profitability and strong corporate governance and management teams as the drivers for the rating upgrades.
• Entering into ISDA (Interna-tional Swaps and Derivatives Association) agreements with Commerzbank in 2011 and Merrill Lynch in 2012 in addi-tion to ISDA agreement signed with IFC in 2009. ISDA enables the Bank to enter into interest rate swaps in order to hedge its US$ interest rate risk on the Bank’s long-term borrowings.
• Signing of a five-year Agricul-tural Finance Facility Agree-ment with EBRD a synthetic Georgian lari loan denominat-ed in US dollars in the amount of US$14.5 million and a six year US$40.0 million loan fa-cility agreement with FMO and DEG to support the growth of the Bank’s SME portfolio.
HEADLINE NEWS & ANALYSIS24 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banks
GOLDEN SPONSOR:
THE FINANCIAL SPECIAL EDITIONON APRIL 23, 2012
Advertiser: The FINANCIAL. Contact FINANCIAL Ad Dep at [email protected]
HEADLINE NEWS & ANALYSIS 25FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
general InformationBank Republic Societe Generale
Group is one of the most succesful financial institutions in Georgia, with leading position in the retail and corporate banking services market. Thanks to its universal business model, Bank Republic Societe Generale Group remains a reliable long-term financial part-ner for individuals, micro, small and medium enterprises, organi-zations and large corporations.
Professionalism, innovation and team spirit are the common guid-ing principles for over 1000 staff members working in the bank’s 38 branches all over Georgia.
Established in 1991, Bank Re-public is one of the first privately owned banks in Georgia. In 2006, the French international financial group Societe Generale purchased 60% of the bank’s shares. In 2009, the group increased its share par-ticipation to 80%. As of today, Societe Generale owns 84.04% of Bank Republic’s stock. Other part-ners of Bank Republic are:, Euro-pean Bank for Reconstruction and Development (EBRD), Interna-tional Finance Corporation (IFC), European Investment Bank, Kred-itanstalt für Wiederaufbau (KfW).
Western banking culture, op-erational efficiency, modern, com-fortable branches and friendly personnel, simple, fast and diverse products, innovation, being close to clients and maintaining two-way communication are distinc-tive features of Bank Republic, as a socially responsible financial in-stitution.
Individual clients of Bank Re-public enjoy diverse credit facili-ties specially designed for them: mortgage, auto, payroll, consumer and deposit-backed loans, over-drafts, instant loans, installments and credit cards such as Dream Card. Term, privileged, convert-ible, cumulative, child deposits, as well as megobari and meti de-posits are also extremely popular among the clients.
Small and medium-size busi-nesses and large corporations enjoy using the bank’s products designed to reflect their busi-ness needs: business loans, credit lines, current accounts, online payments, telephone and internet banking, cash delivery service, deposits, cards, guarantees. They take advantage of the bank’s in-ternational network and smoothly conduct their foreign trade opera-tions via letters of credit and guar-antees offered by the bank.
Bank Republic Societe Generale Group will continue making mod-erate and reasonable steps to-wards growth, further strengthen-ing open and mutually beneficial relationship with clients.
general information updATe:
Name of the bank: Bank Repub-lic, Group Societe Generale
Shareholders (updated): Socie-te Generale Group – Societe Ge-nerale Group – 84.04%; EBRD – 8.48%; Lasha Papashvili – 7.48%
Current Int. rating & awards: AA- by Fitch - (this is the SG HO
rating which is applicable to sub-sidiaries as well)
B ‘BB-/B’ S&P (country rating)
Number of branches: 38
Customer groups: Bank Repub-lic is leading the universal busi-ness model and offers the best banking solutions and superior quality of service to both physical and legal entities.
Latest developments:
Changes in management: In Dec 2010, new CEO – Christian Carmagnolle has been appointed in BR, substituting the former CEO – Gilbert Hie.
Received awards and participa-tion:
• The Most Stable Bank by the survey results made by In-formation Agency Georgian Business Consulting News (2008)
• Second place among competi-tors in the survey on ‘Which Bank You Trust’ conducted by the Georgian media represen-tatives (2009)
• Rewarded as ‘Bank with high Social Responsibility’ by the Golden Brand Annual Award Ceremony in March 2010, 2009 and 2008 consecutively.
New branches: In March 2012 BR opened its 38th service center near the central station in Tbilisi. It is planned to further expand branch network in 2012 both in Tbilisi and regions.
New services or products of-fered:
• Deposit MORE Public campaigns and charity:
Alongside the sponsorship ac-tivities Bank Republic is socially responsible for charity issues as well. In Georgia charity is a bit like tradition versus modernist views and efficiency. BR together with charity fund Tsiskari ex-ecutes various charity projects. Core directions of financing are to assist the needy families, or-phanages, renovation and recon-struction of churches, monaster-ies and old national heritages. Foundation provides support to well-known public figures, pro-fessors, actors, etc. in the respect of providing with various types of financial support.
Charity activities undertaken by BR and foundation Tsiskari convey Bank’s major approach to-wards the society and country as a whole.
Besides, every year, within all the subsidiaries of SG, special Citizen Commitment Week is implemented covering various solidarity projects undertaken by each subsidiary. Bank Republic every year conducts the CCW and implemented various solidarity actions such as: blood donation – by participation of staff; exhibition of masterpieces of orphans and needy children; Participation in marathons against breast cancer; support of disabled people, etc.
Bank Republic is also engaged in public campaign for supporting and popularization of talented art-ists, by exhibiting their works in Bank’s several branches through-out country.
products, services and Rates
Retail bankingDeposits“Deposit” More Usually upon opening deposit, it
is difficult to define in advance the rate of interest that will accrue to the deposit after its prolongation. If you open ‘More’ Deposit you will know in advance the rate by which the deposit interest will increase each time the deposit term is ex-tended.
“Megobari” Deposit An account with no maturity and
unlimited frequency of amount deposited or withdrawn. High in-terest is earned on untouched bal-ance during the month. Interest is also earned on variable amounts. Withdrawals possible with bank-ing card.
On-Call Deposit An account with unlimited term.
No limitations to the frequency of amount deposited or withdrawn.
Child DepositA long term, fixed maturity sav-
ings deposit, designed to save money for child’s education or any other purposes. Interest rate is fixed for the first two years of the deposit term and may vary there-on.
Term DepositTerm Deposit allows placing
funds in a fixed amount for a fixed period of time during which high fixed interest is accrued.
Privileged Term DepositPrivileged Term Deposit allows
placing funds for a fixed period of time during which high fixed interest is accrued. As a special flexibility, customer is allowed to make additional installments to the deposit
Convertible DepositA fixed term deposit which gives
an opportunity to exchange the full amount of the deposit from its original currency of denomination to a different one without losing already generated interest income. After the conversion, deposit con-tinues its existence in new cur-rency
Cumulative Deposit A fixed term deposit, which
gives customer an opportunity to accumulate funds through month-ly savings for a desired purpose.
Prism Accounts Prism accounts gives access to
all the following services:• Multicurrency Current Ac-
count;• Multicurrency Bank Card –
Visa Electron, Visa Classic, Visa Gold, Visa Platinum;
• SMS Notification;• Standing Order;• Direct Debit;
opportunity to use credit limit un-der condition of making periodic repayments. Release from interest payment if outstanding limit is re-paid within 55 days.
lease from interest payment if out-standing limit is repaid within 55 days. High credit and transaction limits.
LoansMortgage Loan A mortgage loan aimed at pur-
chase, construction or renovation of private real estate.
Auto InstallmentA loan determined for financ-
ing purchase of a brand new or a second-hand car directly from showrooms, auto centers or physi-cal person Duration up to 7 years. Annual interest rate from 0%
Consumer Finance LoanA loan aimed at acquisition of
merchandize or services at bank’s partner merchants. Available at merchant’s premises or at bank’s branches. Duration up to 2 years.
Comfort LoanA loan issued for financing cus-
tomer’s personal affairs such as: traveling, education, purchase of home furniture and fixtures, con-sumer electronics or other person-al items/purposes. Duration up to 2 years.
Payroll LoansAn unsecured loan that provides
BR payroll customers with highly flexible loan conditions. Duration up to 3 years.
Deposit Backed LoanA loan issued under guarantee
of deposit placed with the bank. Duration - up to deposit maturity. Annual interest rate + 4% to de-posit interest rate
Overdraft A short-term, maximum 1 year
non-purpose loan, which enables customer to overdraw account and to bridge a temporary lack of fi-nancial funds.
Instant Loan Instant loan up
to GEL 5,000 just in 1 hourEspresso Loan Quick cash just in 1 day without
providing any collateral. Clients income must be registered in any bank.
Remote Banking
Internet BankingTelephone BankingPayments:Utility and other payments
through various channels• Online• ATM • Direct Debit• Bank counter
Call Center:24 hour service, Inbound and
outbound calls, consultation on banking products and services, ac-count information, banking cards help desk
Interactive Voice Response (IVR):
Allow customers to perform the following operations via telephone: balance inquiry, exchange rates inquiry, reaching a specially des-ignated operator for card blocking
foundation Bank Republic has been successfully cooperating with companies working in dif-ferent business sectors. Produc-tive and mutually beneficial coop-eration with our clients is directly related to the growing quality of services and introduction of western banking practices. Bank Republic offers following prod-ucts and services to its corporate clients:
Current Accounts
BR Current Accounts enable cli-ent companies to carry out banking operations (in different currencies), including local transactions and in-ternational transfer of cash to any country.
Bank Republic offers you sale/purchase operations. Government Securities are medium term secu-rities issued in national currency by the Georgian Government. Government Securities are of high liquidity and benefit.
Remote Banking
• On-Line Banking Service “Bank-Client”
• The Bank-Client program is modern software system through which you can carry out banking operations and control and manage your own accounts without visiting the Bank.
HEADLINE NEWS & ANALYSIS26 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banks
HEADLINE NEWS & ANALYSIS 27FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
best georgian banksbalance sheetIn thousands of GEL 31 december
201131 december
2010
assetsCash and cash equivalents 374,153 275,425Due from other banks 291,009 74,736Loans and advances to customers 2,008,745 1,380,955Investment securities available for sale 266,436 216,323Investment securities held to maturity 28,956 28,986Investments in finance leases 21,979 9,681Investment properties 27,082 27,742Current income tax prepayment - 2,500Goodwill 2,726 1,262Intangible assets 10,064 3,560Premises and equipment 163,879 144,429Other financial assets 11,339 5,930Other assets 93,653 93,137Assets of disposal group classified as held for sale - 3,115totaL assets 3,300,021 2,267,781
LiabiLities
Due to other banks 110,378 47,762Customer accounts 1,999,256 1,365,352Other borrowed funds 517,772 280,906Current income tax liability 14,162 -Deferred income tax liability 8,048 7,294Provisions for liabilities and charges 8,434 6,881Other financial liabilities 11,305 3,932Other liabilities 19,405 19,681Subordinated debt 142,480 158,401Liabilities of disposal group classified as held for sale - 300totaL LiabiLities 2,831,240 1,890,509
eQUitYShare capital 15,171 15,113Share premium 203,308 201,723Retained earnings 201,826 123,423Share based payment reserve 6,180 -Other reserves 33,162 31,813net assets attributable to the bank’s equity holders 459,647 372,072non-controlling interest 9,134 5,200totaL eQUitY 468,781 377,272
totaL LiabiLities and eQUitY 3,300,021 2,267,781
Income statementIn thousands of GEL 2011 2010
Interest income 360,215 271,805Interest expense (151,134) (108,991)
net interest income 209,081 162,814Provision for loan impairment (16,049) (31,320)
net interest income after provision for loan impairment 193,032 131,494Fee and commission income 43,802 30,659Fee and commission expense (15,094) (11,605)Gains less losses from trading in foreign currencies 25,419 22,803Net (losses less gains) / gains less losses from derivative financial
instruments (4,987) (300)
Foreign exchange translation gains less losses/(losses less gains) 394 (664)Losses on initial recognition of assets at rates below market - -Recovery of impairment / (impairment) of investment securities
available for sale 116 (173)
(Losses less gains) / gains less losses from disposal of investment securities available for sale - (166)
(Provision) / recovery of provision for liabilities, charges and credit related commitments (1,553) (3,092)
Recovery of provision / (provision) for impairment of investments in finance lease 174 (900)
(Provision) / recovery of provision for impairment of other financial assets (397) (713)
Recovery of impairment / (impairment) for assets classified as held for sale 1,519 (1,519)
Other operating income 9,923 8,972Staff costs (78,426) (57,146)Depreciation and amortisation (15,088) (14,162)Administrative and other operating expenses (51,744) (47,276)
Profit before tax 107,090 56,212Income tax expense (15,465) (6,777)
Profit for the year 91,625 49,435
other comprehensive income:Available-for-sale investments:- Revaluation 1,277 (286)- Reclassification adjustments for gains less losses included in profit
or loss - -
Revaluation of premises and equipment 1,311 -Exchange differences on translation to presentation currency (904) 1,062Income tax recorded directly in other comprehensive income (335) 41
other comprehensive income for the year 1,349 817
totaL CoMPrehensive inCoMe For the Year 92,974 50,252
Profit is attributable to:- Owners of the Bank 90,898 49,374- Non-controlling interest 727 61
Profit for the year 91,625 49,435
total comprehensive income is attributable to:- Owners of the Bank 92,247 50,191- Non-controlling interest 727 61total comprehensive income for the year 92,974 50,252Earnings per share for profit attributable to the owners of the Bank- Basic earnings per share 600.6 329.0- Diluted earnings per share 598.5 329.0
TBC BankW
e are a leading Bank in Georgia, offering a broad range of prod-
ucts through our extensively developed retail, corporate, SME and Micro banking busi-ness lines, with a wide pres-ence within Georgia and an expanding network in the re-gion.
Established in 1992, we became one the largest finan-cial institutions and strongest Georgian brands within a de-cade. As TBC Bank celebrates its 20th anniversary this year, it continues to expand and achieve new milestones.
In 2011, we further in-creased profitability and experienced considerable growth. Total assets grew by 45.5%, increasing our mar-ket share to 25.4%. Similarly, total loans and total deposits grew by 40.0% and 46.4% respectively, increasing our market share of total loans to 26.1% and of total deposits to 29.2%. We have maintained and strengthened our posi-tion as the leading Georgian bank in retail deposits with 34.2% of the market share.
With the acquisition of Bank Constanta in May 2011, we acquired the expertise and resources to become a leading bank in the lucrative micro-finance segment.
We continue to expand our presence throughout Georgia, creating opportunities and providing financial services for new communities and businesses to grow. Our suc-cess has helped fuel the over-all growth of the Georgian economy.
Prominent international financial institutions: EBRD, IFC, DEG and FMO, , joint-ly hold the majority of TBC Bank’s shares.
The TbC Mission statement:
We create new opportuni-ties for the success of people and businesses.
Our aspiration is to contin-ue sustainable growth while remaining committed to our social and environmental responsibilities. We aim to become the finest financial institution in the region and, in turn, promote the interna-tional image of Georgia, and the Caucasus as a whole.
our vision: Through the best employ-
ees, strong branding and su-perior customer experience provided via innovative, mul-tichannel facilities we will:
• have the largest franchise of medium and high-income retail and SME business segments;
• be the core bank for large corporate businesses;
• be the leader in micro-finance
• be the leader in the non-resident deposits seg-ment;
• be the bank of regional importance.
Awards of 2011TBC Bank acquired 80
percent of the assets of Bank Constanta, an established bank in the micro-finance market, enabling TBC Bank to successfully penetrate the micro-finance market.
International Rating Agen-cy Moody’s upgraded the TBC Bank long-term deposit rat-ing in foreign currency by 2
notches – from B3 to B1 and assessed the bank’s financial position as “Stable”.
The international rating agency FitchRatings upgrad-ed the viability rating of TBC Bank from B- to B+.
The Banker, magazine of the Financial Times Group named TBC Bank as the best bank of the year in Georgia for the sixth time.
Deutsche Bank and COM-MERZBANK named TBC Bank best bank in Georgia for its high quality currency transfers.
The largest European fi-nancial magazine Euromoney named TBC Bank “Favourite Bank 2011” and awarded it the title “Best bank in Geor-gia”.
Customer groups: We are a leading Bank in
Georgia, offering a broad range of products through our extensively developed retail (TBC Status and TBC VIP), corporate, SME and Micro banking business lines, with a wide presence within Georgia (51 branches including ser-vice-centers) and an expand-ing network in the region.
shareholdersTwo Founder Shareholders 27.6% European Bank for Reconstruction and Development (EBRD)
20.0%
International Financial Corporation (IFC) 20.0%
Deutsche Investitions-und Entwicklungsgesellschaft (DEG)
11.4%
JP Morgan 5.4% Ashmore 4.6% Netherlands Development Finance Company (FMO) 3.3%
Management and others 7.8%
Retail bankingWe are a leader in Georgia’s
retail banking market, with the largest market share in retail deposits of 34.2 and a 24.1% market share in retail loans. Our success in retail banking can largely be at-tributed to our strong brand name and our ongoing dedi-cation to provide the best customer experience through our extensive branch network and electronic channels. In 2011, we achieved significant growth in retail deposits and retail loans of 27.6% and 38.7% respectively.
Corporate banking
Corporate banking is our core business line. We have strong expertise in all indus-tries and provide tailored fi-nancial solutions for our cli-ents. The legal entity deposit and loan market in Georgia is comprised of a Bank’s Cor-porate and SME portfolio combined. In the past year, our legal entity deposits grew by 85.5% and our legal en-tity loans grew by 23.7%. TBC Bank has a 24.9% share of the legal entity deposit mar-ket and a 27.5% share of the loan market.
sMe bankingWe provide effective finan-
cial solutions and a broad range of products for our SME clients. The SME sector has huge growth potential and we view it is as key for Georgia’s future economic develop-ment. In 2011, we achieved
a loan portfolio growth of 53.5% and a deposit portfolio growth of 46.5%.
Micro-bank Constanta
In May 2011, we acquired Bank Constanta, one of the leading players in the micro-finance sector with a coun-trywide network of branches and a steadily growing client base. During the past year the Bank Constanta portfolio grew by 72.1%. The micro-finance sector offers high growth potential and attrac-tive profitability; both are extremely important tous given the increased competi-tion in the Georgian banking sector.
Number of branches:
We opened 5 new branch-es in 2011 (Tbilisi, Poti, Rustavi-2, Kutaisi), increas-ing its ATM network.
subsidiaries
TbC kreditIn 2007, we acquired a
75.0% equity interest in TBC Kredit, formerly SOA Kredit – a rapidly growing non-banking credit organization which has been operating in Azerbaijan’s MSME market since 1999. TBC Kredit has extensive experience in deal-ing with MSME finance, as well as consumer loans and mortgage loans. It has be-come one of the key MSME lenders in Azerbaijan with a total loan portfolio of USD 27.6 million as of 31 Decem-ber 2011. In 2011, micro and SME lending accounted for 42.5% of TBC Kredit’s loan portfolio, while consumer and mortgage loans account-ed for 30.8% and 25.1% re-spectively. TBC Kredit plans to obtain a full banking li-cense within the next 2 years, either directly or through the acquisition of a small bank in Azerbaijan.
TbC Invest TBC Invest is a fully owned
subsidiary of TBC Bank JSC, operating in Israel as an in-termediary between potential clients and our bank. In 2011, c. 147 customers opened ac-counts through TBC Invest. Our mission is to attract for-eign customers and increase total deposits. As part of our expansion plans for the future TBC is presently considering establishing similar subsid-iaries in other countries.
TbC Leasing In January 2004 TBC
Leasing JSC was founded by TBC Bank and immediately began operations. In 2005, EBRD purchased TBC Leas-ing’s newly issued stock, ac-counting for 9.94% of its total shares. TBC Leasing is one of the leading companies in this sector, with a 62% mar-ket share. While SME enter-prises are the main target, TBC Leasing offers a variety of leasing products tailored to company size, as well as to industry-specific require-ments, thus providing flex-ibility and a high quality of service.
HEADLINE NEWS & ANALYSIS28 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banksBanks Being Risk Averse Towards SMEs in Georgia
the FinanCiaL\by KoKa KaLandadze
At a time when over 80% of Georgia’s population is em-ployed by the SME sector, provision of adequate financ-
ing still remains a big headache for the majority of those enterprises.
According to USAID EPI research, SME owners/managers and other in-dustry experts identified the following areas that represent barriers or ob-stacles to SMEs obtaining banking and non-banking credit. They include:
• Limited supply of alternatives to commercial bank loans
• Limited supply of capital market instruments, such as private equity funds
• Venture capital is not a developed sector in Georgia
• The Angel Investor sector is not developed
• High interest rates and excessive collateral requirements for loans, insurance and leasing services
• A Government Guarantee Scheme does not exist
Experts agree that getting finance from banks for start-ups in Georgia is almost impossible.
However they claim that key areas existing SMEs have to work on in order to get loans is to improve book-keeping methods, other financial information and also introduce comprehensive planning.
“There is a huge competition among banks to offer the best services and rates to existing clients,” George Si-mongulashvili, partner at consulting firm GEC Corp, told The FINANCIAL.
“When it comes to new clients banks are risk averse and they look at all the details such as how long the company has been on the market for, their cash flow, comprehensive analysis of finan-cial statements and even inquiry of the owners of the company (in case of Lim-
ited Liability organizations),” he said.“Financial advisory consulting is
sorely needed in SMEs as most of them don’t have adequate financial infor-mation at hand and banks themselves have to spend time investigating their account balances. Therefore we help those companies to collect all such nec-essary information, structure it and get them ready for taking out a loan from the bank. Even after the loan is dis-bursed, we run monitoring of the loan until it matures. There are often cases of a company paying interest for a loan it has taken from the bank while there are problems within the organization which banks can’t see even when the interest is being paid on time. For example it’s often the case when at the time of inter-est payment, the company takes inter-est payable from other areas/resources of business thus putting its future de-velopment plans at risk,” noted Simon-gulashvili.
“Encouraging entrepreneurial spirit is a very important point in Georgia,” said Kakha Kokhreidze, the author of the draft law on small business, Am-Cham SME Committee Chairman, as well as Vice President of the Georgian Small and Medium Size Enterprises As-sociation.
“We see great potential in people. We believe that vision, commitment and hard work guarantees success. Many things depend on the managers. They must create an environment where people will be able to devise products and/or services that are interesting for customers. Be innovative, different, pay attention to details, create good teams and empower them to be actively in-volved in decision-making. This means that firms need to be customer and employee oriented at the same time. It is also necessary to have a good plan, which is the foundation for getting a loan. Creating a comprehensive plan is not an easy process. Therefore invest-ing in research and at the same time in people is always profitable,” he said.
HEADLINE NEWS & ANALYSIS 29FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
stock market
Last week Bank of Georgia Holding Plc. (BGEO LN) share price increased 2% to
GBP 10.525. During the week around 820,000 shares were traded in the range of GBP 10.20-10.525. As for the debt world, both Georgian Railway (GRAIL) and Georgian Sov-ereign (GEORG) Eurobond prices were up by around 58bps to 107.785 (YTD 7.18%) and 44bps to 105.834 (YTD 6.03%), respectively.
U.S. stocks headed lower Thursday but bounced back later in the day to finish at nearly breakeven. The week of disappointing economic re-ports, which includes jobless claims that fell below expecta-tions, sparked concerns among investors. Worries over China slowdown have also added pressure on world markets. The S&P 500 and the Nas-daq finished in the red for the third consecutive day, as the Dow snapped a two-day los-ing streak. All three major U.S. stock indexes, however, rose more than 10% in 2012. Most major financial stocks, includ-ing Bank of America, JPMor-gan Chase, Citigroup, Morgan Stanley and Goldman Sachs dropped more than 1% Thurs-day. The Dow Jones industrial average climbed 0.50% during the week. The S&P 500 and the Nasdaq composite rose 0.44% and 0.89% w/w, respectively. European stocks closed down and suffered losses over the week. Britain’s FTSE 100 was down 1.93% w/w, the DAX in Germany dipped 1.72% w/w and France’s CAC 40 slipped 2.73% w/w.
top International
newsU.S. economic growth in
4Q confirmed at 3%The U.S. Commerce De-
partment has confirmed that the gross domestic product increased at a 3% annual rate
in the last three months of 2011, the quickest pace since 2Q10. The first estimate stood at 2.8%, which was later re-vised up to 3%. This was the third and unrevised estimate of GDP. Weaker export growth than expected was offset by stronger growth in business investment. However, experts expect the economy growth to slow in 1Q12 as businesses cut back on inventories.
Apple supports reform for Foxconn employees
The U.S. Fair Labor Associa-tion (FLA) was asked by Apple to investigate working condi-tions at its major supplier Fox-conn, after growing criticism about long hours and poor safety. The inspection revealed that employees at the manu-facturing giant worked an average of over 60 hours per week and at times, more than 11 days in a row. Hours after Apple CEO Tim Cook, toured the manufacturing plant, the FLA said it has secured agree-ments to improve working hours, pay, and health and safety protections. Foxconn has over 1.2mn workers in China to produce products for Apple as well as other compa-nies, including Microsoft and Hewlett-Packard.
Eurozone firewall in place soon
Austrian Finance Minister Maria Fekter said the euro-zone finance ministers have agreed to increase the bloc’s debt crisis firewall to around EUR 800bn. The amount comprises the EUR 500bn permanent rescue fund as well as bailouts already in place for Ireland, Portugal, and Greece’s second rescue package. After a lengthy discussion in Copen-hagen, where the EU finance ministers met primarily to dis-cuss the amount of the bailout fund, the 17 eurozone member countries agreed on the lowest common denominator encour-aged by countries including Germany, Finland and the Netherlands.
Capital Markets Watch
capital market watch exclusively provided to the financial by bG capitalcontacts:You can find more information regarding investment opportunities in BG Capital and Bank of Georgia Wealth Management brand new product – Top Investment Ideas. The product offers insight into hot stocks and provides a brief description and general market expectations for 11 international, 4 Georgian, and 4 Ukrainian companies.
capital market watch exclusively provided to the financial by bG capital
By Giorgi shengelia
Oil rose above US$ 123 a barrel on Friday following three consecutive losing sessions, supported by a weaker dollar and expectations of shrinking gasoline supplies in the U.S., the world’s largest oil consumer.
Commodities and FXOil Gold US$/EUR interbank rate
Gold prices were up on Friday as the dollar fell to its lowest in a month against a basket of currencies, with the euro firming vs. the dollar after finance min-isters agreed to increase the size of their sovereign debt firewall to EUR 800bn.
The euro rose vs. the dollar on Friday, heading for its biggest quarterly gain in a year, following the news that eurozone finance ministers have agreed to boost the euro zone’s firewall to around EUR 800bn.
Top bank’s recommendationsANR Target Price Recommendation Consesus
RatingBarclays Capital 69 overwt/positive BUY 12 57,1%Citi 68 neutral HOLD 8 38,1%Deutsche Bank 70 buy SELL 1 4,8%Goldman Sachs 65 neutral/attractiveCredit Suisse #N/A Average Target Price 68,8
Source: Bloomberg
Source: GSE
Georgia (BGC GSE Index, GEL)
Company Ticker Mcap, GEL mn
Last traded Bid Ask
Closing price, GEL
Vol. GEL Chg. (1w,%)
Chg. (YTD,%) 52w High 52w Low
Bank of Georgia GEB 712,0 14-Mar-12 na na 19,500 - 0,0% 2,6% 32,500 18,500Liberty Bank BANK 58,8 30-Mar-12 na na 0,017 2 935 0,0% -15,0% 0,031 0,014VTB Bank Georgia UGB 11,6 4-Aug-10 0,100 na 0,200 - 0,0% 0,0% 0,000 0,000Teliani Valley WINE 1,9 22-Feb-12 0,100 0,200 0,150 - 0,0% 0,0% 0,200 0,100Caucasus Energy & Infr. NRGY 97,4 12-Mar-12 na na 1,200 - 0,0% -14,3% 1,400 1,000United Telecom of Georgia UTC 16,9 5-Mar-12 na na 0,170 - 0,0% 0,0% 0,170 0,145Telasi AEST 103,2 23-Apr-10 0,500 na 1,000 - 0,0% 0,0% 0,000 0,000
top InvestMent Idea: pepsIcoCompany descriptionPepsiCo, Inc. is a global food, snack and beverage company. The Company’s portfo-
lio includes oat, rice and grain-based snacks, as well as carbonated and non-carbon-ated beverages, in over 200 countries. Its operations are in the U.S., Canada, Mexico and the U.K. It is organized into three business units: PepsiCo Americas Foods (PAF), which includes Frito-Lay North America (FLNA), Quaker Foods North America (QFNA) and all of its Latin American food and snack businesses (LAF); PepsiCo Americas Beverages (PAB), which includes PepsiCo Beverages North America and all of its Latin American beverage businesses, and PepsiCo International (PI), which includes all PepsiCo businesses in Europe, Asia, Middle East and Africa (AMEA).
Analysts’ viewExperts take positive outlook on PepsiCo due to its growth potential and the chang-
es the company has already started to make to fully integrate its business going for-ward. The world’s largest snack-food maker has been investing aggressively in un-tapped, developing markets, including Brazil and India and recently announced its entry into the U.S. dairy market, in partnership with a German firm. Moreover, ana-lysts welcomed PepsiCo’s recent announcement regarding a new global structure and strengthened management team. With Pepsi’s history of raising dividend consistent-ly, experts view an increase coming in June 2012 to up to 55 cents per share.
Recent newsPepsiCo reported 4Q and FY11 results. The company’s worldwide snacks volume
grew 8% in the quarter and the full year. Worldwide beverage volume grew 3% in the quarter and 5% for the full year. The company showed 11% net revenue increase in the quarter to US$ 20.2bn. Full-year net revenue rose 15% to US$ 66.5bn. Excluding items, PepsiCo’s EPS grew 9% to US$ 1.15 in the quarter and full-year core EPS grew 7% to US$ 4.40. The Board of Directors of PepsiCo declared a quarterly dividend of US$ 0.515 per share, reflecting a 7% increase y/y, payable March 30, 2012, to share-holders of record on March 2, 2012. Separately, the company announced strategic plans for growth, including initiatives to boost advertising and marketing, reduce its workforce by roughly 8,700 positions, and increase returns to shareholders in the form of higher dividends and share repurchases in 2012.
HEADLINE NEWS & ANALYSIS30 FINANCIAL2 April, 2012 | finchAnnel.com
C M Y K
best georgian banksTop 10 Ways Georgian
Banks Can Grow in 2012D
uring recent years, con-sumers and businesses alike have been in sur-vival mode. Many in-
dustries, including banking, have cut costs to weather the recession. However, austerity alone will not lead to long-term growth.
Even in the midst of current in-dustry challenges, banks can take simple steps to grow in the year ahead. With the squeeze in interest margins, decrease in lending op-portunities and increase in capital-level requirements, bankers need to focus more clearly on where to de-ploy capital for the greatest return.
Grant Thornton suggests 10 ways banks can grow in 2012.
1. FoCus sTRATegIC pLAN oN gRoWTh
Now that many companies are shifting from survival mode to seizing opportunities in an im-proving economy, banks should develop and modify their 2012 stra-tegic plans with a renewed focus on growth objectives. Banks need to find new sources of revenue to suc-ceed going forward.
2. exAMINe AN ACquIsITIoN
Many of the fee-generating activi-ties that have added incrementally to the industry’s profitability are now being restricted. Weaker financial in-stitutions are deciding whether they can shoulder the challenges alone, presenting a potential M&A opportu-nity for their healthier competitors. M&A activity continues to be under-whelming, due in part to the contin-ued uncertainty in the economic en-vironment overall and sellers holding out for a recovery in pricing. Howev-er, there is capital available, includ-ing capital from private equity firms.
3. IMpLeMeNT sMART TAx sTRATegIes ANd sTRuCTuRes
The bank’s transfer pricing poli-cy, if applicable, should be reviewed (new rules have been finalized) to see if business changes have creat-ed opportunities to adjust policies.
4. deveLop NeW seRvICe oFFeRINgs
Banks can no longer rely on old methods of making profits. Devel-oping new services and maximizing the reach of existing services are es-sential.
5. MAke TeChNoLogy WoRk FoR you ANd youR CusToMeRs
In an effort to curb costs, some banks cut back on their IT expendi-tures, but this may have put them at a competitive disadvantage. The advent of online banking and the prolific use of apps have revolu-tionized how banks operate day-to-day and how they interact with their customers.
6. seNd The RIghT MessAge WITh soCIAL MedIA
Social media is a powerful com-munications vehicle with interna-tional reach. According to a recent survey more than 50% of respon-dents see corporate use of social media increasing significantly over the next 12 months. Yet more than 75% of respondent companies do not have a clearly defined social media policy.
Is your bank using social media wisely? For instance, Bank of Amer-ica has Twitter handles for custom-er service and career opportunities. JPMorgan Chase uses Facebook for its Community Giving Program, in which participants can vote for lo-cal organizations to receive grants. Social media provides the opportu-nity for banks to demonstrate their commitment to corporate social re-sponsibility and help regain confi-dence from their customers and the public after being largely maligned during the recession.
7. ReAdy youR bANk FoR RIsk
Risk management is already a part of most banks’ everyday busi-ness. Yet with constantly emerging and changing risks, how do you know your institution is prepared? Does the bank have a chief risk of-ficer? Is the board actively involved in discussions regarding risk? En-terprise risk management (ERM) is an approach to assessing and ad-dressing the full risk profile of the bank, including key strategic risks such as operational, financial, regu-
latory, credit and market risks.
8. uNdeRsTANd ReguLATIoNs
New regulations are constantly emerging. Banks cannot afford to get compliance wrong. However, regulation does not have to be a barrier to growth.
9. pLAN FoR The WoRsT-CAse sCeNARIo: sTRess-TesTINg
Does your bank have an answer for “What if?” Stress tests evaluate the extent of losses a bank would sustain in its major asset catego-ries under a troubled economic scenario, along with the impact those losses would have on the bank’s revenue and capital ad-equacy.
10. buILd A sTRoNgeR FouNdATIoN FoR MoRTgAge LeNdINg
There are major reforms in mortgage-servicing operations to address problems in the pro-cessing of foreclosures and loan modifications, as well as failures in governance. Banks are required to correct deficiencies in their resi-dential mortgage loan-servicing and foreclosure practices. Banks must balance mortgage reform compliance with re-growing this area of their business. If prop-erly managed, a new or expanded mortgage banking effort could be very profitable.
The boTToM LINe
Although the regulatory and eco-nomic environments present chal-lenges for the banking industry, opportunities for growth are avail-able for institutions with the strat-egy and risk management to pursue them in 2012 and beyond.
shARe oF usd IN FoReIgN CuRReNCy ReAChed 74,4 %, euR – 21,2 %
Total volume of the non-bank depos-its in the country’s banking sector increased by 1.0 percent or 66.9 million GEL compared with the
February 1, 2012, and exceeded 6.8 billion GEL by March 1, 2012. In February, 2012, compared to the previous month, the vol-ume of demand deposits increased by 56.6 million GEL (1.7 percent) and term deposits increased by 10.3 million GEL (0.3 percent).
The dollarization ratio of the total non-bank deposits constituted 58.9 percent by March 1, 2012. It decreased by 0.1 percent-age points compared to February 1, 2012.
The annual average weighted interest rate on term deposits constituted 9.2 per-cent. In particular, the interest rate for national currency denominated deposits was 12.2 percent and the interest rate for foreign currency denominated deposits 8.5 percent.
The share of US dollar in the total volume of foreign currency denominated deposits equals to 74.4 percent and the share of Euro equals to 21.2 percent.
The NeT pRoFIT oF bANkINg seCToR FoR 2012 Feb Is 12.3 MILLIoN geL
As March 1, 2012, the banking sector in Georgia is represented by 19 commercial banks, includ-ing 16 foreign-controlled banks
and two branches of non-resident banks. Compared with the previous month, total assets of Georgian commercial banks (in current prices) increased by 9.8 million GEL (by 0.1 percent) and constituted 12.7 billion GEL. The banking sector’s own funds (equity capital) equal to 2.2 billion GEL, which makes up 17.4 percent of com-mercial banks’ total assets.
The share of foreign capital in banks’ total paid-in capital constituted to 77.3 percent.
In February 2012, the banking sector finished with profit. The net profit consti-tuted 12.3 million GEL.
The share of five banks having the larg-est assets within the total amount of the banking sector assets constituted 80.8 percent.
CuRReNT CoNdITIoN oF CoMMeRCIAL bANks’ LoAN poRTFoLIo
The volume of lending by com-mercial banks (including loans to non-residents) in February, 2012, compared to the previous
month, increased by 27.2 million GEL (0.4 percent) and reached 7.7 billion GEL by March 1, 2012. The volume of loans pro-vided in the national currency increased by 41.1 million GEL (1.7 percent) and the volume of loans in a foreign currency de-creased by 13.9 million GEL (0.3 percent).
By the end of February 2012, commer-cial banks issued to resident legal enti-ties 830.8 million GEL worth of national currency-denominated loans (5.5 percent or 43.6 million GEL more compared to the previous month) and 3.4 billion GEL worth of loans in a foreign currency (0.8 percent or 28.6 million GEL less, respec-tively).
Out of the total volume of lending to legal entities, the biggest share falls on trade – 46.4 percent. Compared with the previous month, in February, 2012 the vol-ume of loans provided for trade decreased by 12.6 percent or 280.3 million GEL and constituted 1.9 billion GEL.
Share of loans provided to the industrial sector constituted 21.0 percent of all loans to legal entities and amounted to 880.1 million GEL by March 1, 2012 (21.9 per-cent or 158.4 million GEL more compared to the previous month). 10.1 percent fall on construction, amounting to 425.3 mil-lion GEL (9.0 percent or 35.2 million GEL more, respectively). Therefore, 77.5 per-cent of the total volume of lending to the legal entities falls only on three sectors – industry, construction and trade.
The volume of lending to resident indi-viduals increased by 1.9 percent or 60.2 million GEL, during the February 2012, and reached 3.2 billion GEL by March 1, 2012.
Grant Thornton survey reveals Chief Audit Executives most worried about cybersecurity risks
the FinanCiaL
Chief Audit Executives (CAEs) ranked cybersecu-rity as their #1 concern in emerging risks, according
to a new survey by Grant Thornton LLP. Mobile technology was their second biggest concern, followed by business interruption and social media. While more than half (56%) of CAEs report that their organiza-tion had 10 or less cybersecurity in-cidents in the last 12 months, nearly a third (31%) said that they did not
know how many incidents their company had.
“Not surprisingly, emerging risks are on the minds of CAEs,” said Warren Stippich, a Chicago-based partner and Grant Thorn-ton’s national Governance, Risk and Compliance solution leader. “With cybersecurity threats be-coming ever more common, inter-nal audit needs to make evaluating data security a key part of the audit plan.”
Within the realm of cybersecu-rity, an overwhelming majority of CAEs (81%) are most concerned
about the privacy of employee and customer data; nearly two-thirds (63%) are concerned about mobile computing; and 55% with cloud or internet-based solutions. Most CAEs (42%) see the greatest cyber-security threat coming from exter-nal sources (such as hackers); 38% view internal sources (employees) as the biggest threat.
Other survey findings include:76% of CAEs conducting fraud
investigations, with internal audit leading more than 36% of fraud in-vestigations
42% of respondents have a por-
tion of their internal audit scope conducted outside the U.S., with 51% relying on domestic internal audit professionals to perform at least half of the international work; and 44% have no internal audit efforts in BRIC countries (Brazil, Russia, India and China)
56% of CAEs view internal au-dit as a grooming place for future leadership roles elsewhere in their organizations and 40% see their next career step being an executive management position within their company or another organization
HEADLINE NEWS & ANALYSIS 31FINANCIALfinchAnnel.com | 2 April, 2012
C M Y K
Georgian banking sector continues to improve. As of the end of Q3 2011 there were 19 banks operating with a market capitalization (by total as-sets) of $7.2 billion. Bank of Georgia (BOG) accounts for nearly 35%, fol-lowed by TBC Bank with nearly 25%. The remaining 40% is shared among 17 banks, with the. leading positions held by ProCredit Bank (7%), Liberty Bank and Bank Republic with close to 6% each and Cartu Bank with a little over 4%. The smallest 10 banks ac-count for only 7.35% of the total.
The year end results of all of the banks are still outstanding but the 31 December 2011 financial reports will show that TBC Bank acquired Bank Constanta and Bank Republic acquired the retail loan portfolio of HSBC, the latter closing in early 2012.
Are Loan portfolios diversified?
The total amount of loans issued during 2011 was $3.69 billion (2010: $2.95 billion). As can be seen in the chart below, the outstanding loan portfolio is well diversified. The larg-est sectors are Trade - 28.05% (2010: 31.41%) and Mortgages - 18.83% (2010: 17.64%); worth $1.25 billion (2010: $1.0 billion) and $0.8 billion (2010: $0.6 billion) respectively.
highlights of the year
Note: The analyses are based on unaudited figures as at and for the years ended 2010 and 2011 (unless noted otherwise)
Bank of Georgia maintains stable growth; its total assets increased by $534 million (24%) and reached $2.7 billion. Net profit increased by $32 million (65%) to $80 million, primarily driven by an in-crease in net interest income of approxi-
mately $45 million (47%).TBC Bank also improved their net
profit from $28 million to $55 million on total assets of $2.0 billion (2010: 1.3 bil-lion).
The growth of ProCredit Bank’s total assets slowed increasing only 3% from Q4 2010 to Q3 2011, whereas 2009 to 2010 saw a 14% increase from 2009 to 2010.
Liberty Bank continued its impressive record by increasing total assets by $140 million (a 47% increase).
Bank Republic reported a $17 million loss in 2010 but improved their perfor-mance by minimizing losses to $5.3 mil-lion in 2011.
The market dominance of the five larg-est banks may lead to consolidation in the sector either as the big 5 try to acquire a greater market share through acquisition, or as some of the smaller banks try to seek economies of scale and merge with other smaller banks. Regardless, we expect to see more activity in the banking sector in 2012.
What can customers expect from georgian banks?
Investors/saversToday Georgian banks offer a wide
range of products to customers. They are innovative in terms of new prod-uct development and are trying to be in line with global trends in the industry. For investors, deposit rates still remain high, e.g. term deposits range from 11% to 12 % in GEL, and from 6.65% to 8% in foreign curren-cies; child deposits range from 13% to 16 % in GEL and from 7% to 9% in foreign currencies; other products such as savings accounts, investment deposits, etc. also exist with high rates for those willing to shop around.
BorrowersFor borrowers the main interest
rates offered to retail customers for
loans differ according to their pur-pose, for instance the interest rate for a mortgage is approximately 12%; on consumer loans from 16% to 18%; on student loans from 15% to 19%, and for auto loans from 0% to 20%.
Georgian banks offer various kinds of debit and credit cards to their cus-tomers: visa (electron, classic, gold, platinum), maestro/cirrus and Ameri-can Express, which help Georgian cus-tomers, manage both local and inter-national monetary transactions easily.
In terms of wholesale banking, the banks have special terms for deposits and loans for corporate clients de-pendant on the individual or specific agreements between the parties.
In addition to the current 19 li-censed banks, there is also competi-tion in the loan market from micro-finance organizations (MFOs) who have generally seen a significant in-crease in their loan portfolios over the past few years.
Marketing and InnovationThere has been an increase in in-
vestments in integrated marketing communication tools in order to send messages to actual and potential cli-ents. This aggressive marketing sup-ports the development of the banking system as a whole since information about innovations in the banking sec-tor is distributed to the public quickly and regularly.
In addition Georgian banks are widely using social media tools in order to promote their activities and products. These resources are efficient and inexpensive and as a result of the growing global popularity of social media, the banks are efficiently using facebook, twitter, Youtube, LinkedIn, etc. to approach a wide range of po-tential customers. With the popularity of social media, banks are able to cre-ate a loyal customer base for the fu-ture by inventing different games and competitions on social media sites.
Georgian banks have a vast geo-graphical coverage, offering their ser-vices throughout the country’s main regions, to make banking services at-
tractive for the population and serve the sustainable development of in-dustry.
The banks support employee train-ing and development so that they are able to serve their customers better. While there is a Georgian Banking Training Center in Tbilisi, many of the major banks have their own training centers.
As for technology, most banks of-fer remote banking channels to their customers, such as internet banking, mobile banking, telephone banking, online consultancy, online payments, etc. However these services are not yet developed sufficiently and many customers are more or less illiterate in terms of the efficient usage of these resources; therefore there is an op-portunity for the banks to invest in the use of these resources and increase customers’ awareness. All these steps could lead the banks to operational costs savings, a better quality of ser-vice and therefore increased profits across the entire sector.
Competition from non-traditional players, for example Mobi-Pay, who are seeking to challenge the way people doing their banking (with no branch network and lower costs), should not be overlooked.
International Investors and Regulatory environment
Within the last ten years, inter-national financial institutions, such as EBRD (European Bank for Re-construction and Development), the World Bank, IFC (International Fi-nancial Corporation), EIB (European Investment Bank), KFW (German development bank), FMO (Dutch development bank) and others, have made significant investments in the Georgian banking industry. The par-ticipation of these organizations in
the banking sector has been reflected in the advanced corporate governance and the transparency of the sector.
Today Georgia is represented by a two-tier banking system; one com-prised of the National Bank of Geor-gia (“NBG”) and the other by com-mercial banks. The only permitted legal status of a bank is a joint stock company. Capital requirements for commercial banks are in line with the standards of the Basel Committee on Banking Supervision and correspond-ing EU directives. The level of mini-mum capital for commercial banks is set by the NBG at GEL12 million for newly founded commercial banks and branches of a foreign bank. It should be noted that Georgia does not im-pose any restrictions on the inflow or outflow of capital.
A brighter 2012?2012 is well underway and accord-
ing to the latest NBG statistics, the growth of banking assets decreased in January of 2012 by 0.05%. FDI is increasing, GDP growth looks strong and there are signs of recovery, albeit patchy and tentative, in some parts of the global economy, so all the indica-tors seem to point to a positive 2012.
Also the fact that Bank of Georgia successfully upgraded to a premium listing on the London Stock Exchange (LSE) enabling 35 million of its shares to start trading may herald the start of the largest Georgian banks seeking to tap international capital and reduce their costs of borrowing, which may be passed on to the customer. The Bank of Georgia listing can be seen as a positive development for the whole banking industry in the region and will serve to further develop the sec-tor. Other large banks may follow this example to go for IPOs in the coming year, but this is partly dependant on the ability of these banks to have a compelling equity growth/story to tell.
All in all we should be in for an in-teresting 2012!!
Continued from p. 2
Other Georgian banks to follow Bank of Georgia’s IPO path?
