The FINANCIAL -- Q. How do you assess the financial results of Georgian banks for the 1Q of 2017?
A. As of the 1st of April, 2017, the banking sector’s own funds totalled GEL 4.3 billion, which is 14.5% of the banking sector’s total assets.
If we compare to the previous month, in March Georgian commercial banks’ total assets (in current rate) increased by GEL 0.4 billion (1.5%). It amounted to GEL 29.8 billion.
Commercial banks’ volume of credit investment totalled GEL18.4 billion as of the 1st of April, 2017.
It’s remarkable that currency rates have such an influence on banks’ assets and liabilities.
In March 2017, the volume of loans in the national currency increased by GEL 396.6 million (5.8%). The volume of loans in the foreign currency decreased by GEL 704.1 million (5.9%), excluding the effect of the exchange rate decreased by 0.6%.
During March 2017, the crediting of individuals decreased by 0.7% (GEL 63.2 million), and as of the 1st of April of the current year, it totalled GEL 9.3 billion.
As of the 1st of April, 2017, the Larization rate of total loans amounted to 39.07%. In comparison with the 1st of March, excluding the exchange rate factor, the Larization of total loans had increased by 1.46%.
The volume of non-banking deposits placed in the banking sector amounted to GEL 16.1 billion as of the 1st of April, which is GEL 470.6 million (2.8%) less in comparison with the results of the 1st of March (excluding the exchange rate change factor, 0.9% more).
In March, compared to the previous month, term deposits decreased by GEL 314.6 million (3.4%), but excluding the exchange rate change factor increased by 1.0%. The index of deposit Larization, as of the 1st of April, totalled 30.81%.
The average weighted percentage was 4.4%, where the interest in national currency was 8.5%, and in foreign currency – 2.8% .
Q. What is the current situation with problem loans?
A. Over the last few years the index has been more stable and reached 3%. According to data of the first quarter of 2017, the proportion of inactive loans towards total loans is 3.7%. These results speak of the stability of the banking sector. The liquidity ratio is also quite stable and amounts to about 22%.
Q. How has the GEL devaluation affected banks’ operations?
A. Total revenue of commercial banks amounted to GEL 1,071,331,000. In comparison with the same period of the last year, banks’ revenue has increased by GEL 110 million to GEL 257 million. As noted above, total assets increased by GEL 0.4 billion (or 1.5%), while without the currency exchange factor, revenue increased three times.
Q. Please assess the Larization plan introduced by the Georgian Government?
A. According to 1Q results, loans issued in GEL increased by 5.8 percent. This is quite a significant growth rate and it’s thanks to the state Larization programme. According to it, all loans up to GEL 100,000 are to be issued in the Georgian national currency. Since small and medium enterprises borrow money mainly in GEL, this will significantly reduce credit risks.
Q. Since January 2017 the GEL exchange rate has been more or less stabilized, though recently USD against GEL again strengthened its position. How does this affect the activities of bank clients in Georgia?
A. As you know, countries with nonconvertible currency are characterized by an instability of currency exchange rate. The GEL was strengthened during the mentioned period, from 2.45 to 2.38. So such scenario was expected. Now we see that the GEL has stabilized at 2.45 again. Since December 2016 the range of GEL exchange rate has been within 2.40-2.45 mark. This is also due to proper management of budget resources, income and expenses, which were badly affecting the GEL last year.
According to 1Q results the state budget balance increased by GEL 704 mln to GEL 929 mln due to exceeding tax collection and proper balancing of expenses. Budget deficit spending is at a minimal rate. By increasing excise tax the Georgian Government filled expected losses in the budget. We also see that price hikes caused by inflation were temporary, which indicates a proper monetary and fiscal policy.