Volume of Overdue Loans Increased in 2014

Volume of Overdue Loans Increased in 2014

Volume of Overdue Loans Increased in 2014

The FINANCIAL -- The volume of overdue loans issued by commercial banks in national and foreign currencies as of 1 March, 2014, amounted to GEL 236,283,000. The sum is 10% more than it was in the same period of last year and 17% more than it was on 1 March, 2012.

52% of the total overdue loan portfolio is made up by credits issued in a foreign currency. Short-term loans, which include maturity for less than a year, make up more than 50% of the nonperforming loan portfolio.

Despite the increasing number of overdue loans, commercial banks have been increasing the total credit portfolio proportionally year-by-year. GEL 10,104,823 thousand was issued as loans as of 1 March, 2014, up from GEL 8,333,833 thousand as of 1 March, 2013, and GEL 7,381,289 thousand as of 1 March, 2012. Comparative figures of the total credit portfolio versus overdue loans showed that the share of nonperforming loans has been decreasing slightly. Overdue loans made up 2.6% of the total credit portfolio issued by commercial banks as of 1 March, 2014. In 2013 it made up 2.8% and in 2012 - 2.9%.

With GEL 4,797,618 thousand, consumer loans made up the largest part of the credit portfolio. This is followed by trade, which appears to be the most attractive business sector for banks to finance, with GEL 2,417,780 thousand. Education with GEL 68,125 thousand made up the lowest part, followed by agriculture with GEL 150,519 thousand.

In February 2014, crediting of commercial banks decreased by GEL 23.9 million (0.23%) in comparison with the previous month. With over GEL 21 million, industry is the sector that saw the largest reduction in crediting by commercial banks during 2014’s January-February monthly comparisons. This is followed by transport and communication and healthcare industries, each with GEL 9 million reductions.

Banks reduced the crediting of the construction sector by GEL 8.9 million and HoReCa - by GEL 8.7 million. The education sector received GEL 2 million less in the loan portfolio and trade and agriculture - GEL 1.9 million and GEL 1.6 million respectively.

The credit portfolio of commercial banks was decreasing in 2014 compared to the same period of 2013. Banks managed to attract 1.3% more deposits in February than they did in January 2014.

The total deposit portfolio of commercial banks as of 1 March, 2014, amounted to GEL 10,155,864 thousand, up from the GEL 10,015,543 thousand of the previous month.

With more than GEL 6 billion (60%) Georgians remain prone to saving money in foreign currencies. The deposit portfolio of commercial banks in national and foreign currency amounted to GEL 8,453,034 thousand, as of 1 March, 2013. Annual comparison has shown a 17% growth of the deposit portfolio for commercial banks.

During the last week The FINANCIAL ran a survey to find out consumer behaviour at banks. Over the course of a week The FINANCIAL questioned 200 respondents aged between 30-45 via email, f2f and social networks. Out of the total number, the majority (65%) said that they have had credit from a bank. 12% had used both banking products: deposit and loan. 10% had a credit card and the remaining 13% had used money transfer services.

65% of respondents still require extra finances to purchase a new apartment. However, the stipulation by banks that apartments be used as collateral is the main reason why over 80% of Georgians will not take out a mortgage loan from a bank, as a recent survey of the newspaper’s has shown.

Just 12% (out of 65%) are ready to purchase one with the use of a mortgage loan. The element of unpredictability of their future employment is the main reason behind 75% of the people who will not take out a bank loan. 65% avoid taking out loans due to the high interest rates offered.

In March, international audit company KPMG conducted a study which revealed that nominal and effective rates of interest on loans in Georgia are lower than ones in Kazakhstan, Serbia and Armenia, but higher than in Poland.

The study, covering the mentioned countries, was ordered of “KPMG” by National Bank of Georgia (NBG). The company studied the data of 13 banks, which are members of the top five in their respective countries. In Georgia, the study applied to Bank of Georgia and TBC Bank.

The study placed a focus on such banking products as mortgage loans with fixed and floating rates, secured and unsecured consumer credits, credit cards, corporate credits, and credits to small and middle-sized business.

“I hope that this study will end attempts to establish absurd stereotypes regarding Georgia’s allegedly highest interest rates in the world,” declared Giorgi Kadagidze, NBG President. 

“It is no surprise to anybody that in terms of foreign direct investments’ attraction, the Georgian banking sector is an absolute champion,” Kadagidze noted, adding: “I hope that in line with economic development, rates of interest will decline further”.