The FINANCIAL — Against a background of reduced external risks and the internal institutional structure, Bank of Georgia predicts 5% growth for the Georgian economy. Investors, who attach the greatest of importance to the country’s economic prospects, remain largely positive in their sentiments towards Georgia. A solid base of capital, proper risk management, and high rate of liquidity are what helped the Bank to avoid the recent economic difficulties without any significant impact. Technological development and innovative services will be the main focus of the Bank this year.
“Despite some pressure caused by external factors, macroeconomic stability has been reached and the stability of the banking system has been tested once more,” Murtaz Kikoria, Director General of Bank of Georgia, told The FINANCIAL.
“The economy, it seems, has passed the most dangerous level. Tax revenue, a significant increase in tourism numbers in recent months, the new initiatives of the Government, as well as appointment of the president of the National Bank – are all contributing to the positive sentiments of businesses, and economic growth. These sentiments have been reflected in the exchange rate of the GEL, and allow the National Bank to fill reserves. Against the background of reduced external risks and considering the internal institutional structure, our expectations towards the economic growth of Georgia are more positive and exceed the forecast of Fitch (2.5%). We predict that the country’s growth might even reach 5%,” said Kikoria.
Q. What was the influence of the recent devaluation of the Georgian Lari on the banking sector and on consumer behaviour?
A. Bank of Georgia has a solid base of capital and high rate of liquidity. Accordingly, the devaluation did not have a significantly negative impact on the Bank. Carrying out proper risk management is also important. It is important that the Bank has expressed a proactive position towards borrowers with foreign currency loans who required our support. This step that we made at the beginning of the previous year played a positive role in our carrying out the processes in a steady manner. As for consumer habits, they have not changed considerably. Our credit portfolio in the first quarter of the current year has grown in comparison with the prior-year period.
Q. The high rate of dollarization has always been a challenge for the Georgian economy. Devaluation has further strengthened the problem. What is your viewpoint on solving this problem and what is the role of the banking sector?
A. Naturally, for the banking sector, as part of the country’s economy, dollarization does contain appropriate risks. Overcoming dollarization requires complex work. The existence of a deliberate and consistent policy of the National Bank and the Government is crucial in this regard. Real growth of the economy is the only response to this challenge. Governing this process with short-term, artificial instruments is ineffective. The banking sector reflects the mood of the population and economic entities towards the national currency with financial terms. It is a highly regulated sector. Accordingly, the scope of the sector’s actions is limited by the relevant norms. The role of the banking sector in line with this exact problem is in the adequate management of exchange rate and interest rate risk’s correlation. For example, since September 2015, we reduced interest rates on deposits denominated in USD to 4%, for a one-year term. It has had a positive impact on the dollarization rate. Also in September we increased interest rates deposits in GEL to 11%, for a one-year term.
Q. Tell us from your foreign partners’ example, how has the attitude of foreign investors changed towards Georgia, due to regional instability?
A. First of all, investors pay attention to the country’s economic prospects. Investor sentiment towards Georgia remains positive. Maintaining the credit rating of sovereign and private companies in a positive place by international rating companies (Fitch, Moody’s, Standard & Poor’s) is a good indicator of it. Keeping reforms, maintaining a strong position in doing business and international ratings regarding economic competitiveness are significant. New initiatives of the Government, the regulated situation over the central bank’s independence, any pro-business initiatives, signals aimed at providing stability to institutions, including the banking system – always have a significantly positive effect on investors’ mood. We are one of the first to feel it. As mentioned above, in recent years their interest has increased and developed positively.
Q. A major part of the credit portfolio in Georgia is still made up by trade. Since signing the AA and DCFTA with the EU, are you noticing a switch to the EU market by your customers?
A. We welcome full use of the capabilities of the FTA with Europe and maximum absorption of this market. The FTA process with China is also a very positive factor. Implementation of huge regional infrastructural projects will further increase the investment attractiveness of Georgia. In the financial sector this agreement is reflected in increased opportunities for getting cheap resources in EUR. We are clearly observing this trend. The share of the Eurozone in our economy is increasing and is also reflected in the banking sector.
Q. Despite the air of constant instability surrounding our future, Georgians are less prone to saving. How can this trend be changed?
A. Saving is more connected with habit rather than level of economic development. The habit itself is changing gradually. Thus, slowly but steadily we are seeing progress in this regard.
Q. Bank of Georgia has always been active in implementing high-tech services. On its side, Georgians are generally characterized as being open to innovation. Against this background, is the number of people visiting your branches decreasing?
A. The past few years can be named as technological innovations for Bank of Georgia. The Bank is constantly trying to introduce and implement the latest technologies in order to make banking services even more comfortable for our customers. The number of users of remote channels is steadily growing. At the same time, a large segment of customers are used to going to a service centre and being in direct contact with people. Accordingly, the number of visits to branches has not changed.
Q. As we can see, the Bank has segmented its services. What can you tell us about this strategy?
A. Bank of Georgia has introduced and implemented an important innovation in terms of banking services. Consumers’ needs are crucial to us. We offer them services in line with their needs. The concept of Express Bank is that it helps to start communication with the Bank. The main merit of Express Bank is that lots of people that have not had such an opportunity before can now get access to banking services. Express Bank is one of the most successful and strong brands in the retail banking market. More than 0.5 million customers trust this brand.
Q. What about SOLO?
A. The new SOLO is a radically different concept. The main idea is that everything that we created – design, service or attitude – is built around SOLO clients’ expectations. SOLO clients are at the centre of all events, they use privileged banking services and share the ability of the SOLO Lifestyle.
Q. What will you offer your customers in 2016?
A. We will continue our technological developments and offer innovative services. Bank of Georgia never says still but is always devloping and moving forwards.
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