The FINANCIAL — Bank of Georgia has not yet decided to participate in the new initiative of the Georgian Government, involving taking a GEL 250 million loan from local banks in order to finance social and rehabilitation projects. Georgian officials have said that the new initiative will help banks to use their extra “redundant” capital.
“We have not decided whether we will participate in the exchequer obligations since we don’t know the conditions yet. It depends on the conditions and the interest rate; if the term will be three months then we might participate, if it’s going to be five years, then most likely not,” says Irakli Gilauri, the Chief Executive Officer of Bank of Georgia, one of the leading Georgian banks.
The new initiative of the Government was announced by Georgian PM Nika Gilauri during a meeting with journalists. According to the PM, banks currently have redundant financial reserves, which they are afraid to launch in to the economy. In Gilauri’s words, the Government will take the risks and banks will get their money back in conditions acceptable to them.
The total sum of loans issued by Bank of Georgia in May 2009 made up GEL 86.6 million. The number of customer’s deposits reached GEL 854.9 million. The amount of deposits is GEL 8.1 million larger in comparison with the results of April 2009.
The total market share of Bank of Georgia by equity is 41%. As for assets, the bank occupies a 34% share. Gilauri explains the increased figures of equity by the USD 100 million the bank raised in 2008 through the placement of the new ordinary shares in form of GDRs. He says that the Bank has not yet spent the attracted capital.
According to the new statement of National Bank of Georgia (NBG), the official exchange rate will be fixed on the new Bloomberg trading system. Previously the currency course in Georgia was settled on the currency exchange between local banks.
“At the beginning the new exchange rate system will cause fluctuation of the national currency but that will soon stabilize. In my view this is a good opportunity to find out what is the market interest in the exchange rate. The new system could reveal whether the general estimation of the national currency is exaggerated or not,” Gilauri, Bank of Georgia, notes.
Recently NBG manifested the use of a new monetary policy instrument swap. A swap is an interest rate structure. According to it, NBG will receive financial support from foreign donor organizations and later finance local banks especially in the national currency.
According to officials of NBG, the new monetary system of a swap will encourage the attraction of additional finances from foreign partners. It will sustain banks enough to increase credit portfolios in the national currency. It will reduce customer’s currency risks and strengthen the de-dollarization processes of the local economy.
“A swap will enable us to give out loans in the national currency in larger amounts than before. This will stimulate business as those who have income in GEL can take loans in GEL,” Gilauri says.
The volume of bad debt loans of Bank of Georgia constituted 4.7% of the total loan portfolio.
“The total sum of bad debt is GEL 80 million. We are working on restructuring of the loans for the clients who have obstacles in covering their credit. The Bank has opened a special branch in order to serve such customers and reviews all cases individually,” Gilauri notes.
“The Bank’s liquidity, according to the standards of National Bank of Georgia, amounted to 37.6 % which surpassed the results of the previous quarter by 27% and is much more than the established 20% index of NBG.
By March 2009, in accordance with the standards of NBG, the initial capital adequacy index amounted to 16.4%, while the demanded minimum by NBG is 8%. The total capital adequacy index was 17.4%. The minimum demanded total capital adequacy index by NBG is no less than 12%.
“We are pleased that the bank has shown positive results under the conditions of the tough economic environment. Among the leading Georgian banks, BoG has the highest capital adequacy rate. The Bank’s surplus capital is equal to GEL 177 million, which compared to our loan portfolio is a good figure. The Bank’s surplus liquidity amounts to GEL 200 million. Thus the bank has a strong capital base and sound liquidity rate,” said Nika Enukidze, Chairman of Bank of Georgia Supervisory Board.
Written By Madona Gasanova
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