The FINANCIAL — TBC Bank, one of the leading banks in Georgia, will be increasing its credit portfolio by 100 million GEL during the course of the year. TBC Bank will focus on financing trade operations for corporate clients from the second half of the year. In 2010 the amount of deposits reached its historical maximum.
“On 31 March, deposits of only physical individuals were more than 708 million GEL, while at the beginning of the year that figure was 660 million GEL. In just the first quarter was there an increase of 50 million GEL,” said Vakhtang Butskhrikidze, General Director of TBC Bank.
Q. What were the outcomes of the first quarter of 2010? How would you evaluate this?
A. After the post-war period this was the first quarter when the credit portfolio increased. Despite the fact that the first quarter of the year is always slower, this year the credit portfolio increased by 50 million and the tendency of growth should continue in the second and third quarters too.
Q. What changes were implemented at TBC Bank in 2009? What was special about the year?
A. We should divide the year 2009 in to two parts, the first being up to May, and the second half from then on. Up till May we faced difficulties as there was an outflow of deposits in the banking sector. Deposits decreased month after month. However from May onwards the situation changed significantly, there was a high inflow on corporate as well as physical person deposits. Since September we actively started distribution of loans.
To sum up, we had 2 stages in 2009. During the first four months when the Bank was declining, then the summer period which was more stable and led to active work from September.
Q. The year 2009 was very hard for the Georgian banking sector, as well as for many other countries. The difference with the USA and Europe is that crediting intensiveness was limited by the banks themselves. This fact caused over liquidity. From today’s point of view, how right was it for Georgian banks to implement such politics. Has it interfered with the banks’ development or not?
A. Banks were obliged to reduce credit portfolios for two basic reasons: the banks had short-term liabilities towards foreign banks that were to be paid in the first half of 2009, plus there was outflow of deposits.
This was bad for the sector but it was an involuntary post factum decision. On the other hand, risks were re-evaluated in Georgia after the post-war period and on the basis of this there was new loan giving.
The conference held with the participation of National Bank of Georgia, EBRD, and Currency Fund last week analyzed the last 18 months in different countries of the world. It was summarized that local banks have a more positive attitude towards economics and are more active in credit activities rather than foreign banks.
In my opinion, this has quite a logical explanation, local banks have more information and are joined to the country economy, for them risk taking and consequently trust is high, rather than for foreign banks that are mostly governed by statistical information.
The same can be said about Georgia, if we consider the statistics, the banking sector will be more active in 2010 rather than last year, but especially for Georgian banks.
Q. The financial crisis greatly influenced purchasing ability, as well as people’s decision to use bank products. In your view, what should be done in order to raise society’s activity in this direction?
A. Here the feeling of stability and future perspective plays an important role. If people see that there is a politically and economically stable environment this will be the basis for people to make the decision to spend and invest more.
Q. Representatives of the financial sector interviewed by The FINANCIAL marked that the boom of banks up until the year 2008 will not be repeated in the future. In your view, what will the role of banks in Georgia be in the next few years?
A. Before the war the growth of the sector was 50-70%, which was associated with high risks. The maximum growth rate will be 20% this year.
The boom of banks won’t be repeated and this will lead to a decrease in risks.
Q. According to President of the National Bank of Georgia Giorgi Kadagidze, “Larization” is the main focus of NGB. What is the demand for GEL at TBC Bank?
A. Each company and individual has risks when they have loans in a foreign currency. Larization will decrease risks and will be beneficial for our clients.
Moreover there will be an increase of the GEL share in the credit portfolio in 2010. However, for Larization to be long term it is necessary to change deposits. At present the majority of deposits are in foreign currencies and gradually they should be replaced by GEL.
Q. Taking out a loan nowadays is practically impossible without a solid guarantee, which means using real estate or even business as collateral. What kind of practice is used in this direction in France as well as in different developed countries?
A. The important fact is that while in the post-war period loan giving terms were strict, during the past few months banks have simplified the terms for more loans distribution.
There are different types of loans. In car and mortgage loans you probably need collateral to qualify. However short-term products – such as consumer loans and credit cards do not require collateral and such types of instalments are available at TBC Bank.
Collateral is required corresponding to the type of loan and risks associated with the product.
Q. TBC Bank has significantly changed its terms on saving accounts, why did you decide to change the terms and what influence might this have on deposits?
A. There was high competition for deposits within banks at the end of 2009/beginning of 2008. This restricted us on the resource side and we had to give out loans with high interest rates.
After there was an inflow of deposits, there have been signs of decreasing interest rates on deposits. This is quite good for economics, as it will give us the opportunity to decrease interest rates on credits.
If we compare western banks the interest rates are still quite high in Georgia. At present the interest rate on deposits is quite high and foreigners are making the decision to save their money in Georgian banks.
Q. What are the trends of saving accounts? In which currency do people prefer to save money?
A. If we speak about long-term saving deposits the majority is in foreign currency. As for short-term deposits they are mostly in GEL.
Q. Has the Bank changed its dependence on corporate clients or not? Have business crediting politics changed or not? What demands should business nowadays satisfy in order to get a low percent loan from TBC Bank?
A. Whereas the companies before the war thought of expanding their directions and moving their business into the next stage, at present they are more concerned with ongoing business and are consequently thinking less of new directions.
The main accent for us is financing working capital, and only for small portion financing investments.
For corporate clients our main activity will be financing trade operations, small portion buying for them technologies and making investments.
Q. What advantages does TBC Bank have nowadays?
A. TBC Bank has the highest public awareness among Georgian banks which helps us in communication with corporate clients and private businesses. Moreover to realize more deposits and bring in more loans.
For clients the main factors are the stability of banks and our shareholder structure. TBC bank in all its 17 years has always been stable despite the many political and economical cataclysms that have occurred over that time in the country.
TBC Bank's shares are held by six major financial institutions: IFC, DEG, EBRD, FMO, JP Morgan, Ashmore and Georgian individuals.
Consequently TBC bank is one of the most stable institutions in Georgia.
Q. What products will be attractive for corporate clients and businesses at TBC Bank in 2010?
A. We will offer loans and deposits for our clients that will satisfy their needs. By this we mean maturity, collateral and interest rate.
The tendency of decreasing interest rates has been continuing for 3 years, and this tendency will apply both to deposits and loans.
Q. Recently the world has become victim of USD appreciation against the EUR. After the financial crisis in Greece and Bulgaria saying no to the EUR, analytics say that the Euro Zone might end its existence. Against this background, what is the dependence of Georgians? Are consumers using the EUR more or not? What is your prognosis?
A. Forecasts regarding this is quite difficult and experts give different summaries.
There were quite interesting analyses done in 2008/2009 when change in the currencies of the USD and EUR lead to losses for the population.
This is quite a speculative issue, and only long-term trends are considered. Consequently, a non-qualified accent on that and gaining money occurs and in most cases people lose money.
Q. Within the framework of “Become a Millionaire” there were 45,000 new deposits opened at TBC bank, the total volume of the deposits reached 626 million GEL. How would you evaluate the draw? Will the project be continued in 2010?
A. This was one of the most successful projects and strategic decisions since the year 2008. In 2010 we face more important cases, today we have different priorities and our direction is based on a different marketing strategy.
Q. Are there going to be any changes in the Bank’s management? Will you employ new staff members?
A. The same team will remain at TBC Bank and we won’t have any significant changes. However, we think that during the year we will increase our staff force and strengthen our team.
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