Hits: 4

14 May 2020

Bank of Georgia – Q1 Results

Share Price 882p

Mkt Cap £416m

Conflict Disclosure: No Holding

 

  • Update Q1 NIM of 5% is down from 6% last year on account of loan yields reducing from 12.2% to 10.8% while cost of funds increased from 4.6% to 4.7%. Cost of risk increased sharply from 1.7% to 7.4%. Cost income increased to 38.6%. The bank reported a loss of GEL 112.97m on account of the significant GEL 220m impairment charge which is COVID related. CET1 ratio 8.3%. No dividend in 2019. Outlook is confident the bank will emerge from the pandemic having achieved its priorities

 

  • Estimates Current estimates assume a GEL 151m profit which assumes a recovery.

 

  • Valuation NAV is 2017 GEL or £511m. 19% discount to book.

 

  • Conclusion This very high return bank hasn’t previously been tested in a sudden downturn as we have now. If the impairment provision get released the traditional 20% ROE could result in perhaps 80% valuation upside. There is better risk/reward elsewhere.

7 November 2019

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Bank Of Georgia – Q3 Results 

Share Price 1352p

Mkt Cap £644m

Conflict Disclosure: No Holding

  • Results Loan book up 29% to GEL 11.4bn. .NIM down to 5.1% (2018 6.4%) and loan yields down to 11.5% (2018 13.5%). Cost income up to 37.9% (2018 36.1%). Cost of credit 0.5% (2018 – 2.0%).
  • Estimates Assume 15% growth going forwards.
  • Valuation PER 5.6X Yield 5.8%
  • Conclusion While growth is strong this feels like a new management team in a deckining rate and declining impairment environment.  Which in general is not ideal for banks. The shares remain very cheap but it is hard to see the edge.

14 August 2019

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Bank of Georgia – H1 Results 

Share Price 1346p

Mkt Cap £644m

Conflict Disclosure: No Holding

  • Results  PBT up 8.8% to GEL 223.4m which equates to a ROAE of 23.7%. Impairment charge reduced from 1.7$ to 1.5%. Loan book growth was 19% in constant currency, 30% reported currency, while the Tier 1 capital adequacy was 13.3%, compared to a requirement of 11.6%. Outlook is well placed to deliver strong growth over the coming years.
  • Estimates Full year estimates look for GEL 502m PBT, which looks reasonable in the light of GEL 223m in H1
  • Valuation PER 4.8, Yield 6%. Price/Book is 1.2 and the bank has just delivered 23% ROAE
  • Conclusion The shares are down 24% since May and these are stellar results. Unless there is a Russian invasion imminent the force of gravity on the share price will reverse.

14 May 2019

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Bank Of Georgia – Q1 Results 

Share Price 1684p

Mkt Cap £809m

Disclosure: No holding

  • Results Operating income up 10.2% to GEL 259m from a NIM of 5.8% off loan yields of 12.2%. Cost income was down from 37.2% to 35.5% and impairments were 1.7%, down from 1.8% in the prior year. Tier 1 ratio 12.7% (2018 12.4%) compares to the requirement of 11.6%.. Loan book growth was 22.4% year on year
  • Estimates 10% EPS growth expected in year to Dec 18
  • Valuation ROE 17.2% and Price/Book 1.6. TBC trades at 1.5X Price/Book while delivering 21% ROE . PER is 5.8 and yield 5.3%. TBC PER is 6.2 and yield 4.9%
  • Conclusion  There is not much between TBC and Bank of Georgia. Both look well placed and political risk ensured they are cheap. The stronger growth rate from TBC perhaps bodes well.

19 February 2019

Bank Of Georgia – FY Results 

Share Price 1725p

Mkt Cap £822m

  • Results Profit was up 23% year on year to GEL 493m with a 26.1% ROAE achieved in 2018. The Basel 3 Tier 1 ratio is now 12.2% and the loan book growth was 21% during the year of which close to 70% is retail. Cost of credit was 1.6% down from 2.2% in 2017 and continued to decline over the year while net interest margin was a healthy 6.5% while the cost income ratio was 36.5%. Additional regulation has meant that this bank which traditionally has targeted 20% ROE, 20% growth and 20% Tier 1 is today moderating expectations to 15% lending growth as the lending will now move more towards corporate and mortgage and away from retail.
  • Estimates The GEL 1,030m of revenue looks a little shy of the GEL 1,087 estimate although the net income of GEL 380m is ahead of the GEL 364m estimate. Forecasts are predicated on 13% revenue growth so with reducing cost of credit look reasonable.
  • Valuation The company has delivered 26% ROAE and trades at 1.6X book value.  In PER terms this is 5.5X with a 5.2% yield
  • Conclusion When this company came to market the targets were 20% leverage, 20% growth and 20% ROE. It is now delivering the 20% ROE but at the expense of leverage which is now considerably higher than the 20% and growth expectations have now moderated to 15%, which is the sign of a company maturing.  With an economy growing at 4.8% it should continue to produce stronger returns than most other UK bank stocks so is perhaps one to own.  But banks are a declining part of the UK stock market. In 1913 around 50% of the UK market was made up of railway stocks but the fact that banks have been a large part of the UK market in the past doesn’t meaqn they need to be going forwards.