Bank of Georgia LON:BGEO (BoG), published its 3Q24 results today (12th November) and again it was a strong period for the London-based financial services group that operates in Georgia and Armenia.
As previously reported BoG has consistently improved across all vectors year-on-year and quarter-on-quarter and in its latest results again stepped up to the plate and moved the group forwards.
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In terms of profit, BoG reported GEL509.3m (GBP145.3m) of group consolidated profit, up 42.5% y-o-y, breaking another record in terms of profitability. In Georgia, BoG’s primary market, the bank reported profits of GEL411m with operating income of GEL683.6m, up 11% y-o-y. The bank has total assets of GEL34.9bn.
Wage inflation weighs on costs
That said, banking in Georgia and Armenia is becoming more expensive. BoG reported that its operating expenses were up 19.3% y-o-y to GEL195.9m, driven by higher salaries and employee benefits, an increase in administrative expenses increased by internal investments and growing the business. The volume of salaries also increased as BoG hired more employees, increasing its headcount by 8.5% over the year. Moreover, across the Georgian market wage growth increased on average by double-digits to deal with the rise in the cost of living, and to stay competitive in its home market BoG raised its staff salaries in line with the national trend.
Archil Gachechiladze, BoG’s chief executive said: “We delivered another strong quarter, posting a record profit of GEL 509.3m and an ROE of 32.1%, driven by robust performances in our core business divisions in Georgia and Armenia, supported by lower cost of risk and strong macroeconomic fundamentals.”
As previously reported Georgia’s economy, despite the conflict between Russia and Ukraine next door, has been remarkably resilient. However, politically there have been recent tensions in Georgia following the general election on October 26th, with a rise in protests, with a section of the Georgian populus claiming that Russia intervened in the election process to help the incumbent anti-EU party, Georgian Dream, win a close-fought contest, claiming around 54% of the vote.
The EU are no friends of Georgian Dream, and suspended the process of Georgia joining the economic bloc, citing the ruling party’s recent legislation to compel political parties, NGOs and charities to register their organisations as “pursuing the interests of a foreign power” if they receive more than 20% of their funding from abroad.
[bridgewise report=”overview”]LSE:BGEO[/bridgewise]Gachechiladze said: “The political situation in Georgia has been top of mind for many of our stakeholders recently. As we navigate a period of post-election political tensions which, unsurprisingly and understandably, elevate emotions in everyone, we remain focused on serving the whole of Georgia, supporting our customers and communities as a key systemic universal bank. We do not expect this period to have any significant impact on the economy. Therefore, we maintain our real GDP growth forecasts at 9% and 6% for 2024 and 2025 respectively, with that growth being underpinned by strong domestic demand, resilient external sector inflows, and prudent macroeconomic management.”
Bank of Georgia optimistic on economic outlook
The company saw net loans in Georgia up y-o-y by 21.7% with customer deposits up 14.9% by end-September and the bank has maintained a strong level of liquidity and installed solid capital buffers. In Armenia, loans were up 6.1% quarter-to-quarter and profit was GEL91.4m. The country of Armenia has also been performing strongly and the IMF forecasts Armenia should have 6% GDP growth in 2024 followed-up with 4.9% growth in 2025 and Gachechiladze cites strong domestic demand and ambitious public infrastructure projects as supporting future growth and momentum in the domestic economy.
BoG opened trading on 12th November at 4,930p and was up to 5,090p by 1030. Over one-year shares were up 38.5% and over the year-to-date up 23%. The company has a market capitalisation of GBP2.2bn.
BoG, on The Armchair Trader’s ‘one-to-watch’ list remains a compelling investment opportunity, giving investors a window on a rapidly-growing developing region with an engaging economic story. Despite the recent political tensions in Georgia, the bank remains optimistic about the country’s economic outlook. With its strong financial position, experienced management team, and focus on customer satisfaction BoG continues its robust performance.
