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Bank of Georgia shares up 206% since since we started coverage


Bank of Georgia [LON:BGEO] (BoG), one of The Armchair Trader’s ‘one to watch’ stocks published its final results last week. Since we started covering the FTSE250-listed bank in August 2022, its shares have appreciated by 206% and closed last week (15th March) at 4,845p.

The bank has surfed on the wave of strong economic performance of the Georgian national economy, which according to Geostat saw its real GDP grow by 7.5% in 2023. As previously reported, Georgia, in the Caucasus Region, has been a beneficiary of the Russo-Ukrainian war, with intellectual and financial capital moving to Georgia from both belligerent countries as well as trade routes across the region switching from Ukraine and Russia through Georgia to the Black Sea.

The country is seeing a growth in tourism, with the best performing sectors being trade, IT, construction, transport and education. Strong performance is set to continue this year, with a predicted 6% GDP growth rate, buoyed by the EU granting Georgia candidate status which will help attract external investors. The country has also started to loosen fiscal controls as the economy showed strong performance as the year came to a close. Nevertheless, Georgia resides in a volatile neighbourhood and there is always the risk of conflict spilling across other borders in the Caucasus.

Expansion to Armenia

The big news from BoG’s corporate headquarters in Tbilisi was the proposed acquisition of Ameriabank, a leading universal bank in Armenia announced in February. Ameriabank is an Armenian bank, headquartered in Yerevan that offers corporate, investment and retail banking services. Established in 1910, it is one of Armenia’s biggest banks, top in terms of loans and second in terms of deposits, with an increasing retail and SME footprint.

BoG shareholders approved the move on Thursday (14th March), and Archil Gachechiladze, BoG’s chief executive said: “I believe this acquisition […] is a great opportunity for the group to increase scale and unlock further growth. We are set to acquire Ameriabank with our surplus capital, with no dilution for shareholders, and it is expected to be immediately earnings enhancing with an ROE uplift.”

Gachechiladze highlighted BoG’s growth in digital banking, which grew 21% year-on-year, which helped contribute to a 30.6% increase in operating income to GEL1,778m (GBP515m), an increase in operating profit of 21.4% to GEL1,375m and a 19.6% uptick in the bank’s loan book. Deposits were up 12.2% y-o-y. On the loan book, a large proportion of the new business taken in was on the retail side of the business, which Gachechiladze said was of a lower credit risk.

Although the bank’s net interest margin declined in the year,  Gachechiladze said that this was “more than offset” by BoG’s strengthening balance sheet., and he expected that in the coming year balance sheet growth would continue to grow on a double-digit basis, which would insulate that bank against any interest rate cuts.

The Ameriabank acquisition did punch a hole in the BoG’s cash reserves and saw the bank’s operational expenses bloat on a y-o-y basis, however the transaction was a one-off cost, and management believes the addition of the Armenian bank would help extend BoG’s scale, reach, diversification and immediately start contributing to the Georgian bank’s bottom line.

Expansion to other regional markets with the proposed Armenian deal is keeping up with the Joneses with regard to its main domestic competitor, TBC Bank Group [LON:TBCG], which expanded into Uzbekistan in 2019.

Bank of Georgia to continue dividend record

The company continues its dividend record, recommending a final dividend for 2023 of GEL4.94/share, bringing the total dividend for 2023 to GEL8/share, an increase of 5% over the dividend issued in 2022.

BoG opened trading today (18th March) at 4,916.95p and has offered a year-to-date return of 23%, and a one-year return of 101.5%. Bank of Georgia’s shares have ranged from 2,218.14p and 5,310p over 52-weeks. The bank has a market capitalisation of GBP2.2bn.

BoG also kicked off a GEL100m extension of its share buyback and cancellation programme. The bank said the extension would commence after its current GEL62m buyback programme completed. The programme was instituted as part of BoG’s policy to target a dividend/share buyback payout ratio in the range of 30-50% of annual profits.

It could be another exciting year for BoG. The share price growth over the past few years has been stellar, but there could still be the potential for more upside. The bank has shown its resilience in tough times, and as the outlook improves, not just in Georgia but in its potentially new market, Armenia, a relatively unpenetrated market, the bank should expect to push on through the year. With its ongoing dividend payout and buyback programme, BoG remains ‘One to Watch’.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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