20th Aug 2020 09:14
(Alliance News) - Bank of Georgia Group PLC on Thursday reported a much smaller half-year profit due mainly to a far higher cost of risk.
The Georgian lender reported a GEL10.2 million pretax profit for the six months ended June 30, around GBP2.5 million. This represents a sharp drop from the previous year's GEL227.4 million interim profit.
Cost of risk was the single most significant factor in this drop, increasing to GEL251.6 million from GEL78.1 million due mostly to a GEL216.6 million expected credit loss on loans to customers compared to just GEL72.6 million the prior year.
Interest income was 13% higher at GEL767.4 million from GEL677.0 million, but increased interest expenses and deposit insurance fees caused net interest income to dip 2.4% to GEL372.0 million from GEL381.3 million, a smaller factor in the bank's profit drop.
Bank of Georgia's net interest margin fell to 4.6% in the first half from 5.8% the year before. Its loan book as at June 30 was 19% higher year-on-year however at GEL12.60 billion, though was down 4.1% quarter-on-quarter.
Additionally, the lender's NBG (Basel III) CET1 capital adequacy ratio was lower at 9.9% at the end of June from 11.0% year-on-year.
Given the Covid-19 pandemic, Bank of Georgia's directors opted against recommending a dividend at its 2020 annual general meeting, and so no 2019 dividends will be distributed in 2020.
Chief Executive Archil Gachechiladze said: "Bank of Georgia has two clear strategic targets over the medium to long-term: to achieve at least 20% return on average equity, and to deliver [approximately 15%] growth in the loan book. Given our clear Georgia focus, our performance during 2020 will inevitably be affected by the local Covid-19 impact, but we have already resumed the delivery of our targeted profitability.
"Our performance and balance sheet is demonstrating strong robustness, asset quality is resilient and we remain comfortable, given our economic scenario stress-testing assumptions, with the adequacy of the significant [expected credit loss] provision created in the first quarter. The group is very well positioned for the future, with an outstanding team, coupled with strong funding and liquidity, and capital resources."
Shares in Bank of Georgia were down 2.4% at 786.00 pence in London on Thursday morning.
By Anna Farley; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
Bank Of Georgia Group