The loss of Georgian banks was reduced to GEL317 million
By Nika Gamtsemlidze
Monday, September 28
In January-August 2020, Georgian commercial banks suffered a total loss of 317 million - according to a report published by the National Bank. According to the same document, the operating performance of financial institutions improved in August, as a result of which the net loss, which amounted to GEL413 million in 7 months, decreased to GEL317 million in August.
If similar operating figures of banks are maintained until the end of the year, then it is possible that the financial sector will end 2020 with a loss of less than GEL100 million or a net profit of tens of millions of Lari.
As can be seen from the financial indicators, the main determinant of the existing losses is the accumulation of GEL1.2 billion in the expected credit loss reserve by banks. In total, Georgian commercial banks have reserved GEL 1.22 billion in the ‘possible asset loss’ buffer, which reflects the amount of possible loan losses due to the expected crisis.
The President of the NBG also made a statement on the financial performance of banks. According to Koba Gvenetadze, it is expected that in 2021, the sector will return to the profit figures of previous years.
“Commercial banks carry out active appraisals and I hope that this amount will not be that much (GEL1.2 billion), however even in the worst-case scenario, the banks maintain a fairly high level of capital adequacy and liquidity and their functioning is not threatened by any problems. As for their losses, due to the reserves spent, they may end 2020 with a small loss, although given the stable operating income, it is expected that they will regain their positions next year,” said Gvenetadze.
As for operating activities, in the first 8 months of 2020, they received GEL2.42 billion in interest income, which is 10% more than in the same period of 2019. More specifically, the income from loans to individuals was GEL1.29 billion, which is an increase of 1% annually, while the income from loans to legal entities is GEL910 million, which is an increase of 18%.
Non-interest income amounted to GEL561 million, which is reduced by 2% on an annual basis. This subgroup includes banks' income such as commissions, fines and others. Revenue from commissions in the first eight months of 2020 was GEL199 million, down 18% from the previous year, while revenue from fines and penalties was down 111% to GEL 28.8 million.
As for total expenditures, it amounts to 3.49 billion Lari, which is 36% more than in 2019. 1.2 billion Lari reserved for possible loan losses are included in these expenses. In addition to reserves, banks also increased interest costs. In particular, the interest rate on deposits increased by 157 million and amounted to GEL 714 million, while the interest rate on other borrowed funds attracted by the banks themselves increased by 28% to GEL510.8 million.
