Bank of Georgia reports in line 2Q12 results

Bank of Georgia Holdings (BGEO LN) reported that Bank of Georgia, its sole subsidiary, made net income of USD 28.1 mln in 2Q12, virtually flat in year-on-year terms and up 17% qoq. The result implies annualized 2Q12 ROE of 20%, up from 19% in 1Q12. The bank’s 2Q12 net interest income improved by an impressive 31% yoy to USD 46.7 mln on a wider interest spread (10.5% vs. 10.0% a year ago) and 21% yoy increase in net loan book. At the same time, the bank reported a 67% yoy drop (by USD 14 mln) in FX gains, which contained growth in total revenues to just 5% yoy. Operating expenses added 9% yoy in 2Q12, triggering a 1.5 pp increase in Cost/Income to 45.5%. Cost of risk stood at a low 0.9% in 2Q12 as NPLs improved to 3.3%, from 3.9% a year ago. The bank’s assets increased 10.9% in 2Q12 (up 21.2% yoy).

Vitaliy Vavryshchuk: Overall, the bank is on track to outperform our full-year projections in terms of balance sheet growth and profitability. The bank’s asset growth accelerated further in July as the bank attracted USD 250 mln via Eurobonds, which makes our full-year asset increase projection of 12% look too conservative. Our 2012 net income expectation of USD 101 mln is also likely to be surpassed – the bank earned net USD 52.2 mln in 1H12, but 2H12 is set to be stronger on a substantial increase in assets. We maintain our Buy recommendation on Bank of Georgia Holdings.