Bank of Georgia reports strong 1Q12 results
10 May 2012
Bank of Georgia (BGEO LN) reported strong 1Q12 financials, posting net income of USD 24 mln (+143% yoy and +17% qoq), for a ROE of 17.6%. Net interest income grew 3% qoq (+10.5% yoy) mainly on improved NIM (+0.5 pp qoq to 7.3%) and 4.4% qoq growth in net loan book. Healthier NIM came thanks to decreased cost of deposits (-0.3 pp to 8.0%) and higher loan yield (+0.3 pp to 18%). Cost control remained tight with Cost/Income ratio increasing 0.8 pp qoq to 49.1% (-6.4 pp yoy). Assets declined 3.8% qoq as the bank lowered its interest rate on deposits (-0.3 pp qoq to 8.0%) to limit inflow of excess liquidity.
Bank of Georgia 1Q12 financials, IFRS, USD mln
1Q12 qoq yoy
Net interest income 37 3% 11%
Revenue 70 -1% 33%
Operating expenses -35 0% 17%
Loan loss provisions 4 -15% 40%
Net income 24 17% 143%
Assets 2,705 -3% 14%
Net loans 1,635 4% 24%
Customer accounts 1,581 -3% 30%
Equity 571 18% 32%
Source: Company data
Olena Zuikova: We view the 1Q12 results as positive – the bank continues to be successful in improving/maintaining its NIM and Cost/Income ratios. The decline in assets was a surprise, but the bank did a good job rebalancing their structure – the ratio of net loans to assets increased 4.3 pp qoq to 60.4%. At the same time, the bank decreased its cash and cash equivalents 1/3 qoq, thus normalizing its liquidity position. Our key concern is a substantial decline in Loan/Equity ratio (down to 4.7x from 5.7x at end-2011) following the recent capital injection – further growth in ROE is hardly possible without improvements in leverage. The bank’s 1Q12 P&L data was broadly in line with our expectations and we maintain our BUY recommendation on the stock. BoG shares are currently trading at 2012E P/B of 1.08x, in line with its CEE peers.
