(Alliance News) - Bank of Georgia Group PLC on Wednesday reported strong profit growth in the first half of 2019 as the lender said a dedicated shift to mortgage lending resulted in a sharp rise in its loan book.
In the six months to June 30, the lender's profit before tax and one-off costs increased 11% to GEL243.8 million, about GBP69.6 million, from GEL220.0 million, about GBP62.7 million, the year before. Net profit was up 37% to GEL209.1 million.
Bank of Georgia's net interest income was broadly flat year on year in the first half at GEL364.6 million. The bank's operating income grew 5.8% to GEL516.0 million.
The lender's cost-to-income ratio improved marginally to 36.9% compared to 37.0% the year before.
"In the first half of 2019, the group delivered another period of strong balance sheet and fee & commission income growth, which has continued to deliver superior profitability. Over the last 12 months, customer lending has increased by 301%, supported by 11% customer lending growth in the second quarter of 2019, which demonstrates the strength of the Bank of Georgia franchise," said Chief Executive Archil Gachechiladze.
The bank's loan book recorded strong growth in the first half, ending the period at GEL10.58 billion, 31% higher than the year before. Bank of Georgia's Retail Banking business saw its loan book jump 25% year on year.
The bank said this growth was driven by a 9.2% and 7.4% growth in second quarter mortgage lending and micro-lending. Bank of Georgia's Retail Bank saw 3.9% year-on-year growth in customers.
Group net interest margin ended the half at 5.6%, significantly behind the 7.0% recorded the year before.
"Whilst individual product loan yields have remained broadly stable, our increasing focus on lending in the mortgage segment and to finer margin corporate and SME clients has led to a negative mix effect on the net interest margin," the lender explained.
The product mix, "competitive pricing pressure", increased minimum reserve requirement mandated by Georgian regulators, and the carry-cost of the bank's recent note issue all combined to drive margins lower.
Bank of Georgia ended the half-year with a group Tier I capital adequacy ratio of 13.3%, ahead of the 12.5% seen a year before.
Total client deposits jumped 23% year on year to GEL8.86 billion.
The Corporate & Investment Banking business recorded a 22% year on year jump in net fee & commission income in the first half to GEL15.26 million. Net interest income was up 17% to GEL93.1 million.
In the Investment Management business, assets under management were GEL2.50 billion on June 30, up 26% on a year before and 5.6% from March 31.
"We are achieving significant portfolio growth with continued profitability comfortably in excess of our targeted over 20% return on equity level. With no further material regulatory changes expected, we are well placed to deliver strong growth over the next few years," added Gachechiladze.
The lender's return on equity in the first half was 23.7%.
Shares in Bank of Georgia were 0.8% higher in London on Wednesday morning at 1,356.89 pence each.
Bank Of Georgia Group (BGEO)
