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In the Wake of the Financial Crisis TBC Bank Sets Ambitious Growth Plans

Published: March 7, 2011 | 11:33 am
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General Director: “Now when the financial crisis is over I see more interesting potential ahead”


According to the National Bank of Georgia, the local banking sector proved to survive the financial crisis decently and after the least successful 2008-2009 years in 2010 Georgian commercial banks showed impressive profits. The COMMERCIAL TIMES interviewed Mr. Vakhtang Butskhrikidze, General Director of TBC Bank regarding the bank’s future strategic plans since the good job done last year.

- After 2 years of problems the Georgian banking sector has started to recover. In 2010 banking sector profits amounted to GEL 156 million. TBC Bank’s profit was GEL 43 million. What were the major internal and external factors that conditioned this successful recovery?

- 2010 was a rather successful year for Georgia’s banking sector, GDP last year was estimated 6.5%, which is also a welcome news as the activities of commercial banks is directly linked to the country’s economic development. If in the second half of 2008 and the entire 2009 we saw banking credit portfolios and deposits downsizing in 2010 in parallel to the economic recovery we’ve all witnessed Georgia’s commercial banks growing further, both in respect to corporate and retail markets.

In terms of internal factors, banks were urged to become more active in marketing activities in order to reverse the cut revenues suffered during the crisis period. Big effort was made to attract new individual and corporate clients and in total the banking portfolio grew by 20%.

The final result of GEL 156 million profits is very significant. However, if we take into consideration the fact that banking capitalization is rather high in Georgia, capital profitability indicator has not hit its maximum. This supposedly will take several years to achieve. Investors interested in Georgia’s banking sector should foresee 15-20% capital profitability perspective.

- The volume of lending by commercial banks (including loans to non-residents) increased by 1.1 billion GEL (20.8 percent), during the past year, and reached 6.3 billion GEL by January 1, 2011. The volume of loans provided in the national currency increased by 427.5 million GEL (35.7 percent), while the volume of loans in foreign currency increased by 647.7 million GEL (16.3 percent). Would you say these statistics speak for the good press of the national currency? And why is that so?

- The biggest system risk Georgian banks face year by year is the portfolio issued in foreign currency. Both individuals and private sector representatives get revenues in the national currency, which means that long-term credit allocation in foreign currency might be rather risky. All that is driven b deposit structure. Unfortunately, since 90s deposits are as a rule dollarized. We do see obvious improvement in this regards, but it still needs time to stabilize and let people think it’s a good choice to open deposits in national currency. If you take a look at deposits in retail market, current deposits are opened in GEL while term deposits are mainly in USD and EURO. Companies however choose national currency whether it’s a current or a term deposit.

In 2010 we see a good tendency of more and more deposits opening in GEL, but it will take at least 5-7 years to completely change the asset structure.

- Total volume of deposits in the country’s banking sector increased by 43.0 percent or GEL 1.5 billion. Could this be again conditioned by the trust in banks or the scarce fear of the after-crisis period to save money for the rainy day?

-There are several factors beyond this deposit growth story. First, it’s again growth confidence in Georgia’s banking sector, the reliability of which was proved best during the financial crisis when the local commercial banks took the challenge respectively. Second, of course, it’s an increased responsibility of saving culture, especially since the financial crisis. People have become more cautious about spending and more responsible about money saving.

- TBC Bank JSC is one of the largest, privately held, commercial banks in Georgia. It took time and years of huge effort to become into a large financial organization. However, the timing by then was totally different as Georgia’s financial sector was just about to start emerging. Would you say TBC Bank would reach that success with the minimum capital as it was started years ago if the bank was launched just now?

- From today’s perspective it’s impossible to breakthrough in the current banking sector with minimum capital. It was some 18 years ago when TBC Bank started operations and by then Georgia’s banking sector was quite small while today I’m sure it will require at least GEL 50 million to launch and develop banking activities. Human resources, technologies, fixed assets- all that is truly a luxury investment.

When international financial markets overcome the current challenge they face nowadays Georgia might expect some new players in the market in future perspective. Our country does have that potential. If we compare Georgia’s loan and deposit GDP indicators to East European countries the local banking sector has a tremendous growth prospect, which is not a case in western markets. So, I’m confident we should expect strategic investors coming in Georgia when it’s the right time.

- TBC Bank is owned by International Financial Institutions and Georgian individuals. How would you assess investor confidence in Georgia’s financial sector and in particular in TBC Bank? What concrete arguments make you say it?

Bank’s shares are held by six major financial institutions: IFC, DEG, EBRD, FMO, JP Morgan, Ashmore and Georgian individuals.   Thanks to this TBC Bank is given huge opportunities. Our foreign investors have further plans to broaden their involvement in the local market in the next 3-5 years’ timeline.

- On the other hand, what we see is lowered rates on mortgage and other loans. Does this mean that the demand on loans are increased because of the increased confidence in banks? How impressive are the figures of the loans issues by TBC Bank last year? Q. Do you see the risk of raising housing market prices because of the lowered mortgage rates?

- TBC Bank’s campaign that we announced in December, 2010 and January, 2011 proved to be quite successful. TBC Bank’s retail banking portfolio was significantly increased and in the two months our market share grew by 3% in terms of retail credit portfolio.

As for future expectations in respect to interest rates, this is more depended on external factors. In order to reduce inflation rate the National Bank of Georgia has been taking strict measures in regards to banking regulations including liquidity, capital adequacy, reserve growth- all that serves the one and only goal to decrease credit activities of commercial banks compared to 2010 and thus indirectly influence on inflation risks. Looking at deposit inflow banks will take a second look at mortgage rates supposedly in April, May, 2011.

- TBC Bank offers a wide range of banking products. What we see today is the raised costs on everyday consumption necessities. How helpful your discount cards are? How actively do people use at least 5% discount opportunity offered by the bank?

- TBC Bank has launched a very successful product, a co-brand card for women – TBC Cosmo. Cardholders are offered different discounts at very wide range of merchants, which they visit for everyday shopping. Our experience shows, that if a consumer is offered even low discount at the merchant, this usually becomes a reason for them to choose it.

Last year TBC Bank offered to it’s  loyal customers the most unique and innovative service in Georgian banking sector – SMART CLUB. This project is one of the mostsuccessful projects launched by Bank. Around 70 000 of our clients use this service.. Smart Club is a project directly linked to the activities of our individual clients. Whether you make a transaction, open a deposit or take a loan within TBC Bank you’re given Smart Club points. Besides, TBC Bank constantly offers various events, exclusives to the members of Smart Club. This is a long-term project and we’re thinking to continue it during the next 3-5 years. Smart Club has attracted some tens of thousands of people from the very beginning and we’ll be launching bigger marketing activities to further promote this project.

TBC Bank’s Smart Club is also the most large-scale social media project in Georgia. Currently the number of fans of Smart Club page on Facebook exceeds 113 000 and this number significantly increases every day.

We launched Smart Club last year and when we started thinking of promoting it on facebook, average fan number expectation was 20 000 by the end of the year, I suggested the number would be maximum 45 000, but the result totally exceeded expectations and hit over 100 000 fans.

- You’ve been the General Director of the bank since the very beginning. Do you have other career plans outside TBC Bank in the next five years?

- I have no plans outside TBC Bank. Now when the financial crisis is over I see more interesting potential ahead and I want to be there in every single step TBC Bank will be taking in future. The bank together with its shareholders has rather ambitious plans to implement in the next three years. We want to see TBC Bank grow as a universal bank in Georgia and see its shares growing in the local market. Azerbaijan is also a strategic market for the bank and we’ll be doing our best to broaden our activities there.

- What about your family members, are they all TBC Bank clients?

- My family members they’re all TBC Bank clients. I’m promoting the banks products and services in my family, doing some domestic marketing job and quite successfully obviously.



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