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TBC Bank’s Ambitious Entrance into Georgia’s Microfinance Market

Published: May 1, 2011 | 8:38 pm
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CEO: “I believe that the acquisition is beneficial both for Constanta and TBC bank. With TBC support, Bank Constanta will further increase ambitions to exceed GEL 500 million in assets in 3-5 years.”


TBC Bank, one of the leading commercial banks in Georgia, has recently entered the local microfinance market. The bank already enjoys good reputation in running microfinance institution in neighboring Azerbaijan and now after acquiring the control package of Bank Constanta the bank has ambitious plans in Georgia as well. The COMMERCIAL TIMES interviewed Vakhtang Butskhrikidze, CEO of TBC Bank regarding the recent acquisition and the bank’s further development plans in short-and long-term perspective.

On April 19 TBC Bank and Bank Constanta officially informed the fact, that TBC purchased 80% of shares of Bank Constanta. According to the contract TBC Bank became the owner of the control package. International financial organization “OikoCredit” maintained the previous market share of 13% and the left  7% are still held by Georgian individuals.

- Just recently TBC Bank and Bank Constanta officially informed the fact that TBC Bank purchased 80% of shares of Bank Constanta for GEL 13.6 million. What’s the main reason behind this decision and what were the major factors that draw TBC banks interest toward Bank Constanta?

- For the past three years TBC Bank has been planning to enter the local microfinance market. However, it appeared to be difficult to make this happen only through our own branch network. Thus, we’ve started searching for a financial institution, which would give us opportunity to develop in this direction. This is how we came up with the decision to acquire 80% shares of Bank Constanta – a well established microfinance institution that obtained banking license in 2007.

I would emphasize several major factors why the recent acquisition is beneficial for TBC Bank:

First of all, Bank Constanta is one of the leading financial institutions focused on micro financing sector with an impressive history and know-how in the field, where we see huge development opportunities going forward.

The branch network of Bank Constanta is very attractive for us as they are spread over the small and medium size cities of Georgia where we had no presence before.

Bank Constanta is already successful in running agricultural lending direction which we strongly believe will have significant growth opportunity in the future.

Furthermore, this deal will give us impressive synergy effect. There is huge cross selling opportunities for TBC and Constanta Banks Customers. Also, Constanta will benefit from our know-how to attract deposits and diversify their liabilities structure. As you know majority of Bank Constanta’s liabilities are financed from international financial institutions. Therefore, the challenge is to attract deposits for the bank. TBC Bank as the biggest bank in retail deposits has substantial experience that will add real value to Constanta Bank’s plans of entering deposit market. In the forth coming years we expect Bank Constanta’s deposit portfolio to become quite impressive. Naturally, we can benefit from the scale effect in our back offices where we can consolidate operations and share best knowledge to increase effectiveness and reduce cost.

As far as management is concerned, I strongly believe that Bank Constanta has a professional and organized management team with excellent reputation. Therefore, my vision is that no changes will happen in the executive management level. Currently we’re working on the long-term strategy development for the bank where we will set and have set rather more ambitious goals.

Overall, I believe that the acquisition is beneficial both for Constanta and for TBC bank. With TBC support, Bank Constanta will further increase ambitions to exceed GEL 500 million in assets in 3-5 years.

- Will Bank Constanta continue activities as an independent bank? Do you plan to launch a rebranding campaign?

- Yes, Bank Constanta will continue activities as an independent bank, there are no mergers or major rebranding campaign planned. However, there will be significant improvements. The brand will become friendlier and also will be focused to support deposit growth.

The bank will also offer more refined products and services, Currently there are three banks operating aggressively in microfinance market: Bank of Georgia, ProCredit Bank and Bank Constanta. However, the first two are not primarily focused on microfinance activities while the last one is all about it and this is why we believe in the next future Bank Constanta will turn into the largest microfinance bank in Georgia.

Another very important point is branch network. Bank Constanta has 21 branches and 17 of them are located in the areas where TBC Bank is not presented. Thus, by entering TBC Bank’s credit managers there, our clients can get all landing services at Bank Constanta. Moreover, we want to add new branches to Bank Constanta’s already existing network.

- Why did TBC Bank get interested in microfinance business in the first place?

- There are two main reasons on why TBC Bank is interested in microfinance business –First of all, we did not have any presence in the microfinance market before and secondly – this is the segment that offers big room for business expansion. Microfinance market is far-less saturated compared to corporate or even retail banking, which is a very competitive in Georgia. Due to our estimations there must be around GEL 1 billion demand in micro financing while today the local market can meet only half of it.

- TBC Bank has an experience in running a microfinance institution in Azerbaijan. What are your plans as far as TBC Credit is concerned?

- Azerbaijan is very attractive market with its growth potential and banking penetration. TBC Credit has shown sustainable growth and is becoming a well established microfinance institution in the market.

First quarter results proved to be  successful. TBC Credit’s credit portfolio was grown by 10% and we expect rising it by 40%.

- How would you assess the first quarter results of TBC Bank? How promising are future expectations?

- First quarter of 2011 has been impressive for TBC Bank. We got back to our historical profit indicators and even exceeded expectations. By the end of the first quarter the bank’s profit exceeded around GEL 24 million. TBC Bank managed to increase its market share by 1% in assets. We are very positive with the remaining 9 months that should result in Loans and Deposits further growth.

I should mention that consolidation of the national currency was a good macroeconomic factor during this period. The only challenge remaining has been inflation, which is mainly caused by the international stock exchange fluctuations on oil and food products.

- As you mentioned a couple of month ago in the interview with The COMMERCIAL magazine, some news were to be expected in terms of loan offers in the local market by April-May. How would you evaluate the current situation in this respect?

- In the first three weeks of April only mortgage loan portfolio grew by GEL 14 million, which means that the local market demand has been increased. Obviously, we will continue meeting customers requires with updated products and services.

Starting from May TBC Bank will launch a new credit card, which will offer best customer-tailored flexible services ever.

- As for TBC Leasing, the daughter company of TBC Bank, what plans does the bank have for its further development?

- In the first quarter of 2011, TBC Leasing has been working actively. However, current leasing legislation is not flexible which makes it difficult to develop this sector in the right way. Therefore, for the past one year there have been intensive discussions on these issues where we’ve been closely cooperating with business associations in order to overcome these issues. As a result, the major changes that have to be made are already agreed with the Ministry of Finance of Georgia and are also approved by USAID foreign consultants. I hope in the next two-three months we’ll see amendments made to the legislation as far as leasing is concerned and we won’t have complicated taxation burden any more.

- If we take a look at TBC Bank’s latest entertainment activities, the most hilarious would be Find 10 000 game. How do these kind of activities influence on customer loyalty?

- We’ve conducted quite successful Marketing campaign of deposits in February-March; innovative promotion action has resulted in outstanding feedback.  Besides the deposit campaign, TBC Bank organized very original and innovative game Find $10 000. The bank gave opportunity to all participants to find and become the owner of $10 000. The idea behind this game was to make it clear to the public, that it is a very risky and unprofitable endeavor to burry money or hide it at some other place, and that, money is kept safely only in the bank and particularly, in TBC Bank.

The idea worked very well which was reflected in the increased number of TBC Bank’s depositors. During March savings and term deposit portfolio nominally increased by GEL 23 million. The number of deposits opened in March was up to 5100 which is 70% more than the indicator of previous months.

- Last, but not least, TBC Bank has started organizing exclusive evenings in the TBC Gallery. To whom are these exclusive evenings held for and what’ so exclusive about them?

- From 2010, TBC Bank started new initiative. Every month we organize special events at TBC Gallery which are held exclusively for VIP and Status clients by famous artists. This is our additional bonus service to our clients. We’ve already organized four events. In December a piano concert of Georgian pianist Eliso Bolkvadze was held in TBC Gallery. In February TBC Gallery held a presentation of album of Bidzina Kvernadze’s new songs and the music papers of his last work Requiem. In March TBC Bank presented a wonderful gift to jazz music listeners. In April our VIP and Status clients enjoyed Spring Evening with Theatre Quartet.

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