Bank of Georgia - CEO Steps Down

Bank of Georgia has announced that Kaha Kiknavelidze is stepping down as CEO but will stay on until a replacement is found. Kiknavelidze has been CEO since 2016 and has long been a board member. It has been a challenging period for the bank, and the share price has been very weak this year. Even since the demerger was completed in May, BGEO has underperformed TBC Bank by around 20%. Although the results have been decent enough, the outlook is becoming more challenging for Georgian banks in terms of managing slowing growth and tighter regulation. BGEO in particular has seen its capital position come under pressure (11.0% CET1 versus TBC Bank's 12.8% at end-9m18), a still tough corporate lending environment and margins under more pressure than for TBC Bank (NIM has fallen 35 bps in the past three quarters, compared with TBC Bank's 50 bp rise). TBC Bank has also been ahead of the curve in terms of digital banking, which is now an increasing focus for BGEO.Despite being a long-time board member, Kiknavelidze had not had any direct management experience in banking when he was appointed. This made him a surprising choice in our view. We wait to see who is chosen as his replacement.