Frontier Banks - 1Q19 Preview: Solid Profitability All Round
TBC Bank kicks off 1Q19 IFRS reporting for our frontier banks next week (Monday, May 13), to be followed by Bank of Georgia (BGEO) on Tuesday and Halyk Bank (still TBA). While 1Q is typically a slow quarter, this year it looks set to have been a profitable one all round, and we expect the three banks to deliver 23-24% ROE. As for stock implications, the main market focus for Halyk Bank is the upcoming capital markets day on May 20 and recent announcement that controlling shareholder Almex is considering partially selling down its stake, which we think would be a very positive medium-term catalyst. Meanwhile, a key theme for the Georgian banks will be the ongoing adjustment to recent regulatory tightening (PTI thresholds and lending dedollarization) in terms of slower retail loan growth and lower NIM. We also wait to see whether there has been any negative impact on deposit flows for TBC Bank, given the legal issues that were prominent in 1Q19. Until we hear more from the prosecutor's office, of the two Georgian banks we would favor BGEO, but the extent of the impact of the retail loan slowdown remains unclear for both.
BGEO Group is a holding company. Together with its subsidiary, JSC Bank of Georgia (the Bank) and other subsidiaries, Co. makes up a group of companies that provide banking, insurance, real estate, utility, leasing, beverage production and distribution, brokerage and investment management services to corporate and individual customers. Co. has two operating segments: banking business, which comprises: retail banking and payment services, corporate investment banking and wealth management operations and banking operations in Belarus; and investment business, which comprises Co.'s stakes in Georgia Healthcare Group PLC, Georgia Global Utilities, m2 Real Estate, Aldagi and Teliani Valley.
TBC Bank Group is a holding company. Through JSC TBC Bank and its subsidiaries, Co. is engaged in universal banking operations that include corporate, small and medium enterprises, retail and micro operations within Georgia.
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