Georgian Banks - Closing Long Trade Idea
We are closing the long trade idea on Georgian banks that we opened on August 11 prior to the 2Q20 reporting season. > How has the trade idea performed? Since publishing the report, Bank of Georgia and TBC Bank are up 12% and 9%, respectively, in dollar terms. By comparison, Halyk Bank is up 2%, while the RTS and Sberbank are down 6% and 9%, respectively. > Why are we closing the idea now? We issued the trade idea heading into the 2Q20 reporting season given that we expected the market to appreciate a decent bounce in profitability in 2Q20 and a cautiously upbeat operating outlook. This is basically what we saw, with both banks reporting earnings slightly ahead of our expectations, ROE returning to 20% or so levels, and a cautiously optimistic outlook on 2H20 from the management teams. Our positive longer-term thesis on both names still stands - we have GBP14 per share target prices for both stocks - but this call was intended as a short-term recommendation around the catalyst of the 2Q20 results.
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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