TBC Bank - In Good Shape, but Corporate Governance Risks Remain

In this report, we have updated our forecasts for TBC Bank and also compare its operating performance with that of Bank of Georgia. The two banks are - perhaps unsurprisingly - similar on many key metrics, including ROA, NIM, cost/income and fees/assets. But there are differences. TBC Bank has a stronger capital position, while Bank of Georgia has higher ROE. Bank of Georgia's loan growth has been stronger than that of TBC Bank of late, and the decline in NIM for TBC Bank has been sharper in recent quarters, taking it below that of Bank of Georgia for the first time in a while. While Bank of Georgia is now gaining traction in digital infrastructure, TBC Bank has laid down a marker for regional peers with its initial disclosures on its ecosystem financials, which is a highly welcome first step. It is obviously following a strategy of international expansion, while Bank of Georgia is staying put in Georgia. We raised Bank of Georgia to a BUY last week but we retain our HOLD on TBC Bank with a target price of GBP14.75 per share (up from GBP14.70), primarily on a higher cost of equity, which, among other things, is attributable to corporate governance risks related to the bank's founders.