Georgian Banks: Feeling the heat (BGEO downgraded to SELL and TBC downgraded to HOLD)
Although the Georgian banks have maintained their profitability with success in the past two years, we believe that stricter regulation, slower lending growth and sliding NIMs will likely feed into the banks’ ROEs in the rest of 2019E (around 200bps) and potentially onwards. In our view, the medium-term backdrop is not only more mundane, but also more challenging. We also do not see a silver bullet. Capital ratios are tighter and there is probably limited room to improve economies of scale. Our post-revision valuations are not compelling and we believe the operating environment bears more risk to the downside than upside. We downgrade TBC to HOLD (from Buy, new price target (PT) GBP 17.1/share) and BGEO to SELL (from Hold, new PT GBP 15.8/share).
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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