Georgian Banks: still good value, despite the taxman (Bank of Georgia and TBC Bank stay BUY)
We revise our valuations on the Georgian banks following the corporate tax rate increase and the significant positive one-off that Bank of Georgia (BGEO) expects to book in 4Q22E. We also delve into the deleveraging in the economy, FX loan pricing and liquidity impact of buybacks. We calculate that the increase in the effective tax rate lowers ROEs by around 1ppt. That said, our valuations include a safety margin between current and long-term earnings power. As long as the Georgian taxman does not go out of his way to increase the 20% corporate tax rate further, we believe the sustainable earnings power is intact. We also believe that BGEO’s legacy claim one-off may add 150-160bp of CET1 and strengthen the management’s hand for buybacks. We continue to rate BGEO a BUY, with a price target (PT) of GBP 34.9 (0.9x P/TBV and 3.8x P/E for 2023E). Our new PT for TBC Bank is GBP 26.2/share (0.8x P/TBV and 3.8x P/E for 2023E), which is good value and includes the Uzbekistan business as a free option.
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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