TBC Bank (LON:TBCG)
Share Price £1539p Market Cap £967 million
Bid/Offer 1537p - 1542p Normal Market Size 200 shares
About the Company
Listed on the main London market since March 27th, 2017. TBC Bank is Georgian's largest bank with around a third of the country's deposits and loans provided. The bank is very much an old-style bank where it simply lends money and makes an attractive net lending margin of circa 7.8%.
Geopolitical Risks
The country has real geopolitical risks in particular with Russia. Looking at the map above, show internal 3 shaded areas lie within Georgia but are yet recognised as different independent countries by Russia. More importantly, Russia acts as their protector and has given citizens Russian passports.
Georgia as an independent country is vulnerable from a security point of view in neither belonging to NATO or the EU despite its wishes to do so. It seems that acceptance of Georgia into NATO would anger Russia.
Another country Turkey, not without its own controversy lies also on Georgia's borders. The other bordering countries are relatively economically weak.
Financial Risks
The decline in the local Georgian Lari (GEL) currency for last two years against a rising dollar is particularly important given that two-thirds of overall bank lending are in US dollars. However, the TBC bank has US dollar deposits that near enough match the amount lent out.
The government has put an emphasis on requiring more lending in their local currency for loans below a certain amount. It will take of course take many more years for this large dollar-denominated lending in percentage terms to decline. Naturally, the Central Bank makes TBC Bank and other local banks provide additional risk capital to offset against this exchange rate risk and be particularly prudent in lending and collateral obtained.
The Georgian Lari has appreciated in value against the Turkish Lira because the Turkish Lira had devalued considerably. Turkey is Georgia's biggest trading partner. The weakness in other surrounding countries depressed Georgia's GNP growth to only 2% last year.
TBC bank has become the largest bank in Georgia since November 2016 after TBC group as the number two bank took over Bank Republc, Georgia's third largest bank. Some economies of scale from the takeover and synergies…
