November 1, 2016 / 11:22 AM / 9 months ago

INTERVIEW-Georgia's TBC Bank targets loan growth after acquisition spree

ВРЕМЯ ЧТЕНИЯ 4 МИНУТ

* TBC expects annual loan growth of 15-20 pct

* TBC bought SocGen's Georgia business for 337 mln lari

* Expects cost-to-income ratio of below 40 pct

* Deals to knock off 2 percentage points off capital

* Capital position still comfortable - CEO

By Margarita Antidze

TBILISI, Nov 1 (Reuters) - Georgia's TBC Bank, aims to expand its loan book by 15 to 20 percent a year and has sufficient capital to do so even after buying a business from France's Societe Generale, its chief executive said on Tuesday.

TBC became Georgia's largest bank by loans and deposits after buying JSC Bank Republic from SocGen and the European Bank for Reconstruction and Development (EBRD) for 337 million lari ($141 million) in October.

"Taking into consideration that the Georgian economy is expected to grow faster in 2017-18 than this year, we have a substantial potential for growth," TBC's chief executive Vakhtang Butskhrikidze told Reuters.

"Our medium-term loan growth forecast is 15-20 percent."

TBC's loan book grew by 11.4 percent year-on-year in the first six months of 2016. The bank also bought some business from JSC Progress Bank and Georgian insurance firm Kopenbur for another $47 million in a move to expand in insurance.

Butskhrikidze, himself a minority shareholder in TBC, said the bank, which placed around $240 million through an initial public offering (IPO) in London in June 2014, did not have plans for a fresh share issue or capital injections.

Its recent deals would reduce TBC's total capital adequacy ratio by 2 percentage points, from 15.7 percent at end-June, which is a "very comfortable level" and above the local minimum requirement of 10.5 percent, he said.

Butskhrikidze said that TBC's robust loan growth projections, cost-to-income ratio target at below 40 percent, return-on-equity target of 20 percent and a dividend of 25 percent of its net income in the medium-term give the bank an opportunity to secure sustainable capital growth.

Institutional and retail investors hold 55 percent of TBC, with another 22 percent split among the bank's Georgian founders and 13 percent is owned by the EBRD.

Analysts suggest that the takeover has made Georgia's banking sector less competitive as two major banks, TBC and Bank of Georgia, the largest by assets, now hold more than 60 percent of the sector.

Economy

Georgia's government forecasts growth of 3 percent in 2016 and 4 percent in 2017, compared with 2.8 percent in 2015. The International Monetary Fund (IMF) predicts it will grow by 3.4 percent in 2016 and 5.2 percent in 2017.

Apart from expanding in insurance and conventional lending, TBC plans to continue to invest in services as well as internet and mobile banking, as Georgian banking is "under penetrated, well capitalised and efficiently regulated", Butskhrikidze said.

The South Caucasus country's economy, which was hit by falling exports and remittances and a plunge in the Russian rouble, expanded by 2.9 percent year-on-year in August from 2.1 percent the month before and 2.3 percent a year ago.

"Nominal GDP growth will help loan portfolios of banks to grow, leading to raise in penetration," Butskhrikidze said.

"That's why I don't think there is a risk of bubble."

$1 = 2.3850 lari Editing by Katya Golubkova and Alexander Smith

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