More loans taken out in Georgia, says NBG

Despite the ongoing depreciation of Georgia’s national currency against the US dollar and Euro, more people in Georgia are taking out loans in foreign currencies.

Latest data from the National Bank of Georgia (NBG) revealed the number of loans taken out in foreign currencies had surged by five percent last month despite Georgia’s national currency, the Lari, continuing to depreciate.

The Lari started dropping in value against the greenback in November 2014. At this time the exchange rate saw 1 USD valued at 1.75 GEL. However today, the official price of 1 USD reached 2.2287 GEL.

The Lari experienced similar depreciation against the Euro, where as of March 25, 2015, 1 EUR cost 2.4478 GEL.

The Lari depreciation has mainly affected people who have loans in the US dollar but earn an income in Lari.

To bring relief, NBG earlier asked commercial banks to extend loan repayments for affected clients. NBG president Giorgi Kadagidze believed loan extensions was one way to reduce clients’ minimum monthly repayment rates, reducing the financial hardship on borrowers.

Latest NBG data released today showed the number of loans offered by commercial banks (including loans to non-residents) in February 2015 had increased by 498.8 million GEL (3.6 percent) compared to the previous month. By March 1 2015, the value of loans had exceeded 14.2 billion GEL.

In February, the number of loans taken out in the national currency had increased by 64.8 million GEL (1.3 percent) and the number of loans taken out in foreign currencies had increased by 430.3 million GEL (5 percent).

By the end of February 2015, commercial banks had issued 1.5 billion GEL worth of national currency-denominated loans (5.3 percent or 77.4 million GEL more than the previous month) to resident legal entities and 5.5 billion GEL worth of loans in foreign currencies (4.6 percent or 241.4 million GEL more than January 2015), said NBG.

The majority (61.9 percent) of loans offered last month to legal entities were allocated to three sectors - industry, construction and trade.

The largest share (30 .5 percent) went to the trade industry. When compared to January 2015, the volume of loans allocated to trade increased by 5.2 percent or 104.8 million GEL. By March 1, the total value of loans to the trade sector exceeded 2.1 billion GEL, said NBG.

Meanwhile almost one quarter of loans issued to legal entities in February were provided to the industrial sector, and amounted to 1.7 billion GEL by March 1. This was 2.9 percent or 49 million GEL more than in February 1, 2015).

Of this, 7 percent (487.5 million GEL) of loans went towards construction. This was an increase of 3.8 percent or 17.9 million GEL month-on-month.

For resident individuals, the number of loans offered to this group of people increased by 3.1 percent or 195.6 million GEL in February. By March 1, these loans amounted to 6.6 billion GEL.

NBG data also showed as of March 1, the banking sector in Georgia was represented by 20 commercial banks, including 16 foreign-controlled banks and two branches of non-resident banks.

Month-on-month figures showed in February, the total value of assets of Georgian commercial banks constituted 22.2 billion GEL – an increase (in current prices) of 1 billion GEL or 4.6 percent increase on January. The banking sectors own funds (equity capital) equalled 3.6 billion GEL, which made up 16.2 percent of commercial banks' total assets.

In February 2015, Georgia’s banking sector finished with a net profit of 46.0 million GEL. The five banks with the largest assets made up 77.7 percent of the total share of assets in the banking sector.

On another note, as of March 1, the total volume of non-bank deposits in the country's banking sector constituted 12.4 billion GEL – an increase of 4.2 percent or 499.3 million GEL compared with February 1 data.

NBG noted in February, the volume of demand deposits increased by 46.3 million GEL (0.9 percent) and term deposits increased by 453.1 million GEL (6.6 percent) compared to the previous month.

At March 1, the dollarisation ratio of total non-bank deposits constituted 64.7 percent - an increase of 0.72 percentage points compared to February 1, 2015.

Last month the annual average weighted interest rate on term deposits was 5.6 percent. In particular, the interest rate for national currency denominated deposits was 7.1 percent and the interest rate for foreign currency denominated deposits was 4.8 percent.

The share of the US dollar in the total volume of foreign currency denominated deposits equalled 81.6 percent and the share of the Euro equalled 15.5 percent, said NBG.