How is the coronavirus affecting the banking sector in Georgia?

Banks operating in Georgia are ending the first quarter of 2020 with negative net profit as they have created reserves for handling the negative expectations caused by the coronavirus pandemic.

The operating profits of banks in Georgia was 386 million GEL (about $122.54m/€112.92m) in the first quarter of 2020. Net profit was negative and amounted to -747 million GEL (about $237.14m/€218.53m), which is only 1.5 per cent of total assets, announces the National Bank of Georgia.

This is mainly due to the creation of a reserve for negative expectations from COVID-19. As of March the banking sector created a reserve for possible losses of 1.2 billion GEL in loans, and this number represents only a potential (and not realised) loss. The reserve itself, if this loss actually takes place, will allow banks in the future to avoid the risks of financial sustainability", reads the press-release published by the NBG.

In recent years, the annual average profit of the banking sector was 900 million GEL (about $285.71m/€263.29m). NBG said that due to the increased credit losses, the net profit of banks this year may be negative.

However, given these decent operating incomes, it is expected that when the pandemic is over banks will soon regain profitability", said NBG.

NBG said that there are quite large buffers to neutralise potential losses this year, and the stability of the banking sector is not in danger.