GEORGIAN BANKS` MISTERY

EKA LOMIDZE

No important movements were expected in Georgian banking system in 2003. The past year was considered prosperous and successful.

This period was noted for the perfection of legal framework, increase of personnel qualification level, and increase of liabilities. Therefore, we can conclude that bank system has improved.
Tariel Gvalia (chairman of director’s board in Tbiluniversal bank). We cannot discuss the year 2003 without mentioning and considering past year. The year 2002 with its solved and unsolved problems was quite an important and successful one for both the system and our bank. For instance, our portfolio increased from 9 to 13 millions, assets grew from 16 to 20 millions and liabilities – from 11 to 14 millions. What is important is that the norm of reserves decreased. There are lots of credits that were left in our bank system as well as in assets and portfolios after the Russian crisis. Agriculture credits were, finally, written off. The same happened to many of the above-mentioned credits in 2001. In 2002 the system has really become free from the similar portfolio. We hope that the growth of the system and development of new products will continue through 2003. Competition has revealed that deposits and credits are not of the same type, but rather diversified.
– What novelties do you offer consumers from this point of view?
– Where before there were short-term credits allotted for trade sector, the situation has changed now. The market share of consumer credits has grown significantly. In 2002 consumer credits have reached 10% indicating at the increased purchasing ability of our population. Banks allot consumer credits for education, flat repair, purchase of equipment and cars. According to generally accepted opinion, If something is made for the best in a country, this should lead to the growth of consumer credits share.
The number of credits allotted to private persons is high. However, these are not consumer credits, but rather reflection of shadow economy – a great number of credits circulating in businesses are allotted to private persons. We planned sales by instalments with several well-known firm shops. This is, certainly, a step forward. The same concerns electronic banking that is now very much in fashion. When a client controls his account without leaving an office, this is a certain risk, but nothing venture nothing have. There are novelties in deposit portfolio, too. Last year, the average interest index of credit was 23%, this year it will be 21%. In other words, credits become cheaper. The annual 2% is already important. Dates are delayed, too. Where before the credit date was 23 months, this year it is 26. Where before credits were covered on expiry date, now they are covered on the monthly basis in part. Customers require different products in the liabilities part. There were 3-6 and 12 months’ deposits before, now there are monthly ones. There are accumulative deposits meaning that you can put savings on your account with interests being added to it. There is diminishing or children’s account.
As for relations with the National bank, the latter tries to pursue independent policy. The government tries not to exert pressure on the National Bank as it does not have a direct mechanism for this, but there are indirect mechanisms in our country, too. Though, we should mention in favour of the government that it tries less to let the National Bank issue emissive money. Lari preserves stability, but we have to face a problem here ?solvency or balance of the country. Today, we repay foreign debts, but if we fail restructuring of some great debts in 3-5 years’ time with laris and index of GDP, we will not be able to repay foreign debts.
As far as novelties are concerned, in 2003 Tbiluniversal bank will be added to the number of Georgian banks involved in the issue of credit cards. Today, we serve only credit cards issued by other banks, which is, certainly, expensive. The market is small and production is expensive so this business is not profitable in Georgia. Another thing is that we should have credit card as bank product. Deposit or credit products are not sold equally. If certain production is sold with 50%, this does not mean that only this production should be put on counters. There should be other products on the counter, too, that will have their own customers.
As for branches, we do not plan ones as in previous years we opened some branches. At the same time, we are opening head branch. The office we are in now has two functions: head and branch office. As for cadres, the bank started with 45 collaborators last year, now it has 90. Personnel policy and salary motivation system has changed.
Vakhtang Butskrikidze (President of TBC bank). In 2003 the bank does not intend to give up positions that it reached through lengthy work. According to the Georgian Times, TBC bank was called the best company of the year and according to the magazine “Banks” and Euro award, it was the best bank of Georgia in 2002.
Financial position was quite successful. We are considered the greatest bank of Georgia by 190 million laris’ worth assets. From the viewpoint of image and trust, we are in the lead due to a great number of deposits accumulated in our bank, in Georgia making up approximately 22% of the whole market, which is, of course, a great figure. In 2002, we started to issue visa cards and became real members of visa. Our purpose, mission and main direction is provision of our customers with high-quality and comfort service. Quality is determined in accordance with several directions: it is comfort that allows a customer to enjoy the service as well as temporary expense and high-quality service. We wish to hold the first place in all three characteristics. The year 2002 was quite a successful one in this sense. We wish this trend to last till 2003. At the same time, we wish to orient ourselves on modern electronic service. In the end of 2002, we introduced Internet banking. This product has existed here for the last two months, but we require time in order to make analysis before the product becomes widespread. We attach priority to private business. We will proceed with the same trend in 2003. The development of our business will be connected with private companies and international institutions.
As for co-operation with the National Bank, this state structure performs successful work. In fact, credit policy of the National Bank promotes economic stability of the country from global and strategic viewpoint. There is difference of opinions between supervisory and subordinate companies, but to the extent that allows to reach agreement and optimal decision.
– What would you say about interest rates?
– Interest rate of credits is high. If interest rate or the reserves of Commercial Banks in the National bank reduce, the commercial banks will have more liquid assets. This will, certainly, lead to the reduction of interest rates. The 14% interest rate might reduce to 8%.
– Some think this might lead to lari depreciation.
– No danger threatens lari even if we rely only on this measure without taking any other ones. This interest goes back to 1998 after the Russian crisis. I think that the rate of this reserve must reduce along with stability and reduction of the banks number. This factor will cause reduction of the interest rates of credit, which will affect economy positively.
We are not expecting any cardinal changes in the future but compared with the market growth, the share and assets of TBC bank will be increasing. We wish our institution to be a leading one in 2003, too. Our purpose is not establishment of 30-50 branches in Georgia, which requires much money. Our purpose is to provide modern technologies directly to customers’ office.
Vladimir Pateishvili (president of Georgia bank). We can present purposes of Georgian Bank as follows: “Georgian Bank as one of leading banks of Georgia seeks to strengthen its positions. It should again be in the three by its positive and main quantitative parameters. Our work will be performed as follows: growth of profitable assets, deep diversification, quality perfection, increased investment assets and, on the other hand, expansion of market of legal entities’ customers, principally, at the expense of small and mid-size business; active service of Baku-Tbilisi-Jeikhan projects, high reliability with the provision of appropriate liquidity. We will also work on the growth of efficiency index and technologies renewal as well as on the development of personnel policy and motivation of collaborators.
The year 2002 was important for our activity.
The Georgian Bank was the only bank in our country to go through complete certification both in visa and master card system. Protection and safety systems were renewed, the third credit agreement was concluded between the “Bank of Georgia” and German investment corporation “DEG” for allotting credit to finance small and mid-size business. The amount of credit portfolio was more than 100 million GEL. The number of bank cards emitted by the bank makes up 10000. Assets of Georgian bank exceeded 175 millions, capital was more than 44 million GEL and budget contributions of banks was more than 6 millions. Bank of Georgia and Georgian ministry of labour, health and social security signed the agreement concerning the development of programme on providing jobs. Bank of Georgia has also joined the investment project prepared by Georgian National Investment agency. The honourable degree of “stable bank system” was granted to Georgian bank in the competition held under the aegis of the ” Georgian Times”. The Bank of Georgia was recognised as the best bank in the open competition held under the aegis of the Georgian President.
It is also important to note that Internet banking system was first introduced in Georgia. It needs time to develop. We have 50 agreements all in all. This is not such a great figure as we have no culture of using Internet. Our activities are not confined to Tbilisi. We intend to extend our activities. This service produces no results commercially, but after a certain time it will lead to retroactive effect. Much was spent on plastic cards in its time. Visa and Mastercard lost approximately 100-150 thousand dollars, but now we work for profit. For instance, the aviation factory took 2000 plastic cards at once.
We collaborate successfully with insurance companies. We have has many years’ relations with Imedi-L. As for relations with the National bank, I am pleased to know that supervisory system was established. There are, certainly, issues I do not agree to, for example, the high interest rate in liability reserve. Naturally enough, the National Bank has its own interests. The interest rate should be differential. As for branches, we do not intend to open ones yet.
As far as we see, the year 2002 was quite successful and productive one for the Georgian Commercial Banks. If the situation does not improve, we should not expect contrary indices. As for the position of the National Bank with regards to the position of commercial Banks, we were not able to determine it, as numerical accounts from the Commercial Banks have not been submitted to the National Bank. Thus, we were refused analysis. For our part, we hope that relations of supervisory and subordinate structures allow the population to feel safe and make business in comparatively agreeable conditions.