Bank of Georgia’s investment case marred by political uncertainty – RenCap

By Andrei Skvarsky.

Renaissance Capital analysts warn that investing in Bank of Georgia, until now one of the best-performing banks within the boundaries of the former Soviet Union, poses some risks today due to post-election political uncertainty in its home country.

Georgian Dream, a coalition that beat the ruling United National Movement (UNM) in Georgia’s parliamentary elections of October 1, has not come up with any clear platform, not going far beyond vitriolic but poorly substantiated attacks on the pro-western, market-friendly government of President Mikheil Saakashvili.

But though Saakashvili remains in office for at least another year, coexisting with likely prime minister Bidzina Ivanishvili, a controversial billionaire and the leader of Georgian Dream, the UNM’s defeat “has placed politics front and centre of any debate around investment into Georgia today”, RenCap analysts David Nangle and Armen Gasparyan say in a report.

RenCap still maintains “a constructive view” of Bank of Georgia, believes “nothing fundamentally changes at the bank on a micro level as of today”, and continues to see the lender as “one of the best examples (and beneficiaries) of Georgia’s impressive economic and political transformation”, Nangle and Gasparyan say.

Nevertheless, the Moscow brokerage has downgraded Bank of Georgia to “hold” from “buy”.

Three weeks ago, Nangle and Gasparyan praised the Georgian firm’s “strong fundamentals, dominant market position and a great track record of consistent delivery for shareholders”, and credited it with “best-in-class corporate governance” and “the strength of the management team”.

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