Moscow’s Renaissance Capital has released “cautiously optimistic” forecasts about Bank of Georgia, which has been through some rough times after last October’s parliamentary elections brought about a change of government and consequent political turmoil in the Caucasus country.
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Bank of Georgia, “as a subset of Georgia itself, has been subject to volatility like no other stock we cover in the past year”, says David Nangle, head of equity research at RenCap.
“Once again, it seemed to be staring into the abyss with the Georgian Dream party’s election win in the fourth quarter of 2012, and the near-immediate economic standstill that followed (with a year-on-year GDP contraction of 0.8% in December, vs fiscal year 2012 growth of 6.1%),” he says.
However, “Georgian politics appears to be back on a progressive footing”, and the economy is picking up with GDP showing 2.3% year-on-year growth for January, Nangle says.
While he cuts its earnings forecasts for Bank of Georgia for 2013 and 2014 by between 5% and 6%, Nangle credits the lender with “robust” earnings and says the firm’s margins, new insurance business and costs are “all impressive”.
“Where Bank of Georgia impresses most is in the robustness of its income statement, irrespective of the political/macro environment it finds itself in,” he says.
Bank of Georgia has been “one of the best-performing” bank stocks in Europe, the Middle East and Africa year-to-date, up 42%, Nangle says.
The bank’s insurance business, which has only been operating in its current form for a single quarter – the fourth quarter of 2012, – delivered earnings of 6.4m lari ($3.9m) for the period.
However, politics “remains front and centre of the risk case” for the bank, Nangle argues.
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