If we look at the data on the banking sector, there is a feeling that the country is not suffering a crisis, in Georgia for a long time the real situation in the economy and the banking system statistics are not connected with each other. Banks go ahead much faster than the economy as a whole.
If economic growth cannot exceed 5%, the growth rate of the banking system reached double digits. In particular, in January-March 2015 the banks net profit amounted to GEL 101 mln, which is 7% or 7 million more than in the same period of 2014. Dynamics of banks’ revenues catches the eye in which the national currency devaluation played a significant role. In the second quarter of 2015 banks’ profits increased in comparison with the 1st quarter by 62% and reached GEL 1 billion. The figures on interest and other income are almost identical – 50 to 50. Interest income rose by 22%, non-interest – by 146% and totaled GEL 480 million. Non-interest income increased and reached almost 50% of total revenue, while in 2014 the figure was 35-40%. As for expenses of banks, in the 1st quarter they rose by 77% to GEL 877 million. Interest expense increased by 17%, non-interest – by 90%. Other non-interest expenses increased by 160% and amounted to GEL 381 million. The trend shows that the interest income of banks is growing faster than interest expense – in particular, in the 1st quarter of 2015 the banks received interest income in the amount of GEL 455 million and spent 129 million, ie 3.5 times less on maintenance of deposit accounts .
These figures clearly show how great is the percentage difference between deposits and loans. The average percentage of deposits is 5, 9%, while on the loan – 15%. It turns out that the spread makes 9, 2%, and Georgia is one of the world leaders by this indicator, as in developed countries it reaches an average of 3%, in developing countries – 5%. That is, it turns out that banks receive from attracted deposits triple profits. In this situation, it begs the question – why the difference is so big? The interest rate on bank loans consists of several components, and the biggest of them is a maintenance of the raised funds, about the same – administrative costs, and finally another important component – the risks. If you look at the portfolio of bank loans, it is possible to ensure that it is fairly healthy, that is a risk fee goes mainly to banks’ profits. To determine the portion of the interest rate, which deals with risks, is not difficult. As we know, banks are actively taking various government securities under 6-7%, and the raised money goes to lending at an average of 15%. It turns out that banks are investing in reliable and non-risk government securities at 6-7%, it turns out that the percentage of risk totals 8-9%. This is one of the highest similar rates in the world. Thus, banks lend at interest that is much higher than their costs, which has a positive impact on their financial performance. The result is that despite the difficult situation in the economy, banks’ profits are growing briskly.