The Bank of Georgia and TBC Bank are number one in the world in terms of profitability
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VerdictFactCheck leaves Bidzina Ivanishvili’s statement WITHOUT VERDICT.

 

Resume: Profitability is the chief aim of any commercial entity. The higher the margin of profit is, the more successful the business is. This said, however, arguing about “acceptable” and “unacceptable” levels of an entity’s profitability in a market environment is meaningless.

Bidzina Ivanishvili’s basis for making his assertion that certain commercial banks are number one in the world is unknown because there are thousands of banks in the world and getting complete information about their financial performance is practically impossible. In Georgia, the Bank of Georgia occupies the first position in terms of profitability.[1] Apart from the Bank of Georgia, TBC Bank is outperformed by Halyk Bank Georgia and Liberty Bank in terms of return on equity (ROE) whilst Halyk Bank Georgia has better results as compared to TBC Bank in terms of return of assets (ROA).

As FactCheck is unable to fully verify the statement, we leave Bidzina Ivanishvili’s statement WITHOUT VERDICT.

 

Analysis

Chairman of the Georgian Dream – Democratic Georgia party, Bidzina Ivanishvili, stated that two banks, TBC Bank and the Bank of Georgia, “have devoured the country and are number one in the world in terms of profitability.”

The rate of return (ROE) means that profitability is the chief aim of any commercial organisation. Other things being equal, every business is created and run to earn profit. Therefore, the higher the margin of profit is, the more successful the organisation is. It is perplexing to argue about “acceptable” and “unacceptable” levels of an organisation’s profitability in a market environment. To be fair, Bidzina Ivanishvili himself emphasised that a high margin of profitability is something of which to “be proud.” However, against this backdrop Mr Ivanishvili mentioned specific organisations in a negative context exactly because they have high margins of profit.

Speaking of profitability, it is necessary to clarify that the profit or income of any organisation in absolute numbers does not really say anything. For instance, profit in the amount of GEL 1,000 is a very good figure if a person invested GEL 2,000 to get this profit. Although, that would be completely unacceptable if GEL 100,000 were invested. Profitability is always analysed as opposed to the resource which made that profit possible. A commonly used measure of profitability is the return on equity (ROE) and the return of assets (ROA) of an organisation. There are perhaps different approaches for calculating these figures. This article uses profitability figures from the commercial banks’ published data in compliance with the Rules for Disclosure of Information by Commercial Banks within the Framework of Pillar III.

 

Table 1: Georgian Commercial Bank Profitability Figures

Bank R O E R O A
IV 2017 III 2017 II   2017 I    2017 IV 2017 III 2017 II   2017 I    2017
TBC Bank 20.10% 19.60% 20.66% 18.51% 2.77% 2.81% 3.13% 2.96%
Bank of Georgia 31.83% 33.79% 38.04% 44.41% 3.53% 3.76% 4.16% 4.75%
Liberty Bank 25.76% 23.20% 20.56% 20.33% 3.09% 2.76% 2.45% 2.36%
BasisBank 11.04% 13.06% 16.45% 18.74% 1.91% 2.37% 3.14% 3.51%
VTB Bank 12.6% 13.3% 20.4% 26.7% 1.4% 1.4% 2.2% 2.7%
Cartu Bank 18.27% 7.92% 10.78% 11.20% 3.20% 1.37% 1.81% 1.77%
ProCredit Bank 11.38% 10.36% 7.29% 7.46% 1.55% 1.43% 1.01% 1.01%
Silk Road Bank -1.80% -1.63% 1.92% 0.22% -0.87% -0.76% 0.83% 0.09%
Ziraat Bank 3.72% 4.94% 3.37% 9.05% 1.13% 1.48% 1.04% 2.96%
Is Bank 9.74% 11.18% -5.49% -3.88% 1.10% 1.21% -0.56% -0.40%
Tera Bank 15.26% 13.60% 15.37% 21.24% 2.26% 2.04% 2.31% 3.19%
Halyk Bank 20.46% 21.95% 26.33% 29.01% 3.15% 3.44% 4.06% 4.19%
Pasha Bank 3.86% 5.32% 4.77% 5.58% 1.57% 2.19% 1.91% 2.11%
Finka Bank 6.22% 5.17% 0.63% 3.33% 0.75% 0.62% 0.08% 0.41%
Credo Bank 13.05% 11.80% 9.70% 5.77% 2.41% 2.21% 1.90% 1.14%

Source: Commercial Banks[2]

 

As illustrated by the table, the Bank of Georgia is indeed number one in Georgia in terms of profitability according to the data for 2017. At the same, TBC Bank is outperformed (in addition to the Bank of Georgia) by Halyk Bank Georgia and Liberty Bank in terms of return on equity (ROE) whilst Halyk Bank Georgia has better results in terms of return of assets (ROA). In regard to being number one in the world, it is practically impossible to verify this particular part of Bidzina Ivanishvili’s statement as there are thousands of commercial banks in the world and their financial performance is not available in full. Mr Ivanishvili’s basis for making his assertion is unknown.

 

[1] In accordance with the published data of commercial banks published in compliance with the Rules for Disclosure of Information by Commercial Banks within the Framework of Pillar III.

[2] Quarterly report of Pillar III.

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