On 12 May 2015, on air on Rustavi 2 TV, a member of the United National Movement, Giorgi Gabashvili, discussed Georgia’s economy. Mr Gabashvili remarked: "Some very interesting information was published yesterday. Cartu Bank’s profits have increased 17.5 times as compared to the previous year."

took interest in the accuracy of the statement.

Georgia’s banking sector registered GEL 101.4 million in total net profits in the first quarter of 2015 which is 7.2% more as compared to the same period of the last year. In the first quarter of 2014, 50.5% of total net profits was registered by the Bank of Georgia and 21.8% was registered by TBC Bank whilst Cartu Bank’s share was below 1%. As for the first quarter of 2015, 22.7% and 30.8% of total net profits were registered by the Bank of Georgia and TBC Bank, respectively, whilst Cartu Bank’s share in total net profits soared to 11.4%.

 Bank Share in the Total Net Profit of Georgia’s Banking Sector

In regard to Cartu Bank’s profit, in the first quarter of 2015 the bank’s net profit exceeded GEL 11.5 million which constitutes a 1,655% (17.5 times) increase as compared to the same period of the previous year. None of the leading Georgian banks showed such a rapid increase in profits. The second best result was registered by the Tbilisi branch of Ziraat Bank. However, we can speak about the basic effect in this case as Ziraat Bank’s net profit was GEL 50,000 in the first quarter of 2014 and rose to GEL 705,000 in the first quarter of 2015. TBC Bank registered the highest nominal profit (GEL 31.2 million) although Cartu Bank is the leader in terms of absolute growth (GEL 10.9 million). TBC Bank is in second place (GEL 10.6 million). None of Georgia’s commercial banks exceeded GEL 4.2 million in terms of their absolute growth in the first quarter of 2015 as compared to the same period of the previous year.

Net Profit of Commercial Banks

analysed the profit data of Georgia’s leading banks. To this end, one of the criteria used for assessing profitability is Return on Equity (ROE). According to the Decree of the President of the National Bank of Georgia on the Regulation of the Transparency of a Commercial Bank’s Financial Condition, ROE is defined as the annual net profit to equity ratio. Every commercial bank which operates in Georgia’s financial market is obliged to publish this indicator no later than 30 calendar days from the end of its accounting quarter.

As illustrated by the analysis of the profitability of Georgia’s banking sector, Cartu Bank has distinguished itself not only in terms of the absolute growth of its net profit. Additionally, it is the leader in terms of its ROE coefficient growth rate which rose 14.9 times in the first quarter of 2015 as compared to the same period of 2014.

 Return on Equity and Difference in Percentage

The basic effect also needs to be taken into account as Cartu Bank significantly lagged behind in the first quarter of 2014 in terms of a very low ROE coefficient (1.27%). However, the growth rate of 1,394% cannot be explained by the basic effect alone. The basic effect has been cited as one of the reasons behind the high growth rate although it is not the only one.

Looking into Giorgi Gabashvili’s statement, we have seen that Cartu Bank’s net profit increased 17.5 times (1,655%) in the first quarter of 2015 as compared to the first quarter of 2014 and exceeded GEL 11.5 million.

It is necessary to note that besides the absolute growth of its net profit, Cartu Bank’s Return on Equity rose 14.9 times in the first quarter of 2015 (from 1.27% to 19.04%). This gives us the ground upon which we can state that the absolute growth rate of its net profit has not been caused by a significant increase in capital. Cartu Bank is an exception in which both its absolute and nominal profits increased at the same speed.