Georgian Banking Industry Analysis

1. Georgian Banking Industry Analysis Presented By: Natia Tutarashvili Tiko Ugulava Tamuna Shukakidze Tamuna Khalvashi Nino Lomsadze

15. Five Forces Analysis of Georgian Banking Industry

16. The intensity of competitive rivalry: • The rivalry in today’s Georgian Banking Industry is very intense. • The numbers of competitors is rising annually. • The basic trend to survive the competition is to merge with international well-established companies, like in the case of Bank Republic, when it merged with and joined SociétéGénérale, or become publicly traded by offering stock on international stock markets, like in the Case of BOG.

17. The Intensity of Competitive Rivalry: • Banks are spending large sums of money from their revenues on advertizing and promotional campaigns I n order to attract and retain customers. Every year, the price and quality of commercials that companies in this industry launch, and that we see on TV, is rising. • Today Banks are oriented on quantity, rather on quality to achieve the economies of scale that becomes the only objective determinant of their market success.

18. The Threat of New Entrants • The banking industry itself is very capital intensive. • The market is already full of well-known Banks that occupy their specific niches and have their customers. • But still there is the place where new companies can strive. This is the Internet banking that is particularly not developed in Georgia and requires the minor investment and costs expenditures. • The Retaliation is one of the major barriers to entry that new companies should consider in advance. The banks in Georgia are used to launch new marketing campaigns, cut costs etc, when they fill the real threat of new entrants.

19. The Threat of Substitute Products • Basically it is considered that there are not substitute products in Banking Industry, but based on the nature of the Georgian People, the borrowings from natives, family members and friends in reality are the substitutes of banking services. • Along with the non-formal services presented earlier there are some legal entities that offer alternative substitute services. The most prevalent are the microfinance organizations like Credo, Constanta, GeoCredit and etc that compete with banks for medium to low borrowings.

20. Bargaining Power of Buyers and Suppliers • Interest rates are the single most important aspect of bank profitability, they are the bargaining power. Most bank profits are derived from net interest income. • Another measure is a banks' net interest margin which is a bank's net interest income divided by its average earning assets. When interest rates fall, they have a positive effect on a Bank: • First, net interest margin can expand. • Second, the value of a bank's fixed rate of investment portfolio is enhanced by declining rates. • Third, falling rates lower the cost of credit, which stimulates loan demand and reduces delinquency rates.

21. The SWOT Analysis of Georgian Banking Industry

22. Strengths • The existence of the western banking regulative organizations like EBRD. EBRD has plaid the major role in the development of the Georgian Banking Industry. • The competitive average salary rates. The average salary in the banking system is near 800 GEL compared to the average salaries in country 250 GEL. • The participation of foreign capital and well-established international Banks like HSBC, SocieteGenerale, BTA etc. • The increasing number of branches and customers (especially in the retail-banking).

23. Strengths • The highly competitive environment that helps to increase the customer service quality. • Type of competition that is based in most of the cases on differentiation and quality. • The launch of Georgian stocks on foreign stock market. The BOG was the first to launch the stock on the market thus increase its capitalization. • A lot of well-known and popular brands and banks etc.

24. Weaknesses • Inflexible and unsatisfactory Legislative System concerning the banking industry. • The low level of innovations. The most of the attention of Banks in Georgia is devoted to the credit system and retail banking. • The increasing number of problematic customers that refuse to pay for services provided by the Banks. • The increasing risks that raise the interest rates.

25. Weaknesses • Still underdeveloped banking infrastructure. • Not full participation of the foreign Partner Banks. Like in the case of the Societe Generale and Bank republic, the last one did not get the full access to the huge capital (especially monetary) of well-known international French bank. • Still low confidence and unsatisfactory reputation in the population etc.

26. Opportunities • Because of the increasing amount of technology Internet banking will begin to replace traditional banking, thus cutting personnel costs. • Incorporating investment banking into the banking industry, as some major companies are doing, lets the bank increase profits and promote economic growth while improving company image. • The Banks must exploit technological innovation (new technologies), use progressive software’s etc to improve the quality and speed of services offered and to remain competitive in the future. • Banks must continue to develop their infrastructure and gain the confidence in the majority of Georgian population.

27. Threats • The unstable economic and political situations accelerating the inflation rates. • The low level of democracy and violation of property laws making country less attractive for investments thus causing the divestments and decrease of Industry Average revenues and growths. • The unstable exchange rate of US dollar. • The unexpected boom and growth that is not so easy to control.

28. Opened in 1994, JSC "Bank of Georgia" is a universal bank offering its • partners full range of banking products and services through its 25 branches • and 27 service departments across Georgia. • Over the years of operation, Bank of Georgia has earned the reputation of • one of Georgia's most efficient financial institutions and is viewed by its • customers, shareholders and employees as a reliable and honest partner. • The main innovative products offered by Bank of Georgia: • Retail Banking • Private Banking • Insurance • 4. GALT and TAGGART Asset Management • 5. Corporate and Investment Banking • 6. Leasing Service

29. JSC People's Bank of Georgia ("People's Bank") is a commercial bank with the General License allowing operating as a universal bank.Wide branch network granted the Bank significant advantage from the date of its foundation. Based upon the above facts and specifics the Bank's mission is focused to provide its clients with modern, civilized, high quality service throughout the whole Georgia. People’s Bank of Georgia main services and benefits: • My Accounts • Deposits • Loans • Express Money Transfer • Travellers’ Checks

30. ProCredit Bank Georgia was established in May 1999 as the bank for the financing of the small and micro business. Now the bank is among the leaders in the banking sector of Georgia and along with credit products offers affordable retail banking products and services to the general population and corporate clients. Innovations and Benefits of ProCredit Bank: • Very Small and Small Businesses • Corporate clients • Letter of Credit

31. Registered in 1992 TBC Group is the holding company for GGMW (Georgian Glass and Mineral Water) and TBC Bank - Banking and Financial Services. • TARIFF PACKAGES • ON-LINE BANKING • CASH COLLECTION