BAKU, Azerbaijan, March 16
Tamilla Mammadova – Trend:
The profits of Georgian banks decreased 9.6 times in 2020, resulting in $29.8 million in 2020, Trend reports via the National Bank of Georgia (NBG).
Despite this, the banking sector was one of the few profitable sectors of the country's economy during the COVID-19 pandemic.
One of the reasons for this was the interest rate gap on deposits and loans. In particular, interest rates on deposits in national currency decreased from 9.5 percent to 8.3 percent per annum, in foreign currency from 2.7 percent to 2 percent. Deposits in foreign currency have lost the accumulated function, turning into a store of value - the profit is so minimal that it actually does not exist.
Due to the lari’s constant devaluation, the level of deposit dollarization is very high despite the fact that deposits in the national currency still bring some profit, but it keeps decreasing – in early 2020, the interest rate on the lari savings was 9.5 percent.
Currently the general deposit dollarization level is 62 percent, but it’s worth mentioning that most lari –denominated deposits are business accounts and government deposits. The dollarization rate in the private deposits is even higher and makes 77 percent.
Despite the decrease in interest on deposits, loan interest rates increase - in particular, in December 2020 the interest rate in the national currency stood at 14.4 percent, in February 2021 it increased by 15.7 percent.
The interest on loans in foreign currency increased on average from 6 percent to 6.9 percent.
Thus, the banks expenses on the payment of dividends to deposit holders decreased that allowed to cut the losses associated with obtaining income from loans during the COVID-19 pandemic.
In unison with the increase in interest on loans and a decrease in interest on deposits, the share of overdue loans in the total loan portfolio of the banking sector is also growing. In particular, in January 2020, this figure was $365 million that is 1.15 percent of the total loans. In December 2020, the volume of overdue loans increased to $562 million that is 1.53 percent of the loan portfolio.
In January 2003, the share of overdue loans made 4.5 percent of the total loans, in 2008 before the war and the world crisis - 1.8 percent, in January 2009 after the war and during the crisis - 5.4 percent.
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