General Director (TBC Bank)

“Economic stability gives us opportunity to expand our business”

The Georgian banking system seems one of the most, if not the only, thriving sector of business in Georgia.
Georgian banking sector represented by 19 banking institutions, of which 17 are Georgian resident private commercial banks, and 2 are branches of Turkish and Azeri banks. Top 6 commercial banks hold more than 80 percent of total assets and liabilities of the banking system.

Georgian banking sector suffered a major crisis in the mid 90s when banks went bankrupt one after another cheating their clients, which eroded public confidence in the banks. The recovery began in 1994 when Georgia launched a reform of banking sector. Banks have shown sustainable growth in deposits since 2000-2001. The total number of deposits during the first half of 2005 alone was benchmarked by a 22% increase. Experts explain this progress by an overall economic growth of the country, lessened commercial risk in combination with improved management and service systems that are aligned with western standards.

TBC is the largest bank in Georgia, which occupies the first place according to all major financial indicators. The bank has the biggest share in total banking assets, deposits and loans. We interviewed General Manager of TBC Bank to learn more about the banking sector of Georgia.

Q: Could you tell me how was the starting point of TBC Bank?
A: Times were hard for Georgia, as it regained independence in the 90s of the last century. We had a huge inflation and there were about 200 banks operating. If you wanted to open a bank, you just needed 5 00 USD to get license from National Bank of Georgia. At that time people thought they were having trade companies, shops, restaurants. So, why not set up a bank?

Q: Good question…
A: The financial systems started to stabilize in 1995, mainly due to the influence by IMF and international institutions improving general situation in the country. At the beginning of 1993 unfortunately people had little trust in commercial banks. It was difficult unfortunately. So, the shareholders of the bank decided to bring new generation to the top management of the bank. You know there were many people having practical experience in the banking sector but unfortunately the Soviet experience was irrelevant for the new demands. In contrast, the new generation had much theoretical knowledge but little practical experience. Finally they decided to choose the young management. The average age of our staff in 1995 was 24.I do believe this was the right decision.

Q: How did the young inexperienced people take up the challenge?
A: After that one right decision, the shareholders decided to bring the know-how from the West. In 2000 IFC and German Investment and Development Company (DEG) became the holders of shares at TBC Bank, with participation of 10% each. Since 2000 they have been in the supervisory board and most of the strategic decisions have been made with their participation. Their participation in the management was very helpful. Another strategic decision was to target our policy on an expanding private sector. I remember in 1995-1996 our competitors were much bigger than we were. There were five state companies that were privatized and were ten times bigger largely due to the Soviet legacy they inherited. However, the situation started to change dramatically in 2000, so that by 2002 TBC Bank became the largest bank in the country. Today almost one third of the total deposits of the populations are concentrated in TBC Bank, around 32- 33 percent independent companies are contractors of TBC Bank. The Bank has enjoys strong confidence and popularity. This is how we developed.

Q: How much do the assets of TBC Bank make?
A: Our assets make 800m GEL. At the end of the last year it was about 570 million GEL. So, within third half of the year the total banking activity increased by 35-40 percent. We expect the growth trend continue further: our target to increase the total assets to 2 000 million GEL by the end of 2006. Quite an ambitious goal but we think it is achievable. In the last four-five years our bank has been the most profitable bank in the country and financial institutions have showered praise on us in 2005 for achieving the 33 percent growth.

Q: What is the strategy of TBC Bank?
A: We are targeting mostly private sector because it was starting to expand. We also increased our operation to target corporate businesses. For the next stage we will be increasing our network setting up more branches. Our strategy is to bring new products in the country and introduce new services. To give example, about one-third of the total local transfers made by corporations are made in our banks. We were the first bank who offered individuals internet banking, we have attracted thousands of clients by offering this service as internet banking allows clients to make utility payments from the internet, through out system. It is not a new thing for Western banks but for Georgia it’s a new experience to use e-banking. In addition, within two years’ period our ambition is to increase our operation and become a regional bank. We are making a research of the financial markets in the neighboring countries and I think within one year we will enter one of these countries.

Q: Do you have any action plan yet?
A: We are making a marketing research in our neighboring countries: in Ukraine, Azerbaijan, Armenia, Turkey. I think we have a capacity to have subsidiaries outside Georgia. TBC Bank has the know-how of the programs in the corporate businesses. We can bring our know-how to those countries.

Q: Last year Georgian economy has seen a considerable growth. Is the growth having any spillover effects on TBC Bank?
A: On the one hand Georgia’s GDP growth helped increase our operations and extend new loans to state companies and private companies. The GDP of Georgia increased by 8 percent, and I think this is to be welcomed. Political and economic stability gives us opportunity to expand our business. On the other hand the banks are very active, competitions is increasing which has a positive impact on the total market and economy.

Q: Do you think economy financial sector improved remarkably after the change of power in Tbilisi?
A: I think yes, it did. I became General Director of TBC Bank in 1995. After Rose Revolution situation changed dramatically and the government is making faster and stricter decisions. The main direction is to liberalize markets. The state is withdrawing from the markets. There will be less conflict between private and state sector, since the most state-run companies are being privatized. So, a lot of changes are taking place.

Q: Small and medium-size businesses play important role in building economy. How does TBC Bank support them?
A: As I mentioned our key strategy target was private sector. At the beginning we were contracting these small and medium-size business. It is a positive aspect that the mentality of people has changed. I remember when people applied our bank for the credit; they had little idea how to do claim a credit, what requirements they were to meet and why they really needed the money. Today the situation is much different. Population knows what requirements bank has, how to report and what kind of the demands would be accepted. While we were largely dependent on the credit lines from World Bank, EBRD, IFC before, the situation now is totally different and a number of Western commercial banks are opening credit lines directly to TBC Bank.

Q: Why?
Today the supply is enough as foreign money is flowing into the country. We can finance credits but I believe today the problem is the capitalization of the assets, to bring new investors in the company. Sometimes there are good companies who have good managers but do not have enough capitalization. It would be better if people would invest in the company not as creditors but as investors to increase capitals of these companies. I think it is the next step of our development. As a Bank we were financing credits before, now it is high time to bring these capitals into the market, to invest money in the companies.

Q: How is TBC Bank trying to attract foreign investors?
A: This is one of our strategies. I mentioned in 2000 IFC and DEG became our shareholders. We are now on the lookout for Western banks that would become a shareholder of TBC Bank.

Q: Georgia’s banking sector has been developing very fast. Does it have a potential for further development?
Q: As I mentioned the market is growing very fast. But we see a lot of opportunities in the future. If you compare Georgia’s market with those of the Baltic countries, you would see a huge difference. 16 years ago both were the part of the Soviet empire but the banking sector in the Baltic countries were much more advanced. Nonetheless, I believe the market will develop faster in Georgia. We know this business and how to negotiate with clients. We can compete and go further.

Q: You have been working in TBC for many years. What gave you the biggest satisfaction?
A: I have been working as General Director of the Bank for 25 years. For me it was a big opportunity. I like TBC Bank. As I mentioned, a young team in the bank has achieved lots of development. I have not had any banking experience; also my friends did not have any experience. We have studied economics in the university. I began to work in the institute of economy, and then I began to work in Ministry of Finance later. I did not like it. I stayed there for one year. Then I came to TBC Bank to work as a credit manager. The work was great. We have achieved a huge increase in just a decade, this is a huge success and this is what gives me the biggest satisfaction.