Bank of Georgia (LON: BGEO) (OTCPK: BDGSF) is up 13% this morning. BGEO shares are up on the half year report which shows a continued improvement in performance. The dividend is up “declared an interim dividend of GEL 3.06 per” (about 90 pence). The heart of the results is this “report another quarter of strong results, translating into a GEL 688.8 million profit (adjusted for one-off income) for the first half of 2023, up 33.5% year-on-year, and a return on average equity of 31.3% over the same period. The macroeconomic backdrop has been strong, with the Georgian economy growing at 7.6% year-on-year during the first six months of the year, driven by robust external inflows and increased investment expenditure.”
One lesson to take from this is that yes, there’s a war happening up to the North West. But it’s a considerable distance away and in some senses is in fact aiding the Georgian economy. But that’s not, in fact, what the underlying here is. Instead, we’ve got to realise that Georgia (the country of course, not the state) is one of the grand successes of the post-Soviet world. As with the Baltic states in fact. Effectively, the use of neoliberalism - or if we prefer, free market capitalism - is producing that catch up growth. There’s no particular reason to think it’s going to stop anytime soon either.
Bank of Georgia share price from Google Finance
We’ve looked at Bank of Georgia elsewhere a few years back: “Over the past decade, Georgia’s economy has grown robustly at an average annual rate of 4.5 percent. This was despite numerous shocks, including the global financial crisis of 2007-08, the conflict with the Russian Federation in 2008, and the drop in commodity prices since 2014 that has impacted key trading partners. Poverty declined from 32.5 percent in 2006 to 16.3 percent in 2017. The poor have benefited considerably from the Government’s social policies, as well as from new economic opportunities.”
We looked again a little later too: “Georgia is a strongly growing economy, achieving this feat largely by not doing all the stupid socialist things that the Soviet Union insisted upon. Sure, post-USSR, economies have had transition problems, but following that determinedly-free market path has paid off here. Well-run banks in strongly growing economies provide a form of leveraged access to the performance of that economy.”
One way of investing in a strongly growing economy is in one of the major banks that both finances and benefits from that growth. That’s the value proposition at Bank of Georgia and it’s not a bad one.
