Georgia’s banking market is an outlier in emerging Europe. Not only is it almost entirely free from foreign ownership, it is also highly concentrated. Between them, the two largest lenders – TBC Bank and Bank of Georgia – account for nearly two-thirds of sector assets.
In some markets this might be cause for concern. Vakhtang Butskhrikidze, chief executive of market leader TBC, insists that in Georgia – with a population of just 3.7 million – it is a natural function of the size of the market.
“To have the ability to innovate, to invest in new technologies and to service large domestic corporate customers requires a certain critical mass,” he says. “In a market like Georgia, there is only room for a handful of such strong, well-capitalized and well-established players.”
He is quick to stress, however, that this does not imply a lack of competitive pressure.
“There is intense competition in all segments of the market,” he says. “In the corporate segment, we have to compete with international financial institutions.”
He adds that companies are also increasingly looking towards the local bond market, which is expected to see more activity after the introduction of second-pillar pension funds in Georgia this year.
Meanwhile, the country’s micro and small and medium-sized enterprises are served by a number of mid-sized lenders, all of which also compete with the leading players in the retail segment.
“We actually expect to see increased consolidation in the Georgian banking sector over the coming years,” says Butskhrikidze, who has been in post since 1995. “This process will further increase the competitive pressure on ourselves and Bank of Georgia.
“Concentration brings healthy competition and provides incentive for constant improvement to maintain our leading position in the market.”
Certainly, TBC has shown no signs of losing its appetite for innovation. Last year, it launched Georgia’s first digital-only bank, Space, which has already notched more than 100,000 users.
Butskhrikidze is now looking to export the concept to Azerbaijan and Uzbekistan.
“These are two exciting markets, with a combined population of 40 million,” he says.
In Azerbaijan, TBC plans to merge with a local bank, while in Uzbekistan it is working with international financial institutions and a local partner.
TBC has also started developing ecosystems linked to its core banking products, starting with an innovative digital trading platform and a digital ecosystem for real estate.
“We are planning to develop and roll out more ecosystems during 2019/20,” says Butskhrikidze.