Bank of Georgia Group (LSE: BGEO) is a FTSE 250 stock that occasionally pops up on my radar. It seldom attracts much attention yet whenever I look at it, it’s usually doing quite well.
As the name suggests, it’s based in Georgia and provides financial services via its subsidiaries in both that country and neighbouring Armenia.
Tucked away on the opposite side of the Black Sea, Georgia sits in an area often thought of as Asia. However, it’s considered a European country and has applied to join the EU. Recently, it’s been in the news after protests erupted in opposition to last month’s parliamentary election results, which some claim were rigged.
Depending on how this political situation unfolds, it could affect the group’s performance.
A rollercoaster price
The stock has done well recently, climbing 20% in the past month. However, there’s a caveat — volatility has been a theme for the share price this year. In February it soared 30% only to lose it all again in May before climbing in July and dropping in September.
I wouldn’t be too surprised if this month’s gains taper off again in December.
Still, it’s up 223% over a five-year period with annualised growth of 26%, so it’s made impressive gains in the long term. It also sports a healthy 4.9% dividend yield, adding an attractive value proposition to the stock.
A £1,000 investment five years ago could have grown to almost £3,900 (with dividends reinvested).
Still, I wouldn’t rely too much on dividends — it’s only been paying them for a few years with cuts in both 2019 and 2020.
What do the Q3 results say?
Third-quarter profit rose a huge 42.5% year on year to 509.3m Georgian Lari (GEL), or £145.9m. Return on equity (ROE) split across all sectors now stands at an average of 32.1%.
The group’s loan book increased by 63.4% year on year, driven by the consolidation of its Armenian business, Ameriabank, and 23.6% growth in its Georgian division.
All things considered, that’s a pretty decent result.
Oh, but the risks
The key risk the bank faces, as mentioned earlier and outlined in its earnings announcement, is the local political situation. According to the firm, it does “not expect this period to have any significant impact on the economy.” As such, it’s confident enough in GDP growth forecasts of 9% this year and 6% for 2025.
The company doesn’t go into too much detail as to why it feels the economic impact will be minimal. To accurately assess the outcome of the situation is difficult at such an early point in the situation. And after both the UK and US elections this year, quite frankly I’m a bit done with politics for a while. So I’ll have to take the bank’s word for it.
Still, I think it’s safe to say an escalation of the political situation could derail — or at least hinder — growth. So it’s understandable why UK investors may be hesitant about investing in the bank. While the business itself appears to be performing well, I’ll need to see more concrete evidence of economic stability before I’ll consider the stock.
