Lion Finance (LSE:BGEO) is now among the largest companies on the FTSE 250 — this is the index that is essentially (but not perfectly) composed of the 101st to 350th most valuable companies listed in the UK. The index, however, doesn’t include non-main market stocks like Jet2 or companies like Carnival, which no longer meet domicile/nationality requirements.
So, back to Lion Finance. Many investors won’t be familiar with it because it used to be called Bank of Georgia. And even then, it was possibly overlooked. After all, many investors like to invest in what they know, and they’re unlikely to know a Georgian bank. Thankfully, Georgia and banks are my forte — well, at least that’s what I thought.
Why did the stock surge?
Lion Finance shares hit a low point during the pandemic in 2020, reflecting the global uncertainty and pressure on banks at the time. A further setback came in early 2022 when Russia’s invasion of Ukraine triggered a broad sell-off in regional markets, including Georgia.
Investors initially feared significant economic disruption, but Georgia’s neutral stance in the conflict helped limit the fallout and supported a quicker-than-expected recovery. Against this backdrop, Lion Finance’s shares rebounded from their pandemic trough as economic growth resumed and confidence gradually returned.
As the Georgian economy grew faster than almost anywhere in Europe, Lion Finance flourished. After all, banks typically reflect the health of the local economy. In short, the company kept on beating expectations, returning more and more money to share holders.
For context, the dividend payments in 2025 represent 25% of the share price in 2020. In other words, £10,000 invested in 2020 would roughly result in £2,500 of dividends in 2025 alone.
…despite my concerns
I was a shareholder in Lion Finance, but elected to sell (I had done rather well — circa 300% up) due to concerns about the outcome of the Georgian election last year and polarised positions on Russia. Several of my colleagues felt the same way. Nevertheless, the stock has continued to push upwards, reflecting the government’s focus on delivering economic growth and the country’s relative outperformance.
Now, the bank is trading around 5.1 times forward earnings, falling to 4.4 times for 2027. Clearly this represents a discount to its UK-listed peers, including Standard Chartered which also operates in developing countries — albeit many countries rather than two. The forward yield stands around 5%, increasing to around 6.5% the year after, according to forecasts.
It’s not expensive, and analysts think it could go higher still. The average share price target is 22% above the current levels. This type of discrepancy typically indicates the market is undervaluing a stock, although analysts can be wrong.
The bottom line
It’s definitely worth considering when we look at the numbers and analysts forecasts, which suggest the stock could push for FTSE 100 promotion. However, there are probably investment opportunities out there with less political risk. I’m still a little worried about the political situation in the country. Stability is key for banks, although I’ve been wrong about this Georgian bank before — clearly not the expert I thought I was!
