February 12, 2018 / 7:54 AM / 3 months ago

UPDATE 1-BGEO's investment arm to hike stake in banking unit ahead of demerger

(Adds details, background)

Feb 12 (Reuters) - Holding company BGEO said on Monday its investment arm, Georgia Capital, would increase its stake in the Bank of Georgia to 19.9 percent, up from the previously announced 9.9 percent, ahead of a planned demerger of the two units.

BGEO said the move would ensure that both, Bank of Georgia and Georgia Capital, would have enough liquidity to be “attractive to a broad investor base” and be large enough for inclusion in London’s FTSE 250 index after the split.

The company also said the board had now approved the implementation of the demerger, which was first announced in July 2017.

Post demerger, Bank of Georgia Group will handle the retail, corporate and investment banking, leasing services and wealth management operations. BGEO Investments will continue to invest in Georgian businesses and hold BGEO’s property and casualty insurance operations.

Georgia’s economy expanded by 4.8 percent year-on-year in 2017, up from 2.2 percent the previous year, and Governor Koba Gvenetadze has said current economic indicators showed that 2018 “will be a continuation of the economic recovery which started last year”.

BGEO’s Bank of Georgia unit has more than a third of the market share of Georgian banks based on total assets, loans, deposits and shareholder equity.

Owning a 19.9 percent stake in Bank of Georgia gives Georgia Capital “improved access” to capital and an increased ability to capture investment opportunities by monetising its stake, Tbilisi-based BGEO said in a statement on Monday.

Georgia Capital expects to gradually reduce its holding in Bank of Georgia to under 10 percent in the “medium term”, the statement added. (Reporting by Esha Vaish and Noor Zainab Hussain in Bengaluru; Editing by Sunil Nair)

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