Toroyan, who is the Chief Financial Officer of Ameriabank, our banking subsidiary in Armenia, and Akaki Liqokeli, our Group Economist, who will be covering the macro. We're pleased to report another set of solid results for the quarter, with very strong customer franchise growth across our business operations in Georgia and Armenia. Our loan book grew 22% in constant currency, with even stronger growth in the Armenian operations. Overall, our profit for the quarter amounted to GEL 547 million, an 8% increase versus the prior year. Return on average equity stood at a solid 28%, cost to income was 35.3%, an improvement versus the prior quarter, and our cost of credit risk ratio was 0.5%, and we maintained robust asset quality across the whole business.
Before we dive into the details of these results, we'll first start with the macroeconomic developments, and Akaki will kick off, and then we'll hear from Archil and Hovhannes, and in the end, we'll open the floor for questions. Akaki, now you can start the macro part, and let's move on.
Thank you, Nini. Hello, everyone. I will be presenting the macroeconomic update for our core markets, Georgia and Armenia. Let's start with growth performance. In the first nine months of the year, both economies delivered solid growth numbers supported by robust domestic demand and resilient external sector inflows. Accordingly, we have maintained our full-year real GDP growth forecast for 2025 at 7.5% for Georgia and 5% for Armenia. That said, the uncertainty around the baseline remains elevated due to geopolitical instability in the region and domestic political tensions. Nevertheless, the demonstrated resilience of the economies, along with continued improvements in relations between Armenia and Azerbaijan, has strengthened the outlook, and we have revised our expectation for 2026, as the strong growth will persist at 6% real GDP growth in Georgia and 5.5% growth in Armenia.
Importantly, our projections are in line with the latest IMF forecasts, which place Georgia and Armenia among the top performers in the region in terms of average real GDP growth over the next five years. Turning to the composition of growth, both economies have increasingly shifted to domestic demand drivers, particularly consumption, which is supported by sustained increases in household income from employment and remittances, and ongoing fiscal expansion in Armenia is also helping in this regard. Investment spending is also contributing positively, aided by ongoing public infrastructure projects. External sector inflows are also contributing to growth. The income from exports, tourism, and remittances is increasing at a solid pace in Georgia. We also see that the inflows have gained momentum in Armenia after one of the highest registered last year.
Also, the non-travel export of services, particularly IT and transport, demonstrates solid growth and is contributing to overall hard currency inflows. The strength of inflows is supporting the stability of local currencies as well. Georgian Lari and Armenian Dram have been broadly stable against the U.S. dollar over the last two years, in contrast to most peer currencies. The real exchange rates are also adjusting smoothly after strong appreciations in previous years. This is working through lower inflation with no impact on nominal exchange rates. We expect Georgian Lari and Armenian Dram to remain stable over the medium term, supported by solid macro fundamentals and prudent policies. Exchange rate stability is also essential for keeping inflation low and stable, which we have observed in both countries in recent years. However, more recently, we have seen some uptick in inflation in Georgia, where the headline number was 5.2% year-on-year in October.
This is mostly driven by price increases on several food items from last year's low levels, and we expect this to be temporary and short-lived as inflation expectations remain well anchored, as reflected in low core inflation numbers, and the National Bank of Georgia maintains moderately tight monetary policy with a refinancing rate at 8%. In 2026, as inflation pressures ease, we see scope for a half percentage point rate cut by the NBG. On the Armenian side, the inflation is more stable, and the refinancing rate is slightly lower at 6.75%. In 2026, we also expect a limited space for cuts within 25-50 basis points. The central banks of Georgia and Armenia have been also very active in foreign currency purchases this year, and as a result, their official reserve levels have reached record high numbers, and they are also converging to the minimum adequacy levels.
According to our estimate, GEL 6 billion will be sufficient to reach that level in Georgia and AMD 5 billion in Armenia, and those levels are quite realistic to be achieved in the following year. Strong reserve positions are essential for macroeconomic stability, as well as fiscal discipline that we also observe in both countries. Georgia remains on a consolidation path with a tightly managed fiscal deficit within 3% of GDP, and also the government targets to reduce further the debt level below 35% of GDP. On the Armenian side, the temporary increase in spending needs has led to somewhat elevated budget deficits in the following years, but notably, this is more spending going to CapEx projects, and the government is committed to maintain the public debt below 55% of GDP, and this is also supported by ongoing IMF arrangements.
Lastly, a few words about the banking sectors, which benefit from favorable macroeconomic conditions in both countries. Lending growth has converged to the nominal economic growth in Georgia, and in Armenia, we also see some moderation to more sustainable levels as the mortgage subsidy program is phasing out. Loan dollarization has been stable after substantial decreases in previous years, which contribute to lower exposure to exchange rate risk, and the asset quality remains solid with Armenia and Georgia among the top countries in the region in terms of low non-performing loans, according to IMF. This concludes my part. Back to you, Nini.
Thank you, Akaki. Now we'll move to discussing our performance in Georgia and Armenia separately, and Archil will first start with Georgian operations and strategic highlights, and then we'll move to Armenia.
Hello, everyone. Thank you for joining the call. Let me share the presentation just a minute. Yeah, that's better now. Nini, can you see the sharing of the screen?
We see the screen. We don't see it. Yeah, now we see the presentation.
Excellent. Thank you again for joining the earnings call. We will discuss some of the numbers here. I will present the operating parameters of our Georgian subsidiary. Hovhannes will present the Armenian side, and then I'll summarize in terms of the overall revenue numbers and costs and so forth. The Georgian subsidiary had a very good showing of return on equity of 32%, with 16% year-on-year growth in loans and 14% in deposits, as well as continuing to increase its retail coverage, with retail monthly active users achieving 1.74 million users, up by almost 15% year-on-year.
Just a kind reminder, basically, that our mobile application, retail as well as business, is basically a financial super app with a lot of different capabilities, including not only daily banking and multicurrency accounts attached to a single card and so forth, but peer-to-peer payment and bill split and so forth, as well as fractional trading on US markets, low-cost fractional trading, and many other capabilities. For that reason, and not just that, but as an overall digital capabilities of the bank, we have been recognized second time in a row by Global Finance as the best digital bank in the world. In the run-up to this competition for the best in the world, there were some big global names, including Revolut and others. I would like to congratulate our team behind this effort.
It is a nice achievement and a recognition for our bank to have that, given that our home markets are rather small on a global scale. What we see here is that we are going from strength to strength in terms of the monthly active users. You can see this number here, the middle gray line, which is up by 14.7% that I already mentioned, and the daily engagement is very good. Basically, it's about 50% now, which is very strong. What's also notable is that our business users are growing year-on-year. Monthly active user of our business mobile application is up 19%, which is quite incredible. In terms of the shares sold digitally, we have achieved a new high of 70%, which is very good. More and more of our loans and deposits and cards and other packages are acquired fully digitally.
On top of that, our NPS score, we achieved a new high of 74, I apologize, in terms of the NPS showing, which shows you the strength of our franchise and the satisfaction of our customers with our services and daily banking that they do. That has translated into a 21% increase in terms of volumes of payments. That is POS, terminals, and e-commerce, with slight pickup in the market share year-on-year. Some people have asked the question in terms of this used to be 57. That is restated to exclude peer-to-peer payment that went through the card rails, but that is not really an acquiring business, so we excluded that. If you restated it for longer term, those are the numbers. In terms of the number of people using unique individuals using our cards, year-on-year is up by 13.9%.
Given our high penetration, it's an incredible number, well above 1.5 million now. It's 2.5% up quarter over quarter. Loan growth was 16.5%, constant currency 16.1%, and a quarterly number of 3.6% on a constant currency basis, which is very strong, showing the markets growing about 13%. Deposit was up also by 14%, a slight bump on a quarterly basis. Capital position remains strong. CET1 and Tier 1 is a big focus, obviously, because the sub-debt is widely available from a number of providers, so it's more tightly managed. This is plenty of capital. As a reminder, we target a management buffer of 1.5% above the minimum requirement. We can go slightly lower if need be, but basically, that provides a slightly higher cushion that we target.
Now, I would like to ask Hovhannes to step in and present the shiny results that Ameriabank has.
Can you see my screen?
Yes, Hovhannes, yes.
Yeah, perfect. Thank you, everyone, for your time. For the Armenian operations, I want to mention that our profit grew 22% year-over-year to reach AMD 111.5 million. Our return on equity also improved quarter versus quarter to reach 21.8%. As Archil already mentioned, both loan and deposit portfolios grew at significant rates, namely, loan book grew 36.5 percentage points in constant currency basis, and deposit portfolio grew 28.6% again in constant currency basis. We continue our expansion in terms of acquiring more customers. Here you can see that both total customer base, monthly active customers, as well as mild DAOs are increasing pretty solidly, and I'll be talking about it on the next slides. Here, again, likewise, we're working on developing a super app locally that is becoming more and more popular. Indeed, the usage of our mobile application that is called My Ameria has increased more than 60%.
That is also remarkable given the high penetration that we have in the local market. There we have several different features, more than actually 100 new features introduced during this quarter. We also introduced our loyalty program that we hope will tie up our customers with us in the long term. As we spoke last quarter, we have launched My Ameria Star. This is an application for kids two quarters ago, and we can be very happy that it's gaining more and more popularity among children and is serving to become an educational financial educational platform for a number of kids in Armenia. In terms of digital usage, as I mentioned, if you look on our growth on an annual basis, it's mostly at or about 60% for both MAU and DAO.
We are very also happy and proud to share that also our digital uptake has improved more than 5 percentage points quarter over quarter. That is also remarkable given this very rapid growth of the number of customers that we have, the number of MAU and DAO. Here, I also want to mention that we have been doing a number of campaigns to attract new-to-bank customers, as well as to activate the customer base that we have. We are offering a number of perks and benefits to our customer base. When we will be talking about fees and commissions, the costs on there are running a bit faster related to card transactions due to the campaigns that we are doing. For the loan and deposit portfolio, again, we have remarkable results, 36.9% on loans.
It's very important to note that the growth is very balanced both on the corporate and retail side. Also, just to remind that last year, we had elevated demand for the mortgages due to this tax rebate program. I want to mention that on one hand, the growth pace of the mortgages has decreased, but it's higher than whatever we had in 2023 and 2022. There is a very healthy growth continuing in this market. We have no fears about any potential bubbles in this sector. As for the deposits, again, 28.8% growth year-over-year. Here, I also want to mark another milestone agreement that we announced very recently with another DFI EBRD. We have been very active with our DFI partners to attract more liabilities to support our long-term growth.
As for the capital position and liquidity position, I'm very happy to also mention that there is improvement in both areas. Our headroom versus requirements has improved versus quarter two. Also, Central Bank of Armenia has officially introduced the changes to the local regulation, where in line with a couple of other changes, now banks can do perpetual loans as part of their regulatory equity. Also, there is significant improvement in our liquidity ratio. You can see 202% and 121% for NSFR and LCR ratios. We are standing very sound both in terms of capital position as well as liquidity. Our NPS has also further improved to 77.4. It's 1.4 percentage point increase versus previous year-end. Obviously, with the remarkable growth rates of the loans and deposits, our market share both for loans and deposits has increased by 1.6 percentage point.
As we announced earlier, we see significant untapped market opportunities, and we will be working towards increasing our market share in the local market. With this, I can conclude and pass the floor back to Nini. Thank you.
Thank you, Hovhannes. I now hand it over to Archil for the overall group overview.
Congratulations to the whole Armenian team. I think it's incredible results in terms of balance sheet growth, but also in terms of fundamentally our coverage and rolling out of our retail products and enhancing monthly active users there. With 300,000 people using our products there monthly, that's about 10% of the population. In Georgia, we're covering 45%. There's plenty of opportunity to grow and roll out our daily banking excellent services to more and more clients. In terms of how this translates into the overall numbers, you can say that our operating income grew by 15.6%, and you see the equal distribution of 13.4% in Georgia and 21.3% in Armenia. In terms of the net interest income, the growth was stronger than the overall revenue, which was 18.4% in Georgia and 30% in Armenia. This translates into 21% growth of net interest income year-over-year.
Net non-interest income was rather subdued, and we've discussed it in our results as well. I'll go into detail in terms of FX and non-FX numbers on the next slide. Net fee and commission income grew by only 4.8% for the overall group. In Georgia, it was 8.6%. Last quarter, I said in Georgia would be high single digits. That's more or less what we have there. In Armenia, it was down by 17.8%, largely due to the massive spending on the client acquisition and reactivation that Hovhannes mentioned as well. In net FX, it has been largely flat, slight decrease in Georgia, 3.3% year-over-year, partly due to the stability of the currency. This line of revenue is more juicy when there's more volatility in the currency.
In both markets, the stability has been there because basically there's a strong influence into the country, and both national banks are basically providing the lower target, basically, through which they're not allowing the currency to get stronger, but they are refilling the reserves, which that kind of stability is not great for us, obviously, but overall, it's still solid numbers. Operating expenses, we are up 17.1%, about 15.4% and 16.6% in Georgia and Armenia. The other business was a bit slightly higher, but overall, Q over Q, there was a slight improvement in cost income, but year-over-year, slight decrease from 34.8% blended to 35.3% blended. That remains our focus, and from next year, we should expect neutral to positive operating growth. Loan portfolio growth and deposit portfolio growth for both countries were very positive in this quarter.
In Georgia, we grew by 16.1% in cost and currency year-over-year, and in Armenia, it was incredible, 36.5%. As Hovhannes mentioned, it was well distributed between retail and corporate. It was all very good and strong growth in deposits as well. All in all, yes, one other good news was that as we deployed more liquidity in Georgia, we had a slight pickup in the net interest margin in Georgia and a 10 basis point pickup in Armenia as well. All in all, it translated into an increase of 20 basis points Q over Q, which was welcome news. Cost of credit was 0.5%, and that's closer to the normal levels. We guide between 18 and 100 basis points through the cycle, but we are in a good benign environment. That's what it is.
We had a slight pickup in NPL ratios, which was mostly on the SME side, reclassifying some small hotels, mainly in the regions that have not performed very well. There is no systemic underlying issue in any of the segments there. That is about that. The profit was up by 7.5% year-over-year, although that basically does not show the fundamental pre-provision size of the business grew about 15%, which is something that we focus on as well. Return on equity is 27.8%. All in all, strong showing. We are announcing a quarterly dividend of GEL 2.65 per share, as well as recommending to do the buybacks of GEL 51.5 million for this quarter. It is a buyback and cancellation, as you know, and you see over the last five years how the number of shares has been reducing because of this type of capital returns that we do.
This is what we promised to do, and we are continuing to do that. I'll wrap it up here and open for Q&A. Nini, anything to add?
Yeah, we can start the Q&A. Nothing to add. To ask questions, please use the raise hand button or the Q&A chat, and please introduce yourself when you speak. We have the first question from Jens Ehrenberg. Let me bring him on the line.
Thanks, Nini. I hope you can hear me all right. Thank you very much for the presentation, guys. A couple of questions from my side. Sorry, I should have introduced myself. It's Jens Ehrenberg from Cavendish. Firstly, as far as looking at loan growth, which has been pretty strong across both markets, are there any key growth levers you'd look at over the next 12 to 18 months that we should be mindful of? Secondly, just on the level of NIMs, I mean, it's great to see how robust they've been in the quarter. In the face of uncertainty around global rates, how should we think about this going forward? Are you sort of confident in the stability of those margins, or is there anything we should be mindful of? Finally, more on the sort of digital side of things, particularly on the retail side.
Thinking back to sort of the time of the de-merger, to what extent do you believe that, I suppose, the market actually appreciates the franchise value that you've built on the back of the digital retail offering? Thanks.
Thank you. For loan growth, I'll say Georgia, and then maybe Hovhannes can cover the Armenian side. We don't guide Georgia separately, but our expectation is between 10% and 12%, 13% medium term. Although, as long as the growth of the Georgian economy remains above 5%, which is the medium to long-term expectation of Georgian growth, not long-term, but medium-term, that allows us to grow faster than that. We have been able to grow, as the market grows at 13%, we have been able to grow at 16%. There's no particular sides other than retail and corporate both are growing very strongly. SME has not been growing strongly. It's high single digit there. We are in discussion with policymakers how to support SME growth, SME loan growth there. In terms of Georgian corporates, they are in excellent shape.
They've delivered, as the denominator of the economy, overall grew their profitability, as well as margins were in excellent shape over the last three, five years. They've delivered and able to invest in many different sectors. Energy remains a big sector that should attract a lot of investment over the next three years in Georgia. Consumers are still growing very well because the income levels have been growing at double digits five years in a row, five years every year, double digit, which is excellent growth that we are seeing. Hovhannes, do you want to say about loan growth in Armenia, and then I'll switch to NIM? Why don't you cover NIM as well in Armenia, and then I'll say the Georgian side.
Absolutely. For the loan growth, we do anticipate for the market like lower double-digit growth for the next couple of years. For Ameriabank, our estimate is to keep it between 15% and 20%, maybe a bit higher for the initial years, and then going slightly lower towards like three, four years horizon. We should be able to keep it between 15% and 20% growth for the next three to four years. As for NIM, we do think that the level of the NIM where we are is fairly stable. We do not anticipate any sharp changes either way, either up or down. There could be a 10-15 basis point change over time. Overall, we think this is in terms of midterm, this could be a guiding figure for the management.
Thank you, Hovhannes. I'm a bit more optimistic on the loan growth side. As long as we grow on the retail side as we want to, I think it should provide 20%+ growth, but we'll see. On the NIM, in Georgia, it's broadly stable. We are in a good shape there. I don't expect any major changes. Obviously, this business just happened, so we'll see up and down. There's no reason to expect a particular movement there. On the franchise value side, you're absolutely right. A lot of people are focused on book multiple because there's this understanding that banking is all about a balance sheet play, and somebody can bring a couple of billion dollars and recreate this franchise. I don't think that is right. I mean, when there's the front end, it's not just the balance sheet.
The front end, which basically that's why I focus so much on the NPS, on the top of mind, most trusted bank. This shows the stickiness of the customer revenue and so forth, which translates then into growth and this and that, but also it's the stickiness of such revenue. Unfortunately, the market has not given us credit for it because we're still trading at five times P/E, while historically we used to trade at eight, nine, sometimes 10 times. If you ask me, and maybe that's subjective, but also objective measures show that we are in the best shape in terms of the franchise quality that we have ever been on the Georgian side. Now it's joined with Armenia. It's getting better and going from strength to strength there as well. Unfortunately, not yet. Not yet appreciated, but hopefully it's coming, right?
Thank you.
Super. Thank you very much.
Thank you. Thank you, Jens.
There were a few questions typed into the Q&A side. Nini, do you want to cover those?
Yes. Maybe if we kind of categorize them, there are two questions on the market shares. On the Armenian side, basically the question is, what percent market share is attainable in the next few years? For Georgia, the question is, given already large market share, how much more market share could BOG gain in the next few years? Maybe we will cover the market share questions first.
I can cover both, Hovhannes. Sorry. In Georgia, a regulator has basically said that they would like to keep the concentration constant and not increase it too much, i.e., below 40%. We have basically so there is more capital requirement as we go above 40% in deposits, which we are currently we have about 50 basis points extra for that. We intend to keep it just under 40%. There is a slight percentage or two gains still available on the long side. There is not much to gain there, a little bit. In Armenia, we would like to grow towards 30% and slightly above that over the next few years so that the scale advantage that we currently have actually translates into good advantage in cost to income ratio as well.
Okay. Mike Gabon has a few questions. One is if we can give more color into the potential perpetual bond issuance from Armenia.
Hovhannes, do you want to say anything? Be aware of the public market rules there.
Sure. We have not formally yet discussed and approved internally, so I would really prefer to refrain from giving any guidance. We will definitely, I mean, we have been working with some of the bankers to understand actually the market opportunities. Also, we clearly understand our needs. I just can say that this is a very good tool to improve the efficiency and cost structure of the equity. We are actually seriously considering that opportunity. Once approved by our ALCO committee and then by the board, I think after that we can disclose more information.
Thank you, Hovhannes. Another question is from Mike Gabon as well on the Bank of Georgia's recent Eurobond issuance. The question is if why did we issue this three-year bond if we have so much capital and why in Georgian Lari and why 11.5%, which Mike thinks is a high rate. Maybe we can, Archil, can you take it?
Yeah. I think Lari instrument has not been present on the local or the international market for some time. I agree that 11.5% was a bit disappointing, but it's unfortunate that people have not been looking at Lari strength for a long time because there was no instrument, Lari instrument outstanding. That's partly due to the fact of the high interest. We would like to have some public financing available in U.S. dollar as well as Lari. There's no need for U.S. dollar at this point, but in Lari, there was need. That's why we raised it. Given how we are deploying it, we thought it was a good idea. I don't know what you are referring to. If we didn't think it was a good idea, we wouldn't raise it. We think it's a good idea.
It does help us to de-dollarize the balance sheet, which has a marginal improvement on the liquidity requirement as well. That helps as well overall, which every time you de-dollarize either deposit funding, basically, or the loans, then it helps you with the lower liquidity requirement. Every marginal side is pretty good. It provides longer-term Lari as well. Three years is better than most of the deposit, which is either current or one year. Nini, next question.
Yes. The next two questions come from Artem Yamschikov from Roemer Capital. The first is, please comment on the Fee and Commission Income QORQ decline and outlook for the next several quarters. Maybe we will take that first. The second is on the operating leverage. You mentioned positive operating leverage effects ahead. Could you guide us a bit with respect to cost-to-income ratio for GFS and IFS?
Yes. On the Fee and Commission Income, basically, we will have improvement. It was not a decline. It was a small increase, 2.8%. We should be on the Georgian side going double-digit in the fourth quarter and then going forward. That should stick. In Armenia, it is a bit more bumpy. Could be given the fact that we are in a very high expansion period of grabbing new clients and so forth. There should be improvement, but we do not provide more guidance than that. The same is true for cost income as well. We are guiding either neutral or positive or slightly positive operating growth for next year. We do not want to provide more breakdown than that.
Thank you, Archil. Now we have a raised hand from Simon Nellis from CITI. I'll let him talk.
Hi. Thanks very much for the opportunity. I was hoping you could elaborate a bit more on what was driving the margin expansion in Georgia, I think a little bit over the quarter in Armenia as well. I know you're guiding for broadly stable margins, but can you kind of give us some thoughts longer term about the sensitivity of your margin in both markets to rates, which might come down, I guess? What is your rate view kind of going forward over the next 12 to 24 months? Thank you.
Yeah. Let me do that on Georgian side. Basically, I'll start with the last one. First, sorry. First was deploying high liquidity. We had slightly higher liquidity than normal. As we were deploying it, we thought that it would translate into a slight pickup. There was a pretty simple exercise there. In the mix, we have slightly higher consumers. Consumers are growing slightly more than other stuff. That's also helping the margin. That's why it's north of 6% instead of historically lower. If you rewind 5, 10 years before, sometimes we've had it at 7%, 8%, but then we've had it just about 5% as well. Right now, it's 6%, probably due to the mix and high interest rate environment.
Now, talking of interest rates, as our Chief Economist shared with you, we expect around 50 basis point reduction at the end of 2026 in Lari. That should be either neutral or maybe 10 basis point reduction over time. Initially, it's slightly positive, in fact, because we have short-term in fixed Lari, more of the assets are in fixed short-term than the funding. That, in fact, has a slight pickup of 10 basis points or so, but over time, it neutralizes out. In Armenia, Hovhannes, do you want to say a few things?
In Armenia, we also have a short position on interest rate on the FX. Technically, the decrease of the rates of USD or Euro Libor will affect slightly positively, but that's not going to be anything significant because we do not really keep a very big position, I mean, open position. As for the NIM, yes, we did have a 0.1 percentage point improvement in NIM, but here we, again, are guiding it to be flat in the Q4 and probably in the next couple of quarters. This was due to a slight increase in the yield of the loans. At the same time, we also note that short-term, our cost of funding has gone up slightly, and that was mainly driven by our attraction of the FI funding.
That is slightly more expensive as of today, but given the long tenor of those facilities, we have estimated that through the lifetime, the average cost of that fund will be slightly lower than the local borrowing. We are currently paying a bit more than the local market, but with the expectation to be paying less within the expectation that the rates will go down.
Thank you. Very helpful.
Thank you, Simon. Let's see. We have one question from Pars Tucker on the Georgian business. What is your market share in private banking affluent retail in Georgia? Asking specifically about retail deposit market share and how much is the share of these deposits in your total deposit base? What is the dollar?
Yes. We cannot exactly measure the market share, but my estimate is somewhere between 45%± . In terms of the total share, I do not remember. We will probably have to get back to you. There is the SOLO, which is upper premium segment, which is substantial, and we do disclose. In terms of what you are asking for, I think it is more like wealth management. I am not sure we disclose the breakdown of that, but we can get back to you on that. In terms of how much we are paying, it is the average deposit cost. I also do not remember. We will need to provide that to you.
Overall, as far as cost in Georgian operations, cost of client deposits in foreign currency is 1.4%, but that's blended across all segments.
Correct.
I see Jens' hand, but he might have just forgotten to. Yeah, he put it down. Let's see what else. We have one raised hand from Gohar Khachatryan, who is, I think, from Armenia, but let's see if.
Yes, Gohar.
Hi, Gohar. Do you have a question? Maybe it's accidental. I think it is.
There are a few questions from Mike Gabon that are in Q&A. Do you want to cover those?
Let's see. Questions on Armenia. Is there a higher regulatory capital requirement on foreign currency in Armenia? That's probably for Hovhannes. Also, is there any notable inflows/outflows of foreign currency into and out of Armenia?
We do have higher capital requirement for FX-denominated loans, and that has been enforced from 2004. It is not new to us. On average, I would say, because there are different risk weights for different asset classes, but most of the FX-denominated assets have approximately 50% more capital requirement, or their risk weights are about 50% higher. The second part was about the capital.
About the foreign currency inflows in and out of Armenia and notable foreign currency inflows happening in and out of Armenia.
Yeah. I think Akaki also presented that when we look at the remittances, for instance, I mean, there is a very healthy growth in Armenia. If I'm not mistaken, it's about 16% year over year. That positive trend is continuing both in 2025 and was also there in 2024.
Hovhannes, and then the clarifying question was that the cap Mike was asking about the cap, any cap on deposits in foreign currency or any additional requirements.
There is no any capital requirement for FX-denominated deposits, but there is a high regulatory cost in terms of higher required reserves for foreign currency-denominated deposits, regardless where they're attracted from. Now, with these new changes to the regulation, the Central Bank of Armenia is also introducing higher requirements for concentrated attractions for customers in terms of calculation of NSFR and LCR probability of the outflow. Again, we did our internal analysis, and due to this increased requirement to these concentrated means, the requirement for a liquidity position for Ameriabank will not change. That is very immaterial change. We are going to be, as I presented, well above the required thresholds.
Okay. Thank you, Hovhannes. Another question is regarding the potential M&A opportunities, if we can comment on any potential M&A plans and if we have any interest in Central Asia. I think that's the question in summary.
There's no comment that we can provide in terms of expansion, but we are scanning the market, and that would be East Europe, Central and Eastern Europe, Southeast Europe, Central Asia, mainly two countries, which is Kazakhstan, Uzbekistan. We're always looking, but we're concentrated on top banks, top three, maybe top five for larger banks. We don't like turnaround stories. We like stories where we can enhance and so forth. There is no immediate update there. Should I cover the next one? Bruno Berry is asking about capital distribution.
Yeah. The range of 30%-50%, which is our medium, like the target, where do we expect it to be in the near term? What are our thoughts regarding the split between dividends and buybacks?
We expect it to be in the low 30s, as we guided a couple of years ago for two, three years. That is because the growth, we remain on the higher side, and we have been growing more than our medium-term guidance. That is why we are deploying capital there. In terms of the split of capital returns, roughly two-thirds, one-third has been dividend and buybacks, and we will probably stick to that.
The next question is from Ben Maher on the line. Hi, Ben.
Hi. Can you hear me?
Yes.
Thank you for taking my question. It's just a quick one. You mentioned some regulatory changes in Armenia. I'm interested if you have any idea or expect any further, I guess, regulatory changes or any headwinds as we move into next year across Georgia or Armenia. Any color would be helpful. Thank you.
There's nothing material coming up in Armenia.
There's nothing immediate in Georgia either. There's plenty of discussion in terms of open banking and how this is affecting and encouraging fintechs and so forth, but there's no particular big change right now.
Okay. Thank you.
Thank you, Ben. Thank you. No more questions.
Thank you very much for joining our quarterly call. Third quarter was a record high. This is the first time that we made more than $200 million equivalent, right? Nini, maybe you correct me if I'm wrong, but I think it was the first time. Given the fact that we'll be growing quarter by quarter, hopefully, we can deliver value to our shareholders. Armenia remains a very strong case, and prospects there are also very positive, medium to long-term prospects, given the fact that Azerbaijan and Turkish borders remain closed, while there's an in-principle agreement already to open those up. This will take time, a few months, but less than a year, hopefully.
That means that the economy will open up with plenty of opportunities that will emerge, and we are very well placed there to fund and provide funding for growth to go there. Georgia remains and continues to be a very strong economy. More and more people appreciate how strong the economy and numbers have been. As you can see, the growth has been good, a single-digit. Inflation is under control. CPI picked up, but core inflation remains at 2.4%. All of this basically translates into a strong economy, people benefiting with average incomes growing double-digit, and all of this is reflected in our strength. Georgia, on the macro side, is a very good story. On the franchise value, I think we are stronger than we've ever been.
We are very well placed to benefit from this medium-term wave, which is called investment in the middle corridor, be it through this highway being discussed from Azerbaijan to Armenia or being through a more established Georgian route. In both cases, we are very well placed to benefit from this medium-term movement. All of that, I think, will translate into a long-term value creation. Thank you for joining this call, and we look forward to seeing you in one quarter.
Thank you and take care. Bye.