The Full Year of 2025. My name is, Ninia Arshakuni. I'm Head of IR, and I'll be moderating today's call. I'm joined, as always, by the Group CEO, Archil Gachechiladze. We also have on the line, the CFO of Ameriabank, our banking subsidiary in Armenia, Hovhannes Toroyan, and our Group Economist, Akaki Liqokeli. First, we'll start with the presentations, and in the second session of this call, you'll be able to ask your questions. With that, I'll hand over to Archil first for opening remarks, and then we'll dive into our performance and the operating environment. Archil, you can go ahead.
Thank you, Ninia. Hello, everyone. Thank you for joining the call. I will just have opening remarks, followed by the macro review by Akaki. As you can see, we have delivered a record quarter and a record year, in fact, with our net income growing by 20.9%, just shy of $2.2 billion, delivering 28.4% return on equity, and in the quarter, that was just above 30% return on equity, with 35.5% cost-income ratio, and cost of risk, which is about half of what we usually expect through the cycle. For the quarter, it was 0.3, for the full year, it was 0.4.
Both of the strong franchises have delivered a very good increase in the quality of the franchise, which we measure by the satisfaction of the customers, as well as the pickup of the monthly active users on the retail front. Also both of the franchises delivered above average or above expected or above guidance growth in our portfolio, especially on the credit side, but also on the deposit side. We are quite quite happy with the results, and I would like to thank our Armenian and Georgian colleagues who have done a very good job in 2025. As a kind reminder, Armenian Ameriabank full year.
In 2025 was the first year when Ameriabank was, for the full year, part of the Lion Finance Group, hence the renaming, as you know. As you can see, it has delivered substantial good growth, not only on the balance sheet side, but also on the retail covered side. With this bright note, I would like Akaki to cover our macro. As you know, both of the countries have enjoyed a record-breaking macro performance over the last few years, which is continuing year by year. Akaki, would you tell us what to expect?
Thank you, Archil. Hi, hello, everyone. I will be presenting the macroeconomic update for our core markets, Georgia and Armenia. Starting with growth performance, 2025 was another strong year for both countries. The Georgian economy expanded by 7.5%, fully in line with our expectations and supported by strong consumption spending and resilient external inflows. Meanwhile, Armenia surprised on the upside, delivering 7.2% real GDP growth. For 2026, we expect this strong growth momentum to persist, with supported by ongoing strength of services and public capital expenditure. Real GDP growth in Georgia is expected at 6% and within the range of 5.5%-6% in Armenia.
Due to this strong growth in recent years, as you can see on the right-hand side, per capita income levels in both economies have been steadily growing and converging towards Central and Eastern European peers. While the baseline outlook remains positive, uncertainty is still elevated. Geopolitical tensions in the region create downside risks. Both economies are well positioned to withstand potential shocks, supported by solid macroeconomic buffers and prudent policy frameworks. Upside opportunities could also emerge, especially from the ongoing implementation of the historic peace agreement between Armenia and Azerbaijan. Solid external inflows have also supported local currency strength. Georgian lari and Armenian dram have been relatively stable in recent years, recording modest but consistent gains against the US dollar.
Notably, real effective exchange rates for both currencies have stabilized, reinforcing our assessment of currency, that currency valuations are broadly in line with fundamentals and supporting stable medium-term outlook. Currency strength is also important for low and stable inflation, which the two countries have enjoyed in recent years. The recent headline inflation uptick in Georgia is mostly related to food price pressures, and core inflation remains low, reflecting well-anchored inflation expectations. Over 2026, we expect inflation to stay close to the central bank's 3% targets in both countries, underpinned by prudent monetary policies. In the second half of this year, we see room for around 50 basis points cuts by National Bank of Georgia, while the policy rate of the Central Bank of Armenia is expected to remain unchanged, as the current policy stance is assessed as broadly neutral.
Both central banks have been very active in accumulating, foreign currency reserves, due to strong foreign currency inflows and stable exchange rates. By the end of 2025, current, exchange, foreign currency reserves reached record high levels, of $6.2 billion in Georgia, and $5.1 billion in Armenia. Importantly, the current reserve levels are above the minimum adequacy thresholds, and they continue to increase. Another key pillar for macroeconomic stability is prudent management of public finances. Georgia and Armenia have demonstrated fiscal discipline over the years. The Georgian government remains on a consolidation path, with tight management of fiscal deficits at 2.5% of GDP and declining debt to GDP ratio.
Meanwhile, the Armenian authorities have been successful in balancing ongoing spending needs with fiscal sustainability objectives. Despite elevated fiscal deficits in recent years, they managed to keep debt to GDP ratio broadly unchanged. This year, we expect fiscal policies in both countries to remain sound and supportive to growth, particularly through sustained public capital expenditure. Lastly, financial sectors in both countries have benefited from favorable macroeconomic environments and continue to support growth. We observe solid and strong expansion of lending, lower levels of loan dollarization, and solid capital buffers. This concludes my part. Back to you, Nini.
You know, thank you, Akaki, for the overview. Now we're back to Archil, who will, discuss our performance first in Georgia.
Yes.
We'll move on.
Just one second. Let me share the presentation. There we go. In Georgia, the numbers were, as we said, ahead of our expectations. Our net profit for the quarter was just shy of GEL 460 million, which was 17% growth on year-on-year and return on equity of 32.7%. In terms of loan book growth, we were at 16.1%. As you may remember, we guide +10%, 16% was a strong showing, and our digital monthly active user continued to grow by 15% year-on-year, reaching 1.8 million.
We have our retail app and the business mobile app both are quite capable applications that do a lot of different things, and we have a list here. What's interesting is that second year in a row, we won the world's best digital bank by Global Finance, and there were very big names in the run-up at the end. Big mobile digital banks, basically, the biggest in Europe. In terms of the monthly active users, you can say that we are up by 15%, but also on a daily active, it's up by more than that, which was 24%, achieving just shy of 1 million customers, which gives you an idea that the engagement is increasing.
Customer engagement is ever-increasing number, which is very good showing. On the legal side, so on the company side, we had increase of 14% year-on-year, achieving 133,000 companies that use our mobile application, and obviously, Internet then is used there as well. We are increasing our sales with digital, and there we have achieved new heights of 71% in the Q4 , achieving 71% of all products being sold digitally. You can see that in loans as well, in deposits, we are increasing the share of sales which are done digitally. That is based on an on small differences or small improvements that we do through to each product.
On the Net Promoter Score, which is part of our DNA, no, customer satisfaction, and the focus on that is part of the DNA, and this NPS is more like a quick measure of how we are doing overall. We have achieved the new highs of 76, showing at the end of December. It just shows you that our franchise is enjoying a high moment or the highest quality it has ever been, in fact. In terms of our payments acquiring volumes, we are up by 22.6%, and market share of 55.8%, 0.1% down year-on-year. Basically, it's the strongest showing, as you can see.
What makes me also very happy is, number of people using our Visa, Mastercard, or let's say the cards, not just Visa, Mastercard, Visa, Mastercard, and Amex, because Amex debit is something that we do as well, is up by 13% year-on-year.
to 1.64 million people in Georgia, which is, it keeps us, it makes us happy to see that, although we are a leading retail franchise in the country, and in the region, we can say is also we can say that, it's still increasing double-digit number of people using our cards on a monthly active user basis, which is something that makes us happy and lays a strong ground for further growth going forward. Our loan portfolio, as we discussed, grew by 15.9% or 16.1% in constant currency basis. On a quarterly basis, that was 4.5%. Deposit continued to grow 13.6%.
Having said that, we'll discuss it later, that high liquidity is waiting on our NIM, we would like to go below 40% market share, where it's 41, and we would like to do it so that we don't hurt the franchise, so that people will still have Bank of Georgia as the top choice for keeping their money. On the capital position side, as you can see, there are very strong buffers there, and on the liquidity side, slightly higher than we usually keep. On this note, I would like to ask Hovhannes to cover the Armenian side, which has delivered a fantastic results. Please.
Thank you, Archil, greetings, everyone. I'll be sharing the presentation. Yes. As Archil mentioned, this quarter was another breaking record quarter for us in terms of performance. Our net profit for the quarter grew 38%, and annualized stand-alone net profit grew 24%. Our return on equity was 26.8%, and the loan portfolio growth was also astonishing, 28% in constant currency basis, and this was very diversified between both retail and corporate portfolios. Our time deposits grew 33% year-over-year, showing the very strong trust of our customers towards our franchise. Total attractions from customers grew 22% on constant currency basis, and again, we are very happy with this. All these are well above the benchmarks and guidelines that we have shared earlier.
We are very happy also to mark that our MAL and DAL ratios are growing at astonishing, over 25% per annum. In terms of digital infrastructure, we do continue to heavily invest into improving our digital infrastructure, both internally as well as customer-facing part. Our mobile app has already incorporated most of the beyond banking services, so it has become a very good ecosystem for our customers to meet a number of their needs, including investments in terms of brokerage, my home, my car, and so on and so forth. We have enhanced the digital payments in our ecosystem and mobile application, and technically, the number of transactions through our online banking have more than doubled within one year span.
We have launched our loyalty program in Q4 of 2025, and we are very happy and enthusiastic about it. We hear a lot of compliments from customers already, we do believe that it's gonna be another very strong pillar for us to bond our long-term relationship with our customers. Again, we do continue to invest heavily into financial education, both for the kids as well as for the adults. My Amiris Star is the application targeting kids and mostly educational part of that, and we are very happy to see the uptake on that as well. We do have very positive dynamics in terms of coverage of retail sector.
Here you can see more than 45% of growth for MALs and DALs. We are currently serving 1/3 of the adult population of Armenia. This gives us a lot of much bigger opportunities for growth in the local market. We are very happy with it. At the same time, I cannot fail mentioning about very positive dynamics of digital uptake and engagement ratios that show that whatever improvements we are doing into our systems are actually to the benefit of our customer base.
In terms of portfolios, the very strong macroeconomic situation in the country leads to very healthy and positive demand for loans. You can see that we were able to increase our loan portfolio by 28% in Q4 of 2025 year-over-year. We do expect to see very positive dynamics going into 2026 as well. As I mentioned, the growth has been very balanced between retail and corporate, but within retail portfolio, we see that the share of consumer loans is growing a bit faster than mortgages that constitute about half of the portfolio of the retail banking in Armenia. Deposits and attractions from customers are also growing very, very fast. We can see that 22%, roughly, growth of total attraction for customers comes to prove it.
It's very important also to note that 60% of our deposits already constitute deposits in AMD, and this is a result of a rapid increase of the number of customers. Over the last year only, we have increased the number of customers by 33%. At the same time, it's also a result of the very stable macroeconomic situation and very stable currency of Armenian dram. Ameriabank has been continuing to improve its market share. We are at 21.7% in terms of loans and 19.5%, sorry, in terms of deposits. As we have announced earlier, this really shows the additional growth opportunities that we see in the local market.
In Q4 alone, 96% of all the loans dispersed by Ameriabank retail sector were loans that were underwritten through our online channels. Technically, AI and machine learning based underwriting algorithms that cover it. That gives us opportunity to reach out to technically any Armenian citizen across the country with very low costs. In terms of liquidity, just like the Georgian peer, we have been over-liquid towards the end of the year, you can see from the ratios. At the same time, in terms of capital position, I want to mention that while technically the capital position was tight by the end of the year, we did enhance our capital position already in December. It just came into effect in January, when Central Bank of Armenia approved it as part of our regulatory equity.
We're talking about EUR 30 million, and effectively, by end of January, our capital position was already 17.5%. Later, in early February, we were able to do the first inaugural $50 million AT1 notes that will elevate our capital position by another 86 basis points further. We are very confident both in terms of our capital position and liquidity position. This is very short. I'm going to hand it over back to Archie. Thank you.
Thank you, Hovhannes. Those are very impressive results from Armenia. Armenia is continuing to deliver very strong results also on the macro side. As Hovhannes mentioned, it's very good that we are increasing the number of customers that we are serving. Having said that, we only serve about one third of the adult population in Armenia, so there's plenty of growth that can happen there. Now I will summarize what it means for the group results. Overall, the operating income up by 16.4% in the quarter and by 20.8% for the year. As you can see here, the net interest income was very strong, showing of 19.9% for the quarter and 25.9% for the year.
The reason why we don't show Armenia here for the year is that in the base year of 2024, one quarter is omitted, so it would not be a right comparison. If you remember, we acquired the bank end of March in 2024. Net non-interest income was up by 10% for the quarter and by 10.8% for the year. I'll discuss a little bit there because there was some details there that we should discuss, and we did disclose it in the results.
I'll just mention that in the Q4 , net fee and commission income was up by 33.8%, but that was partly due to the fact that we got a new deal from the system providers for the card payment system providers, which was starting from the 1st of April. So it covered the last three quarters, in fact, but it was booked in 2020 in the Q4 . We got a few questions earlier today that what should you think going forward? On the net fee and commission income side, I think, going forward, we should expect growth to be somewhere between 15%-20%.
On the high teens side, because it, not only we benefited for the last three quarters, but we benefit for the next five years with improved terms with the system providers. On the net effect side, we have seen a decrease in both markets, and on an annual basis, it's up by 5.1%. There, I think it's important to note that both of the currencies have been very stable. We make more money at better margins when the volatility is there. Volatility has been down. The competition has increased as well in Georgia, specifically.
Especially when you have a one-sided bet, when the currency is getting stronger and the National Bank of Georgia provided a backstop to about 2.7-2.68 GEL per dollar, that basically is a one-sided bet, it's hard to make money there. That's what we have been experiencing, similar kind of trends in Armenia as well. If there's volatility, we'll make more money. If there's no volatility, we'll be flattish to slightly increasing going forward. I think it's, you know, it's already reflected, that low volatility is already reflected in the numbers, and going forward, we expect positive dynamics. Operating expenses were up by 14% for the group on the Georgian side, slightly higher than the revenue.
Going forward, as we said, that overall as a group, we are expecting to have neutral or positive operating leverage. As you can see, in the Q4 , the group was 35.2% cost income, but notably Armenian side was 40.5%. That kind of drop is partly for the cost control and partly due to the fact that Q3 was the last one where we amortized the retention bonus arrangement that we had with the key managers of the bank. Going forward, as I said, we expect neutral to slightly positive operating leverage going forward. Loan portfolio growth was well ahead of our guidance, close to 20%, 19.7%, and the last quarter was 5.8%.
Where Georgia as we said, contributed 4.5% and quarter-over-quarter growth, and Armenia was 8.5%, which was very significant. Overall, I think Hovannes did mention that 28% was ahead of our expectation in Armenia in terms of growth. What's interesting also is that last quarter, Q4 of 2024 was a very big jump in loan growth, so with that high base to grow at 28%, especially on a Q over Q basis, you get the idea that the activity was very strong. Armenia overall, is there's a lot of positive dynamic happening there, and a lot of businesses are expecting to grow.
On the deposit side, we grew 17.3%, as you can see the breakdown there as well. Both of the franchises are enjoying very high liquidity, which is shows strength on one side, but it also is a weight on our costs of interest. Net interest margin was slightly reduced in Q4 , as I said, partly due to the fact that it was increased costs in GEL and AMD. Local currency is becoming both markets, in fact, higher proportion, and the costs there have been a bit higher. That will be a big focus going forward over the next couple of quarters.
Cost of risk were down at 0.3%. For the annual costs came 40 basis points. Our NPL ratio remained 2.1. Although we had a slight increase in Armenia, but slight decrease in Georgia, overall, as a group, we are at 2.5% or 2.1% NPL ratio, which is just fine. In terms of NPL coverage, mainly the decrease there, it's automatic. We didn't change any rules. In fact, the main reason why that change happens is because the proportion of the NPL ratio is increasingly towards the unsecured. There, basically, it's that's what it's result.
Profit before one-offs, as you can see, we had 22.7% growth in the quarter. It's a very strong quarter, in fact, record quarter. For the annual growth was also by 20.9%, which is very strong, and Armenia played a very, very good role there. With Return on Equity for the quarter at 30.1%. Nowadays, every time Return on Equity starts with three, I'm relatively happy. For the full year, I was less happy because it was 28.4% and not starting with three, you know, who knows? Return on Average Assets, as you can see, was up slightly from the previous quarter. For the full year, it was 4%.
All in all, I think it's something to note that leverage ratios in Georgia and Armenia are very low. We have almost twice as much capital as our peers in Eastern Europe. As a result of this, we have declared a dividend, which is an increase for the full year of 16.7%. Having said that, we are leaving significant buffers in both banks for strong growth because over the last two years, in fact, we have been growing more than more than we indicated as our medium-term guidance, and we want to be able to have that flexibility of deploying capital where the growth opportunities are.
For example, in Armenia, we did indicate that the acquisition that we were going to deploy the retained earnings, which are quite strong, to fund the growth. That is very important to have that flexibility and ability as a group, which is well-funded, to on one side, to pay dividends, which is growing year by year. A CAGR of 28.8%, but just last year was 16.7%. Going forward, we expect positive dynamics there, as well as ability to deploy our capital in growth opportunities, be it organic or inorganic, if it comes along. That's basically that.
As a reminder, our strategy is to be the main bank for our customers, and be excellent in customer experience and with our eyes on profitability. With annual book growth of about 15%, and profitability of 20+, over the last few years has been closer to 28%-30%, and dividend payout ratio between 30% and 50%. There as indicated, in fact, a couple of years ago, we've been on the lower side, which reflects our higher than higher than guided growth over the last 3 years. That's about that. Let's open up for questions, because I think questions, Q&A is usually the most interesting part, not only for our audience, but also for us.
Yeah.
So please-
We can open the floor for questions, and we have a few raised hands from the analysts. The first will be Sheel Shah from J.P. Morgan. Hi, Shil.
Hi. Hopefully you can hear me.
Yes.
Great. I've got two questions, please, if you can help me. First, can I ask about the NIM outlook for the business going forward, in the context of rate cuts coming in Georgia or expected, some of the funding pressures you've seen in the Q4 , and then you've also said, the local currency deposits, you know, you're going to be focusing on those, I presume, on the cost of those going forward. I'd be interested to hear, firstly, on the NIM outlook of the business going forward. Secondly, I'd like to know a bit more about the tech infrastructure of the bank, because we can clearly see the output of the tech in terms of the NPS score, the growth in the number of mobile active customers, the number of sales on the digital channel.
I'd be interested in, you know, how many of your applications are on the cloud? You know, what sort of platforms are you using? How many core banking systems are you using? What are you doing in terms of AI, which I noticed is, you know, newly on the slide. You know, a bit more information on the tech stack would be interesting, please.
On the NIM side, you did mention all the negatives, and you didn't mention the positive, which is deploying this extra liquidity. I mean, we are drowning in extra liquidity, which we either will deploy or push out of the bank. On balance, we'll either be flat to slightly positive on the NIM side, and that's in both markets. On the tech side, we are either the largest or second largest technology company in the whole region. We employ 1,000+ tech specialists, either or digital specialists, in fact, be it on the programming side or just digital workers.
We have translated that into the good numbers as well on the customer acquisition side, as well as the balance sheet growth. A few years ago, basically. First of all, our core banking in Bank of Georgia is homemade. It's fully homemade, as well as the main applications, the retail app and the mobile app, on retail, as well as business. In Armenia, I'll ask Owen to cover it in a couple of minutes, but mostly home done there as well. Basically, we have, a few years ago, said that we want to be cloud, on cloud or cloud ready.
So, about three, four years ago, we started to integrate that thinking into design and everyday development, and we've been chopping up our core system into smaller pieces, connected with APIs, which allows for the scale-up not to be too expensive in different parts of the business. It's many parts of our data is on cloud, and the rest can be on cloud any minute, but it's a cost, it's a cost-benefit exercise on each case because, yeah, that's because it's not cheap. But otherwise, in terms of technical capability of putting it everything on cloud and having it in smaller pieces, 90% is done.
I mean, there are small pieces that we are rewriting and changing, but otherwise, it's very well developed. Also on the AI side, we are experimenting in many different directions. Chatbot is the most obvious one, but we have done a lot of different testing of different capability now in the processing, payments processing, AML, and other types of applications, as well as on the risk and underwriting. While we focus on AI a lot of times we understood that there's more to be done on the automation side, so there's a lot of work going there. Not much more to report there.
Only thing I can say is that it's a big focus and going forward, it will deliver efficiency, but also more importantly, the speed of execution and quality, which will benefit our customers. Hovhannes?
Yeah, in the Armenian operations, we are using the two major software from third parties. The core banking is from the leading provider in the country. At the same time, CRM is one of the leading international solutions that we use. Other than that, the other major parts, namely mobile banking, online banking, are internally developed. At the same time, we are also technically one of the largest technological companies in the country, despite tech being one of the strategically important sectors for the country, with a number of employees engaged into tech development that we have. We also have this Agile framework, so product teams are working through this Agile mechanism.
We do deploy machine learning and AI in certain areas, namely, in a number of areas to improve internal efficiency, as well as to improve the customer experience. For example, one of the latest beta types of the AI applications we've seen internally was analyzing the needs or potential needs of the customers to be able to come up with the best next offer for the customers. As I mentioned, 96% of all the retail loans that we've disbursed in Q4 were through our online and automated models, machine learning and AI models. Technically, for us, that means, A, underwriting process is 38 x cheaper than it would have been through conventional lending technique, and, B, it also means outreach to technically anybody on the territory of Armenia.
obviously, I mean, that's another perspective that we look at it, and clearly, we're also at the doorsteps of the unleashing all the opportunities that these new technologies will enhance for our sector. We are very optimistic that we're gonna be using AI in general, wider with better benefits.
Thank you. That's very helpful. If I can have just one quick follow-up. When you say that you have the potential for outreach to all of Armenia or to, you know, all of Georgia, is this a direct-to-consumer method, or are you using sort of online tool or online aggregators? You know, what's your method of distribution of these loans?
In case of Armenia, it's technically mostly direct. We are rarely using other platforms to as an aggregator to outreach our customer base. Technologically, and we do have a number of customers today that can become customer of Ameriabank remotely sitting on their couch. They can apply for a loan remotely sitting at their home or office. This actually... and with the pretty significant penetration ratio of mobile and internet usage across population, we see our digital platforms, our own digital platforms, gaining very good and positive traction over the last few years, and that's actually also being represented by more than 45% growth of our MALs and DALS. Our transactions more than doubled, and 96% of retail loans through online platforms.
All these are kind of early indicators that whatever we have been doing for the last four or five years are actually kind of giving their results already.
I'll cover the Georgian side. We have 1 million users daily in the country of 3.7 million people. Short answer is, yes, we do it directly. The long answer is that we are the biggest brand, not only in the financial intermediation, where the top of mind is 57%, but we are the biggest brand in the country, period. I mean, it's bigger than any other brand. When, you know, say, do we do it directly or not? Yes, we do it directly. We still have a very significant branch network, very significant ATM network, and we are the biggest brand in the country overall, and plus in finance.
That basically gives you an idea that we are not a back office or some kind of intermediary, but we are the main intermediary in the country.
Thank you.
Thank you, Shil. The next question is from Alex Kantarovich from Roemer Capital. Hi, Alex.
Hi, can you hear me?
Yes. Yes, go ahead.
Yes, thank you for this opportunity. Can we please differentiate between outlook for loans between Georgia and Armenia? Clearly, the dynamics are somewhat different. This is my first question. Yeah, and, I'll follow up with the second one.
Sorry, Hovhannes, I'll do it. 10 plus in Georgia, 20 plus in Armenia.
That's very short and sweet. Thank you. If I can address the elephant in the room, inclusion in FTSE 100, do you expect it to happen imminently?
As economists like to say, all else being equal, yes.
Yeah, that's great. That's great, thank you. Finally, I appreciate that you deploy your capital very, very efficiently, but is there a scope for increasing the levels of distribution from 30%?
Absolutely. As long as we grow at 20% instead of 15%, as long as we are open to the M&A opportunities being, you know, major banks in smaller economies, and such opportunities may come along. We would like to keep a little bit of buffers there. You know, if either one or the other don't play out for a longer period of time and we grow at, I don't know, 12%-13% instead of 20%, like we have been growing over the last three years, then of course we will return, you know, return more capital. Our distribution is between 30% and 50%. I think it's a mirror image.
Either we grow more and we deploy capital, and I think we've been very disciplined and showed our investors that we don't throw around the money, so we either deploy it in businesses which are generating 25%-30% return on equity, or we are looking at acquisitions of similar kind of returns. If this doesn't happen, then, of course, we will return more, but I hope it will happen. Until those things are happening, we will be on the lower side of the distribution guidance of 30%-50%, and if it happens less, then we'll grow capital returns.
That's great. Thank you so much.
Thank you, Alex. The next question is from Jens Ehrenberg. Hi, Jens.
Hi, Nini. Thanks. Can you hear me all right?
Yes. Yes.
Super. Thank you very much. Thanks, guys. Firstly, just on Armenia, I suppose it's very good to see more sort of digital uptake there. It feels like with sort of 11% of penetration, the growth headroom there is still really enormous. Is that the right way to think about it, given you're sort of roughly at 47% in Georgia? Is the opportunity really that big? Secondly, on Armenia, I think we've had quite a material improvement in the cost-income ratio in the Q4 , and I appreciate you touched on that earlier, but just going forward, is sort of the low 40s level, do you reckon that is sustainable for Armenia going forward?
Lastly, I suppose on the Georgian side, believe we had one of your key competitors talk about their strategy yesterday and the intention to try and grow more on the retail side in Georgia. I'm just curious to see how you see the competitive situation on the ground at the moment, and really, what you expect going forward there. Thank you.
Hovhannes, do you want to take the opportunities of growth on the Armenian side?
Sure, sure. We have indicated earlier that currently for midterm, we do envisage to grow our market share to 30%, so this is our midterm strategic objective as of today. Obviously, I mean, that's gonna be a moving target as we go forward, and you've seen that over the last few years, we have improved our market share significantly, and we do anticipate to be outperforming the market in the year 2026, and next two years as well. In that case, theoretically, maybe in a bit longer term, we could get closer to the market share where our Georgian peers are, but current target is at 30%. That's kind of where we wanna be first, and then we'll see how it goes.
In terms of cost-to-income ratio, we do believe that the ratio that we are reporting in Q4 is more than sustainable. Moreover, as I mentioned, a number of initiatives that we've done within the bank have significantly improved our cost base. We do expect to continue in that direction further. I would say, I would not be very surprised to see the higher thirties in terms of our cost-to-income ratio in the coming years.
As regarding the competition, I think, first of all, I cannot comment on, you know, competitors' statements. The only thing I can say is that competition on the ground in each and every direction is nothing new. As you can see, over the last 20 years, there has been a pretty strong competition between the two. Having said that, I think both players have been cognizant of the fact that they don't want to destroy the profitability. I think we are seeing a significant push and effort on the side of the quality in terms of user experience, in terms of easiness of use, et cetera, et cetera, and all of that, I think, will continue.
Having said that, you know, we believe that we are very well placed to continue delivering the strong numbers well ahead of the whole banking system.
Super. Thank you very much, guys.
Thank you. Thank you, Jens. We have the next question. We have the next question from, Ben Meyer from KBW. Hi, Ben.
Hi. Can you hear me?
Yes. Hi.
I've just got a couple of questions. The first one's on market shares. Obviously, you mentioned you've been growing it in Armenia. I noticed there's a small decrease in the quarter in Georgia. I was just wondering if there's a particular reason for this? Also, could you just please clarify I think it was a point on liquidity, where you said you wanted to keep the deposit market share below 40% in Georgia. My second question is just on consumer lending has been very strong through the year. Is this just households re-leveraging, or do you think that's, you know, potentially early signs of some financial strain? Obviously, asset quality has been doing very well, so I was just interested in your thoughts.
On the share of time deposits in Armenia, that's risen, year-on-year, although it was down slightly in the quarter. How do you expect the share of these deposits to evolve in 2026? Thank you.
I think, Ben, I would not read too much into the quarterly changes of market shares. They are rather volatile. Let me show you what you're referring to. You're referring to this change here, the last quarter, and I would say, look at the longer term, look at 10 years or more. For this particular year, you can see that 37.6% has become 37.8% for the full year, so it's flat to slightly increasing. And, you know, competitor numbers are different. That's that. In terms of the retail deposit market share also is very strong. Here, on the total deposits, we're trying to decrease it below 40% without losing the preferred preferred status in people's mind in terms of keeping their money.
We feel very strong on the local market, in fact. I think the key characteristics, when you look at the quality of the franchise, is the NPS score, which kind of is like a body temperature, measuring the health of the service. Inside, there are a lot of different subsegment, top of mind, most trusted. Those are some of the things that we're watching at, and all of those are basically at record highs. We are in a very, very strong position.
I can say that probably the strongest position, that the franchise has ever been in terms of the quality of the franchise, and that's on the back of a very strong macro performance over the last few years, and double-digit growth of average incomes, as the unemployment rate comes down. Overall, very strong macro and a very strong franchise, that's the combination that we have. Very similar in Armenia. Hovhannes?
It's very similar technically in Armenia, but we do expect to grow obviously our market share in the coming years, as I already mentioned. In terms of the structure of deposits, I think it would be fair to anticipate similar changes in coming years, because we do anticipate very stable macroeconomic performance and FX exchange rate in the country. At the same time, the more we cover retail segment, the more AMD-denominated deposits share is gonna grow over years. I'm not sure about the same dynamics in terms of the speed of change, but it would be fair to expect that in the coming years, share of AMD deposits and current accounts will be slightly growing.
Great, thank you. Just sorry, on the consumer lending, strong growth, is there any obvious reasons behind that you see in both markets?
Consumer growth in both markets has been very strong. In Ameriabank, I think it's partly due to the fact that our offering has become just much higher quality in terms of the user experience and the reach in terms of offering has been much wider as well. In Georgia, we are in a leading position, and we have seen Georgian consumer, their incomes growing double-digit five years in a row, and first two years was high teens as well. I think it's a very strong base. We're not seeing any signs of any credit quality deterioration. We watch it very carefully in different subsegments of credit, yeah, so, like, no signs whatsoever at this point.
In fact, if anything, there are very strong signs on the credit quality side on, all around, in fact.
Well.
The only part where we saw a little bit of issues were smaller hotels in the regions, which is, like, you know, 1% of portfolio or less, and there we've tightened the underwriting two years ago, and we described it in different qualities. In terms of the large corporates, in terms of real estate, in fact, that was a big focus, and we've seen a much stronger performance than anticipated. In terms of all different types of consumption, investment, there has been very strong performance all around, and in fact, people underestimate the amount of investment portfolio that is geared up to invest in a lot of different segments in Georgia, especially on the energy side, especially on the logistics side, and other things.
Armenia is a slightly different sectors, but same. Please, Hovhannes.
Yeah, I mean, I'm totally in the same line. Technically, the disposable income of the households over the last five, six years have grown immensely. As Arturo mentioned, our digital propositions have improved. Also, please keep into consideration that during the last two years, we have doubled the number of customers that we're serving. Technically, in our case, we have also this very significant growth of the customer base, and clearly, this also is additional market for us to go out there and present our different propositions, including consumer finance opportunities.
Very useful . Thank you.
Thank you, Ben. We have another question from Dmitry Vlasov.
Thank you very much for the opportunity to ask a question. Congrats on a very strong set of results. My first question is about cost of risk. You have a guidance of around 100 basis points over the cycle. My question is, do you have a view for 2026, how will it be different for Armenia and Georgia? The second question is about the potential M&A. Is my logic correct that it's mostly about the right opportunity, right timing, the right price, rather than you waiting to maybe scale Amiria first, then, sort of, deploy capital elsewhere? Those are the two questions.
On the cost of risk side, you rightly said that between 80 to 100 basis point is through the cycle guidance that we provide. Having said that, we've been well below those numbers when the macro macro growth has been bigger and the performance has been much stronger than average in the history for both countries, and I think you can apply that rule. In terms of the M&A, you are absolutely right. I mean, we are opportunistic. We scan different markets, and we look for the right opportunity and right price. We are quite disciplined about it, so we don't have to do any M&A, but if the right opportunity comes up, we would like to be in a position to do that. That's our approach.
It may be that we do something, and maybe we don't do anything. In terms of what we're looking for, we're looking for major players, and that by, just by our scale, that means that we're looking at smaller markets, unfortunately. We do prefer to look at well-established players, and in fact, if we can add value in terms of applying our approach to customer care and technology, and usually we do, we like those kind of stores, where it's a well-established player, and we can add value, by putting some of the approaches that we have to customer care and technology in place.
That, I think, can be very beneficial for the franchise, for the country where we may be going, as well as for our shareholders. We look at, we don't like turnaround stories. Banking is a leveraged business, so we are very careful there. We like good teams. We're very lucky with the team in Armenia. It's a fantastic team. We've done everything possible to retain the whole team. We're very happy to see them stay and deliver fantastic results. We may not get as lucky every time, that would be the idea.
That's very clear. Thank you very much. Maybe one small additional question, if I may, about how 2026 started for you so far. Is it in line or maybe even a bit above your expectations? Thank you.
2006 started, very well. Strong start.
Thank you.
Thank you, Dmitry. Thank you. We have one more question. I think we had it from Simon Nellis. I saw his hand. Yes. Hi, Simon.
Hi, thanks for the opportunity. Apologies if this question's already been asked, 'cause I had to drop off just for a little bit. It's around your capital return strategy going forward, 'cause I think you've been at the lower end of your guidance range as you reinvest into the Armenia business.
Um-
Is that still the case, or are you going to up the payout over time?
Until we are able to grow at the rates which we have been growing, which is blended 20%, probably will be on the lower side of the capital returns. I think our buffers allow for us to be a bit more opportunistic if non-organic comes along. If one or the other or both do not happen, obviously we'll be increasing to the higher side of that guidance, which is between 30 and 50. We've been on the 30 side, obviously as things mature, we'll be increasing that significantly. Short term, I think we are in a luckily in a situation where we are growing well above our midterm guidance.
Are you still reinvesting the dividends into, I mean, you're not paying dividends out of Armenia, and you don't intend to?
We have not, but we will be looking at slight upstreaming, especially because we have had ability to put the Tier one instrument in place, which provides significant buffers there. We'll be watching the growth opportunities there. Quite frankly, I believe that Armenia is been doing very well. In fact, as a macro story and geopolitically, there are huge positive moves, and when big investments happen, I mean, there have been just couple of big investments, so honestly, you want to mention that have been announced?
Yeah. Very recently, the Vice President of U.S. was in Armenia, around this whole Peace Three and Trip Corridor, there have been mentioned several very significant investments into AI, data center, technology and institutions, nuclear power plant, and a number of other infrastructural projects, like railway, roads, and so on. We are talking about $4 billion-$9 billion of potential investor investments into the country, for our economy, it's really huge. The potential positive impact of that on the economy and subsequently on the financial sector, could be really very decisive in the coming years.
Simon, all of these positive things, they need banking, and we want to be able to bank them properly without much limitations. I think our capital position and liquidity position allows us to be flexible. If we find that, you know, we are growing at, I don't know, 12% instead of 25, then we return more capital. I mean, we are quite cost-conscious and quite disciplined on capital side, and we act as shareholders, in fact. Yes, I mean, and so far, we've been growing more than we guided medium term, and that's true for last three years in a row, almost 20% growth of balance sheet. Going forward, if that continues, we'll be returning capital, but on the lower side, and if we grow less, then we return more capital.
Very clear. Thank you.
Thank you, Simon. I don't see raised hands. There is just maybe two questions that I'll read. One is on Armenia: "Can you please confirm the growth in Armenia is self-funded? Also, if there are any inorganic growth opportunities in Armenia?" That's two questions.
Yes and no.
Well, in Armenia, we are self-funded in terms of not receiving any funds from within the group. There are no any intra-group funding allocations or capital allocations as of today. At the same time, we are also very actively working with a number of Development Finance Institutions. In 2025 alone, we were able to attract $400 million equivalent funding from the DFIs. That also improved our liquidity position in foreign currencies. It's kind of long-term financing for us to be able to serve the needs of our customers. Technically, as a fully independent entity, yes, we are funded by the funds of our customer base as well as our partner DFIs, if that's the question.
This question is for Archil on NPS. It says: "A couple of years ago, you said you won't push on NPS as hard, given the costs associated with it, but yet it keeps improving. How did you do it?
Just can't help it. It's part of the DNA now. I think, customer satisfaction and the focus on that, I think is key to long-term success of any franchise, especially when you are touching lives of millions of people. I would keep that focus.
we don't have any more questions.
Excellent. On this bright note, I would like to thank you for your interest and for your support that we have felt, not just today, but over the long period of time, for your trust. I would like to thank the Armenian and Georgian team and the whole Lion Finance Group team for really doing your best and delivering consistently very good results. As long as we make our customers' lives better, I think we'll be in business and doing well. Thank you for your support, and let's look forward to a very strong start of the year and I hope some good news very soon as well. Thank you.
Thank you, everyone, and see you next time. Thank you. Take care.