Hello everyone, welcome to Bank of Georgia Group PLC's results call. My name is Nini Arshakuni, I'm Head of Investor Relations, and I'll moderate this call. Today we'll be presenting the group's preliminary financial results for the fourth quarter and the full year of 2022. We'll start, as usual, with an overview of the performance, which will be presented by the CEO, Archil Gachechiladze, and afterwards, we'll take your questions. Now we'll be handing over to Archil.
Let me jump to the presentation, share the presentation, go through it, and then we'll go to the Q&A session, which is usually probably the most interesting part of the presentation. We had finished the year with very strong results. You may have already seen it. Our profit for the quarter was GEL 326 million, which was up 62.4% year-on-year, with return on equity of 33.7% and cost income of 31%. This is third quarter in a row that we have delivered return on equity higher than cost income, which is just a fun fact. On an annual basis, the net profit was up by 55.7%, GEL 1,132 million.
Overall return on equity of 32.4% and cost income of 32%. For the full year also, we had higher return on equity than cost income. Also very important is that our Net Promoter Score is high at 58%, slightly down from the peak of 60. Overall, I think is keeping the trend of increasing that and the focus of customer satisfaction. Monthly active users of our digital application is up by 31.5% year-on-year, which really is where all of these numbers are coming from. Not only this one, but it's one of the metrics that we drive the success of our franchise. With that, let me summarize few things about the macro economy.
I'll talk on the update of strategy like we do usually on a quarterly calls. After that I'll share the results and few numbers from the results, financial results. The year continued with very strong performance. We had enjoyed double digit growth in 2021 at 10.5%, and 2022 ended with 10.1% estimate. At this point, the fourth quarter was 9.5% real growth. All in all, I think, Georgia delivered very strong growth. That was underpinned by strong growth in exports, which in December in fact was up 32%, which was strong, but previous months were also not bad.
Remittances were strong in December, we ended it with 133% up. Imports also increased in the fourth quarter it was about 30%. The tourist inflows, which includes the migrants as well, was. We are comparing it to the peak 2019 revenue. We ended it. We surpassed it and the last quarter was well above the 100%, which was 2019 peak in dollar terms. In December ended with 167%. All in all, it was up roughly about 45% for the full year versus 2019 again, if that was the peak year.
As I mentioned, two years in a row of real growth, of double-digit real growth and 2023, we are expecting 4.8%, and the year after 5%. This obviously has some risks but also has some upsides. In the upside scenario, we're looking at about 7% real growth. In terms of inflation. Inflation and the refinancing rates remain still at a high level. We ended the year with headline CPI of 9.8% and core CPI 6.9%. Inflation continued to decelerate after that, and January ended with 9.4%, so it's headed in the right direction. It peaked close to 14%, as you can see on the chart. We are seeing that should continue reduction.
PPI, in fact, if I remember right in January, was around zero, so there's no no pressure from the wholesale prices on this retail prices, so it should continue to decelerate. We do expect the refinancing rate to remain at elevated levels throughout most of 2023. Second half of the year we may see some reduction, although National Bank says that they expect to keep those rates until the end of the year at this point. Georgian lari has done very well over the last year. Over 2022, it has strengthened versus U.S. dollar by 12.5% and has strengthened by versus other trading partners as well. The performance was very good.
As you can appreciate, the nominal growth in 2022 because of high real growth and high inflation was close to 19%. With lari getting stronger, it was very good for our investors who are counting their money in U.S. dollars. It's very good year in the terms for investors as well. In terms of lari getting stronger, we also see that National Bank is increasing the reserves and reserves went up by almost GEL 1 billion this year. It reached GEL 4.9 billion at the end of the year. As you can see, the net purchases were around $100 million per month over the last five, six months, as you can see. It's very strong purchases every month.
Nevertheless, I think lari has remained very strong overall and strengthened another 1.9% in January, in fact. The growth in the banking sector slightly decelerated to 12.1% at the end of the year. That is on a constant currency basis. If you look at nominal growth because of some of the debt is in U.S. dollars an d in lari terms it's less. The overall growth came to 4.0%. I think constant currencies growth is really what shows the economic activity. It was 12.1%, well below the nominal growth of the economy.
As you can see, the bank dedollarisation of the banking balance sheets is going very well, especially due to the incentives, capital incentives, in fact, introduced by National Bank one and a half years ago. You can see that it is just below 45% on the asset side, and the trend is very strong. I think that risk has all but gone from the banking sector. The deposit dollarization is also dropping, and it's at 56% at this point. The loan dollarization where the risks lie mainly is below 45%. NPL has remained at a very low level, under 2% in this sector.
All in all, because the nominal growth was so strong, and the growth in banking sector, because of higher interest rates were high, the growth was not very, very strong. Denominator increased substantially, and the growth was not as substantial. We have seen over the last two years that the overall leverage in the sector in the country of banking assets to banking loans to GDP has dropped to 63%. Which basically means that it creates potential for us to grow in the outer years, as the rates come down over time. We have also seen the national debt to GDP, which peaked at 60% in 2020, come down below 40% in 2022.
That was also one of the risks that we were looking at, over the last couple years, a couple of years. That has, also, that risk has been reduced substantially. Also, I think I should also mention one other thing, which is. Two other things, in fact. One is that the, that the budget deficit it's estimated right now, but it should be within 0.1%. Correction, it should be at 3.1% for 2022, which is already pretty decent given the large deficits, deficit that Georgia was running in 2020, and then reducing it in 2021. It was well ahead of, or at least it was much narrower than the original budget.
The tax revenues increased by almost 29.8, if I remember right, almost 30%. That allowed the government to decrease the budget deficit. I have to underline the fact that although the capital expenditure grew, spending grew by 27%, the operating expenses only grew by 8%. The fiscal discipline that Georgia has had for many, many years now, is maintained very well. That is very good. The current account deficit also narrowed to about 3%, 3.1% estimate for 2022, which is also a very large reduction.
I think macroeconomically, not only was it a very strong year in terms of growth, but it was growth that was not financed by credit, and in fact vice versa. It was a major deleveraging that has happened throughout. As well as, the deficit narrowed, the national debt is less, the reserves are at the record level and lari strengthened. It was very good year economically speaking, for sure. Now, few things that I would like to update you on. This is our strategic priorities that we set out, the mobile app, payments and loyalty and how to do it. It was focusing on customers and especially employee empowerment. Strength of our franchise in terms of the brand and to do a lot in terms of data decision making by data.
All of these doing it very well on profitably. This was the focus that we announced in 2019, in fact, so about three and a half years ago. We have been delivering on each and every one of those. We all know that we are a footage company, a leader in digital banking in the country. We are top of mind bank and most trusted bank in Georgia by third party marketing agencies. According to third party marketing agency research, delivering good profitability above 1% and high standards of governance and overall ESG. Talking of our retail banking application, the monthly active users went up by 31.5%, and I am very happy about this result.
31% was a very ambitious target that we had, was GEL 1 million, in fact, for the management. We surpassed it comfortably by GEL 120,000. What makes me very happy also is that our monthly active clients, overall our clients, grew by 17%. Given our high overall high usage of Bank of Georgia products, we thought that that kind of growth was not possible. I think it's our because of our focus on customer satisfaction and the quality of our products, more and more people are using Bank of Georgia products. There are a lot of double users as well.
Basically people that use Bank of Georgia that used to be using other banks or are still using other banks, but that it's still a very good number to have. 17% growth overall of clients and in terms of monthly active users, 31% up. As you can see, year-on-year, our monthly active users to the total monthly active customers has gone from 61% to 68.7%. More and more people that are our customers are using our mobile application, which is of very decent quality and we are listening to our customers to what they want and what they need to see in our application and continuously improving. The automa also increased, daily interaction from 44% to 47.6%.
Today, more than half a million people on a daily basis use our application. For a small country, it's a very big number. In the fourth quarter, in October in fact, we launched sCoolApp. Application for school kids, banking application, because they also need financial services. Which has money requests that they can request the money from their parents. It has a piggy bank. It has all kinds of discounts that kids enjoy, schemes for interaction, et cetera. We think that this is a very important product for starting the relationship at early age and financial discipline and education is very important.
Increasingly we will be introducing financial education, gamified financial education for kids. We believe it's very important from an ESG point of view to introduce that at the teenage years for kids. We believe that it will be a big impact overall for the country longer term. Still it's an important thing for us. In terms of the overall number of transactions, it went up to 90 million from about 70 one year ago, quarterly number of transactions. Notably, mobile bank transactions represent now 58%. That's the part that is growing the most and nothing is surprising there. We see that number probably grow further. What's interesting is that our offloading of our sales, so selling our products.
On a transactional basis, more than 96% is out of the branch. In terms of selling products, being it loans, deposits, cards or different types of products, it's only 40%. 40% was a big increase in the fourth quarter because we digitalized number of different products and implemented some other things that we were focused on. It went up pretty well in the fourth quarter as you can see here. In December it was 44%, so it was a strong growth. Nevertheless, we believe that there's more growth to be had there. We would like to see this number increase towards 60%-70% in the next couple of years.
In terms of our applications, the internet bank and mobile bank for our businesses, business customers. The monthly active digital users went up by 39% on an annual basis to 58,000 customers, and number of transactions was up by 32% as well. The quality of our service, which we measure, it's an internal measure, so we can only compare it to ourselves. One year ago, the CSAT was up by 5% and 6%. We would like usually to see that more than 80%. A few years ago, it was not, and we'd like to see that move forward the quality of our services.
As you can appreciate, the number of products and the sophistication of services for the legal entities is much higher than for individuals because they use more products. Another line, which is payments, which is also our strategic direction, has had a phenomenal growth. Year-over-year, our volume of acquiring business went up by 52.8%. That's for the quarter, the last quarter. The market share of acquiring went, reached more than 50%, 50.3%. That's up by 7.3% on a year-over-year basis. The market has grown by about 30%, and our business has grown by 52.8%.
Moreover, something that we've been watching closely is the number of people using Bank of Georgia card at least on a monthly basis. The payment now so-called, which went up by 33% and surpassed 1 million people. More than 1 million people in Georgia use Bank of Georgia card on a regular basis. At least monthly, but, you know, most on a regular basis. How do we do it is by focusing on customer satisfaction, which you can see the trend over the last five years. It's upwards, and we will continue focusing on customer satisfaction, which has become a new religion at Bank of Georgia . Now few words about the numbers. The numbers that are a result of some of the strategic initiatives that I've talked about.
We mentioned the return equity is 33.7%. For the full year, 32.4%. Cost of risk for the quarter, 0.9%, and for the year, 0.8%, close already to our long-term range that we expect between 1% and 1.2%. Cost income ratio at 31% for the quarter, 32% for the year. Most importantly, I would say, is that all of this has been achieved at a very strong capital ratios. Core Tier 1 ratio of 14.7%. Again, this is by the national standards, and you'll see the IFRS numbers very soon, more than 3% above the minimum requirements.
We had loan growth for the year at 12.9% in constant currency, and deposits of 43.2%, very strong growth. This year for last two quarters already, our net loan to deposit ratio is well below 100%, first time in history of Bank of Georgia that I remember. In terms of the income statement, few numbers that I would like to highlight. Net non-interest income of the last quarter was up by 129%. If we can only continue this for next 20 years, it would be nice. For the full year, it's up by 99%. Obviously we have benefited, as you can see, for three quarters in a row, we've benefited from high FX. It has started to come down slightly.
We will probably see about a third of this number go away. At least that's our expectation. For the last three quarters, we have still enjoyed this slightly longer than we expected, but we don't mind quite frankly, as you can expect. Also the operating income overall is up by 54.2%. For the full year, for the full year, it's up by 46.6%, surpassing GEL 2 billion mark, which was also nice. Our operating expenses in the last quarter grew by 20%, which is not low obviously, but in this high inflationary environment and in the spending business, we thought it was not bad, especially when you look at last three quarters, and second quarter was up by, f irst quarter was up by 29%, second 32%, third quarter up by 26%, and fourth quarter up by 20%. The trend was nice and that was good. That has been reflected in the cost income ratio, where we achieved 31%. One year ago, as you can see in the fourth quarter of 2021, it was 39.8%. For the full year, it means cost income ratio of 32%. I would like to remind you that the midterm guidance that we had was around 35%. We are ahead of that guidance. Well ahead of that guidance. Loan portfolio and deposit portfolio we discussed, in nominal terms it was less, so 4.3% only, while in constant currency it was 12.9%.
Fourth quarter was not bad. In fact, it was pretty good for us, but overall banking sector I think decelerated, nevertheless. Deposit portfolio grew by 43.2%. In nominal terms, that was 30%. It was a very strong growth, including in the fourth quarter. Net interest margin, we saw a nice improvement in the fourth quarter by 40 basis points, as you can see. For the full year that meant an improvement of 50 basis points. That was a good one. Something that helped us on the cost of funding here, was the fact that we did the buyout of in the third quarter of part of our dealer bond, and there was a high interest rate there.
It's only $82 million outstanding now out of $350 million, which matures in May this year. As well as had enjoyed an increase of yields there a little bit as well. I think the combination was overall good and it's good to have larger margins. Cost of risk we had at normal levels at 0.9%. For the full year, 0.8%. We had a slight decrease of coverage. That was because we increased the NPL ratios to 2.7%. That was partly due to the reclassification of some of the loans. It was getting a Stage 3 loan. It was included in Stage 3, but it was not included in NPLs, and we decided to, that it was the right thing to align those closer to Stage 3 numbers, and that's what caused a slight increase.
On a constant basis, it was down to 2.2%, and we feel it's a good coverage. On a profit, as we mentioned, this is up by 62.4%, and on a quarterly basis, 12.3%, but it's because it's seasonal. It's probably year-over-year is a better number to look at. As well as for the full year, it's up by 55.7%. Of course, we had one-offs that were a very good positive number that we have seen. Return on equity-wise, we had a record high of 33.7%, and for the full year, it's 32.4%.
This is an interesting slide that I would like to draw your attention to. First time we are reporting IFRS-based capital ratios. National Bank has done what they promised to do, which was to prepare the banks and the system for reporting in IFRS. This year we'll be reporting in the old standards, which is this one here, as well as IFRS. Now investors can actually see with IFRS classes on what our actual capital position is. As you can see, the Core Tier 1 ratio in IFRS is 17.7%, and Tier 1 ratio of 19.7%, and total capital of 21.7%.
It's a very good capital position here, as you can see, and these are the numbers that we expect the fully loaded ratios to be at the end of 2023. Well above the minimum requirements. We'll probably be adding slightly more sub debt for the total capital ratios to have a slightly bigger cushion. Overall, the core capital and Tier I is very good. Also, needs to be noted that our one-off settlement that was here, it went to the holding level, so it's not included in capital ratios. That is on top. This is just a graphical presentation.
We have plenty of liquidity, obviously, and we are deploying it in mainly U.S. Treasuries, which are offering decent yield nowadays. Loan-to-deposit ratio is below 100%. Last but not least, we are delivering more than we promised in terms of return on equity. We are growing more than our loan book guidance is, at 12.9%. In nominal terms, it's less, but constant currency is what we focus on. In terms of capital distribution between 30% and 50%, because of very strong numbers, that has meant that this year we are distributing around $200 million, total, including the interim that we distributed. There will be.
The Board will be recommended to the shareholder meeting in May GEL 267 million dividend. Today we've also announced GEL 148 million buyback program. That will be up to, which will be implemented until the shareholder meeting. With that, I. That was half an hour. I'll stop the presentation and open up for the Q&A.
thank you, Archil. now we'll be taking the questions. we have the raise hand feature in Zoom and also the chat. if you're dialing in, please press star nine. also please be aware that this call is being recorded.
Mark Webster
Archil, we have a question here.
Yes. Mark Webster is asking, do you have any observations of your performance and the Georgian economy in relations to the influx of Russian migrants?
Well, the observation is that obviously the Georgian economy benefited from the influx of Russian migrants. Some of them relocated for long because it looks like that some of them have opened businesses here. Others are working remotely for the IT workers. They've also moved some of their savings and are buying apartments here. Overall, I think the Georgian economy is benefiting from the influx of Russians, predominantly young professionals. We are seeing that in the total growth number as well as our numbers, which is not specific to Georgia.
I think every country on the, on the outskirts of Russia is benefiting from that because Russia, a lot of negative developments happening there. You can, you can basically see a lot happening in Turkey, in Georgia, in Russia, in Kazakhstan, in Uzbekistan, and so forth. It's infecting Romania as well. There are a lot of countries that are seeing this professional migration of young professionals maybe from Russia. Moreover, I think what we are seeing is that because Central Asian countries need import export corridor, it used to be mainly through Russia. Because Russia is heavily sanctioned and Iran is heavily sanctioned, Georgia remains the main corridor for Central Asian countries.
We've seen the transport or transport capacity fully utilized. We've seen railways and roads full of trucks and cargo going in and out for Kazakhstan to Turkmenistan, Uzbekistan, and so forth, for all of Central Asian countries. We are seeing more and more interest from this region in Georgia. In fact, I believe we'll see a lot of investments coming in in those sectors in the next few years, so it could be good.
James Hammonds. Do you wanna read the question, Nini, and I can answer?
What would your CET1 ratio be if all of the surplus capital was deployed in the bank on an IFRS basis?
Beats me. If you can do your math, Nini, and answer this question in a short period of time. We'll be back to James.
We'll get back to you, James.
Any more questions?
You have one, raised hand from, Can Demir. I'll let him ask the question.
Hi, Can.
Hi. Thank you. Archil, thanks for taking my questions as well. I actually have three questions. The first one is, it feels like you were a bit slower than the market on the lending side last year. Is there a specific reason behind that? That's the first question. I'm not sure if you wanna answer one by one, or should I just give you three questions?
Why don't you give us three questions?
Okay. The second question.
I can take notes, and then I'll answer. I'll take one by one.
Great.
I'll answer one by one.
Okay, okay. The second question is, can you talk a bit about the nature of the settlement claim? Maybe when you think about your capital returns this year in 2023, what kind of role would that play? That's the second question. The last question is the NPS score. I mean, it's been increasing consistently over time, so big kudos on that. My question is, why do you think it was that low back in 2017? I mean, what did you change in the bank? What changed for your customers, and why do you think they believe they are better taken care of right now versus in 2017? Thank you.
Let me take it one by one. Slow and loan growth. We believe that loan growth is good, but we want to do it. We don't want to be cutting prices. We want to do it, on a market basis, and in fact, increase the sophistication of how we do it in terms of convenience, et cetera, et cetera. That's what we're focusing on. It was a decent growth. I don't think it was much lower than the sector. It was slightly lower in the first three quarters. In the fourth quarter, I think we caught up. If anything, I think the trend in the last quarter was good.
We had seen this year slightly high cost of risk in consumer, so we tightened the underwriting significantly, in fact, in February and March. Calibration of that takes time, and I think we are in a better place now than we were in the first quarter of last year. That had a little bit of a effect, but overall, I think we are doing very well there. It's not significant or anything of notice in my opinion, Can. I can only say that in SME lending, which retail and SME, which are strategic for us. In retail, we remain the leaders in slight, with a slight difference, but very you know, very similar rates with our main competitor, 38.8%.
In SME, around 33%, which is over the last four years, up from 19%. Our SME franchise has done incredible improvement over the last four years, moving lending at a very different level. We used to take 17 working days to say if we were going to issue or not issue a loan to an applicant. Now it takes five working days. Behind this, there's a lot of different systems that need to be changed. All of that has been done. There's more and more that we are doing. We have to automate and make life easier for our SME clients. I think fourth quarter was not behind the market in the beginning. I just explained.
On the settlement, nature of settlement, I think we issued the note basically to the market that it was something to do with an old legacy claim, and it was a one-off unit of a kind, and I can't comment much more than that on that one. In terms of the third question, thank you for that one because it's I take a lot of pleasure talking about this because I think the big change, cultural change that has happened over the last few years in Bank of Georgia, was something to do about the customer satisfaction and focus on that. When you say that, why was it so low five years ago? Well, it was not that low.
I mean, when you look at NPS scores of different banks, the universal banks, some of them have zero. As you know, NPS is calculated by taking your recommending clients, i.e., happy clients, and subtracting the unhappy clients, right? Neutral is not calculated. A lot of universal banks have it around zero. I don't want to name, but there are many large big name banks that have NPS around zero. There are as many happy customers or as many people that would recommend their services as there are that would recommend against it. That's why a lot of digital disruptors emerged.
What we said was that if we want to be the intermediary of the future, we should not be a balance sheet play, but we should be a service play. In fact, 33 was not bad for a universal bank. As long as these banks exist, and they don't necessarily go back, in fact, because customers make decisions, based on a number of things, including access to branches, including the easiness of this, that, and so forth, the number of products you offer. They may be not super happy with you, they still stick with you. We said, "No, no.
You know, we want happy customers. What happens there is we need to measure what they are happy and unhappy about, and then build a system in the back to incorporate those messages as quickly as possible. That's what we have done. I can talk about hours, what that means, but it's a transformation of agile. It's making 26 updates per year to our app instead of three that we used to have. Also incremental small updates as well as a lot of new launches that we had. Including fractional trading, including for our stock trading, which we do have, but we are not promoting frequent trading because we are a bank.
We want to have it as an investment product. We have Insurance Marketplace. We're doing a lot of new developments for our financial app and turning it into a financial super app. Not quite a super app, so you're not gonna be buying bread from our application. In terms of financial application, we are adding more and more capability to it. I hope that answered your question regarding the NPS score. A lot of times when you see financial companies focusing on payments, on customer satisfaction, and easiness of use, [mild dial ], the interaction and so forth, usually those were the sexy fintechs. I would like to think of Bank of Georgia as a service-oriented fintech with some balance sheet, obviously.
It's a core focus for us, is to focus on customer satisfaction and providing services to customers at a very fast and quick manner and reflecting of what they need. Yes.
Super. That's very comprehensive answer.
Thank you very much. Thank you.
We've had a raised hand for a while from a phone, so I can let the person in, and then we can probably read the other questions. Hello?
Yes. Thanks a lot. This is Constantine from JPM. Thanks a lot for the presentation, for taking my questions. I had three questions that I wanted to ask. The first one is that it seems that the economic backdrop and growth backdrop is extremely strong. Still, you know, despite this, you know, positive backdrop, are there any vulnerabilities that you see in the loan portfolio? Are there any areas that you think is worth monitoring more closely, prospectively? If you could please provide any color and guidance on that. The second question, could you please provide your expectation for cost of risk for 2023?
The last question, should we expect the bank to call its USD perpetual bonds next year? What's your thinking around this topic? Thanks a lot.
Constantine, regarding the sectors to watch out for, I don't see any particular sector that we believe is under threat at this point. Obviously, there are some ups and downs, and there are always one or two cases where we are watching, but that's reflected in numbers. Nothing specific to watch out for. If overall on a macro basis, if there's one thing to worry about, it's still high inflation and still high refinancing rate. Given the overall strong macroeconomic performance, I think that covers it in a good way. The cost of risk, I believe it will be in the overall range that we advise, maybe slightly high, slightly low of 1 to 1.2. And there will be for this year or more.
In terms of perpetual bonds, I don't know if legally I am, I'm allowed to talk about the intentions, but we understand the market expects us to call it at year five. I'll stop here and just say that we have very strong capital position.
Got it. Yes. That is very clear. Thanks a lot. Maybe if I could fit in the last question. In terms of the strong capital ratios that you currently have, is the expectation that the bank is going to maintain these ratios and over a medium term at this level? Do you expect some capital distributions? Do you expect the ratios to, you know, to come down with, you know, growth accelerating? How do you see capital ratios trending on a medium term basis, you know, say three to five year horizon?
I think the buffers that we are holding right now are at record high. We believe it's reasonable given the very high volatility. Obviously we have had a very strong year, but the environment is so volatile that I would like to hold those buffers high for, you know, potential bad times, but also for potential opportunities. As you said, you know, if growth opportunity is there for us to grow loans and grow balance sheet, because the economy is growing so well and because it has deleveraged, I don't want to be in a position that we are short of capital. Things are changing and volatile so much that I think it's prudent to keep high capital position in these times, and that's what we're gonna do.
In the medium term, we'll probably keep buffers between 1% and 2% above the minimum requirements.
Got it. Is there an expectation that, the minimums would remain as they are pretty much today, so there won't be any relaxation in the minimums over the medium term?
We don't expect relaxation at this point with high inflation, for sure. I think the regulator overall has a tight monetary policy. Relaxing banking ratios, I don't see that happening immediately. In medium term, who knows? We'll see. The capital ratios are very high, as you can see. By the way, one of the investors asked what would be the Core Tier 1 capital ratio if we included the folding buffer that we have. It would be extra 2%. CET1 would be 19.6%, which is, you know, very high as you understand by the local standards and IFRS 9. I hope that answers your question. Yes.
Okay. Got it. Thanks a lot. Thank you very much for the color.
Nini, there are a lot of questions in Q&A.
Yes.
Should we go through them?
We have a question from Ronald Gardia. He's asking if we can comment on the stickiness of the deposits that the bank attracted during the 2022 item. Well, 2023 now.
Yes. We believe that our usual deposits. More than two-thirds of that is from the residents. Less than one-third is from non-residents. Even the non-residents that we qualify as non-residents have relocated a lot of them to Georgia. We don't see all of them going back. Maybe small part, but not significant part could be at risk.
Mark Webster. Is there a share price level where you might reconsider doing share buybacks and looking at the other forms of distribution, accelerated reinvestment? Not really, because it's a capital return one way or the other. We have had the indication from a majority of shareholders that they in fact prefer share buyback to dividends.
There are other investors that prefer dividends, so that's why we are keeping a good balance there. Not really. Ronald Gardia.
Another question.
Yes. Can you please provide more details of the exceptional gain? Was the cash or a non-cash gain? What does the bank intend to do with the excess capital in the forward growth level because of this gain? It was cash. 137 out of 141 or 43 was cash. It was predominantly cash, you know, more than 95%. We intend to keep that buffer given the volatility of the region and of the environment. Once the volatility decreases, then obviously we'll either deploy it or return it to the shareholders. In terms of more color, I cannot say anything other than it was a settlement of a legacy claim and a one-off in nature. Can you please provide more details?
Yeah, I think we answered that. What is the new loan growth and FX income guidance for 2023? The NIM, we don't provide such guidance. We just say that in NIM, we can probably say that it will be between 5% and 6%. You know, we don't expect further significant growth there. I know it will be shorter term. It'll be between that range. That should be decent. In terms of loan growth, it's difficult to say at this point, more than 10% is what we are guiding the markets for medium term. We keep the same guidance given the higher interest rates. Overall, we are seeing deleveraged economy, which is good for us.
Given the high interest rates, probably it should not be much higher than 10%, but we'll be opportunistic and see what we can deliver. In terms of FX income, as I said, about a third, about 40%, about a third roughly of what we've seen in the second, third and fourth quarter, may not be sustainable. So far we've been, I mean, it started to decrease, but we still have very good numbers. So at some point we should probably assume that about a third of that will go away. What are the three most important components? This is Mark Webster. What are the three most important components of the Bank of Georgia story over the next three years? Loan growth, NIM, capital distribution, low loan loss provision, NPLs.
What are the three most important components of Bank of Georgia? I would say the three most important components of Bank of Georgia is our financial application becoming more and more important for our customers, our payments franchise becoming more and more important, and our loyalty program as well. We do it in many different ways. Once we are very strong in those, then we can attach loans and we can have decent NIM, and you can have low loan loss provision because our data capability is good in analytics. I hope that kind of answers what we are focused on. We are focused on being relevant to our customers on a daily basis. That's our main component of our success and story.
The rest is numbers that I think we are decent in terms of managing those. Anonymous attendee. What do you intend to do with the capital from exceptional legacy gain? I think we answered that. We intend to keep that right now until the high volatility and later on either deploy or return it to the shareholders. Firebird Management. Can you discuss the taxation environment? Is it stable now? Yes. As you know, the government announced that banks would now be enjoying the so-called Estonian model, i.e., profit tax only on distributing profits from the first of January as it was planned. They canceled the dividend, 5% dividend tax and added that to the profit tax. It's 20% now.
We had a one-off charge in the fourth quarter for that, going forward we expect that to remain at this level. Overall, I think Georgian government has been very good at not increasing taxes. You know, for what I can say is one-off in nature. Yes, I believe it's a stable taxes right now.
There is a raised hand, I think from Constantine, but he may have forgotten to put it down, but let's try. Hello?
Probably.
Probably.
Let's wait for 15 more seconds. If you have any question, please don't hesitate to ask. We understand you have busy life, so we don't want to spend more of your time. We'll wrap it up. Of course. I think we answered all the questions so far. Thank you very much for your time. I think results were very strong for 2022. For sure it was record results. We continue to focus on our main task, which is to keep our customers happy and deliver more and more product improvements to them. Stay tuned. Thank you. Bye-bye.
Thank you. Thank you. Bye.