The leading banking group in Georgia with regional expansion…
Lion Finance Group (“BGEO”) is a dominant banking institution in Georgia (38% market share of loans), holding a significant market share across retail, corporate, and investment banking. It has a wellestablished physical and digital presence, operating more than 180 branches, nearly 1,000 ATMs, and over 3,000 self-service terminals across the country. In 2024, BGEO expanded its regional exposure by acquiring Ameriabank, the largest bank in Armenia (~21% market share in loans), further solidifying its position as a key financial player in the Caucasus region.
…in an attractive market with strong loan growth and high barriers to entry.
The Georgian banking sector is characterized by a healthy duopoly, where Bank of Georgia and TBC Bank dominate the market, ensuring a stable competitive landscape. Regulatory oversight remains strong, with high capital requirements and strict supervision, which limits new entrants and enhances the profitability of established players. Loan growth in Georgia has consistently exceeded 15%, driven by increasing demand for mortgages, SME lending, and corporate financing, further supporting Lion Finance Group’s expansion strategy.
Key Data
LWS Forecast
Contact Directory
Name: Mr .Kamikaze
eMail: mr.kamikaze@locosdewallstreet.com
LWS Financial Research
We forecast a loan book CAGR of ~15% in our conservative base case, maintaining +20% Return on Equity despite NIM compression and cost of risk – net foreign gain normalisation
We expect the company‘s loan portfolio to grow double-digit, supported by economic expansion, rising financial penetration, and increased corporate activity. The acquisition of Ameriabank provides an additional growth catalyst, diversifying revenue streams and reinforcing cross-border synergies. The bank has consistently delivered high return on equity (ROE) and strong net interest margins (NIM), supported by its market-leading position and disciplined risk management. Management’s strategic focus on digital banking and transaction, operational efficiency further strengthens its long-term growth outlook.
Valuation upside
We see a substantial potential upside of approximately 300% over the next five years, based on conservative projections and exit multiple assumption—offering a compelling margin of safety.
Disclaimer
This document has been prepared solely for informational and research purposes. The information contained in this report is the result of an independent analysis conducted by LWS Financial Research. It should not be construed as investment advice, financial guidance, or a guarantee of future results.
LWS Financial Research accepts no responsibility for any decisions made based on the information provided in this research. The data and opinions expressed herein are subject to change without prior notice and are not warranted for accuracy, completeness, or timeliness.
All information used in this analysis is obtained from sources believed to be reliable; however, no representation or warranty is made as to its accuracy or completeness. This content is not intended to substitute professional judgment or financial advice.
Table of Contents
PM summary: A leading bank in strong growth and profitable markets
1.1 Bank of Georgia: A Leading Financial Institution in the Region
Lion Finance Group (“the Company“ or “BGEO”) is a premier universal banking group operating in Georgia and Armenia, providing a comprehensive suite of retail, corporate, and investment banking services. With a well-established network of over 180 branches in Georgia, robust digital banking platforms boasting over 1.6 million monthly active users, and award-winning financial applications, the Company is at the forefront of financial innovation. The Company maintains a dominant market position in both countries (37.6% of loans in Georgia and 20.9% in Armenia), with strong leadership in retail and corporate & investment banking. A high-quality deposit base is a key competitive advantage due to the lower cost of financing (41% market share of customer deposits in Georgia and 18.5% in Armenia) reinforcing its financial strength. Following its strategic acquisition of Ameriabank in early 2024, the Company is actively leveraging its digital expertise and operational know-how to expand its market share in Armenia. This market, characterized by higher fragmentation and lower banking penetration, presents a compelling growth opportunity where Lion Finance Group is well-positioned to drive consolidation and digital transformation.
Banking Industry – A High-Growth Sector in Georgia and Armenia…
The banking industries in Georgia and Armenia continue to exhibit strong growth (+12.7% and 18.5% CAGR of growth loans in $ respectively), driven by a combination of economic growth, increasing financial penetration, and digital transformation. Despite significant progress in recent years, financial services penetration in Georgia (68% loans GDP) and Armenia (63% loans GDP) remains below that of more mature markets, creating ample room for expansion. As one of the leading financial institutions in the region, we consider the Company well-positioned to capitalize on these industry tailwinds and overperform market growth, especially in Armenia due to a more fragmented market.
…with high barriers to entry driving strong profitability metrics
The banking sector benefits from high barriers to entry, with strict regulatory requirements, capital adequacy standards, and compliance frameworks limiting new market entrants, particularly in smaller markets like Georgia (3.7 million people) and Armenia (3 million people). This reinforces the stability and profitability of leading banks, further supported by NIM of ~6%, significantly above Western Europe due to elevated local interest rates reflecting geopolitical risks, lower banking competition, and limited alternative financing sources. Additionally, strong fee and commission income, active foreign exchange trading, a favourable tax environment, and a benign credit cycle with low NPL ratios contribute to the sector’s strong profitability. As a result, the Company enjoys a robust RoE of ~30% in Georgia and ~25% in Armenia, while maintaining relatively low leverage (7.4x Assets to Equity) and strong capitalization (Total Capital Requirements of 22.1% and 16.6%, respectively).
Other markets with optionality
The Company could explore further regional growth in adjacent countries such as Azerbaijan, with a population of over 10.5 million, a highly fragmented banking market, and strong loan growth dynamics. The country’s banking sector has been expanding, with total loans growing 20.37% year-on-year as of January 2025, driven by increased private consumption and business lending
Valuation
We see Lion Finance Group as a leading financial institution with exposure to attractive banking unit economics, strong net interest margins, and a resilient macroeconomic backdrop across Georgia and Armenia. The bank benefits from solid economic growth in both markets, relatively low banking penetration, and disciplined capital allocation. Additionally, its recent expansion into Armenia provides further growth opportunities in a market with similar structural dynamics but lower banking penetration than Georgia. This translates into loan book expansion and earnings growth at the top of a peer group composed of regional banks and emerging market financial institutions (TBC Bank Group (LSE: TBCG) and Halyk Bank (LSE: HSBK)). Valuation remains lower than TBC Bank and in line with Halik Bank, on NTM P/E and P/B basis. This fails to capture, in our view, BGEO s’ superior ROE and growth, its geographic expansion benefits, and strong capital return potential. Despite the investment risks, we feel BGEO is a very attractive investment opportunity.
Key Risk
Downside risks include: (1) Regional Tensions & Geopolitical Uncertainty – Georgia and Armenia are both exposed to regional geopolitical risks, particularly tensions in the South Caucasus. Any escalation in conflicts, such as the Armenia-Azerbaijan dispute over Nagorno-Karabakh, could impact investor confidence, economic stability, and banking sector performance. Additionally, Georgia’s complex relationship with Russia poses risks regarding trade, remittances, and financial stability, particularly given historical tensions. (2) Sanctions & External Relations – Georgia’s and Armenia’s economic ties with Russia, the EU, and the US expose them to potential indirect risks from sanctions or trade restrictions. While Georgia aims for EU integration, any geopolitical misalignment or external pressure could create policy uncertainty affecting the financial sector. (3) Competitive Pressure & Margin Compression – While BGEO has a dominant position in Georgia, increasing competition from TBC Bank, foreign entrants, and fintech disruptors could lead to pricing pressure on loans, deposits, and fee-based services. In Armenia, BGEO faces strong local competitors with established market positions. (4) Foreign Exchange & Inflationary Risks – A sharp depreciation of the Georgian lari (GEL) or Armenian dram (AMD) could negatively impact the company’s foreign currency loan book, capital ratios, and profitability. Persistently high inflation could also reduce consumer disposable income, slowing loan growth and repayment capacity.
1.2 By the Numbers
Table 1: Projected consolidated P&L (GELmn)
Table 2:Projected Consolidated BS (GELmn)
Introduction to the Group
2.1 Background and history
Bank of Georgia traces its origins to 1903 and was privatized in 1994 as the successor to state-owned Binsotsbank. Throughout the late 1990s and early 2000s, it secured international financing, became one of the first companies listed on the Georgian Stock Exchange (2000), and underwent a major management transformation (2004). From 2003 to 2010, the bank expanded through strategic acquisitions, including Galt & Taggart, insurance firms (forming JSC Aldagi), and local banks, while also becoming the first Georgian company to list Global Depositary Receipts (GDRs) on the London Stock Exchange (2006) and issuing its first Eurobond (2007). Further international milestones included multiple Eurobond offerings (2011-2013), LSE premium listing (2012), and FTSE 250 inclusion. The bank demerged its insurance business (2014), acquired Privatbank (2015), and launched premium banking service Solo. In 2015, it underwent a corporate reorganization, separating banking and investment businesses under BGEO Group PLC, later completing a full demerger in 2017 into two distinct London-listed entities: Bank of Georgia, “BGEO” and Geogia Capital “CGEO”. In 2024, the Bank of Georgia completed the acquisition of Ameriabank, one of Armenia’s largest banks . This marked a significant step in its regional expansion strategy and strengthened its presence in the Caucasus banking sector. Currently, its name has been changed to Lion Finance Group to reflect the bank’s global presence.
Exhibit 1: Lion Finance Group to 2022
The European Bank for Reconstruction and Development (EBRD) becomes a shareholder of the Group.
Bank of Georgia launches intgernet banking (iBank) and mobile banking (mBank).
Bank of Georgia launches PLUS card -the first debit card project width American Express in the EMEA region.
The Group redefines its Environmental, social and governance (ESG) strategy and produces its first Task Force on Clilmate-related Financial Disclosures (TCFD) report.
Bank of Georgia's digital monthly active users (Digital MAU) exceed one million retail customers.
2.2 Company structure
Following the acquisition of Ameriabank at the end of March 2024, the Company is structured as: (1) Georgian Financial Services (GFS), which comprises JSC Bank of Georgia and the investment bank JSC Galt and Taggart, (2) Armenian Financial Services (AFS), comprising Ameriabank CJSC and (3) Other Businesses including includes JSC Belarusky Narodny Bank (BNB), which serves retail and SME clients in Belarus; JSC Digital Area, a digital ecosystem in Georgia including e-commerce, ticketing, and inventory management SaaS.
Exhibit 2: Company structure
As illustrated in the table below, as of FY24, the majority of assets and profits come from GFS, reflecting its strong market position and profitability metrics. However, management anticipates that AFS will grow faster than GFS, with potential improvements in the efficiency ratio and overall profitability metrics.
Exhibit 3: Financial breakdown by subsidiary as of FY24
Source Annual Report FY24
Georgian Financial Services
3.1 Main Figures at a Glance
3.2 P&L Evolution
▪Strong growth of net interest income at a 15.6% CAGR17-24 driven by loan growth, partially offset by NIM% compression due to moderating interest rates in Georgia and higher liquidity levels.
▪Growth of recurrent net non-interest income at 23.2% CAGR17-24 boosted by fee and commission income driven by transactions undertaken by clients and purchases from PoS and online and net foreign currency gains as commissions of currency exchange
▪Efficiency ratio % improved from 33.1% to 30.4% as a results of economies of scale
▪Cost of risk % declined to -0.5% due to strong economy performance
3.3 BS & Ratios evolution
Assets mainly comprise:
- Liquid assets (33% of assets): comprised of (i) cash and cash equivalents, (ii) amounts due from credit institutions (primarily obligatory reserves deposited with the NBG) (iii) investment securities (mainly debt instruments, including Ministry of Finance of Georgia treasury bonds and foreign treasury bills). As of FY24 liquids assets accrued 5.2% of interest.
- Loans (63% of assets): it grew at 26.3% CAGR17-24, driven by robust loan expansion across the country and market share gains. The blended loan yield (LC & FC) stood at 12.5% as of FY24.
Liabilities mainly comprise:
- Deposits (75% of liabilities): it grew at 20.8% CAGR17-24, fueled by increasing financial inclusion and market share growth. The blended cost of deposits (LC & FC) stood at 5.1% as of FY24.
- Other debts (23% of liabilities): primarily composed by (i) amounts owed to credit institutions (short-term loans from the NBG and borrowings from international credit institutions) and (ii) debts securities issued (mainly notes issued international institutions such as $300mn additional Tier 1 perpetual bond issued by Bank of Georgia in 2024)
Ratios
Georgian Financial Services maintains strong profitability metrics, with a RoE% exceeding 25% and a low leverage ratio (7.4x assets to liabilities). This performance is primarily driven by healthy interest rates, a low-efficiency ratio, a well-managed cost of risk, and a high level of non-interest income (due to strong digitalization and asset-light approach)
3.4 Business Model
Introduction to the Business Model
Georgian Financial Services operates a universal banking model, providing a comprehensive suite of financial services to individuals, businesses, and institutional clients. BoG’s business model is built upon three segments: (1) Retail Banking, (2) SME Banking and (3) Corporate Investment Banking. As we can see in terms of size, the retail segment is the largest segment of GFS in terms of loan-deposits. Furthermore, as we are explaining later in this document, the company has exposure to local currency and foreign currency (mainly USD) due to the country’s nature. As of dec-24, 26.5% of total loans had FC loans exposed to FX risk (loans disbursed in FC when a borrower’s income is in GEL).
Exhibit 8: Breakdown by division as of Dec-2004
Exhibit 9: Breakdown by currency as of Dec-2004
3.4.1.- Retail banking
The retail banking segment primarily offers consumer loans, mortgage loans, overdrafts, credit cards, and other credit facilities, along with fund transfers, settlement services, and deposit handling for both individuals and legal entities. It serves a diverse customer base, including mass retail, mass affluent, and high-net-worth segments. Through a digitally-driven approach, they provide a comprehensive suite of daily banking, payment solutions, and financial services. Its award-winning mobile application, combined with one of Georgia’s largest distribution networks, ensures seamless and efficient customer experiences.
As of Dec-23 (2024 data not available yet), 47% of loans in this segment were allocated to mortgages and 46% to consumer loans.
- ~70% of mortgage loans had a loan-to-value of <80% and 25% 80%-100%
- ~50% of consumer loans were unsecured
In addition to loan services, this segment stands out as the leader in Georgia in terms of monthly active users, with 2 million users (notably, Georgia’s total population is approximately 3.7 million). The bank also has 1.6 million digital customers, reflecting its strong digital presence. Furthermore, the market share of products sold through retail digital channels reached 62%, demonstrating a clear market dominance.
Exhibit 10: Retail customers and payments
Exhibit 11: Loans and deposits in Retail banking
3.4.2.- SME Banking
SME Banking — This business principally provides SME loans, micro loans, consumer and mortgage loans, funds transfers and settlement services, and the handling of customers’ deposits for legal entities. It targets small and medium-sized enterprises and micro businesses.
This segment is characterized by a high loan-to-value (LTV) ratio or unsecured loans, with its primary clients being entrepreneurs, who are the backbone of the economy. Additionally, it has greater exposure to foreign currency loans, driven by its role in facilitating export-import activities and lower level of deposits which impacts on lower net interest margin as higher funding costs
Exhibit 12: Loans breakdown by sector as of Dec-23
Source FY23 Annual Report
Exhibit 13: Loans and deposits in SME banking
3.4.3.- CBI
Corporate Investment Banking – comprises Corporate Banking and Investment Management operations in Georgia. Corporate Banking principally provides loans and other credit facilities, funds transfers and settlement services, trade finance services, documentary operations support and handles saving and term deposits for corporate and institutional customers. The Investment Management business principally provides brokerage services through Galt & Taggart.
This segment is characterized by greater exposure to foreign currency loans, higher NMI% driven by a high level of deposits and low cost-to-income ratio due to a high operating leverage (greater accounts compared to retail or SME)
As of Dec-23, the top 10 CB borrowers comprised 23.0% of CB gross loan books, and the top 20 CB borrowers comprised 33.0%.
Exhibit 14: Loans breakdown by sector
Source FY23 Annual Report
Exhibit 15: Loans and deposits in CIB banking
Georgian Banking Market
4.1 Market Overview – Loans
The Georgian banking sector plays a crucial role in the country’s economy, contributing significantly to GDP and serving as a key driver of financial inclusion. It is one of the most developed in the Caucasus, benefiting from strong financial reforms, a free market environment, and high levels of foreign investment.
Georgia’s banking sector has undergone significant transformation since the early 1990s, following the country’s transition to a market economy after the collapse of the Soviet Union. Initially plagued by hyperinflation, financial instability, and a lack of regulatory oversight, the banking system saw rapid consolidation and modernization in the 2000s. With the support of international financial institutions such as the International Monetary Fund (IMF) and the World Bank, reforms were introduced to enhance financial stability and improve governance. The 2008 global financial crisis and the Russo-Georgian war posed challenges, leading to a temporary contraction. However, the sector rebounded strongly, aided by foreign investments and regulatory improvements.
Since 2015, the growth rate of loans and other financial assets in Georgia has been significant, achieving a CAGR of 17% since 2014, substantially outpacing GDP growth. Key factors include (1) Financial Sector Liberalization – Anti-corruption measures, tax simplification, and market liberalization have improved transparency and investment appeal. (2) Expansion of Banking Services – Increased SME and retail lending, along with reduced dollarization, has strengthened credit accessibility. (3) Digital Transformation – Growth in online banking, mobile payments, and fintech has expanded financial inclusion. (4) Foreign Investment – Strong FDI inflows and integration with global financial markets have boosted capital availability.
Exhibit 16: Loans growth YoY% in Georgia local currency
Exhibit 17: GDP growth local currency %
Loan Penetration Expansion – In light of ongoing financial sector reforms, loan penetration as a percentage of GDP has seen substantial growth, increasing from 46.4% in 2015 to 67.8% in 2024. This expansion has been driven by a combination of liberalization measures and banking sector growth, which have collectively improved credit accessibility.
Furthermore, Georgia has experienced a significant shift from foreign currency loans to local currency loans over the past decade, reflecting a broader de-dollarization trend. This trend has been driven by (1) Regulatory Reforms – The National Bank of Georgia has implemented stricter regulations on foreign currency lending, particularly for unhedged borrowers, to mitigate currency-related risks. Additionally, incentives for local currency loans, such as differentiated reserve requirements and risk-weighted capital adjustments, have encouraged the use of the Georgian lari (GEL). (2) Macroeconomic Stability – Strengthened confidence in the Georgian lari (GEL) and competitive local interest rates have made borrowing in local currency more attractive. (3) Risk Mitigation – Both borrowers and banks have actively sought to reduce exposure to foreign exchange risks, further accelerating the shift toward local currency lending.
Exhibit 18: Loans as % of GDP
Exhibit 19: Local and foreign currency loans %
Loans by Sector
Georgia’s loan expansion reflects shifting economic priorities, with construction (28.7% CAGR) leading due to urbanization and infrastructure growth. Real estate (22.2%) and hospitality (21.7%) saw strong financing, driven by tourism and commercial investments. Healthcare (20.8%) and agriculture (17.9%) also expanded, highlighting investment in medical infrastructure and rural development. These trends demonstrate a diversified financial landscape supporting Georgia’s long-term economic development.
Household Loans
Household loans grew at 19.9% CAGR (2015-2024), surpassing legal entities’ loan growth, mainly driven by consumer loans. Key factors include rising disposable income, expanded credit accessibility, lower interest rates, increased credit-based consumption, and urbanization-driven housing demand. This trend highlights household credit’s growing role in economic expansion and financial inclusion.
Exhibit 20: Loans by Sector
Exhibit 21: Household loans
Deposits
Local currency deposits increased from 30% in 2015 to 46% in 2024, reflecting greater confidence in the Georgian lari (GEL) and regulatory efforts to promote local savings, while foreign currency deposits declined from 70% to 54%, supporting de-dollarization efforts. Loan-to-deposit ratios show key trends: foreign currency loans-to-deposits fell from 100% (2015) to 79% (2024), indicating more cautious foreign currency lending, while local currency loans-to-deposits rose to 126% in 2024, demonstrating higher demand for local currency credit. Meanwhile, the total loan-to-deposit ratio remained stable around 96-100%, reflecting balanced growth in deposits and lending. These trends confirm a stronger reliance on local currency funding, reduced exchange rate risks, and a more resilient financial system.
Exhibit 22: Local and foreign currency deposits %
Exhibit 23: Loan to deposit ratio
4.2 Credit Quality, interest rates and the role of the National Bank of Georgia
Credit quality
Georgia’s banking sector has maintained relatively stable credit quality, supported by prudential regulations and risk assessment frameworks set by the NBG and strong performance of Georgian economy.
Inflation and monetary policy in Georgia
Inflation remained low below the NBG’s 3% target,. In 2025, inflation is expected to rise slightly but return to target by year-end. The NBG has kept its policy rate at 8.0% as of Mar-25
Exhibit 24: NPLs as % of Gross Loans as of Se-24
Exhibit 25: NPLs as % of Gross loans as of Se-24
NBG
The National Bank of Georgia (NBG) is the country’s central bank and fiscal agent, primarily responsible for maintaining price stability, regulating the financial sector, implementing monetary and foreign exchange policies, and managing Georgia’s international reserves. It also supervises banks and non-banking financial institutions, ensuring financial transparency and stability. Governed by a seven-member Council, the NBG operates independently, with its President appointed by the President of Georgia and Council members elected for seven-year terms. NBG has played a crucial role in strengthening Georgia’s financial sector, successfully promoting dedollarization, ensuring banking stability, and managing inflation through effective monetary policy. Its independent decision-making has contributed to economic resilience, even amid exchange rate volatility and external shocks
4.3 Competitive landscape and Bank of Georgia position as of 2024
The banking sector in Georgia remains highly concentrated, with Bank of Georgia (BoG) and TBC Bank dominating the market. These two institutions collectively account for a significant share of total loans (37.6% BoG vs. 38.6% TBC) and deposits (41.4% BoG vs. 38.0% TBC), limiting competition from smaller financial institutions. Although BoG holds a slightly lower share of total loans compared to TBC, it benefits from a significantly higher market share in deposits, providing it with a competitive advantage through lower funding costs (BoG: 5.2% vs. TBC: 6.1%). Additionally, BoG operates with considerably lower efficiency ratio, further enhancing its profitability, which is reflected in higher RoE than its competitor.
Armenian Financial Services
5.1 Transaction Summary
Transaction
AFS was acquired in 1Q24 through the 100% acquisition of Ameriabank at a very attractive price: $303.6mn , which implied 0.65x NAV and 3.6x P/E fully paid in cash with surplus capital and, therefore, no dilution for shareholders.
Transaction Rational
The acquisition of Ameriabank by Bank of Georgia Group PLC (BOGG) represents a strategic move that aligns with BOGG’s growth objectives and strengthens its market position in the region. The rationale behind this transaction is outlined as follows:
- Expansion into a High-Growth Market: Armenia presents an attractive adjacent market with strong economic growth potential, similar to Georgia. The country’s banking sector remains fragmented, with lower credit penetration, offering significant opportunities for further expansion and financial inclusion.
- Acquiring a Leading and Profitable Bank: Ameriabank is a well-established, universal bank in Armenia with strong profitability. The transaction enables BOGG to leverage its expertise to enhance Ameriabank’s future growth potential, optimizing operational efficiencies and synergies.
- Scaling and Diversifying BOGG’s Business: The acquisition significantly increases the overall scale of BOGG’s operations, strengthening its regional presence. Diversification of revenue streams and business segments enhances the Group’s resilience against economic fluctuations.
- Value Creation for Shareholders: The transaction was accretive, delivering profitability uplift with no dilution
5.2 Main Figures at a Glance
Source: Transaction Presentation and Investor Presentation. Note FY20-22 figures based on historical information vs FY23-24 based on IFRS reporting.
5.3 P&L evolution
- Net interest income experienced strong growth, increasing by 29% in 4Q23 vs 4Q24 and by 11.3% in 3Q24 vs 4Q24. This growth was driven by robust loan expansion, supported by deeper banking sector penetration in Armenia and market share gains. NIM% remained moderate in 2H24.
- Strong growth of recurrent non-net interest income by 46.8% 4Q23 vs 4Q24 and 48.5% 3Q24 vs 4Q24 driven by client transactions and purchases from PoS and online and net foreign currency gains as currency exchange commissions.
- Efficiency ratio % remained below 48% in 4Q24 which is impacted by the seasonality of variable expenses in salaries. The difference in efficiency ratios between GFS and AFS is primarily driven by differences in scale, business nature, and higher director remuneration required to retain leadership. It is expected that this gap will normalize over time.
- Cost of risk % remained below 0.5% due to strong economy performance.
5.4 BS & Ratios evolution
Source: Company information and LWS Research Calculation
Ratios
Armenia Financial Services also maintains strong profitability metrics, with a RoE% exceeding 20% and a low leverage ratio (7.6x assets to liabilities). This performance is primarily driven by healthy interest rates, a low-efficiency ratio, a well-managed cost of risk, and a high level of non-interest income (due to strong digitalization and asset-light approach)
Assets mainly comprise:
- Liquid assets (27.5% of assets): comprised of (i) cash and cash equivalents, (ii) amounts due from credit institutions (primarily obligatory reserves deposited with the NBA) (iii) investment securities (mainly debt instruments, including Ministry of Finance of Armenia treasury bonds and foreign treasury bills). As of FY24 liquids assets accrued 4.4% of interest.
- Loans (69.3% of assets): Strong growth by 35.6% Dec-23 vs Dec-24 and 16.5% Sep-24 vs Dec-24 driven by robust loan expansion within Armenia and market share gains. The blended loan yield (LC & FC) was 11.6% as of FY24.
Liabilities mainly comprise:
- Deposits (68.5% of liabilities): Strong growth by 31.6% Dec-23 vs Dec-24 and 16.0% Sep-24 vs Dec-24 driven by robust loan expansion within Armenia and market share gains. The blended cost of deposit (LC & FC) stood at 3.3% as of FY24.
- Other debts (26.8% of liabilities): primarily composed by (i) amounts owed to credit institutions (short-term loans from the NBA and borrowings from international credit institutions) and (ii) debts securities issued (mainly notes issued international institutions)
- Equity increased by 7.2% in only 3 months Sep-24 vs Dec-24
5.5 Business Model
Brief Introduction to the Business Model
Ameriabank follows a universal banking model, with Corporate and Investment Banking CIB as its dominant segment, contributing the largest share of assets and income. This strength is driven by the bank’s expertise in corporate finance, strategic partnerships, and investment banking services, resulting in a lower cost-to-income ratio and high operational efficiency. Meanwhile, Retail and SME banking are emerging as key growth areas despite their higher cost-to-income ratios due to broader customer bases, increased personnel expenses and less scale compared to BoG in these segments. To improve efficiency and competitiveness, Ameriabank is investing in digital solutions, including mobile-first banking, digital lending, and simplified SME onboarding. These efforts are already translating into faster loan growth in the Retail and SME segments, reflecting the bank’s strategic push to gain market share in these areas. In contrast, Bank of Georgia has a stronger focus on retail banking, with ~43% of its loan book dedicated to retail lending.
Exhibit 30: Breakdown of loans by division
Exhibit 31: Amieriabank upside potential
Armenian Banking Market
6.1 Market Overview
Loans
Armenia’s modern banking sector emerged following the country’s independence from the Soviet Union in 1991. The Central Bank of Armenia (CBA) was established in 1993, taking over the monetary and regulatory functions formerly managed by the Soviet banking system. Throughout the 1990s, the country underwent financial liberalization, allowing the formation of commercial banks and the privatization of banking institutions. Major reforms in the 2000s strengthened regulatory oversight, increased transparency, and attracted foreign investors. Armenia adopted international standards, including Basel II and III, and enhanced its anti-money laundering framework. The 2008 global financial crisis tested the sector’s resilience but had limited impact due to Armenia’s relatively small and conservative financial system. Over the past decade, the sector has grown rapidly, with a strong push toward digitization, modernization, and integration with regional and international markets.
The growth rate of loans and other financial assets in Armenia has been significant, achieving a CAGR of 11.3% since 2014, outpacing GDP growth. Key factors include (1) Financial Sector Liberalization (2) Expansion of Banking Services – Increased SME and retail lending, especially in mortgage loans, along with reduced dollarization, has strengthened credit accessibility. (3) Digital Transformation – Growth in online banking, mobile payments, and fintech has expanded financial inclusion.
Exhibit 32: Loans growth YoY% in Armenia in local currency
Source FY23 Annual Report
Exhibit 33: GDP growth local currency %
Source FY23 Annual Report
Loan Penetration Expansion – In light of ongoing financial sector reforms, loan penetration as a percentage of GDP has grown substantially, increasing from 42.0% in 2015 to 63.1% in 2024. This expansion has been driven by a combination of liberalization measures and banking sector growth, which have collectively improved credit accessibility.
The banking sector continues to navigate the challenges of significant dollarization, albeit with notable improvements in recent years. As of the end of 2024, the proportion of FC-denominated loans within the banking system has decreased to 30.9%, compared to 59.6% at the end of 2012. This phenomenon was driven by a higher stability in the currency, inflation rate and strong economy growth.
Exhibit 34: Loans as % of GDP
Exhibit 35: Loans in FC %
Deposits
By the end of 2024, Armenia’s loan-to-deposit ratio had fallen below 100%, reflecting increased liquidity and growing public confidence in the banking sector. This improvement was driven by rising deposit inflows, economic stability, and prudent lending policies. Simultaneously, the country achieved significant de-dollarization, with foreign currency deposits dropping from over 75% in 2012 to 41.9% in 2024. This shift was supported by regulatory incentives, lower interest rates on AMD loans, and stronger trust in the local currency. Moving forward, both trends are expected to continue, fostering a more resilient and balanced financial system.
Exhibit 36: local and foreign currency deposits %
Source: NBA
Exhibit 37: Deposit in FC %
6.2 Credit Quality and interest rates
Credit quality
Armenia’s banking sector enjoys strong credit health, with NPLs at just 1.1% — among the best levels compared to peer countries and at historic lows. It highlights the robustness of Armenia’s financial system and reflects prudent lending practices
Inflation and monetary policy in Armenia
Inflation remained low below the NBA’s 3% target. The central bank of Armenia kept its benchmark interest rate at 6.75% during its March 2025 meeting, marking its first pause since the easing cycle began in June 2023.
Exhibit 38: NPLs as % of Gross Loans as of Se-24
Source: IMF
Exhibit 39: Interest rates and inflation
Source: NBA, Lion Finance Group Investor Presentation.
6.3 Competitive landscape and Ameriabank position as of 2024
The banking sector in Armenia is less concentrated than in Georgia, with Ameriabank leading in loans and interest income. However, Ardshinbank holds the top position in deposits and total income, driven by higher commission levels. There is a notable efficiency ratio gap between the two institutions, indicating that Ameriabank has substantial room for improvement.
Exhibit 40: Loan market share by company
Source: Ameriabank Annual Report and Lion Finance Group Investor Presentation
Exhibit 41: Ameribank market share evolution
Since 2021, Ameriabank has increased its market share to 20.9%, with a strategic focus on the retail segment, and SME, where it has less position and sees greater potential for further growth
Financial Outlook and Valuation
7.1 Our estimates at a Glance
Exhibit 42: Projected loans by segment in GEL (mn)
Source LWS Research Estimates
Exhibit 43: Projected NIM by segment in GEL (mn)
We project loans growth at 14.1% CAGR24-29E at an aggregated level based on:
- GFS loans are expected to grow at a 12.4% CAGR24-29E, supported by projected GDP expansion and increased financial sector penetration, gradually closing the gap with developed markets. According to the latest update from the National Bank of Georgia (NBG), loan growth reached 20% YoY in January 2025. For 2025E, we assume a more conservative estimate of 17.5% loan growth, tapering off by 2.5 percentage points annually through the forecast period.
- AFS loans are projected to grow at a 17.9% CAGR24-29E, also driven by GDP growth and deepening financial inclusion. Compared to Georgia, the ASF market remains significantly underpenetrated, offering greater room for expansion. According to the National Bank of Armenia (NBA), loan growth stood at 25% YoY in January 2025. For 2025E, we forecast 25.0% growth, in line with current market trends and not factoring in potential market share gains.
Net interest income projected growth at 12.1% CAGR24-29E at an aggregated level explained by:
- GFS NIM growth at 10.1% CAGR24-29E, driven by loan growth but partially offset by expected compression in NIM% due to lower rates in Georgia (currently remained stable at 8%) and higher pressure on deposits. We prefer to be conservative due to macro situation of the country.
- AFS NIM growth at 17.1% CAGR24-29E, driven by loan growth but partially offset by expected compression in NIM% due to expected lower rates in Armenia (currently remained stable at 6.75%%)
Exhibit 44: Projected net non-interest income by segment in GEL (mn)
Source LWS Research Estimates
Exhibit 45: Projected Efficiency Ratio and Cost of risk by segment
We project net non-interest income growth at 11.2% CAGR24-29E driven by:
- In GFS, we project net non-interest income to grow at a 9.6% CAGR24-29E, driven by: (i) net fee and commission income growth of 12.4% CAGR24-29E, supported by continued economic expansion, increased consumer activity, and accelerating digitalisation; and(ii) net foreign currency gain income growth of 8.5% CAGR24-29E, underpinned by the normalisation of currency spreads and rising foreign currency inflows.
- In AFS, we project net non-interest income to grow at a 16.9% CAGR24-29E, driven by: (i) net fee and commission income growth of 17.4% CAGR24-29E, supported by accelerating digitalisation and financial inclusion, given the lower current levels compared to Georgia; and(ii) net foreign currency gain income growth of 16.2% CAGR24-29E, driven by a stronger inflow of foreign currency into the country.
- In GFS, we project a slight improvement in efficiency ratio over the next 5 years, likely to be very conservative. Cost of risk is expected to increase to 1.2% driven by a normalised credit environment.
- In AFS, we project an improvement in efficiency ratio over the next 5 years to 43.2% driven by scale increase and synergies. The cost of risk is expected to increase to 1.0%, driven by a normalised credit environment.
Table 7: Projected Consolidated P&L (GELmn)
Table 8: Projected Consolidated BS (GELmn)
Table 8: Projected Ratios & Valuation Multiples
7.2 Valuation – P/E and key metrics comparison
Summary
- We expect Lion Finance Group to deliver low double-digit top line (NIM and net non-interest income) and high single-digit net profit due to higher cost of risk, driven by: (1) its strong positioning in the banking market in both countries with capacity to gain market share; (2) attractive growth markets due to GDP growth and unpenetrated banking sector. Our peer group for BGEO comprises listed banks in Georgia, Indonesia, Vietnam, Malaysia, Philippines, Pakistan, India and Kazakhstan.
Valuation
- We use a multiple valuation based on P/E target of 6.0x over net income projected in 2029E. We see a potential of +200% in 5 years, driven by strong cash excess generation, multiple expansion from 4.2x today to 6.0x of exit multiple and earning growth (mgmt. is projecting higher growth in its long-term guidance).
Exhibit 46: Valuation bridge
Source: LWS Research Estimates.
Comps summary
