• TBC’s $136 million purchase will create country’s biggest bank
  • TBC and Bank of Georgia will hold two-thirds of local market

TBC Bank Group Plc agreed to buy Societe Generale SA’s ’s business in Georgia in a deal that would create the country’s biggest retail bank and consolidate most of the market in two domestic lenders.

TBC will pay 315 million lari ($136 million) to buy 94 percent of the French company’s top-five Bank Republic, the Tbilisi-based lender said in a regulatory filing Monday. The European Bank for Reconstruction and Development will continue to own the other 6 percent.

If the deal receives regulatory approval, TBC will overtake Bank of Georgia Holdings Plc as Georgia’s biggest lender by loans and deposits, leaving them each with about one-third of the system’s assets, according to Giorgi Kepuladze, head of Tbilisi-based non-profit Society and Banks. 

“The best thing that Georgian banking sector has going for it is strong competition,” Kepuladze said. “With the announcement of this deal, the sector is now less competitive.”

‘Key Milestone’

The central bank will consider how the acquisition would affect competition and consumer protection in the Georgian banking system when deciding whether to approve it, the regulator said in a statement Monday.

“We don’t anticipate that there will be any impediments from the side of the central bank,” Fitch analyst Alyona Plakhova said by phone from Moscow. “If the deal goes through, the picture won’t change significantly because Georgia already had the highest banking sector concentration in the former Soviet Union.”

The industry’s biggest weakness is its ties to the dollar, but the sector is well capitalized and its asset quality is stable with about 4 percent in non-performing loans at the end of the first half, Plakhova said.

Societe Generale has been trying to offload Bank Republic as it seeks to streamline its global business. Plans to sell a majority stake in the Georgia unit to China’s Xinjiang Hualing Trade & Industry Group fell through earlier this year.

“The transaction represents a key milestone in the consolidation of the Georgian banking sector,” TBC said in the statement. Bank Republic’s focus on the consumer and mortgage lending markets is “highly complementary to TBC’s existing operations.”

In a separate deal, TBC said it is also in talks to acquire some assets and liabilities from Progress Bank, a small regional lender, according to the Monday filing.

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