Rating action

Scope Ratings UK Limited (Scope) has affirmed JSC Microbank MBC’s issuer rating of B+. Strong and profitable growth has led to a deterioration of the microbank’s CET1 buffers. Ongoing growth will further moderate buffers which resulted in a change of the outlook to negative from stable.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business model assessment: Focused (Low). The issuer rating is anchored by the Focused (Low) business model assessment. JSC Microbank MBC is the second largest domestic microbank with total assets of approx. GEL 187m (approx. EUR 60m). While only commanding a 0.1% domestic market share it has a market share of approx. 21% in the microbank niche segment as of September 2025.

The microbanks focused business model comprises business, consumer, agricultural and mortgage loans which are mostly fully collateralized. Business and consumer loans continue to play an important role in MBC's loan portfolio. Exposures to the business and agricultural sector are expected to grow unless NBG expectations on microbanks loan composition become changed.

Scope views positively that as a microbank, MBC is now able to better diversify its balance sheet and funding. Increasing customer deposits to further improve its funding diversification and reduce funding costs will take some time, however.

The group's strategic plan for 2025–2027 focuses on continuing to grow in business and mortgage loans, opening up new branches as well as strengthening its digital capabilities to compete with its peers. Scope expects MBC to continue developing new products, strengthening its focused business model and gradually increasing its market share in a highly competitive microbanking sector.

Operating environment assessment: Constraining (High). The assessment reflects Scope’s view on Georgia, MBC’s sole market.

Georgia (Constraining – High for the banking and micro banking sector) is the bank’s sole market. Georgia is a small emerging economy that has seen gradual improvements and reforms in recent years but still lags regional peers on several macroeconomic indicators (e.g. unemployment rate, GDP per capita, economic diversification).

The banking sector has traditionally exhibited high profitability, with an average RoE of about 24% since 2022 due to overall lending volume growth and increasing net interest income. The domestic banking system is highly concentrated and characterised by a moderate level of cost efficiency and improving asset quality indicators. Overall, non-performing loans have declined since March 2023, amounting at 2.6% as of August 2025. Georgian commercial banks are on average well capitalised, maintaining satisfactory capital buffers above minimum requirements.

Georgian banking regulations are considered adequate by international standards and are the strongest in the Caucasus area. While not formally part of the EU, the capital requirements for the Georgian banking sector are aligned to the Basel III standards.

Georgia’s microbank framework is designed to enhance financial-sector competitiveness, expand the range of product offerings and services, and support entrepreneurs and the self-employed, driving economic growth.

Our CLOE assessment for Georgia incorporates a downwards adjustment to account for heightened geopolitical risk, including a highly contested election and political crisis in 2024, as well as the high level of dollarisation of the economy, which heightens the risks to asset quality from currency volatility.

Scope arrives at an initial mapping of b based on a combined assessment of the issuer’s operating environment and business model.

Long-term sustainability assessment (ESG factor): Neutral, from Developing (no rating impact). The assessment reflects Scope’s view that the issuer is embracing changes to ensure the long-term sustainability of its business model. Progress made may be tangible but does not warrant further credit differentiation.

Microbank MBC remains committed and active in environmental, social and governance areas and investing in digitalisation (ESG factor). MBC has been publishing a corporate social responsibility report since 2019 and sustainability initiatives, focused on efficient use of resources, are an integral part of the company’s strategy. MBC will begin to more formally implement additional ESG risk assessments reflecting new requirements for Georgian microbanks. MBC is already in advanced implementation stages and also has become one of the first domestic impact investors.

MBC has strengthened its digital and technological capabilities in the recent past, with most of the capital expenditures required for being a microbank were already made in 2024 but also continued in 2025. The company plans to make further investments in the medium-term to accompany growth.

MBC’s governance model is adequate compared to peers. All members of top management hold shares in the company, indicating a commitment to the company’s long-term value. The company has a clear strategy in terms of transparency and social impact. For the fourth year in a row, MBC has won the Transparency Bartas Honorary Award within the category of small and medium business as a result of its quality of reporting and transparency.

The role of newly created microbanks in Georgia in empowering underserved local communities, supporting entrepreneurial and agricultural sectors as well as facilitating financial inclusion also reinforces the company’s business relevance.

The long-term sustainability assessment leads to an adjusted rating anchor of b.

Earnings capacity and risk exposures assessment: Supportive (+1). The assessment reflects Scope’s view that earnings capacity is stable through economic cycles and provides a strong buffer against losses. Risks are well managed and are highly unlikely to lead to losses capable of undermining the issuer’s viability.

MBC’s profitability remains supportive and but might have reached a peak with a return on RWAs of 5% and and ROE of 27% in Q3 2025. Current results reflect some one-off effects following the transition to a microbank and provisioning’s are expected to normalise. Current loan loss reversals reflect an NBG guided alignment of provision practices with other regulated banks. The supportive profitability also reflects strong customer and volume growth after obtaining the microbanking licence.

Scope expects MBCs revenue momentum to continue as long as the good momentum of the Georgian economy persists (although the current political instability is likely to weigh on the outlook) and its growth not to translate into higher provisioning requirements.

MBC’s asset quality metrics remain modest reflecting its business and lending focus but also reflects that most exposures are collateralized. Scope notes a slight increase in the number of uncollateralised loans, as well as a mild weakening of its collateral quality due to a reduction in real estate collateral. Asset quality remained broadly unchanged as the increase in Stage 3 ratios to approx. 5% is rather technical and also driven by a changed write-off methodology that is now is aligned with other banks and differs to applicable policies for microfinance organisations (MFOs). Microbanks only require full write offs after 720 days as opposed to 180 days for MFOs. As a result, fully written off but still existing loans overdue for more than 180 but less than 720 days were added back to gross loans. Scope expects MBC’s asset quality ratios to remain broadly stable in the medium term.

Financial viability management assessment: Adequate. The assessment reflects Scope’s view that financial viability management provides some buffer and, under a base case scenario, could not imminently push any metric close to minimum requirements or jeopardise the issuer’s financial viability.

The group’s solvency position has started to moderate in the past months, driven by the microbank’s strong growth and fast increase in risk weighted assets, resulting in a CET1 ratio of approx. 12.5% at the end of Q3 2025. MBC’s buffer to CET1 ratio reduced to 150bps as of September 2025. Assuming further growth, Scope expects CET1 buffers to further tighten to levels that might no longer be commensurate with the current assessment of an adequate financial viability management. Restoring a more sustainable buffer will hinge on earnings retention as well as a potential restructuring of the microbank’s composition of its capital stock. Pending regulatory and investor approvals are not expected to be completed before the first half of 2026 at the earliest, however. The leverage ratio stood at high levels of approx. 15% as of September 2025, well above the minimum required of 5%.

MBC’s significantly exceeds its liquidity coverage ratio (LCR) requirement with an average LCR of over 1,900% during the period between January-September 2025. Its NSFR ratio, on the other hand, is closer to the minimum requirements, which is typical of the banking and microbanking sector in Georgia. MBC intends to more tightly manage liquidity ratios slightly above the minimum requirements.

MBC has managed to diversify its funding mix, but currency mismatches remain an area of attention. Non-GEL denominated funding and resulting hedging needs add to overall funding costs. MBC’s funding currently relies on funds from international financial institutions and bond issuances but also some funds from commercial banks. Funding will become more diversified as with the microbank license, deposits are expected to become a material source of funding in the medium-term and its funding plan is evolving to be more focused on bonds and funding by international financial institutions.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Negative Outlook reflects Scope’s view that the risks to the current rating are currently tilted to the downside.

The upside scenarios for the rating and Outlook are (individually or collectively):

1. A material improvement in capital metrics, in particular larger and stable excess buffers above the minimum regulatory requirements, and sound liquidity management, could lead to a higher Financial Viability Management assessment.
    
2. Significant growth and wider product offerings while preserving sound levels of profitability could strengthen MBC’s market position and combined with strong governance and risk management lead to an upgrade of the Business Model assessment.
    
3. An improvement of the operating environment assessment for Georgian banks and microbanks, could drive a review of the initial mapping for the issuer rating.

The downside scenarios for the rating and Outlook are (individually or collectively):

1. Ongoing tight management of capital and liquidity buffers only slightly above regulatory requirements and/or material deterioration in the company’s liquidity position could weaken the Financial Viability Management Assessment.
    
2. A significant deterioration in the operating environment for Georgian banks and microbanks, which could result from prolonged political uncertainty and tensions, could lead to a downgrade of the Operating Environment assessment.
    
3. Pressure on profitability due to a lower ability to generate sustained revenues, weaker risk management resulting in higher impairment charges from unbalanced growth and/or higher funding costs could lead to a lower Earnings Capacity and Risk Exposures assessment.

Environmental, social and governance (ESG) factors

Please refer to the ‘long-term sustainability assessment’ under the ‘key rating drivers’ section above for the ESG analysis.

All rating actions and rated entities

JSC Microbank MBC

Issuer rating: B+/Negative, Issuer rating affirmed, Outlook changed to negative

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodology used for this Credit Rating and Outlook, (Financial Institutions Rating Methodology, 18 September 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions - Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/uk-regulation. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Rating if the Credit Rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Rating: public domain, the Rated Entity, and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting the Credit Rating originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Rating and Outlook and the principal grounds on which the Credit Rating and Outlook are based. Following that review, the Credit Rating and Outlook were not amended before being issued.

Regulatory disclosures
The Credit Rating and Outlook are issued by Scope Ratings UK Limited at 52 Grosvenor Gardens, London, United Kingdom, SW1W 0AU, Tel +44 20 7824 5180. The Credit Rating and Outlook are EU-endorsed.
Lead analyst: Alvaro Dominguez Alcalde, Senior Analyst
Person responsible for approval of the Credit Rating: Karlo Fuchs, Managing Director
The Credit Rating/Outlook was first released by Scope Ratings on 3 February 2020. The Credit Rating/Outlook was last updated on 10 December 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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