This is one of the largest lenders in Georgia, which is one of the fastest-growing economies in Europe. Economic growth in the eastern European country has averaged 5% per annum since 2017 as the government has pursued several free-market initiatives to help the economy prosper.

While a dispute with Russia has weighed on growth recently, policymakers remain optimistic that the country can return to its 5% per annum growth rate. The region is trying to position itself as a transit point in trade between Central Asia and Europe, and so far, the strategy seems to be working.

Bank of Georgia has been riding its home country’s prosperity for the past few years. Net income has grown at a compound annual rate of 18% since 2013 as the bank has consolidated its position in the market and rolled out new products to customers. 

Emerging group

Most investors might take one look at Bank Of Georgia and write the company off because of its exposure to the former Soviet state. However, in my opinion, this bank is better than many of its European counterparts. 

For example, it has a strong capital position with a tier one capital ratio of 11%, above the minimum level of 9.6%, and for the first half of 2019, the group delivered a return on average equity — a key measure of bank profitability — of 23.7%. Most European banks can only dream of being able to achieve a return on equity of more than 20%. Many are struggling to make 10%.

The main reason why Bank Of Georgia is so profitable is its net interest margin. It’s the difference between what the bank pays depositors and charges borrowers, and financial firms live and die by the net interest margin. On average, UK banks reported a net interest margin of around 3% for 2018. Bank Of Georgia, on the other hand, reported a margin of nearly 7%. 

Growth continues

The bank’s expansion is only accelerating in 2019. Today the group reported a 36.9% rise in first-half profit off the back of strong lending at its retail business.

While overall margins were hurt by pricing pressure in the unsecured customer lending market, the company’s investment banking division and asset management division both reported robust growth. Assets under management increased by 25.6% year-on-year and the investment banking net loan book grew by 42.6% year-on-year.

Cheap growth

With some of the best profitability metrics in the European banking industry, you might think that investors are rushing to buy shares in Bank Of Georgia.

That is not the case.

At the time of writing, shares in the group trade at a forward P/E of just 5.1 around half of the European banking sector average. The stock also offers a dividend yield of 6.1%. 

While there are always going to be risks investing in an emerging market like Georgia, I think the market is being too pessimistic here. If the bank was based in Western Europe, the stock might command a premium valuation compared to the rest of the sector.

All things considered, I reckon it should be worth at least as much as the rest of the sector. That’s why I think shares in Bank Of Georgia have the potential to double your money. 

The post Looking for stocks to buy? I think this FTSE 250 dividend stock could double your money appeared first on The Twelfth Magpie.

More reading

• 3 UK stocks to consider snapping up if the stock market crashes this month
• Up 1,042.8% in 5 years! Is this still a top UK stock to buy?
• £20,000 in a Stocks and Shares ISA? Here’s a surging value share to consider

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The latest attack involves its emergency fundraising in the financial crisis. In 2008, Barclays took a £12bn loan from Qatar to avoid it seeking a UK government bailout. As part of this deal, the bank lent £2.3bn to Qatar Holdings, which the Serious Fraud Office claims was a special favour to help Qatar stump up the bailout cash — against the law if true. 

The SFO has already charged Barclays plc (the group holding company) and four executives with conspiracy to commit fraud, but now it is going after Barclays Bank, the operating company. If found guilty, it could mean that the entire group is stripped of its operating banking licence. While I believe that it is unlikely the SFO will shut down one of the UK’s largest companies, this is just the latest example of the bank’s continual struggle to recover from the financial crisis. That being said, the group has made enormous progress over the past 10 years streamlining its operations and disposing of non-core, as well as toxic assets. 

However, despite these actions, due to caution surrounding the group’s outlook, the shares still trade at a near to 40% discount tangible book value and a forward P/E of less than 10. But while this valuation might look attractive, I believe that BGEO (LSE: BGEO), the holding company of the JSC Bank of Georgia is a much better buy. 

Accelerating growth 

BGEO offers both an attractive valuation and explosive growth in a country that’s experiencing rapid economic growth as well as a rising demand for loans, wealth management products and insurance. 

Georgia’s economy grew at 4.8% in 2017, faster than all of the developed markets and this helped the Bank of Georgia grow its loan book by 17.4% on a constant currency basis and expand profit by 49.8% for the fourth quarter. Overall, profit for the full year increased by 8.1% and revenue expanded by 23.7% thanks to healthy growth across all of the company’s business divisions. 

The one warning sign in the results is an equity Tier 1 capital ratio of only 8.1%. For comparison, Barclays’ Tier 1 capital ratio was 13.1% of the end of September 2017, although the group does have to hold slightly more capital due to its size and position in the global banking system. Still, BGEO’s management is targeting an improvement in the capital cushion to 9.5% by the end of this year, which should offset some concerns about capital adequacy.

To help unlock more value for shareholders, management is planning to split the business into two separate entities, one focused on banking and one focused on investment management. 

A bright outlook

As well as BGEO’s rapid earnings and profit growth, like Barclays, shares in the bank look cheap today. The stock is currently trading at a forward P/E of 8.5, which seems to undervalue this business, growing earnings per share as a double-digit rate. Also, my Foolish colleague Peter Stephens believes that the market is overlooking BGEO’s dividend potential. 

All in all, while BGEO might not have the global presence of Barclays, it is growing faster looks undervalued and should continue to register steady growth thanks to its leading position in one of Europe’s fastest-growing emerging economies.

The post Why I’d sell Barclays plc to buy this hidden banking stock appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Up 50% in a year! That’s not the only reason I’d consider buying Barclays over Nvidia stock today
• Barclays shares could soon soar another 21%, according to the latest price target
• After a 160% rally, major brokers still see more gains for Barclays shares. Here’s why
• How many Barclays shares do I need to buy to get a £1,000 passive income?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.