Friday, March 26 2010 17:15
Ardshininvestbank sets sights on long-term large-customer crediting
ArmInfo. Interview with Chairman of the Board of Directors of Ardshininvestbank Nerses Karamanukyan
2009 was a hard year from many points of view. Nevertheless, Ardshininvestbank has managed to retain its leadership in the banking sector. How would you assess the last year for the Armenian economy, in general, and for your bank, in particular?
You are right, 2009 was actually a hard year for the financial-economic system of Armenia because of the crisis. Despite 14% decline in GDP, the banking system demonstrated stability and flexibility and showed growth in assets and crediting. Ardshininvestbank fulfilled its plans on assets, deposits, capital and profit and finished the second.
I am glad to say that, despite the difficulties, our physical and legal customers have not lost their confidence in our banking system. In fact, today, they trust us even more than they did before, which is proved by their growing deposits. In our bank deposits are growing quicker than the average depositing around the banking sector. And even though the share of USD in deposits is high, we are still glad that people continue to trust us. Our bank did have certain losses because of the general economic decline: in early 2009 we reduced our credit portfolio. However, this year the situation has improved and we are active on all types of crediting.
Why did you reduce your credit portfolio? One the one hand, your bank credits large companies, first of all, those acting in the industry, the sector that has suffered the most from the crisis. On the other hand, this sector is reviving due to direct injections by the Government: they have received so many government loans that they will hardly need banking credits for, at least, half a year.
Yes, we did reduce our lending to mining companies and you are right, we did it because of the Government’s extensive mid-term credit support in mid 2009. Our banks could hardly provide so much money, mostly because of the credit size restrictions. Though having the second biggest capital in the sector, Ardshininvestbank could not do it either. So, the Government decided to directly finance the mining industry and we were forced to reduce our lending to this sector.
However, we hope that we will soon make up for these cuts. Presently, we are negotiating with international financial institutions and some local banks for co-financing the large business in case we prove unable to do it alone. I would rather not give names but I can say that we are negotiating with two international organizations, which can help our bank in the field of long-term large-customer-oriented crediting – by means of either co-financing or guaranteeing.
Last year our bank – just like the whole banking system – was forced to curtail its customer lending. However, this year we are showing signs of resurge. Today, we are implementing different large-scale customer crediting programs. We are shortly planning to restore the rate of automobile lending due to our old and new partnerships with car dealers. In the field of mortgage lending the Central Bank has set up a National Mortgage Company for refinancing AMD mortgage loans and has launched an “Affordable Housing for Young Families” program. We have already joined this program and will shortly start providing government-subsidized mortgage loans. So, I can say that the wise policy and the active support of the Central Bank and the Government have greatly encouraged customer lending.
Do you think that our banking system has no lack of liquidity?
Today, we have it in excess. By toughening the foreign exchange requirements the Central Bank is encouraging the banks to lend in AMD. The CB is making effective efforts to dedollarize our economy, which is good for both the banks and the population. Today, long-term crediting in AMD is possible mostly in the form of CB refinancing. AMD loans are also issued from the Russian stabilization credit. We also lend in AMD in the framework of KfW’s programs.
Ardshininvestbank cooperates with big national exporters. Do you have examples of project financing?
We have good experience of long-term project financing of companies importing technologies. I think that our banking system does not have big experience of project lending. However, we need this product today and are shortly going to offer it to our customers. At first, we are planning to attract long-term foreign exchange resources so as to enable our customers to create a base of long-term incomes – including AMD revenues – and to effectively service their debts and to control their risks in the future.
Your bank is quite passive on the leasing and factoring markets. What plans do you have in this field?
We do not provide leasing or factoring services, but, I don’t rule out the possibility that our shareholders may decide to set up a leasing company as this sector has quite good development prospects.
What are your macro-economic expectations for 2010?
Now that GDP is resurging, we are expecting 1.5%-2% economic growth this year. The economies of the region and Russia - on whom we heavily depend - are also reviving. The world metal prices are rising and this is having a good effect on the economy of Armenia with its copper, molybdenum and gold resources. I think that this year we will see steady but not very active growth. This will allow us to strengthen our positions in the banking sector due to our active efforts all over the country and well trained personnel. This year we will show even higher activity and will ensure growth in all figures. We have two development scenarios: moderate and intensive.
In the last years your bank has been quite active in the field of private money transfers. What are your stimuli? And what plans do you have for 2010? Are you planning to join new systems?
Our high activity in this field is due to active partnership with different big international systems. Shortly, we are planning to join two more networks. In Feb 2010 we showed 8.5% annual growth in private money transfers. In Jan-Feb 2010 our bank transferred a total of $16mln. We are actively diversifying our involvement in money transfer systems and are conducting different actions. We also have a network of 55 branches in Armenia and Nagorno-Karabakh Republic.
Does this ramified network meet modern requirements?
Most of our branches have been brought into conformity with modern standards. Some of them still need repair and corporate improvements – something we failed to do last year because of the crisis. This year we are planning to finish the repair of our branches in Ijevan and Armavir, with one of them to be moved to a new building. Next year we are planning to complete the renovation of our branch network.
What plans do you have in the plastic card business?
This year we will continue to be active on this market. In the field of retail banking we have opened a new card business development department for enlarging the list of corporate customers under payroll card programs. Today, Ardshininvestbank is Armenia’s only bank offering Visa Infinity cards to big exclusive clients. While deepening our cooperation with Visa, MasterCard and ArCa, by the end of this year are planning to focus exclusively on chip cards.
What plans do you have on securities?
We are planning to enhance our participation in the government bond market. We have increased this portfolio by 11bln AMD. The yield on our bonds has also increased.
In the second half of 2009 the banking system of Armenia recorded a 3% growth in bad loans. Will this tendency continue this year?
I would not say that the share of substandard loans has grown, on the contrary, according to the Central Bank, last year their share decreased to 5%. We have the same situation: in Sept-Oct 2009 we optimized our efforts to restructure our loans and reduced the share of inoperative credits.
The certain decline in total crediting in Jan 2010 due to seasonal factors has affected this index. As a result, it has risen to 7%. However, the ongoing economic recovery will lead to growth in the amount of credits and will certainly improve their quality.
We have a special substandard loan committee, which combines new methods with in-depth analysis in dealing with problematic credits.
What predictions do you have concerning AMD depreciation in 2010?
The rate will stay within the budget-planned 390-400 AMD per 1 USD level. I think that this is a quite realistic figure. Some experts even say that AMD rate will grow.
What effects risk management procedures have had on your bank?
Ardshininvestbank was one of the first banks in Armenia to create a special risk management department. We are also consulted by two big international institutions: in risk management by our shareholder, IFC, in retraining and loan underwriting – by Bank World, a US company with which we have a three-year consulting contract. In 2010-2011 we are planning to organize training courses for our personnel, including branch managers.
Naturally, the reform has brought about changes in procedures. In order to improve lending procedure, the Credit Committee has been authorized to make final decisions on lending.
In the last half a year Ardshininvestbank has effected substantial structural reforms. Since you are a universal bank, can I surmise that by doing this you are seeking to ensure even higher efficiency in all of our activities?
You are right, our bank is a universal bank with large ramified network of universal branches. Since its birth our bank has been dynamically developing. Today, we need to revise some of our directions. In order to provide more flexible and effective services and to be more efficient in meeting the needs of our business customers, we have specified our priorities and have set up two special divisions: Large Corporate Clientele Department (as big corporate customers are of strategic importance for our bank) and SME Development Department. Despite the crisis, customer loans are still in demand. So, we have created a Retail Business Department. We are launching large-scale lending activities and, in order to avoid bad loan problems, we have opened a Risk Management Department for predicting and detecting possible and existing risks.
We realize that all these reforms require heavy spending but, considering the growing demands of our clients and based on the principle of mutually beneficial partnership, we are ready for this as our motto is “Together We are Strong.”
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