Wednesday, October 6 2010 17:56

Perspectives of auto lending in Armenia

Interview with Head of the Retail Banking Department of Areximbank-Gazprombank Group Roman Gortsakalyan

Mr. Gortsakalyan, Areximbank-Gazprombank Group has always been actively involved in the market of auto loans. What are the portfolio of auto loans and the dynamics of the current year? Are auto loans in demand at present?

Car loan market has originated in Armenia relatively recently almost simultaneously with development of consumer lending. In 2005-2006 the auto loan market grew 83.5%. By data of AmRating, Areximbank was among top three banks in terms of auto loans in early 2006 (12% of the bank’s loan portfolio). In 2007 the emerging financial crisis affected the market. In 2008 and 2009 Armenia’s economy especially felt the negative impact of the crisis. Banks cut and even suspended auto lending. Arexibank was not an exception either. In that period of time the bank’s shareholder was changed (Russian Gazprombank). The new shareholder certainly corrected the policy in favor of big corporate customers, specifically big energy companies in the country. We did not refuse retail banking either. Over the last few moths we twice reduced tariffs of various types of credit services, including auto loans.

What are your lending conditions?

Areximbank-Gazprombank Group provides auto loans both in the primary and secondary markets. The loan for a Russian second-hand car is given only if the car is
not older than 3 years. The maximum age for a foreign car is 7 years. The interest rate for both cases ranges within 17%-20%. For new cars the conditions are as follows: 30% prepayment for both Russian and foreign cars, the maturity is 3-36 months, the annual interest - 16%.

There are banks that offer better conditions…

Better conditions were offered also before, but banks soon faced a number of serious problems with customers. For instance, a bank offered an 8%-10% annual interest rate, but the car cost a customer 15%-16%. The bank-customer relations must be mutually-advantageous and banks should cover their risks. Our interest rates are quite real. Areximbank-Gazprombank Group portfolio of auto loans totaled 2,194,810,000 drams for the first half of 2010 and will be raised 15% till late 2010. We are careful in automobile financing sector, first of all, for lack of compulsory insurance in the sphere and the problems with sale of motor vehicles in pledge as security for a loan.
As soon as the Law on OSAGO (motor third-party liability insurance) is adopted in 2011 the mechanism will work and customers will really feel the difference in tariffs, I think.

What companies does the bank cooperate with in the given segment?

Areximbank-GPB Group cooperates almost with all the biggest insurance companies in Armenia. It is instructive to say the insurance companies not always agree to insure a motor vehicle. For instance, it is quite risky to insure the vehicles engaged in taxi-services or the ones belonging to organizations renting cars to foreigners.

Does the bank deal with car traders? And what are the preferences of your customers?

We cooperate with Armenia-Lada and KiaMotors companies. Our customers have begun preferring more expensive foreign cars. Over the last years the car fleet in Armenia has become significantly “young” and these trends will be continued. Although Russian cars occupy a significant part of the market in Armenia thanks to their low price and the traditions and consumer habits inherited from the Soviet times, more expensive foreign cars are gradually gaining the segment. When the difference in the price of a foreign and Russian car is reduced to 20%, a customer often prefers a foreign car.

What are the bank’s sources of financing for auto loans?

The bank has enough own resources and has no problems with raising funds.

By Arthur Aslanyan

RUB	4.56	0.06
USD	383.47	0.72
EUR	449.96	2.75
GBP	519.91	2.59
CAD	277.17	1.47
JPY	25.95	0.08
CNY	53.85	0.12
CHF	481.44	2.76

News

Perspectives of auto lending in Armenia