Wednesday, March 23 2011 14:28
Banks stiffen competition and fight for customers
ArmInfo. Interview with Artak Hanesyan, Chairman of Directorate - Director General of Ameriabank
The excessive USD liquidity, growth of interests rates, price boost, inflation deepening, low rates of economic growth have become the reasons of toughening of CBA's monetary policy aimed at maintaining stability in the country's financial market, restraining of the inflation and dedollarization of the economy. Ameriabank as one of the top banks in the country has already drawn its action plan. It keeps developing in various segments. The bank pays a special attention to corporate customers hereby promoting the real sector of economy. International programs the bank is involved in aim to fund SMEs, develop renewable energy and trade finance. Retail business is also among the bank's priorities. Ameriabank is actively involved in the corporate and retail segments, wages a weighted policy of customer selection, which makes it possible for it to retain the high quality of the loan portfolio. The motto of the bank after the intensive capitalization in 2008 is to get top positions, which was a success in 2009-2010. Now the bank is working to upgrade efficiency, which will allow it to retain its top positions. To achieve its goals, Ameriabank is strategically developing through expansion of the branch network, introduction of new loan and deposit products, upgrade of service, package services for corporate customers, activation in the card market, and flexible tariff policy in all directions. Artak Hanesyan, Chairman of Directorate - Director General of Ameriabank, tells about the bank’s achieves in 2010 and plans for 2011 in details in an interview with ArmInfo.
What do you think of the situation in the banking market of Armenia?
Competition in the banking market has been stiffened enough. There is a fight for customers through dumping. It is a wrong method, I think. Dumping without high quality service will have a short-term nature. It is necessary to boost the Customer-Bank relations through high quality service and wide range of products.
What do you think of the results of the toughened monetary policy and increase of the refinancing rates?
On Feb 8 2011 the reserve requirements at CBA were somewhat toughened, as a result of which 9% out of the envisaged minimum 12% was reserved in Armenian drams, 3% - in foreign exchange (for EUR - in euros, for the rest of currencies - in US dollars) against the
earlier reserved 6% in AMD and foreign exchange. As regards Ameriabank, it has not felt the changes yet. CBA is gradually changing the reserve requirements for banks with gradual transition to AMD reserve for the purpose of dedollarization and inflation restraint. They think this will equalize the shares of current AMD and foreign exchange liabilities, afterwards AMD liabilities will prevail over foreign exchange ones.
The new 16% reserve requirement will apparently be distributed in the following way: 13% in Armenian drams, 3% in foreign exchange. In case of reserve requirements growth the banks
will need more drams, as result of which excessive USD liquidity will be observed, and this will lead to changes in USD placements rates. The banks will mange to increase the AMD liquidity due to REPO transactions with CBA, sale of part of the government bonds portfolio, or attraction of funds in the interbank market.
What is your forecast of the change of interest rates on raised and placed funds?
The market is not volatile at present. But the latest incidents in Japan may make certain adjustments to it. In case of 5% difference of interest rates in favor of the deposits in AMD, funds from the deposits in terms of USD will flow to the deposits in AMD and customers will face no risks. In this light, convertible and multi-currency deposits are very convenient for customers, but risky for banks in case of discrepancies in exchange.
Given the high liquidity in the banking sector of Armenia, loan interest rates fell 2%-3% in 2010 in average. As regards loans in the Armenian dram. In 2011 average interests on deposits in
AMD will be comparable to the yield of the three-year government bonds i.e. within 11%-14%, whereas the interests on foreign exchange deposits will fall 1%-1.5% over the year.
"Interests on deposits in terms of AMD keep growing because of the growth of the refinancing rate (from 7.75% to 8.25% since March 4) and the inflation pressure on the market that leads to the growth of the yield of government bonds, which creates the upward trends of interests on dram deposits and dram credits. As regards foreign exchange deposits, bankers have different views. Thus, some of them think that Libor may start growing already in late 2011, while others
say that the current level of interest rates will not change for at least a year.
Ameriabank has already begun making certain steps towards reduction of interests on deposits. The first step was reduction of deposits in foreign exchange in average by 0.5%-1% starting March 9.
As regards interests on loans in AMD it will grow proportionally to the growth of
interest in deposits in AMD - 2% in average. The approach to loans in USD is two-way: on the one hand, the following changes in the regulatory framework of compulsory reservation (in case of a growth) will lead to surplus free funds in USD in the banking system, which allows investing more in USD. On the other hand, considering the growing cost value of dollar funds, no significant fall of interests is expected i.e. the interests on loans in USD will be left
unchanged. Ameriabank is currently revising its policy of interest rates towards raised and placed funds.
What about inflation, economic growth, real estate prices and foreign exchange rate in 2011?
Every year the bank discusses a plan of strategic development for 3-5 years during its September sittings. Last year’s session made the following forecasts for 2011: a 5% growth of GDP and 7.5% growth of inflation is expected in Armenia in 2011. As for the foreign currency rate, no sharp fluctuation is expected in 2011, as all the key measures on gradual keeping of the rate were taken by the Central Bank in 2010, such as: pressure on the foreign currency market, fixing of special normatives for banks and tightening of the standard of obligatory reserving so that not to let accumulation of big foreign currency funds and open positions. The monetary policy of the Central Bank of Armenia does not allow sharp fluctuation of the rate of Armenian dram
against US dollar, though the tendency at the world currency markets may become a serious challenge to financial structures in all over the world especially after the disaster in Japan.
What is the forecasts of key figures for 2011 and did the bank manage to fulfill the goals for 2010?
Ameriabank, which is among top three biggest banks of Armenia, is going to gradually extend the line of the retail products over the next 5 years. The bank adopted a decision to correct the strategy during the September sitting of the bank in 2010. If today the share of the retail loans in the loan portfolio of the bank is 18%, we are going to increase this indicator up to 30% by the year of 2013. The mortgage portfolio will be increased by 25% in 2011, auto loans - by 52%, the number of the plastic credit cards (chiefly at the expense of introduction of the salary projects and two new retail-cards) will grow twofold, small crediting - by one and half, big borrowers - by 21%, the SME - by 40%, leasing - by 54% and factoring will grow twofold. As a result, the retail loan portfolio will grow on average by 50% and the corporate loan portfolio - by 26%. The share of the loan portfolio in the structure of assets will reach 60-65%.
We are also going to increase the volume of the time deposits of individuals by 25% through introduction of the new deposit products. In 2011 stress will be put on attraction of the dram deposits which may grow by 47%. As for the time deposits from legal persons, the are expected to grow by 20%. The number of the plastic cards will grow by 13.5 thsd and reach 31.3 thsd.
Do you envisage any specific steps in the way towards universal banking?
For this purpose, Ameriabank is expected to expand the branch network and introduce new products on its way towards universal banking. In 2011 the bank will open 5 branches, including 3 in Yerevan and by one branch n Gyumri and Vanadzor. Another 3 branches will be opened in 2012. Ameriabank serves 7 branches (4 in Yerevan, 2 in the regions and 1 in NKR) including the city branch "Moskovyan" opened earlier this month. The new branch provides a new service: lockboxes and discounts for a range of the existing services. As regards introduction of new products in 2011, it will be two card products. One of the new products is a novelty in Armenia. Ameriabank is expected to launch a project "Diaspora" to attract Armenians from Diaspora and first of all from the USA (California State). The bank will start with deposits and then provide a full range of banking services in future. The main stress will be put on investment banking (raising investments from Diaspora to the financial sector of Armenia), opening and service of accounts, including savings. In 2010 the bank introduced such new products as metal accounts, gold deposits with guaranteed payback.
What are your plans in the loan market?
The stress will be put on SME finance in 2011. Ameriabank is going to raise about $40 mln from external sources in 2011, the great majority of which will be directed to development of the renewable energy. The funds will be raised via involvement in the new projects as well as through additional financing within the frames of the programs which have been already implemented. In various programs Ameriabank has been cooperating with the following structures: IFC (SME finance); European Bank for Reconstruction and Development ( to finance big business, SMEs and trade finance); the Netherlands FMO and DEG - business support; FMO and DEG – small-scale renewable energy financing (small HPPs); EurAsian Development Bank (SME finance); Asian Development Bank (trade finance). At the same time the bank has been
closely cooperating with Commerzebank, Citibank, BNP Pariba, which opened the credit limits for the trade financing, and with the Swiss Atlantic Forfaitierungs AG company. The total of $100 mln have been already drawn down under these programs, in general.
The bank has recently introduced a new credit product - trade finance with a very low rate of interest - 8-9% and a 6-months maturity term and refinancing by the partner-banks. This product is targeted at the trade organizations with permanent turnover specializing in import and resell of goods in the local market. Two projects have been already financed within the frames of this
product, and we hope that the number of businessmen which want to make use of the services of this product will grow.
Will you change the stresses in the loan portfolio?
In 2011 the main stress will be put on energy, production and trade as well as the agrarian sector, transport and communications. Like in 2010, in 2011 as well we shall have a very conservative
and balanced approach to the problems of house construction financing. We still see no positive tendencies in the present stagnation situation in the real estate market.
Do you expect growth of the customer base, particularly, in the segment of deposits and loans?
Our plans to introduce new products and change the interests on deposits will make it
possible to increase the customer base up to 36 thsd in 2011. At the same time the bank will continue preserving its customer-oriented policy.
Since 2010 the have been reports about possible acquisition of Troika Dialogue by the Russian Sberbank. It was officially announced on March 14 2011. Ameriabank's shareholder is the affiliated company of Troika Dialogue, TDA Holdings Limited with
99.99%. Will the deal have any impact on Ameriabank’s activity?
First, Troika Dialogue Group has no direct legal connection to Ameriabank. These two financial structures are legally connected via Ruben Vardanyan, the majority shareholder of the both.
In addition, merger of two big financial structures and the decision of the management to head the new bank for at least 3 years will create new opportunities of cooperation with Ameriabank.
Sberbank is the biggest bank in Russia, Central and Eastern Europe. The share of the bank is nearly 30% of assets of the Russian banking system with nearly 240,000 employees.
The deal of the two big structures will allow creating a powerful corporate and investment bank. The deal was made public on March 14 2011. After acquisition of Troika Dialogue by Russian Sberbank (Savingsbank) the shareholders' capital and leadership of Ameriabank will not change. I think that thanks to the owners and partners of Ameribank the Sberbank - Troika Dialogue deal may open new perspectives for it in new technologies of doing business.
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