Wednesday, October 29 2014 19:39
Armenian banks have considerably deteriorated loan book quality, profit therefore keeps shrinking
ArmInfo. In H1 2014, Armenian banks considerably deteriorated the loan book quality, Gevorg Tarumyan, Deputy General Director, CFO at Ameriabank, said at today's press conference.
He explained this by the deteriorating economic situation in the world due to the slow recovery of global economy, reduction in the inflow of foreign investments, drop in the consumer demand, and decline in the household income. So, the customers of Armenian banks have difficulties repaying the loans.
Tarumyan pointed out that in H1 2014 the share of overdue loans in the total loan book of Armenian banks exceeded 7% versus 6.5% in H1 2013.
"The quality of the Armenian banks' loan book keeps dropping. The growth rates of the loan loss provisions are accelerating. Along with the writing-off of the toxic loans, this does not enable the Armenian banking system's profit to overcome the negative dynamics", said Tarumyan.
He thinks that in the current situation the banks only have to rely on their competitiveness. "Now the banks are toughly competing for good customers", he confessed.
According to the Financial Rating of Armenian Banks prepared by the Agency of Rating Marketing Information (ArmInfo), in H1 2014 the number of the banks, whose loan book's non-performing loans were in the critical range (10-15% in international practice) or exceeded the upper threshold, was 7 (3 of them exceeded the maximum threshold). In H1 2013 there were 4 such banks, with 2 of them exceeding the upper threshold. In H1 2014, the amount of overdue loans in the aggregate loan book of the Armenian banks totaled 150.5 bln AMD (including bad loans), with a 29.4% year-over-year rise. Moreover, the growth rates of overdue loans are accelerating, while the standard loans have considerably slowed down their growth. As a result, in H1 2014 versus H1 2013, the aggregate net profit of the banks dropped by 13.6% (20.1% year-over-year drop). There are 21 commercial banks in the Armenian banking system.
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