Profit of Armenian banks sagging amid lending stagnation

 

In Q3 2015, credit exposure remained at 2.1 trillion AMD, with the aggregate net profit suffering a 1.6% decline versus Q2 2015 (against 2.5-fold growth in Q2 2015 versus Q1 2015). As of 1 Oct 2015 versus 1 

Oct 2014, the lending growth slackened from 12% to 10.5%, and the net profit decline accelerated from 22% to 52.3% (versus 21% growth in 2013 and 8% decline in 2012).

 

The assets amounted to 3.3 trillion AMD, with the share of lending dropping over year from 64.4% to 62.1%. The slight acceleration of the growth rates of the assets (from 8.7% to 12.3% over year) was due 

to the investments in trade portfolios that grew by 6%. As a matter of fact, the banks tried to compensate for the reduction in lending revenues by active transactions on the securities market. 

 

The total liabilities of the banks accelerated their year-over-year growth rates from 8% to 14.3% to 2.8 trillion AMD versus 19.6% growth in 2013 and 24.5% growth in 2012. The payables to the banks and other financial organizations grew over year by 24% to 967.1 bln AMD, and the payables to the customers (call liabilities and time deposits) rose by 9% to 1.8 trillion AMD. The share of payables to the banks and other financial organizations made up 34.5%, with the share of call liabilities and time deposits being 62.7% versus 31.7% and 65.7%, respectively, a year before. It should be noted that the payables to the banks and other financial organziations take into account the funds received from the sale of corporate securities issued by the banks. The matter concerns four banks: Ardshinbank, ARARATBANK, ArmSwissBank and Prometey Bank. 

 

The total capital of the banks slackened the year-over-year growth from 12.2% to 2.4% (from 3.3% to 1.7% in Q3), amounting to 511.3 bln AMD by 1 Oct 2015. Given the negative dynamics of the profit, the 

total capital growth was due to the statutory fund increase by 1.5% in Q3 and by 11.1% as compared to the previous year. In Q3 2015, only one bank (Areximbank-GPB Group) increased its authorized capital (by 17.2%). As compared to the previous year, the number of such banks was 4. 

 

The analysts of AmRating recall that the new minimum total capital standard of 30 bln AMD (versus the current 5 bln AMD) will come into effect on 1 Jan 2017. The analysts point out that none of the banks 

has so far announced an intention to merge with another bank or leave the market. For now, the banks quarterly increase their authorized capitals. According to AmRating, only the top five out of the 21 

banks in Armenia can boast of their total capitals (46-53 bln AMD) exceeding the new standard (30 bln AMD), namely, ACBA-Credit Agricole Bank, HSBC Bank Armenia, Ardshinbank, Ameriabank and VTB Bank (Armenia).  Four more banks will be able to retain their positions among the leading banks if they slightly replenish their capitals (by a little less than 1 bln AMD). They are followed by 7 banks, which 

will have to tangibly invest in their capitals (7-17 bln AMD). The remaining 6 banks will have to increase their capitals by more than 20 bln AMD to meet the new standard.