Armenian banks, having replenished the buffer of capital, sharply intensified crediting

ArmInfo. Banks of Armenia having significantly increased the buffer of capital over the past year, sharply intensified lending. According to the Express-Ranking of Armenian Banks as of July 1, 2017, prepared by the Analytical Service of the Information                 Company ArmInfo, the annual growth rates of crediting accelerated from last year's 12% to the current 20% to 2.6 trillion drams.  This increased assets more significantly - by 25.3% - to 4.2 trillion drams, compared to the year before (9.1%).

As a result, the net profit of the banking system grew 49.5% year-on-year to 19.2 billion drams, while in the second quarter it sank 20.1% after a significant growth in the first quarter (11 times). A year earlier, the growth rate of net profit was higher - 58.7%, and the improvement in rates was also observed quarterly - after a decline of 13.8% in the first quarter, the growth was 3 times in the II quarter. Slowing growth in profits suggests that the purge of the portfolio from toxic credits continues.

The total capital of banks grew by 22.1% year-on-year, against 19.4% growth a year earlier. Moreover, the authorized capital accelerated the annual rate of growth from 28% to 36.1%, and the accumulated profit began to sink faster - the recession deepened from 3.5% to 11.1%. In the year under review, 10 banks were capitalized, and this process was completed last year, which was dictated by the need to fulfill by January 1, 2017 regulatory requirement on the amount of capital (min 30 billion drams). As a result, the regulatory total capital of banks increased by 31.7% year-on-year to 39.1 billion drams on average in the market, against growth of 17.5% a year earlier.

The capital adequacy ratio increased from 27.35% to 34.45% on average, with a regulatory requirement of min 12%. The average liquidity ratio on the market increased from 30.33% to 36.12%, while the current liquidity rose from 200.63% to 225.55% with the required min 15% and min 60%, respectively.  According to analysts of the National Rating Agency AmRating, high capitalization amid excess liquidity can increase banks' appetite for risk, which further threatens to deteriorate the quality of the portfolio. And despite the fact that capitalization is probably sufficient to absorb potential losses, nevertheless, the quality of assets remains one of the key risks for Armenian banks.

Note that in 2015-2016 from the market came four banks - thisProCredit, BTA, Areximbank and Armenian Development Bank, unitedRespectively, with INECOBANK, Armeconombank, Ardshinbank andARARATBANK. As a result, from 2017 on the banking market of ArmeniaThere were 17 players.