Wednesday, December 14 2016 18:28
Karine Melikyan

ARARATBANK acquires assets and liabilities of Armenian Development Bank, leaving the capital out in the cold  

ARARATBANK acquires assets and liabilities of Armenian Development Bank, leaving the capital out in the cold  

ArmInfo. ARARATBANK is purchasing the assets and liabilities of the Armenian Development Bank, leaving that bank's total capital out in the cold, trustworthy sources have told ArmInfo. Meanwhile, ARARATBANK's website reports that at the extraordinary meeting of the buying bank's shareholders on 10 Dec 2016 a decision on merger was taken.  

A month ago ARARATBANK issued shares to increase its capital to meet the requirement that will come into effect in 2017. Following the placement, the Bank increased its total capital to almost 33 billion AMD (versus the required 30 billion AMD). It seemed that after that the need to acquire another bank for the same purpose ceased to exist. However, ARARATBANK's shareholders decided to acquire the Armenian Development Bank, but only its assets and liabilities (apparently, their healthy part) without the total capital.

AmRating analysts think that the picture of the balance sheet figures of Armenian Development Bank as of 1 Oct 2016 is able to reveal some hidden hazards. Firstly, in Jan-Sept 2016 the share of NPLs in the bank's loan book rose from 6% to 15%, reaching the upper threshold of the international critical limit (15%).  Secondly, the structure of the loan book is too unbalanced and poorly diversified in terms of sectors, which is proved by the prevalence of mortgage loans - 59%. Thirdly, amid the slight growth of the loan book (by 2.5% versus a year before), the bank considerably increased the call deposits (by 25%) and reduced the time deposits (by 8%).  At the same time, the bank increased the investments in government bonds (including the Armenian Eurobonds) by almost 20%. Amid such dynamics, the sharp growth of the bank's profit can be considered inorganic, because the interest revenues mostly formed due to lending considerably fell, while the small amounts of the non-interest revenue items grew but were unable to ensure the profit mentioned on the balance sheet. One cannot suppose either that the profit tangibly grew due to the recovery of the loan book, because the standard loans of the bank kept declining. Here one can only admit the probability of internationally practiced schemes for problematic small banks, when major shareholders provide gratuitous aid to the bank and that aid is directly taken into account in the bank's revenues and eventually increases the profit. In Jan-Sept 2016, the Armenian Development Bank increased its net profit 9-fold (!), which in turn raised the accumulated profit by 35.6%. As a result, the total capital grew by 18%.

Nevertheless, in case of such a scheme, the bank lacked over 18 billion AMD to meet the 30 bln AMD requirement. The conclusion is that all the efforts of the shareholders were actually aimed at selling the bank "in a worthy manner". 

To note, by 1 Oct 2016, the assets of the Armenian Development Bank amounted to 68 bln AMD (down 2% versus a year before), general obligations - 56.2 bln AMD (down 5%), total capital - 11.8 bln AMD, accumulated profit - 6.9 bln AMD, lending - 44.2 bln AMD, time deposits - 43.3 bln AMD, call liabilities - 7.4 bln AMD. In Jan-Sept 2016, the net profit of the bank totaled 1.2 bln AMD versus 131 mln AMD a year before.

As of 1 Oct 2016, the majority shareholders of Armenian Development Bank OJSC were the Armenian Football Federation president Ruben Hayrapetyan (19.98%), Rafik Hayrapetyan (19.65%), and Grigor Termenjian (US) - 16.03%, with the remaining 70 being minority ones. The bank has 9 branches - 4 in Yerevan, 4 in the provinces and 1 in Nagorno-Karabakh.

According to the Financial Rating of Armenian Banks by ArmInfo, as of 1 Oct 2016, the assets of ARARATBANK OJSC amounted to 137.5 bln AMD (up 9.3% versus a year before), general obligations - 113.4 bln AMD (up 9.7%), accumulated profit - 12.4 bln AMD, lending - 70 bln AMD (up 4.7%), time deposits - 22.5 bln AMD, call liabilities - 28.7 bln AMD, investments in government bonds - 26 bln AMD (up 2.3-fold). In Jan-Sept 2016, the net profit of ARARATBANK amounted to 732.8 mln AMD, including 406.5 mln AMD in Q3. Following the recent issue of shares in November, in the structure of the shareholders' capital 72.73% belongs to Flash oil trader, 18.14% - to the EBRD, 8.58% - to the Rural Impulse Fund II, with the remaining 0.55% distributed among 82 minority shareholders. ARARATBANK has 54 branches (4th position): 27 in Yerevan, 26 in the provinces and 1 in Nagorno-Karabakh.


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Government Bonds

Issue volume

10 billion

Volume of T-bills for placement

200 million

Volume of submitted competitive applications

200 million

Volume of satisfied bids

200 million

Yield at cut-off price

 5.8314%

Maximum yield

 5.8314%

Мinimum yield

 5.8314%

Weighted average yield

 5.8314%

Number of participants

2

The maturity date of T-bills

03.02.2020

ArmEx

 

СПРОС (Покупка)

USD

Средневзв. Цена

482,00

ПРЕДЛОЖЕНИЕ (Продажа)

  USD

Средневзв. Цена

-

СДЕЛКИ

USD

Цена откр.

482,00

Цена закр.

482,00

Мин. Цена

482,00

Макс. Цена

482,00

Ср/взв. Цена

482,00

-0.16

Кол-во сделок

1

Объем (инвал.)

200 000

0бъем (драм)

96 400 000