Wednesday, February 14 2018 18:47
Karine Melikyan

Armenian banking system is gradually being freed from the trap of ultra-precise liquidity

Armenian banking system is gradually being freed from the trap of  ultra-precise liquidity

ArmInfo. The level of capital  adequacy of the Armenian banking system declined in 2017 from 38.8%  to 33.2% (with the required minimum of 12%). According to the  Financial Rating of the Banks of Armenia, prepared by NA ArmInfo,  this is due to a sharp slowdown in the annual growth of both total  capital - from 32% to 5.8% and assets - from 24.1% to 6.7%.

(Nostro) from 38.6% to 0.5%, in parallel with which the growth of  investments in securities dropped sharply from 72.2% to 22.3% and in  precious metals from 77.6% to 23.1%, as well as fixed assets and  intangible assets - from 15.6% to 7.9%, against which the yield of  cash dynamics from a 9.4% decline to 7.9% growth looks too modest.  And the dominant article - loan investments slowed growth moderately  - from 14.8% to 10.2%. Moreover, in the loan portfolio, the  activation of retail was accompanied by a decline in corporate  lending. In particular, retail lending improved dynamics with the  exit from the 2.7% decline to 15.4% growth, while the corporate one,  on the contrary, worsened - from 29.5% growth to 0.4% decline.

According to analysts of the rating agency AmRating, the slowdown in  the growth of banks' capitalization and asset growth with the  completion by early 2017 of the process of replenishment of capital  to a regulatory minimum of 30 billion drams. The capitalization  process in early 2017 led to an increase in the excess liquidity  indicator, which by the end of the year began to decline gradually  due to a sharp slowdown in the growth of total liabilities from 22.7%  to 6.8%, in particular, the obligation to receive - from 23.7% to 18  % and time deposits - from 22.6% to 6%.

As a result, the level of total liquidity on average in the market  declined to 35.99% in 2017 (with the required minimum of 15%), and  current liquidity to 222.42% (with the required minimum of 60%),  against 37, respectively, 55% and 253.83% in 2016. According to  experts, this situation can be viewed as a positive trend, as  evidenced by a sharp increase in retail lending. However, failure to  follow the general trend of lending to the corporate sector can be  viewed as a short-term hitch in anticipation of growth, adequate to  the general economic trend, namely in the economic sphere in the  country by 7.7%. Support for the fossil market at 6%.

ROA - from 0,96% to 0,9% and ROE - from 5,76% to 5,6%. Moreover, a  meager decrease in these indicators was provoked by a moderate  slowdown in net profit growth to 15.6% in 2017 from 26.8% in 2016  against a sharp slowdown in total capital and assets. The main reason  is due to low interest rates, the presence of excess liquidity and,  so far, a restrained pace of credit market recovery.

In terms of capital adequacy, the annual decline was recorded in 11  banks, the level of total liquidity was in 10 banks, current  liquidity level was in 14 banks, ROA in 7 banks, ROE in 6 banks. The  regulatory total capital on the market slowed down the annual growth  rate to 10.5% from 40% in 2016, but the decline in this indicator was  recorded only by two banks, and insignificant, and the other 15  significantly accelerated the growth rate of 3 banks against a sharp  slowdown in growth the majority.

As of January 1, 2018, the assets of the banking system amounted to  4.4 trillion AMD ($ 9 billion), total capital - 701 billion AMD ($  1.4 billion), total liabilities - 3.7 trillion AMD ($ 7.6 billion).  In the structure of assets, credit investments amounted to 2.9  trillion drams ($ 6 billion) invested in securities - 558 billion AMD  ($ 1.2 billion), balances on correspondent accounts in the Central  Bank - 481.9 billion AMD ($ 995.5 million), Cash - 125 billion ($  258.1 (nostro) - 80.5 billion ($ 166.3 million), investments in  precious metals - 987.1 million ($ 2.1 million), fixed assets and  intangible assets - 117.9 billion ($ 243.6 million ) In the structure  of liabilities, term deposits amounted to 1.3 trillion  ($ 2.7  billion) and call deposits - 834.7 billion ($ 1.7 billion). 2017 the  banking system of Armenia is completed familiarize with a net profit  of 38.3 billion ($ 79.1 million).

17 banks operate in Armenia since 2017, and their branch network  includes over 520 units, of which about 230 are metropolitan, more  than 260 are regional and more than 30 are located in the NKR. 

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