ArmInfo. The loan portfolio of Armenia's banking system increased by 14.4% in the first half of the year, which indicates the activity of banks in terms of lending. However, fierce competition in the credit market affects profitability by a significant slowdown. This opinion in an interview with ArmInfo correspondent on August 23 was expressed by the Chairman of the Union of Banks of Armenia (UBA) Artak Anesyan at the end of a press conference dedicated to improving financial literacy of the population.
He stressed that in conditions of fierce competition, banks lower interest rates, improve lending conditions for customers, increase repayment periods, which leads to a decrease in income and, consequently, "" of profit. "Thus, more comfortable credit conditions are good for customers, but adversely affect the profitability of banks," A. Anesyan noted.
Continuing, the head of the UBA added that today banks are also spending a lot on modernization, technical equipment, development of new software, products that will lead to good results in the coming years, namely, they will increase profits.
In particular, at a press conference in the UBA, speaking about lending to the banking system of the Republic of Armenia, A. Anesyan stated that since last year mortgage lending has been intensifying. <I can say that at the moment the offer lags behind the demand", he noted.
In addition, he said, there has been an increase in lending to the business segment, the demand for which is growing steadily. In this regard, he noted that recently, entrepreneurs have become actively engaged in the implementation of their small production on online platforms. "This indicates the dynamic development of e-commerce in Armenia, which is a rather promising direction," A. Anesyan believes.
In conclusion, he noted that, despite the vacation season, the number of transactions in August of this year is comparable to the available indicators of December 2018, when the highest activity was observed. "This indicates that activity is growing every day, and we expect that in the fall of 2019 the number of customers in the banking system will be more impressive, both from a quantitative point of view and in terms of the volume of services provided and transactions", he concluded.
According to the Financial Rating of the Banks of Armenia prepared by ArmInfo IC as of June 30, 2019, the volume of credit investments in the banking sector amounted to 3.4 trillion drams or $ 7.1 billion. In assets, the share of credit investments amounted to 64.3%. Corporate loans dominate in the structure of the loan portfolio - 62%, but in terms of growth rates they are significantly inferior to retail loans. In particular, the volume of retail loans increased by 32.6%, while corporate loans grew by only 2.9%. The share of mortgage loans in the loan portfolio of the banking sector reached 9%, amounting to 304.03 billion drams ($ 637.2 million) in absolute terms with a y-o-y growth of 35.6%. The share of lending to SMEs in the loan portfolio is much larger - 23.6% or over 797 billion drams (about $ 2 billion) with a y-o-y growth of 14.6%. In the total loan portfolio of banks, the NPL share so far exceeds 9%, in the structure of which high-risk groups (doubtful and bad loans) are still dominant and most of them are concentrated in consumer loans. According to the results of the first half of 2019, the net profit of the banking system amounted to 38.5 billion drams ($ 80.6 million), having increased only 6.2% year on year, while a year earlier an impressive growth was recorded (2-fold).