Armenian banking system increased net profit for the I quarter of  2020 by 40% per annum

ArmInfo. The banking system of Armenia increased its net profit in the first quarter of 2020 by 40% per annum to 23.3 billion drams ($ 46.3 million), while a year earlier a subsidence of 17.4% was recorded.

According to the Express-Ranking of Banks of Armenia, prepared by IC ArmInfo, this was observed against the background of an acceleration in the annual  growth of credit investments and other loans from 16.2% to 20.4%,  with a volume of 3.8 trillion drams or $ 7.5 billion.

According to the analysts of the national rating agency AmRating, judging by the  higher growth rates of non-interest incomes than interest incomes -  26.3% versus 15.3%, it can be assumed that the upward support for  profit came to a greater extent from the sharp activation of distance  services (including . card), which resorted to banks during the  emergency to ensure safety in a pandemic of the coronavirus.  In a  quarterly context, net profit also reversed the trend from downward  to upward - from a 16.1% decline in the fourth quarter of 2019 to a  23.4% increase in the first quarter of 2020, which nevertheless is  much inferior to the quarterly growth a year ago (53 %).

At the same time, the volume of credit investments and other loans showed a  modest quarterly growth of 5.4%, which is slightly lower than the  rate of the previous quarter (6%), but significantly higher than the  growth of the first quarter of 2019 (1.8%).

According to AmRating analysts, banks managed to ensure high profit  growth thanks to 2-3-month credit loans announced from March 13 the  holidays. Namely, without this postponement, during the state of  emergency, when a temporary ban was imposed on many types of  activities, the quality of the loan portfolio would deteriorate  significantly, which would naturally lead to a sagging profit. After  the expiration of credit vacations, the situation is likely to become  more complicated, since the stipulated payments of the deferred  period are spread over the next months with a concomitant increase in  the debt burden, the repayment of which is complicated by the economy  that has not yet recovered and the uncertainty of the further  development of the events associated with the coronavirus pandemic.   Accumulated profit of the banking system by April 1 of this year  reached 246.5 billion drams ($ 488.7 million), accelerating annual  growth from 11% to 32%. This, coupled with the capitalization of four  authorized capital banks, accelerated the annual increase in the  total capital of the banking system from 8% to 10%, reaching the  level of 862.1 billion drams ($ 1.7 billion). In particular,  Ameriabank (in the 1st quarter of this year), Armeconombank (in the  1st quarter of this year), Armbusinessbank (in the 3rd quarter of  2019) and Armswissbank (in the 4th quarter of 2019) replenished the  authorized capital, which ensured an annual growth of the total  authorized capital of the system by 3% - up to 525.9 billion drams or  $ 1.04 billion.

TOP-5 in total capital includes Ameriabank, Ardshinbank, ACBA-Credit  Agricole Bank, Armswissbank and INECOBANK. Of these, four are in the  top five in terms of net profit.

The regulatory total capital in the average market increased by April  1, 2020 by 12.4% to 48.6 billion drams ($ 96.3 million). The total  capital adequacy level determined by the N1 / 2 standard with the  required minimum of 12%, in annual terms decreased from 30.64% to 27%  on average. In addition, in order to strengthen capital buffers, the  Central Bank renewed the requirement on the capital adequacy ratio  (N1 / 1 - min 10%) from 2020, which, on average, amounted to 30.6% in  the market in the first quarter. It is noteworthy that the capital  adequacy ratio previously appeared in the banks' accounts in  2005-2007 and then the required minimum was 8%, and now the Central  Bank, having re-launched it, was forced, in the situation created due  to the coronavirus, to revise the level down up to 9%.

It should be noted that 17 banks function in Armenia. Assets as of  April 1 amounted to 5.9 trillion drams ($ 11.7 billion), of which  63.7% accounted for credit investments. And the total obligations as  of this date amounted to 5.1 trillion drams ($ 10 billion), of which  67.9% are obligations to customers.