ArmInfo. In the banking system of Armenia, the share of non- performing loans (NPL) may exceed 10%. This forecast was given on September 8 at a press conference by the Chairman of the Central Bank of the Republic of Armenia Martin Galstyan, noting that it is still difficult to predict when this will happen - this year or later.
He explained that according to the Central Bank's estimates, the growth of NPL in the total loan portfolio of the banking system is expected due to the introduction of loan payment holidays, as well as a decrease in citizens' incomes due to the epidemiological crisis.
M. Galstyan informed that at the moment the share of problem loans in the loan portfolio of the banking system is 6.3%. It should be noted that in Armenia since March 16, as part of the fight against the spread of the coronavirus, a State of Emergency was introduced, which was extended each month and will be lifted from September 12, while maintaining restrictive measures. But the banks of Armenia, on the eve of the emergency, already from March 13, announced the introduction of loan payment holidays with an accompanying extension of maturities.
According to the Financial Rating of Banks of Armenia prepared by ArmInfo IC as of June 30, 2020, the growth of non-performing loans resumed in the banking system and the share of NPL in the loan portfolio grew in Q2 from 8% to 8.3%, and in assets from 5.2 % to 6.3% (taking into account bad loans, which the Central Bank does not take into account due to write-offs to the off-balance sheet). This was observed against the backdrop of accelerating y-o-y growth in loan investments from 11% to 19% and a slowdown in asset growth from 17% to 14%, with strongly weakened quarterly growth in both cases. To provide a complete situation on the NPL, ArmInfo IC requests the necessary data from banks, which, together with the data published in financial reports, make it possible to calculate the total volume of overdue loans and, therefore, their share in the loan portfolio and banks' assets.
The rise in toxic loans, in turn, prevented profits from accelerating growth. Thus, net profit, amounting to 40.6 billion drams ($ 84.2 million) in the first half of the year, increased by 6% per annum, similar to the rate of a year ago, which was observed against the background of an increase in the volume of overdue loans by 8.2% (with a quarterly growth of 10.1% ). Moreover, not only consumer loans, but also sectoral portfolios (trade, catering / services, agricultural and industrial sectors) are distinguished by high toxicity (with the domination of doubtful and bad groups). And this was accompanied by a decline in the value of healthy (standard) loans for the reporting quarter by 0.5% (from 5.1% growth in the first quarter), with a y- o-y growth of 15.3%, presumably to a greater extent secured due to renegotiation of contracts during loan payment holidays (from March 13 to June) and active participation in the 1st and 2nd anti-crisis state programs. The total loan portfolio of Armenian banks by July 1, 2020 exceeded 4 trillion drams ($ 8.3 million), and assets reached 6 trillion drams ($ 12.4 million), and the acceleration of the y-o-y growth of the first, amid decline in the growth of the latter, increased the share of loans in assets from 64.3% last year to 67.1%.
