Saturday, January 21 2023 23:58

ArmInfo.Armenian banks' net profit totaled AMD 263bln ($668mln) last year - a 3-fold growth in 2022 due to an unprecedented 4-fold increase in noninterest incomes. 

According to the data of the Express Ranking of Armenian Banks by the  ArmInfo news agency, the high increase in noninterest incomes was  accompanied by a 15.4% increase in interest incomes. This increase in  the noninterest incomes, up to AMD 434.3bln, with interest incomes  gradually reaching AMD 606.3bln, narrowed the gap between the  noninterest and interest incomes - 1.4-fold against 4.4-fold. 

As a result, the share of interest incomes in the gross incomes  decreased from 78% to 58%, with that of noninterest incomes  increasing from 17.6% to 41.4%. 

In 2021, banks' profit increased by 52%, accompanied by a 7% increase  in interest incomes and a 3% increase in noninterest incomes. 

ArmInfo experts believe that the considerable increase in incomes  recorded last year was accompanied by large-scale commercial banking  transactions, mostly purchase and sale of foreign exchange. 

This is confirmed by moderate rates of increase in assets, an 18.3%  increase up to AMD 8,400bln ($23.4bln). The share of loans decreased  from 56.7% to 49.6%, totaling AMD 4,200bln ($11.8bln), with a 4.5%  year-on-year increase. 

The share of investments in securities increased from 18% to 22.5%,  up to AMD 1,900bln ($5.3bln), - a 46.2% year-on-year increase. Thus,  income increase is not so much supported by lending, as securities  transactions are the main factor of this upward trend. 

General liabilities showed a 15.2% increase, up to AMD 7,100bln  ($20.1bln). Liabilities to clients totaled AMD 4,990bln (70.3%),  liabilities to banks and other organizations, AMD 1,800bln (26%),  including revenues from the distribution of corporate bonds, with a  31.3% year-on-year increase in liabilities to clients and a 10%  year-on-year decline in the liabilities to banks and other  organizations.

Experts account for the high increase in the liabilities to clients  by the fact that numerous Russian, Ukrainian and Belarusian arrived  in Armenia, relocated their businesses and capitals to Armenia and  opened accounts at Armenian banks. It is this factor (about 100,00  relocated employees) made Armenian banks prioritize card and foreign  exchange transactions over traditional lending. And it is due to the  transactions in question that, along with a highly volatile exchange  rate, that Armenia's financial sector received excess profit,  including due to the high card service and account opening tariffs  for nonresidents, as well as due to generally high commission rate on  financial transactions.

This increase in profit caused a considerable 73.4% increase in  accumulated profit, up to AMD 499bln ($1.4bln), which, in turn,  caused a 38.8% increase in the aggregate capital of the banking  system, up to AMD 1,300bln ($3.7bln). 

The increase in the aggregate capital was, to an extent, due to the  fact that seven Armenian banks replenished their authorized funds  last year, which caused a 28.5% increase in the sum total, up to AMD  731.7bln ($2.1bln). 

Among the aforementioned seven banks is FastBank, which joined  Armenia's banking system last November. Before that it worked as the  Fast Credit Capital lending company and had to bring its authorized  capital from AMD 7bln up to AMD 30bln to me the standards set for  banks, thereby increasing its aggregate capital 2.3-fold, from AMD  22.2bln up to AMD 50.1bln (with the required minimum being AMD  30bln). 

Last year, Armenian bank were able to ensure a rise in required  standards. Specifically, capital adequacy (N1/1 min 9%) showed an  average rise from 23.12% up to 28.55%, aggregate capital adequacy  (N1/2 min 12%), from 24.88% to 29.91%, current liquidity ratio (N2/2  min 60%), from 157.79% to 205.95%.  Moreover, Armenian banks managed  to improve their results in terms of the Liquidity Coverage Ratio  (LCR min 100%, N2/3) and Net Stable Funding Ratio (NSFR min 100%,  N2/4) - 354.2% and 154.11% up to 381.73% and 161.64% respectively.  Furthermore, two new standards too effect last year - N5/1 max 10%  and N5/2 max 5%, which are supposed to curb mortgage lending risks.  In the 4th quarter, the aforementioned standards showed a decrease  from 3.51% and 3.17% down to 1.95% and 1.63% respectively. 

As of the end of 2022, the following banks were the TOP-5 in terms of  assets: Ardshinbank, Ameriabank, ArmBusinessbank, ACBA Bank and  INECOBANK. In terms of investments in securities, the following banks  were the leaders: Ardshinbank, Ameriabank, ArmBusinessbank and  Artsakhbank. In terms of liabilities to clients, the following banks  topped the list: Ardshinbank, Ameriabank, ArmBusinessbank, INECOBANK  and ACBA Bank. In terms of aggregate capital, the following banks  topped the list:  Ameriabank, ArmBusinessbank, Ardshinbank, ACBA Bank  and INECOBANK. 

In terms of net profit, Ardshinbank was the leader, followed by  Ameriabank, Evocabank, INECOBANK, ACBA Bank. 

In 2022, the following banks replenished their authorized capital:  Ameriabank (0.1%), Armeconombank (3.8%), Evocabank (15%), Araratbank  (16.6%), INECOBANK (22.4%), ArmBusinessbank (4-fold),and FastBank  (4.3-fold). As a result, ArmBusinessbank ranked first in terms of the  authorized capital, Ameriabank ranked 4th, VTB Armenia Bank ranked  2nd, ACBA Bank and Ardshinbank ranked 3rd and 5th respectively. 

After FastBank launched its activities in Armenia last November, the  country's banking system comprises 18 banks, including the branches  of foreign banks - HSBC, VTB (Russia), Mellat (Iran), Byblos Bank  (Lebanon). International institutional investors - EBRD and ADB -  have shares only in the capital of Ameriabank.