Central Bank Head:  serious demand for credit products observed in  2023 to increase profit growth of banking system

ArmInfo. Unlike 2022, when the Armenian banking system received most of its profits from services provided to non-residents (accounts, payment cards, currency transactions, ed. note), in 2024 there is a serious demand for credit products, which will allow banks to more thoroughly generate profits. Governor of the Central Bank of Armenia Martin Galstyan stated during a press conference on October 31.

In particular, he noted that the market is experiencing healthy  lending rates and a variety of loan products are offered. Mr.  Galstyan said that by October, consumer loans to individuals  increased by 18.9% per annum. "This is a very good, healthy  indicator, which is conditioned by the continued growth of income in  individual segments, as well as the natural growth cycle of  industries," he said.  At the same time, the head of the Central Bank  drew attention to the fact that by October, deposits of residents  grew by 25.2% per annum, and non-residents - by 16.8%.

According to the Express Ranking of Armenian Banks as of September  30, 2023, prepared by ArmInfo IC, the net profit of the banking  system for 9 months of this year amounted to 215 billion drams  ($546.4 million), having greatly stalled in y-o-y growth from 3-fold  to 11%, while in Q3 it began to decline. And this is against the  background of accelerating y-o-y growth of the loan portfolio from  1.7% to 20.5%, the volume of which reached 4.7 trillion drams ($12  billion), and growth continues to be supported largely by retail  loans.

This improvement in lending dynamics greatly accelerated the y-o-y  growth of interest income to 25%, while non-interest income dropped  2-fold, while a year earlier non-interest income showed a progressive  growth of 4-fold, with a modest increase in interest income of 9.7%  alone. And if interest income increased due to lending and  transactions with securities, then a significant reduction in  non-interest income was provoked by the inhibition of transactions  with currency, money transfers and card transactions, which were very  actively carried out by immigrants last year.

Within assets, the share of lending increased to 54%, and 74% of  total liabilities are liabilities to customers (time deposits and  demand deposits) - 5.3 trillion drams, with y-o-y growth rates from  16.2% to 23.3%.