ArmInfo.Armenia's banking system is making half-hearted attempts to reanimate corporate lending, which snowed a decline last year, against a backdrop of accelerated growth in private loans, which ensure acceptable return on and diversification of assets. However, such activity requires special attention needed for preventing delinquent loans from turning into risky ones.
According to the data of the Financial Ranking of Armenian Banks by the ArmInfo news agency, the unprecedented, extremely high year-on-year growth in profit due to large capital inflows, showed a rapid decline from 200% down to 11%, which had been expected. That happened amid a new trend - a 12.4% growth in lending to economy against last year's decline, and accelerated growth in private loans up to 22.1%. Such highly active consumer lending to keep the return up caused a new 3.5% increase in the number of non-performing loans (NPL). As a result, the share of "toxic" loans in the loan portfolio neared 7% and their share in assets, 4%, which, although far from being critical, is a reason for concern. Moreover, 50% of NPLs are in the riskiest groups, namely, doubtful and bad loans.
Still, the aggregate volume of retail private loans is nearing that of corporate lending, $5.6bln and $6.7bln respectively. Interbank loans continued to show the highest growth, 34.2% against the previous 5.4-fold growth - $519.2bln. This active mutual support in at least short-term loans can easily be explained by the declining foreign funding the second year in a row, with a 14.3% decline recorded.
Nevertheless, somewhat reanimated corporate lending and continuing growth in private loans enabled a 15.4% growth in the loan portfolio, up to $13.4bln. In turn, that enabled a 14% growth in assets, to over $22bln.
In sectoral terms, the "economic" loan portfolio shows a correlation with the economic growth pattern. Specifically, the lending to the construction sector showed the highest growth, 35.4%, to transport and communication (15%), public catering and services (11.2%), with much more moderate growth in the lending to the trade (7%) and agricultural (6.3%) sectors. On the other hand, banks have not yet managed to cope with the steep decline in lending to the industrial sector, with a 3% decline being recorded now. Consumer lending shows a 29.4% growth, with mortgage lending recording the same growth rate, which is farther and farther from the once recorded growth. However, it is consumer loans that constitute over 42% of NPLs, with most of them being bad ones.
In terms of assets, the following banks are in the TOP-5: Ardshinbank, Ameriabank, Armbusinessbank, ACBA Bank, and INECOBANK. These banks are also among the five leaders in terms of loan portfolios. Four of the banks - Ardshinbank, Ameriabank, Armbusinessbank, ACBA Bank - remain in the TOP-5 in terms of both corporate lending and private loans.
As regards lending to branches of economy, the leaders are: Ameriabank (industry, construction, transport and communication); Armbusinessbank (public catering and services). Acba Bank is traditional leader in agricultural lending (35%), closely followed by Ameriabank (31%). Ameriabank and Ardshinbank remain leaders in consumer and mortgage lending. Acba Bank is leader in SMB lending, followed by Ameriabank and Armbusinessbank.
In January-September, 2023, the following banks were leaders in terms of net profits: Ardshinbank, Ameriabank, ACBA Bank, INECOBANK, and ID Bank.
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.