Thursday, February 15 2024 17:45
Alina Hovhannisyan

With HSBC`s withdrawal, Armenia loses last transnational  institutional investor - analysts

With HSBC`s withdrawal, Armenia loses last transnational  institutional investor - analysts

ArmInfo. The likelihood of attracting a new international brand to the Armenian financial market  is quite low. Economist Haykaz Fanyan expressed a similar opinion on his Facebook page, commenting on the HSBC's withdrawal from Armenian market.

In this regard, he noted that the Austrian Reiffeisen has the largest  representation in the region, but even Reiffeisen's assets in Kosovo  exceed $1.3 billion, of which the loan portfolio is $900 million.  "For comparison, here are only 4 banks in Armenia that exceed this  indicator: Ameriabank, Ardshinbank, ACBA and Amio," the economist  emphasized.

According to Fanyan, in order for large financial groups to enter  Armenia, or acquire a local bank or establish a new one, either one  needs to sit and wait until the country's banking system becomes more  developed and attractive for large financial groups, or there should  be consolidation in the banking system, perhaps even by uniting with  banks from other countries in the region, because only the Armenian  market is quite small.

"I am sure that these consolidation processes will take place in the  coming years. "I would also like for the regulation of digital banks  to be relaxed as much as possible and digital banks to be formed or  gain access to our market," he emphasized.

At the same time, Fanyan noted that no matter how painful HSBC's  withdrawal from Armenia was for our economy, it was not unexpected.  He recalled that HSBC's entry into Armenia was determined by Vache  Manukyan factor (British businessman and philanthropist, who owned  30% of the bank's shares, ed. note), and not by economic feasibility.

Meanwhile, as Emmanuil Mkrtchyan, head of the AmRating national  rating agency, noted, the strategic decision to withdraw from Armenia  was made by the international banking holding HSBC several years ago.  And this concerned not only Armenia, but also other countries,  "uninteresting" for global business. 

We were talking, among other things, about Russia, where the bank was  developing its corporate business, which was put up for sale, and  which had already lost about $300 million. As a result, in recent  years, the growth rate of the balance sheet currency of the Armenian  subsidiary of HSBC was gradually decreasing, and analysts made  conclusion about the gradual "winding down" of its presence in the  country. According to the agency, in order to withdraw from the  market, the banking holding company had to, firstly, buy out Vache  Manukyan's 30% share, and, secondly, find a "fair" buyer, which, as  is known, was the largest to by assets of the Bank of Armenia as of  today, Ardshinbank.

According to Mkrtchyan, HSBC's withdrawal from the market, which  instilled international banking standards and literacy among Armenian  bankers in the late 1990s, can be called the worst case that happened  in Armenia's economy in recent years. After all, before HSBC, other  institutional banking investors gradually left Armenia, including the  German ProCredit Bank, which continues to operate quite successfully  in Georgia, Moldova, Ukraine and Eastern European countries, as well  as Credit-Agricole Bank, which withdrew from the capital of Acba  Bank. Such international financial donors as EBRD, which remained  only in the capital of Ameriabank, as well as IFC, KfW and other  smaller ones such as Incofin, greatly reduced or completely  eliminated their presence in banking capital.  "There is no need to  unequivocally negatively assess the withdrawal of donor organizations  from banking capital, since it was thanks to their help, financial  and advisory support that the formation of the country's banking  system took place. However, the withdrawal of strategic institutional  financial and banking holdings is nothing more than a litmus test  paper of the state of the national economy. After all, as a rule,  such large banks do not operate in the consumer and pawnshop loan  markets; they are interested in serious strategic medium- and  long-term investments in the real sector of the economy, and as of  today Armenia has nothing to boast about in this sense," the head of  AmRating noted. And yet, for now, Russian VTB and Iranian Mellat  continue to operate in the country, whose presence today is largely  politically motivated.

The only representatives of international financial institutions in  Armenia continue to be pension fund management companies (Amundi and  C-Quadrat), with a rather low level of investment involvement in the  development of the national economy.

According to Mkrtchyan, talk about the possible consolidation of the  banking system is no longer relevant today due to the lack of fierce  competition. Cash injections, which, although reduced, have not yet  exhausted themselves and will act as an important factor until the  end of international turbulence, have expanded the volume of the  financial pie, which has become large enough for all banks present in  the country. Moreover, for this reason, the number of banks has even  increased during the last year.

On February 6, Ardshinbank announced that it had reached a binding  agreement with HSBC Europe B.V, a subsidiary of HSBC Holdings plc, on  the acquisition of its subsidiary banking company in Armenia.

According to the ArmInfo rating, the assets of HSBC Bank Armenia  totaled $719.7 million at the end of 2023 (12th place). Total loan  investments and other loans totaled  456.3 million dollars. The total  capital of the bank is $149.8 million. Total liabilities are $569.9  million, of which $504.9 million are liabilities to clients. HSBC  Bank Armenia completed 2023 with a net profit of $27.3 million, with  a y-o-y growth of 38%.

Until 2022, the shareholders of HSBC Armenia were HSBC Europe B.B.  with a 70% share in the capital and the Wings Establishment with a  30% share, owned by English businessman of Armenian origin Vache  Manukyan. The latter sold his share in the first quarter of 2022.  HSBC opened its branch in Armenia in 1996. 

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