Armenian banks` profit increased by 18.8% per annum in Q1 2024 thanks  to similar growth in loan portfolio

ArmInfo.The net profit of Armenian banks increased in by 18.8% per annum Q1 2024  (after a 2.2-fold increase a year earlier), exceeding 83.1 billion drams ($211.4 million). It was possible to maintain the positive dynamics of net profit thanks to the acceleration of the y-o-y growth of the loan portfolio from 3.5% to 18.7%, ensuring a volume of 5.1 trillion drams ($13 billion), according to the data of the Express Ranking of Banks of Armenia on March 31, 2024, prepared by ArmInfo IC.  In Q1 2024 alone, the net profit of banks increased 5.6-fold, while a year earlier in the same period a meager quarterly growth of 1.5% was recorded, and in Q4 2023, the dynamics completely slipped to negative 35%.

 But it is worth noting that such a high increase in net profit on  quarterly terms, could not be due to the loan portfolio, since it  grew by 1.6% alone (against 3.5% growth for Q1 2023), in comparison  with which the growth investments in securities were more noticeable  - 7.8% (versus a 2.4% decline in the first quarter of  2023).investments in securities were more noticeable - 7.8% (versus a  2.4% decline in Q1 2023).

Notably, double-digit y-o-y growth in interest income continued with  a slight slowdown from 22.8% to 22.3%, while the slowdown in  non-interest income growth continued - from 11% to 8.1%. As a result,  the gap in favor of interest income increased to 3-fold from 2.6-fold  in Q1 2023. As a result, the dominance of interest income in total  income for the year increased from 71.3% to 74%, and the share of  non-interest income decreased from 27.3% to 25%.

According to ArmInfo analysts, the high y-o-y growth of the loan  portfolio is largely supported by the continued double-digit rates of  upward dynamics in consumer lending and mortgages, which were  observed in previous periods.

This growth in the loan portfolio kept assets in double-digit growth,  despite the slowdown in y-o-y rates from 18% to 11.5%, securing them  at the level of 9.4 trillion drams ($23.96 billion). In their  structure, the share of credit investments and other loans increased  from 51% to 54.3%. At the same time, the share of investments in  securities in assets decreased to 20.8% (from 21.8% a year earlier),  with a sharp slowdown in y-o-y volume growth from 38.6% to 6.6% - to  1.96 trillion drams ($4.99 billion).

Total liabilities have slowed down from 16.7% to 10.7% by April 1,  2024, exceeding 7.8 trillion drams ($19.9 billion). In their  structure, over 71.2% (versus 70.9% in 2023) or 5.6 trillion drams  ($14.2 billion) falls on liabilities to clients, and 24.9% (versus  25.2% in 2023) or 1.96 trillion drams ( $4.98 billion) - for  obligations to banks and other organizations (taking into account the  proceeds from the placement of corporate bonds), with a strong  slowdown in the y-o-y growth of the liabilities to clients from 30.5%  to 11.3% and an improvement in the dynamics of the liabilities to  banks and other organizations from 11.5% decline to a 9.7% growth. 

Moreover, such a sharp slowdown in the y-o-y  growth of liabilities  to clients is explained by the activity of immigrants, including the  opening of numerous accounts for certain transactions (movement of  capital and business).

"However, from the high tariffs for cards and for opening accounts  established then for non-residents, as well as the general increase  in commissions on financial transactions that are in effect to this  day, banks continue to receive serious income, thereby supporting the  growth of earned excess profits," ArmInfo analysts note.

Based on the results of Q1 2024, the TOP-5 in terms of assets  includes: Ardshinbank, Ameriabank, AMIO Bank (renamed  Armbusinessbank), Acba Bank and INECOBANK; in terms of credit  investments:  Ameriabank, Ardshinbank, Acba Bank, AMIO Bank and  INECOBANK; in terms of investments in securitie: Ardshinbank,  Armswissbank, AMIO Bank, Ameriabank and Converse Bank; in terms of  liabilities to clients: Ardshinbank, Ameriabank, Acba Bank, AMIO Bank  and INECOBANK; in terms of total capital - Ardshinbank, Ameriabank,  AMIO Bank, Acba Bank and INECOBANK.

AMIO Bank took the lead in the TOP-5 in terms of authorized capital;  Ardshinbank moved to 2nd place, displacing VTB Bank (Armenia) to 3rd  place, which in turn moved Acba Bank and Ameriabank to 4th and 5th  places. Only two banks replenished their authorized capital in Q1  2024 - Ardshinbank (by 96.17%) and Armeconombank (by 12.04%). 

The composition of the shareholders of Ameriabank also changed, the  majority shareholders of which were BOGG and Bank of Georgia,  affiliated with this group (a total of 90%), and therefore the share  of EBRD in the bank's capital decreased to 10%.

Ardshinbank holds the lead in terms of net profit for Q1 2024,    Ameriabank continues to occupy the 2nd place, INECOBANK is in the 3rd  place, and Acba Bank and Converse Bank are in 4th and 5th places,  respectively.

There are already 18 banks operating in Armenia, with a new  participant FastBank entering the banking market in November 2022,  including foreign subsidiaries of HSBC (Great Britain), VTB (Russian  Federation), Mellat (Iran), Byblos Bank (Lebanon). The international  institutional investor represented by the European Bank for  Reconstruction and Development (EBRD) is present in Armenia in the  capital of only one bank, Ameriabank.