HERE AND BEYOND
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Interview given by Mr. Tigran Jrbashyan, Development Director at Ameriabank, to www.banker.am

- Mr. Jrbashyan, despite the crisis Ameriabank has shown a high rate of growth in H1. What indicators have actually improved?

- True, in H1 Ameriabank continued to maintain a high rate of growth, by which it stood out during the last two years. By our estimations, the bank is the leader in the South Caucasus by its growth rates. In H1 the assets of the bank increased by 75.77% totaling AMD 86,168 bln, by the total capital we rank forth in the market, by profit we are in top 3 in the banking system (retained earnings by the end of the quarter accounted for AMD 554.9 mln).
In H1 the liabilities of the bank increased by 2.28 times totaling AMD 65.4 bn. This was driven mainly by the increase in liabilities of clients. The loan portfolio has decreased slightly due to loan repayments by large corporate clients.

Only in H1 we allocated AMD 4.7 bn to 80 corporate loans. Overall, during the past 6 months our liabilities to clients increased by 2.58 times to reach AMD 60.4 bn.

The structure of liabilities underwent changes too, i.e. time deposits reported increase to AMD 32.2 bn (increase by 2.12 times during halfyear). Retail deposits during the same period increased by 3.3 times to a total of AMD 6.3 bn, vs. corporate deposits of AMD 35.94 bn (95% growth).

We have improved our indicators in the banking system of Armenia too, particularly, we have a market share of 7.53% by assets, 7.36% by liabilities and 12.74% by profit.
These financial indicators testify to the fact that by today we have accumulated serious resources due to the reliability and mutual understanding with clients. We treat our clients as our partners.

- You say Ameriabank is a leader in the South Caucasus by the growth rates. How would you explain it?

- The bank was established at the right time, so at the beginning of the crisis it already had the resources and potential which allowed taking the chance of the crisis, and we made the utmost use of it. Second was the right positioning of the bank in the market. Ameriabank is positioning itself as a corporate bank with emphasis on investment activities.
The next is that during the crisis the winner is the one who is client-oriented and aims at not only selling services but also satisfying the changing needs of clients.

One of the main factors is also the team of Ameriabank. I think the bank has a team of skilled professionals who solve all current problems. We shouldn’t ignore that the banks running their business before the crisis had built loan portfolios, and they faced some problems. In particular, the risk management in crisis and normal conditions is quite different.

Thanks to the right cooperation and mutual understanding with clients, we have the best loan portfolio in the South Caucasus. Our NPL was 0.7% vs. 3% as the best indicator in the overall banking industry.

- How would you explain the indicator of 0.7%?

- Taking into consideration that the establishment of the bank coincided with the beginning of the crisis, significant investments were made in the risk management and monitoring system. As a result, we can manage, accurately assess and control the risks, which is very important. I would like to emphasize that we are a client-oriented bank, due to which we build reliable relationships based on mutual understanding.
Clients consider us not only as a servicing bank, but they also ask for advice, present their business plans. In such atmosphere of strong reliability we can properly assess the risks and help our clients assess their own ones.
This all taken together gives an opportunity to keep the loan portfolio healthy, which is very important nowadays. The key issue today is not the liquidity, but the quality of loan portfolio. The banking system in Armenia is over-liquid.

- It was planned that this year Ameriabank would issue its own corporate bonds. What steps have been taken in this direction?

- We planned to launch our own bonds on the market only when it was profitable for us in terms of interest rates. Today there is a great interest among corporate clients in placement of bonds through our bank. I think a deferred demand for corporate bonds is formed in the market.

Due to devaluation of the dram and volatile situation in the market, a large group of potential issuers and potential investors has been developed. But the thing is that no one wants to take the foreign currency risk. There is a problem with foreign currency risk management.

Together with some banks we have filed an inquiry with the Central Bank on whether it would be better to allow issuing foreign currency bonds thus developing foreign currency bonds market. We hope that this issue will have a positive solution.

We try to find mechanisms, which will render it possible to manage and minimize foreign currency risks for investors. I hope that our and regulating body’s efforts will contribute to the placement of bonds of our corporate clients in the market by the end of the year. As for our own bonds, things will depend on the market developments.

- Early this year Ameriabank announced about its intention to buy a bank, the name of which was to be made public in May. May has passed but you still haven’t announced it.

- For any company in any industry, the crisis gives an opportunity of inorganic growth. During the crisis the acquisition of assets becomes easier. Today newly-configured companies pop up throughout the world.
Given this and its investment-oriented profile, Ameriabank always considers the opportunities for inorganic growth. This is an ongoing process. There are some cases when the valuations and expectations of the parties do not coincide. It is a common thing. The whole deal is considered to be over when there is a mutual understanding between the parties.
We had negotiations underway with an X bank, but since we had different points of view on valuation, the process was terminated. Anyways, we can buy a bank at any time. I am sure that during the crisis the banking system of Armenia will be reorganized. There will be both acquisitions and mergers.

- It seems that in chase of deposits, the banks started an interest rate competition. Aren’t there any risks that the banks will have some difficulties with placement of costly money?

- Right you are. However, I would like to mention that Ameriabank is one of those few banks, which from the ground up made a decision to compete on quite a different level, by offering innovative solutions based on depositors’ needs and meeting requirements of the Armenian market.
However, there is a down trend for deposit interest rates in the market and it will continue throughout the year. Today the banking system experiences a problem of placing financial resources. Taking into consideration the refinancing project of the Government and the CBA, interest rates are supposed to go down. Given this, there is a risk related to the placement of deposits attracted at high interest rates.
I have told once that we will have quite a low profit in the banking system this year. Today it has dropped by 3 times Y-o-Y, totaling about AMD 4.4 bn by the midyear. This is partly due to the increase in the requirement for NPL reserves and decrease of margin. This process will go on.

- In the first halfyear, the economy fell deeper into the recession but since June the banks have become more active in the lending market. Will this activity be maintained during the whole year?

- The activity is driven by repayment of their liabilities by some of clients so the banks managed to accumulate resources and direct them again to lending.
The second factor is the financial resources injected into the banking system by the CBA. Given this and the fact that the banks have to meet their obligations to the depositors, they are forced to be active in the lending market. This activity will eventually lead to the decrease in interest rates.

I do not think that the drop in refinancing rates influenced that very much. The experience of the world shows that the influence of refinancing rate on the interest rates during the crisis is not that high.

 

Updated 14.03.2014, 18:38
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