Trade finance and export experience parallel growth
Media Room

Interview with Suren Kocharyan, Head of Trade Finance Division, Ameriabank CJSC

During the recent years trade finance appeared among the most dynamically developing banking products. What are the key factors that boosted growth of the trade finance market?

Recently the trade finance industry grows at a fast pace in developing countries, including Armenia. This tendency became more distinct particularly during the post crisis period when financial relationship of trade partners underwent changes in terms of payment of deals, which in its turn resulted in emergence of risks related to financial pressure. In this regard trade finance instruments became more popular. The volume of trade operations during 2011-2012 proves that this market definitely has a growth potential. The key factor of growth is the increase of the volume of import/export transactions. For instance, some projects to be launched in Armenia in 2013, such as construction of North-South highway, establishment of metal moulding factory in Charentsavan and launch of a factory manufacturing disposable medical accessories, imply import of equipment and facilities and export of finished goods. According to our estimations, during the coming 3 years the volume of export-import operations and accordingly trade finance are expected to grow. Besides, businessmen are becoming financially more aware due to which they prefer trade finance instruments rather than loans.

What is the volume of the Armenian market of trade finance and the market share of Ameriabank?

According to our research, the volume of trade finance market of Armenia currently totals about 260 million US dollars. Ameriabank’s market share makes 50 %. Moreover, staring from 2008 our bank has practically been doubling the volume of trade finance each year. For instance, in 2012 Ameriabank’s trade finance volume totaled 132 million US dollars as compared with 70 million US dollars in 2011. These results are very impressive for us since they indicate the trust of Armenian businessmen in Ameriabank and their preference to cooperate with us.

What changes did the product line and the terms of financing undergo in post crisis period? Which are the most demanded trade finance instruments and is there any difference between the trade finance instruments offered by Armenian and foreign banks?

Surely the product line changes along with the demands of clients. During the pre-crisis period documentary collection was very popular while during the post crisis period L/Cs and bank guarantees became more demanded for being more reliable financial instruments. Besides, Ameriabank offers to its clients so-called mix-facilities, aiming to adjust the financial instruments to the needs of clients, depending on the terms of the agreement executed by and between the client and its counterparty. As to the difference between us and Western banks, to me they do not actually differ, since they are guided by certain rules which are international.
Yet, developed countries use a greater number of such instruments and their variations which are not demanded in Armenia for various reasons such as underdeveloped securities market (most of trade finance instruments are linked to promissory notes and securities). We could offer them if our clients were interested in them.

Is there any demand for international factoring?

Recently the demand for international factoring has been growing due to increase of export volume in the country. In this regard international factoring suits best for financing of export operations. By the way, Ameriabank increased the volume particularly of export financing. In 2012 the demand for international factoring in our bank totaled about 3 million US dollars. Given this Ameriabank joined Factors Chain International – a major international factoring association. This will enable our bank to increase the volume of financing through international factoring along with reduction of both the bank’s and clients’ risks.

Successful trade finance operations require cooperation with international financial institutions. How do you deal with that issue?

We closely cooperate with international banks (Deutsche Bank, Commerzbank, UBS Bank, Citibank, UniCredit, etc.) and financial institutions (IFC, EBRD, ADB). Our successful cooperation is evidenced by the IFC awards for the second year in a row, Commerzbank award in the ‘Best trade finance partner’ nomination, the Global Finance award in the ‘Bank of the Year in Armenian in trade finance’ nomination for the second year in a row, etc.

We actively cooperate with international commercial banks with the highest ratings. We select banks with wide branch network and rich experience in trade finance. Due to it we can execute trade finance operations all over the world. Besides, the mentioned banks defined rather high credit limits and competitive interest rates for our bank which in its turn is reflected in the interest rates offered to our clients.

Mr. Kocharyan, the competition in trade finance among Armenian banks toughened during the last two years. How does Ameriabank manage to retain its position under such conditions?

To me, our main advantage is that we do not simply offer to the client to use the trade finance instrument. We explain the difference between trade finance and loans since most of the clients apply to the bank for a loan to cover 80 % or 100 % downpayment for supply of goods. We explain that though it is easier to get a loan, the interest rate will be higher while the goods will only be delivered in six months. This is an absolutely ineffective scheme of financing. We provide consultation from the very first day the client applies to the bank, highlight the difference between the scheme of financing he has chosen and the one we recommend, thus enabling the client to have 30-40% of costs saved. We draw up the whole contract with the client, negotiate with the counterparties of our clients and the banks of counterparties, select a common scheme of financing attractive both for the client and its counterparty and participate in contract execution process (in terms of financing-related issues).

Does this mean you do not use dumping to attract clients?

No, that is not the policy we follow. Prices may not go down indefinitely: there is a limit below which the reduction of process affects the quality of the product. Even if the bank bears the financial risks, client will gain noting from a failed contract. Ameriabank has skillful specialists who constantly improve their professional knowledge, participate in trainings, and win in various nominations. They are ready to draw up the whole scheme of financing including several financial products, offer a number of post financing or discount options enabling the client to get a loan with favorable conditions, 3-5 years term and a competitive interest rate which is even lower than the deposit rates offered by some Armenian banks. We are able to finance the whole production cycle starting from pre-export or pre-import financing. This means that Ameriabank emphasizes the quality of service and the diversity of financial products, providing to the client a full range of services, sometimes even exceeding expectations of our clients.

Anahit Julhakyan  “Деловой экспресс”

Updated 12.03.2013, 13:43
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