The world crisis, despite certain assurances, has already had an impact on the Armenian economy. The financial sectors have suffered too; specifically the sectors of crediting and risk increase have suffered. Despite this problem the Armeconombank has increased the capacity of money deposits on part of physical persons by 8.3%, and the capacity of deposits on part of judicial persons – by 54.8%. The number of the bank’s clients has increased by 34.8% and now the bank has 71680 clients. According to the annual report results of the bank, in 2008 only the crediting portfolio was reduced by about 2 billion dram. The chairman of the Armeconombank board Davit Sukiasyan says that as soon as the financial crisis started the bank adopted a controlling crediting policy and restricted the crediting policies to reduce the risks. Meanwhile, the bank has changed the crediting portfolio and now provides business loans more. While the proportion of business and consumer loans was 40% / 60% in 2008, now it is the vice versa. Mr. Sukiasyan assures that the bank will continue this policy and till the end of the year the capacity of business loans will be increased up to 75-77%.
– Can we say that the bank is starting to fulfill its main function, i.e. collect the free money from the population and direct this flow to the business sector?
– Providing consumer loans is the function of the bank too, but in consideration of the fact that at present there are a number of projects specifically focused on the business sector, now on the capacity of business loans will prevail.
– Do you mean the loans received from other countries? Do you mean the Russian and other loans that the government has been seeking?
– Yes. These are the government’s project, the Russian loan and the World Bank’s project. In the near future we will start providing loans received by the Russian borrowing. The bank has participated in all projects in 2008-2009 even if these projects involved 5-6 banks. There were no obstacles, and we fulfilled a very active loan project. Now we believe that till the end of 2009 our loan portfolio will be increased up to 28-30 billion. In other words, compared to the situation in the beginning of the year the growth of the loan portfolio is expected to be 20%.
– What will be the interest rate of business loans?
– The Central Bank lets the commercial banks set the interest rates independently. However, the banks that provide lower interest rates will be encouraged first. Now it is not time when banks should think of incomes only. If banks think of higher profits now, it is the same; they will not have profits if the market economy is not generated. The state supports banks, provides with resources, and it is time when banks should think twice and with understanding and not to pursue very high profits. Even there was a suggestion to define the margin at 5-7% but not 10-12% as before. The issue was discussed in the union of banks, and all banks are ready to provide these loans with low interest rates in consideration of the crisis. We can get less profit for one year but let the economy be generated.
– What are the proportions of deposits? Do people prefer to keep their savings in the national or foreign currencies?
– After the slump of the national currency our clients mainly prefer to keep their money in US dollars. It is worth mentioning that the capacity of the deposits has grown in our bank in case when we are offering the lowest interest rate, which reaches maximum 6%. The deposits ranging from a half year to one year are prevailing. In other words they prefer the highest interest rate which we suggest for long-term deposits.
– Aren’t people more cautious as a result pf the crisis? Don’t they prefer short-term depositing now?
– No, their preferences to this issue are the same. Generally from the point of view of recruited resources foreign investments prevail in our bank. Our policy is that the deposits of physical persons should not exceed the 20% of the bank’s actives.
– You said that people mainly prefer to keep their savings in foreign currency. What is the currency of the provided loans? Are there banks which provide even the consumer loans in dollar?
– Banks don’t have the right to provide loans in other currencies except for loans provided as mortgage credits. Maybe the card credit services provide this opportunity but the capacity should not be so big. In our bank consumer loans are provided in the national currency. As for the assistance and loans provided to the business sector, the government’s approach and policy toward the Russian and World Bank borrowings and business sector is appreciated. I mean the fact that such loans will be in the national currency. The economy currently needs for dram, also borrowers don’t want to take the risk with foreign currency exchange because their incomes are in the national currency as well. In case of providing loans in dram, this risk is excluded. As for consumer loans, currently companies are being shut down and people are losing their jobs, thus such loans are quite risky. Even citizens don’t take the risk to take such loans. For example, we haven’t stopped providing mortgage credits, but before we used to receive about 300 applications a month but this year there have been months when we received 4-5 applications a month. Of course the future expectations of price changes may influence too because people hope that they will be able to buy cheaper real estate in the future.
– The government has decided to establish a pan-Armenian bank and mortgage fund. What do the trade banks think about this initiative? Will this be an obstacle for trade banks and competition in the banking system?
– Currently in consideration of the existing economic situation both the pan-Armenian bank and mortgage fund will support the economy to recover. The problem is the behavior and policy of these institutions which have state participation. It’s about this policy. If they try to use their leverages and tools to manipulate processes in the market, of course there will be big problems. But if there is healthy competition, there will not be any problems.
– Mr. Sukiasyan, the government alleges that our country has overcome the first phase of the crisis and the banking system is stabile. What do you think about this?
– Our financial sector did not suffer from this crisis that much. Even more, if the world famous banks are losing the profitability, in our country the stocks raised their profitability. The reason is that the stock balloon that is so common in Western countries does not exist in Armenia. In our country banks have specific and concrete amounts of attracted money and allocated money. As the prices of real estate property fell down only by 20-30% in our country, banks did not have so big problems. The CB’s decision to allow reallocation of loans was very important. If someone takes a loan and covers a part of it, and later his profits are cut down and he can’t cover the loan any more, there will be problems with this client. With this decision the CB provided an opportunity to banks to prolong the term of loan coverage, which we could not do before. It was a great help both for banks and persons that have taken loans, and this help arrived in time. Otherwise banks would have problems with about 50% of the loans.
– After the dram depreciation people fell in panic and even they were taking the small cash amount out of their bank accounts. Do you think that this panic has been overcome?
-The panic was artificial because people started to exchange their money back without any reasons in order to pay for their expenses. If you remember the exchange rate of dollar reached 380 dram but later slowly the rate was regulated. Now the CB does not interfere with the exchange rate formation and the dram has grown a little. However I think that it will not last too long. Dram will depreciate but this process will be slow. I mean that we will not have such shock as 25% any more. As a result of the panic people lost their trust to the financial sector, but this was overcome too. As I already said, specifically Armeconombank does not have such problems because during the first months of this year and during the crisis both the number of our clients and capacity of money deposits in our bank have grown.