Armenia’s banking system to become reliable and transparent in 2016 - Ameriabank CEO

2016 will be a year of structural changes for Armenia’s banking sector, marking a period of consolidation and strengthening, Chairman of the Management Board-General Director of Ameriabank CJSC for Tert.am said in an interview with Tert.am.

Mr. Hanesyan, it looks like 2016 is going to be a significant year for the Armenian banking system. How drastically will the banking sector change and what will it be like by the end of the year in your opinion?

2015 was a year of hassles for Armenian banking system. Difficulties were mainly related to efforts towards ensuring growth of the banking system. Despite this, the desired growth could not be achieved. Yet another issue was the quality of banks’ assets, moreover it turned to be the main problem of the previous year. Banks suffered tremendous losses due to loan loss reserves, as a result they faced a problem of capital adequacy. Last year we witnessed 2 bank merger deals, several banks increased their capitals. The decision of the Central Bank of Armenia regarding the increase of the minimum regulatory capital effective from 2017 played a huge role in this process.

Despite the difficulties, I think that 2015 opened  great opportunities for some banks and created a strong basis for their further activity. In 2016 we expect the quality of assets to be more stable. I don’t think that we can expect the banking system to demonstrate high growth rates in 2016. The task for 2016 is consolidation and strengthening of the banking sector rather than ensuring high growth rates. We will see positive changes in disposal and liquidation of non-preforming assets. The process of consolidation of banks will speed up since currently the half of the banks does not meet the new minimum requirement of capital set by the Central Bank, thus the number of M&A deals will increase. As a result by the end of 2016 capital adequacy ratio will grow too, the banking system will become more reliable, transparent and clear for clients and shareholders.

Despite hard economic times in 2015 Ameriabank demonstrated growth in all key indicators and the bank’s assets totaled over USD 1 bln. How did you manage that? What new opportunities for growth does EBRD’s and IFC’s equity participation in Ameriabank create?

While  estimating the market situation we always focus on long-term development prespective. Thus, in the stream of all short-term tasks and issues, trying to solve them we at the same time are always aiming to reach the long-term benchmarks. The main advantage in such difficult situations is the professionalism and cohesiveness of our team. Nevertheless, the core of the bank is not only its team, but also it’s internal regulatory framework, risk management system, corporate governance, decision-making. In auspicious times of course it is easy to grow and develop at a high rate, boost assets and liabilities;  but the crisis is the situation, which when you vividly see the real value of the company. It is during crisis that it becomes clear whether or not the bank’s foundation is stable or fit to withstand various challenges. Although 2015 was not the most successful year in general, we continued to lend, providing finance to attractive and in our opinion less risky projects.

Our assets have exceeded USD 1 bln ,this is very important for us and, I think, symbolic for the banking industry as a whole. We also continued our cooperation with IFIs. Last year we signed two  such deals with OFID (20 million USD) and FMO (25 million USD), thus attracting USD 45 million for subsequent financing of Armenian economy. In result of the two major deals signed with EBRD and IFC this amount grew by another USD 90 mln, out of which USD 40 mln is EBRD’s direct equity investment and USD 50 mln is the subordinated loan provided by IFC which had fully been disbursed back in December 2015. We have created all the necessary preconditions for further growth of Ameriabank and lending to the real sector of the economy of Armenia. 

What plans for business development do you have regardingthese deals?

Having signed the deals with EBRD and IFC Ameriabank had a growth of capital by USD 90 mln (almost doubled) which enables us to raise additional USD 500 mln, including funds from IFIs. However, this does not mean that we we are going to raise the whole amount this year, as, apart from raising, we need to allocate those funds on the market. In line with attracting we need to enhance lending to real sector. In particular, we are planning to lend to top taxpayers, increase lending to small and medium enterprises as well as boost retail lending. 

To what extent your cooperation with IFIs can affect the bank’s   pricing policy in lending?

The pricing policy of the bank depends on several factors. Firstly (speaking of external market lending), it is the LIBOR rate. Secondly, it is sovereign credit rating (the country risk), and finally, it is the corporate risk. EBRD’s equity investment and the IFC deal improved the third aspect – corporate risk. LIBOR is currently going up, while country risk remains flat. Therefore there will be no our pricing policy will not be subject to significant changes, either upward or downward. 

In result of these deals the bank’s total capital  enables to substantially boost the loan portfolio. On the other hand, the situation on the lending market is not very favorable. So my question is, isn’t the local market becoming too narrow for Ameriabank? Are you planning to explore new markets?

Allocating such volumes locally is certainly difficult, when still problems with creditworthiness and viability of enterprises still persist. But this does not mean that there is no local market. There is indeed, and we are currently are focused on its development. There are several upcoming major projects in Armenia,  we are going to assist during the implementation. We also intend to create appropriate environment for growth of small and medium sized enterprise lending. This can be achieved not only by setting low interest rates, but also by reviewing our requirements towards potential borrowers (softening pledging and reporting requirements, decreasing the time for application review process). Certain mechanisms do exist, they work and I am confident that they will yield positive results and this policy will enable us to increase our loan portfolio by at least USD 100 mln. Furthermore, we are planning to conclude an acquisition deal and we can use our funds for that purpose as well.


As for entering  regional markets: we have always had such plans and do have them now. But everything depends on the current picture, market trends and offers available. If there is an offer to acquire a bank in the region, to be more precise – in Georgia, we are ready and open to consider and study it thoroughly. This scenario is still subject to our consideration. However, currentlyour main priority is the acquisition on the local market, and then we can restart planning our steps towards regional market.