REPUTATION IS MORE IMPORTANT HSBC BANK ARMENIAC, THAN POSSIBLE LOSSES
Lilit Aslanyan

2009-04-17 19:41:00

ArmInfo
April 14 2009

Interview with Tim Slater, HSBC Bank Armenia CEO

How does HSBC Bank Armenia manage the crisis?

The banking sector in Armenia is well capitalized, which allows us feel
more comfortable. Moreover, compared with Western countries Armenia’s
debts at the macroeconomic level are not so big. So the main risks
are companies making less profit and an increase of unemployment.

The main problem of the banking system is lack of deposits in the
Armenian dram due to customers’ massive conversions of their savings
into US dollars, because of dram devaluation expectations. So,
banks suffered real losses. Fortunately, since the banks are well
capitalized, they can absorb these losses. The question is how
this situation affects the borrowers and those who want to receive
a loan. It is not a secret that banks have reduced lending volumes
and our bank is not an exception. Banks will resume lending when
customers convert their deposits from foreign currency back into drams.

So, on one hand, it is necessary for depositors to regain their
confidence in Armenian dram, and on the other hand, the banks to
prove the real potential and advantage of dram.

In case of further macroeconomic risks, no one will exchange its
savings in foreign currency for Armenian dram. How will banks earn
on their assets then? Maybe, the banks will have to raise interests
on dram instruments even higher to recompense risks?

If deposits in foreign currency are not converted into Armenian
dram, banks will hardly be able to continue lending and will earn
less. Regarding the interest rates, I think we will consider raising
deposit and loan rates together. And this policy of risk compensation
will help depositors understand that it is more reasonable to save
and borrow money in drams.

Generally, it is correct to borrow in the currency of your income. If
a businessman is engaged in export it is natural to borrow in foreign
currency. However, profits of the majority of businesses in Armenia
are in drams and salaries of almost 99% of the population are also
paid in dram.

Many clients of HSBC Bank Armenia are big importers. How much they
are subjected to currency risks?

There are no serious problems at present. Over 13 years of our activity
in Armenia we have established good partnerships with importers,
and we have suffered no losses. Some importers will suffer losses in
the short term, because of currency losses.

Your bank is considered one of the fairest in the market. Your bank
proved very brave and fair to clients in the crisis period. It did
not force the clients to revise credit agreements.

Image is very important for our bank. Our brand is represented in 85
countries across the world.

We20cooperate with our clients on the basis of contracts that are
not subject to changes as long as they are valid. Reputation is
more important than possible loss for HSBC. Every bank should be
attractive for clients for confidence and high trust, which requires
continuous efforts.

HSBC Group takes many risk management measures in various areas,
which are new for Armenia. Has the Group introduced any such measures
in Armenia?

HSBC Group is known across the world for its conservative approach to
strategy which cannot change overnight. We are conservative in lending
policy and are understanding our clients if necessary. Nevertheless,
we tighten control over possible increase of operational risks,
first of all, the fraud risk. Due to it, we avoid such loss.

Many Armenian banks even conservative ones often change strategic
plans…

We have not made any essential changes to our development strategy. In
October-November 2008 we just reduced our loan to value ratio for
housing and car lending. No other changes have been made in the
current year yet. As regards the currency of loans, we still issue
loans in foreign currency to the clients whose incomes are in foreign
currency. We are not likely to increase lending in Armenian dram
until the volume of dram deposits with the bank grows. Naturally,
we are expecting less profit for the year. We have no intention to
capitalize in the current year, unless this is=2 0necessary. Last
year we were granted significant funding of $100 million but we did
not need to use that reserve.

Our bank has developed a new strategy to serve clients through
technologies, which becomes more and more important since it requires
no extension of the bank’s physical presence. We have recently
introduced a service of telephone banking and attracted over 2500
clients. We are currently working on Internet banking service that
will be available in July-August 2009.

Investments in this project totaled $2 million. In addition, we
are going to increase the number of ATMs. Hereby, we will keep on
investing in technologies and attracting clients by new, safe and
modern services, which are convenient for our clients.

Mr. Slater, yet last year you repeatedly stated that HSBC would
open also insurance company in Armenia. Has the crisis damaged also
this project?

Times have really changed and now it is not good time to launch a new
business. We see more opportunities in the banking sector rather than
insurance in the near future.

From: Emil Lazarian | Ararat NewsPress