ARMECONOMBANK IS DEVOTED TO TRADITIONAL DIVIDEND POLICY

ArmInfo
2009-12-23 20:23:00

Interview of Chairman of Armeconombank Board David Sukiasyan with
ArmInfo news agency

Over the last two years Armeconombank has shown its worth as an
organization with high-level stress-resistance to both political and
economic risks. What is the secret of the bank, if one may say so? Is
it the high loyalty of clients or anything else?

Actually, over the past two years our bank got through numerous stress
tests but managed to resist all the challenges – both political and
economic. Already in 2009, unlike 2008, the bank demonstrates stable
growth in all indices, including the number of clients. I think you
have correctly pointed out the high-level loyalty of the clientele base
to the services of our bank. The result is evident: over the past year
the number of persons that made operations at our bank has grown by
20-25%, and by the end of 2009 the growth will amount to around 30%
thanks to various actions. In particular, at present the clientele
base of Armeconombank is over 75 thsd persons whereas in 2008 there
were around 55 thsd clients.

The bank has never stopped cooperating with international structures
and was even going to attract a new syndicated loan. What stage is
this project at?

Attraction of resources from international structures is a strategic
direction for us. It is important that the international structures
trust Armeconombank and its "healthy" credit portfolio. Certainly,
they assessed the bank for many times, studied the level of "health"
of our credit portfolio and came to a conclusion that the resources
provided to us are spent purposefully and efficiently. Armeconombank
strategy on attraction of resources, first and foremost, from
international investors is conditioned by the fact that the domestic
market resources are highly dependable on the economic conjuncture
and crisis fluctuations. Under these conditions, international
investors are much more conservative and do not hurry to come out
with alternatives. For instance, in 2007 when the reduction in
Armeconombank assets made up about 30%, not a single international
structure displayed its concern about this.

One may say that in general, in 2009 international structures were
passive in the Armenian market, and reduced provision of loans to
banks. Only several credit agreements were signed with IFC and EBRD.

However, we have quite ambitious projects for 2010, and probably
in the second quarter of 2010 the bank will reach arrangements on
receiving big resources. At present we are going to attract a new
syndicated loan, in which 7-8 eminent foreign banks may participate.

We already have direct arrangements with participants in the
syndicate. There were no such direct contacts with creditors in 2007,
there was only an arrangement with the syndicate organizer – EBRD. At
present the bank is negotiating with EBRD and IFC, one of which will
become the organizer of the new syndicate. However, it is already
known that the new syndicated loan will be given to the bank for two
years and directed to crediting of the small and medium-sized business.

Has Armeconombank changed the structure of its credit portfolio under
conditions of reduction in retail crediting in the market?

In general, over the past two years we focused on SME crediting. If
before this the ratio of consumer and business credits was 50/50, today
it is 30/70. We are going to maintain this ratio in 2010 as well. It
should be noted that under the current conditions consumer crediting
contains more risks than SME crediting. We have distinct technology
of SME crediting: the borrower’s activity for the past 6 months is
analyzed, and its activity for the loan redemption period is predicted.

As regards the risks of consumer credits, they have grown, and one
of the reasons is that starting 2001-2002 the decisions on provision
of consumer credits were often made over "half an hour". This was the
mistake of the market. Certainly, all participants had to be active in
the consumer crediting market, but one should increase the portfolio
not by accumulating big risks under conditions of severe competition,
but by using special technologies of crediting. But they failed to.

The consumer crediting market was completely closed. This problem
is characteristic of not only Armenia; as you know, the whole
international banking system suffered from this, having created huge
risks in the market and failed to overcome them.

A similar situation is now observed in the market of crediting by
plastic cards. Though the matter concerns the loans worth only 300-500
thsd AMD, however, this is quite a big amount for clients whose
salary is 100 thsd AMD. We have worked out an accurate mechanism
of risk estimation for loans by cards. At present we have around
75-80 thsd active cards, but it is not ruled out that in 2010 we
will be somewhat passive in this segment of crediting. At the same
time, however, we are going to launch a new project on TeenCards for
non-cash operations of schoolchildren at cultural establishments. This
is rather a future-oriented social project.

Armeconombank is a participant in the WB programme and Russian
stabilization loan for small and medium-sized business. How do you
assess the rates of using these resources?

The crediting terms under these pogrammes are not bad. But the point is
that the demand for loans is not so high. I mean the reliable demand
meeting our standards introduced on the basis of IFC, EBRD and KfW
technologies. However, we provide big loans worth $1-2 mln at our
own expense under the EBRD co-financing programme. As you know, the
limit on this programme was increased, and EBRD is ready to increase
it even more if necessary. The advantage of this financing is the
relatively low interest rate for big loans – 12% p.a., the redemption
period being up to 5 years.

What credit portfolio does Armeconombank have today and what is the
share of the overdue loans ?

First of all, I would like to say that basing on the credit portfolio
indices one can divide the current year into two stages. Reduction in
assets and credit portfolio was fixed at the first stage, however,
in the second half-year we managed to exceed the index as of the
beginning of the year. At present the credit portfolio of the bank
is about 28 bln AMD, which may grow up to 29-30 bln drams by the end
of the year. The number of problematic loans is small, and the share
of overdue loans is about 2%.

Earlier Armeconombank was going to increase its capital due to foreign
investors, however, the level of its capital has not changed so far.

Has the bank changed its mind to be capitalized?

The plans on increasing the capital are still on the agenda.

International and Russian investors make offers to Armeconombank
to enter its capital. But the shareholders of the bank see just a
short-term benefit but not stable long-term steps in these offers. We
do not rule out entering our capital of any foreign commercial bank,
but at present the key investors, which we are negotiating with, are
IFC and EBRD. By my forecasts, by the end of the first half-year 2010
the authorized capital of the bank will be increased, and even if the
capital is not replenished by that time, documents on increasing the
capital will be signed.

Will Armeconombank ensure profit in 2009 and is it going to pay
dividends?

The bank is going to pay dividends from the profits of nearly 200-300
million AMD expected in the current year. Basing on the policy of the
bank, the dividends will be paid and the management of the bank are
doing their best to stay devoted to the traditions of dividend policy.

The bank will pay dividends to its shareholders for 2009. The dividends
will be paid on the basis of 6% per share versus 10% per share in 2008.

Interviewed by Lilit Aslanyan, ArmInfo, 23.12.09