INTERVIEW: ON THE ROAD WITH ARMENIA’S ARDINSHININVESTBANK
Clare Nuttall
business new europe (subscpription)
1338
Nov 3 2008
Germany
Ardshininvestbank has emerged as one of the largest players in
Armenia’s small, but highly competitive, banking market. To keep up
the momentum, the bank is exploring many options to raise funds on
international and domestic markets.
When I caught up with deputy chairman Evgeny Spravtsev at the
BTA Interbanking conference in Almaty at the end of September, he
explained that the bank had passed two highly significant milestones
in the last year. First, in December 2007, the International Financial
Corporation (IFC) took a 10% stake in the bank, also providing a $15m
credit line for small business and mortgage funding. In July, Moody’s
Investors Service assigned its first credit rating to Ardshininvest. At
‘Ba3/Ba1/NP/D-‘, Ardshininvest has the highest rating it could hope
to gain given Armenia’s country ceiling.
These developments, Spravtsev says, are the bricks on which the
bank’s future will be built. "With the IFC’s investment and our
Moody’s rating, we can go to international financial markets to borrow
money. They make us more understandable for our peers, and show that
we’re as transparent as any CIS bank could be."
The bank is preparing for an AMD1.5bln (around $5m) domestic bond
issue at the end of November. "This is our debut issue. It’s a small
amount by international standards, but for Armenia it’s quite big –
almost four times largest than the latest issue. Our main objective
is to establish a credit history so we can borrow more in future,"
says Spratsev. It also has two deals in the pipeline with international
investors, to be closed by the end of this year.
Hard job
The lobby of the Intercontinental Hotel in Almaty seems an appropriate
place to mull over the pros and cons of raising money on international
capital markets, given Kazakhstan’s recent financial history. Comparing
Armenia to Kazakhstan, Spravtsev explains that, "The Armenian financial
sector is less involved with international financial markets. This
was a disadvantage, but at this stage it’s to our advantage because
we are not so harassed by the financial crisis." However, the gloom
that international capital markets have been plunged into means that
despite eight years of double-digit GDP growth in their country,
for Ardshininvestbank and other Armenian banks, it’s "not as easy to
raise capital as we thought."
A large part of Spravtsev’s role involves raising money and arranging
trade finance. He was invited to join Ardshininvestbank in order to
bring his experience of the Russian market – working at Home Credit
and Finance Bank – to Armenia. The bank’s owners had already spotted
that Armenia’s banking sector was progressing in a similar way to
Russia’s, but was several years behind in terms of development.
Evgeny Spravtsev
He is particularly proud of the IFC deal – "the largest deal with
an institutional investor in recent Armenian history," he points
out. As well as working on the bond issue and raising finance from
international investors, he is also working on partnerships with
international institutions and arranging trade finance, opening as many
lines for the bank as possible. Most recently, the bank announced a
trade finance deal with Ä~LSOB (Ceskoslovenská Obchodná Banka) – the
very first trade finance deal between Czech/Slovak and Armenian banks.
Given the highly competitive landscape of the Armenian banking sector,
investment is necessary to maintain Ardshininvestbank’s position as
one of the country’s top three banks. "There are 22 banks in Armenia –
that’s not many for some countries, but for Armenia it’s too many. We
expect to see a process of consolidation, and more new entrants to
the market," Spravtsev says.
Around 50% of Armenia’s banking sector is already in foreign hands,
and this figure is likely to increase. The Armenian banking sector
is extremely well regulated, according to a report released earlier
this year by ratings agency RusRating, which has further increased
its attractiveness to potential investors.
Ardshininvestbank’s majority owner, with 86.8% of the stock, is
Region-IFC – a diversified holding company owned by businessman Karen
Safaryan. It was formed in 2003 and later in that year acquired a
significant part of the assets and liabilities of two Armenian banks –
Ardshinbank and Armagrobank.
It is active across both corporate and private banking, with more
than 12,000 business clients and 52,000 private clients. "We think of
ourselves as a universal bank. There is no one sector that we would
like to develop more than others," Spravtsev says.
Today, the bank is Armenia’s largest in terms of authorized capital,
loans, net profit and term deposits. It is also a big player in
the international transfer market, which is highly important to the
Armenian economy – remittances from Russia amounted to $554m in the
first quarter of 2008 alone. "There is a huge cash flow into the
country from Armenians working abroad," explains Spravtsev. "For
many families this is their only source of income. We work with all
the major providers – both international firms like MoneyGram, and
CIS-based firms such as Unistream and FastPost."
Much of the Armenian economy is still cash-based, meaning that
Ardshininvestbank and its peers have an uphill struggle persuading
their clients to adopt new banking products.. "What I say to everyone
here is ‘be patient, you can’t do it all in a day’," Spravtsev
says. "Good communication is very important."
Highlighting its arrival as one of Armenia’s largest banks,
Ardshinivestbank moved to new headquarters in central Yerevan in
April this year. After three years of renovation work, the opening
of the new offices, designed by prominent Armenian architect Sargis
Gyurzadyan, was celebrated with a lavish housewarming attended by
the then president, Robert Kocharyan, and the president-elect, Serge
Sargsyan. It was the chairman of Ardshininvestbank’s management board
who summed up the significance of the occasion, describing his ambition
"to bring to life an idea of a pan-Armenian, big and powerful bank."
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