Exclusive interview with board member of the credit institution Norvik Tigran Bostanjyan

ARKA News Agency - What are the main financial indicators of the credit institution for January-September 2009, and what are the dynamics of growth in comparison with 2008?

T. Bostanjyan - Organization Norvik began its operations in 2006 and currently occupies a leading position among the credit institutions of the country on all indicators. Norvik has the highest value of the capital share, profits, assets and loan portfolio.

We carry out consumer lending, business lending, service the mortgage market, undertake a comprehensive lending, as well as provide services related to international safeguards. The shareholder of Norvik is the Latvian-Icelandic Norvik Bank, which is currently considered one of the most stable banks with 40-50%-term liquidity in Latvia.

In 2009, the indicators of the credit institution Norvik, despite the crisis did not fall much, although there were bad loans that resulted from the global financial and economic crisis. In the past two months, customers do make payments on loans, which could not be said of the first four months of the year. Overall, the first quarter of 2009 was the cruelest for us.

At the present time, with the decision of Norvik shareholders, we have temporarily suspended lending till the end of 2009 and we are working with the so-called bad debts for their return. From the first quarter of 2010 Norvik will introduce new products and resume lending to people and businesses. The direction of our activity will change in the corporate lending and the consumer lending will be directly linked to it. Norvik will work with corporate clients as an investment bank.

During the first half 2009, Norvik profit totaled to 3.5 million, and the loan portfolio amounted to 15 billion drams, or about 40 million USD. In general, our indicators are not particularly different from those of last year. With regards to bad loans, they constitute about 6-7% of the total loan portfolio. Today, we are serving 14 thousand customers.

ARKA News Agency - As far as the return to floating exchange rate policy, implemented by the Central Bank of Armenia in March of this year, what is the affected volume of lending?

T. Bostanjyan - Norvik initially pursued a policy of lending in dollars, as the shareholders did not take the risk of lending in Armenian drams. Thus, we only carried out consumer lending in AMD through our capital.

Currently, we are fighting for the Central Bank of Armenia to introduce measures to hedge against such risks as the Armenian dram is not yet convertible for a potential investor. Our shareholders do not agree to converting US dollars or Euros into Armenian dram for lending a business for 5-10 years, or providing mortgage loans for 10 years. No investor will take such a risk.

Unlike the banks, we have no leverage to bring AMD to the public in the form of deposits, and foreign investors for the risk they will not take.
The risk is out there for us, so we approached the CBA to take on such risks or for the banks to hedge these risks using futures, swaps or free contracts.

ARKA News Agency - How is the crisis in terms of mortgage lending?

T. Bostanjyan - Mortgage began to actively develop in particular in the past four years: people are actively involved in the transaction of buying and exchanging of housing. There were instances when our countrymen have used a mortgage as an excuse to take a business loan. They were using loans under their relatives or a false name, thereby deceiving the banks and the credit organizations by using the long-term money in their businesses.

Currently, foreign transfers have declined, and now a push should be given for the development of the mortgage. Mortgages today are not particularly active because of the impact of the crisis and the slumping real estate market. However, I think that donor funds, which Armenia has received from Russia, from the World Bank and other organizations and some of which focused on mortgage lending, will help to increase mortgage lending.

In general, the stirring up of our market is very closely related to the transfers, which came to Armenia in past years. According to various sources, the volume of transfers each year amounted to 2.4 billion dollars. However, currently, people are left without work in Russia, the United States and other countries and can no longer send money to relatives in the same volume. Therefore, I link the activization of the market in Armenia with the process of restoring the flow of transfers up to 90%.

ARKA News Agency – Is Norvik going to expand the lending market, if so, in what areas? Do you have an intention to transform into a commercial bank?

T. Bostanjyan - We are optimistic and expect that we will begin the process of enhancing the credit markets from mid-2010. Norvik does have plans for expansion. We will be looking for a good, reliable and reasonable business, to which we can lend support, if necessary. Our participation in the capital of companies is also possible. This is our first step towards corporatism.

With regards to changes in the bank, I should mention that before Norvik planned to transform itself into a commercial bank, but our plans changed with accordance to the shareholders and because of the situation in the world. At present, we delay the transformation into a commercial bank for an indefinite time, but plans do remain in force.

ARKA News Agency - How successful is the organization’s scoring system?

T. Bostanjyan - First of all, I will note that the scoring system is designed to provide additional benefits to customers. However, at present, the system does not work due to temporary suspension of consumer crediting.

However, we're ready to harness it, both the card system and the payment terminals. Norvik is the only structure of Armenia attached to these systems and terminals, through which our customers can make payments through the Internet. The scoring system is complex and well-built, we have everything ready, and we expect it to run in full by 2010.

ARKA News Agency - How do you rate the competition in the lending market in Armenia? What are the main difficulties the credit organizations face in the market?

T. Bostanjyan - We are out of competition as a credit institution, because Norvik is not subject to standards of CBA on lending to one borrower and the liquidity ratio. We are out of competition and in terms of quality of work.

The competition between the lending institutions should be in dumping and interest rates.

Regarding the problems in the market, the credit institutions don’t have any. We have a problem with the borrowers, who for some reason can not pay the loans. Difficulties exist with the court, the judicial system as a whole and there is a problem in delaying the trial. We are happy with the legislative base. A simplification of laws has been held, although there are certain incomplete nuances.

ARKA News Agency – Is Norvik planning to become a member of the newly created Association of Credit Institutions?

T. Bostanjyan - We are not yet members of the Association. But from January 1 2010, we will address this issue because we believe that we can achieve better solutions to our problems in collaboration with the Association, for example, in matters of hedging the currency risks.