Exclusive interview with Astrid Clifford, Chief Executive Officer of  HSBC Bank Armenia

ARKA - Ms. Clifford, how would you assess the bank’s performance in 2011?

Astrid Clifford - Last year was very successful. Profit before tax amounted to 8.3 billion drams, almost a 50 percent increase compared to 2010, which also was quite successful. By this indicator we are the best bank in Armenia. Our return on equity rate was 24 percent, a very high rate The bank's assets amounted to 179 billion drams, having increased by 23.5 percent from the beginning of the year, liabilities saw a 24 percent rise to around 149 billion drams, our liabilities to clients totaled 120 billion drams, having increased by 14 4 percent. The total capital exceeded 30 billion drams, a 23 percent increase as compared with the beginning of the year while the outstanding loan portfolio amounted to 108 billion drams, having increased by 26 percent. The bank was very active in lending market. In particular, the volume of corporate loans amounted to about $100 million, and loans to individuals to about $10 million. The Bank also sold 2.5 thousand Casco, health, home and car insurances HSBC Bank was named the best bank in Armenia by the British The Banker Magazine.

ARKA - HSBC Bank Armenia is among top Armenian banks in terms of a number of indicators and an undisputed leader by size of liabilities and profit. How do you manage to maintain the plank so high in conditions of tough competition?

Astrid Clifford – There is indeed a very tough competition. In an effort to attract new customers, the banks reduce lending rates and increase rates on deposits. But still we remain the market leader by size of deposits holding 14% -15% of the market. We're not trying to keep up with the market by reducing the rates, our competitive edge is our high quality services. Our customers should receive the highest services and be happy. Therefore, we do not just lend them money, we are in a constant touch with them to help run their businesses and provide them with consulting. Our leading position by size of deposits is due to a large extent to HSBC’s image, so it is very important to maintain it, and we do it by health index (a comprehensive method of studying the brand). As for high profit rate, I would like to note that we do not want to achieve it at any cost. We are very careful in choosing projects that are really profitable.

ARKA – In 2011 HSBC Bank Armenia introduced the "Sunday Banking." How effective was it?

Astrid Clifford - This idea has been materialized as a pilot program in connection with the 15^th anniversary of the bank’s operations in Armenia, and the result surpassed all our expectations. The number of clients over the weekend was a little lower than on weekdays. In the future we will offer banking on Sundays but not as often as it requires additional costs and resources.

ARKA - HSBC Bank Armenia’s ATMs resumed last year servicing Visa, MasterCard and local ArCa cards. What results do you have?

Astrid Clifford - It was very important for us to service these types of cards, so we resumed it in August and September and by the end of the year the cards were used to make $1 million worth transactions. In 2011 the bank issued more than 20,000 cards, including 17,800 banking cards and 2,400 credit cards. The figure represented a 38% rise from 2010, when the bank issued a total of 14,600 cards, of which 3,600 were credit cards.

ARKA - What Armenian economy sectors are the priorities of HSBC Bank Armenia lending?

Astrid Clifford - Our priorities have not changed much. Consumer, car and mortgage loans for corporate customers. With regard to commercial lending, we provide a wide range of services to companies in various economic sectors. HSBC Bank Armenia is also very active in lending to companies engaged in exports and imports operations, which is natural given the presence of the HSBC Group in more than 80 countries. In general, cooperation with companies at foreign markets is in tune with the global policy of HSBC. Today, the outstanding credit portfolio of the bank is worth $280 million. We expect it to grow by another $60-100 million in 2012.

ARKA - What is the proportion of delinquent loans?

Astrid Clifford – Delinquent loans account for 3.7%, of which 3.2% are commercial loans. We are not talking about non-repayment. Simply, these borrowers have temporary difficulties, which they gradually will resolve and fulfill their obligations.

ARKA - Does the bank plan consolidation of its portfolio by acquisition the assets of other financial institutions?

Astrid Clifford - We always keep our finger on the pulse, and if there is a profitable offer, we are ready to accept it. For example, in September last year the bank bought a $1 million loan package from The First Mortgage Company. In the future we will consider such proposals, if they are attractive from a financial point of view and are consistent with our strategy.

ARKA – Are you considering the opportunity to participate in a syndicated lending to a major project in Armenia?

Astrid Clifford - In principle, we are open to it. We have already a contract with a financial organization for a syndicated lending, but we did not issue such a loan due to lack of demand. The fact is that Armenian companies do not have to attract very large sums of money, and banks prefer to lend from their own resources. Besides, HSBC Armenia, like other banks with institutional shareholders, can provide syndications through their head offices.

ARKA - How would you assess the increasing interest in the Armenian banks by the World Bank, EBRD, the EDB, and the ADB?

Astrid Clifford – We think that the growing partnership of Armenian banks and international institutions is very important. Moreover, some banks have a long and successful record of cooperation with these institutions. We also have this experience. Last year we signed a $12 million loan agreement with EBRD for boosting small and medium businesses, developed also a program of syndicated co-financing. In 2012 the cooperation in one or both directions will continue, probably, it will be about the same amount. But for now I will refrain from further details.

ARKA – To what extent is the Armenian banking sector ready to withstand a possible second wave of financial crisis? What are the main risks that the banks may face in 2012 and what precautionary measures should be taken to counter these threats?

Astrid Clifford - The main risks are coming from Europe, plagued with huge external debt and euro’s exchange rate fluctuations. But we do not see very serious direct risks to Armenia, as Armenian banks did not acquire Eurobonds, and, in general, the country is not so much integrated into the European economy.

The forecast 2-3% economic growth for this year, stability or a slight decline in oil prices, which is important in the context of Russia and the volume of transfers, as well as stability in base metal prices at world markets (which is the principal article of Armenian exports), allow us to think that Armenian economy and banks will not face serious threats this year. However, we can not exclude the shock situations, for example, connected with the possible collapse of the euro or escalation of the situation around Iran, which could lead to negative consequences for the global economy, and for the Armenian economy and its banking sector.

ARKA – Are you planning a revision in your strategy in anticipation of a possible second wave of crisis?

Astrid Clifford – We do not plan any specific changes. We have always been a conservative bank, very selective in lending and customer choosing.

ARKA - What new services will the bank offer this year?

Astrid Clifford - This year we plan to open two new branches in Yerevan, bringing the total to ten. Also currently we are working to introduce insurance services for our clients against all sorts of scams and frauds with credit cards. In all likelihood we will introduce this service later in February. We will insure cardholders against forgery, theft or loss of credit card, transaction with forged documents, amount abduction when using an ATM, emergence of commitments and overdraft. Insurance against card fraud is provided for international bank cards and MasterCard from 500 thousand to 1.2 million drams.

ARKA – What would you say about rumors that an Armenian bank is going to acquire the assets of HSBC Bank Georgia?

Astrid Clifford - This information does not correspond to reality. It was said that HSBC Bank Georgia will cease operations by March 2012. As for its customers, corporate customers will be refinanced individually by other banks and obligations to individuals will be acquired by a Georgian Bank.

ARKA – We would like to know also about your strategy to work with clients and to what extent their interests are taken into account?

Astrid Clifford - Our goal is to become a real partner for all our customers and provide them with a complete package of banking services that could satisfy them fully. This is why we attach such significance to our services, which is why the bank operates a feedback, and this is why we always keep our finger on the pulse and know what our customers think so that quickly resolve their problems. Currently the bank has 36,000 individual and 4000 corporate clients. In 2011 we attracted about 12,000 new customers.  -0–