Bad loans affecting Armenian banks performance: Weekly

22.06.2012 16:03
Bad loans affecting Armenian banks performance: Weekly

YEREVAN, June 22. /ARKA/. It seems that this year is not going to be as successful for Armenian banks as the past year, Delovoy Express (Business Express) Russian-language weekly says in a story.

The weekly cites the results of a monitoring of banks’ performance in the first quarter of this year conducted by the Central Bank, which reveals that the banks’ net profit in the first three months of this year dropped to about 7.8 billion drams from 8.1 billion drams from a year earlier.

The newspaper says the downward trend in earnings continued in April. The banks also reported a 1.4 percent decline in their total assets. Experts believe that the problems that were accumulating and were hidden until now are beginning to reflect. One is the problem of "bad" loans.

The weekly says over the last years the volume of bad loans has been surging by 10-50% and falling just as sharply, reflecting writing -off of bad debts as uncollectible and emergence of new "bad" loans, as indicated by the data on banks’ compulsory payments to the reserve fund. Thus, in the first quarter of 2012 banks’ payments to the reserve fund to secure against possible losses amounted g to 29.2 billion drams, but they have got back 19.7 billion drams.

The weekly says the main cause of bad loans is that before the pre-crisis years the banks ignored making analyses of loan risks against the backdrop of economic growth and significant growth in lending.

It says today bankers privately admit that that strategy carried certain risks, which are getting stronger due to the uncertainty of the global economy. The newspaper writes that in 2012 the banks in order to diversify their portfolios plan to increase lending to small and medium business as well as consumer lending, expecting lower growth rate in credit portfolio, which, incidentally, was predicted by the Central Bank. -0-


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