Exclusive interview of ACBA-CREDIT AGRICOLE BANK CEO Hakob Andreasyan to ARKA news agency

ARKA – The first 100 days of a private company or a government agency head in office is a milestone allowing to make some conclusions. Could you name your most significant achievements in the first 100 days in office as Chief Executive Officer of ACBA-CREDIT AGRICOLE BANK?

Hakob Andreasyan – The first 100 days, in fact, are not a long time span, especially for a bank. As you know, the banks usually pursue a conservative policy of doing business and value greatly their reputation of a reliable business partner. My main task was in the first place to create a comfortable psychological climate for the staff, so that they could gain confidence and an appropriate mood. Most importantly, in my opinion, I was to make the team realize that we intend to continue the bank’s strategy of development in view of necessary changes. It is obvious that a change for a bank is a long but necessary process that requires certain costs and efforts to enforce a number of structural reforms, create new services and substructures, appoint new decision-makers and address the issue of technical equipment. All this is very important in terms of specifying the banking strategy. In my opinion, it is time to change our business mindset, our comprehension and understanding of our priorities. It is clear that as any other bank, we want to make profit. The financial component is undoubtedly very important, but it is only the result, and if we really want to succeed, we need to have a complete idea of the customers’ needs in order to meet them to the fullest extent possible. This is the main task and if it is done the financial results will follow.

ARKA – Do you have a plan to achieve it?

Hakob Andreasyan – Here we need a different approach; more precisely, we need to use the principle of customer targeting - to divide them into target groups in accordance with their demands and try to use all available means to satisfy their demands. The size of tariffs is not the main factor for customers in choosing a bank. Many banks offer better tariffs and the banking products are actually the same, however, customers prefer to be served at another bank. Of course, this is a matter of preference, when a customer in choosing a bank prioritizes such parameters as the speed and quality of service, confidence in the bank, human relations. All this is very important, and the banks have long realized that they need to carefully work with each client based on their needs and capabilities. Our shareholder - Credit Agricole - pursues this same strategy. Of course, modernization requires significant resources, staff training, internal structuring and specification of obligations. After all, if an employee was previously responsible for a product, now he/she is responsible for a group of clients, which requires re-training of employees who have to master all the required skills and be able to motivate clients.

ARKA - ACBA CREDIT AGRICOLE BANK is the leading bank by size of agricultural lending. Does the bank have a strategy to increase this type of lending?

Hakob Andreasyan - Agriculture has been our priority. This is the area where we feel very comfortable. Most of our customers are engaged in agri-businesses, with whom we have built very good relationships with a two-way understanding and mutual interest. At present, our portfolio of agricultural lending is approximately 64 billion drams, which makes more than 51% of the total agricultural lending of all Armenian banks. This year we have increased the share of agricultural credits in our total loan portfolio from 33% to 39% and expect it to exceed 40% by the end of the year. If we consider the situation from loan repayment view, we are most successful in terms of agricultural credits with the highest rate of return, although everyone knows that agricultural lending is very risky, especially in view of our climate. In the context of risk minimizing I would like to single out the government's program designed to subsidize agriculture. This is a wonderful program that allows farmers to receive funding in the national currency, the dram, at the annual rate of 14%, of which 6% -8% are subsidized by the government. The amount of lending by this program is 15 billion drams, of which 14.5 billion drams are our bank’s share.

ARKA – Do you think Russia’s decision to ban imports of some foods from the USA and Europe opens up new prospects for Armenia’s agricultural sector?

Hakob Andreasyan - It is obvious that Armenia depends on the Russian economy, on the amount of remittances sent home by Armenian labor migrants there, on foreign exchange fluctuations, the depreciation of the ruble, etc.. But, on the other hand, the Russian ban opens up some opportunities for us. I do not mean winning the Russian market, which is impossible, but promotion of our goods there. Armenia is not a very big producer when compared with countries such as Turkey, China and Iran, which can easily replace European exporters. But we should try to take advantage of these new opportunities for stepping up exports of quality Armenian goods to countries whose consumers are familiar with them. For example, in Russia, there is a very large Armenian Diaspora. Representatives of other nations also like our products, such as brandy and others. But we need to focus on the middle layer and get stronger in this niche. It is difficult to name any figures now, but our customers are unanimous that the Russian ban did open new prospects for Armenian producers. It is important to seize the moment. On our side, we can finance local production, but we must not forget that finances do not resolve all the questions. We need also to take into account the situation in the field of agriculture. In Armenia, the biggest challenge for this sector is the presence of small farms that prevents the industrialization of agriculture. Therefore, their productivity is extremely low. The government is concerned about this, but ultimately, it is up to land owners.

ARKA - Earlier you said you intended to increase lending to small and medium-sized businesses. How large is your SME lending today and what is the dynamics of its growth?

Hakob Andreasyan - SME is our second priority area with a portfolio standing at about 173.5 billion drams. We expect it to increase by another 10 billion drams before the end of the year. Today many local banks prefer to work with retail sector, small companies, because working with larger companies suggests larger hassle. There are difficulties and we are no exception, but they all can be solved.

ARKA - What can you say about the bank’s consumer lending strategy and about your stepped up activity at the mortgage market, particularly, your involvement in a mortgage program designed for young families?

Hakob Andreasyan – Consumer lending has been on rise for several years in a row. Our consumer lending portfolio now stands at 55.5 billion drams, or 32% of the total loan portfolio of the bank - an increase of 18 percent when compared to the same period last year .Consumer lending is unfortunately affected by several factors such as falling solvency of population, growing out-migration. However, I should also note that against the backdrop of falling number of potential customers, the number of people using banking services and products is still insufficient and there is room for growth. This is not just my opinion, but the opinion of the heads of other banks. We still have a lot of people who do not use banking services; at best they can make a bank transfer.

ARKA - What are your forecasts about major banking indicators for this year?

Hakob Andreasyan – In the first half of 2014, the bank's assets amounted to 273 billion drams, having increased by 2% from the beginning of the year. Credit investments amounted to 182 billion drams, having increased by 7.3%, while its liabilities stood at 219.2 billion drams, a 2.6% increase compared with the beginning of the year. The allowance for possible losses amounted to 6 billion against 2.8 billion drams last year. As for annual results we have some problems caused by 2-3 large borrowers, and this situation has affected the overall picture. For example, if last year the bank’s profit was 4 billion drams, today we still have a small loss of 260 million drams. But we are working to solve these problems, and this month we have made profit, and our revenues this year are even higher than those of previous years.

ARKA - Today, many banks have a problem in attracting new customers. What do you do to solve this problem? What is your customer base?
Hakob Andreasyan - We have 275,000 customers, most of them are individuals, including of course, a large army of farmers. We are constantly working to expand the range of our banking services and improve lending terms. We have simplified lending procedure, introduced the scoring system that allows a faster and better service of customers. Also, the Internet banking system is demonstrating a steady growth with increasing number of customers choosing online banking. We pay much attention to projects with payment cards. Particularly, together with AmEx we have issued American Express Cashback cards, which allow cardholders to manage their funds and at the same time earn bonuses for making Cashback transactions. In the near future we will begin issuing contactless payment cards which are used to pay for goods and services with just one touch. We want to further integrate into the social sphere. For example, a lending project designed for young people was to attract them to the banks because they are our potential future customers. Recently we presented a video with guidelines how to save paper, encouraging respect for nature because saved paper means more saved trees.

ARKA - Your bank is the leader of the Armenian banking system in terms of capital size. Do you plan to replenish it before the end of this year?

Hakob Andreasyan - At present, the total capital of the bank is about 54 billion drams of which 30 billion drams are the share capital. At this stage we do not envisage an increase, but do not rule out capital replenishment in the future both by current and new shareholders.