YEREVAN, July 20. / ARKA /. Net profits of Armenian commercial banks in the first half of 2015 slashed by almost 55% from the year before to 8.130 billion drams. In the first half of 2014 they posted 17.8 billion drams in net profit, according to ARKA news agency’s Banks of Armenia bulletin for the second quarter.

Out of 21 commercial banks operating in Armenia seven banks closed the first half with a total loss of 8.65 billion drams. In the first six months of 2014 six banks reported total losses of 2.7 billion drams. The decline in bank profits began in the second quarter 2014 and is still ongoing.

Besides, total assets of the banks also saw a drop in the first half of 2015 falling by 3.62% from the beginning of the year to 3.267 trillion drams; the banks’ total liabilities fell by 5.1% to 2.764.3 trillion drams; their credit investments fell by  4.53% to 2.069.2 trillion drams and the banks’ liabilities to clients dropped by 1% to 1.678.7 trillion drams. As for the banks’ capital, it increased by 5.4% to 502.6 billion drams.

The drop in the banks’ profits and other key indicators is blamed on the overall economic situation, the regulator’s decision to toughen some of its mandatory requirements and financial market shocks linked with the devaluation of the Armenian dram.

Earlier this month Moody’s said Russia’s recession and the decline in global oil prices will affect banks across six CIS countries in 2015-16.

“We expect that CIS banks will be affected by lower oil prices and Russia’s recession through pressures on local currencies, declines in remittances from CIS nationals working in Russia, and lower exports from CIS countries to Russia,” Moody’s  report entitled “Banks in CIS feel pinch from Russia downturn and low oil prices,” said. Moody’s expects a 3% contraction in Russian GDP this year followed by zero growth in 2016, based on Brent oil prices averaging $60 per barrel in 2015 and $65 next year.

Moody’s report said also  banks in Armenia will be moderately affected, reflecting the relatively modest devaluation in the dram, but its highly dollarized banking sector will face increased asset quality pressure if the dram continues to depreciate. –