Armbusinessbank is set to consolidate its leading position on several indicators in Armenia's banking system

08.01.2020 13:54
Armbusinessbank is set to consolidate  its leading position on several indicators in Armenia's banking system

YEREVAN, January 8. /ARKA/. Armenia's banking sector keeps on progressing, taking over new niches. In an exclusive interview with ARKA news agency, Artavazd Sargsyan, the Chairman of the Executive Board of ARMBUSINESSBANK, shares his vision of Armenia's banking sector development, the current trends in the financial market and the new services the bank is planning to unveil in 2020.

Q. - Mr. Sargsyan, you took over as Chairman of the Executive Board of ARMBUSINESSBANK recently. How much your expertise in the Central Bank of the Republic of Armenia and your extensive experience in the banking sector in general are helping you today?

A. - Certainly, extensive experience of working for the Central Bank of Armenia has helped me to look at the banking sector not only as an employee of a supervisory body, but also as head of the financial institution. The experience I have gained has a key role in quick understanding and coordinating of ARMBUSINESSBANK's strategic policies and approaches and keeping focus on key directions. Within this short period, the Bank's entire staff, including its top managers, have been working to address the toughening competition challenges and to preserve the reputation and undisputed confidence that ARMBUSINESSBANK enjoys today.

Q. - The banking sector is one of the well-established sectors of our economy. However, only a few banks that entered the banking sector in the first years of Armenia’s independence have been able to withstand competition and gain a strong place in the sector. What is the standing of ARMBUSINESSBANK in the banking sector of Armenia now? How does it face competition and how would you rate your achievements to date?

A. - Indeed, ARMBUSINESSBANK is as old as our newly independent country and it is somewhat symbolic. Since its establishment, the Bank has held a prominent place in the financial system of Armenia. The mission of the Bank is to promote the economic advancement of our country and to support local businesses. Today, 30 years since its inception, ARMBUSINESSBANK is one of the leading banks in the country in terms of assets, credit portfolio, liabilities, and is the first in the market by the size of deposit portfolio. This, of course, is an indication of high-level confidence that the citizens of Armenia have in our bank. But despite all these positive indicators, we work to make the growth continuous, and so far, we have been successful in doing so. Creation of the most comfortable and profitable conditions for our clients is the guarantee that we are strong enough to face the toughening competition in the field.

Q. – For any company or organization, having a new top manager implies some management policy changes and rearrangement of priorities. Are you planning a revision of ARMBUSINESSBANK’s strategy and which are the priority areas that need to be emphasized?

A. - There will be no drastic policy changes, but the emphasis will be on strengthening the retail and small business sectors. We will actively develop new products for small businesses. I do not mean loan products only, but also new services, one of which is to support start-up projects. It is important to us that small business customers look at our bank as a reliable and trustworthy financial partner. It is one of the key elements of our retail business development strategy. I think the Bank has undeniable advantages for financing the development of this sector - a well-developed branch network, a large retail customer base and a high level of public confidence. In a short time, we have developed a string of new products, and conducted several promotion campaigns. We try to think in terms of specific products that will suit every customer segment. We have also revised and updated internal structures and processes to meet the Bank's platform for retail segment development (including small businesses). The Bank is currently introducing proactive IT solutions, such as centralization of credit application monitoring, problematic asset management, card account servicing, customer services through contact centers and more.

Q. - There is a boom in mortgage lending today, of course, not without government support. Do you think that this trend may lead to the growth of non-performing loans because of inadequate assessment of borrowers' solvency?

A. – Indeed, the growth in mortgage lending is unprecedented, driven largely by government support, income tax refund, and the growth in the construction sector. However, when issuing mortgage loans, which are long-term ones, banks exercise a cautious policy placing the stress on such factors as a thorough evaluation of customer creditworthiness, availability of down payment, collateralized property insurance, in some cases additional real estate collateral and availability of guarantors. Therefore, we believe that the likelihood that Armenia’s banking sector may pile up large volumes of non-performing loans in the mortgage portfolio is low. The ongoing rise in mortgage lending provided by local banks will contribute to the activation and growth of the construction sector, so ARMBUSINESSBANK will continue its active involvement in the mortgage lending market by offering loans on favorable terms to its clients.

In this context, I would like to draw the attention of our clients to the fact that when purchasing real estate from a developer, all payments must be made to the developer's special account in banks. I would also like to point out a sensitive fact, which is important when making down payment transfers: The law allows the developer to dispose of some of these funds prior to the conclusion of the Transfer of Property Act, in case it is provided for by the contract concluded between the developer and the buyer. I would advise that buyer give his/her consent only when the funds in the special accounts are used solely for the purpose of repayment of the developer's credit obligations or the financing the construction of the housing.

Q. - According to Moody's, the rapid growth in consumer lending poses a long-term risk to the Armenian banking system, in particular, to the quality of assets. At what level is your bank's risk management and assessment? What is the share of non-working assets?

A. - All the risks associated with the Bank's operations are manageable being directly overseen tightly by the management. Effective management of credit risks is one of the Bank's key priorities. The share of non-performing loans in the Bank's overall loan portfolio has been fluctuating around 4% in recent reporting periods. As for the high growth rate of the consumer loan portfolio, I should note that ARMBUSINESSBANK has a low risk appetite for consumer loans, avoiding lending to overburdened and credit-burdened clients; so its portfolio risk is fully manageable. I would also like to point out that the Central Bank of the Republic of Armenia has also expressed its concern over the high rates of consumer credit growth. The regulator plans to introduce some new regulations in the field of consumer lending to limit the rise in the credit burden of the clients and help restrain the aggressive policy of the banks when it comes to consumer lending.

Q. - In the last few years, Armenian banks have been actively attracting funds through the issuance of liquidity bonds. What are the sources for your bank to attract borrowings? Is the bank going to enter the Armenian bond market?

A. - Customer deposits are the main source of funds attraction for ARMBUSINESSBANK. Our Bank is the number one bank in the country by size of deposit portfolio. As for entering the Armenian bond market, ARMBUSINESSBANK has been issuing bonds every year since 2016. This year too we are going to issue both AMD and USD-denominated bonds.

Q. – What is the scale of ARMBUSINESSBANK’s customer involvement in digital products? How promising is this direction for the bank?

A. -Customer involvement in the Bank's digital products is not high now, making about 4% of the total base of individual customers, but this direction is one of our priorities. We have set up a separate unit to deal with the development of these products (internet banking, mobile banking, and e-wallet). We work to ensure that all of the technologies we introduce are in line with updated market requirements. In the near future, we expect a significant activation of customer involvement in digital products.

Q. - You said the bank runs a developed branch network: Are you planning to continue your policy of mitigating the disparities between large urban communities and other settlements, and where are you going to open new branches?

A. - It is important for a citizen living in any part of our country to have access to banking services. It also solves an important issue of proportionate territorial development. ARMBUSINESSBANK should be accessible to our fellow citizens living in the most remote communities of Armenia and Artsakh, and their voices must be heard. This is a key goal for our Bank. It is not accidental that ARMBUSINESSBANK is in the top three today in terms of the number of branches and ATMs. We now have more than 60 branches. The Bank has also designed a new customer service concept. Last year we opened the first “Massive” branch of a new format in the Nor-Nork administrative district of Yerevan, furnished with technically new equipment and customer service features. This was followed by the opening of a branch at Zvartnots International Airport, which operates 24 hours seven days a week. It offers customers the entire range of services and products, such as provision of loans and acceptance of deposits, replenishment of accounts, money transfers, payment of utility bills, consulting, etc. Another branch- "Lori" - opened in Vanadzor. Also, the ‘Kumairi’ branch started operations in Gyumri. They are the third regional branch offices of our Bank in Lori and Shirak marzes (provinces).

Q. - ARMBUSINESSBANK supports the initiatives designed to help conserve national, historical and cultural values, sponsoring various cultural events. What was the response to the cultural events sponsored by ARMBUSINESSBANK last year and which of them were the most memorable?

A. - Many companies and organizations today are paying close attention to corporate social responsibility programs. ARMBUSINESSBANK is also pursuing such initiatives. Since 2013, the Bank has supported dozens of social programs aimed at the development of cultural, sports, health, educational and other areas. In 2019, we provided a lot of support to the cultural sector sponsoring concerts, theaters and festivals. During this time, we have worked closely with the Yerevan City Hall, government agencies and other structures. One of the latest two cultural events sponsored by ARMBUSINESSBANK was a concert entitled "Cultural Dialogue" held at the Geghard Monastery under the auspices of the Ministry of Foreign Affairs of the Republic of Armenia, which was attended by the President and Prime Minister of Armenia and high-ranking guests from different countries. The Bank was also one of the main sponsors of the 5th International Ujan Documentary Film Festival, organized with the support of the Ministry of Education, Science, Culture and Sport.

Q. - ARMBUSINESSBANK's concern for preservation of structures which have architectural value, its policy for improving the environment is also noticeable…

A. - Yes, I would like to remind that the Bank’s Head Office is located in a building on Nalbandyan Street, which is a valuable architectural monument of the late 19th and early 20th centuries. It used to house the Regal Palace, the Gubernatorial Treasury, the ministry of finance of the First Armenian Republic and various other administrative organizations. Recently, ARMBUSINESSBANK has expanded its Head Office into an adjacent building, which also has a rich history. It has recently been renovated. We do our best to preserve the old values ​​and create modern conditions for delivery of high quality banking services. We work so that these buildings that have their unique place in the capital city Yerevan, continue to be unmatched in architectural form and look just as beautiful in the future. We also pay close attention to the improvement of the surrounding areas of our branches, spread across different communities. It is one of the components of corporate social responsibility and in a broad sense- this is where the culture begins.

Q. - What are your expectations regarding the Armenian banking system in 2020 and what are your expectations for ARMBUSINESSBANK?

A. – The competition in Armenia’s banking sector will become even tougher; the banks will improve and expand the range of their digital products. ARMBUSINESSBANK will work to strengthen its stable and leading positions in the banking sector of Armenia. According to the Bank's 2020-2023 development strategy, we will have a more advanced lending toolkit, providing our customers with more flexibility, accessibility and convenience of products and services. We remain committed to the philosophy of our business, moving together along the safe path to the future. -0-

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