ArmInfo.In the conditions of moderate economic growth, economic motivation will continue on the banking market of Armenia aimed at the process of consolidation. This opinion was expressed in the interview with ArmInfo correspondent by the financial director of one of the largest banks of Armenia Ardshinbank ex-finance minister David Sargsyan.
According to him, many market experts expected that in the light of consolidation, connected with the increase of the norm of the minimum total capital of the banks of the country to 30 billion AMD, the market will leave 8-10 players, however, in fact, the banking system of Armenia in the past year or two has declined by 4 banks. "But it seems to me that this process will not last long, so consolidation will continue, as in the current conditions this is a fundamental process", the expert said.
Speaking about the possible systemic risks accompanied by the consolidation process, Sargsyan noted that in the context of the next two years we will witness the presence of substantial excess liquidity in pre- capitalized banks. "And it is natural that banks, their owners and management, will strive to quickly place these funds in order to generate revenue and generate profits. This process, in the face of continuing strong competition for profit, will lead to further lowering of loan rates, and rates are already declining and are at one of the lowest levels in the history of the country's independent banking system. But, in the end, in a year and a half this excess liquidity will resolve and the situation will be normalized", he stressed. As a consequence, in this, and next year, we should not expect a significant increase in the profitability of banks. And it becomes clear that the process of further consolidation of the market will remain the mainstream of the country's banking market development in the next few years.
But, the expert noted, that there is one more variant of the system's growth, which is indicated by the results of the fourth quarter of last year. "Our banks began to actively step outside of Armenia. At the end of the fourth quarter, at least two banks significantly increased lending to non-residents, and the amount of lending, according to published reports, has already reached 300 billion AMD. This means that we will go beyond the limits of our market, which, to some extent, can reduce internal tension from the point of view of competition and the process of consolidation. This is a good alternative - an opportunity to grow and grow at the expense of foreign markets", Sargsyan said, noting that this scenario is much more preferable than "eating each other", accompanied by loss of profitability. "As for the domestic market, that is, growth due to the domestic market, our market is already limited. The assets of the system have reached 70% of GDP and further growth is hardly possible", the expert stressed.
Sargsyan also noted that in the past year, in general, there was some stagnation in the retail credit market, "that is, there was no obvious growth in this segment and one can hardly expect it in the short term". The statistics show a decline in retail trade turnover in reduction of imports, which indicates a decrease in consumption. "The level of consumption and retail lending, that is the things are interrelated and this we see on the example of the state of the banking system", Sargsyan resumed.
To note, the process of consolidation of the banking sector in connection with the need to fulfill the capital requirements starting from 2017 began at the end of 2015. ProCredit Bank (Armenia) and BTA Bank, which were acquired by INECOBANK and Armeconombank respectively, announced their withdrawal from the market. A year later, in December 2016, Areximbank-Gazprombank Group and Armenian Development Bank announced the merger, which were absorbed by Ardshinbank and ARARATBANK respectively. Before that, 21 banks operated in Armenia.