YEREVAN, February 17. / ARKA /. Armenian banks may face difficulties in attracting additional capital, Ameriabank Development Director Tigran Jrbashyan said today.
Speaking at a news conference he said Armenian banking sector’s index of return on capital is 2-3 times lower than in other former Soviet republics, ‘which means that Armenian banks will face difficulties in raising additional capital, as the risks in the region are identical, while the return is lower.”
He said in the last three years Armenian banking system developed extensively, while increasing lending was accompanied by a reduction of returns.
‘In particular, if the pace of development of the banking system over the past three years was higher than the GDP growth rate – thus the ratio of loans to GDP rose from 40% in 2012 to 47.7% in 2014 to become comparable with Russia’s index, but compared with other countries it still remains at a low level,’ he said..
According to him, the situation is the same with respect to assets and deposits. Thus, the ratio of assets to GDP at the end of 2014 was 75.8%, while the ratio of deposits to GDP was 37.8%, which were higher than in neighboring Georgia, where assets to GDP ratio was 70.1% and the ratio of deposits to GDP was 31.4% , but the figure for Armenia was lower than in Russia or Bulgaria.
“Under circumstances of high competition, such indicators were achieved at the expense of profitability. In terms of ROA ratio (return on assets) Armenia is ahead of Eastern and Central Europe countries, where ROA is fairly low, but Armenia’s figure is smaller than in other former Soviet republics, which suggests that our assets are used by the banks less effectively,” said Jrbashyan.
He said also a very important indicator for the banks in terms of capital raising is the ratio of earnings to capital (profitability of capital). Armenia’s rate is 6.9%, while in former Soviet republics it is double-digit.
In summary, Jrbashyan said the performance indicators of the banking system are quite low, especially of small banks and therefore, to ensure progress banks need to improve their efficiency. -0-
