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UNLIKE OUR COLLEAGUES IN AZERBAIJAN, WE WORK IN A DIFFERENT REGIME IN ARMENIA: CHARLES GREGORY

Below is an interview of Chief Executive Officer of the "HSBC Bank Armenia" CJSC Charles B. Gregory.

Last year the world's information channels spread a report on the closure of the branch of the HSBC Bank in Azerbaijan. Head of the branch Charles Mason announced the termination of any operations from March 7 and the closing of clients' account before June 2002. Mason pointed out that before the expiry of this term the bank was to meet its fix deposit liabilities to its clients, which make up about 50mln. USD. Mason accounted for the closure of the branch by the narrowness of the market. Moreover, he said, the long-term forecasts of the oil business were not justified in Azerbaijan. This factor proved to be decisive for the HSBC Bank, as 2/3 of the branch's activities in Baku were in some way of another connected with this business. Interestingly, this opinion was soon parried by President of the National Bank of Azerbaijan Elman Rustamov, who said that "the closure of the Azerbaijani branch of the HSBC Bank was the result of a wrongly chosen strategy." According to him, the bank did not make sufficient investments in economy, and the greater part of the bank's assets was invested in foreign banks, whose interest rates sharply declined after the terrorist acts in the USA, which, in turn, created difficulties for the bank to meet their liabilities to clients.

- Mr. Gregory, the HSBC Bank's leaving Azerbaijan, despite different pretexts, may arouse concern over the bank's future in Armenia. If the oil factor is taken as a basis for the bank's leaving Baku, then it is more that clear. But if we speak of the business activity, Armenia does not much surpass Azerbaijan?

- There is no ground for concern. First, the difference between the branch of the HSBC Bank in Azerbaijan and the "HSBC Bank Armenia" is that the latter is registered as a resident-bank of the Republic of Armenia and is working in a different regime than the HSBC Azerbaijan. Secondly, the HSBC Bank's role on Armenia's bank market is quite stable and weighty. The success our bank has achieved in Armenia, a testimony to which is the level of its profitability in the banking system, cannot be compared with the situation of the HSBC Bank in Azerbaijan.

I would like to clear it up. The branch of the British HSBC Bank in Azerbaijan is not being closed, but is changing the nature and quality of its services. In particular, the bank is terminating the service of accounts of the population, but is continuing the activities of retaining banking license and serving corporate clients.

- Nevertheless, some experts believe that the "HSBC Bank Armenia" does not invest capital in the country's economy either and is pursuing a passive credit policy.?

- As regards investments in Armenia's economy, our bank is continuing to invest considerable funds in the development of enterprises in different fields, upgrading of the personnel's professional level and the widening of the range of its services. In particular, this year the bank plans to increase credit investments in Armenia's economy by 20%. The bank has a special Credit Department which works with corporate clients and selects potential borrowers. Special attention is paid to the client's solvency for liabilities to be met uninterruptedly. Among the bank's borrowers are agricultural, light and food industry enterprises, the construction sector.

Preference is given to the clients following the policy of exporting their products. however, our experience shows that most of the projects are not properly prepared and are not usually in conformity with the present-day realities. As assistance in upgrading the professional level of local businessmen the bank intends to publish, in two months, a manual for economic entities in the small and middle-sized business sphere. The bank has chosen the right crediting tactics, but many good and solvent clients are unfortunately difficult to find.

- Do You mean that the bank is ready to invest much more funds, but it has no borrowers?

- The group of solvent businessmen being limited, the bank has to find conscientious borrower-partners itself, as, the rapid rate of the deposit base growth necessitates restoration of the balance between the attracted and placed funds.

Credits are allocated for up to three years at an annual interest rate of 20%-24%. Considering the borrower's good credit history and specificity of projects, the mechanism of interest rate reduction is applied in case of re-crediting. Thus, the bank recently launched a program of consumer credits for physical persons with positive bank histories during the last few years.

Nevertheless, an army of professional businessmen has been formed in Armenia, and their right financial policy allows good results to be achieved without using bank credits. The enterprises that are the bank's ex-clients recently joined them. Effectively using their credits and repaying them, they achieved success in their businesses and do not any more need the bank's financial assistance.

One of the innovations is that this year the bank has instituted the "HSBC-export" nomination (US $10,000), which will be awarded to the winner-enterprises that will achieve the best results in exporting its products. This nomination is instituted only for the clients of the bank. This action will be an impetus to enterprises manufacturing competitive products, which are in demand not only on the domestic market, but also on the foreign market, which is necessary for maintaining the trade balance and the country's economic development in general. The CB president, director of the Armenian Development Agency and the British ambassador expressed their wish to participate in selecting these enterprises.

- What is the structure of the bank's earnings?

- In the structure of earnings the lion's share is interests received from the funds placed, including the interbank deposits, and from government treasury bonds (GTB). The rest the bank receives from the bank commission and other sources. Earning assets are on the rise in this line. The share of GTBs is on the fall, which can be considered a positive fact. The bank intends to continue making interest incomes less dependent on the situation on the market, and increase the share of noninterest incomes.

-How does the "HSBC Bank Armenia" feel as to competition?

- We are for a healthy competition, which has existed since the moment we launched our activities in Armenia, though it has become more appreciable during the last few years.

- What is the influence of the latest developments in the banking sphere on your bank's activities?

- It is natural that any uncertainty in the system marks causes a redistribution of clients' accounts in favor more reliable banks. We do not conceal that considerable funds come to our banks, but we do not consider it to be an achievement, as any instability is against all of us. Considering this fact, it would be desirable to see the banking system more stable. I am a proponent of the CB's policy of recovering the banking system, as the right way has been chosen to clear it of "pocket" banks, which hinder a healthy competition on the market.

- How successful is, in your opinion, the bank as to the card segment of the market?

- We are quite active here. Our cash-dispensers serve the cards of the international payment system VISA. Besides, as one of the founders of the Universal Payment System using the "ArCa" plastic cards, the bank issues only credit cards, most of which will be replaced by the international credit cards "Europay" after the certification process is completed. The volume of operations on these cards is 80% of the total volume of operations in the ArCa. The bank has no POS-terminals, as we do not consider it a priority now.

It debit salary cards the ban has been issuing since 1997, and 7,000 cards have already been issued. Seven cash-dispensers are currently operating, and some others are expected to be installed. 300,000 operations are carried out yearly with the use of plastic cards. The monthly volume on debit cards is 3mln. USD. Regular polls of clients are held to find out the directions of widening the range of services.

13 April, 2002
Emmanuil Mkrtchian, ARMINFO