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Vice Speaker of Armenian Parliament: Madrid Principles are not the key element of the Karabakh peace process

US "deeply concerned" on criminal charges against Yunus family

US Department of State: It will take weeks to restore full visa processing capacity

VTB critical of EU's decision to restrict its access to capital markets

Rostelecom launches 40Gbs network in Yerevan

Electric power tariffs rise for population of Armenia on 1 August

Audit Chamber of Armenia calls silly statement claiming that ex-head of Pension Fund 'paid' $250,000 to Audit Chamber's leadership

Orange Foundation helps opening a new computer center in Pemzashen village, Shirak marz

Nominee for U.S. ambassador to Turkey: "Facilitating Armenia's regional integration by opening its border with Turkey will be one of my key goals as Ambassador"

Georgi Kolarov: The second Nagorno-Karabakh war is inevitable

Russian Embassy in Armenia gives a harsh response to the U.S. Embassy

Participants in Beeline's Fortune drawing campaign awarded prizes

Yerevan-Sevan-Ijevan-Azeri border highway to be open in late August

Armenian FM: Through its destructive stance Azerbaijan hinders the Nagorno-Karabakh peace progress

Up to 45% of Armenian citizens are potential emigrants

US Embassy urges Armenian businessmen to refrain from contacts with Russian companies

A leopard family in the south of Armenia gives birth to two cubs

Two Armenian soldiers die because of the Azerbaijani sabotage attack at the line of contact

Human rights activist Leyla and Arif Yunus are accused of secret collaboration with Armenian special services

Member-churches of World Council of Churches going to recognize Armenian Genocide in 2015

NKR foreign minister: Nagorno-Karabakh is where Europe begins

On Aug 2 South Caucasus Railway's commuter trains will be free of charge all over Armenia

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Azeris continue firing at Armenia's borderline villages

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Economist: The West's sanctions against Russia will affect the Armenian economy

Rostelecom launches online payment service

Public Services Regulatory Commission of Armenia imposes a 15mln AMD fine on Electric Networks of Armenia

Oppositionist: Interests and viewpoints of Stepanakert do not necessarily coincide with those of Yerevan

Oppositionist: Interests and viewpoints of Stepanakert do not necessarily coincide with those of Yerevan

Ashot Manuicharyan: Armenian President's function is to answer "yes, sir!" and to go do it

Deputy Prime Minister of Azerbaijan criticizes the ICRC again

Nature protection minister charges to resolve problems of several tailing dumps on Syunik region

Official stance of VTB Bank OJSC and VTB Bank (Armenia) CJSC on U.S. sanctions

RPA member: Nagorno-Karabakh Prime Minister's statement had no message to negotiators

Ashot Manucharyan: Armenia may face chaos or isolation at any moment

Armenia joins World Day against Trafficking in Persons

Lake Sevan is among top ten attractions in post-Soviet preferred by Russian people

Leyla Yunus is at Prosecutor General's Office, Arif Yunus decides to "give up"

Pre-Parliament: The overarching goal for all Armenians is the formation of a representative government in Armenia

The OSCE is ready to assist in any way possible to stop the cease-fire violations in karabakh conflict zone, Andrzej Kasprzyk says

US Department of State: Media outlets of Armenia published inaccurate articles portraying religious minorities as criminals and spies

Levon Hayrapetyan loses consciousness on Wednesday morning

Public Services Regulatory Commission decides to reduce tariffs of some services of ArmenTel CJSC

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The NKR premier: The Madrid Principles are certainly unacceptable to us

Armenian Copper Programme cuts blister copper production by 13.5%

Expert: Armenia's banking system stops serving economy's interests due to shortage of "good" customers

  • by Elita Babayan

  • Wednesday, February 12, 23:32

The banking system of Armenia is experiencing a severe shortage of creditworthy borrowers and is surviving due to revolving credit facilities. This is the dismal assessment of banking experts who comment on the financial and economic situation in Armenia and its impact on the condition of the banking sector.    

Bankers themselves confess that the banking system of Armenia stopped serving the interests of the real sector of economy a couple of years ago and is surviving mostly due to the debt restructuring. "Armenia lacks correlation between the GDP growth and the level of lending to real economy. Occasionally, the correlation is even negative. Meanwhile, the banks seem to continue financing economic entities. This means that the bank money fails go to economy. What is really going on is large-scale refinancing of loans and outflow of capital.  These two factors explain the negative correlation between the GDP growth and the lending level".  

Bankers point out the deterioration of the social conditions of citizens who are simply forced to apply to the banks repeatedly. At the same time, the banks reproach the citizens for excessive prodigality: "Our compatriots have acquired the debt bondage syndrome - an American disease of living on credit. Moreover, people are borrowing money to buy not only food and clothes but also expensive smartphones". 

According to the bankers, the system has come across the problem of continued lending reduction due to the shortage of "good" customers. Under the current conditions, experts expect the banks to become fewer within the next three years. "There will be no more than 15 banks in the market. In a perfect world there should be no more than 10 banks. They will be able to ensure optimal distribution of customers among themselves and to maintain the operating profitability at the same time", experts say. 

Bankers believe that the inevitable consolidation will help restore the former investment attractiveness of the banking system. "The average Return on Equity (ROE) in the banking system dropped to 8% in 2013. Not a single shareholder will invest money in the banking sector with such a ROE. As regards investors, they would prefer deposits with the yield of 12% p.a.", experts say. 

According to the Bulletin "Financial Ratings of Armenian Banks" by the Agency of Rating Marketing Information (ArmInfo), over the pre-crisis period (in 2007) the average ROE in the Armenian banking system was 13%. During the active phase of the crisis (in 2008-2009) the given index dropped to 5%. Afterwards, for two years running (in 2010 and in 2011) the ROE in the banking system rose to 10%. At the yearend of 2013, however, ROE fell to 8%.   

Banking experts assure that the real condition of the Armenian banking system is not reflected in the indices published by the banks. The banks are exaggerating their financial indices and creating an illusion that the banking system keeps on developing.

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