“We manage not only our own funds, but also those of people and we bear responsibility for that,” Saribek Sukiasyan

Interview with Saribek Sukiasyan, Chairman of the Board of ARMECONOMBANK

Mr. Sukiasyan, how do you evaluate the decision of the Central Bank of Armenia issued on 30 December 2014, which raises the regulatory capital requirement to minimum AMD 30bn from the current 5 bn from 1 January 2017?

I think that the implementation of this resolution of CBA will be difficult for many banks since only 5 banks out of 21 met the newly established standard as at the end of the year. The remaining banks will have to look for solutions. However, as the Board of CBA consists of knowledgeable specialists, I believe all the negative aspects and consequences were taken into account when making that resolution.

Perhaps one of the reasons for this decision of CBA was the AMD devaluation, because of which the nonperforming foreign currency loans existing in some banks could threaten their stability and so become a potential issue for the entire banking sector of Armenia. I think that upon making the decision CBA first of all should have paid more attention to the level of capital of similar banks.

I must note that the RA banking sector holds leading positions among the banking sectors of CIS countries.

To what extent are those risks manageable in ARMECONOMBANK?

There is an important point in the business logic throughout the world: create a system with a capital as small as possible, which will generate high profit. Which today fully applies to our Bank. Let me talk in numbers. With a AMD 2.3bn charter capital, about AMD 100bn assets, and a AMD 50bn loan portfolio, ARMECONOMBANK has nearly 99.5% loan performance ratio.

Could you please further details of the steps ARMECONOMBANK is planning to take towards bringing its capital into compliance with the CBA decision?

Since the resolution of the Central Bank has already been adopted, we will adjust the capital to meet this requirement, and we will raise it to AMD 20bn already by the end of this year. Right at the beginning of this year, the Bank’s key shareholders supplemented the charter capital with AMD 5bn. For the coming month, we are planning to issue shares worth AMD 5bn for open subscription, that is, they can be obtained by anyone. As key shareholders, we, the Sukiasyan brothers, are planning to purchase shares worth about AMD 4bn.

The emission prospectus has already been published to inform the potential investors on the shares to be issued.

What is your vision of the Armenian banking sector after 2017, what are your predictions?

The result of the CB resolution should be the enlargement of the RA banks. But, to be honest, in the conditions of the Armenian reality, I find it difficult to believe in bank mergers, because an Armenian owner always strives to own the controlling stock and no other options are even considered. Our family does not have stereotypes, we are willing to consider any effective option of collaboration.

The banks that are able to overcome the 2017 “barrier”, will face another problem, as the competition in the market will become much more intense according to our forecasts. This, of course will be conditioned by the fact that the banks will have more free resources. In the current situation, some banks will may simply be pushed out of the competition. In this case, the banks with cheaper and better managed resources will certainly gain an advantage.

A fact to be taken into account is that we, the managers, manage not only our own funds, but also those of people and we bear responsibility for that.

Meanwhile, many experts express their dissatisfaction and disagreement with regard to this decision of CBA, and I find it possible that the implementation deadlines may be extended to 2020.

Mr. Sukiasyan, what is the situation in the market today, to what have the banks been contributing to the growth of the Armenian economy?

The banks are the locomotive of the economy, hence both the Central Bank and the Union of Banks of Armenia must constantly support the commercial banks. Today the Armenian banks actively negotiate with international donor organizations to find resources at the lowest possible interest rate. The banks should be able to receive such aid from CBA as well. After all, the lower the "price" of the resources, the lower the loan interest rate will be, which in its turn will boost the economy.

Any regulatory efforts based on standards – I am referring to the tighter mandatory provisioning standard imposed by CBA – should mainly be of temporary nature.

I hope that CBA will lower this standard in the near future, which would stimulate the banking sector and so uplift the economy as well.

Mr. Sukiasyan, on 19 June the annual meeting of the shareholders of ARMECONOMBANK OJSC will be held. Are you planning to pay dividends this year?

ARMECONOMBANK OJSC Board has adopted a resolution on paying dividends to the shareholders based on 2014 performance, and the matter has been referred to the annual meeting for consideration. This proves once again that ARMECONOMBANK shares not only provide an authority to participate in the management of the Bank, but also represent a profitable shareholder investment

Hraparak Daily, 28 May

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