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ARMINFO / "Converse Bank" is Heading on to New Instruments. 07.06.2010
Mr. Davtyan, it is known that changes were introduced in the structure of "Converse Bank" Board and Management Board in the second half of 2009. How did they affect the bank's policy and strategy?
Indeed, two members joined the Bank's Board in 2009. The rich experience of these experts is of great assistance to us. Loans and Accounting Committee was established by the Board, risk management was toughened for the purpose of reinforcing control over big loans. In general, the fact that new members and managers have joined the Board did not seriously affect the bank's policy; it just toughened the approach to the work. The Bank remains universal and implements the same functions as before. The only significant change was the establishment of a unit responsible for collection of bad assets. This unit is acting successfully and its effectiveness is evident.
The banking sector is experiencing reallocation of assets portfolios. "Converse Bank" has always been a universal bank and its retail loans' portfolio developed along with the corporate portfolio. But this correlation had to change in some way during the period of the crisis, when the retail volumes were significantly reduced. Besides, there are new participants at the market, and they pursue the goal of having the largest clientele in order to attract big financial flows, including export and import companies. This situation changed the market. How did it affect "Converse Bank"? What kind of changes occurred since the second half of 2009 and which is the current position occupied by the bank?
The Bank remains universal and we do not intend to leave the previously covered segments. Besides, we are planning to increase the portion of the SMB in our credit portfolio. Currently, half of the portfolio is made up by corporate loans. Inside their structure, we intend to increase the volume of SMB financing, retaining the current level of attention towards big loans. In my opinion, it is not reasonable to extend big loans during the crisis period; it is more expedient to provide smaller loans. Thus, for instance, it is less risky to extend 10 loans 500 thousand each than one 5-millon loan. Thus, small and medium business loans and retail loans will prevail in the structure of the portfolio. Our sources of funding are rather diversified. The Bank is a party to almost all international financial projects in Armenia, including WB, KFW, Millennium Challenges, IFAD, RESCAD, etc., as well as mortgage projects. Though refinancing of the funds of the Russian stabilizing loan by the Central Bank is over, we have another credit line from the European Bank. Besides, currently we are negotiating with two international organizations for opening of credit lines.
By the end of this year, we are planning to increase the SMB portfolio by 20-25% up to minimum 20 million USD, and the retail loans' portfolio - up to 70 million USD.
What kind of new products does the bank intend to introduce at the market in order to retain its strong point during these hard times, i.e. the high-quality loan retail, in which the bank has been engaged for many years and has elaborated technologies?
Currently, we are working at increasing the range of all products, both lending and deposit. Meanwhile, we strive to retain flexibility and not to refuse providing any client with the requested service. We have toughened the requirements towards customers, but we have never ceased rendering any of our services. It is noteworthy that even in times of crisis we were still offering preferential tariffs to our loyal customers, for instance, providing loans at lower tariffs.
We also have a wide range of deposits, starting with the period of 1 month until 16 years, in AMD, USD and Euro. We have accrual and standard deposits. Recently, we have introduced a new type of account - non-physical metal account, to which we credit the customer's gold in grams, without specifying the individual properties of the gold bars. When opening an account, at the customer's instruction, the bank purchases the respective quantity of gold, in the whole volume of the account. The account is replenished by AMD equivalent to the respective quantity of 999.9 carat of gold, at the price quoted on the date of purchase. Like other bank accounts, the non-physical gold account can be replenished by the customer occasionally and non-cash transfers of gold can be made. Besides, we also sell standard gold bars that weigh from 1 gram to 12 kg., which we purchase from different suppliers. This is to say, we are introducing new instruments. I would like to remind that our bank was among the first banks that established "Child" and "Pension" deposits, which are in fact very profitable products. They yield considerably high interests. As to the lending products, even during the peak of the crisis we never stopped providing loans to individuals and legal entities. We were not panic-stricken and did not try to persuade our customers to convert their AMD loans to USD. We were honest with out customers.
Besides, we pursue the goal of occupying leading positions by credit cards. As you know, besides being a member of Visa, we have already become a member of the MasterCard system, with which we will work in several directions, with development of new products. Our principal focus in the cards' business are salary projects.
It is noteworthy that we pay considerable attention to the quality control not only at the head office but also in all branches. We are working at introduction of new services based on IT, considering the fact that we have promoted the whole IT-base to the international level. An IT consultant from Argentina regularly visits us, checks security of the information and the reserve centers. Besides, we have launched a new product: e-banking. As you see, we deal with a reverse process: currently, we are looking for clients. At present, finding good clients is very difficult, especially in the part of SMB.
What is the bank's interest rates policy and how was it affected by the Central Bank's regulating measures aimed at suppression of the dollar?
It so happened that AMD completely vanished from the market. At present the market faces two urgent problems: mismatch of the terms of attracted funds and lending, which results in a certain time gap. The second problem is the lack of AMD resources, whereas these are what the customers want, since their earnings are in AMD.
How do you estimate the problem of bad loans at the bank and in the general banking system of the country?
As you know, we registered loss in 2009, which was composed of two major components. The first component is the overestimation of currency, through which we lost a considerable amount, and the second one is removing of bad loans from the portfolio. It is noteworthy that in some cases the internal requirements to borrowers are tougher than those specified by the Central Bank. Having "refined" the portfolio in 2009, we tried to be honest both with our founders and our customers. The most important factor is that the quality of the loans in our portfolio that were provided during the crisis is on a rather good level. I think that many banks will still have to face writing-off bad loans. Currently, we are trying to work with these borrowers and help them overcome the consequences of the crisis by means of conducting specific crisis management.