How do you estimate the activity of "Converse Bank" in 2007, which are the results of activity of the Bank in first quarter of 2008.

2007 was quite significant for "Converse Bank", in the context of important change - change of owner in the first quarter of last year. One of the important events was the recognition of Converse Bank as Best Bank of 2007 on developing markets, for operations with foreign currency by the competent American business edition "Global Finance". We have summed up the year with high results of principal indexes. So the Bank activities on December 31, 2007 made 58.7 billion AMD, total capital - 11 billion AMD, net profit - 1.4 billion AMD, and a balance of profit in the capital account on December 31, 2007 of 7.1 billion AMD. Last year was also the year of increase of the number of branches. All the above - mentioned facts create the preconditions for further development.
As for 2008, I would like to remind you that I took my position from February 1 this year and the first quarter closed with a profit of 682.4 billion AMD exceeding for 50% the expected level. At the same time the activities of the Bank on March 31 made 56.2 billion AMD, total capital - 11.6 billion AMD, and balance profit in the capital account for the same period made 7.8 billion AMD. Summarizing the above I would like to mention that the annual results will probably be better than forecast. In April we observed positive dynamics and if we continue the same way, 2008 will be also successful, we will maintain our position staying among the five leading banks with several indexes.

You have mentioned the enlargement of branch network among your positive achievements. How many operating branches has your bank at the moment?

Today Converse Bank has 23 branches. Last year we opened eight branches, this year we plan to open ten. Everything depends on whether we will be able to realize the modernization of the banking systems. Of course, some branches will be opened in Yerevan but most of them will be opened in the regions. At the moment from 23 branches of Converse Bank only 8 are operating in the capital, the others are in the regions.

Does the Bank intend to go on the stock market ?

I will not conceal we intend to go on the market possibly in July - August. At present the Bank is finalizing this project. Now we have a double objective: to study the market tendencies towards "long term money" and determine our potential in terms of activities in the stock market. Because we are not present there we consider this market from the point of view of attraction of means and an instrument which lets us announce about ouselves. Certainly we will not stop with this and we will consider going onto international markets in the future but it is still early to speak about it.

How do you consider the arrival of the Scandinavian exchange operator OMX in terms of development of capital market?

I think that the arrival of a large foreign structure to a developing country can be always welcomed first of all from the position of the introduction of experience, management standards, relationship with the markets and of course in terms of investments. From this point of view OMX is the right company. We should accept that we still have a lot to learn from other countries.

How do you evaluate the current stage of development of the banking system of Armenia in the current situation of the growth of competition, new players, enlargement of assortment and improvement of quality of services, activation of the stock market?

Today we are witnesses to interesting processes, which can be seen in the Banking system of RA. I think that our banks are in the turning moment of their development. The matter is that there was a formed culture in the banking system which supposed close collaboration between owner and manager. But after implementation of the concept of corporate management the tandem owner-manager stopped to function. Today the owners of the banks already know that the future is with corporate management and the promoting circumstance is that the number of banks with foreign capital, which initially are the carriers of those views, increased in Armenia. At the moment the Armenian banking system needs many changes. The concurrence, of course grows but let's accept that besides that there was very much space for the growth of the banks themselves. This is the reason of the interest towards our market by European banks. When comparing the level of demand of bank services, today we are considerably behind European and neighboring countries. We have a certain layer of population which is revealed from banking services and they are our potential clients.

Escalation of concurrence requires the banks to implement new products. What does Converse Bank undertake in such cases?

We follow one principle: if we want to keep our position on the market and develop, the only means is - service. First of all we review all our business processes, striving for rendering maximum comfortable services to the clients of the Bank. It means that we have the goal to increase the effectiveness of the Bank. We create the feeling of satisfaction with quality of rendered services. We can of course increase the percentage of deposits, decrease a little the rate of credits, this will have a timely effect but it is important to make strategic goals. That is why our first goal is to render the customers high quality services. This refers to standard services, which are rendered by all banks, and the winner is the one who renders higher quality services. Today we have developed some new approaches connected with the attraction of deposits and there are also other perspectives regarding the forming of pension funds. Which we will announce about most probably in June. Unambiguously we conduct the process of review of our domestic instruments, particularly with cards, we intend to improve our technological base of services, which will allow the client to use bank services without visiting the Bank. Among new instruments we consider also the issue of implementation of services referring to leasing and factoring - this is the spectrum of tasks we have to perform in 2008.

In total, what will be the strategy of the Bank taking into account the above - mentioned?

We remain faithful to our strategy to be a universal bank, servicing all sections of the population. I think that during last years the bank ceded its positions in the sphere of individual services to clients and from now on we are trying to repair the omission.

How do you evaluate the concurrence between the banks and credit organizations in the market of hypothec crediting? How is the situation on this market?

Hypothec is considered as one of the most interesting instruments. With this we want to implement the experience of satisfaction of the demand for improvement of habitation for the average section of the population. When speaking about the market of hypothec in general, I think the demand for this type of service in Armenia is big enough and it will remain unchanged. Today in financial - credit institutions there is an advance demand of credit resources and we always have to think about where we can procure them. When wide sections of the population start to keep their savings in banks the problem will ease. I would like to mention that the Armenian market of real estate is generally very well developed, this refers to secondary market. The primary market of elite accommodation is already established but for medium sections of society this market is not developed yet. And we want to occupy this niche. It is necessary to build cheaper habitation and not necessarily in the center. Undoubtedly, it will be necessary to attract more serious resources, and here not only banks have to achieve this. Banks can supply the secondary market, when it refers to sale - purchase but when it refers to large constructions it will not be correct to rely only on means attracted by banks for getting the hypothec. Here we will need a new approach particularly the possibilities of capital market.

Can we expect in the current situation any changes of interest rates and prices for habitation on hypothetic market?

I think there will not be any decrease of prices and also there will not be any increase of prices. But we should not also forget that the prices for building materials increased recently and it will of course influence the prime cost. But from the other side if we consider the fact of competence and solvency it is possible that it will not lead to adequate increase of prices for habitation and will be a stimulus for their containment. Regarding the interest rates, it is difficult to make any forecast, because Armenia always had a deficit of credit resources under existing conditions of lack of liquidity in international markets and lack of resources, it is possible that the lack of interest will not happen. Some years ago we observed it but in the current situation most probably there will not be any decrease of interest rates referring to hypothetic credits.

Which are the rates that can be considered as optimal on hypothetic market?

I think that the most optimal can be the rates of about 14-16% per year. But depending on the whole of bank expenses these figures can be less.

How much is the credit port-folio of "Converse Bank" CLSC?

The credit portfolio of the bank was 30.2 billion AMD as per April. If we consider the structure of the portfolio, at the end of the 1st quarter of 2008, the credit of the private sector of the economy was 18.7 billion AMD, 8.5 billion of which has been granted to large enterprises, and 10.2 billions - to small and medium businesses. Credit to physical persons was 11.1 billion AMD, 7.8 billion of which - were consumers credits, 484.1 millions AMD - credit cards. Hypothetic credit portfolio within the current year was about 3 billion AMD. In the structure of the credit portfolio of the Bank financing of state institutions was 451.7 million AMD. In terms of sectors 22.1% of the credit portfolio or 6.7 billion AMD were for industry crediting, 25.7% or 7.8 billion AMD - in the area of trade, 25.9% or 7.8 billion AMD - the area of consumer credits.
About 98.7% of credits - are standard credits, the quality of our portfolio is enough high. The Bank participates also in some international projects of the World Bank and the German Bank KfW.

Which are the objectives of Converse Bank in the sphere of the enlargement of services to customers?

In the sphere of corporate service we have a good dynamic. Today the Bank has open 2700 accounts for legal entities not counting the accounts of 24 thousand physical persons. Besides that, Converse Bank issued 22 thousand VISA cards until April, taking into account that Armenian Banks issued totally about 91 thousand cards of international payment system VISA.

Which sectors of the economy are mainly financed by the Bank?

The owner of "Converse Bank" is the Argentinean entrepreneur of Armenian origin - Eduardo Eurnekian, who focuses his attention in the area of aviation, agriculture, small and medium business, especially if it the business in the sphere of the processing food industry.

For the participation in the competition of "Millennium's challenges" we were winners in five tranches out of eight and all these means will be used for the development of the agro-sector. This will make about 500 thousand dollars and we will of course also use our own resources which will result in the creation of new work places and the raising of qualifications.

In your opinion, how does the crisis of liquidity on international financial markets, influence on Armenia, in the sphere of the attraction of long term cheap resources?

Unless the situation on exterior markets stabilizes, interest rates will continue to be high. I think, that the situation will gradually improve and possibly in a year we will be in another situation.
Now of course, a negative influence exists including from the point of view of rendering means to institutional investors. We collaborate with international banks and the improvement of the situation with liquidity on international markets of course will positively influence on the economy of the RA.

Today "Converse Bank" having the smallest nominal capital, keeps the fifth position with the size of total capital. At the same time can we expect a change of status of the Bank and as a consequence of it the increase of its capital?

Actually, with the level of capitalization Converse Bank is among five leading banks. At the moment we do not intend to increase the capital but the owner of the Bank has a corresponding program for the assistance of the capital increase. At the same time today we do not consider the question of change of our status but we do not exclude it in the future. In any case, the model with which the Bank works today is considered as optimal because it reflects the effective collaboration of owner and professional management and this is I think the formula of our success.

ARCA