Russian financial capital concedes its positions in Armenia
Since December 2014, when Central Bank of Armenia (CBA) made the minimum threshold for general capital AMD 30 billion from AMD 5 billion, almost everybody was making predictions which bank out of 21 will remain in the system.
Deadline for the banks is 1 January 2017, i.e. greater part of this time has passed, and many things have been uncovered. Number of banks has twice decreased (ProCredit Bank was purchased by Inecobank, and BTA was joined to ArmEconomBank).
Thus, 2.5 months prior to the deadline it became clear that the third bank, quitting Armenian banking system is Areximbank-Gazprombank Group CJSC. Initially Russian press informed that Gazprombank has sold Armenian Areximbank. Then information was spread that the buyer is Ardshininvestbank. And on October 11 it became clear that Arsdshinbank officially stated on this.
“The deal on purchase of 100% of shares of Areximbank-Gazprombank Group CJSC by Region Finance Industrial Corporation CJSC was finalized 7 October 2016, the only shareholder of which is the final beneficiary of Ardshinbank CJSC, well-known businessman in Russia Karen Safaryan. Upon the next stage Areximbank-Gazprombank Group CJSC and Ardshinbank CJSC have the intention to initiate the process of merging of the banks pursuant RA legislation,” the official statement reads.
Simply said Ardshinbank swallows Areximbank, and slightly said, it was unexpected.
Areximbank isn’t among the leaders with its loan portfolio, deposits and other indices. Moreover, total capital of the bank was AMD 8 billion (as of the end of the first semester 2016). However, few people were suspicious that the capital of Areximbank will be easily supplemented with the lacking 22 billion on account of parent company. Actives of Russian Gazprombank as of second quarter of 2016 were exceeding RUB 5 trillion, and their own capital—RUB 520 billion, i.e. means of Gazprombank are a few times more, than Armenian banks altogether.
The main issue was the intention whether Gazprombank intends to continue its presence in Armenian financial market, represented by Areximbank. This issue seemed to obtain its answer. 7 September 2016 Banks.am issued projects of Armenia’s banks ahead of 2017. It referred to the claim of normative capital. In reply to the website’s quest Areximbank-Gazprombank Group stated that there is a respective decision by Areximbank-Gazprombank CJSC board, linked to the bank’s normative capital and the bank will continue functioning in Armenia’s banking system.
Areximbank-Gazprombank Group would hardly make such a statement independently without clarifying it with the parent company. This means that Gazprombank initially planned to maintain its daughter company in Armenia, then it changed its mind.
The strangest is exactly this. Thus, the decision of selling Areximbank was spontaneous. And this means that a serious issue is existent.
This story is contradicting in one point as well. Armenia has been an EEU member for 2 years, which means that in this period integration was to deepen in finance and banking system as well. Many were anticipating particularly after the decision by the CBA, Russian capital would attempt to enter Armenian market through buying one of the operating banks or by founding a new one. However, this didn’t happen. Just the contrary, one of the banks with Russian capital leaves Armenian banking system.
The other bank with Russian capital—VTB Armenia doesn’t have this intention yet. By the way, on September 30, head of VTB 24, Chairman of the Management Board, replying to the question of 168.am—“it’s been more than 1.5 year, that Armenia is a EEU member country, why great Russian banks don’t show interests towards Armenian banks?” said, “It seems to me that development of VTB Bank in Armenia is a clear example and edifies of the interest by Russian banking system. However, the Armenian market is small and all banks can’t function here. This is an objective reality.” It turned out that the market of Armenian banking system is small and isn’t capable of giving space not only to the newcomers, but a few of the operating banks.
Areximbank didn’t provide information on the prices and will hardly do, on account of the two banking deals. The amount will hardly be big, as already stated, Areximbank wasn’t among the leaders and faced serious issues of capital supplementation. However, it may be supposed that the amount comprises a few dozen million dollars.
There are opinions that in any case, capital flow was recorded, a round sum passes on to Russia, to Gazprombank. However, stating of this allegation isn’t definite, conditioned by the nature of the deal. The point is that by the first stage owner of Areximbank wasn’t Ardshinbank, but Russia-based businessman Karen Safaryan through his Region Finance Industrial Corporation. Thus, to some extent, not Armenian capital has flown to Russia but other Russian-Armenian capital was moved.
On the other hand, a glance from another standpoint may be cast as well. We seem to get used to the fact, that Russian capital always purchases something here (in particular, in energy system).
Presently, the contrary is taking place—one of the serious companies of the field is being returned to Armenian “space.” And more particularly, it is returned from a company, having relation to Gazprom. That very Gazprom, which throughout recent years has repeatedly strengthened its presence in Armenia.
In short, purchase of Areximbank by Ardshinbank, to some extent may be considered as weakening of Russian capital in Armenian finance and banking system (and generally on economy dimension) and strengthening of Armenian capital.
By Babken Tunyan
