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CASCADE BANK FULL OF AMBITIOUS PLANS
By Lilit Aslanyan
ArmInfo
2009-05-22 20:13:00
ArmInfo's exclusive interview with Cascade Bank Executive Officer
Aharon Levonyan
Mr. Levonyan, I'd like to start with one of the most topical issues
i.e. unification of Cascade Bank and Cascade Credit Universal Credit
Organization. How soon will this issue get solution? What is the goal
of unification of the two infrastructures of one holding?
Actually, we have adopted a decision to unite these two companies
and this issue is currently discussed with the regulator and the
partners of the bank and the credit company. The goal of uniting the
two structures is to increase the share and strengthen the position
of the bank in the market as well as to provide a full package of
services by a single company. Uniting two structures we can first
of all increase the resource base, and second, considerably reduce
costs. I think that this issue will get final solution within the
coming 1-3 months.
What do you mean speaking of services diversification? Do you consider
cooperation also with other participants in the financial and banking
sector?
As regards services specifically, cooperation with Cascade Credit
UCO will help us expand the bank's credit portfolio also through
credits to the renewable energy and agricultural sectors provided by
Cascade Credit UCO. As for cooperation with other companies, Cascade
Bank has studied various projects and cooperation possibilities with
other banks from the point of view of strategic development. However,
Cascade Bank has to revise its strategic programs and budget because
of the indicators for the 1Q and the influence of the global financial
crisis on Armenia.
I'd like to mention that we have recently revised also the interest
rates since our net interest margin is high enough - 9-11%, whereas in
the USA it totals 3-4%. We have reduced interest rates of credits and
avoided fall of profitability through more effective bank operations.
How much the interest rates at Cascade Bank have changed? Did the
bank ensure profit for the 1Q in the crisis period?
We have considerably reduced interest rates of credits, in particular,
the annual basic interest rate for business loans was reduced from 18%
to 15%.
However, the annual interest rates of population deposits with the
bank in terms of the national dram have been increased to 15-15.5%.
In the1Q of 2009, we ensured rather high profitability of 40 million
drams taking the 12th position in the banking system. Although our
bank is not among the leaders by assets, we are on the 10th position
by the capital assets and on the 8th by return ones.
Indeed, the first quarter proved difficult for the banking system
of Armenia also for devaluation of the Armenian dram and growth of
credit risk.
Nevertheless, the rates of deposits with=2 0our bank and the share
of non-performing loans (NPL) in total credits portfolio for the
1Q proved rather low as compared to the averaged indicators of the
banking system. For instance, NPL in the banking system totaled 4.40%
in December 2008 and grew to 7% in January 2009 and then to 7.98%
in February. In March NPL fell to 7.87% in the market. NPL in the
credit portfolio of Cascade Bank totaled 0.92% (Dec 2008), 3.59%
(Jan 2009), 2.57% (Feb) and 4,54% (Mar).
I'd like to highlight that in 2008 Cascade Bank had serious
achievements.
The basic strategy was aimed at development and increase of the bank's
share in the banking system, increase of profits and improvement of the
quality of services. Thus, two branches were opened in Yerevan. The
number of clients grew 56%, the number of accounts 66%, the number
of cardholders - 85%.
Over 2008, the bank's assets grew 30.7%, deposits - 35%, liabilities
- 46%. The profit under IAS for 2008 totaled 308 million drams and
under Armenian Central Bank Standards - 300 million drams.
Mr. Levonyan, despite its stable and profitable activity, Cascade
Bank is rather passive in international programs, particularly, in
the mortgage lending program funded by the German development bank
Kreditanstalt fuer Wiederaufbau (KfW)?
I'd like to highlight that Cascade Bank has never suspended mortgage
lending and keeps on providing mortgage loans on own fu nds despite
certain toughening of lending terms. In the 1Q of 2008 we announced a
large-scale action in the sphere of mortgage lending and considerably
increased our share in the mortgage market. As regards KfW program, we
were not actively involved in it since the conditions of the mortgage
loans provided during the 4-month action announced by Cascade Bank
proved more attractive than the terms of mortgage lending under
KfW program.
KfW selected our bank as one of the program participants when the
terms of our mortgage loans met KfW requirements.
However, later we have considerably reduced interests for loans at
the expense of own funds, which was then fully justified and ensured
a healthy portfolio for our bank. Now we provide mortgage loans for 16
years starting from 15% annual interest and maximum prepayment of 40%
of the cost. The maximal size of mortgage loan is 20 million drams.
Besides participation in the mortgage lending program, Cascade Bank
made a contract with European Bank for Reconstruction and Development
(EBRD) for $5 million in 2008, including $3 million were placed in
the 1Q of 2009. As soon as the final $2 million are placed, which we
are going to do till the end of the 3Q of 2009, we will consider our
involvement also in other programs, including in EBRD trade finance
programs.
Would you comment on Cascade Bank's policy in the consumer-lending
segment that was affected by the c risis and the devaluation of the
national currency in March?
The key reason of reduced consumer lending is the growth of foreign
exchange deposits and significant reduction of deposits in term of
Armenian dram. As a result, consumer lending procedure has become
rather difficult since consumer loans are provided only in terms of
national currency in compliance with the country's legislation. So,
banks make some corrections to their asset management policies. If
deposit dollarization is maintained, it will lead to inflation and
will affect the market participants. In this connection, alongside with
other participants in the financial system we should exert efforts to
increase the confidence of depositors in national currency, which will
be in favor of both the banking system and economy and clients. At
present the share of the dollar deposits in total deposits with our
bank is 46%. It is rather a low indicator as compared to the averaged
indicators of the banking system as of April 1 (73%).
We have hardened the consumer-lending terms to some extent. Cascade
Bank cooperates with 177 trade and service points in the consumer
market that serve clients through the plastic cards of our bank. In
conformity with our contracts with these points, our plastic cards
provide 5-50% discounts. In addition, we have jointly issued cards
with some companies.
As regards ArCa and MasterCard plastic cards issued by Cascade Bank,
thei r number exceeded 4300 as of April 1 growing 10% over the 1Q.
Mr. Levonyan, for conclusion, would you comment on the rumors about
unification of Cascade Bank and Ameriabank?
I'd prefer not to comment on these rumors. However, since you have
already asked this question, I assure you that no transaction on sale
or unification with Ameriabank is planned. Like any other modern and
healthy organization, we plan strategic scenarios, but it does not
mean amalgamation, sale or purchase. We have ambitious and aggressive
plans of development.
By Lilit Aslanyan
ArmInfo
2009-05-22 20:13:00
ArmInfo's exclusive interview with Cascade Bank Executive Officer
Aharon Levonyan
Mr. Levonyan, I'd like to start with one of the most topical issues
i.e. unification of Cascade Bank and Cascade Credit Universal Credit
Organization. How soon will this issue get solution? What is the goal
of unification of the two infrastructures of one holding?
Actually, we have adopted a decision to unite these two companies
and this issue is currently discussed with the regulator and the
partners of the bank and the credit company. The goal of uniting the
two structures is to increase the share and strengthen the position
of the bank in the market as well as to provide a full package of
services by a single company. Uniting two structures we can first
of all increase the resource base, and second, considerably reduce
costs. I think that this issue will get final solution within the
coming 1-3 months.
What do you mean speaking of services diversification? Do you consider
cooperation also with other participants in the financial and banking
sector?
As regards services specifically, cooperation with Cascade Credit
UCO will help us expand the bank's credit portfolio also through
credits to the renewable energy and agricultural sectors provided by
Cascade Credit UCO. As for cooperation with other companies, Cascade
Bank has studied various projects and cooperation possibilities with
other banks from the point of view of strategic development. However,
Cascade Bank has to revise its strategic programs and budget because
of the indicators for the 1Q and the influence of the global financial
crisis on Armenia.
I'd like to mention that we have recently revised also the interest
rates since our net interest margin is high enough - 9-11%, whereas in
the USA it totals 3-4%. We have reduced interest rates of credits and
avoided fall of profitability through more effective bank operations.
How much the interest rates at Cascade Bank have changed? Did the
bank ensure profit for the 1Q in the crisis period?
We have considerably reduced interest rates of credits, in particular,
the annual basic interest rate for business loans was reduced from 18%
to 15%.
However, the annual interest rates of population deposits with the
bank in terms of the national dram have been increased to 15-15.5%.
In the1Q of 2009, we ensured rather high profitability of 40 million
drams taking the 12th position in the banking system. Although our
bank is not among the leaders by assets, we are on the 10th position
by the capital assets and on the 8th by return ones.
Indeed, the first quarter proved difficult for the banking system
of Armenia also for devaluation of the Armenian dram and growth of
credit risk.
Nevertheless, the rates of deposits with=2 0our bank and the share
of non-performing loans (NPL) in total credits portfolio for the
1Q proved rather low as compared to the averaged indicators of the
banking system. For instance, NPL in the banking system totaled 4.40%
in December 2008 and grew to 7% in January 2009 and then to 7.98%
in February. In March NPL fell to 7.87% in the market. NPL in the
credit portfolio of Cascade Bank totaled 0.92% (Dec 2008), 3.59%
(Jan 2009), 2.57% (Feb) and 4,54% (Mar).
I'd like to highlight that in 2008 Cascade Bank had serious
achievements.
The basic strategy was aimed at development and increase of the bank's
share in the banking system, increase of profits and improvement of the
quality of services. Thus, two branches were opened in Yerevan. The
number of clients grew 56%, the number of accounts 66%, the number
of cardholders - 85%.
Over 2008, the bank's assets grew 30.7%, deposits - 35%, liabilities
- 46%. The profit under IAS for 2008 totaled 308 million drams and
under Armenian Central Bank Standards - 300 million drams.
Mr. Levonyan, despite its stable and profitable activity, Cascade
Bank is rather passive in international programs, particularly, in
the mortgage lending program funded by the German development bank
Kreditanstalt fuer Wiederaufbau (KfW)?
I'd like to highlight that Cascade Bank has never suspended mortgage
lending and keeps on providing mortgage loans on own fu nds despite
certain toughening of lending terms. In the 1Q of 2008 we announced a
large-scale action in the sphere of mortgage lending and considerably
increased our share in the mortgage market. As regards KfW program, we
were not actively involved in it since the conditions of the mortgage
loans provided during the 4-month action announced by Cascade Bank
proved more attractive than the terms of mortgage lending under
KfW program.
KfW selected our bank as one of the program participants when the
terms of our mortgage loans met KfW requirements.
However, later we have considerably reduced interests for loans at
the expense of own funds, which was then fully justified and ensured
a healthy portfolio for our bank. Now we provide mortgage loans for 16
years starting from 15% annual interest and maximum prepayment of 40%
of the cost. The maximal size of mortgage loan is 20 million drams.
Besides participation in the mortgage lending program, Cascade Bank
made a contract with European Bank for Reconstruction and Development
(EBRD) for $5 million in 2008, including $3 million were placed in
the 1Q of 2009. As soon as the final $2 million are placed, which we
are going to do till the end of the 3Q of 2009, we will consider our
involvement also in other programs, including in EBRD trade finance
programs.
Would you comment on Cascade Bank's policy in the consumer-lending
segment that was affected by the c risis and the devaluation of the
national currency in March?
The key reason of reduced consumer lending is the growth of foreign
exchange deposits and significant reduction of deposits in term of
Armenian dram. As a result, consumer lending procedure has become
rather difficult since consumer loans are provided only in terms of
national currency in compliance with the country's legislation. So,
banks make some corrections to their asset management policies. If
deposit dollarization is maintained, it will lead to inflation and
will affect the market participants. In this connection, alongside with
other participants in the financial system we should exert efforts to
increase the confidence of depositors in national currency, which will
be in favor of both the banking system and economy and clients. At
present the share of the dollar deposits in total deposits with our
bank is 46%. It is rather a low indicator as compared to the averaged
indicators of the banking system as of April 1 (73%).
We have hardened the consumer-lending terms to some extent. Cascade
Bank cooperates with 177 trade and service points in the consumer
market that serve clients through the plastic cards of our bank. In
conformity with our contracts with these points, our plastic cards
provide 5-50% discounts. In addition, we have jointly issued cards
with some companies.
As regards ArCa and MasterCard plastic cards issued by Cascade Bank,
thei r number exceeded 4300 as of April 1 growing 10% over the 1Q.
Mr. Levonyan, for conclusion, would you comment on the rumors about
unification of Cascade Bank and Ameriabank?
I'd prefer not to comment on these rumors. However, since you have
already asked this question, I assure you that no transaction on sale
or unification with Ameriabank is planned. Like any other modern and
healthy organization, we plan strategic scenarios, but it does not
mean amalgamation, sale or purchase. We have ambitious and aggressive
plans of development.