Exclusive interview of the chairman of “Unibank” Board Vardan Atayan to Mediamax Agency and Banks.am portal

- Assessing the possible risks of “Unibank” in the pre-crisis period, you described the activity of the bank as “moderately conservative”. Has the policy of the bank changed since then?

- Just like in the pre-crisis period, today “Unibank” risk management policy is composed of a few components. First of all, it is maintaining the capital adequacy, secondly – credit diversification, thirdly – introduction of new products.

In the pre-crisis period, we faced a serious problem, related to currency risk, when our AMD deposits were converted into USD ones. In particular, deposits at the sum of about $50mln were converted, and the majority of our assets remained in AMD, which led to significant losses in the process of national currency devaluation. However, in the course of a year we managed to not only catch up with the losses, which made 827mln AMD all in all, but also work with profit.

Starting from the second-third quarter, 2009, we took up serious revision of our credit portfolio. For all creditors, who expressed readiness to pay for the credit, but experienced certain problems in that period in business activity, we prolonged credit terms, reduced interest rates, demonstrating a partnership approach for our customers.

The end of 2009 was quite an active stage for the bank in terms of crediting: within the framework of the Russian credit, we started receiving refinancing from the part of the Central Bank. Within the framework of this program, as of the end of the year, we had placed means at the sum of 17bln AMD as to small and medium enterprise. The total credit portfolio of the bank exceeded 65.6bln AMD, the number of credits made 9.5 thousands. Only in the fourth quarter, the bank provided 2000 credits.

With the growth of the credit portfolio, aiming at maintaining the bank’s capital adequacy, we turned to “Unibank” shareholders for capital replenishment. The capital of the bank was replenished by 2.8bln AMD. At the same time, the Central Bank provided a subordinated loan again at the volume of 2.8bln AMD for the term of five years.

Concerning the policy of “moderate conservatism” of the bank, which I voices in the pre-crisis period, it equally related to the entire banking system of Armenia, which, not being integrated into international financial markets, avoided serious losses. 

Today, the strategy of “moderate conservatism” is in the fact that we position ourselves as a retail bank. The international experience shows that banks with retail-orientation found themselves in a more favorable situation in the period of the crisis. The customers, who have a credit line, started actively using it at the height of the crisis, which led to increase of the profit percentage of banks.

Today we state with confidence that “Unibank” is a retail bank for all, which aims at servicing the population and crediting small and medium enterprise. We intend to reduce the average volume of our credits, reduce the possible risks, expanding the customer base at that.

- “Unibank” is one of the few large Armenian banks, which did not receive loan means from international donors. What is the reason?

- We planned to receive a loan from European Bank for Reconstruction and Development (EBRD), we had signed a memorandum for $10mln; however, along with aggravation of the crisis, EBRD froze a few projects, including ours.

In one of the most difficult periods for us, which was the December of 2008, when the outflow of deposits from banks started (in December, it made $6mln), Russian “Uniastrum Bank” provided us with a credit line at the volume of $50mln. Moreover, as of today, we have an agreement signed with “Uniastrum Bank” on providing a credit line at the volume of $20mln at quite affordable conditions. 

Per se, the bank does not experience the need for external additional means. Today our credit reserves make about $30mln.

Using the occasion, I would like to note that soon “Unibank” will be assigned international rating from Moody’s.

- Following the results of last year, your bank occupied leading positions in the banking system of the country, at least as to two indices: the volume of car crediting and the volume of time deposits. Due to what did you manage to secure leadership?

- Concerning car crediting, here we speak about inertial leadership, that is to say, the indices, which were marked in 2008 and moved to 2009. I should note that in 2007-2008, we issued 30-40 car credits every day, while in the initial market of the country there were 80-100 cars sold daily. But just like last year, this year car crediting will be a passive product for the bank: there are car salons today, which have unsold cars produced in 2008.

Concerning time deposits, in this market, Unibank is a recognized leader already. The most important is that the population believes and trusts our bank. Our depositors enjoy one of the best interest rates, convenient order. We also give depositors the chance to participate in drawings and win valuable prizes. Today, “Unibank” has over 13 thousand depositors with the average volume of deposit making $7-8 thousands. As of today, over 80% of placed means are USD deposits, while back in 2008 we had the opposite picture.

- Some time ago, you suggested legislatively fixing the requirement on realizing cashless purchase and sale operations on real estate. What did your initiative end up with? 

- So far, due to unknown reasons, this initiative has not been realized. If deals on real estate are realized through the banking system, it will lead to increase in bank liquidity; the deals will be transparent and controllable.

There will be a convenient mechanism of payment created for the participants of real estate purchase and sale. The deal itself is not taxed, thus, there is absolute reason for realizing this initiative.

- We would like to get your assessment concerning steps of the Central Bank on dedollarization. Won’t the toughening lead to increase of interest rates in the banking system in general and in “Unibank” in particular?

- The struggle against dollarization should become a general matter. Everything is very simple here: if we do not struggle against dollarization, we will not have a monetary-credit policy and we will be directly dependent on the currency, which will be in circulation here.

According to the requirements of the Central Bank, a part of means in foreign currency, attracted by banks, is subject to compulsory backup. Within the framework of refinancing, 7% limitation has been introduced for long currency positions of banks concerning the capital. Besides, the banks are obliged to keep the refinanced credit means, repaid by creditors, in AMD, or to place them again in the national currency.

The struggle against dollarization will be much more efficient, if the potential depositors at least in a short-term prospect are sure of the currency exchange rate stability. I should note that there is no special demand for foreign currency today. 

Concerning the second part of your question, according to my forecasts, serious difference between interest rates of AMD and USD credits will be registered by fall, 2010: the interest rates of AMD credits will increase, and the one of USD credits will go down.

- You attach special importance to implementation of IT technologies in the banking sector. In particular, “Unibank” has implemented an automated banking system - LSBank, the wap version of the website has been launched, the bank realized payments for utility services in on-line mode, etc. Are you preparing for novelties?

- Recently we started working over establishing our own processing center and we purchased software support. Processing will already be put into operation in July, 2010. At present, we are installing the corresponding device, and after concluding its testing, the customers will be offered a loyalty program.

For instance, if you have made a payment at a supermarket with the use of “Unibank” card, you receive bonus points. That is to say, the customer, spending money, at the same time earns. We have already concluded preliminary agreements and memorandums on cooperation with certain companies and trade outlets. Implementation of the loyalty program is concordant with the strategy of the bank on expanding the activity in the market of retail services.

- “Unibank” carries out active policy on broadening the branch network. In this term, it is interesting to know how you solve the personnel issue, in particular, at the level of choosing the managers of the branches. 

- This issue was separately discussed at the annual meeting of “Unibank” shareholders, which took place in early May. We started thinking about opening specialized branches on particular services. This issue is becoming more urgent, given shift of the bank’s emphasis to retail services. The branch managers should mainly be in charge of quality service, basing on established standards. For instance, if we issue credits at the volume of 300 thousand AMD, the monthly payments on which make 10-12 thousand AMD, this issue may be solved automatically.

Concerning selection of new personnel, we enroll probationers for 3-6 months, organize their training, after which we make a decision on hiring them for the job.