OREANDA-NEWS. October 23, 2009. www.banker.am – interview with the Chief Executive Officer of Cascade Bank CJSC Aharon Levonyan, reported the press-centre of Cascade Bank.

- Dear Mr. Levonyan, how would you assess the principal financial results of Cascade Bank during this year? Please compare them with the results of the same period of last year.

- The results of Cascade Bank should be considered taking into account the developments at the general banking market and banking system stipulated by the world economic crisis. Cascade Bank has retained its positions and the crisis did not considerably affect profitability of the bank. As of the second quarter of 2009, the income exceeded our projections by 9-10%. It should be mentioned that Cascade Credit Universal Credit Organization has merged with Cascade Bank, in the result of which the bank got new strategic opportunities and possibilities of interesting innovations.

Both due to the consolidation and the effective activity of the bank, its assets increased by 41% as compared with the end of 2008, reaching 19.5 billion against 13,8 billion of 2008; at the end of 2008 the loan portfolio amounted to 7,3 billion while at the beginning of this year it reached 11,8 billion. The total liabilities increased by 47% - from 8,3 billion to 12,2 billion. Consolidation of Cascade Bank and Cascade Credit UCO resulted in the increase of the bank’s capital – from 5,5 billion to 7,2 billion. Speaking about financial results, it should be mentioned that the bank’s interest revenues have increased by 50% - from AMD 650 million to AMD 981 million. The bank earned 192 million by the results of the second quarter of 2008, and 205,6 million – during the second quarter of 2009. We should take into account two important factors – decrease of GNP and the general economic activity, as well as merger of Cascade Credit UCO with the bank. If we compare the fourth quarter 2008 with the second quarter 2009, the number of customers increased by 24%, and the number of card holders – by 27%. 

- What kind of new banking technologies were used by Cascade Bank during the latest time period?

- In the latest time period, we implemented mainly anti-crisis measures and the bank did not intend to use new banking technologies. Still, the bank always updates and expands its products. Introduction of internet banking is considered at the bank. The relevant software is already available and it will be possible to use it in 2010. Besides, we created a system of discounts in cooperation with different organizations and shops. In the result of consolidation with Cascade Credit UCO, the list of the bank products was supplemented with loans provided to the renewable energy sector. At present, introduction of the clean development mechanism project is at the final stage. The bank will act as the seller within the scopes of it, i.e. will be able to sell at the world market the certified reduction of emissions resulting from its customers’ activity. This is an innovation for the banking system of Armenia.

- In your opinion, which fields of the private sectors are most efficient for lending? 

- Taking into account the present situation, the fields where the demand is not elastic are most preferable. Basically, these are the fields of catering, agriculture, small and middle business, the production of which is consumed at the internal market. But there are other fields, the demand for which has not decreased. There are various organizations which are rather stable, since they bring their structure to conformity with the demand at the market. Thus, I consider the trade sector also preferable for lending.

- Was there any change in the loan portfolio of 2009 and what are your expectations with regard to this?

- Naturally, there have been changes in the portfolio. Both positive and negative changes were observed in the first quarter 2009. The quantitative increase in the portfolio was due to consolidation of our organizations. The volume of the bank’s portfolio almost remained the same. In terms of quality, there was aggravation as compared with 2008, which was predictable. But the increase of the lending risk for the bank’s loan portfolio was insignificant and its condition is above the market average. Increase of the lending risk in 2009 was predictable.

As to 2010, I am of the opinion that the same trend of 2009 will be preserved. We do not expect any increase of economic activity and, if we manage to retain the indicators of 2009, we will consider this a positive result. 

- Which were the principal fields for lending by Cascade Bank in 2009?

- If we do not consider consolidation with Cascade Credit, 47% of loans were extended in the field of trade, 20-21% were the agricultural loans. Consumer lending, including mortgage loans, comprised 23% of the loan portfolio, in particular, 7% was the share of loans extended to the field of industry. And if we consider the lending organization as well, the significant share will be that of loans provided to the field of industry (about 48%). The principal direction for the bank was business lending, though we see great potential in consumer loans. 

- How would you assess the present situation in the banking system of Armenia? Which are the current principal risks for banks? Do you think that banks are ready to confront these risks?

- As compared with other developing countries, the condition of the banking system of Armenia is satisfactory. I do not think there are great risks in connection with stability of the banking system or liquidity. The factor of the liquidity risk in the banking system is insignificant. Basically, the banking system is exposed to foreign currency and lending risks. Very often, foreign currency expectations and fluctuations can affect the structure of the bank’s assets and liabilities considerably. Besides, there might be negative influence of the bank’s long-term strategy. As to the banks’ readiness to confront these risks, many banks are changing their approaches to management of these risks and amending the internal regulations and product structure. The crisis made the banks more prepared. Many products used to be affordable for banks. Lately, taking into account the increased risk, banks became more vigilant, which is positive on the one hand, but might limit the lending volumes. In the result of the crisis, banks intensified the control over internal regulations and processes, which renders the banks more steady and ready for management of different risks. We can consider this as a positive consequence of the crisis.