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| Home > News & events > 2006 feature stories > Banking booms in thriving Armenia | ||||||||||||
Banking booms in thriving Armenia |
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Armenia is booming, and locally-owned Armeconombank is booming along with it. Having survived the chaotic and lean 1990s, the bank known as AEB has become one of the leading players in the country’s growing financial services market. The Armenian banking market has progressed in recent years, with AEB at the forefront as a pioneer setting new benchmarks, delivering new products and showing others the way as it sought higher standards of corporate governance and business transparency. The Sukiasyan family bought AEB in 1997 when the country was considered politically and economically unstable. The bank had been registering losses for a number of years. “It was a high-risk venture due to the chaos in the banking system, yet an exciting challenge and an incredible opportunity to evolve within the new, liberalised banking structure. It took us three years to regain profitability, after an intensive restructuring and clean-up period,” says Saribek Sukiasyan, the AEB’s Board Chairman. A larger-than-life personality, he’s well known in Armenia for his efforts to galvanise the entrepreneurial spirit in the country’s youth, part of his passion for furthering the country’s transition to a market economy. Period of rapid growth After 1997, AEB entered a period of rapid growth. With 16 branches in Yerevan and 25 in regional towns, it now ranks fifth among Armenia’s 20 banks and is the only one in which the EBRD has taken an equity stake (25 per cent). Mr. Sukiasyan is one of four brothers who own the SIL Group, a large holding company including AEB and over 20 manufacturing, service, real estate and trading companies. An influential player in Armenia’s growing private sector, SIL currently employs around 6,500 staff. The well-respected Sukiasyans say they are committed to creating employment opportunities in Armenia - one of the most vibrant and fastest-growing economies in the former Soviet Union. Having emerged from numerous years of turmoil since its independence in 1991, it is now buzzing with liveliness and energy, experiencing a building boom and eagerly moving towards a more prosperous future. AEB has earned a well-deserved reputation as an innovator in the local banking sector. It was the first to introduce debit and credit cards and still dominates this niche, with about a 50% market share. It was the first to introduce services for utility payments and arranged for employee salaries to be paid directly into their bank accounts. Demand for mortgages The bank was also quick to recognise the potential in developing the mortgage market. “The very idea of borrowing money to buy a property was foreign in Armenian society,” says Mr. Sukiasyan. “Historically, everything here is bought in hard cash. We also had the challenge of working with the authorities to reform legislation to facilitate mortgage lending. We put our own resources into developing the mortgage sector and into promoting the concept to the public.” The EBRD has played a key role in AEB’s development, especially in its drive to adopt high standards in corporate governance. “Having the EBRD recognise our efforts have been one of our greatest achievements. We value EBRD’s guidance in raising our standards further, especially with its expertise in the corporate governance sphere. Elevating business ethics is very important to our reputation and it also improves stakeholder relationships and increases investor confidence,” Mr. Sukiasyan says. With advice from the EBRD, AEB’s most recent step in improving its corporate governance was to separate its management and ownership structures. “We recognised very early that business cannot run efficiently without transparent accounting systems,” says Mr. Sukiasyan. “Also, business ethics start with the board. We want to set a precedent for the whole banking sector and also the business community in general. It is important for us and our further expansion to work with open and transparent enterprises.” Sound banking practice is a priority Board Secretary Anahit Simonyan, who is also a Board Member, adds: “Since the very start in 1998, AEB has worked on introducing an independent internal audit system within the bank. So in 2005, when the Central Bank established the corporate governance law, AEB was not hit hard by the problem of changing its practices, unlike many other banks.” The bank is also applying the same rigorous standards to its customers. In a country where personal contacts are highly valued, some customers assume that friendship with the bank’s owner means they can receive loans just by picking up the phone and speaking to the Chairman, without going through the bank’s formal procedures. “Regardless of the person’s status, we insist that everyone goes through the same standard procedures. Initially it was difficult for people to grasp the idea, but we were consistent in our decisions and our actions were transparent. We assessed risk correctly, which has resulted in success,” says Mrs. Simonyan, who has been working for the company for almost 10 years and knows the bank like the back of her hand. “Information transparency and proper protection of minority shareholders’ rights are of paramount importance for the Bank’s owners,” she insists. As he strolls through the bank’s headquarters, Mr Sukiasyan explains what he perceives to be AEB’s edge in the local marketplace. “We are consistently looking to improve our services, always keeping an eye on new products. EBRD’s expertise helped us expand our product range and respond more effectively to our clients’ needs. This was particularly important in our earlier days as the concept of friendly customer services was new to the Armenian service industry. ”We hope that with consistent improvements we will soon be able to achieve our ambition of being the leading private and business lender in Armenia,” he adds. Saribek Sukiasyan still has more ambitious plans for the bank that helped stir Armenia’s stock exchange into life by being the first institution in the country to issue corporate bonds. He wants to build on AEB’s competitive advantage as a market leader in new products and become the country’s largest full-service bank. “There is still much work to be done. My ultimate ambition is to float Armeconombank shares, so we must work on raising interest among the largest international stock exchanges, and I am sure we will do it one day soon,” says Mr. Sukiasyan, brimming with confidence and determination.
By Loretta Martikian, Member of Press Office
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