What Armenia's Banks Have Done with Their 2023 Profits: Insights from the President of the Bank Association

The total profit of Armenia's banking system in 2023 decreased from 263 billion drams to 230 billion drams (approximately 568 million dollars). This was stated by Daniel Azatyan, the President of the Armenian Bank Association, during a meeting with journalists.

Azatyan noted that this figure is still very high compared to previous years; for example, in 2021, the profit was only 86 billion drams (about 212 million dollars at the current exchange rate).

In previous years, the return on equity (RoE) for banking capital fluctuated between 5-10%, but it surged to 22% in 2022, only to drop to around 14% in 2023.

According to him, if we do not take into account the indicators of the last two years, the yield on government bonds has often been higher (though not always) than the profitability of banks. This means that, theoretically, buying government bonds (and not taking loans) would have been equally profitable for banks.

The profitability of Armenia's banking system over the past 20 years has been 10.5%, while in Georgia it was 14.5%, in Kazakhstan 24%, in Moldova 15.8%, in Hungary 13%, and close to 10% in the USA.

Regarding 2021 (since the revenue of banks decreased in 2022-2023 due to the crisis, especially in Europe), Armenia's RoE was 5.5%, which was significantly lower than other comparable countries: in Georgia, it was 23.5%, in Kazakhstan 30%, in the USA 12.5%, and in Hungary 10.2%.

When asked how banks managed the additional profit from 2022-2023, Azatyan responded that the majority was not distributed to shareholders but was reinvested. Primarily, banks used these funds to replenish their capital as a defensive buffer against potential new risks.

Additionally, banks continue to incur expenses on new infrastructures and personnel to remain competitive in global markets. The head of the Armenian Bank Association pointed out that such projects had been implemented in previous years as well, and the added profit from 2022-2023 helped to pay for them.