By Shakeh Avoyan
The Armenian Central Bank (HKB) gave on Wednesday its go-ahead to the first-ever merger of commercial banks in the country’s history and pledged $5 million in loans to support the process. The HKB board said the move is in line with its efforts to promote bank consolidation.
“This is one of the most important elements of our policy,” the HKB chairman, Tigran Sarkisian, told reporters.
Ardshinbank (ASHB) and the much smaller Adana bank hope that their unexpected decision to team up will boost their efficiency and profits. Sarkisian said their financial position in the banking sector “will get much stronger after the merger.”
ASHB, which is still partly owned by the government, is the second largest Armenian bank in terms of its net assets. They stood at 23.5 billion drams ($42 million) as of last November. Adana, by contrast, has only one billion drams worth of assets.
Some local observers say a group of Armenian businessmen from Russia, interested in buying ASHB, is behind the merger. Sarkisian confirmed the existence of investor interest from Russia but did not go into details.
The merger has also resulted in the unexpected dismissal of Levon Farmanian, ASHB’s chief executive credited with saving it from bankruptcy in 1997. The unexpected development is widely believed to result from recent fraud scandals in some of the bank’s 29 branches scattered across Armenia. Several bank executives are currently facing criminal proceedings.
The merger will leave the number of commercial banks operating in Armenia at 28. The overwhelming majority of them is too small even by local standards.