YEREVAN. – The acquisition of ProCredit Bank Armenia may help Inecobank attract cheaper foreign funds and hence, lend on better terms,
Head of the European Bank for Reconstruction and Development (EBRD) Yerevan Office, Mark Davis, said the aforementioned at Thursday’s press conference, which announced the deal.
Inecobank has announced buying 100 percent of the shares of ProCredit Bank Armenia. To complete the deal, the bank attracted funds from the International Finance Corporation, which extended a loan of $20 million, and the European Bank for Reconstruction and Development, which made an equity investment of AMD 9.8 billion (around $20.2 million, at present exchange rate), becoming a stockholder of 22.7 percent.
This landmark deal stands at the outset of the consolidation process in Armenia’s banking system, which has been at the forefront of state policy. If one looks across the region, he will see that Armenian banks, despite being relatively small, have relatively higher costs to assets’ ratios. Cutting administrative costs through mergers may increase efficiency while larger banks can better absorb economic risks. This is particularly true in today’s uncertain economic situation, he added.
“[Inecobank] is a strong bank with a relatively high technology. As a partner, we can work together to transfer that into financial products,” Davis added.
Lastly, larger banks can better work their way through capital markets. Accordingly, Inecobank is rapidly moving to the stage where it can participate not only in local but also international markets, drawing capital on better terms. This process is extremely relevant for Armenia in general, and it can create a new level of sophistication of financial products to cater the economy, he concluded.
