Azerbaijan, Baku, Sept. 16 /Trend E. Aliyev/
Next year about 20 banks will remain in the Azerbaijani market, Chairman of the Board of VTB Bank (Azerbaijan), Alexander Eremin believes.
"Expectations of the Central Bank of Azerbaijan (CBA) on changing the number of banks in the country after the new regulatory requirements for minimum total capital came into force seem optimistic. I mostly share the opinion expressed by the international rating agencies in this regard. The CBA predicts that the number of banks operating in Azerbaijan, will be reduced to 30, but it seems to me that there will remain less of them at around 20," Eremin told Trend.
According to a decision of the CBA, from January 1, 2014, the minimum total capital of country's banks will be increased from 10 to 50 million manats.
According to the VTB Bank (Azerbaijan) head, the lack of time for taking alternative measures except for raising capital is the one of the reasons of such a possible reduction.
"The process of combining the banks is quite long as it can take up to 18 months. Besides, the owners have to negotiate and agree on all the issues. In the absence of sufficient experience in such transactions in the history of Azerbaijan's banking sector, this process will be even more complicated and time consuming for existing players. During the remaining three and a half months it will be unlikely possible to massively carry out such transactions in a small market," Eremin said.
The scenario of a mass takeover of smaller banks by larger banks also seems very realistic, he said.
"With the entry the new regulations for banks which will be unable to increase their share capital to the required level there will be only two options to proceed. Either offer to more big banks to buy themselves too cheaply, or turn into a non-bank credit organisation (NBCO). The second scenario of events seems to me to be the most possible although the bank's licence will be revoked and the organisation will waive a part of its banking operations, but will retain its loan portfolio and core business in the form of loans," Eremin said.
He went on to add that the banks which have been engaged in transfer operations are likely to simply dissolve.
"The banks engaged in real crediting may be preserved in the form of the NBCO. Perhaps we will also see deals on a takeover of one bank by another, but these will be single such situations. I'm pretty sure that the prices the big banks will offer to the owners of small banks for the purchase, will not satisfy the owners of the latter and transformation into credit unions will be more economically justifiable," Eremin said.
VTB Bank (Azerbaijan) also considered the possibility of consolidation with other banks in the country, but later dropped the idea.
"There have been some discussions about a number of banks, but no more. As a result of these discussions, the management of Group VTB abandoned the idea of consolidation and decided to increase the capital of its subsidiary bank. The consolidation of banks is a very difficult and complex process that requires considerable time. Azerbaijani banks do not have experience in consolidations and expecting high level of expertise from them in this matter, would probably be too optimistic.
"Since the problem of the capital increase is mainly faced by small banks, then in the sense of expanding the client base the consolidation is not very interesting, because any actively working bank may increase its customer base fast enough," Eremin said.
VTB Bank (Azerbaijan) has been operating in the country since 2009 and is a subsidiary of OJSC VTB Bank. Some 51 per cent of its shares belong to JSC VTB Bank (Russia) and 49 per cent to AtaHolding.
In the Russian banking market the VTB Group holds second place in all major indicators. Among Russian banks JSC VTB Bank has the highest rating of the international rating agencies Moody's Investors Service, Standard & Poor's and Fitch.
Some 43 banks operate in Azerbaijan.
The official exchange rate for Sept. 16 is 0.7845 AZN/USD.