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Grigori Zakaryan: “We are ready to provide comprehensive investment services to businesses”
09/04/2024 11:51
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Grigori Zakaryan: “We are ready to provide comprehensive investment services to businesses”

Converse Bank’s Head of the Investment Department Grigori Zakaryan recently participated in the second “Capital Markets of Armenia” conference.

‘What is the current capital market situation in Armenia, what are its development prospects and how does Converse Bank see its participation in the development of the market.’ We talked about these and other topics with Grigori Zakaryan, Converse Bank’s Head of the Investment Department.

What policy has Converse Bank adopted regarding investment activities?

I would like us to differentiate investment activities and the business of investment banking as such, because they have different meanings.

All banks have investment policies,  when investing in specific instruments form their investment assets (portfolio), which acts as a liquidity buffer, ensuring smooth bank operations It also allows for the transformation of assets as needed, for example by directing funds from investments to credit investments.

Depending on the specifics of each bank’s investment policies, it can serve not only as a liquidity buffer but also play a significant role in the structure of the bank’s income generation. Converse Bank, for example, exemplifies this strategy.

As for the investment banking business strategy adopted by the Bank, here we are dealing with the provision of certain investment services, such as  issuance, tallocation and market making for securities (both the Bank’s own and those of  other corporates ), the processes related to the mergers of companies and further provision of asset management services to the clients, which as an investment banking service the Banks has integrated into its business model.

Another important area for us is Private Banking – the provision of private banking services. This feature will appeal to clients who need more sophisticated investment tools and require special private services, who will also be willing to delegate to us the authority to effectively manage their finances and generate income for them. In short, in this instance we are talking not only about investment banking services but also about all areas related to the investment sector in general.

How do you see the growth perspectives of the sector?

We have adopted a policy to support the Bank’s existing and potential clients in issuing and allocating low-volume, affordable, debt securities and offering assistance in establishing their secondary with market – making.

The growth of the capital markets around the world has largely been driven by small and mid-cap issuances that have been followed by large-cap issuances. The increase in the number issiances and those involved in the process leads to the increase in issuance volume, thereby revitalising and developing the capital market.

Today small and mid-cap issuances are in demand both by businesses, which will thus solve the problem of attracting financial resources, and by investors among whom there are participants with different risk profiles who are ready to invest in bonds of companies with more diverse risk profiles.

With the growth of the capital markets, we will be able to meet the demands of people with wide variety of investment appetite and preferences for different risk/return ratios. Quantitative increases, periodic issuances, a variety of optioms, this is how the capital markets are formed and developed, thanks to the involvement of first large and then numerous small and medium-sized issuers.

What projects were implemented in 2023 and what projects will be implemented this year?

Businesses need financing and financial independence. From this point of view, the more diverse the sources of funds raised are, and the more of various market participants’ investments are involved, the freer and more independent the company is in its actions.

From this point of view, issuing bonds is a good way of attracting financing also for small and medium-sized companies that are understandable and recognisable, can borrow, service debts and whose debt is of interest to investors.

A prime example is Euroterm, a company with steady cashflow, clear business processes, a company with products and services recognisable under the brands of Noyan and Eurotherm. The best solution for replenishing its financial capacity was to raise debt from the public sector. We proposed to issue bonds, which was gladly accepted by the company’s management. The rational and the advantage of this decision for Euroterm from its business point of view will become more visible in the coming years, also during further distributions.

The result was impressive, we have successfully completed theallication of bonds in the total volume of 500 million AMD ahead of schedule. 150 investors invested in the bonds, mostly through the Converse Mobile app:

On the other hand, this was one of the few cases of a real sector company issuing small-scale bonds in Armenia. Creating such opportunities for the real sector is very important to us. They should understand that they can have access to capital markets, t raise funds and Converse Bank is ready to become their partner in the financial market, offering the most broad range of services.

We have already started the distribution of another company’s small-scale bonds, which I think will have a particular consumer market, since the project will be more of social nature.

We are working on abond issuance initiative  with several other companies and we are in active contact with the Ministry of Economy on this issue.

My vision is to create an uninterrupted production line that will provide recognisable, transparent and understandable financial access to all companies in the capital markets.

Will the Bank issue corporate bonds?

Since 2017, Converse Bank has been a reporting issuer. To date, Bank has allocated a total of 41,591,450,000 AMD in bonds, of which 19,645,100,000 AMD are traded on the Armenian Stock Exchange. The investors were paid a coupon income in the amount of 6,686,778,742.00 AMD.

The bank’s policy is aimed at ensuring continuity of bond issuance. We intend to maintain our position in this area, and we naturally plan new releases in the near future.

What are Converse Bank’s ambitions in the business of investment?

As a participant in the capital market, the Bank is ready to offer its clients a range of investment services, whether it is the issuance of equity or debt securities, the provision of brokerage and financial management services, etc.

Potential investors are willing to consider investing in new but understandable products.

It is generally believed that the financial market develops in stages, starting with the short-term money market instruments, moving on to more long-term and complex instruments, and then derivatives. Today, we are still at the stage of formation of the market for medium-term corporate debt instruments, which still has a long way to go.

It is my deep conviction that today in Armenia, first of all it’s necessary to develop the market of corporate debt securities and to reach such volumes and variety of instruments, that the saturation of which in itself will take the growth of the market to the next stage.

What impact can education have on the growth of the market:

The issuer must be explained and trained through their own experience and then proved by experiments that attracting financing by issuing securities is an important step towards financial independence. This helps to be more open and transparent with investors and have a clearer internal corporate governance culture. These are important conditions for the company’s development, which is greatly facilitated by working with the Bank, because in addition to consulting in the field of corporate finance, the Bank also helps issuers to bring their internal management standards in line with best international practices.

Investors are very diverse both quantitatively and typologically. However, they are united by the desire to earn income. Therefore, in order to educate them and to create a demand for securities, it is necessary to present to people the advantages and benefits of investing in securities in a clear and understandable language.

The use of new digital technologies is very important in this case, as they make the financial instruments available on the market affordable and accessible even to retail investors.

Advertising the sale of bonds on Converse mobile application is a prime example. Because of its simplicity, we have had a surprisingly large number of investors via the app. In addition, we will soon also offer a wider range of tools through mobile banking, which will be fully focused on the market of retail investment.

Converse Bank has experience, a wide range of tools and skills.

Therefore, businesses need to delegate the financing tasks of their companies to us, while investors need to take advantage of our wide range of services.

23/05/2024
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