It’s In the Bank

How would you assess the Bank’s performance throughout the period of the 2012-14 strategy?

A key element of the new strategy we adopted at the end of 2014 is to further increase our presence in business and commercial banking, build our SME portfolio, and enhance our understanding of the microfinance market. Although microfinance is not in our agenda as a business model, we have spent time and resources to understand micro-lenders’ strategies and the way they operate. Thus in 2013, we have established a fund to render technical assistance to microfinance institutions to have more solid grounds for lending to those organizations and actively working with them in the money market. Over the same period, in 2013 we began expanding overseas with the opening of our Georgian operations. We continued expanding further in the region, and, at the end of 2014, the Turkish banking sector regulator granted PASHA Bank permission to acquire the controlling stake of TAIB Bank from Aksoy Holding of Turkey. We will start business operations there in 2015 and we are very excited about the prospects the Turkish market holds for us. During the strategic period we pioneered in many aspects, such as developing various innovative programs, introducing a microfinance technical assistance fund, and adopting a new approach to SME lending, corporate banking, and project finance. We have a strong presence as market makers in securities market.

There were many changes in the banking sector over the course of 2014. The Central Bank of Azerbaijan has resolved to tighten control over the pace of growth of the retail market, because debt on the one hand improves lifestyles, but it can also create over-indebtedness, which is not always sustainable. Growth of retail banks has generally been slow, but in 2014, retail banks started growing at a rate of around 20-25%. As a result, there is a potential need to grow in the retail sector and to lend to SMEs and corporates. There have been signs that the level of competition between the banks that lend to the retail sector is starting to change. Competition is good, and we have always been supporting this.

What is PASHA Bank doing to develop its online and technological offerings?

Key developments in this area for PASHA Bank over the past year include internet banking, which is something we have been actively promoting. In 2014, we saw the biggest increase in new internet banking customers since we started operations in 2007. There are a number of other technology projects we are working on right now such as new client communication channels, contactless payments with MasterCard and Visa, as well as mobile wallet solutions. Our operations have always been focused on corporates, SMEs, and investment banking, and we support our clients with the best possible solutions, even if some of these may traditionally be more relevant for retail banks.

To what extent does online development help to grow the client base?

Online banking services are still new, and we sometimes face some hesitation from clients because change is not always welcome. We are working to educate people about the benefits of our online services, which is important. However, I think the key reason behind our success is our ability to meet customer requirements. This is where we want to develop our strengths, to be a significant and useful partner for our clients. Our online solutions support our appeal to clients and we will constantly continue to improve our customer service, as there is no limit in service excellence.

PASHA Bank Georgia won the Caspian Business Award in 2014 and the Turkish market is opening up for you. What does this say about PASHA Bank’s expansion in the region?

We observe intensive business interactions between Azerbaijan, Turkey, and Georgia, and trade has been increasing recently. This is a major focus for us, as we will be financing trade between the three markets. We want to be a local bank in both Georgia and Turkey. That is our approach, and we adopt international best practice wherever we operate. However, we have to keep strengthening ourselves locally in order to look outside. We are actively promoting ourselves as a gateway to the region maintaining good relationship with financial institutions and investors in Europe, North America, Asia, and MENA countries, and we will continue our efforts in this direction.

PASHA Bank recently held a forum in Sheki on agriculture. How does PASHA Bank help to facilitate the development of this sector?

Agriculture contributes 5% to Azerbaijan’s GDP and up to 40% of the population is employed in this sector. This is a major gap, which is high on the government’s agenda. Azerbaijan is an agricultural country and has been one of the major suppliers to the neighboring Russian market. PASHA Bank has financed many factories where agricultural products are processed and exported. Our role is not only to finance large projects, but also to finance mid-sized projects and corporate entities with smaller processing lines. We know the potential of the agricultural and agribusiness sector of Azerbaijan and where the opportunities and challenges lie. The government recognizes these challenges and opportunities and demonstrated its attention and support: thus it has withdrawn all taxes in agricultural sector until 2019. There are, of course, some risks such as issues of underdeveloped agro insurance products and services. However, waiting for these issues to be resolved would mean losing a lot of time. PASHA Bank has a dedicated project team working solely on agro-finance, and we have people advising us on this using lessons learnt both in Azerbaijan and other parts of the world.

PASHA Bank underwrote local bonds for Embawood in 2014. How significant do you think this is in the evolution of Azerbaijan’s capital markets?

Embawood’s bond issue is the latest in a series of corporate bond issues that PASHA Bank has underwritten. This is another step in the right direction. We started underwriting bonds for telecom and financial services companies, not only for our own benefit, but also to support our clients’ institutional investors and as of today we have managed to issue 21 corporate bond issue and total volume is AZN228 million. We are interested in more players coming to the market since this will really support the development of Azerbaijan’s capital markets and we are therefore best placed to help Azerbaijani companies to raise capital on the domestic capital markets. Successful placements are important for building confidence in the domestic capital markets. Helping to develop Azerbaijan’s capital markets is one of PASHA Bank’s key aims, since this will not only help to bolster investment banking activities in the country, but it will also support Azerbaijan’s economy as a whole.