One of Azerbaijan’s largest banks, PASHA Bank, has opened its first Business Centre to further develop its business banking operation. Farid Akhundov, the Chairman of the Executive Board of PASHA Bank commented on this along with the bank’s other recent activities, in an interview to the Caspian Energy journal. 

Caspian Energy (CE): Mr. Akhundov, how long has PASHA Bank been ope­rating in the Azerbaijani market? Which goals have been achieved over that period and which still lie ahead? 

Farid Akhundov: Ever since it was established in 2007, PASHA Bank has positioned itself as a corporate banking-focused bank. At that time, there was quite a large number of companies operating in the Azerbaijani market, so the demand for corporate lending was high. Alongside our corporate banking services, we started developing trea­sury operations and cooperating with other Azerbaijani banks in the interbank market. And two years ago we also decided to launch our Private Banking division. As our business closely follows the needs of our corporate clients, we have also successfully developed  investment banking services. By helping other banks, non-bank credit organisations (NCO), leasing companies and other organisations to issue corporate bonds, we have become the recognised leader in investment banking in Azerbaijan.  This year we have also become a member of the Azerbaijan Micro-Finance Association and have started to provide funds to credit unions and NCOs which in turn provide credit to their own clients. 

Becoming the best investment bank was never one of PASHA Bank’s key priorities. Nonetheless, our intensive acti­vity in Azerbaijan’s securities market has been recognised by international experts with PASHA Bank named “The best investment bank of Azerbaijan” at the  “Europe Banking Awards” in 2011 and 2012,  and the “Financial Awards 2013”. 

PASHA Bank has also received presti­gious international awards for the quality of services provided to private ban­king clients. We were named “Best Private Bank in Azerbaijan”, as we provide balanced and convenient services which combine understanding of customer needs with the simplicity of services. We believe this international re­cognition indicates that we have taken correct and successful steps towards the development of private banking in Azerbaijan. 

PASHA Bank is currently Azerbaijan’s largest private bank by volume of author­ized capital. We expect our assets to be approximately AZN 700-800 mln by the yearend. Our strong financial position enables us to provide services to large companies and implement large-scale projects. All of this means that PASHA Bank has become the bank of choice in the corporate market. We are now perceived as a serious player which maintains fair relationships with clients, adheres to professional ethics and is committed to transparency. 

CE: Which branches of the real economy does PASHA Bank find attractive for crediting?

Farid Akhundov: In terms of risk ma­nagement, there are certainly some sectors that are more attractive to us than others. With its passion for an individual approach, PASHA Bank prefers working with companies which have a clear-cut development plan. Such companies ope­rate in a variety of industries, including services, trade, construction and agriculture. We actively coope­rate with food distribution companies and other types of companies operating in the agriculture sector. We believe that Azerbaijan’s agriculture business has tremendous potential. It is actively backed by the state given that 40% of the country’s population is engaged in this sector. 

Some of our clients operate in the tele­communication market, which is a very promising industry in Azerbaijan. ICT is a priority area in Azerbaijan, with an information technologies park ope­ning shortly and a State Fund for Information Technologies Development dedicated to helping the sector to develop. We have submitted our application to this Fund and hope to become one of its authorised agents in the near future. 

Other most promising areas of the economy are the transportation and logis­tics sectors. With the development of the oil and gas industry, demand for logistic and refrigerating centres is steadily growing. Production of cons­truction materials is another growing industry, given the huge volume of cons­truction work to be completed in Azerbaijan over the coming years. 

CE: How do you plan to innovate SME credit allocation? 

Farid Akhundov: In October 2013, PASHA Bank opened a new Business Centre mainly aimed at promoting business banking in Azerbaijan, which is a well-known concept of financing small businesses in many countries, but is new to Azerbaijan. The key advantages of business banking at PASHA Bank’s new division will not only be the pro­vision of a wide range of financial products on favourable terms, but also a high-level of customer service. 

We are determined to keep the number of required documents to an absolute minimum to ensure that the application process for our products is as quick as it can be. In addition, our tailored approach to customer service will ensure that our SME customers get the similar high level of customer service as enjoyed by our large corporate clients. We are also planning up to five new Business Centre openings in the foreseeable future. 

We are growing our highly successful merchant banking business, which includes the provision of letters of credit and investment loans intended for procuring capital equipment from abroad, as well as opening of credit lines and credit cards for managers travelling to foreign countries. One of PASHA Bank’s strengths is straight-through payments (STP), which have helped PASHA Bank to become one of the most sustainable and competitive banks in Azerbaijan. Ins­tead of offering clients a choice of commonly available services, we have taken up the “open architecture” concept to analyse every app­lication (it is particularly relevant to small and medium businesses) and offer clients the best pro­duct meeting their requirements. 

CE: How does the situation with the US Federal Reserve System and the permanent European bank crises affect the activity of Azerbaijani banks? 

Farid Akhundov: The economies of many world countries are closely interrelated, and it is quite natural that the world’s biggest economic powers may affect other economies linked to them. Our country is certainly no exception, with broad circulation of dollar-based oil profits in Azerbaijan. Considering the volume of oil export and dollar profits, the situation in the US economy has a significant influence on Azerbaijan. The European crisis  has also had an impact, as the western banks have reduced their risks and are now less actively pursuing new business opportunities with partners from developing markets such as Azerbaijan. 

Taking all the above into account, the policy implemented by the Central Bank of Azerbaijan and the peg between the manat and dollar are growing in significance. The Central Bank of Azerbaijan has implemented quite a conservative policy and has all necessary tools for neutralising the effect of a possible rise of foreign exchange rates, including a “safety cushion” in the form of accumulated reserves. 

CE: What are the most pressing problems and tasks currently facing Azerbaijan’s banking community? 

Farid Akhundov: The assets of Azerbaijan’s banking community currently total approximately AZN 20 bln. We consider this figure to be very low in relation to GDP, which means there is a high growth potential. There are many branches of the economy where banks must do more to ensure that the Azerbaijan corporate sector is transparent, that market players provide high-qua­lity services and that the banks charge acceptable fees for their banking services. 

In addition, the local banks need to increase the volume of businesses. We are confident that, due to government policy, entrepreneurs will demonstrate more interest not only in bank credit, but also in executing transactions through banks. It is then that we shall be able to speak of bank pro­fits consisting equally of interest and non-interest revenues, as is the case in developed countries. Shifting to cashless operations is another challenge for Azerbaijan’s banking community, along with the liberalisation of the fiscal policy, which in turn will lead to the growth of the taxable base. 

CE: What do you think of the banking sector’s ability to influence the country’s economic growth?

Farid Akhundov: I think the banking sector has a very large influence over the country’s economic prospe­rity. Credit resources that banks extend to their clients help businessmen implement large projects which influence the life of not only a certain city or a region, but also the entire country. A dairy manufacturing company that cooperates with us, Atena, serves as a good example. This company’s activities have not only helped to increase jobs, but have also positively influenced the performance of farms in Agjabedi.

The upcoming year is about bringing essential growth to the non-oil sector, which is becoming increasingly significant in Azerbaijan’s economy, and the role of private commercial banks in this area is irrefutable. With a competent approach, each wisely invested manat of credit resources can produce a multiplying effect and more intensive economic activity and the creation of new jobs, leading to further growth.

CE: Does PASHA Bank intend to expand its activity in the countries of the Caspian-Black Sea region and the EU? 

Farid Akhundov: Certainly, we are actively pursuing our expansion plans. In early 2013, we opened our first subsi­diary bank in Georgia, PASHA Bank Georgia, and in the near future we intend to approve its development strategy over the period of 2014-2017. We are also considering Turkey as a potential market, since many Azerbaijani companies, including our clients, have operations there. We intend to choose a model of conducting business in this country and to identify the key priorities in the foreseeable future. In general, as a bank actively involved in trade financing, we are attracted by the strong commercial ties between the cities of Baku, Istanbul and Tbilisi. We have no plans to expand beyond these countries at present.         

We are also sizing up Europe, watching the current market conditions and the regulatory framework of the countries across the Old World. So, as soon as we see an opportunity that can serve our clients’ interests, we shall be able to make corresponding decisions. We have partnership relations with Swiss banks and our PASHA Bank private banking subdivision traditionally maintains ties with the Swiss banking sector. 

CE: What objectives does PASHA Bank set for 2014?

Farid Akhundov: The Bank will continue its operation in accordance with our Development Strategy for 2012-2014. As part of this plan, we will try to bring our assets up to the level of AZN 1 billion by the end of next year. Besides, the operating efficiency indicator of the bank’s performance is traditionally very important to us and we plan to maintain our leading position in the market in terms of income per employee rate. 

Our goal for the coming years is to help our corporate clients to achieve strong and sustainable growth so they are able to enter new markets with PASHA Bank as their strong partner. As a bank, we are completely open to the market and to relations with both big corporate customers and representatives of SMEs who have marked their path for development and need a strong partner bank.