BANK OF AZERBAIJAN - WE WILL JUSTIFYOUR NAME

 

Caspian Energy (CE): Mr. Gasanly, will you generally review the activity of Bank of Azerbaijan, please? What is the history of its establishment?  

Mammad Hasanli, Chairman of the Board, Bank of Azerbaijan: Originally the Bank was set up in 1993 that is the year since when the bank has implemented its direct activity in Azerbaijan. At first the bank's name was Rabatbank. The bank started activity with the Turkish capital. Further, in 2002 the bank was purchased by local shareholders and renamed into Ish Bankasy Azerbaijan. The bank's present Management Committee has been working in Azerbaijan since August 2005. Its  present name, Bank of Azerbaijan, the bank received in March 2006 when the Turkish shareholders completely left the board of stakeholders. The follow-up work included changing the bank's image as we decided to leave the previous image of Ish Bankasy.  We have implemented the wide campaign so as to replace both the corporate and general image of the bank. Now we are not the bank looking forward to being a leader in the banking sector of the country. We are the bank for whole Azerbaijan and all Azerbaijanis that offers the whole range of services both to the corporate and private sectors.

 

CE: Why was the bank's image changed? Why did the today's Management Committee of the bank not like the previous image?

Mammad Hasanli: Previously the bank served interests of a certain group of entities and a certain circle of Turkish entrepreneurs. Since when the shareholders changed, the bank has expanded its activity, started attracting deposits from individuals and developing various products.  The process was launched during the former management. We introduced a quite new conception related to the services offered, expanded their assortment and at the moment we render services to both the corporate sector and individuals. We do not have any differences in our mission. Justifying our name we render services to the whole Azerbaijan market. As the bank has worked with corporate customers for a long time, of course nowadays the bank's business mainly covers this circle. The reason is that by the time we opened doors for a wider range of customers, many of our competitors had already held certain niches in the market of individuals throughout Azerbaijan. As a result, it was very difficult to conquer markets uncovered by other banks. We carry out work in this direction and offer certain products to involve the remaining part of the market of individuals to start working with our bank.

For instance, in mid 2006 we were among the first who offered services on cheap plastic cards of VISA International payment system. This project is mainly aimed at the market of individuals because the shift to cheap card payment in the public transportation system of Azerbaijan is to be introduced this year. The Baku Underground has already shifted to this system, whereas other types of intraurban, suburban and intercity transport will shift to this system very soon. At the same time we offer deposit placement in our bank and simultaneously present a credit card with a cheap that can be used in any transport. The plastic cards project will be fully introduced this year. We did our best to purchase new samples of plastic cards, introduced them to the market and offered our customers the opportunity to use these cards both through our ATMs and POS-terminals. To date the bank purchased over 30 ATMs. Over ten ATMs have been already installed in the capital and some regions. We keep on working in this direction.

 

CE: What fields of the Azerbaijani market are attractive for Bank of Azerbaijan? What projects do you plan to introduce in future?

Mammad Hasanli: Some institutions of the transport system are our clients. Our ATMs have been recently installed at the terminals of M-Trans Company. We plan active cooperation with the structures of a new bus terminal. The banking service of this huge unmatched in the Caucasus complex will be provided by our bank. We offered the best service conditions to customers in this area. At the same time the bank is actively expanding its business in the regions of the country. Our shareholders, the Supervisory Board of the bank see huge potential in the regions, namely in the market of individuals. The great difference between the capital and the regions is obvious now. My personal opinion is that the main market to be conquered by commercial banks is regions.

Besides, we have potential projects in both food and heavy industry as well. Even big regional business is interested to work with us. By this reason we look forward to development of regions through implementation of our projects.

 

CE: Can the bank extend its credits to large business? What is the level of cooperation with the National Business Support Fund?

Mammad Hasanli: We are implementing active work with the Business Support Fund of the Ministry of Economic Development. Within the framework of the State Programme on development of regions our bank holds the second positions regarding the number and the sum of extended loans intended for development of small and medium business in the regions. At the moment the total portfolio on the National Business Support Fund comprises 18 million AZN. The bank itself is able to credit big business in the regions. But enterprises are not interested to agree on commercial conditions as the projects implemented in the regions are long-term. Their payback period approximately makes 5-10 years. Therefore, the conditions we offer will not be profitable for these entities.

 

CE: What are the basic indicators of the bank? What international payment systems work in the bank?

Mammad Hasanli: The largest indicator I could mention is growth the bank's assets which has almost doubled within 18 months. At the moment the full package of the banks' assets comprises 56 million AZN. One of the major tasks in 2007 is to enhance the indicators related to profit-earning capacity of assets. We have large assets, but their profit-earning capacity leaves much to be desired. The bank holds the seventh position due to its all packets of indicators, though 6 months ago the bank occupied the second place regarding its capital. Thus, the amount of the total cumulative capital of the bank had been more than enough for the operation in the market since already 2004.

Western Union system and express money work in our bank. The negotiations with Money Gram system and Bystraya Pochta that enables to transfer money in the territory of CIS are ongoing.

 

CE: How developed is the branch network of the bank? Do you plan to expand your branch network in the regions of the country so as to support projects on crediting small and medium business?

Mammad Hasanli: At the moment the bank has 18 branch offices. 13 are located in Baku and suburbs of the capital, whereas the rest 5 of them are in the regions. This year we plan to open offices in Ganja and Guba. The strategic plan of the bank's development provides expansion of the branch network to other regions of the country next year.

Very large projects are associated with the development of business in Nakhchivan where our branch office has been working since the previous year. This is a potential and very perspective market where most of customers have already agreed to pay salaries to their employees by means of our plastic cards. The potential market of customers we can cover in Nakhchivan within this year might comprise nearly 20,000 people. Both government agencies and private structures show interest in it.

CE: What about mortgage lending in the bank?

Mammad Hasanli: We joined the Mortgage Fund in September 2006 but have extended no credits as we have several interesting projects that will be submitted to the Mortgage Fund in February 2007. In 2006 we decided not to extend our credit portfolio at the expense of the Mortgage Fund.

 

CE: Does the bank implement any concrete programmes regarding informing the population and attraction of potential clients? 

Mammad Hasanli: The year 2006 was a transition year as we changed our image, carried out the advertising campaign in all mass media. We make large investments in these operations. This year we plan to enter the market of individuals. At the moment we are preparing a mass advertising campaign that will bring our information to all layers of the population. Besides Mass Media, it will also be brochures and the sponsorship activity. We did not provide powerful advertising support to our cards exclusive of publications in some highly specialized editions. We are arranging a large public-oriented advertising campaign in spring-summer 2007 to inform the population with the services of Bank of Azerbaijan.

 

CE: What is the degree of trust of citizens to local banks? How do you attract individuals? What concessions do bankers make?

Mammad Hasanli: The crisis the Azerbaijan bank faced after reorganization and during the first years of independence ruined the trust of Azerbaijan legal entities and individuals to the banks. At the moment we are regaining positions. I dare say at least 10 years are required to completely restore the trust of the population. Of course, banks make certain discounts while working with clients because of the serious competition in the market. We permitted our branch office in Nakhchivan to make discounts when distributing plastic cards. For government institutions commission fees and tariffs subjected to payment to the bank are important as the rate of salary an employee withdraws from the account is deducted back from the institution. A budget institution is first of all interested in low commission fees. We made a step so as to attract more customers in exchange for potential losses and lower benefits. This enabled us to create a perspective market for 2007.

In the beginning of the year we decided to enhance the deposit rate for individuals to 18%. This is a maximum rate we can offer to clients now. We kept this rate at the level of 13-14% for a long time and did not risk raising it. The final figure shows the minimum risk. At the same time it is accompanies by a downplayed completion. We felt flow-out of deposits from the bank. Indeed, people search for higher interest rates. Under conditions when some banks offer up to 24% it is very difficult to survive in the market with 13%. Within a month of working with new rates we felt good outcomes. However, this trend has an inverse effect. It is unprofitable to both the bank and our customers because of growing tension, inflation and enhanced risk factor. But this is a certain economic progress that we cannot stop and just have to observe.    

 

CE:How many foreign banks do you have correspondent relations with?

Mammad Hasanli: The cooperation with foreign banks is of high priority to us. The bank has correspondent accounts in Dresdenbank and the largest banks of Russia. At the moment we carry on talks with Americanexpressbank so as to open a correspondent account. In view of active development of cooperation with foreign financial institutions we were the first bank in Azerbaijan that got 9001:2000 standards for Quality Management System in 2006. This will enable the bank to adjust to international standards and become more recognizable in international markets. The point is that our bank was officially audited in 2004 and 2005. The year 2006 is going to be the third one when we will get officially audited reports. International organizations and world-famous banks search for cooperation with banks which experience includes three years of passed audits. We have already signed the contract with Deloitte and Touche. I think that by April we will have a ready report on the banking activity officially audited by this company. The certificate we have along with our experience will allow searching for further cooperation with other banks and international financial institutions.

 

CE: Does the bank plan to enter the CIS market for instance?

Mammad Hasanli: Not yet. Our plans cover other directions. We plan to emit the first bond issue of our bank.. In 2008-2010 we intend to get settled in the market of Azerbaijan (Baku Stock Exchange). Our further strategic plan includes the entry to the CIS market. It will depend upon the indicators of the bank, the degree of our presence in the Azerbaijan market and achievement of our near-term objectives. Then we will decide what markets to enter. The placement in foreign markets requires rating. To achieve it we have to implement much work. First of all, we have to shift to a new office, expand our personnel, adjust our bank to world-recognized international standards and later think of getting a rating.

  CE: How does the probable execution of the WTO's requirements regarding establishment of direct representations of foreign banks threaten to local banks? Will it be easy to compete with them?

Mammad Hasanli: I do not think it will be an easy business. Foreign banks have worked for many years and have representations and experience in many countries of various development levels. In this regard the market of Azerbaijan is not a problem for them. But a certain cultural factor, as the international practice proves, will always be on our side. I believe that the fact that we are the bank for Azerbaijan will enable us to compete with foreign banks and provide a great advantage of ours. By that time we will have had a quite developed network in the regions. I regard these facts as an advantage we will enjoy if we face probable competition with foreign banks. When they enter our market, I hope we will attract most customers and provide such high level of services and thus make their conditions noncompetitive with ours. By then we will make decisions as the situation requires. As to the financial market, it surely will benefit much from their presence in Azerbaijan. Foreign banks mainly enter the markets of developing countries with a large and cheap capital, which is a deficit for us now. Money is expensive in Azerbaijan and is extended on discount conditions. Of course, this is a great advantage for the development of the financial system of Azerbaijan and economy on the whole, but I personally see some threat for the banks. But the ongoing capitalization of banks that leads to the reduction of their number and improvement of the direct financial base of each bank creates opportunities to resists to the capital that will be brought to the country by foreign banks.          

 

CE: What future of Bank of Azerbaijan in Azerbaijan would you suggest?

Mammad Hasanli: Our mission and objectives do not concern capturing leadership or precedence in the home market. We just intend to offer more qualified and contemporary services to the whole population of the country. For instance, if an average statistical Azerbaijani knows about our bank and takes interest in our services without being our client, it will be a great achievement of our mission. We want to be the bank, no matter how hackneyed it sounds, that works mainly to strengthen the financial field and the whole economy of Azerbaijan. I hope, in the near future we will justify our new name and carry it with honor.