Azerbaijan, Baku, 11 August /corr. Trend I.Khalilova / Recently Fitch Ratings assigned one of the largest banks of Azerbaijan, Unibank Commercial Bank, the next rating. The Agency approved 'Stable' Long-term Outlook for Bank's rating.
Over the past several years, Unibank has been stably occupying the third place in Country's banking system for the amount of assets, credit portfolio and other key indicators.
Unibank became the first Azerbaijani bank, of which shareholders were joined by the institutional investors as the European Bank for Reconstruction and Development (EBRD) and German investment corporation DEG. Furthermore, the EBRD became part of the shareholders of the daughter company of Unibank - Unileasing - and acquired 33% of the assets of the company. This deal became the first such project of EBRD in the leasing market of Azerbaijan.
Faig Huseynov, Chairman of Unibank's Board, spoke about bank's current activities and future plans during his interview with Trend .
Question: Fitch Ratings assigned rating for Unibank and stated that Outlook for the rating is Stable. In 2009 the Agency expects improvement in the bank's rating due to support for acceptable quality of assets. What is possibility for it?
Answer: Assigning rating for the bank is a positive factor, taking into consideration the global financial crisis, which has been lasting for already more than one and a half years. We are the witnesses of negative processes in the financial sector, the colossal losses of the leading banks due to the mortgage crisis in the USA, which affected the entire world financial system.
Summarizing all these circumstances and
taking into consideration the complex working conditions in the market of
capital, rating is a positive signal to all partners of Unibank both inside and
outside the country.
We also have good reasons to consider possible the improvement in the rating in 2009. Mainly this is connected with the plans regarding institutional development, achieving strategic goals and balanced growth in Unibank.
Question: What is the reason for assigning Unibank the level of support on long-term rating of the Issuer Default as "no level of support"? Is it connected this with absence of support from the State?
Answer: The level of support envisages
support both from State and from the shareholders, which is firstly of interest
for the rating agencies. In our case, large part of the assets belongs to the local
shareholders - physical entities. Some 23.5% of assets is owned by the
institutional investors - EBRD and DEG.
When we speak about the factor of support, then we firstly imply supporting the
level of capital, indeed precisely the capitalization is the key factor of
support from shareholders. It is completely obvious what our foreign
shareholders, as the large worldwide financial institutes, have high possibility
to support their participation in the capital of banks.
According to the strategic development plan, Unibank is at a sufficient level of capitalization over the outlook from the end of 2008 - mid of 2009. The issue of further increase in capital of bank has several solutions: due to the acting structure of shareholders, due to attraction of new shareholders or due to access to IPO. We consider all possible versions, analyze their pluses and minuses. However, I again emphasize that this problem does not stand currently.
With regards to the State support, firstly State banks can use it. At the same time, Azerbaijan Republic's Law on Banks envisages rendering support to liquidity by the National Bank of Azerbaijan to the banks of the country. Accordingly, Unibank also can consider the support from the NBA in specific cases, but up to now, such precedent has not occurred in our work.
Question: Is Unibank prepared to pay off essential part of the international borrowings (AZN 63mln), which Fitch mentioned, by the end of 2008 and will this affect the general state of the bank?
Answer: The bank has a clear plan of
re-financing and re-paying the attracted funds. Today we fulfill all our
obligations. Daily the bank carries work with all its creditors, which gives
grounds to predict that no unpleasant surprises expect us.
Currently the total amount our external borrowings comprise AZN 225mln, and by
end of the year we expected an increase in this portfolio up to AZN 340mln. The
attracted funds are directed towards qualitative financing of private sector
and consumer (mortgage, auto and other) crediting.
The bank developed ambitious plans to reach certain figure indicators, but we preserve our right to re-consider them to please healthy balance. The highest figures are not end in themselves for us. Attaining figure indicators on assets, loan portfolio and other indexes are possible only due to observance of two terms, including healthy balance structure and balanced risks. We prefer more reasonable growth policy with inclination to conservatism.
Question: As to you, how strongly will the world financial crisis affect the Azerbaijani financial system and what steps are necessary to be taken to mitigate this stroke?
Answer: People should not have special fears and reasons for panic. The impact of the financial crisis on Azerbaijan is the restriction of access to financial sources: foreign investors are more selectively approaching debtors at the developing markets. Second, funding seriously went up and became more conservative due the terms of borrowings. However, according to our experience, I can say that we have not faced problems of return or prolongation of existing agreements and attraction of funds.
Moreover, we, as an active creditor in the country, strongly object to take borrowings in higher prices because in this case, we will have to increase rates on loans for final debtor, respectively.
In this situation, there are two versions: either to borrow expensively and sell loans, reducing our margin, or to reduce amount of borrowings and respectively decrease loans. Both of these versions are acceptable.
It is not a secret that at present majority of the Azerbaijani banks seriously have risen rates on loan. On the one hand, it is the consequence of financial crisis, on the other hand - reduced and expensive sources of interior financing. Rate rise on deposits testifies it.
At present, Unibank's rate on loans varies at averagely 18-24% level and on deposits - 13-15%. Moreover, maximum rate on dollar deposits make 18.7%.
I hope that toughening the funding terms will be basic and the only impact of the world financial crisis on Azerbaijan. Currently, banks of the country do not possess such amount of borrowings abroad, that it should considerably affect the country's economy. If a bank pursues balanced loan policy, conservative approach to mortgage property and functions in the condition of stable developing market, there are not reasons for special fears.
For foreign borrowings, the key component is avoidance of temporal break between involved funds and allocation and conservative assessment of not only gold, but also debtor's activity and his/her purchasing capacity.
Our bank is one of the most interesting partners for the foreign investors. Therefore, we have got several proposals from different foreign banks and funds. We work with them and choose more favorable terms, whilst at present we do not need funds urgently. The highest priority in the current condition is balanced growth and managing with risks.
Question: How do all these processes affect Unibank's plans on Eurobond issuance, which was postponed to the end of 2008?
Answer: The project of Eurobond issuance is at the highest readiness stage. All documentations have been developed and the bank had been prepared to begin the project since October-November 2007. However, assessing the situation at the markets, we decided to postpone terms of launching, and the time shows that it was a correct decision. We follow up all deals at the markets not only with the Azerbaijani issuers, but also with the whole CIS and the Eastern Europe and understand that issuing Eurobonds would not be successful in these conditions.
Question: Unibank's shareholders comprise two portfolio investors, including EBRD and DEG. Generally, portfolio investors stipulate for period of leaving shareholders staff. Do the EBRD and DEG plan to sell their shares at Unibank and how are your plans on strengthening bank's institutional development connected with these changes?
Answer: Aggressive development and achievement of ambitious financial indexes on increasing business can not be realized without strong and well prepared institutional platform. In 2007, we invited two foreign specialists from the United States and Germany, which have experience both at foreign markets and CIS banks. The specialists are responsible for strengthening risk-management, developing retail-business and managing branches.
With regards to the foreign investors' leaving Unibank's shareholders staff, early or late leaving shareholders staff is prescribed at the regulations of institutional banks such as the EBRD and DEG. I think that it is not excluded in our case. We are one of next projects for these banks and sooner or later they will leave Unibank's shareholders staff. Moreover, in accordance with the signed agreements, the EBRD and DEG possess this right since 2008. Thus, potential share package of these organizations can be sold by strategic investors or purchased by acting shareholders.
Question: Have the EBRD and DEG decided to leave shareholders staff currently and to which potential investors can they sell their shares?
Answer: Unibank's achievements are considerably connected with co-operation with the EBRD and DEG over the past these years. Currently, a wide range of foreign banks are interested in Azerbaijan: offices are being opened and issues on opening foreign banks' branches are being considered.
Azerbaijan is an interesting market and the country receives millions of money both from oil sale and investment in different fields of economy, which rises interests of foreign banks.
Foreign strategic investors have repeatedly held similar meetings both with us and other banks. However, the talks should not lead to any agreements.
We do not consider necessity and topicality of changing bank's holders. However, the EBRD and DEG have the right to within the framework of signed agreements sell their shares to foreign strategic investors at the shareholders staff. At present there are not any concrete agreements in this regard, if arise, then it will be natural process.
Question: Do some shareholders plan to sell their shares in capital of the bank? If it takes place, how will it affect the Board and Supervisory Council of Unibank?
Answer: We do not exclude possibility of selling share package of the EBRD and DEG and other minorities as well. It is their right and we respect it. Currently, there are not agreements and plans on serious changes in shareholders staff. I can definitely say that changes are not expected to be made to the bank's supreme leadership at the Supervisory Council and the Board of the bank within 2008 and 2009.
Question: Finally, I want to know, which tasks does Unibank plan to solve soon?
Answer: Bank's key tasks 2008 and 2009 include active increase of participation at the market of the country, opening new branches and establishment of new sale canals. In this way, the number of bank's branches will reach 30 by the end of 2008. At present 55 ATMs of the bank function in the country and we plan to install 20 more ATMs by the end of 2008. The bank is holding leader position at the market of the country due these indexes.
Improving staff remains topical for us, as well. Our requirements towards the personnel are too high and, unfortunately, few candidates correspond to the criterion. Due to it, we have launched new Unitraining project since the beginning of 2008. Unitraning is a separate structural unit at the bank. Trainings are being held for young personnel - graduates and acting personnel improve their qualifications on the basis of it. Certification and qualification examination system has been developed at the bank, as well. Absolutely, achievements of the tasks are possible only through the correctly chosen and trained personnel because finally, any enterprise's signboards are its employees. Only their joint labor leads to the company's success.
Unibank is the second largest private bank in Azerbaijan, which possesses 6% of assets in the banking system of the country and 5% of retail deposits at the end of the first quarter. The bank leads at the car and mortgage loaning market. The bank's shareholders are the European Bank for Reconstruction and Development and Deutsche Investitions- Und Entwicklungsgesellschaft: 15.2% and 8.3%, respectively.
According to the data, published in The Banker magazine, in January 2005, Unibank was the only Azerbaijani bank joining the top ten in the list of the CIS and Eastern Europe's 50 most rapidly developing banks. At that time, the bank ranked the ninth place. Unibank joined 50 most rapidly developing banks at the countries, where the EBRD operates, as well.
Euromoney magazine appreciated Unibank as the Best bank in Azerbaijan in 2005 and 2007.
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