A TIME TO GATHER STONES…

In 2007 Russian newspaper Kommersant described Bank Standard as the fastest growing bank in Azerbaijan. The bank came 26th in a rating of the top 1,000 banks in the CIS on their 2006 results and 228th for the overall volume of its assets. Bank Standard recently announced a trebling of its authorized capital when it gained a credit from one of the world's largest banks, Credit Suisse.

- Why was such a big increase in capital necessary?

- The authorized capital is a key indicator of a bank's financial strength. Any bank is assessed, first of all, by the size of its authorized capital, then by its potential and rate of growth. These are the figures that give an idea of the real worth of a bank. Recently Bank Standard has been developing quite rapidly. Over the past 18 months alone our assets have grown more than fivefold. Such dynamic development required an appropriate increase in authorized capital. On the other hand, the high rate of growth in the national economy as a whole and in its financial sector in particular will continue in the foreseeable future. As a result, the bank's shareholders decided to increase the authorized capital to 50 million manats, creating the necessary reserves for the future to reinforce the bank's leading position and ensure its further growth.

- You now have a substantial lead on the other private banks.

- Of course, on top of all our other achievements a trebling of our authorized capital gives us great new advantages. First, this moves us to a qualitatively new level. A large authorized capital gives a good basis to grow our assets further and improve their quality. I think that by the time we publish the figures Bank Standard's assets will exceed half a billion manats (or 600 million dollars).

- On the other hand, it's no secret that the country's economy is developing more rapidly than the banking sector.

- This is highly relevant today and needs to be resolved. There are companies on our market, whose turnover and size means they need access to tens of millions in credit.

- Which bank can they go to?

- You might say that this problem also prompted us to move towards increasing the bank's capitalization. Our authorized capital today is around 57 million dollars and this is not the limit in the short term. We plan to increase it further over the course of the year. This will enable us to attract serious funds and to finance quite major projects.

- This is the first time that a world famous financial institution has granted such a large credit to increase the authorized capital of a private bank in Azerbaijan without acquiring a share in the bank. Why did they choose Bank Standard? What inspired this confidence?

- It is obvious to the naked eye - Azerbaijan is a country with a stably developing political system. Another fact is obvious - high macroeconomic indicators. All this makes Azerbaijan a very, very attractive country for foreign investors. GDP has grown by dozens of per cent, people's incomes have grown - all this allows us to think about the great potential for growth in the banking system, which is underestimated today, you must agree. If the banking system in our country accounts for 25 per cent of GDP today, then in neighbouring countries, for example Kazakhstan or Russia, that figure is 60 per cent. This gives food for thought. The private sector of the Azerbaijani economy is of great interest to foreign investors too. We understand that our bank has good prospects for further growth, so we don't think it's worthwhile now offering our shares for sale. It is too early to do this, because the bank's potential value is much higher than what we might be offered today, that is, the shareholders could not yet get the price they would like. This is why the difficult but right decision was taken to increase the authorized capital by bringing in an international player - through debt financing. It's a real success for us to acquire as a strategic partner Credit Suisse, one of the world's major banks which manages more than one trillion US dollars. The deal was difficult, it took us six months to prepare and Credit Suisse specialists carried out a thorough audit.

- But what made them still want in?

- First, our shareholder AB Standard Holding has a strong position. Then, the bank is developing rapidly and comfortably holds the second position in the market after the International Bank of Azerbaijan. The bank's profitability and efficiency are clearly increasing. Finally, I think they were also interested in entering the Azerbaijani market through a deal with one of the country's commercial banks. 

- Increasing the authorized capital allows the bank direct access to the international market to attract financial resources for longer periods and at more favourable rates. What will this give the bank's customers?

- As a general-purpose bank we work actively with corporate clients and at the same time have a strong position in the retail business. Of course, we will offer new types of products to our corporate clients. We will be able to offer the private sector and corporate business lower rates and longer-term credits without losing the profit share set out in the bank's business plan. Mortgage credits are more urgent for private individuals. We will expand our own mortgage lending programme which is impossible without cheap, long-term resources. And international banks have these.

To sum up the answer to your question, I can say that the client will gain a more profitable and flexible approach from the bank.

- Bank Standard's services are very popular today both in the private sector and amongst the general public. What plans to you have for new bank products?

- We are preparing a new, expanded mortgage programme for private individuals. New plastic products are being prepared - in the near future we will be concentrating on plastic business. We think that the market has great potential for financing through credit cards for private individuals. We intend to increase our branch network to give the public better access to the bank's services. 

In our work with corporate clients we will concentrate on the international securities market. This niche is free: hardly any bank in Azerbaijan today is engaged in this seriously. We envisage consulting on financing through the issue of securities - promissory and long-term and also consulting on merger and takeover deals. This is not practised today in Azerbaijan. Of course, we will receive a large number of lines for trade financing and other possibilities for price formation in currency operations. 

- At the recent CIS bonds congress one Azerbaijani private bank entered the external securities market. What stopped you taking the lead in this?

- We wish Muganbank success in this field. We considered this unprofitable for ourselves from the point of view of price formation. It's quite expensive. We are preparing a serious programme to attract and raise funds with quite a different value. 

As for Eurobonds, we are waiting for the International Bank of Azerbaijan or the state to enter the market, so that we can assess the situation and determine its price formation. In other words, a standard issue is needed after which we will be able to offer our own securities. I am convinced that it is realistic to talk of 150 million dollars with regard to our bank - this is the sum that the Bank Standard is able to raise and float amongst its clients.

- Is this part of the plan for next year?

- Probably March-April 2008. The process of getting an international rating from the Moody's agency is nearing completion and we hope that it will be attractive to investors. As soon as we have the rating, we will begin to put our Eurobond plans into practice. All in good time.