OREANDA-NEWS. April 21, 2009. The "International Bank of Azerbaijan" is the coeval with the independent Azerbaijan. IBA has managed to pass successfully all stages of formation of the local economy and become an efficient financial institution, gaining a leading position in the banking system of the country and being rightfully considered as its national identity at the international scene, reported the press-centre of IBA.

In his interview to "Zerkalo" newspaper Emil Mustafayev, the Senior Deputy Chairman of the Board of the "International Bank of Azerbaijan", speaks about the accomplishments and the prospects.

- IBA has already been operating for 17 years. Nowadays, IBA is recognized by the international financial institutions as the leading bank in the South Caucasus. The Bank is a member of S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunications) (1993), as well as such payment systems as "MasterCard International" (1994) and "VISA International" (1997), the founder of the "Baku Interbank Currency Exchange", "AzeriCard" processing center, the "International Insurance Company", "Joint Leasing" leasing company, the first bank in the country’s history that has established its bank abroad - "IBA - Moscow" (2002), and affiliated bank in Georgia (2006). The representative offices of the bank are operating in New York (2008), London (2002), Frankfurt (2005), Luxembourg and Dubai (2007). It is planned the establishment of banks in Kazakhstan, Dubai and Luxembourg. An active work on establishment of bank in Qatar is currently in progress.

IBA is the first entity from the region that has become co-founder and the registered full-fledged member of the "Community of Global Emerging Companies" established within the framework of the "World Economic Forum". For over the past five years the bank’s rating awarded by "Fitch IBCA" has been raised three times and at present, it is evaluated at the level of "BB+". The international rating agency "Moody’s Investors Services" has evaluated the IBA’s rating in the local currency at the level of "Baa2", and the long-term rating in foreign currency is "Baa2".

In comparison with 2000, the volume of Bank's net assets increased by 18.4 times, while the authorized capital - by 82.8 times. The share of IBA in the overall volume of bank credits in the country constitutes 43%, while the credit portfolio proper has increased 22 times as much as compared to the beginning of 2000. The similar tendency characterizes the balance sheet incomes as well, and now they are 12.3 times as much as the figures of 2000. Deposits, the main component of resource base, increased by 17.5 times, whereas the deposits from individual clients increased by 21.6 times. Thus, by accomplishing its definite mission, the Bank has established itself as the support for stability of Azerbaijani banking system and actively promotes the dynamic development of the country's economy as a whole.

- What is your overall assessment of the Bank's performance for the past financial year in the context of global recession?

- The productive activity of the "International bank of Azerbaijan", the positive dynamics of its financial indicators, and a sustainable development under the conditions of economic stability achieved in the country, have been more than once highly appreciated by the international financial institutions and have also gained the worldwide recognition.

The "International Bank of Azerbaijan of Azerbaijan" has recently been ranked as the "Most Stable Bank in the Time of Crisis" in Europe in accordance with the decision of the Board of Directors of the "European Economic Chamber of Trade, Commerce, and Industry" (EEIG) based in Brussels and established in 1998 at the initiative of the European business circles and in accordance with the decision of the Council of the European Communities (nowadays, the Chamber involves 41 countries, such as, the USA, Austria, France, Russia, China, Saudi Arabia, and etc.).

Under the circumstances of global recession, the results of IBA's financial performance in 2008 have been more than positively appreciated by the Chamber. I would like to point out that at the year-end of 2008, the volume of Bank's assets totaled 4 billion 316.7 million manats, that is up by 68% as compared to the results of 2007. As the basic active financial instrument, the volume of credit investments, with the share of 68% reached 3 billion 058.7 million manats, up by 62% as compared to the similar indicator of 2007. As a whole, the market shares of IBA's assets and credits made 42% and 43%, respectively.

The ratio between the credit portfolio of IBA and the gross domestic product (GDP) constituted 8% (7.5% in 2007), which in its turn reflects the traditionally growing role of the Bank in the national economy. It is also worthwhile to emphasize the activity of operations with regard to securities, the growth in which, having exceeded twofold, reached the level of 356 million manats.

- And what were the changes in structure of liabilities?

- Even in the circumstances of acute shortage of financial resources at the money markets, the Bank's liabilities increased to a record rate of 3848.8 million manats, up by 65% as compared to the similar indicator of 2007. With all external repayments, the aggregate volume of external borrowings reached 1,014.4 million manats. Of the total volume of liabilities, the share of household deposits alone accounted for 497 million manats, the growth in which made 33% per annum.

This segment of liabilities is the most expensive, but at the same time, as one of the indicators of confidence among the population; it has a strategic importance for the Bank. The remarkable fact is that the growth in household deposits continued even during the active phase of global financial crisis. And, as a result, the market share of IBA with respect to deposits increased up to 26%.

I think that the main role here played a long-term experience of IBA and the status of the only government bank in the country. And considering the fact that the nationalization of many financial companies was the only possible solution aimed at preventing them from financial collapse, then, in our opinion, the fact of placing money on deposits precisely with IBA undoubtedly demonstrate the confidence among the Bank's customers concerning safety and efficiency of in depositing with our Bank.

Speaking about the efficiency of borrowings, I think, it is also worthwhile to mention, how much it did cost the bank. As a result of such effective passive operations in 2008 alone with a 73% increase, the Bank paid out to its clients 109 million manats in interest payments, of which the share of household deposits accounted for 38.5 million manats, that is up by 58% as compared with 2007.

- What is the situation in Bank with regards to capitalization?

- The increase in level of Bank's capitalization may be notched up in 2008 as one of the important and main achievements of IBA. For the first time, the level of aggregate capital reached the amount of 418.6 million manats with a 70% growth. Such increase was achieved owing to the additional placement of shares for the amount of 89.7 million manats, as well as due to the undistributed profit of 2008 in the amount of 32.4 million manats.

Moreover, concerning the financial results for 2008, I can say that IBA has fulfilled all objects set with respect to profitability. For the first time, the overall aggregate revenue exceeded 400 million manats, thus totaling 407.1 million manats, up by 55% as compared to the similar indicator of 2007. At the same time, the level of expenditures in 2008 increased up to 291.9 million manats, that is the growth constituted 51% (192.9 million manats in 2007).
Despite the rise in expenditures, their efficiency significantly increased and made 140%, up by 4% as compared to the similar indicator of 2007.

In other words, every invested manat began yielding by 4 percentage points more revenue than in 2007. IBA's profit totaled 115.2 million manats, up by 64% as compared to the last year. The profit tax increased by 57%. Accordingly, the Bank's net profit increased up to 85.5 million manats, up by 66% as compared to the similar indicator of 2007. The overall tax assessments to budget the country's budget in 2008 totaled 44.9 million manats, up by 45% as compared to the similar indicator for last year. Against the background of high efficiency, the rate of return on assets (ROA) increased up to 2.5% (2.4% in 2007). Whereas the rate of return on equity (ROE) also increased by 18%, thus, reaching 40%. Thus, following the results of performance in 2008, the high rate of return had been maintained, the fact that enabled the Bank to fully secure the share capital against depreciation and the negative effect of inflation.

- Considering the on-going global financial crisis, what plans have the Bank set itself for the current year?

- Briefly speaking about the main financial indicators for 2009, I would like to note that Bank's assets are planned at the level of 4.5 billion manats, the current growth -at 15%. The credit portfolio is planned at the amount of 3 billion 243 million manats. I would like to point out that in the current year the Bank is intended to continue its conservative approach with regard to crediting, and, accordingly, only a 13% growth relative to the current portfolio. The growth in the securities trading is planned at 40% and the volume of transactions is expected to increase up to 490 million manats.

The volume of liabilities for 2009 is predicted at the amount of 3 billion 960 million manats, up by 17% as compared to the current indicator. Thus, the share of external borrowings is to make 1.2 billion manats, while the total amount of household deposits - 620.9 million manats. The level of Bank's share capital with a 16% annual growth is predicted at the amount of 543 million manats. The revenues in the current year are predicted at the amount of 490 million manats, up by 20% as compared with 2008. The expenditures - at the volume of 315 million manats, that is an 8% growth is predicted. The profit is planned at the level of 174 million manats, up by 51% as compared to the actual profit in 2008.

The rate of return on assets (ROA) is predicted at the level of 3.1%, while the rate of return on equity (ROE) - at 26.8%. The common profitability index is planned at the level of 27%, up by 23% as compared with the result of 2008.

- The Bank's shareholders are probably even more interested in the issues connected with the dividends. What are the Bank's arrangements in this respect?

- Regarding its dividend policy for 2009, the IBA has defined the interest corridor from 40% to 48% per annum. I would like to note that within the framework of the Law of Azerbaijan Republic "On creating incentives for increasing the capitalization of banks, insurance and reinsurance companies", the Managing Board of IBA has made a decision on capitalization of undistributed profit for 2009 on the Bank's authorized capital. This decision of IBA's Managing Board will be submitted to the appropriate authorities for approval.

Thereby, after the approval of this decision, the nominal value of each share will be increased by 20%, that is from the current 0.20 manats up to 0.24 manats, without additional contributions from shareholders. As a result, the total volume of dividends with an allowance for capitalization of profit on the authorized capital will make not less than 60% per annum.
- It has come to our knowledge that IBA has switched over to the new banking software system. What was the reason for that?

- Since 1995, IBA had been using the automated banking system (ABS) of "MIDAS". And if, in its time, "MIDAS" was the most advanced banking software system in the country, which met our requirements, over the past years the performance capabilities of the system prevented us from defining the ambitious goals set by Bank for itself in the conditions of highly competitive environment. This raised the question of changing the automated banking system (ABS). Based on the due tender procedures, the Bank's management has made a decision on entering into a contract with "Oracle Financial Services Software Limited" company (earlier the company was called "i-flex solutions ltd") for the purchase of license for their "FlexCube" product. On December 31, 2008, the Bank, together with its 130 subdivisions, successfully switched over to the new software system.

I can mention some performance characteristic of the new software system: on-line operation mode, maximum number of clients' accounts (10 million accounts, ten times as much as the performance capabilities of "MIDAS" system), integrated modules for introduction of innovative banking products, and etc. In the near-term outlook, the new software system of "flex-cube" will become the engine of the Bank's innovative development.