Pasha CEO eyes Azerbaijan state IPOs, but rules out Eurobond until 2017

By Henry Kirby in London May 12, 2016

With the dust still settling on two punishing devaluations of the Azerbaijani manat in the last 18 months, Pasha Bank will wait at least until 2017 to think about a Eurobond issue, says the Azeri lender’s new CEO, Taleh Kazimov.

Speaking to bne IntelliNews on May 9, Kazimov explained that tight conditions for Pasha following the central bank’s manat devaluations in February and December 2015 mean that a Eurobond that was originally mooted for 2014 will have to wait until at least 2017.

“Due to the devaluation the level of dollarization [in the banking sector] is high, so for this year we definitely will not be going for a Eurobond issue. Depending on business needs, we may reconsider in 2017,” he said.

With more than 80% of Azeri banking assets being FX- and predominantly dollar-denominated, an extended period of currency stability may be necessary to calm Pasha’s and other potential issuer’s nerves.

The devaluation in February and eventual free float in December last year saw the manat lose 35% and 50% against the dollar, respectively. Since then Pasha’s non-equity capital fell by over 30%, in dollar terms, from December 2014 to March this year.

While Kazimov makes clear that Pasha will not be tapping into international capital markets in the short term, potential IPOs of state-owned companies are very much on Pasha’s radar for its advisory business.

“The government is currently working on a [privatisation] programme, and while there is no announcement yet, I think that these privatisations could lead to further IPOs in the real sector - maybe in utilities,” he says.

In the mean time, Kazimov explains, Pasha will remain primarily a corporate investment bank. The main focus will be, in the short-term, supporting current clients and “preserving the market position in the face of the economic situation in the region and, in particular, Azerbaijan”.

In the medium term, the small-to-medium enterprise (SME) segment of the market is a growth area that Kazimov aims to grow throughout his tenure at the helm of Pasha.

“From 2013 we implemented a new, relationship-based strategy for our SME clients. Prior to 2013, our SME activity was more transaction-based: lending; collateral; no advising; no consulting,” Kazimov explains.

“There is a need for a financial advisor who can not only provide credit but can advise how to properly structure the finance side of the business. We see SMEs as the main driver of the diversification and development of the economy. Currently, 25% of our loan book is made up of SMEs, from around only 5% two years ago,” he says.





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