PASHA Bank to announce its half-year financial results

PASHA Bank has disclosed its financial results for the first 6 months of 2014 at the press-conference at the Four Seasons hotel in Baku. The speakers at the conference were Mr. Taleh Kazimov, the Member of Executive Board and Chief Investment Officer, Mr. Bahruz Naghiyev, the Head of Treasury Department, and Mrs. Sona Abbasova, The Head of Corporate Communications Department.

Despite the difficult process of stabilizing the country's economy, Azerbaijan's banking sector grew by almost 11% in the first six months of 2014. PASHA Bank is fully on track to deliver on its 2012-2014 strategy, which aims to position the Bank as one top of the top Azeri companies and to provide more services to SMEs and corporate clients with international exposure.

The Bank has maintained its position as one of the largest commercial banks in terms of total equity, which reached AZN 342,320 thousands (USD 436,466 thousands) in the first half of 2014.

The Bank's strategic decision to diversify its assets portfolio has enabled it to maintain a strong service offering for its clients.

As at 30 June 2014, PASHA Bank's total assets amounted to AZN 998,004 thousands (USD 1,272,477 thousands), an increase of 42% compared to 2013 (AZN 704,055 thousands / USD 897,686 thousands), mainly due to increased activity on customers' accounts. The breakdown of these assets is as follows: - loans to customers - 37%;
- securities portfolio - 34%;
- cash and cash equivalents - 15%;
- due from credit institutions - 6%;
- other non-current and current assets - 8%.

The number of disciplined loan repayments on the Azeri market has reduced and there is continued demand for credit among Azerbaijani corporate clients, mainly SMEs or companies with an international footprint. Throughout the crisis, PASHA Bank has benefited from its strong capital position and has established itself in the market as a strong and reliable business partner for companies with transparent and sustainable financial management. The Bank continues to successfully support its existing SME client base during current economic uncertainty.

We have generated strong loan growth, increasing our gross portfolio by 10% to AZN 384,522 thousands (USD 490,274 thousands) compared to AZN 350,956 thousands (USD 447,363 thousands) in FY 2013. The effective provision rate on the portfolio was 3.3% (year end 2013 - 6.2%).

Remaining loyal to our customers despite the volatile economic environment has helped us to build strong customer relationships, which are now benefiting our business. As a result, we have expanded our customer base with total customer accounts AZN 449,188 thousands (USD 572,725 thousands). Of these customer accounts, 63% were placed in demand accounts, and 37% into term accounts, compared to 61% and 39% respectively in financial year ended 2013.

The Bank's net profit for the first half of 2014 amounted to AZN 2,499 thousands (USD 3,186 thousands), which represents a decrease on the corresponding period last year (AZN 5,490 thousands /USD 6,999 thousands). Pretax profit amounted to AZN 3,938 thousands (USD 5,021 thousands). Total operating income for the first half of 2014 was AZN 27,414 thousands (USD 34,953 thousands), a 6% increase compared to the corresponding period of 2013 (AZN 25,950 thousands / USD 33,078 thousands).

The Bank's interest income increased by 9% and reached AZN 30,099 thousands (USD 38,377 thousands), whereas non-interest income amounted to AZN 4,191 thousands (USD 5,344 thousands).

As a result of successful cooperation with international financial institutions, PASHA Bank was able to provide more trade finance services to its corporate clients by accessing a broader range of financial instruments. After obtaining credit ratings from two international credit agencies, it was also able to secure better terms for financing operations of its customers.

The Bank has continued its efforts of educating the corporate community of Azerbaijan about finance options and PASHA Bank's services and products by holding a number of seminars and workshops for its clients and wider community.

As at 30 June 2014, documentary operations balances reached AZN 64,707 thousands (USD 82,503 thousands). PASHA Bank's current target is to grow its trade finance portfolio to AZN 144,000 thousands (USD 183,603 thousands) by the end of 2013. The Bank generated strong internal capital growth, producing an estimated tier one capital adequacy ratio under the Central Bank of the Republic of Azerbaijan's capital requirements of 45% (compared to 36% for FY 2013), which means better utilisation of the Bank's share capital. We remain focused on meeting the required capital levels once Basel II and Basel III are finalised, while returning capital to our shareholders through dividends. During 2014, the Bank paid dividends of AZN 14,992 thousands (USD 19,115 thousands) to its shareholders from the 2013 net profit, and retained earnings of previous periods.

*all figures are correct as at 30 June 2014 unless otherwise stated, and are based on the report of interim condensed consolidated financial statements