The FINANCIAL — PASHA Bank has been operating in Georgia for two years. Its target segment is made up of large and medium-sized enterprises. During these two years the Bank entered a number of syndicated deals with Georgian banks. Turning a profit will be the main task for the Bank for year 2015. In this regard the Bank plans to hit a number of operating milestones and targets related to institutional development, staffing and IT systems’ implementation.
“We are a corporate bank – we do not do retail banking at this stage of our development. To some extent this is certainly appealing to a number of our audiences; we pay a great deal of attention to every single client, which may or may not have been possible if we were actively engaged in retail banking as well, which requires a lot of time and resources,” Goga Japaridze, Commercial Director of Pasha Bank Georgia, told The FINANCIAL.
Q. How would you estimate the year 2014 for PASHA Bank?
A. 2014 was a formative year in many respects. We completed staffing of the front-office by the middle of the year. For the first time we became able to cover the entire target segment of ours, which is made up of large and medium-sized enterprises. Apart from that we also increased our portfolio almost ten-fold compared to January 2014. While the growth is rather aggressive, the base from where we started was fairly small, which accounts for the unusually rapid growth.
We entered a number of syndicated deals with Georgian banks: considering their scale and other characteristics, some of them were unprecedented even in the original Azerbaijani market of PASHA Bank.
We have identified our market niche and have finalized localization of brand platform. All in all, we have positioned ourselves for sustainable growth in 2015.
Q. What are the competitive advantages that you offer your customers?
A. The fact that we are focused on corporate and investment banking services, rather than dealing with retail services as well, is appealing to most of our clients. In addition to this, the bank has other advantages: it has access to the parent bank’s balance sheet, which is very significant, scale-wise to our local market. “In a rare case when PASHA Bank Georgia cannot finance a very large deal on our own, we can always call upon our parent and fund the deals through Azerbaijan. This gives us an opportunity to take part in much larger transactions than would have been possible if we were relying on our local capital base only”.
“Another differentiator and strength of PASHA Bank is that we operate regionally. In addition to Georgia and Azerbaijan, PASHA Bank has recently launched a fully owned subsidiary in Turkey,” Japaridze added.
Q. You mentioned the news of PASHA Bank entering the Turkish market. Can you tell us what this means for Georgian customers?
A. Turkey is Georgia’s largest trading partner. Basically all local companies that do business with Turkey now have the opportunity to deal with a single financial institution in both countries. Like Georgia, Azerbaijan has a very significant trade turnover with Turkey. Any company from our region is now able to access financial services at a single institution, regardless of which country it is physically based in.
Q. PASHA Bank is becoming the number-one choice for other banks when selecting a partner for syndicated deals. What is the reason for this?
A. The main reason is probably the fact that we are a corporate bank and we do not have retail operations as such. Therefore we do not compete with other banks for retail customers and this makes it easier for them to team up with us, rather than with other banks, with whom they compete on a daily basis.
The other reason is that we have a formidable capital base in Georgia of GEL 103 million, which allows us to issue sizable loans. This naturally makes us a large player for the local market.
Another advantage of ours, at least the way we perceive it, is that we have cut back on red tape to the greatest extent possible. We are actually able to react to proposals coming our way from other banks in a swift and efficient manner, in some cases being even twice as fast as certain competitors. Being able to offer an immediate collaboration is often of critical importance when it comes to being selected a partner for a syndicated deal.
Q. At present PASHA Bank offers solely corporate banking service. Are there any expectations for you to start serving the retail segment as well?
A. As for retail banking, we are not planning to enter retail for the current strategic period which encompasses the next three years.
Q. What are your plans for developing the bond market in Georgia?
A. PASHA Bank in Azerbaijan is one of the leading banks in terms of handling bond originations. We are looking at ways to transfer our parent’s expertise to Georgia and try to duplicate our success in Azerbaijan in our local market as well. At the same time we should keep in mind that the market realities in Georgia and Azerbaijan are quite different. Interest rates on corporate loans in Georgia are much lower than those in Azerbaijan, which somewhat limits the appeal of bond financing to the largest corporates. But there are many other reasons apart from cost of funding that might induce a corporate to issue a bond. We already have certain indications of interest, hopefully mid-year we will know more about the market.
Q. Are there any new businesses lines that PASHA Bank is planning to launch in the nearest future?
A. Natural extension of our current core competence of large-scale corporate banking is entering into SME segment. We are presently researching this opportunity. We want to make sure that as an institution we are ready to cover the SME sector, which is several times larger, by number of entities, than large corporate segment. This is something we are looking at and most likely we will decide upon our next steps closer to the end of the year.
Q. During 2014 PASHA Bank sponsored a range of events in Georgia. Is this tendency going to continue in the future?
A. Throughout 2014 we were sponsoring such events as the Business Brilliance Awards organized in Tbilisi by London based Global Event and Training Group (BOC), Caspian Energy Forum, Trade Finance Seminar, Tbilisi International Film Festival and many more.
Due to its daily activities and efforts in marketing communications PASHA Bank is gaining growing recognition. We were awarded “Bank of the Year” by the President of Georgia, Mr. GiorgiMargvelashvili, in November 2014 at the Caspian Energy Forum. Considering its recent marketing activities PASHA Bank Georgia won the nomination of “Newcomer in Georgian Marketing” by EGO MAG. It is nominated for being “The Fastest Growing Corporate Bank in Georgia” by GLOBAL BANKING & FINANCE REVIEW, UK. We strongly believe that the positive tendency of raising awareness and recognition of the brand will continue throughout the following years.
Q. What are your plans for 2015?
A. The key objective for 2015 would be turning a profit, as we are still in the red. Being a start-up this is very normal, as we had to incur certain costs related to institutional development. But our portfolio size and operations have not yet reached a sufficient scale to cover those costs.
We hope that the break-even moment will come somewhere in the middle of the year 2015 and we will turn a profit by the end of the year. This is the number one task for our team.
To do that, though, we need to hit a number of operating milestones and targets related to institutional development, staffing, IT systems’ implementation and so forth.
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