Miles cards issued by banks who cooperate with airline companies are popular with travelers all over the world. The more often you use such a card to pay for goods and services the sooner you will accumulate points to be spent on air tickets. Azerbaijan keeps pace with the world standards: now our citizens can also use miles cards. For a good reason, we started our interview with Elchin Akhmedov, Chairman of the Bank Silk Way, with the question about miles cards.



Nobody expected the miles cards you launched in 2011 to be such success. Could you tell us in more detail about these cards and the further development of the project? 

This joint project was launched on June 1, 2011. The idea of miles cards was suggested by representatives of VISA in Russia. At that time similar projects were already operational in Russian banks. We took up the idea, went through all the required formalities. Then, after completion of technicalities, a trilateral agreement was signed by Azerbaijan Airlines, Bank Silk Way and Visa.

The SW Bank Miles card is a co-branded payment card combining the advantages of the banking card and the privileges of an Azal Miles program participant. Unlike regular debit cards, miles cards, by virtue of their characteristics, decrease cash operations and increase non-cash transactions, as points are added only for payment with the card. A cardholder should use the card as often as possible for daily payments without any additional fees. Every purchase brings you more points, and this works when you make settlements in any currency. These cards can be used everywhere in the world where Visa and MasterCard are accepted, as well as in the Internet. The bonus miles you earned can be used to upgrade the service standard during the flight: from the economy class to business class, or to buy a free ticket (both business and economy) from the airline company.

The cards encourage non-cash payments, which is good for the country’s economy. By the end of the year we plan to issue three more miles cards, so there will be 7 such cards altogether. Each of them has additional privileges which makes them more attractive. The annual turnover of these cards is about 60 M manats, the number of cardholders has reached 5000.

Alongside with that, on May 1, 2016, we launched the SW Club loyalty program. The SW Club discount card is given as a gift to the holders of miles cards. SW Club is a unique discount program. Paying with the miles card its owner gets discounts and earns a lot of miles.

The purpose of our club is to offer the bank clients discounts and benefits at shopping and recreational centers and other agencies providing all kinds of services. Thanks to the benefits offered by the numerous partners of SW Club, our customers will get more opportunities to shop, rest, take care of their health and beauty, and travel. The number of our partners is steadily growing and, respectively, the scope of our unique offers is growing, too.

What are your plans for the future? What novelties can we expect in Azerbaijan’s banking market in 2017? 

The dynamically rising banking market of Azerbaijan is very sensitive to world market fluctuations. The country’s economy is developing not just on the basis of the oil sector but also through other branches. The proportion of the oil industry in the economy has recently been going down. Azerbaijan’s government is working on measures to enhance the export capacity of the non-oil sector and to develop imports phase-out, including tax and customs exemption for the imported industrial equipment.

Azerbaijan’s market of retail banking service is developing, slowly but steadily. Raising of customer confidence in banks, improving legislature and stimulating competition will facilitate its further progress. Banks will become more efficient using market research helping them to improve their product and service portfolio and enhance the service quality. Any market is characterized by the supply and demand balance and by the equilibrium price. The markets where effective demand considerably exceeds supply are more promising.

Bank Silk Way plans to increase its capital (using banking profit and shareholders’ investments), to improve its competitiveness and image. The Bank intends to expand its work with international commercial transactions (correspondent banking relations) to enable our clients to make contract settlements with their local and foreign partners both in manats and in other currencies. We work with all groups of customers focusing, however, on partnership with airline companies. One of the main goals of our Bank is to enhance the service quality and to maximally expand the range of services for the general public.

What is your mid-term strategy and does it need to be revised taking into account the situation in the world financial markets? What is your view of the further development of your Bank? 

In the mid-term perspective, the Bank will follow faithfully the principles of reliability, liquidity and independence, staying absolutely transparent for the customers, shareholders, prospective investors, and for the regulator. Our strategic priority is raising the investment potential of the Bank by means of the following measures:

  • to optimize the asset profile in order to mitigate the loss risks. Optimization implies the reduction of the Bank’s investment business and the equilibrium of the three principal spheres of our activity: corporate business, private banking, and interbank transactions;

  • to enhance the operations efficiency by means of switching the non-performing assets over to more economical types of service;

  • to optimize costs, which will provide for break-even activity and allow to retain the high level capitalization;

  • to improve the control structure in order to provide high standards of service, management, and business ethics.

I am happy to mention that in spite of the crisis we managed to preserve our stable and highly professional personnel. 

What are the mid-term prospects for the market penetration of your Bank? How is its financial performance rated on Azerbaijan’s banking market? 

Our loan portfolio makes about 2% of the market and the deposit portfolio constitutes 1.5%. In the mid-term perspective, we plan to raise our market share to 3% and 2%, respectively. Basing on the international experience of risk mitigation, the Bank focuses on the development of the Compliance and Risk Management systems.

How would you assess the current situation in Azerbaijan’s banking sector, in particular the management of the troubled loan portfolio? 

The economy of the country has entered the post-oil period; the national currency rate has been corrected – these factors force banks to make adjustments to their strategies with due regard to the new market reality.

The quality of the loan portfolio is deteriorating; dollarization of deposits boosts the liabilities of banks. The foreign currency deposits exceed 80% of all deposits. Foreign currency loans make about 50% of all the loans.

The new rules of loan services set forth by the Financial Market Services Agency stiffened requirements for credit granting. A stricter underwriting procedures will improve the quality of banks’ new loan portfolios.

To solve the problems of loan defaults, with regard to the currency, banks give their clients an opportunity to convert their foreign currency loans into manat loans as well as to restructure their credits. Credit restructuring means easing of the loan payment terms: both prolongation of the loan term and reduction of the annual percentage rate. This will relieve the debt burden of the borrower and allow him to service his debt in due course.

What is financial performance of the Bank as of July 1, 2016? Are there any changes in the structure of the credit and deposit portfolios of your bank that have taken place over the past year? Is there a need to revise the product line and introduce new products?

The financial results of the Bank as of July 1 are as follows:

  • assets: 375.6 M manats, including the loan portfolio of 356.7 M manats;

  • funds borrowed from monetary institutions: 116.2 M manats;

  • deposits: 114.1 M manats;

  • shareholders’ capital: 101.5 M manats (1.8 M manats will be added to it from the last year’s undistributed profit).

The Bank’s operating profit is 0.5 M manats. We have taken into account all the recommendations of the regulatory authorities aimed at minimizing risks of hard currency loan repayment and transferred 9 M manats from profit to reserves to prevent from the currency credit losses in future. At the same time, by the end of the year the estimated banking profit will reach approximately 5 M manats.

Since July 2015, our loan portfolio has grown by 114.1 M manats while the dollar loan portfolio has increased by $ 7.1 million. The main reason for manat portfolio growth is manat’s devaluation. The currency structure of the portfolio looks like this: manat – 42.0%, USD – 55.6%, and euro – 2.4%. 93.9% of the loans were issued to the transport sector, 2.0% - to the commercial sector, and 4.1% - to the consumer sector.

As for the deposit portfolio, it has grown by 49.1 M manats over the year; the USD deposits have increased by $14 M. Again, it is the devaluation that caused the growth of the manat portfolio. Manats make 1.7% of the deposit portfolio, US dollars – 98.2% and euros – 0.1%.

We can see that depositors’ priorities have changed: now more people prefer to have their savings not in manats that underwent two devaluations in one year’s time but in US dollars which they consider a less risky currency.

Could you name the Bank’s achievements in the second quarter of the year? How would you describe your new development strategy? 

I would say that our main achievement is minimizing hard-currency loan risks. In our new strategy, we will take into account all potential risks and ways to mitigate them. We are ready to sacrifice our profit for the sake of security and minimization of risks, both for the Bank and for our clients.

And the last question: why should I choose Bank Silk Way? 

It is worthwhile to do so for the following reasons:

  • We offer financial service complying with international standards in order to provide a better future for our customers, shareholders, and for society in general.

  • We work to preserve our greatest value: customer confidence.

  • We combine our stable positions on financial markets with the international expertise and scope. This is a guarantee of our strength and reliability.

  • We are oriented towards open partnership and cooperation, we are transparent and understandable.

  • We offer integrated solutions of any degree of complexity thanks to our presence in various financial sectors.

  • We are strong because we are a team of professionals: knowledge, capabilities, energy, and creativity of each of us make our team unique.

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