ANNUAL REPORT 2012 CONTENTS
Strategic Vision / Mission / Values ...... 4 Corporate Governance ...... 45
General Information About the Bank ...... 5 Social Responsibility ...... 49
Risk Management ...... 51 Significant Events In 2012 ...... 12
Measures Against Money Laundry and Management of TuranBank ...... 14 Terrorism Financing ...... 56 Foreword ...... 16 Information Technologies ...... 58 Macroeconomics ...... 22 Human Resources Management ...... 60 Banking Sector ...... 25 International Cooperation ...... 64 Credit Policy ...... 31 Treasury Activity ...... 67
Service Network and Customer Service ...... 39 Correspondent Relations and International Settlements ...72
Marketing and Public Relations ...... 42 Auditor’s Opinion ...... 73
2 3 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT STRATEGIC VISION / MISSION / VALUES GENERAL INFROMATION ABOUT THE BANK
Full name of the Bank: TuranBank Open Joint Stock Company
Our Strategic Vision Short name of the Bank: TuranBank OJSC To make TuranBank a retail-oriented universal bank with foreign investment, serving individuals, micro, small and Date of foundation: June 12, 1992 medium-sized enterprises throughout the country by Legal address: the means of its sales network established in all the re- 85, Ismayil bay Gutgashinli street, Baku city, AZ1073 Azerbaijan Republic gional centres of the Republic. Code: 507462 Our Mission TuranBank is a reliable and transparent bank, provi- Tax ID: 1300016391 ding its customers with high-quality services in line with Correspondent account at international standards via its developing professional Central Bank of Azerbaijan: AZ26NABZ01350100000000027944 team, takes an active part in the development of the so- SWIFT: TURAAZ22 ciety, and grows dynamically while raising the value of Call Centre: +994 (12) 935 its shareholders’ investments. Phones: +994 (12) 510 79 11, 510 79 22 Fax: +994 (12) 497 25 77 E-mail: [email protected] Our Values Web: http://www.turanbank.az • Reliability Facebook: www.facebook.com/turanbankasc • Transparency • Customer to be approached as a partner LICENSE • Employee as a Most Valuable Asset License No. 115 issued by the National Bank of the Republic of Azer- baijan (current Central Bank) on 30.12.1992 for commencement of its • Corporate Social Responsibility activities and license No. 115 updated on 23.03.2005 in connection with • Serving Azerbaijan Economy the change of the organizational and legal form of the Bank. • Compliance and Respect for Laws
4 5 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT Main Indicators for the End of 2011 million AZN MEMBERSHIP IN PROFESSIONAL ASSOCIATIONS, UNIONS, EX- Indicators 2008 2009 2010 2011 2012 CHANGES AND PAYMENT SYSTEMS Assets 82.7 106.1 125.2 165.8 217.1 Credit Portfolio 65.5 76.5 100.4 117.0 161.3 • Azerbaijan Banks Association (ABA) Deposit Portfolio 30.9 44.8 54.5 86.7 102.8 • Azerbaijan Micro-finance Association (AMA) Shareholder’s Equity 16.0 17.0 20.0 22.0 30 • Azerbaijan Export and Investment Promotion Foundation (AZ Profit 2.2 2.0 1.3 3.8 4 PROMO) • Azerbaijan Risk Professionals Association (ARPA) • German-Azerbaijan Business Association (DAWF) • American Chamber of Commerce in Azerbaijan (AMCHAM) • EurAsia Agricultural Credit Association (EURACA) Our Shareholders • Society for Worldwide Interbank Financial Telecommunication Indicators 2008 2009 2010 2011 2012 (SWIFT) Total number of shareholders 26 25 25 26 27 • Baku Interbank Currency Exchange (BBVB) including: • SAXO Bank – Trading Platform legal entities 6 5 5 5 5 individuals 20 20 20 21 22 • MasterCard International Payment System including: • Western Union International Payment System bank personnel 6 5 5 5 5 • Contact International Payment System Share of shareholders in the • Migom Payment System for CIS countries authorized capital (%), including: • Express Money International Payment System legal entities 27.14 21.8 21.51 21.54 19.41 • PrivatMoney International Payment System individuals 72.86 78.2 78.49 78.46 80.59 including: • Allure Payment System for CIS countries employees of the bank 22.73 27.58 28.11 22.39 21.95 • Zolotaya Korona Payment System for CIS countries The dividends payable to our • Blizko Payment System for CIS countries shareholders • IBA-Express Payment System for CIS countries 2008 2009 2010 2011 2012 • Monex money transfer system in the Republic 15% 18% 17% 15% 12.3%
6 7 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT Our Personnel Service Network Indicators 2008 2009 2010 2011 2012 Total number of employees, 197 205 237 274 337 Indicators 2008 2009 2010 2011 2012 including: Number of branches, 11 11 11 12 12 head office 71 76 88 100 112 including: branches and representative offices 94 103 120 143 189 6 6 6 6 6 exchange points 32 26 29 31 36 in Baku in regions 5 5 5 6 6 Number of subbranches, 1 including:
in Baku Our Capital Investments in regions 1 Number of exchange points, 23 21 20 20 20 including: Share of the shareholder # Name of Organization 21 19 19 19 19 2008 2009 2010 2011 2012 in Baku in regions 2 2 1 1 1 1 Azer-TurkBank OJSC 4% 4% 4% 4% 4% Number of ATMs, 9 9 13 19 20 2 Bashak-Inam Insurance Company 15.74% 15% 10.77% 8.33% 8.33% including: Milli Kart LLC Processing 3 3% 3% 2.4% 2.4% 2.4% Centre in Baku 7 7 10 12 12 2 2 3 7 8 4 TuranLizing LLC 100% 100% 100% 100% 100% in regions Number of POS terminals, 73 73 74 60 262 including: Our International Auditors: PriceWaterHouseCoopers, Deloitte & Touche and KPMG in Baku 67 67 68 54 232 in regions 6 6 6 6 30 Our subsidiaries 1 1 1 1 1 Our representatives 8 8 8 8 6
8 9 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT CONTRACT OF THE CENTURY
On September 20, 1994 a product-share type The Contract of the Century was ratified in the Par- contract on joint production of deepwater oil from liament of the Republic of Azerbaijan and brought Azeri-Chirag-Guneshli fields in Azerbaijani sector of into force on December 12, 1994. The first estima- the Caspian Sea was signed in Gulustan Palace in ted extractable oil reserves were 511 million tons Baku. The contract is called Contract of the Century and increased to 730 million tons as a result of eva- due to its historical, political and international sig- luated fields. In this connection, investments re- nificance, which is reflected on about 400 pages in quired to produce oil in these fileds were deter- 4 languages. 8 countries and 13 most well-known mined in the amount of USD 11.5 billion. Azerbai- companies of the world participated in the signing jan’s share of the total net income accounts for 80% of the Contract of the Century. Thus, the new oil whilst the remaining 20% goes to the investors. strategy and the doctrine began to be implemented Afterwards this contract paved the way for conclu- successfully. ding 26 contracts with 41 oil companies from 19 countries. SIGNIFICANT EVENTS IN 2012
• The Bank began to implement the Strategic Plan • The Bank has signed a contract with the Societte developed for the years 2012-2015; Generale Bank to attract funds; • The Bank continued its cooperation with IFC on the • The Bank has reached initial agreement with IFC to Project of Small and Medium Entrepreneurship Banking; receive loan facility for trade finance, aimed at SMEs; • The Bank continued its cooperation with USAID (US • The Bank was elected as a member of AMCHAM Agency for International Development) on the Deve- (American-Azerbaijan Chamber of Commerce); • The Bank has launched new Gift and Image card lopment of competitiveness and trade in Azerbaijan products to customers; project; • The Bank has presented micro service, pensioner, • The Bank celebrated its 20th anniversary and pre- group and jubilee credit products to the customers; pared corporate video, various events and promotions • The Bank has applied credit repayments service dedicated for the event; through MilliÖn devices; • The Bank has sent 4 members of the middle ma- • The Bank has launched Call Centre service; nagement team for experience exchange to 3 US banks • The Bank has established its page in Facebook so- within framework of the technical support project with cial network; FSVC (Financial services and Volunteers Corps); • The Bank has started online consultation and Skype • The number of the personnel of the Bank has call service through its corporate website; reached 327 individuals; • The Bank has joined Monex express money transfer • The Bank has joined the Project of the USAID for system; Guarantee of the agricultural credits in Azerbaijan; • The Bank has joined IBA-Express express money • The Bank has signed the contract with ICD (Islamic transfer system; • The Gazakh subbranch of the Bank began to Corporation for Funding of Private Sector) to receive operate; funds in the amount of 3.5 million US dollars for 5 years • The Bank has signed an agreement with KPMG for in the direction of Small and Medium Entrepreneurship preparation of external audit report of 2012 financial Finance; year.
12 13 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT MANAGEMENT OF TURANBANK BOARD BOARD
CHAIRMAN OF THE MEMBER OF THE CHAIRMAN OF THE SUPERVISORY BOARD SUPERVISORY BOARD MANAGEMENT BOARD Fuad musayev AKIF KARIMOV NAZIM SADIGOV SUPERVISORY MANAGEMENT
DEPUTY CHAIRMAN DEPUTY CHAIRMAN OF THE MANAGEMENT OF THE MANAGEMENT MEMBER OF THE MEMBER OF THE MEMBER OF THE BOARD BOARD SUPERVISORY BOARD SUPERVISORY BOARD SUPERVISORY BOARD FAZAIL MUSAYEV MAHAMMAD KALASHOV Rauf Kazımov DAVUD GULIYEV RAMIZ GASIMOV
AUDIT COMMITTEE MEMBER OF THE MEMBER OF THE MANAGEMENT BOARD MANAGEMENT BOARD KAMALA MUSTAFAYEVA ORKHAN GARAYEV
CHAIRMAN OF THE MEMBER OF THE MEMBER OF THE AUDIT COMMITTEE AUDIT COMMITTEE AUDIT COMMITTEE CHINGIZ AGHAYEV FAMIL NABIYEV ORKHAN HASANOV
14 15 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT FOREWORD adopted for the years 2012-2015. local funds such as National Fund Thus, directing towards the retail- for Entrepreneurship Support, State orientated universal banking model, Agency for Agricultural Credits, Azer- the Bank continued to provide various baijan Mortgage Fund, and with such types of banking services to the popu- international organizations as US lation during the past year. Reaching Agency for International Develop- Fuad Musayev 40 thousand customers during the ment (USAID), World Bank Group, as Chairman of the Supervisory period is the indicator of competitive- well as International Finance Corpora- ness of our services and its improve- tion (IFC), International Development Board ment from the point of essence. Also, Association (IDA), at the same time, development of contact and service International Fund for Agricultural channels with the customers from the Development (IFAD), Islamic Develop- Dear Ladies and Gentlemen! Demonstration of 2.2 percent growth parameters of quantity, quality and di- ment Bank Group, as well as Islamic by Azerbaijan economy while show- versity has made thoroughly positive Corporation for Development of Pri- I’m pleased to present you with our ing endurance to the above-stated impact on our results. Establishment vate Sector (ICD), Islamic Trade and traditional Annual Report that briefly background is the result of eco- of Call Centre, online consultation, Finance Corporation (ITFC), in particu- describes TuranBank’s activity in 2012. nomic policy implemented under the contact through social networks and lar Black Sea Trade and Development Unlike previous years, presentation of leadership of the President Ilham Ali- other channels will be the beginning Bank (BSTDB), World Business Capital the report for 2012 is a rather respon- yev. Especially, despite the fact that the of the steps made in this direction. As / OPIC, Bank im Bistum Essen, Societte sible and, at the same time, honou- production in the oil sector fell down, well as, close contact of our team with Generale, BCP, ZiraatBank, BankAsya. rable task. The Bank has celebrated it is a positive case that non-oil sec- the customers and being a proper fi- In general, the fundamental the 20th anniversary of its existence in tor increased by 9.7 percent and pro- nancial consultant for them will stand bases of successful business, such as the year 2012. As one of the first es- vided essential support for the general on the base of our activities in future. its harmony with the corporate stan- tablished banks of the Republic, the economic growth. Confirmation of the It is gratifying case that our Bank, as a dards and its sustainability in terms creation of the Bank dates back to the increasing growth rate forecasts of the local financial organization, continued of institutional development are period when Independent Azerbaijan economy by many international finan- to provide support to the development gaining more importance in the en- was established. Being dedicated to its cial institutions gives great hopes to of the economy of the Republic during vironment of increasing competition. development strategy over the course the private sector in respect of future the year through capital investment The two factors that I noted will be of 20 years, the Bank has always pro- development expectations. for the growth of non-oil sector, as in taken as the basis in our future ac- vided its support to the development Progress of Azerbaijan economy previous years. For the diversification tivities for our Bank as a priority. Suc- of the economy. as well as the banking sector as its of the economy and provision of SME cessful application of the noted fields Continuing trends of the crisis in integral part, with continuous deve- subjects with the necessary financial in our Bank in previous years created the world economy have kept on test- lopment rate during the accounting resources, the Bank has implemented pro- ing economic fundamentals of a num- year has supported positive growth It is gratifying case that our Bank, as a lo- of the Bank in terms of financial in- jects through its own ber of countries in 2012 as well. The cal financial organization, continued to pro- mentioned cases have shown them- dicators and value created for the resources, as well as selves in the form of reduced eco- customers. Many achievements that together with do- vide support to the development of the nomic growth indicators, high level our Bank gained during the finan- mestic and foreign economy of the Republic during the year of unemployment, unexpected losses cial year may be explained as a result funds it cooperates through capital investment for the growth in private sector subjects, arising from of the purposeful steps made from with. In such types of of non-oil sector, as in previous years. non-competitive business models and the first year in the direction of suc- projects, the Bank is non-sustainable debt levels, and etc. cessful application of the strategy cooperating with the
16 17 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT grounds for our starting to apply gained within the framework of this get various services for card accounts has increased the interest of the share- the strategy for the years 2012-2015 project will be substantially helpful in through mobile banking services with- holders of the Bank in its shares, and from the accounting year with confi- application of the system reflecting out visiting the Bank. Our next target that was reflected in the capitalization dence. Gaining achievements in ap- comprehensive approach to the tar- in this field is organization of com- process for the year 2012. plication of the above-mentioned geted customer segment. prehensive banking services to our As we already know, the require- fields is regarded as the result of the As an integral part of our mission, customers through corporate website ment of the Central Bank for the to- Bank’s productive cooperation with as previously the Bank continued to and ATM network that will create pos- tal capital has been increased up to Azerbaijan Bank Training Centre, In- implement and support various events sibilities for our customers to get more 50 million manats, with the deadline ternational Finance Corporation, US during the year, being loyal to the va - comfortable service. Information tech- date of 01 January 2014. The General Agency for International Development lue of social responsibility before the nologies, developing at hyper speed, Meeting of the Shareholders has ap- and US for Financial Services Volun- society. These include projects on im- are being integrated into the banking proved the action plan in the direc- teer Corps on technical support proj- provement of health and knowledge sector. Provision of services through tion of increasing the capital, and this ects. The visit of 4 associates of our of the young generation, supporting remote sales points to our customers reflects a three-stage execution plan. Bank to 3 US regional banks within the events in the direction of their career by benefiting from the developments The first stage of the approved plan framework of cooperation with FSVC planning, realising various types of in this field is one of the important is- was finalized in October of the ac- and exchange of experience is the festivities for the underprivileged class sues in our agenda. counting year and the volume of the obvious case of how such projects are of the population, improving financial Qualitative development of our paid-in share capital was raised from knowledge of the teenagers and etc. It service network is integral part of 23.8 million to 30 million manats. In is unambiguous that the our future development plans. As the general, the increase in the authorized As an integral part of our mission, as Bank will be active in integral part of our strategic view, capital was 36.4% in the accounting adaptation of our existing branches to year in comparison with 2011, while previously the Bank continued to imple- terms of taking part in so- cial life of the society in today’s requirements and representa- during the last 6 years the total in- ment and support various events dur- the future and executing tion in regional centres continued to crease was 2.4 times. The investments ing the year, being loyal to the value of its obligations as an orga- be executed in the previous year. As implemented by the shareholders social responsibility before the society. nization, and it is the in- a result of the policy we executed in during the past period and their con- tegral part of the increa- this direction, the Bank has started to fidence in the Bank provide complete sing trust and responsi- operate its Gazakh subbranch, which is assurance that the targets set forth valuable to us. Unconditionally, we bility in society. its first subbranch. in this directions will be executed on plan to expand our cooperation that In order to apply the intended ap- The results of each business acti- time. was built on mutually beneficial values, proach to the target groups through vity should be reflected in its quantity At the end, I want to express my as well as, to build business relations our sales structures, the variety of criteria along with the quality criteria. deep gratitude to everybody who with new partners in coming years. products and services offered to cus- If we look at the financial part of the contributed to the achievements we Based on retail orientated univer- tomers was increased during the year, activities of the Bank, we can see that gained in 2012 accounting year, to our sal banking module, the Bank aims periodic trainings in order to increase during the accounting year the assets shareholders for always supporting us, through sale network being represen- customer satisfaction and quality of increased by 31% in comparison with to our staff for being irreplaceable in- ted in all regional centres of the repub- the services were conducted, as well as the previous year and reached 217.1 tegral part of our business activity, to lic to provide services to population, a Mystery Shopping project was imp- million manats, the loan portfolio inc- our customers and partners who se- micro, small and middle entrepreneur- lemented. Efforts to ensure comfort of reased by 37.9% and reached 161.3 lected us as the partner. I am sure that ship, whereas it considers it one of its our customers will always continue to million manats, the deposit portfolio TuranBank family will achieve higher main duties to correctly address target be in our attention. One of the mea- increased by 18.5% and reached 102.8 results in terms of execution of deve- consumer groups. It is necessary to sures taken in this field during the pe- million manats. During the accounting lopment targets and quality presenta- note continuation of cooperation with riod was establishment of an opportu- year the indicators of net profit of our tion of modern bank services to the International Finance Corporation in nity for our credit customers to make Bank have reached 3.2 million manats. population in the year 2013. this field on the project of Small and payments through more than 600 Mil- The positive position on this indicator Middle Enterprises Banking during liÖn Pay Points within the territory of the year. I think that the results to be the Republic. Also, our customers may
18 19 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT EUROVISION SONG CONTEST
Azerbaijan made its debut in the 53rd Eurovision On 14 May 2011, with 221 points, Azerbaijan won Song Contest held in Belgrade, the capital city of the 56th Eurovision Song Contest held in Dussel- Serbia, in 2008. Gaining 132 points in the contest, dorf, Germany, among 43 countries with the song Azerbaijan ranked 8th among 43 countries in the of “Running Scared” performed by Eldar Gasimov same contest. and Nigar Camal. Participating in the 54th contest held in Moscow, Finally, during the 57th Eurovision Song Contest the capital of Russia, Azerbaijan ranked number held in Baku, Azerbaijan on 26 of May, 2012, Sa- 3 among 42 countries obtaining 207 points. And, bina Babayeva, representing Azerbaijan, gained the within the 55th contest, held in Oslo, the capital of 4th place among 42 countries obtaining 150 points, Norway, in 2010, Azerbaijan obtained the 5th place with the song When the music dies. with 145 points among 39 countries. MACROECONOMICS reached 9.7%. The special weight of in Azerbaijan economy, with 60% of the non-oil sector in GDP was equal to this coming from domestic investors, 52.7%, and GDP growth is specifically including state-owned and private en- attributed to this sector. terprises, while 40% from foreign in- The analysis of economic indicators well as various fields of the economy Statistics show that the capital in- vestors. Furthermore, during 2012, the provides grounds to say that Azer- have developed, while measures have vestments in Azerbaijan economy state entities and private companies of baijan economy continued to grow continued being taken in the direc- continued with increasing rate over Azerbaijan have taken part in the ex- in 2012. The growth in the economy tion of maintaining low inflation rate, the years. The growth observed in the ecution of various infrastructure pro- under the conditions of continuing ensuring stable national currency and capital investments signals success of jects in foreign countries. During the global economic crisis has occurred improving business environment. The the steps taken in the direction of inc- accounting year, the foreign currency as a result of the measures planned measures undertaken have also had a reasing attractiveness of the business reserves of Azerbaijan increased and and successfully executed within the positive impact on population’s stan- environment in the country. The suc- reached 46 billion dollars. framework of the state’s economic dards of living in the country. cesses Azerbaijan gained in this field The measures planned within the policy. As a logical consequence of the In 2012, the GDP in Azerbaijan in- were reflected in the World Bank’s framework of various state programs execution of these measures, many creased by 2.2% in nominal expres- Doing business 2013 report. Thus, were implemented timely and suc- macroeconomic indicators of the sion and by 1.1 billion manats in ab- among 185 countries Azerbaijan was cessfully in 2012. As a consequence country have increased from different solute expression and reached 54.0 ranked 9th for the criteria of register- of work done within the framework perspectives in the accounting year. billion manats. Despite the fact that ing property, 18th for starting busi- of one of these programs, the State Thus, Gross Domestic Product (GDP), the production in oil and gas sector ness activity, 25th for protecting in- Program for social economic develop- capital investments, foreign currency decreased by 5%, the growth indica- vestors and 53rd for obtaining credit. ment of the regions of the Republic of reserves have risen, non-oil sector as tor in the non-oil sector increased and In general Azerbaijan took the 67th Azerbaijan for the years 2009-2013, The structure of GDP in 2012, % place for the criteria of ease of do- income of population reached 34.7 ing business. During the accounting billion manats increasing by 13.8%, year, 22.1 billion dollars were invested income per capita reached 3784.3
Level of poverty by years, %
22 23 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT manats, increasing by 12.2%, and av- The water, electric and gas supply erage monthly salary reached 391.4 were improved in the settlements, manats, increasing by 9.1%. 117 thou- work in the direction of laying and res- sand new work places were opened in toration of new roads were continued, the country, level of unemployment construction of medical stations was fell to 5.2% and the level of poverty to ensured. BANKING SECTOR 6%. One of the main steps made in the In order to develop agriculture sec- direction of increasing welfare of po- tor in the country in 2012, issuance of pulation in the year was repayment of soft loans (218 million), allocation of the deposits remained from the Soviet subsidies, provision of agro leasing According to the information of and authorized capital of the new banks period to the population in the form services (55 million) and application the Central Bank of Azerbaijan, to- was determined in the amount of 50 of one-off compensation. The major- of tax reliefs were ensured within the tal of 176 financial organizations million manats from January 1, 2014. ity of the work implemented in this framework of the State Program for re- had licenses to perform banking ac- The majority of the banks in the coun- direction was completed until the end liable provision of the population with tivities in the country in 2012. 43 of try have made statements that they of the accounting year. Furthermore, foodstuffs in the Republic of Azerbai- these financial organizations were would meet this requirement and are gas, electric power and water supply jan for 2008-2015. It is the positive re- banks, while the remaining 133 were continuing their work in this direction. were improved in the country, work on sult of all of these that the production non-bank financial organizations. During the accounting year, 1 state construction and repair of hundreds of of agricultural products has increased In comparison with the previous bank operated in the country and the educational and health institutions, by 5.8%. year, a decrease was observed in the number of the banks with foreign culture and sport centres were execu- Azerbaijan Government has been number of banks and an increase was capital was equal to 22. The foreign ted. The State Oil Fund has allocated able to reduce the rate of inflation to observed in the number of non-bank capital in most of the banks (14 banks) 300 million manats for improvement the minimum during the recent years credit organizations. Thus, during the with foreign capital made up less than of standards of living of the IDPs, and as a result of the economic policy car- accounting year Central Bank revoked 50% of the authorized capital. Du- more than 20 thousand IDPs were pro- ried out at the time when the volume the license of 1 of the banks and 6 of ring 2012, 2 branches and 5 repre- vided with apartments. of investments and of population in- the non-bank credit organizations. sentative offices belonging to the fo- During the accounting year, the come has been increasing. In 2012, the In general the number of non- reign banks operated in the country. execution of the State Program for inflation rate was 1.1%. The volume bank credit organizations eleva- The number of branches and sub- social-economic development of Baku of money supply in the turnover for ted and reached 133 by the end of branches of banks in the country city and surrounding settlements in the end of 2012 reached 13.8 billion the accounting year, with the bulk decreased in 2012. In the previous 2011-2013 was ensured successfully. manats, increasing by 26% in compari- of these organizations (78%) being year, 666 branches and 161 sub- son with the previous year. credit unions while the rest opera- branches of banks operated in the ting as non-bank credit organizations country whereas, in the accounting funded by international humanitarian year, banks had 665 branches and organizations. During the accounting 158 subbranches. Though there was year, 1 other non-bank credit organi- not any change in the number of zation was performing in the country. branches of the non-bank credit or- During the year, one of the impor- ganizations in the accounting year (63 tant events related with the banking branches), the number of subbranches sector in the country was the decision reached 945, increasing by 9%. made by the Management Board of There was no change in the number the Central Bank on July 25, 2012 to of subsidiaries of local banks opera- strengthen the financial stability and ting in foreign countries. Thus, as was in sustainability of the banking sector. the previous year, 2 affiliates, 1 branch Based on this decision, the volume of and 6 representative offices of banks the total capital of the banks operating were active in foreign markets in 2012.
24 25 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT During the accounting year, 33 of 43 reached 33 in 2012. banks performing in the country have The banking sector assets increased The structure of credit investmments into fields, % accomplished their activities with total by 23% in 2012, as compared with the profit in the amount of 195.51 million previous year, and were equal to 17.6 manats, while 10 banks have accomp- billion manats.
Bank sector assets, billion AZN
lished their activities with a loss in the The volume of the credits directed amount of 65.5 million manats, as to the economy by credit organiza- part of the credits directed to the (4.3%) had special weight in the total a result of which the final profit ob- tions has seen 79% increase during the economy in either national or foreign volume of the credits directed to the tained by the banks was 130.01 mil- last 5 years. The amount of the credits currency was made up by long-term real sector during the accounting year. lion manats. Though the volume of put into the economy in 2012 by cre- credits. The credits granted to house- The volume of deposits and savings net profit obtained by banks in the dit organizations reached 12.7 billion holds (33.9%) and trade and service placed in the credit organizations du- (20.8%), industry and production ring the accounting year reached 10.6 (10.2%), construction and property billion manats, increasing by 13% in Credit investments into the economy, billion AZN (10.0%), transport and communica- comparison with the previous year. tion (6.3%), agriculture and processing During the accounting year deposits
Division of payment cards by types, %
accounting year decreased by 8% manats. The bulk of these credits were in comparison with the previous year, granted by private banks (65%) active an increase was observed in the num- in the country. ber of the banks performing with pro- The statistical information shows fit – though there were 31 banks that that 2/3 of the credit investments accomplished the activity with profit were provided in national currency in the country in 2011, the number during the accounting year. The main
26 27 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT BAKU-TBILISI-CEYHAN OIL PIPELINE
The Baku-Tbilisi-Ceyhan is a pipeline transporting Construction of the pipeline began on September Azerbaijan’s oil from the Caspian Sea to Ceyhan 10, 2003. A foundation ceremony attended by the port in Turkey, from where the pipeline transports heads of the states the pipeline passes through the oil to European markets passing through the was held In Sangachal terminal, where the pipeline Mediterranean Sea. Being 1773 km in length, the starts in Azerbaijan, on 17 September 2002. pipeline crosses the territories of Azerbaijan (449 The process of filling BTC pipeline with oil started km), Georgia (235 km) and Turkey (1059 km). The on the 10th of May 2005, and the oil reached Ceyhan diameter of the pipeline is 42 inches (106.68 cm) in port of Turkey on the 28th of May 2006. 10 million Azerbaijan and Turkey and 46 inches (116.84 cm) in barrels of oil were required to fill the pipeline. Georgia. and savings placed into credit orga- The statistical data also point to the nizations by households amounted fact that the habits of making transac- to 5.1 billion manats, to 2.7 billion tions by the means of payment cards manats by financial institutions and tend to become prevalent among to 2.8 billion manats by non-finan- people. Thus, during the accounting cial organizations. Households pre- year, 5753.0 thousand transactions CREDIT POLICY ferred the national currency when were realized by using debit and credit placing deposits and savings in the cards, which is 14% high in compari- credit organizations, whereas or- son with the previous year’s indicator. ganizations (financial and non-fi- Given the statistic indicators, the The Credit Policy approved by the priorities of the lending activities, the nancial) favoured foreign currency. volume of the funds attracted from Supervisory Board of the Bank deter- tools and methods for their imple- As shown by statistical data, 5008.0 non-resident banks and international mines the principles and parameters mentation, covers the mechanism of thousand payment cards were used in financial organizations for the end of of lending process. Credit Policy has organization and supervision of credit the country during 2012. That was 9% 2012 was equal to 2.3 billion manats. been prepared in accordance with operations. Credit Policy is the docu- high in comparison with the respective These liabilities accounted for 15% of the Law on the Banks, the Civil Code ment reflecting existing reality and will indicator of the previous year. Dur- the total liabilities for that period. As of Azerbaijan Republic, the norma- be regularly improved by taking into ing the accounting year, 51% of the a consequence of foreign resources tive acts of the Central Bank of Azer- account the changing situation of the payment cards accounted for social being replaced with domestic depos- baijan Republic, other legislative credit market in future. cards, 27% for salary cards, 14% for its, the banking system of Azerbaijan acts and Strategic Plan of the Bank. In order to achieve the goals set other cards and 8% for credit cards. was protected more against external Credit Policy sets the goals and forth, there are medium and long- The number of credit card users in influences and obtained a chance of fi- the country has more than doubled nancing through more stable resources. Thus, the credits disbursed to the entrepreneurship subjects per- in comparison with the previous year. forming in various fields of the economy and individuals in 2012 in- creased by 44.3 million manats in comparison with 2011 and reached 161.3 million AZN, whose breakdown by categories was as follows:
2012 2011
# Loans Credit Credit Reserve Reserve Net credit Net credit investment investment investment investment
Loans to corporate 1 74 396 4 480 69 916 59 140 4 593 54 547 customers
Loans to SME 2 58 291 3 111 55 180 21 563 870 20 693 subjects
Loans to individual 3 22 790 926 21 864 28 152 1 031 27 121 customers
4 Mortgage loans 12 320 0 12 320 9 621 229 9 392 Other credits to 5 1 999 0 1 999 5474 230 5 244 individuals Total: 169 796 8 517 161 279 123 950 6953 116 997
30 31 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT term strategic requirements set for the in conditions of the products may were disbursed in the amount of 35.0 The Bank closely cooperates with loan portfolio of the Bank. While com- be attributed as the successful re- million AZN for funding the projects of the following international financial piling these requirements, thorough sult of cooperation conducted with 451 entrepreneurship subjects (as well organizations: analysis is conducted by evaluating the various international financial as micro credits – in 157 cases) in 34 profitability and risk level. The strate- institutions as well. cities and regions by the Bank through 1. ICD: The Bank has disbursed gic requirements are reviewed peri- The business lending in various re- resources of the fund during that pe- low rate loans in the amount of 5 mil- odically, and when necessary they are gions of our Republic, supporting the riod. 93% of the funded projects fall in lion AZN for funding the projects of 6 amended and modified. economic policy of the state, was in- the share of regions, and the weight entrepreneurship subjects within the The Bank continued to implement creased considerably either on ac- of projects in the field of agriculture framework of this project. and production is 96%. For the end of 2. IFC: According to the credit The loan portfolio by the sectors of the economy for 30.12.2012 was as follows: 2012, the credit investments through agreement signed in May of 2011, IFC, the resources of the National Fund for member of World Bank Group, has In thousand AZN Entrepreneurship Support were 23.35 given the Bank technical support to million AZN, and its weight in the loan implement systems enabling to offer Economic sector Credit Amount Weight in loan portfolio portfolio of the Bank was 14.5%. diversified service and products in the The Bank was one of the initial banks regions along with provision of finan- Consumer loans 21 029 13.04% beginning to act as an agent bank in cial support in the amount of 7 million Production 29 169 18.09% lending through the resources of the US dollars within 5 years in the frame- State Agency for Agriculture Credits, work of funding micro and small and Agriculture 17 393 10.78% attached to the Ministry of Agricul- medium entrepreneurship. Trade and service 51 630 32.01% ture, in the framework of the Project 3. Societte Generale: The Bank Real estate and mortgage 12 320 7.64% for Development of Agrarian Sector. has signed an agreement on attraction The Bank has disbursed low rate loans of 1 mln USD with Societte Generale Construction 23 108 14.33% in the amount of 8.46 million AZN for on March 9, 2012 in the framework of Other 6 630 4.11% funding the projects of 289 entrepre- the strategy for development of Inter- neurship subjects performing in the national Relations. The attracted funds Total 161 279 100.00% field of cattle-breeding, production were directed to the funding of micro and processing in 28 regions in the and SME entrepreneurship. The co- credit policy directed to identifica- count of internal resources of the Bank framework of this project since 2007. operation with Societte Generale, one tion of borrowers with paying capacity or discount resources attracted from As stated above, the Bank closely of the leading financial leaders of the among the potential customers in local financial institutions, whereas fi- cooperates with both local and inter- world, is one of the next achievements 2012 as in previous years. nancial support was strengthened in national financial organizations in the on international arena. Generally, credit investments made order to develop current businesses of field of business lending. The Bank has 4. BSTDB: Black Sea Trade and in 2012 were typical, having been di- small and medium entrepreneurship disbursed loans in the amount of 1 Development Bank and the Bank rected to such fields of the economy and to stimulate capital investments million AZN to fund 106 entrepreneur- signed an agreement on allocation as production, processing, agriculture, in new business fields. Business loans ship subjects in the regions (Guba, Ga- of credit line for funding trade in the construction, trade and service. were disbursed in the amount of 104.4 bala, Dashkasan, Gadabay, Ismayilli, amount of 4 million USD on 5 Decem- million manats for 1323 contracts in Lerik, Shahbuz) covered by the project ber 2011. The funding was directed Business and Project credits 2012, with 12.5 million manats of this during the period passed from 2004 to increase a trade turnover between The Bank paid special attention to amount given for 231 contracts and in the framework of the program for the member countries of the Black Sea the funding of new projects submitted falling into the share of project lend- development of Mountainous and Cooperation Organization. by the business subjects for various ing. Higher Mountainous regions by IFAD fields and softened the conditions of One of the domestic financial or- (International Fund for Agricultural Micro-financing our business credit products. Thus, the ganizations that the Bank has closely Development). Micro-financing is already becom- interest rates for business loan pro- cooperated with for a long time (since ing a special position in the credit pol- ducts were lowered and the term was 2002) is the National Fund for Entrep- icy of the Bank. The Bank has achieved extended. The positive changes made reneurship Support. Low rate fund loans essential changes in its credit policy by
32 33 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT using institutional values of the micro launched. As a result, the Bank con- From 1 year up to 3 years – 88.01 mil- million AZN or 17.09% of portfolio financing (theoretical and practical). tinues to strengthen its position in the lion AZN or 54.56% of portfolio Over 5 years – 20.67 million AZN or Sustainable customer position (from market of consumer loans and makes From 3 years up to 5 years – 27.56 12.82% of portfolio small to corporate business) has been steps towards getting leadership in achieved by the Bank in the market this field in future. At the same time, in micro-lending by building micro- the Bank tries to ensure that loans financing discipline. In fact, two credit are disbursed to individuals through Growth dynamic of the loan portfolio by years, (in million AZN) products were established in the field plastic cards in support of the State of micro-financing (individual micro Program for expansion of non-cash loan and group loans) and relevant payments. One of the key areas in procedures were prepared and ap- meeting personal needs of individuals proved with respect to the products. for loans involves mortgage lending. The experienced managers and spe- Joining the state program for mort- cialists were invited to the Baku and gage lending and becoming an agent Binagadi branches of the Bank, the bank of Azerbaijan Mortgage Fund in pilot project was started ensuring dis- 2006, the Bank has disbursed loans to bursement of loans on two micro-fi- the population in the amount of 11.53 nance products. It is possible to cover million AZN, and the loan portfolio for the customer segment staying outside the end of 2012 was 10.21 million AZN. the present credit market and having large potential through these pro- There are the following loan pro- ducts in the Bank. The Bank has ex- ducts of the Bank in the field of len- panded cooperation relations with ding to individuals: various international financial organi- 1. Small size consumer loan zations, as well as international experts 2. Middle size consumer loan have conducted training for obtaining 3. Large size consumer loan Breakdown of the loan portfolio by customer types, (in %) technical support considering the de- 4. Teacher loan velopment of this field and improve- 5. Healthcare loan ment of knowledge and skills of the 6. Serviceman loan staff on micro-financing. During the 7. Student loan accounting year, trainings were con- 8. Jubilee loan ducted on micro and small entrepre- 9. Car loan neurship lending together with the 10. Lombard (pawn) loan USAID and these types of work are 11. Home repair loan regularly continued. The Bank plans to 12. Pensioner loan apply these products in all branches. 13. Credit cards 14. Mortgage loan Lending to individuals The Bank also pays special attention The breakdown of the loan portfo- to disbursement of loans to indivi- lio by tenors was as follows: duals to fulfil needs for financial resour- Up to 1 month – 0.02 million AZN or ces related with personal consump- 0.01% of the portfolio tion. The population is presented with From 1 month up to 6 months – 3.81 various credit products, conditions of million AZN or 2.36% of portfolio the products are modified regularly From 6 months up to 1 year – 21.24 in accordance with the requirements million AZN or 13.16% of portfolio of the market or new products are
34 35 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT LAUNCH OF THE FIRST SATELLITE INTO SPACE
Communications Satellite Azerspace/Africasat-1A, The second centre for managing the satellite is the first communications satellite of Azerbaijan, was based in Nakhchivan. Work carried out in all the built by the US-based company Orbital Sciences management centres is planned to be completed Corporation. Azerspace-1A satellite was put into by the end of September. Azerbaijan is one of the orbit by France’s Arianspace company with an Ari- 11 countries possessing an artificial satellite in the ane-5 rocket from Kuru Cosmodrome, located in world. It is planned Azerbaijan will launch its second French Guiana (Southern America), on 7 February satellite in 2015. This satellite is aimed for underta- 2013. The satellite will be managed by Azerkosmos king underground explorations, monitoring OJSC. The main management centre is located in weather and ecological status and etc. Today, Azer- Guzdek village of Baku city’s Garadagh district. baijan has the degrees of 43.2, 46 and 58.5 in the space, which translate into the meaning of places in the space. The satellite cost Azerbaijan USD 203 m. Distribution of the loan portfolio into fields of the economy (in %)
SERVICE NETWORK AND CUSTOMER SERVICE
By expanding the service network, of the new branches in the regions the Bank directly takes part in the in the framework of this project. We program of socio-economic devel- would like to emphasize that at pre- opment of the regions, increases its sent there is a great potential that was regional customer base, offers custo- not attracted to the economic turn- mers fast and high-quality service by over in the region and the main goal being close to them. Increasing num- of the Bank’s expansion of the branch ber of service possibilities for corpo- network is to utilize these possibili- rate clients that operate in the regions ties. Supporting implementation of contributes to the Bank increasing its the state program of social-economic attractiveness in terms of investments. development of the regions by the go- To make the branch network more vernment, the Bank in its development comprehensive from geographical strategy, gives special importance to point of view, to manage the network the expansion of the branch network system from the single centre and in the regions. identification of the bank products The Bank values qualitative and presented to customers, the policy of quantitative indicators on an equal optimization of the branch network level. This is why the branches opened was continued during the accounting for service do possess capability of year as done every year. providing customers with services of In order to identify sales techniques high quality. It is not random that for applied, the same type standardiza- expansion of the service network in tion process was conducted in all the the regional centres within the context branches of the Bank. The goal is to of the Strategic Plan approved in the offer customers the Bank’s services in Bank, a new subbranch was founded in a fast manner and with high quality, Gazakh city during the year. to search for new markets for our ser- The geographic location of bran- vices and to establish more advanced ches, representatives and currency wide service network for expansion exchange points is distinguished for into both internal and external mar- its originality. During the account- kets of the geographic region. ing year, 12 branches, 1 subbranch, 6 According to the Strategic Deve- representatives and 21 currency ex- lopment Plan covering the years 2012- change points of the Bank operated. 2015, there is intention to raise the 6 of the Bank’s branches are in Baku number of branches and subbranches city, the others in the regions such to 17 in total. It is planned to open most as Sumgait, Ganja, Tovuz, Agstafa,
38 39 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT Zagatala, Khachmaz and Gazakh. in purchase of a gift for a party, birth- Through use of this service, without tancy on the left hand of the Bank’s As stated above, both qualitative day or a special event, TuranBank also coming to the bank, customers can official website (www.turanbank.az). and quantitative measures are equally launched its new product Gift Cards. make payments for communal ser- Besides, on the official website of the valued by the Bank. Thus, the Bank, TuranBank’s Gift Cards are the indis- vices, execute such operations as Card Bank the section of Skype number was being constantly engaged with cus- pensable gift for any holiday, birthday to Card, Cash by Code, card blocking established, which is aimed for those tomer satisfaction, is keen to devise or party. Image Cards and Gift Cards without having to apply to the bank, who are calling from abroad or those and apply novelties in its operation products combine all features of Mas- receipt of balance statement and in- who can’t use other means of commu- for ensuring customer comfortability. terCard plastic cards in them. Thus, formation on the card account in real nication. For using this service, it is re- Projects such as repayment of loans through these cards customers can time at any time during a day, irres- quired to enter the Skype number sec- by the means of MilliÖn Pay Points as take cash from ATMs, make non-cash pective of their location or the mo- tion on the official website of the Bank. well as Mobile banking intended for and interest-free payments by the bile operator whose services are used. Nowadays, interest in virtual life plastic card users, Call Centre, Online means of POS terminals in hotels and In order to simplify customer around the world has increased. As Consultancy, and Facebook page can shopping centres, both in the country applications to the Bank and respond in other parts of the world, people in be cited as an example for this. and in more than 200 foreign count- to their queries on time, a Call Centre Azerbaijan prefer to obtain informa- Based on the model of universal ries, pay for communal services, mo- service with the number of 935 was es- tion on developments in any field and banking, focusing its operations at its bile phone services, cable TV, Internet, tablished. Calling 935, customers can news developments from online social target markets, the Bank didn’t put online shopping, and use services like get information about products and networks. Considering this fact, the aside the needs of employees of edu- Cash by Code, ATM SMS Notification services, tariffs, exchange rates, details, Bank introduced its Facebook page cational and health service institutions, enrolment, Card to Card and Mobile service network etc. For those custo- in the accounting year to increase the students, military servicemen, retired banking. mers who are unable to call or want to number of sales channels and to ex- people, customers celebrating their One of the projects implemented save time, Online Consultancy service pand sales being directed to its targets. anniversaries and owners of SMEs, and by the Bank taking into account cus- was launched on the official website of Facebook is not only a sales channel, offered them loans with favourable tomer satisfaction is receipt of loan re- the Bank. Being part of the Call Cent- but is also a means of communication conditions during the accounting year. payments through MilliÖn Pay Points. re, Online Consultancy provides real used to share with society the Bank’s The interest rates for the Sirler Khe- As you know, the bulk of customers time answers to the above -mentioned achievements, latest developments, zinesi (the treasure of secrets), which is don’t always have opportunity to visit questions of customers through the in- information on its new products and a deposit campaign lasting for years, the bank for loan repayments, which ternet. To use this service, it is required services and to discover new markets. were increased in line with interests of causes delays in repayments of these to enter the section of Online Consul- customers and options were given to customers and certain problems for select the insurance of their deposits them leaving their work place. In order through Deposit Insurance Fund. to prevent those problems and ensure Considering the needs of custo- customer comfortability, the Bank has mers willing to have their unique plas- launched this specific project. Now tic cards, the Bank presented them customers only need to go to MilliÖn with the possibility of having their pre- Pay Points located in various areas of ferred images printed on their cards. different regions of our country and Images that customers can have prin- dial their codes to make loan repay- ted on their cards include those of- ments. MilliÖn Pay Points are installed fered by the Bank and those custo- in various trade and business centres, mers have chosen unless those are metro stations, supermarkets, stations on a restricted list. Image cards can and airports in Baku city and in other be presented as either debit or credit cities of Azerbaijan. cards. Depending on customer needs, The project of management of card images can be printed on MC Stan- accounts of the plastic card holders dard and Cirrus Maestro. Taking into through mobile phone without coming account needs of customers interested to the branch is called Mobile banking.
40 41 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT MARKETING AND PUBLIC RELATIONS loans such as Teacher, Health, Student, rator. As from the early days of 2013 plas- Microloan, Lombard (Pawn loans). tic card users will be able to change the Along with asset-side products, the existing PIN code of their plastic cards Bank also improved the conditions of with the codes they favour by the As mentioned before, the accoun- corporate social responsibility, service liability side products. Thus, the inte- means of the Pin Change service. This ting year of 2012 is recalled for many to Azerbaijan economy, compliance rest rates of 7 types of deposits under service is more valuable when a cus- significant events in the Bank’s history. and respect for country laws as always. Treasure of Secrets deposit campaign tomer possesses several plastic cards, The event dedicated to the celebration Working principles of the marke- were increased in comparison with the thus, having difficulty remembering of the Bank’s 20th anniversary on 12 ting and public relations sectors of the deposit products of other banks. the PIN codes for all these cards. June 2012 and the Bank stepping into Bank are based on internal policies For the purpose of providing com- One of the major principles of the the new Strategic Period of 2012-2015 and regulations, being the leading dri- fortable service to customers, the Bank Marketing and Sales structure con- can be cited as the main events. vers employed by the Bank’s Business launched a new product jointly with cerns implementation of advertising Within the 20 year anniversary cam- Development structure. During the ac- Komtec Company. On the basis of the campaigns on the Bank’s products paign the Bank carried out a number counting year, regular implementation project, TuranBank’s loan customers and services, and promotion of them of events. Thus, the Bank held a pro- of the measures planned marketing make repayment through over 600 to the public. In the accounting year, duct development campaign among its actions, market research was ensured, MilliÖn Pay Points located in various promotion activities were implemen- th employees, dedicated to its 20 anni- training sessions were organized in the areas of our country any time during ted more heavily and broadly in rela- versary. Employees who got victory in head office and branches to facilitate a day, without having to visit the Bank. tion to the previous years. Promotion the campaign were given awards. As a active-sales channels, quarterly reports In 2012, the Bank didn’t put plastic campaigns were implemented prima- result of this campaign, the most pre- on customer behaviour were prepared card customers out of its interest circle. rily through local radio channels, TV ferred, Anniversary loan product was to manage customers’ cooperation Thus, targeting its customers who are channels broadcast in Ganja-Gazakh introduced to the customers. One of with the Bank, periodic segmentation in constant search for novelties, the region, newspapers and magazines, the significant Anniversary measures analysis and research in expansion of Bank developed its new products such websites, social networks, metro car- taken was preparation of an Anniver- sales network, new products and ser- as Image Cards and Gift Cards. Within riages, metro platforms, buses, the sary video clip, reflecting the Bank’s vices in line with customers’ needs the framework of Image Cards, cus- Bank’s ATMs, outdoor means of ad- activities over the years. In the video were developed, internal product de- tomers are provided with a possibility vertising, and information on pro- clip financial institutions, organiza- velopment campaigns were organized, of having their preferred image prin- ducts was printed on the back of re- tions and customers that had coope- winners’ proposals were assessed. ted on their card, thus, enabling them ceipts given to population for use of rated with the Bank shared their opi- As in other years, the major respon- to have their unique cards. Those who electricity. For the purpose of raising nions on the Bank and expressed their sibilities before the Bank’s Marketing obtain the Bank’s Gift Cards can pre- the Bank’s sales volume, distribution congratulation on its 20th anniversary. and Sales structure in 2012 was to for- sent their money not in an envelope, of leaflets and brochures designed for During the Anniversary year, a logo- mulate new products and services by but in TuranBank’s Gift Cards. various products of the Bank was un- type commensurate with the event of studying customer needs, while at the To extend the list of services pro- dertaken on a regular basis through the Bank’s Anniversary was prepared same time upgrade the existing asset vided to plastic card users, the Bank special stands placed at various by the Marketing and Sales division and liability products to the needs of introduced to its customers the new venues of trade, health, education, and used in all advertising campaigns customers. Thus, in 2012 new Pensio- service of Mobile Banking, and start- shopping and etc. implemented throughout the year. ner, Army Serviceman, Home Repair, ed preliminary negotiations to launch In order to increase efficiency of As regards the Bank’s Strategic Plan Anniversary loans were presented to Pin Change service. Mobile Banking promotion campaigns, regular surveys for 2012-2015, the Bank stepped into customers, a pilot project was initiated service involves a system of bank ac- were conducted among customers to a new period while staying true to the for Group and Micro service loans aimed count management, which is done in find out sources of information they principles of reliability, transparency, for special service fields. In addition to real time without applying to the Bank, employ, and techniques of promotion taking customer as a partner, valuing these, competitive changes were imp- irrespective of location and time, that are more efficient and favourable employee as the most valuable equity, lemented to conditions of the existing through the number of any mobile ope- to customers were specified.
42 43 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT As known, social networks have be- undeniable role in daily operation of come one of the sales channels with the Bank. Thus, Public Relations divi- people showing greater interest in sion shares with public information them, utilizing and sharing them more on developments and new achieve- frequently. Considering the importance ments occurring in daily operation. Du- of these sales channels and the ease of ring the accounting year, unlike other CORPORATE GOVERNANCE targeting market segments, the Bank structures of the Bank, Public Relations established its Facebook page in a new division took on many of the responsi- format and introduced it into use. The bilities associated with the Bank’s 20th primary goal of the Bank in this field anniversary. The key goal here was to If management is about orga- of its members. Issues such as con- is to foster the Bank’s sales activity on enlighten public about the Bank’s 20 nization and implementation of a duction of IT audit and approval of the social networks which people show years of experience, its development business, corporate governance is Audit strategy were addressed during greater interest in and utilize more fre- over years, stability and transparency a collection of systems accurate- the meetings of the Audit Committee. quently as mentioned above, view this in a proper and purposeful fashion. ly reflecting methods to operate it. The General shareholder meeting direction as an alternative sales chan- Interviews and articles by the Bank’s Generally, by attaching great im- by laws show the rights of all the in- nel and apply potential service oppor- management contributed a lot to the portance to the establishment and de- vestors in detail. Here are some of the tunities. work of enlightenment. Meanwhile, the velopment of corporate governance Bank’s shareholders rights: On the basis of development and Bank ensured delivery of all the infor- practices for a long time, TuranBank customer satisfaction strategy of the mation considered as important to be has shown its interest in application of • Participate in the management Bank, Call Centre service, attached to released to the public through both its modern management practices in the of the Bank; the Marketing and Sales division, while official website and other mass media Bank. Thus, TuranBank OJSC has given • As regulated by the legislation, at the same time covering the services means. This was done given the provi- of Online Consultancy and the Skype sions of Information Disclosure policy great importance to the development obtain information about the activity number, was established during the developed by the Bank in accordance of corporate governance principles of the Bank, get acquainted with its year. The Bank applied the phone num- with application of Corporate Gover- during cooperation with both Azer- annual report and accounting balance ber of 935 for improving the Call Centre nance standards in banks by the baijan Bank Training Centre (ABTC) once a year; operation and ensuring that customers Central Bank and within the framework and International Finance Corpora- • Participate in the Bank’s Gene- contact the Bank more easily. of Corporate Governance project by IFC. tion (IFC) and in following periods. ral Assembly of Shareholders with the Bank didn’t forget customers using As mentioned above, the Bank’s Bodies of corporate governance of right to vote and demand a copy of speedy money transfer services in the articles were printed and advertise- the Bank include the General Assemb- the minutes of meetings; accounting year. Thus, the Bank joined ments placed on local magazines ly of Shareholders, the Supervisory • Get dividends from the Bank’s Amazing World lottery campaign con- and newspapers during the accoun- Board, Audit Committee and Manage- net profit and etc. ducted under the auspices of Western ting year. Thus, interviews and ar- ment Board. The supreme manage- Union speedy money transfer. ticles by the top management of the ment body of the Bank is the General There are 5 internal committees in To ensure customer coverage Bank were printed on Consulting & Assembly of Shareholders, which held TuranBank, consisting of the Credit over Baku city and areas that may have Business, Business Life magazines as 7 meetings in 2012, with a quorum Committee, IT Committee, Risk Ma- been missed during the visits to cus- well as on Zerkalo newspaper, and present at all the meetings. Many de- nagement Committee, Human Re- tomers, areas for sales activity and advertisements on its new prod- cisions were made in the meetings sources Management Committee and operation 11 branches of the Bank ucts and services were placed on IRS on all the operations related to the Assets and Liabilities Management were determined in order to minimize and Art Beauty magazines. A signifi- Bank’s shares, including profit divi- Committee. Over the course of the overlapping activity by the personnel. cant event in this field was the hold- sion, approval of reports, increasing accounting year internal committees Public Relations division, included ing of an interview with the Bank’s top the authorized capital, and issuance of of the Bank gathered at least once a into the structure of Business Deve- management by a world-wide maga- shares and etc. Meanwhile, 8 meetings quarter, with decisions made in these lopment Department and considered zine, The Business Year, and the prin- of the other management body, Audit committees having a positive impact as one of the leading forces, plays an ting of this in magazine’s issue for 2012. Committee, were held in the accoun- on the efficiency of the Bank’s opera- ting year, which were attended by all tion.
44 45 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT FIRST PARTICIPATION IN OLYMPIC GAMES
Azerbaijan National Olympic Committee was found- Olympic movement started after Ilham Aliyev was ed in 1992. 5 sportsmen from Azerbaijan, within the elected as the Chairman of the National Olympic united team of CIS countries, took part in the 25th Committee in 1997. He successfully heads the Na- Summer Olympic Games held in Barcelona in the tional Olympic Committee since 1997. same year. Azerbaijan’s flag was raised and anthem New and modern Olympic sports centres were played in Olympic Games in Barcelona. built and introduced to sportsmen’s use in a num- ber of regions of Azerbaijan, including Baku, Ganja, Nakhchivan, Sheki, Guba, Barda, Zagatala and etc. over the course of these years. The number of the centres in use is equal to 18 at present. To ensure transparency of the Bank, and successful achievement of set meeting the requirements of the In- goals underscores stable development formation Disclosure policy that was of corporate governance in the Bank. approved in May 2011, TuranBank re- Considering the speedy development leased information on important de- and reforms in the field of corporate velopments on a monthly, quarterly governance that are effective on the SOCIAL RESPONSIBILITY and annual basis and took steps from global scale, TuranBank will make the perspective of ensuring transpa- efforts to further advance systems of rency for stakeholders. Furthermore, corporate governance in the future for a long while Bank has contracted and ensure execution of many reforms Collaboration and cooperation with • Respect the rights of interested one of the top four audit companies with the goal of making the Bank’s society and business community is ma- parties for external audit services. KPMG has corporate governance practices match jor factor of maintaining stable growth • Pre-eminence of law been hired by the Bank to prepare ex- with those applied in leading compa- of every commercial organization. To • Respect to human rights ternal audit reports for 2012. nies on the international scale. gain a good reputation of country citi- Thus, dynamic growth of the Bank zens, to reach new business heights Through our daily activity and vo- is possible by paying attention to in- luntary projects, the Bank supports terests of each audience, in general, and informs the public regarding whole public. Systematic approach the sustainable development of the to the corporate social responsibility society. The Bank continued its sup- is connected with principles of long- port in the directions of sponsor and term growth strategy of our bank. This charity activities, took part in the so- approach reflects in the Social Eco- cially important projects to improve logy Responsibility Policy of the Bank, the well-being of population and con- approved in December of 2011, and tact with society. To render assistance was new initiative step in the growth of to low-income people, to improve the Bank as a socially responsible insti- science, education, culture and sport is tution. our support to customers, collabora- We consider that our success is di- tors and all people surrounding us. At rectly related to the growth of our the same time, this is investment for country and society. The Bank is aware the future. of its responsibility before the public, As every year, the Bank included therefore plays an important role with wide ranging social plan of actions in its the purpose of contributing to the de- operational plans. In the frame of this velopment of regions. action plan, the Bank was the main Corporate social responsibility of sponsor for the project of Student the Bank is reflection of its respon- Program signed between Risk Profes- sibilities before customers, emplo- sionals of Azerbaijan (RPA) and Azer- yees, partners, shareholders and ove- baijan State University of Economy. rall society. Adopting its procedures in In the meantime, sponsorship activity the direction of Corporate Social Res- of our bank for the Goyazan Football ponsibility, the Bank brought general Club and Goyazan Wrestling School is values together under the following considered one of the main indicators principles: of our support for the sport field. An- • Transparency other main activity in the field of Cor- • Accountability porate Social Responsibility held by the • Ethical behaviour Bank was Novruz Holiday for the house
48 49 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT of elderly. such as collection of used waste pa- Our Bank closely takes part in the pers by the structures of the Bank and growth of future career and provi- double-sided print mode can be given sion of employment of well-educa- as a sample of this activity. ted youth with the finance-economic The Bank attaches primary impor- orientation. As every year, our Bank tance to the social and ecological RISK MANAGEMENT took part in the employee fairs name- responsibility in terms of the financing ly Graduate-2012, held in Azerbai- of investment activities. Thus, the Bank jan State Economic University, as well tries to finance highly ecological and as Employment careers job fair in the socially important projects, wherein Risks management activities are inconsistent with the risk level accept- Ministry of Labour and Social Security minimize the environmental risks du- carried out in accordance with the able to the Bank as well as unexplored Department and the University Career ring investment decision-making. All Laws on Banks of Azerbaijan Repub- and unclassified risks. Planning Centre in Baku. financing premises are assessed from lic, Guidelines on Risk Management As for the organizational manage- TuranBank OSC organized training the ecological social aspects and regu- in Banks of CBA, Instruction on the ment of bodies and units active in the on financial management and efficient lar monitorings are carried out. Corporate Governance Standards, field of risk management structure of use in the subject of financial educa- As stated in the mission statement, Regulations of TuranBank OJSC, Risk the Bank, risks at the bank are mana - tion and literacy for the pupils of se- in terms of improvement of material Management Policy, Regulations of ged at General Assembly of Share- condary school number 13 of Yasamal and moral welfare, the Bank regularly Risk Management Department, rec- holders, Supervisory Board, Audit district, within the frame of collabora- carried out the assessment of emplo- ommendations and principles of Ba- Committee, Management Board, In- tion with Hopeful Future Youth Orga- yees from the financial perspectives sel Committee and other international ternal Audit Department, Committees nization of the Ministry of Education and career development, as well as best practice. and structural units and various em- and Aflatun-Child Social and Financial enabled staff to participate in local and Education Network. In the framework foreign trainings in order to develop Risks Management System is the ployee levels. of above mentioned training, pupils and implement the best practices in process of determining, evaluating, TuranBank has further improved were informed about the banking sec- the Bank. Additionally, in the accoun- measuring and regulating of all risks its Risk Management activity in 2012. tor of Azerbaijan, as well as operations, ting year as in the past years, the Bank and reporting appropriately about Thus, in 2012, in line with each of the work process, services and products of has traditionally conducted different them. TuranBank’s risk management risk groups, Market and Liquidity Risk TuranBank and thorough discussion social events with the purpose of sup- activities are managed with the com- Management, Operation, Image and was held regarding the ATM, POS ter- porting moral incentives of staff. In this bined strategic and operational phases Strategic Risks Management as well minals, fraud operations and preven- regard, visits were organized to Nabran of the system. Strategic phase reflects as Credit Risk Strategic Management tion methods of these operations. The settlement of Khachmaz city and Za- itself the recognition and measure- divisions were established within the main purpose of the event was to teach gatala city regarding the twenty-year ment of risk, but the operation phase Bank’s Risk Management Depart- children how to properly deal with the anniversary of Bank, and provide par- contains the assessment, reducing and ment to enable timely and adequate banks from an early age. ticipation of Bank´s employees in the the reporting of the risks. response to risks emerging as a result Although activity of bank business is Eurovision song contest. The main objective of the risk ma - of Bank’s operations. This structure respected as environmentally friendly As in previous years, our bank con- nagement is to ensure that the Bank ensured timely and effective control type of activity, considerable volume tinued lending activity from Mortgage only undertakes risks of reasonable over financial and business risks at the of energy and resources being used Fund as an agent bank with the pur- amount and adequate according to Bank. by the bank is an area of worry for us. pose of improving living condition of its business activity. At the same time, The Bank understands and tries to re- young families. the process involves reducing risks Strategic activity: Negative eco- duce its impact to surroundings, as it Thus, it can be concluded with the that may arise from a process of daily nomic processes and recessions hap- leads to reduction of expenses and as assurance that corporate social respon- activity to a minimum, while ensuring pening in the world, especially in de- well as influences improvement of the sibility is an integral part of TuranBank preservation of assets and capital at a veloped countries of Europe demands environmental situation. Small actions, activity. possibly maximum level. The key prin- that banks should constantly improve ciple is to prevent the execution of op- their internal procedures in the fields erations creating conditions for risks of risks management. Taking this into
50 51 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT account, TuranBank continued coope- ability, profitability, liquidity indicators While preparing the Risk Coefficients the managing of each risk type. ration with International Financial and market risk sensitivity categories. Control System, the norms of the Cent- The Bank will thoroughly implement Corporation (IFC) in the fields of risks ral Bank, the covenants of the Interna- risk analysis methodologies such as Fi- management with increased rate du- Credit risks: With the purpose of tional Financial Organizations in terms nancial Analysis Tool, Credit Scoring ring 2012. So, with the purpose of analysis of credit risks, the above men- of credit, market and liquidity risks, the and Risk rating systems that was es- improvement of credit risks analysis, tioned Financial Analysis Instruction, recommendations of Basel Committee tablished this year to minimize credit Financial Analysis Instruction, Cre- Scoring and Risk rating Systems were for capital risks and risk based coef- risks, at the same time the methodolo- dit Scoring and Risk Rating systems prepared. At the same time, Non-per- ficients mostly used in international gies such as Loan Portfolio Monitoring, were created with the support of IFC forming loan management and Credit practice were taken into consideration. Non-performing loan management expert. These instructions should Portfolio Monitoring were carried out The Bank plans to implement se- and Credits Monitoring for credits enable to keep the credit risks at a ma- in the direction of analysis of credit veral strategies in the direction of risks risks management, which are based on nageable level. Apart from credit risk risks. In addition, new Loan Monito- management in the next activity year. new international practice. analysis, with 2 different experts of IFC, ring Methodology was prepared to The rapidly-developing bank sec- New report forms and control various works are done in the direc- manage credit risks at more optimal tor and financial markets bring new mechanisms in order to manage Mar- tions of non-performing loans ma- level and to execute credit monitoring complex operations and products ket and Liquidity risks more efficiently nagement and credit portfolio moni- more effectively. Separate and new with them. These complex operations are also planned for upcoming year. toring in the current year. As the result approaches were applied to different and products force the Bank to face As the basis for management of of collaboration with IFC, recommend- typed customers during monitoring new risks, especially the process risks. operational risks, it was targeted to ations were received and international of the loan provided by sale struc- That’s why, the Bank plans to work out work out and establish new systems experience was learned in the direc- tures in the methodology. Different and apply new Risk Policy as soon as optimizing control mechanisms and tion of credit risks management. approaches were taken into conside- possible during the next activity year. as well as, technological processes ration to reveal the borrower’s busi- In order to implement new policy, the ensuring timely and effective achieve- Internal Control System: A number ness and financial risks, cases of inter- Bank will prepare the rules of separate ment of strategic goals in accordance of works have been conducted in the nal fraud, control systems and etc. risks management in accordance with with the volume of the activities of the direction of improving internal control the new risk policy. Meanwhile, new Bank. systems in the Bank. Initially, internal Operational Risks: Stress tests block-scheme will be established for processes and control systems were were carried out regarding active investigated, adequacy of existing in- Bank operations such as clearing and ternal control systems were measured money transfer systems in the direc- and accordingly plan of measures tion of operational risks. Those stress was prepared. Plan of measures was tests were carried out separately for executed by the sectors and other the Branches and Customer Services employees of the Bank and at the same Department. Material damages caused time was analysed by Supervisory and within the 1 hour and 1-day breaks Management Board. due to problems of network and sys- tems of payoff and money transfer in Market and Liquidity risks: In the Bank, were estimated. In this case, the current year rating system was the Bank determined the volume of applied with the purpose of capital reserve which needs to be held banks credit analysis and new stress within possible events of these opera- tests in accordance with international tional risks. standards regarding the currency and interest rate risks. Rating system that Risk Control: Risks Management was developed enables to systemati- Department has established new con- cally analyse Banks and Non-Bank trol-report system named Risk Coef- Credit Institutions based on Capital ficients for improvement of efficient adequacy, Asset quality, Management control system of risks of the Bank.
52 53 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT CONGRESS OF WORLD AZERBAIJANIS
Based on the order 724 on organization of the 1st President Ilham Aliyev was elected as the Chairman Congress of World Azerbaijanis by the President of of the Coordination Board of Word Azerbaijanis in the Republic of Azerbaijan, dated 23 May 2001, the this congress. 1st Congress of Word Azerbaijanis was held in Baku İn accordance with the order on the 20th anniver- on 9-10 November 2001. Members of the Coordi- sary of restoration of the state independence of the nation Board of World Azerbaijanis were identified Republic of Azerbaijan by President Ilham Aliyev, and Haydar Aliyev was elected as the Chairman of dated 21 January 2011, the 3rd Congress of World the Board during the congress. And, based on the Azerbaijanis was held Baku city on July 5, 2011. order 1291 on organization of the 2nd Congress of World Azerbaijanis by the President of the Republic of Azerbaijan, dated 8 February 2006, the 2nd Con- gress of World Azerbaijanis was held in Baku on March 16, 2006. MEASURES AGAINST MONEY LAUNDRY AND TERRORISM FINANCING rection of fighting against money laun- AML/TF to the Compliance specialists. dering and terrorism financing. In the The infrastructure established in meantime, the suspicious operations the Bank in the direction of fighting are identified and suspended during against AML/TF meets the require- The activities in the direction of com- The rapidly growing economic pro- the operation by the GoAML module. ments and standards of the domes- bating against money laundering and cesses and the increasing activities in The Bank implements identification tic or foreign country institutions and terrorism financing were conducted the direction of money laundering re- and verification of its customers, as organizations acting in the direction based on the law of Azerbaijan Repub- quire that the banks regularly improve well as its beneficiaries for all opera- of fighting against AML/TF. The Bank lic on measures against legalization of their internal procedures. TuranBank tions. All operations not conforming regularly follows the activities of the money resources or other property OJSC taking all of these as basis has to the normal business practice or Financial Monitoring Service under obtained through criminal ways and reviewed and improved the internal considered atypical from the cus- the Central Bank of Azerbaijan Repub- funding of terrorism, the orders and regulations of the Bank for measures tomer relations point, deemed comp- lic and the Expert Committee (MON- decisions of the Financial Monitor- against legalization of money resour- licated and too big in current situa- EYVAL) European Council for Evalua- ing Service under the Central Bank of ces or other property obtained through tion, having no rational economic tion of Measures against AML/TF of Azerbaijan Republic, the requirements criminal ways and terrorism financing. essence and that are accompanied Bank, the Working Group for Financial of the international conventions that The system of operations reflecting with mysterious behaviour, as well Measures of the Organization for Eco- Azerbaijan Republic is the party to, the process of fighting against lega- as the operations not conforming to nomic Cooperation and Development the recommendations of the Working lization of money resources or other the customer profile are considered (FATF) and Eqmont – the specialized Group for Financial Actions of Organi- property obtained through criminal extraordinary and are investigated organization of Information Intel- zation for Economic Cooperation and ways and terrorism financing was pre- and monitored. The Risks Manage- ligence Authorities and implements Development and the principles of the pared. In particular, Risk Categories ment Department regularly transfers the recommendations and decisions Basel Committee for bank supervision. were prepared in terms of importance the information about the innovation in its activities adopted by these orga- TuranBank OJSC has improved its for fighting against AML/TF classifying in the direction of fighting against nizations in the direction of AML/TF. activities in the direction of fighting as country, customer, amount and against money laundering and ter- products risks in the Bank. rorism financing in 2012. In order to One of the more important actions implement bank policy in the field of was that GoAML module was prepared prevention of legalization of money and is applied in operation-informa- resources or other property obtained tion system of the Bank with the pur- through criminal ways and terrorism pose of optimizing and automation of financing, to improve the control sys- internal processes of the Bank in the tem in this field and to build relations direction of fighting against AML/ TF. with the relevant state authorities and This module enables the Bank to give as well as to implement exchange of adequate response to all operations in information, the Compliance divi- this direction on time. So that, the cur- sion was established within the Risk rent operations are daily processed by Management Department of the the system and is turned to the special Bank in 2012. In order to increase the report form in XML format in order to adequacy of the works done in this accelerate and optimize conducting field, the Suspicious Operations, Analy- the analysis and as well as sending the sis and Reporting sections were estab- obtained information to the state su- lished as part of Compliance division. pervision authorities acting in the di-
56 57 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT INFORMATION TECHNOLOGIES of the calls made to the Bank through vestments to the field of information the short number of 935 was ensured. security. According to this tendency, The fiberoptic line project with 10 mb/ with the purpose of protection infor- sec speed between the Nasimi branch mation security of the Bank, informa- The researchers see the first sparks information technologies. The recent and the Head Office was completed. tion security systems produced by the of establishment of computer and in- rapid development of information Also, establishment of internal net- leading companies in the world has formation technologies in establish- technologies made adaptation of the work relevant to the international been purchased and applied in 2012. ment of calculation machine enabling Bank inevitable to this development. standards for recently opened Gazakh There are plans to further execute to conduct addition and deduction Thus, the investment put into the field sub-branch of the Bank and online adequate works for development of operations on the 7 composition num- of information technologies enabled connection with the Head Office was information technologies of the Bank bers by William Shikkard in 1623 – at laying more reliable communication ensured. One of the most successful in 2013. Especially, strengthening of the beginning of the XVII century. Af- lines and organization of more sus- projects of 2012 in the field of infor- infrastructure, laying relevant cables terwards, in 1644 Blaise Pascal, in 1668 tainable services. During 2012, many mation technologies was the project for implementation of communica- Samuel Morland, in 1820 Charles de projects were applied in the infra- for creating possibilities for indivi- tion between the Head Office and the Colmar have prepared improved forms structure of information technologies duals to make their credit repayments branches through fiberoptic cables, of the calculation machines. The ef- of the Bank and several investments in online mode through more than application of additional security sys- fectiveness of the initial steps caused made to the infrastructure. The new 600 MilliÖn cash-in machines within tems for encryption of information steady development of this field and version of automated bank system the country, together with KOMTEC transferred through all communica- Konrad Zuse founded V1 model, con- was applied, the server equipments of company. This is the first online credit tion lines, organization of services for sidered to be one of the first compu- the Bank was updated, reserve com- payment service through MilliÖn cash- the customers that reduces need to ters, in Berlin in 1938. The scientists munication possibilities were created in machines in Azerbaijan. The project visit the bank, as well as payment of working in this field made new in- for ensuring uninterrupted activities was completed successfully and sub- credits in online mode through plastic ventions during the World War II. For of the ATMs, several works have been mitted to the use of the customers. cards over the internet, and informa- example, in 1943, Howard Aiken done for institutional development In recent years, due to rapid growth tion security as whole are considered created ACC Mark 1 machine. This ma- on IT, the relevant documents were of internet, increased number and the main priorities. Application of such chine, consisting of 750 000 elements, prepared for this field. Special equip- volume of online payments on the types of projects in 2013, increase of weighed more than 7 tons and was ments were purchased and presented internet has proportionally increased service qualities and service forms for used with the purpose of calculation of to use for storing reserve copies of the the need for IT security solutions. the customers, more strengthening of artillery schedules. But, in 1945, John data and regular protection of reliabi- Meanwhile, on the global scale, the information security will further con- von Neumann was first in the world lity of the Bank. Special Technical Sup- cybercrime cases happened over the firm the slogan of the bank In confi- to prepare the model of the compu- port (Help-Desk) system was estab- various computer networks made di- dence with us once more. ter working with the software loaded lished for more efficient service of the rect impact to the increase of the in- from outside, but Mauchly and Eckert information technologies structure of established ENIAC the computer with the Bank and receipt and analysis of all huge and powerful lamp. The require- requests through this system was en- ment for development of the informa- sured. The system used by the popula- tion technologies during half a century tion for loading funds in the gas coun- caused development until substitution ters through smart cards was installed of 7 tons computers with several kilo- in all branches of the Bank. The Call grams PC and notebooks. Centre of the Bank was started for the Today, the most rapidly develo- purpose of increasing quality of the ping field in the world is considered the service to the customers and receipt
58 59 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT HUMAN RESOURCES MANAGEMENT features in the position by noting the Financial Knowledge of Small and expected development stages from Medium Entrepreneurs by the Na- the employees working in the Bank by tional Confederation of Azerbaijan reference to their knowledge and skills Entrepreneurship Organization, strug- Strategic period of 2008-2011 years of the travel costs, provision of cor- and it was decided to start to apply gle against Money Laundering and was the period of radical changes in porate mobile phone numbers, bo- them from the beginning of 2013. Funding of Terrorism held by the or- the field of Human Resources Man- nus system, additional salary for the TuranBank takes regular care of de- ganization of Organization for Secu- agement, while strategic period cove- results of the year, remuneration for velopment of its staff. The trainings rity and Cooperation in Europe. Our ring 2012-2015 is considered the pe- important calendar events, other so- were held by the participation of ex- team have represented the Bank in riod that should include steps towards cial assistance and privileges by the perts of foreign organizations (ABTM, foreign training, seminar and confe- improvement and innovation of the Bank is the proof of that employees GRBS and etc), along with the trainings rences organized during 2012 and systems installed in the direction that is always in the attention of the Bank. within the Bank with the purpose of participated in Sustainability Day of will impact total development of the Looking at the financial indicators strengthening professional skills of the IFC, the 37th Annual Conference Bank in accordance with the require- of the Bank, we will see this growth employees, developing their compe- of Islamic Development Bank, the 15th ments of the modern management. has been brought about by the la- tence in the current year, as in every International Micro Financing Confe- One of the first targets of this stra- bour of the Bank’s personnel. Labour year. The employees of the Bank have rence, the 19th International Islamic tegic period is meeting the needs for of each employee is appraised indi- participated in the trainings related to Banking Conference and possibilities the employees required for achieve- vidually by the Bank. As an important the financial analysis and aspects of were made available for middle ma- ment of goals set forth by each struc- part of the HRM policy and according market strategy by the experts of In- nagers for exchange of experience in 3 ture, and as the continuation of these to the guide for appraising employee ternational Finance Corporation (IFC), various banks of the USA in the frame- 94 employees were hired to the Bank. performance, at the beginning of the Basel II and its conclusions organized work of technical support project by Dedicating the main part of its activi- year all staff salary rose. Not being by the Central Bank by the participa- the Financial services and Volunteers ties during the year to the recruitment, content with this, guidelines consist- tion of foreign experts, International Fi- Corps of USA. the HRM Committee has kept the rec- ing of career stages and concerning nancial Reporting Standards, Financial The sufficiently trained staff of ruitment tendency involving profes- systems of advanced division of posi- Stability, Protection of Environment in TuranBank tries to reach the goals and sional and finance/economics educa- tions into categories and base salary the direction of Corporate Social Res- targets by implementing the respon- ted staff and conducting recruitment were applied in the mid of the year. ponsibility by USAID, Preparation of sibilities put on them more correctly of young, dynamic and creative per- This resulted in new increases in sala- Corporate Governance and Strategy by and faultless by understanding the re- sonnel to the service networks, while ries of the employees. Application of IFC and Isgandarov and partners com- quirements asked of them. keeping in accordance with the human these rules has accelerated the deve- pany, Enlightenment and Increase of resource development procedure. lopment of career in the Bank and as Currently, the Bank has 327 emp- the practical consequence of this, 98 loyees. There is an applied HR policy employees advanced their carriers. aimed to preserve loyalty to the The year of 2012 is considered one Bank, support regular develop- of the remarkable in the history of ment and take care of the staff. TuranBank. Therefore, the corporate The HR Motivation system applied event to celebrate the 20th years an- since 2008 is being updated every niversary of the Bank has been held in year. The additional payments con- one of the attractive region of Azer- tinued up to now and paid quarterly baijan together with the full staff. for the work experience, compensa- Individual career plans were tion for monthly food and some part prepared reflecting professionalism
60 61 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT INTERNATIONAL MUGHAM FESTIVAL
The Space of Mugham International music festival A three-day scientific symposium dedicated to was held in Haydar Aliyev Foundation’s initiative in mugham was arranged within the international Baku on 18-25 March 2009. An international scien- music festival in 2009. A special book was printed tific symposium, a contest for mugham performers to describe the outcomes of the symposium. The and a number of opera shows as well as concerts symposium was attended by around 30 scientists were organized within the framework of the festival. and musicians representing countries such as USA, The key goal of this festival involved promoting Great Britain, Russia, France, Italy, Germany, Turkey, mugham of Azerbaijan in the modern world and Netherlands, Hungary, China, Tunisia, Uzbekistan, ensuring Azerbaijan possesses the place it deserves Iran, Morocco, India and etc. in the word’s music heritage for the traditional mu- sic art of its nation. INTERNATIONAL COOPERATION within the Azerbaijan Competitiveness mentioned events, the representatives and Trade (ACT) project, started in of the Bank have participated in the 2011, in the accounting year. meeting of Sustainability Day of IFC During 2012, TuranBank gave great held in Istanbul during the account- The availability of wide variety of systems and express money transfer importance to the programs for trade ing year. Furthermore, the representa- sectors in Azerbaijan economy, huge systems. Unambiguously, cooperation financing within the framework of in- tive of the Bank has participated in the potential for development of sepa- with international financial institutions ternational cooperation. Our bank had 19th International Islamic Banking Con- rate sectors, efficiency of business has played great role for the Bank to conducted successful negotiations ference held in the Kingdom of Bah- environment in the country increases be accepted as reliable partner by do- with IFC and Asian Development Bank rain within the framework of Islamic the interests of the famous compa- mestic and foreign companies. in the direction of attracting financial Banking. nies of different countries, transna- The bank successfully continued to resources. Within the framework of tional corporations to the economy increase the list of international coo- technical assistance projects, the IFC’s Trade financing of the country. It is not accidental that peration within the framework of de- project of Risk Management and SME The trade financing has its own in October of 2012, according to the velopment strategy. Thus, on March 9, Banking has been continued in 2012. place among the active products of competiveness rating prepared by the 2012, our bank has signed the agree- During the accounting year, the the Bank. In this respect, the Bank has World Bank and International Finance ment with the Societte Generale on at- Bank has successfully continued the always paid special attention for the Corporation and reflecting the evalua- traction of resources in the amount of project of technical assistance for the financing of import and export opera- tion on the favourableness of the busi- 1 million US dollars. According to the years of 2009-2014 with the FSVC. As tions of SMEs. In the reporting year, ness environment, Azerbaijan taking agreement, attracted funds are direct- the continuation of this project, based the Bank has successfully implemen- th the 46 place among 185 countries by ed to funding micro and small entre- on mutual agreement, 4 associates ted a number of operations within the number of indicators is positioned as preneurship. One of the remarkable of middle management have partici- exposure limits provided by the inter- one of the leading countries. The exis- events of the accounting year was pated in the experience exchange in 3 national financial institutions and cor- tence of such a favourable investment signing of new agreement between various banks of the USA. During the respondent banks the Bank coopera- climate gave huge impetus to the dif- TuranBank and the affiliate of the Is- visit, the Bank’s team conducted dis- tes with. Thus, the resources attracted ferent banks as well as to TuranBank lamic Development Bank, Islamic Cor- cussions with their colleagues in the in the amount of 4 million US dollars in the field of international relations to poration for Development of Private US, participated in the presentations within the framework of trade finan- cooperate with a number of banks and Sector (ICD) with the purpose of at- held, obtained practice on marketing cing from the Black Sea Trade and De- funds. tracting the additional resources in the management, lending, customer ser- velopment Bank in 2011, were comp- During the current accounting amount of 3.5 million US dollars for 5 vice and strategic planning organiza- letely disbursed on its assignment year, the activities of TuranBank in years in the direction of funding micro tion, Corporate Social Responsibility during the accounting year. The Bank the field of international relations and small entrepreneurship. in the field of retail banking in the US. has increased the volume of applica- and cooperation were important with In the reporting year, TuranBank The Bank was also distinguished tion regarding the more reliable trade new achievements. Throughout the and USAID have signed agreement for its active participation in various financing instruments (letter of credit, 20 years of activity, the Bank has suc- in the amount of 3 million US dol- international conferences in 2012. As bank guarantees etc.) to its business cessfully developed its cooperation lars within the framework of Loan in every year, TuranBank has partici- partners. Moreover, the successful ne- within the framework of attracting Guarantee Fund. The project under- pated in the conference of European gotiations conducted by the Bank with international practice and resources takes 50% of the guarantee risk of Bank of Reconstruction and Develop- IFC in the direction of trade financing, to finance small and middle entrepre- the loans disbursed for supporting ment in London (EBRD), the annual that enables to say that the agreement neurship and trade funding programs, the development of micro, small and meeting of Islamic Development Bank to receive resources in this field will establishment of correspondent rela- middle entrepreneurship in the agri- held in Khartoum and Annual Inter- be finalized in 2013. tions with foreign banks, international cultural sector. The Bank, at the same national Micro Financing Conference payment systems, interbank payment time, continued its activity with USAID held in Tbilisi. Along with the above
64 65 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT Islamic Banking US dollars during the years 2011 and The interest of TuranBank in appli- 2012 from ICD. The Bank also has at- cation of Islamic banking, which was tracted the resources in the amount of growing rapidly in global context, has 1.3 million US dollars from Internatio- started since 2006 and as the results of nal Islamic Trade and Finance Corpo- active negotiations with the Islamic De- ration (ITFC) in the direction of fun- TREASURY ACTIVITY velopment Bank Group subsequently, ding of trade based on Sharia criteria. the associates of the Bank joined train- In light of above mentioned, Turan- ings held in Almaty/Kazakhstan by ICD Bank has directed the resources at- since 2007 and the resources in the tracted from either ICD and/or ITFC for The events occurred in the world and 2.8 % in 2014, which reflects rapid amount of 1 million US dollars were the development of small and middle economy in 2012, were characterized recovery of the economy of the USA attracted for the period of 6 years in entrepreneurship within the framework sensitivity and non-stability. The against to the Euro zone countries. So- the direction of funding of small and of Sharia conditions and conducted growth indicators of the world lution of budget insufficiency problem middle entrepreneurship. Afterwards, regular marketing and PR works about economy were under the prior in 2013 stands as a main duty for the the Bank has attracted additional important role of Islamic banking and expectations of the analysts and the USA economy. resources in the amount of 6.5 million wide development perspectives of it. risks continue to remain. International Decrease of demand and openness rating agencies have decreased the to impulses of developed countries growth forecast of the world econo- which combines 50% of world econo- my published for the years 2012-2014 my, has negatively impacted to the from 2.1%, 2.6% and 3% to 2%, 2.4% developing countries respectively. In and 2.9% respectively. According to this respect, economical contraction the forecasts, the growth in the econo- of Euro zone and developed countries my of the developed countries of the have resulted in weak development of world was 0.9% in 2012, 1.2% in 2013 the big developing countries such as and is expected to be 1.9% in 2014. Brazil and India. Economic growth of The decrease that started in the China for 2012 was 7.8% and will be economy of Euro zone in the third slowed for the next 2 years according- quarter of 2012 is expected to con- ly 5% and 6.5%, which will negatively tinue in 2013 as well. Despite the fact affect the world economic prosperity. that the threat for the Euro zone was Financial markets as a main driver decreased relatively by the interfe- of economies have been affected by rence of financial regulators of Central non-stability in developed countries Bank of Europe, they failed to prevent respectively. The instability has been the economic stagnation in the region. caused in all type of financial markets Furthermore, the risks over the tax- such as stock (capital market), money budget (financial) system of the USA, and foreign exchange markets. the problem of budget insufficiency of In the background of this instabi- the country economy caused sufficient lity in the financial markets, as active anxiety in financial markets in July- participants of the financial markets, August. Thus, in order to cover budget banks’, particularly local banks’ risk expenses, there is necessity of increase coefficients were required to be re- of sovereign debt level, otherwise the- viewed more conservatively. In this re was a threat of facing default. The respect, TuranBank, demonstrating growth rate of the economy of the sensitive conservative approach to the USA is forecasted to be 2.3 % in 2013 risks in the financial markets, conti-
66 67 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT nued the mitigation risk policy be- short periods of time in 2012. • Conducting operations within ventive measures. ginning from 2011. The policy has the limits defined by ALCO; The relevant suggestions are provided shown that the Bank took right posi- Assets and Liabilities Manage- • Insurance against risks of loss based on the results obtained after tion in light of described situations in ment Division – this division’s pri- that may arise from Open Currency analysis. 2012 and formed sustainable platform mary responsibility involves ensuring Positions through hedging operations against internal and external risks. efficient management of the Bank’s in currency markets; Liquidity planning – the core This was expressed in the dynamics in resources and, at the same time, cur- • Insurance of the Bank from fo- priority track in the field liquidity ma- the volume of incomes of the Bank co- bing risks, especially market and li- reign currency risk and ensuring con- nagement of the Bank is more effi- ming from this field and simultaneous- quidity risks faced by the Bank in its duction of an analysis; cient management of the assets and ly, in optimization of the banks risks. operation. The division undertakes • Giving preference primarily to keeping stable level of required mini- analyses for each risk item and sub- arbitration operations; mum liquid assets. But, the recent fi- Treasury Department of TuranBank– mits outcomes to ALCO’s discussion. nancial crisis proved the necessity of is a structure executing operations in Meanwhile, the division operates as Interest risk – as a result of change efficient management of liabilities financial markets on the Bank’s behalf the analytical information centre res- of interest rates in the market, the along with the assets. The various and playing a special role in efficient ponsible for identifying and analyzing monthly analyses are conducted with liquidity coefficients, namely quick li- management of assets and liabilities, changing situations and threats in in- the purpose of prevention profitability quidity, current liquidity, long-term minimization of liquidity and market ternational financial markets and re- reduction of assets and liabilities being liquidity, general liquidity and GAP risks as an income centre safeguar- porting it within Treasury Department. sensitive to the interest rate changes analysis are applied for measuring, ding the Bank’s interests. The main risk categories managed of the Bank. The main attention is paid evaluation and managing of the li- Treasury Department consists of by the division in respect of treasury to the compliance of duration gap of quidity risk in the Bank. The analyses the following divisions: activities are the follows: the attracted resources to the placed are conducted in certain time intervals • Market Transactions Division resources and simultaneously, the cor- and afterwards, the liquidity planning • Assets and Liabilities Manage- Market Risks Management – this relation of the variable interest liabili- is composed in short-term period (up ment Division type of risk reflects currency, interest ties to the changing variable interests to 1 year) based on the obtained re- • Operation Division and capital risks in itself. The Treasury assets. sults. According to the achieved results Department of the Bank has conduc- the relevant suggestions are provided. Market Transactions Division– ted successful operations in the Cur- The measures for minimization of this division is responsible for execu- rency Trade Platforms (FX platform) of potential losses that may happen due Operation division – the main duty ting transactions associated with cur- Bloomberg and other banks in 2012, to interest rate risks of the Bank are as is to record all operations conducted rency, dealing operations, internal cur- used the financial instruments effi- follows: by the market transactions division rency exchanges, FX operations, ma- ciently for being insured against cur- • Determination of interest risk to the balance sheet and information nagement of currency position, for- rency and market risks (forward, swap coefficient; data base of the Bank and to carry ward operations, currency swaps, in- and other hedging operations), thus • Calculation of interest risk coef- out accounting on the FX positions vestments in highly liquid and other being more integrated into interna- ficients for the periods; and documentation on executed op- securities, REPO, option, futures, tional currency markets. It was ex- • Re-evaluation model (GAP); erations, to ensure accountability on promissory notes within the limits actly this practice of integration that • Duration model; these operations. This enables the approved by ALCO. The division ope- created conditions for the Bank to • Stress tests; Bank to implement the operations in rated quite successfully in 2012. Thus, grow more competitively and imple- • Analyses of the results of transparent and riskless conditions re- the division fulfilled the Bank’s inte- ment a number of arbitration opera- various scenarios stress tests and pre- garding the financial markets. rests by executing various transactions tions. both in local and in foreign markets. Profit made from currency transactions Currency risk – is kept in the centre amounted to 914.0 thousand AZN in of attention by the TD on a daily basis. 2012. The Bank gained an income of The measures for minimizing the pos- 353.5 thousand AZN from placement sible losses that may arise from cur- of available resources in the country’s rency operations of the Bank are the local money and securities market for following:
68 69 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT TEMPORARY MEMBERSHIP TO THE UNITED NATION’S SECURITY COUNCIL
The Republic of Azerbaijan was elected as a tempo- Acquisition of the membership to the UN’s Secu- rary member of the UN’s Security Council for a two- rity Council contributed to Azerbaijan’s fame in the year period (2012-2013) on 24 October 2011 for the world and to further expansion of its international first time. The Security Council is the UN’s essential relations. This event bears great significance from body that has permanent operation. According to the perspective of Azerbaijan’s history of statehood. the Charter of the UN, this organization is respon- sible for preserving international peace and secu- rity. CORRESPONDENT RELATIONS AND INTERNATIONAL SETTLEMENTS
During the reporting year, as in the credits and guarantees. previous years, TuranBank continued The Bank is a member of a total of its successful activities in the field of 10 express money transfer systems. As correspondent banking. The Bank has in every year, during the accounting built correspondent relations with year, the Bank introduced for use of leading banks of the USA, West Europe the customers the new Monex and and CIS, and this enables to effect pay- IBA-Express money transfer systems. ment and remittances to any place of the world in a short time. During the accounting year, the correspondent relations with local banks were expanded, the number of NOSTRO accounts reached to 50, AUDITOR’S OPINION and the number of LORO accounts reached to 20. Recently, the Bank’s list of main correspondent network in- cludes Deutsche Bank, Commerzbank, Raiffeisen Zentralbank, SaxoBank, T.C.Ziraat Bankası, Türkiye İş Bankası, Asya Katılım Bankası, UralsibBank, Russkiy Slavyanskiy Bank, Privatbank and etc. For the purpose of increase of range of services provided to the cus- tomers, presentation of more efficient conditions, provision of efficiency and Now, our customers may execute reliability of settlements, increase of fast, comfortable and reliable money quality and speed in the field of in- transfers in various currencies with ternational trade and money transfer, relevant tariffs within 5-7 minutes recognition of the Bank in interna- to about 200 countries through the tional arena, the existing relations with above mentioned systems. the leading banks and organizations Thus, TuranBank is going on to ex- of the world have been strengthened. pand its relations with various foreign, As in previous years, during the re- international companies and organi- porting year in order to mitigate the zations. Our main goal is to provide risks in international trade operations, more efficient service to our custo- the Bank offered optimum forms of in- mers. ternational settlement such as letter of
72 73 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT 74 75 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT 76 77 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT 78 79 TURANBANK 2012 ANNUAL REPORT TURANBANK 2012 ANNUAL REPORT THE ADDRESSES OF THE HEAD OFFICE AND BRANCHES OF TURANBANK OJSC
Head Office Ganja Branch Baku city, 85 I.Gutgashinli street, AZ1073 Ganja city, 24 Javadkhan street, AZ2000 Tel: +994 (12) 510-79-11/22 Tel: +994 (222) 56-43-86 Fax: +994 (12) 497-25-77 +994 (222) 56-49-75 [email protected] Fax: +994 (222) 56-43-86 [email protected] Baku Branch Baku city, 251 D.Aliyeva street, AZ1014 Agstafa Branch Tel: +994 (12) 493-54-69/75 Agstafa city, 11A H.Aliyev street, Fax: +994 (12) 493-54-69 AZ0500 [email protected] Tel: +994 (2222) 5-30-02 +994 (2222) 5-18-47 Binagadi Branch +994 (2222) 5-35-95 Baku city, 11c, block 3066 Fax: +994 (2222) 5-30-02 A.Nakhchivanski street, Az1130 [email protected] Tel: +994 (12) 436-46-08/09 +994 (12) 436-13-82 Tovuz Branch Fax: +994 (12) 436-46-09 Tovuz city, 11 Sabir street, AZ6000 [email protected] Tel: +994 (2231) 5-62-11 +994 (2231) 5-06-11 Nur Branch Fax: +994 (2231) 5-62-11 Baku city, 61 G.Garayev ave., AZ1118 [email protected] Tel: +994 (12) 520-10-71/72 Fax: +994 (12) 520-10-74 Zagatala branch [email protected] Zagatala city, 100 H.Aliyev ave., AZ6200 Tel: +994 (2422) 5-57-65 Nasimi Branch +994 (2422) 5-47-53 Baku city, 84 /2 S.Dadashov street, Fax: +994 (2422) 5-57-65 AZ1073 [email protected] Tel: +994 (12) 510-60-38/39 Fax: +994 (12) 510-60-26 Khachmaz branch [email protected] Khachmaz city, 58b N. Narimanov street, AZ2700 Yasamal Branch Tel: +994 (2332) 5-61-24/25 Baku city, 53 Nizami street, AZ1005 Fax: +994 (2332) 5-61-26 Tel: +994 (12) 596-06-38/24 [email protected] Fax: +994 (12) 448-23-55 [email protected] Gazakh subbranch Gazakh city, 100 H. Aliyev ave., AZ3500 Sahil Branch Tel: +994 (2229) 5-56-72/73 Baku city, 31 Matbuat ave., AZ1100 Fax: +994 (2229) 5-56-71 Tel: +994 (12) 539-85-02 [email protected] Fax: +994 (12) 539-64-70 [email protected]
Sumgait Branch Sumgait city, 11 N.Narimanov street, AZ5004 Tel: +994 (12) 448-35-36 +994 (1864) 2-22-29 Fax: +994 (12) 448-35-36 [email protected]
80 TURANBANK 2012 ANNUAL REPORT