Azerbaijani Economy 20 march — 11:43

Why was Jahangir Hajiyev given the push? (Our afterword)



It was like a bolt from the blue: the site of the International Bank of Azerbaijan reported on resignation for health reasons of Jahangir Hajiyev, one of the most influential actors at the financial market of the country. As far back as yesterday position and status of Jahangir Hajiyev in the political and financial system of Azerbaijan seemed to be unshakeable. Rather young and perspective banker, a brother-in-law of Eldar Mahmudov, head of country’s special services, was considered as the most likely candidate to the post of Central Bank’s chairman, especially as powers of omnipotent Elman Rustamov are to expire in a month.

Note that the authority of J.Hajiyev rose with every passing day. Just a year ago the head of the Azerbaijan’s largest bank seized control over the oil company Bahar Energy and the construction firm Azinshaat. Everything pointed to the strengthening of J.Hajiyev’s position, not his resignation.

In an effort to prove himself as successful manager, the chief banker of Azerbaijan began investing construction projects in Moscow (in collaboration with Chehchens) as well as in metallurgic projects in Fujairah.

However, both the government and expert community have been sceptical about J.Hajiyev’s stirring up at world markets. A simple reason was that over the past 2-3 years the IBA’s business has been on the wane. Given that above half (50.2%) shares of the IBA are owned by the state, people in charge of monetary-credit policy of the bank became anxious. For this reason, relations between J.Hajiyev and these persons did not get on.

It is difficult to judge about sentiments in the country; the authoritative American rating agency Fitch Ratings expressed its anxiety before local experts did. A couple weeks ago, quoting the agency we reported on the crisis of the IBA, especially in terms of manat devaluation. Experts concluded that the bank needs additional support to smooth over consequences of devaluation and restore capitalisation indices.

Hajiyev’s main mistake lies in the policy of crediting. Proceeding from managerial accountability, Fitch calculated that prior to the devaluation the high 58% of IBA credits were nominated in foreign currency. It means that drop in manat’s rate to dollar by 34% on February 21 to 1.05 from 0.78 manat led to the rise in the cost of credit portfolio of the bank in manat by 20%.

The rise above together with adjusted asset risks means that a regulative index of capital sufficiency may reduce to a level lower than minimum 12% (from 12.02% in the end of  2014).

Roughly speaking, the IBA received credits from foreign banks in euro and dollars, and issued credits, for example, to AZAL, in manats. It is evident that scores of state concerns are in no position to reimburse losses due to the devaluation. Fitch stressed this tendency: ‘Following the devaluation, the currency credits make up 65% of portfolio that Fitch considers to be a source of essential credit risk given that some borrowers have no profits in foreign currency.’

Whereas the expert community, bank depositors, as well as credit recipients were unaware of the oncoming devaluation, Hajiyev as one of the country’s chief bankers must have known about the forthcoming devaluation. Though people familiar with J.Hajiyev note that he is more of a functionary than a banker or a manager. In other words, he is a man incapable of adopting independent decisions and incessantly waits for instructions from above. A part of experts admit another reason of the resignation: he fell prey to intra-power intrigues. Apprehensive of banker’s career growth, functionaries availed themselves of his poor management and failure in business-projects in Moscow and Fujairah and thus dug some dirt up on him.

At any rate, Hajiyev’s resignation proved to be an emblematic event in country’s political life.

Most probably, the resignation will have no effect on status of financial institutions and, first of all, the bank itself. It was no mere coincidence that the yesterday’s report stressed Samir Sharifov’s preparedness to support IBA’s development. This statement was designed for foreign investors. In summer last year, the foreign investors and IBA’s depositors felt the oncoming financial crisis in Azerbaijan. Foreign investors came to take their money back. It was indirectly conceded by the head of the Central Bank, Elman Rustamov in his recent speech at the parliament.

What expects the IBA in the future? As viewed by bank experts, Minister of Finance Samir Sharifov is ready to stake at the new Azturk bank. A momentous event occurred the other day: One of the largest bankers of the country, former head of Capital-bank and Sharifov’s close friend Elmar Mammadov has headed a small, at first sight, bank Azturk. Bankers received news wonderingly. E.Mammadov is a big shot to manage such a small structure.

However, there is obvious desire of the largest financial grouping to strengthen the bank and turn it into country’s principal bank. It would be a thankless task to guess.

As for J.Hajiyev’s bitter fate, it is yet another lesson for all oligarchs and top officials of the country, especially as he was more than ordinary functionary or a banker. It looks like a minefield: a negligent step… and an official is being pushed out.

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