2016 was a hard year for the Azerbaijani banking sector but it can be also described as a preparatory stage for further reforms.
Appearance of a single financial market regulator
Perhaps, one of the most important events of 2016 was the establishment of an agency regulating the entire financial market of the country. Previously, the Central Bank of Azerbaijan (CBA) was the regulator of the banking sector. The State Insurance Supervision Service was the regulator of insurance companies and the securities market was under the supervision of the State Securities Committee.
The Financial Market Supervisory Body has been regulating all these spheres since February 2016. Such a system when the CBA deals with the monetary policy of the country, while another agency controls the banking and other financial sectors has been successfully used by many developed countries, namely, Switzerland, Turkey, Germany, Finland, Denmark, Japan and others.
From the very beginning, the Financial Market Supervisory Body has taken a number of important actions aimed at improving the stability of the banking sector. It banned issuance of consumer loans in foreign currency, began to prepare a plan to recover banks, etc. The CBA and the Financial Market Supervisory Body have revoked the licenses of 10 banks since early 2016.
The CBA banned foreign currency exchange outside the head offices, branches of the banks in January 2016. Only tourist facilities, hotels and airports are still exchanging currency.
According to the new rules, citizens can not purchase the amount equivalent to more than $500 or sell an amount equivalent to more than $10,000 without ID card since early 2016.
In particular, a number of banks opened round-the-clock branches. Such branches of some banks operated before but this approach was more widespread in 2016. Banks have begun to install the round-the-clock automatic currency exchange terminals.
The CBA introduced a four percent currency corridor in early 2016. The currency was exchanged within this corridor.
The decision was very important because after two devaluations [in February and December 2015], the number of foreign currency speculations increased in the country.
As of late 2016, the CBA also limited the transfer of funds abroad by physical entities.
Thus, physical entities (residents and non-residents) could transfer no more than $1,000 per day, no more than $10,000 a month without opening an account for private purposes and no more than $10,000 a month to close relatives abroad since December 8, 2016.
The only exceptions are tuition fees and payment for medical services. The CBA explained this decision by the need to improve the effectiveness of the currency control mechanism, which plays an important role in maintaining equilibrium in the balance of payments and the foreign exchange market. The new rules do not limit the repatriation of foreign investments and any income received as part of investments.
New banks’ support tools
The CBA started to hold deposit auctions aimed at money supply sterilization for the first time in 2016. The sterilization is required to eliminate excess free cash flow as the excess can cause inflation and other negative processes.
The CBA drew 1.45 billion manat from banks in 2016, while the banks’ demand exceeded 1.5 billion manat.
The CBA took measures on monetary sterilization in the amount of 6 billion manat in 2016 through deposit operations and an issue of short-term notes.
The mechanism of currency auctions has been also changed. According to the new mechanism, the official rate of the manat to the US dollar on the next day is set on the basis of the average rate on transactions concluded with commercial banks in the interbank foreign exchange market and auctions.
The official rate of the manat to the US dollar is set on the basis of the average rate, which is formed in the currency market on the basis of purchase and sale transactions concluded among banks during the days when auctions are not held.
The regulatory requirements supporting banks also changed in 2016. In particular, the CBA increased the reserve requirements for deposits in foreign currency from 0.5 percent to 1 percent.
That is, earlier, the banks kept 0.5 percent of all foreign currency deposits in the CBA. But the banks began to keep more after the amendments. Thus, the CBA tried to reduce the level of dollarization in the sector. It also completely cancelled the reserve ratio on foreign liabilities of banks, by providing them with more opportunities to repay debts to foreign credit organizations.
By another decision, the CBA allowed the banks to create smaller volumes of reserves for the issued loans. The index dropped from 30 percent to 25 percent in the loans classified as "bad", while from 60 percent to 50 percent in the loans classified as "dangerous". Such an action will reduce the burden on the banks' capital as it is used for reserves.
The CBA increased the rate by four times during one year from 5 percent to 15 percent.
For 10 years the CBA changed the rate so often only in 2008.
But the rate increased from 14 percent to 15 percent and then reduced fourfold up to 8 percent.
Such a decision can be explained by the fact that the CBA is trying to restrain the fall of the national currency and inflation. This practice is widely used in many countries. The banks buy the funds from the CBA and convert them into foreign currency in case of low interest rates and the weakening of the national currency.
Thus, they begin to gain money as a result of foreign currency difference. Such speculations negatively affect the national currency rate. Such operations at a high interest rate are unprofitable for the banks.
The loan interest increases at a high key rate. Therefore, the entrepreneurs’ demand for loans is weak.
The CBA’s currency reserves decreased by $36.6 million (0.9 percent) up to $3.974 billion in December 2016 as compared to November 2016.
In 2016, CBA’s currency reserves decreased by $1.042 billion or 20.78 percent as compared to 2015.
The reduction in CBA’s currency reserves began in July 2014. The reduction was at a slower rate (within the range of $20-50 million) at the beginning, but a sharp decline in the volume of reserves began in December 2014 due to an increase in demand for dollar in the country.
In 2016, the volume of currency reserves increased by 0.9 percent in March, by 1.35 percent in April, by 3.97 percent in May and by 0.7 percent in August.
Currency market and manat rate
The official exchange rate of the US dollar to manat was formed on the basis of the ratio between supply and demand in the foreign exchange market in accordance with the exchange rate in the country in 2016.
The ratio of supply and demand in the foreign exchange markets depends on the balance of payments. Along with the amount of currency, imported in the country and exported out of the country, the amount of transfers from the State Oil Fund of the Azerbaijan Republic (SOFAZ) for budgetary needs is also taken into account.
According to the floating rate regime principles, the CBA seldom appeared in the foreign exchange market in February 2016, while SOFAZ ensured transparent holding of foreign exchange auctions.
The country passed to a new exchange rate regulation regime amid tightening of monetary policy and rising rates. The monetary base was controlled together with other state agencies.
The official exchange rate of the manat to the US dollar hit a historic minimum rate – 1.7707 AZN / USD in December 2016. The official exchange rate of the US dollar to manat was 1.5610 manat in early 2016. As of March 11, 2016, the official exchange rate of the US dollar to manat reached a record rate – 1.6456 manat.
Thus, the highest value of the US currency after the devaluation of the manat was observed in late 2016.
Azerbaijani banks sold the minimum amount of the US dollars since 2006.
According to the CBA, banks sold a little more than $3 billion in 2016. This is the lowest index for the past ten years. Around $1.7 billion was sold in 2006.
The sales of the US dollars decreased by four times in 2016 compared to 2015.
The banks bought $2.56 billion in 2016, which is also rather a low index.
Lower volumes were observed for the last time in 2011 - $1.9 billion.
The purchase of the US dollars in the reporting period decreased by 26.4 percent in 2016 compared to 2015.
Volume of foreign exchange operations in 2015 and 2016
|
Purchase (thousand standard unit) |
Sale (thousand standard unit) |
|||
|
Currency |
2016 |
2015 |
2016 |
2015 |
|
US dollar |
2 559 517 |
3 478 205,9 |
3 004 956,7 |
12 317 396,4 |
|
pound sterling |
6 785 |
3 890,2 |
41 226,5 |
64 102,6 |
|
euro |
292 381 |
245 264,4 |
559 028,6 |
1 074 476,9 |
|
Russian ruble |
11 379 905,8 |
9 551 580,2 |
2 214 718,6 |
2 385 745,8 |
Azerbaijani monetary market
The money supply rate (M2) (cash in circulation (outside banks) and remainders in the national currency on accounts of non-financial organizations, financial organizations (excluding credit organizations) and physical entities) amounted to 11,546.3 million manat as of late 2016 increasing by almost 23.05 percent for the year.
The amount of cash money supply (M0) increased by 33.5 percent for the year from 4,775.9 million manat to 6,376.9 million manat. M0 increased by 9.3 percent compared to the previous month.
As of December 2016, Broad Money Supply (M3) totaled 20,889.6 million manat or 1.87 percent less compared to December 2015 and by 3 percent more than in late November 2016.
The transaction money (M1) increased by 29.9 percent for the year.
The transaction money (M1) increased by 68 percent and amounted to 8,960.3 million manat compared to late November.
Parameters of monetary market, in million manat:
|
Monetary market parameters |
Volume, December 2016 |
|
Money mass in extensive understating (М3) |
20889,6 |
|
Money mass on manat (М2) |
11546,3 |
|
Cash in manat (М0) |
6376,9 |
|
Non-cash in manat |
5169,4 |
The bank reserves amounted to 2.26 billion manat in Azerbaijan as of Jan. 1, 2017, which is by 5.6 percent more than in December 2015 (2.14 billion manat).
The report said that the broad monetary base in the country as of late December 2016, amounted to 9.23 billion manat or by 22.1 percent more compared to the same period of 2015. For comparison: this figure amounted to 7.56 billion manat as of late December 2015.
According to the CBA, as of Jan. 1, 2017, the monetary base in manat amounted to 7.86 billion manat compared to 6.9 billion manat as of Jan.1, 2016.
The volume of currency in circulation amounted to 6.96 billion manat during the reporting period, while this figure stood at 5.42 billion manat as of Jan. 1, 2016.
The ratio of cash in circulation to monetary base as of Jan. 1, 2017 amounted to 75.4 percent, increasing by 3.8 percentage points compared to late Dec. 2015.
Azerbaijan’s loan market
As of late 2016, the credit organizations' loans reached 16.44 billion manat. Despite a 24.3 percent annual decrease, the volume of issued loans increased by 1.04 percent for the month.
Loans in Azerbaijan’s national currency prevail in the structure of the issued loans.
Around 52.7 percent (8.66 billion manat) of all loans account for those loans. During the year, their volume decreased by 21.2 percent. The remaining funds are foreign currency loans (47.3 percent, or 7.78 billion manat), their volume decreased by 27.52 percent compared to December 2015.
This ratio was 73 and 27 percent in early 2015. But the share of foreign currency loans began increasing, reaching 49.3 percent as of the year after the February devaluation of the manat.
However, Azerbaijan’s Financial Market Supervisory Authority established a moratorium on the issuance of consumer loans in foreign currency to the individuals who do not have foreign exchange earnings and bank deposits since April 2016 and imposed a ban on mortgage loans in foreign currency since May.
Moreover, some banks have started to convert dollar-denominated loans into manat ones.
In December 2016, the volume of overdue loans in Azerbaijani national currency reached 682.4 million manat, which is by 18.78 percent less compared to December 2015.
The share of overdue loans in Azerbaijani manat reached 4.15 percent of the loan portfolio of the country’s banks and non-banking credit organizations as of late December 2016, the report said.
Overdue loans in foreign currency amounted to 790.2 million manat, which is by 18.2 percent more during the same period, and their share reached 4.8 percent.
In general, the total volume of overdue loans in Azerbaijan amounted to 1,472.6 million manat (2.4 percent less for the year). The share of those loans reached 8.95 percent.
As of late December 2016, the volume of short-term loans amounted to 3.48 billion manat (including overdue loans worth 340.2 million manat), the volume of long term loans amounted to 12.97 billion manat (including 1.13 billion manat of overdue loans).
According to the CBA, the credit portfolio of the state banks in the country amounted to 5.75 billion manat with a specific weight of 35 percent, while private banks issued loans worth 10.22 billion manat with a specific weight of 62.2, where 4.33 billion manat falls to the share of banks with foreign capital. The remaining 2.9 percent falls to the share of non-bank credit organizations, which issued 473.4 million manat.
Azerbaijani banks decreased the issuance of consumer loans by 1.17 percent in December 2016. The consumer loans reached 5.86 billion manat.
According to the CBA report, consumer lending decreased by 30.12 percent for the year.
The consumer lending volumes decreased in Azerbaijan after the first devaluation of the manat rate [the dollar rate increased by almost 34 percent February 21, 2015].
However, the largest part of the total loan portfolio of banks – 35.6 percent (as of December) still accounts for the consumer loans.
According to the report, the trade and services sector (15 percent or 2.47 billion manat) ranked second, the construction and real estate sector (11.6 percent or 1.91 billion manat) ranked third in the total loan portfolio of banks.
Some 1.26 billion manat (7.7 percent of the total lending volume) accounted for the industry and production sector.
Some 7.7 percent (1.27 billion manat) accounted for the loans issued in transport and communication, 2.7 percent (441.3 million manat) - agriculture and processing, the report said.
The loans issued in energy, chemistry, and natural resources also increased since November 2016.
Thus, the share of loans in this sector amounted to 3.7 percent (601.8 million manat) in November 2016 for the first time since 2011. The best index of 3.2 percent (396.7 million manat) in the reporting period was observed as of 2012.
Around 3.6 percent of all loans or 596.2 million manat accounted for this sector in December.
Lending to the Azerbaijani districts decreased by 30 percent up to 2.45 billion manat in 2016 compared to 2015.
According to the CBA report, the volumes of loans issued in the districts are being reduced amid general decline in lending in the country by 24.3 percent or 5.3 billion manat.
According to the CBA, the loans worth 14 billion manat were issued in Baku in 2016 that is by 5.7 times more than in the districts. Around 7 billion manat (50.01 percent) accounted for the loans in national currency.
For comparison: as of 2015, borrowers received loans worth 21.7 billion manat in Baku, of which 11.01 billion manat (50.7 percent) accounted for the loans in national currency.
The average annual interest rate on loans in the country as of 2016 was 10.5 percent, while 8.9 percent in Baku.
|
Districts |
Lending volume |
Average interest rate |
|
|
Including manat |
|||
|
Absheron |
459 549,9 |
286 244,4 |
16,4 |
|
Aran |
601 442,9 |
389 291,8 |
21,8 |
|
Mountain Shirvan |
91 929,5 |
60 969,5 |
22 |
|
Ganja-Gazakh |
514 249,9 |
336 894,0 |
19 |
|
Guba-Khachmaz |
188 864,4 |
134 453,9 |
19,4 |
|
Lankaran |
215 237,6 |
132 069,9 |
21,2 |
|
Seki-Zagatala |
168 809,0 |
117 442,4 |
21,3 |
|
Upper-Karabakh |
94 090,1 |
88 930,0 |
13,8 |
|
Kalbajar-Lachin |
889,9 |
710,8 |
13,7 |
|
Nakhchivan |
110 828,7 |
108 691,4 |
12,1 |
The average interest rate on deposits in Azerbaijani banks decreased in national currency and foreign currency in December 2016 compared to November 2016, the report said.
The average rate on deposits in manat amounted to 12.05 percent in December 2016 compared to 12.18 percent in November 2016 and 13.6 percent in December 2015.
The average rate on deposits in foreign currency amounted to 8.6 percent in December 2016 compared to 9.16 percent in November 2016 and 12.53 percent in December 2015.
The banks drew deposits of legal entities in manat in the amount of 3.79 percent per annum in November 2016 compared to 5.80 percent in November 2015.
The legal entities received manat loans at an average rate of 8.55 percent in December 2016 compared to 8.36 percent in November 2016 and 9.72 percent in December 2015.
The average rate on bank lending to the corporate clients in foreign currency amounted to 5.59 percent in December 2016 compared to 5.71 percent in November 2016 and 8.78 percent in December 2015.
As of December 2016, the average rate on manat loans to physical entities amounted to 15.71 percent compared to 16.07 percent in November 2016 and 17.46 percent as of January 1, 2016.
The average rate on bank lending to the individual customers in foreign currency was 16.04 percent compared to 17.3 percent and 20.72 percent accordingly.
Mortgage lending
The agent-banks of the Azerbaijan Mortgage Fund (AMF) resumed the issuance of mortgage loans in December. The number of banks, issuing mortgages through the AMF, increased from 8 to 19.
Xalq Bank, AG Bank, PASHA Bank, Bank Avrasiya, Kapital Bank, Bank VTB, NBC Bank and Azer Turk Bank are the authorized banks. AFB Bank, Nikoil Bank, Unibank, Bank Respublika, Turanbank, Caspian Development Bank, Expressbank, Bank Silkway, Rabitabank, Bank VTB (Azerbaijan) and Yapı-Kredi Bank (Azerbaijan) are also among the authorized banks now.
AMF expanded the number of insurance companies with which it will work.
Earlier, there were PASHA Insurance, PASHA Life, Qala Insurance and Qala Life insurance companies.
Eleven more insurance companies, namely, Ateshgah Insurance, Ateshgah Life Insurance, AzInsurance, Xalq Insurance, AtaInsurance, Baku Insurance, AXA Mbask, A-Group Insurance, Ravan Insurance, AzerInsurance and Silkway Insurance appeared.
AMF will work with two appraisal companies.
AMF agent-banks have issued 114 loans worth more than 7.07 million manat since the restoration of lending process.
Earlier, the banks did not issue loans within six months, while the volume of mortgage lending amounted to 97.2 million manat in 2015.
Around 18,111 mortgage loans worth 737.88 million manat were issued from 2006 up till now by the AMF’s authorized credit organizations.
AMF issued 33 million manat to refinance mortgage loans in 2016, which is by almost 3.5 times less than in 2015.
Over 42 percent of refinancing or 14 million manat accounted for soft loans.
Around 298 soft loans were issued in 2016.
As of late 2016, Muganbank led ranking of Azerbaijani banks in terms of mortgage loan issuance, by increasing its portfolio by 1,023 loans in the second half of the year.
According to the AMF’s report, as of December 31, 2016, there were 2,128 active loans of the bank.
As of the first half of 2016, Zaminbank with 1,631 active loans was the leader in mortgage lending in Azerbaijan. But Zaminbank was liquidated in the second half of the year and part of its portfolio was transferred to Muganbank.
Bank VTB ranked second, however, as of the end of the first half of the year, the bank was not even in the top ten. The reason is that the active mortgage portfolio of a number of the banks liquidated during the year was delivered to the bank. At present, the bank has 1,942 loans.
AGBank, which ranked second earlier, slipped to third, despite the number of loans increased by 116 in its portfolio.
Comparative table on the number of active credit agreements:
|
Banks |
2016 |
First six months of 2016 |
Bank position (2016) |
Bank position (first six months of 2016) |
|
Muganbank |
2 128 |
1 105 |
1 |
6 |
|
Bank VTB |
1 942 |
- |
2 |
- |
|
AGBank |
1 551 |
1 435 |
3 |
2 |
|
Xalq Bank |
1 437 |
1 266 |
4 |
3 |
|
Demirbank |
1 395 |
1 247 |
5 |
4 |
|
Unibank |
1 227 |
1 086 |
6 |
8 |
|
Nikoil Bank |
1 116 |
1 088 |
7 |
7 |
|
Bank Respublika |
937 |
790 |
8 |
9 |
|
NBC Bank |
781 |
- |
9 |
- |
|
AFB Bank |
716 |
691 |
10 |
10 |
According to the new mortgage loan issuance order, approved in June 2016, an ordinary mortgage loan will be issued only to Azerbaijani citizens and only in the national currency for a term from 3 years to 25 years, while preferential mortgage - up to 30 years to purchase a house, owned by the citizen. Interest rates on conventional mortgage must not exceed eight percent, while 4 percent per annum in preferential mortgage loan.
The maximum amount of the mortgage loan (including preferential) is determined by Azerbaijan Mortgage Fund JSC and must not exceed the cost of repaired housing with an average of 100 square meters in zone #7 in Baku. Annual interest rates on the loan are determined by the company’s Supervisory Board.
The amount of preferential mortgage loan must be 85 percent of the cost of purchased housing by the date of the loan issuance, except for cases when a borrower appeals to decrease the loan amount. The amount of conventional mortgage loan must not be less than 75 percent and more than 85 percent of the cost of purchased housing by the moment of the loan issuance, except for the cases when a borrower appeals to decrease the loan amount.
The monthly payment for a mortgage loan must not exceed 70 percent of a debtor's monthly income. The age of the borrower must not exceed the retirement age according to the legislation. An agreement on life insurance is required.
The family members of war victims, national heroes, internally displaced people, civil servants with at least a three years' experience, teachers of secondary schools with at least a five-year service term, PhDs, doctors of science and those having special merits in sport as well as the military with at least a three-year service term can use the preferential conditions. Each family having the right to such a mortgage loan can use it only once.
Around 20 of 32 banks in the country, as well as 16 insurance companies [in total 21] and two appraisal organizations are the authorized banks of the Azerbaijan Mortgage Fund.
Azerbaijan’s banking sector
The economic cycles, seasonal factors and the attitude of investors, dictated by a variety of causes, impact on the dynamics of deposits.
As of late December 2016, the total amount of deposits of physical and legal entities drawn by the Azerbaijani credit organizations amounted to 22.091 million manat.
The deposit base of banks decreased by 2.5 percent in December 2016, while by 5.7 percent per annum.
The amount of deposits in the Azerbaijani national currency – manat reached 5.459 million manat as of 2016.
Some 2,635.1 million manat accounted for demand deposits, 2,823.9 million manat - term deposits, the report said.
According to the report, the deposits in freely convertible currency reached 16.632 million manat including 4,803.3 million manat - demand deposits, 11,828.7 million manat - term deposits.
Thus, as of January 1, 2017, 24.7 percent accounted for the deposits in manat, 75.3 percent of the total deposit base of banks accounted for foreign currency.
As of January 1, 2016, around 18.4 percent of the banks' deposit base was formed through the national currency, while 81.6 percent – through foreign currency. A slight increase in the volume of deposits in manat was registered in 2016.
According to the report, the physical entities' deposits reached 7,448.7 million manat in December 2016.
Most of the physical entities' deposits accounted for the ones in the foreign currency – 79.6 percent or 5,931.5 million manat, the report said.
According to the report, the population’s deposits decreased by 2.06 percent for the month and by 21.4 percent per annum.
The total volume of the legal entities’ deposits in Azerbaijani banks reached 14,642.3 million manat or by 13,989.2 million manat (4.7 percent) more than in December 2015, the report said.
As of late 2016, the amount of the Azerbaijani financial organizations’ deposits reached 5.528 million manat compared to 6,358.8 million manat in 2015.
The amount of the Azerbaijani non-financial organizations’ deposits reached 9,114.3 million manat compared to 7,630.4 million manat in 2015.
The population’s bank deposits in Azerbaijani districts (except for Baku) totaled 498.58 million manat in 2016, that is, 6.69 percent of all deposits, the report said.
According to the CBA report, the share of bank deposits in districts was 6.4 percent (606.7 million manat) in 2015.
As of early January 2017, the amount of deposits in Baku amounted to 6.95 billion manat, while the deposits in the national currency - 1.26 billion manat.
According to the report, the foreign currency savings of the residents of Azerbaijani districts amounted to almost 243.9 million manat or 48.92 percent of all deposits in the banks in the districts in the reporting period.
For comparison, this figure amounted to 393.2 million manat in December 2015 or 64.8 percent of total deposits in the districts.
As of 2016, the average annual deposit rate throughout the country and Baku reached 4.8 percent.
Distribution of bank deposits in Azerbaijani districts:
|
Districts |
Amount of deposits (thousand manat) |
Average interest rate (%) |
|
Absheron |
164853,9 |
5,8 |
|
Aran |
81509,3 |
4,7 |
|
Mountain Shirvan |
11897,7 |
5,6 |
|
Ganja-Gazakh |
106544,0 |
5,7 |
|
Guba-Khachmaz |
34935,5 |
5,5 |
|
Lankaran |
34025,1 |
6,4 |
|
Seki-Zagatala |
29141,7 |
4,5 |
|
Upper-Karabakh |
6052,7 |
3,5 |
|
Kalbajar-Lachin |
22,8 |
10,8 |
|
Nakhchivan |
29597,6 |
2,3 |
The average interest rate on deposits in Azerbaijani banks increased in national currency and decreased in foreign currency in December 2016 compared to November 2016, the report said.
The average rate on deposits in manat amounted to 6.5 percent in December 2016 compared to 6.36 percent in November 2016 and 8.08 percent in December 2015.
The average rate on deposits in foreign currency amounted to 4.66 percent in December 2016 compared to 4.68 percent in November 2016 and 8.06 percent in December 2015.
The banks drew deposits of legal entities in manat in the amount of 3.91 percent per annum in December 2016 compared to 3.79 percent in November 2016 and 5.82 percent in December 2015.
The funds on the accounts denominated in the foreign currency brought 3.34 percent to legal entities in December 2016, 3.2 percent in November 2016 and 8.83 percent in December 2015.
As of January 1, 2017, the average interest rate on deposits of physical entities in manat made up 10.31 percent compared to 10.18 percent as of December 1, 2016 and 9.14 percent as of January 1, 2016.
The interest rates on deposits of physical entities in foreign currency are as follows: 5.44 percent in December 2016, 5.6 percent in November 2016 and 8.83 percent in December 2015.
Financial activity of banks
According to the banking supervision survey of Azerbaijan’s Financial Market Supervisory Body, almost a half of Azerbaijani banks have foreign capital.
In total, there are 15 banks with foreign capital. The share of foreign shareholders exceeds 50 percent of the authorized capital in 6 of those banks.
Two branches of foreign banks (Bank Melli Iran and the National Bank of Pakistan) operate in the country.
In general, around 32 banks operated in the country as of late 2016, two of which – state banks, Azerbaijan’s Financial Market Supervisory Body said.
Around 569 branches and 131 offices of the banks operated in the country during the reporting period, while as of late 2015, there were around 41 banks with 750 branches and 164 offices. There were around 21 banks with foreign capital as of 2015.
According to the survey, as of late 2016, around 16,947 people worked in the country’s banking sector. As of November 2016, around 17,008 people worked in the country’s banking sector, 17,030 people in October and 17,490 people in September. The number of people working in the banking sector decreased by 3.1 percent during the fourth quarter.
The licenses of two banks - Eurobank and Azerbaijan Credit Bank were cancelled in 2015. The licenses of Bank of Azerbaijan, Gandja Bank, United Credit Bank, NBCBank, Atra Bank, Caucasus Development Bank and Texnika Bank were also annulled in early 2016.
However, the CBA restored NBC Bank’s license in connection with the merger plans, although these plans were unsuccessful. The licenses of five more banks - Dekabank, Parabank, Kredobank, Zaminbank and Bank Standard were revoked in the middle of 2016.
When two banks left the market in 2015, it was not noticeable because those banks did not have the deposit portfolio. But the compensation is being paid to the depositors of ten banks, which closed in 2016. The trial over United Credit Bank has not been over yet.
Around 144 non-bank credit organizations operated in the country, including 97 credit unions, in the reporting period. Nine non-bank credit organizations have foreign capital.
The total volume of capital of the Azerbaijani banking sector as of 2016 amounted to nearly 1.91 billion manat.
According to Azerbaijan’s Financial Market Supervisory Authority’s report, as of late November 2016, the capitalization level decreased by 17 percent.
The assets of the sector amounted to almost 31.44 billion manat as of late December compared to 31.87 billion manat as of late November 2016.
The cash, left in the banks as of late December, amounted to 1.08 billion manat (1.17 billion manat in November), while investments in securities - 414.6 million manat (409.9 million manat in November).
Liabilities of local banks to the CBA amounted to almost 1.7 billion manat as of late 2016.
The loss of the banking sector amounted to 1.68 billion manat in the reporting period.
The banks' liabilities to the CBA in November amounted to nearly 1.7 billion manat, decreasing by 213.6 million manat since September.
The client base of Azerbaijani banks increased by 0.4 percent as of late December 2016 compared to November. The client base decreased by 6.5 percent compared to late 2015 and amounted to more than 5.35 million people.
According to the report, most of the clients (98.7 percent) accounted for physical entities, including 172,660 entrepreneurs. The rest clients (69,990 people) accounted for legal entities.
During the reporting period, the number of client accounts of commercial banks in the country decreased compared to November 2016 and amounted to about 15.16 million.
During the year, their number decreased by 6.6 percent. However, over 82 percent of client accounts (12.48 million accounts) accounted for current accounts.
Some 99 percent (12.35 million accounts) in the structure of current accounts accounted for the current accounts of physical entities, while 169,420 accounts belong to the entrepreneurs. The rest current accounts belong to the legal entities.
As of late November 2016, the number of credit client accounts decreased by 2.1 percent for the month.
The number of credit client accounts decreased by 26.3 percent for the year and amounted to over 2.3 million.
The number of debit accounts in the reporting period amounted to 378,680, which is by 2 percent less than as of late November 2016 and by 17.8 percent compared to December 2015.
Payment card market
The total turnover on payment cards via ATMs and POS-terminals amounted to 1.30 billion manat in Azerbaijan in December 2016 or by 3.9 percent more than in December 2015.
According to the report, the total number of transactions with payment cards reached almost 8,073 units increasing by 3.3 percent for the year.
The number of transactions on debit cards reached 7.166 million units totaling 1.151 million manat in the country and beyond the country during the reporting period.
Of the total number of transactions, 5.234 million transactions amounting to 990 million manat were implemented on debit cards via ATMs within the country, and around 823,000 transactions amounting to 97 million manat via POS-terminals.
As much as 907,000 transactions worth 147 million manat were made on credit cards in the country and beyond the country in December 2016.
Of the total number of transactions on credit cards, 186,000 transactions worth 58 million manat were implemented via ATMs and there were 333,000 transactions worth 41 million manat via POS-terminals.
The number of payment cards in Azerbaijan decreased by 5.7 percent in December 2016 and reached up to 5,334 units compared to December 2015.
Of the total number of cards, 4,703 units accounted for debit cards, in particular, 2,552 - social cards, 1,521 - salary cards, 630,000 - other cards. The number of credit cards was 631,000.
As of January 1, 2017, as many as 2,454 ATMs operated in the country of which 1,322 are located in Baku and 1,132 in other cities and districts of the country. The total number decreased by 240 units or 8.9 percent for the year compared to December 2015.
The number of POS-terminals amounted to 71,806 units of which 40,518 are installed in Baku and 31,288 units in other cities and districts as of late 2016.
The number of POS-terminals has decreased by 7,849 units or 9.96 percent for the year.
Stock market
The total turnover of exchange transactions on all instruments at the Baku Stock Exchange reached almost 5.7 billion manat in 2016, that is, by 32.6 less than in 2015.
The volume of the state securities market totaled 836.16 million manat (40.2 times increase for the year), while the turnover of corporate securities market reached 421.5 million manat (5.3 times decrease).
The volume of derivatives market reached 4.44 billion manat (28.3 percent decrease).
Comparative table on the trades results in the state and corporate sectors at the Baku Stock Exchange:
|
Market segments |
2016 |
2015 |
||
|
Volume of transactions (AZN) |
Number of deals |
Volume of transactions (AZN) |
Number of deals |
|
|
I. State Securities Market |
836 158 061,99 |
282 |
20 793 458,9 |
17 |
|
State bonds of finance ministry |
567 402 695,1 |
261 |
20 793 458,9 |
17 |
|
Initial placement |
421 490 192,42 |
207 |
0 |
0 |
|
secondary market |
145 912 502,72 |
54 |
20 793 458,9 |
17 |
|
Notes (Central Bank) |
268 755 366,9 |
21 |
0 |
0 |
|
Initial placement |
268 755 366,85 |
21 |
0 |
0 |
|
secondary market |
- |
- |
0 |
0 |
|
II. Market of shares |
117 971 840,35 |
2 027 |
279 448 960,97 |
3 755 |
|
Initial placement |
114 709 000 |
18 |
268 703 390,35 |
114 |
|
secondary market |
3 262 840,35 |
2 009 |
10 745 570,62 |
3 641 |
|
III. Debt market |
301 478 233,31 |
585 |
1 837 125 925,98 |
668 |
|
Mortgage bonds (Initial placement) |
- |
- |
45 382 918 |
11 |
|
Mortgage bonds (secondary market) |
26 639 576,70 |
12 |
1 502 415 877,29 |
196 |
|
Other corporate bonds (initial placement) |
169 090 229,45 |
468 |
25 620 244,66 |
82 |
|
Other corporate bonds (secondary market) |
105 748 427,16 |
105 |
263 706 886,03 |
379 |
|
- including market makers |
- |
- |
227 864 964,7 |
272 |
|
IV. REPO transactions |
2 064 763,58 |
2 |
123 762 620,25 |
113 |
|
Repo transactions of the Central Bank |
- |
- |
32 217 600,76 |
30 |
|
Other repo transactions |
2 064 763,58 |
2 |
91 545 019,49 |
83 |
|
V. Derivatives market |
4 440 667 093,66 |
45 833 |
6 194 376 765,84 |
48 814 |
|
- currency |
4 168 572 619 |
40 172 |
6 095 486 561,34 |
43 445 |
|
- goods |
272 094 475 |
5 661 |
98 890 204,5 |
5 369 |
|
Total |
5 698 339 992,89 |
48 729 |
8 455 507 731,94 |
53 367 |
The Azerbaijani National Depository Center registered 29 off-exchange transactions in the amount of 1.3 million manat at face value in December 2016.
The National Depository Center registered 65 deals worth almost 435,120 manat and the volume of off-exchange transactions increased by almost threefold compared to November 2016.
Around 152 purchase-sale transactions of shares in the amount of 22.23 million manat at face value were registered by the National Depository Center, which is by 2.2 times less than in November 2016.
For comparison, the National Depository Center registered 160 deals worth 49.89 million manat in November 2016.
Around 49 transactions on the additional issue worth almost 167.61 million manat (face value) were also registered. The volume of such deals increased by 19.5 times for the month compared to November (8 deals worth 8.58 million manat).
The National Depository Center was established on September 18, 1997.