Azerbaijani bank reserves easily cover bad loans

Business Materials 20 August 2010 15:26 (UTC +04:00)

Azerbaijan, Baku, Aug. 20 / Trend N.Ismayilova /

The Central Bank of Azerbaijan (CBA) continued preventive measures to adjust its business model and preserve credit risk at an adequate level where necessary early this 2010, the bank stated in a report released this week.

Bank lending grew by 5.2 percent to 8.658.3 million manat in the first half of 2010. A stable exchange rate contributed to 8.5-percent loan growth in the national currency. The potential dollarization of the loan structure was averted and the share of loans in the national currency increased from 58.5 to 60.3 percent.

Meanwhile, the share of long-term loans in the credit investment structure increased by 1.6 percent to 74.4 percent (6,439.8 million manat). Long-term loan growth (7.5 percent) exceeded the overall growth of the loan portfolio (5.2 percent).

The highest loan growth was observed in the energy, non-oil industry, production, trade and services sectors. Credit risk and diversification portfolio revaluation impacted loans issued to individuals.

Loans to individuals grew by 0.7 to 27.1 percent. Loans granted to businesses and consumers accounted for nine and 73 percent of all loans, respectively. Thirteen percent were real estate loans.

The quality of the loan portfolio remained at an acceptable level. The share of non-standard loans in the total loan portfolio amounted to 6.9 percent compared to six percent earlier this year. Broken loans increased by 0.4 to 3.9 percent. Reserves established for loans amounted to seven percent of the portfolio. Reserves created during the first half of the year reached 12 percent of the total reserves. They cover non-business loans twice over, and bad loans 4.5-times over.