CBA expects banks' credit activity to increase in 2011

Business Materials 1 June 2011 16:39 (UTC +04:00)

Azerbaijan, Baku, May 31 / Trend I.Khalilova.

The Central Bank of Azerbaijan expects an increase in the credit activity of the banking sector in 2011, depending on the needs of the economy, CBA Director General Khagani Abdullayev told Trend.

"After the global financial crisis, banks pursue a conservative policy from the standpoint of risk, accumulate excess liquidity and are more cautious in their lending policies," Abdullayev said.

Today, a big difference exists between the growth rates of loans and deposits, but the banks may now change its plans on diversification of funds, and a significant portion of their liquid assets may be directed for lending to the real sector, which will be implemented gradually.

A real rate on bank lending has declined by 1.18 percent and the loan portfolio of banks has declined by 8.7 percent in the first quarter of 2011. As of April 1, the loan portfolio of banks in the country amounted to 8.366 billion manat, the issuance of new loans stood at 3.51 percent of the banks' loan portfolio, and net withdrawals from the credit market have remained at 10.4 percent of the accumulated portfolio.

Real deposit rate of Azerbaijani banks since early 2011 decreased by 2.7 times that did not hinder the growth at 1.5 percent in the deposit base for the quarter.

The deposit base of banks amounted to 5.532.3 billion manat as of April 1, 2011 compared to 5.448.8 billion manat in early 2011. The deposits of legal entities totaled 2.243.2 billion manat compared to 2.419 billion manat in early 2011, while deposits of the public (physical entities), in contrast, rose during the period from 3.029.8 billion manat to 3.289.1 billion manat.

"The proportion of overdue loans is expected to reach 4-5 percent in 2011, and we do not expect a growth in the share of problem loans," Abdullayev said. "There were expectations that in 2009 the figure will increase, but the CBA prevented it through the adequate policies."

The share of overdue loans amounted to 6.5 percent of the loan portfolio as of April 1 compared to 5.4 percent in early 2011.