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Azerbaijani state banks’ share in lending to economy falls below 20%

Business Materials 11 October 2017 17:12 (UTC +04:00)

Baku, Azerbaijan, Oct. 11

By Azad Hasanli – Trend:

In January-August 2017, the share of Azerbaijan’s state-owned banks in the total volume of lending to economy fell to below 20 percent for the first time in more than 10 years, the country’s Central Bank (CBA) said in its report.

The total share of two state-owned banks - the International Bank of Azerbaijan (IBA) and Azer Turk Bank - totaled 19.6 percent in August, according to the report.

In July, this indicator was 22.5 percent, and at the beginning of the year - 34.5 percent.

The reduction in the share of state-owned banks is mainly due to the recovery of the IBA, which has been going on since 2015. As part of the recovery, the troubled assets of the bank are gradually transferred to the Aqrarkredit state non-banking credit organization. In exchange for troubled assets, the Aqrarkredit provides IBA with liquid funds.

The highest share of state-owned banks in the total loan portfolio of Azerbaijan’s banking sector was recorded in 2005 [no earlier statistics are available] - 51.9 percent.

As a result of reduction in the share of state-owned banks, the share of private banks and non-banking credit organizations increased. As of early September, their shares amounted to 76.7 percent and 3.7 percent, respectively. In July, the share of private banks and the Aqrarkredit was 74 percent and 3.5 percent, respectively, and at the beginning of 2017- 62.7 percent and 2.7 percent, respectively.

Presently, the reduction in lending, which started in 2015 after two devaluations of Azerbaijani national currency, the manat, continues in the country. Azerbaijan’s banks have tightened the requirements for the issuance of loans and are now more focused on improving the quality of their assets.

Therefore, the decline in the share of state-owned banks is not associated with increase in the issuance of loans by private banks or non-banking credit organizations (NBCOs). To a large extent, this is due to the fact that the pace of reduction in lending by state banks exceeds the pace of reduction in lending by private banks and NBCOs.

In terms of lending volumes, in January-August, the loan portfolio of all banks and NBCOs in Azerbaijan amounted to 12.37 billion manats (a 26.5 percent decrease compared to the results of eight months of 2016). The loan portfolio of state-owned banks amounted to 2.42 billion manats (2.27-fold decrease), private banks – 9.49 billion manats (a 12.2 percent decrease), the NBCOs -452.3 million manats (11.5 percent decrease).

There are 31 banks, including two state-owned ones, in Azerbaijan.

(1.7003 AZN = $1 on Oct. 11)

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