Monetary sector

The Central Bank of Azerbaijan (CBA) is satisfied with positive tendencies in the banking sector of the country, observed over the past three months. Despite drop in the banking sector in the first quarter of 2009, the situation improved in April-June 2009.

According to statistics, rise was observed in this sector over the past three months, in particular, on assets, deposits and loan portfolio. The situation has stabilized and definite positive tendencies are seen.

The Parliament of Azerbaijan adopted the amendments to the Law on the National Bank, which allow to increase the flexibility of the Central Bank of Azerbaijan (CBA) and the use of tools for rapid response on the background of global crisis and to solve problems in order to overcome the post-crisis situations.

Amendments were made due to renaming of the National Bank into Central on the basis of the referendum dated March 18, 2009.

The amendments allow the Central Bank to issue loans, including subordinated loans, to the banks under the certain conditions. Up to now, the Central Bank could give loans to commercial banks for a period of six months with possibility of prolongation for another six months, that is very short in crisis.

Another innovation is that the Central Bank will be able to finance social-economic projects, as well as to provide real sector of economy with financial aid and grant banks purposeful loans upon state guarantees. The Central Bank will be able to purchase them on initial market upon terms of securities emission in case of necessity to provide debt obligations on purposeful loans owing to state guarantees and paying off these obligations fully or partially owing to state debt securities.

Currency market and rates of AZN

In June official exchange rate of the national currency dropped 6 points. Dollar's rate increased from 0.8035 manat per U.S. dollar up to 0.8041 manat per dollar.

Exchange rate of USD increased gradually during the month, but sometimes was stable at 0.8041. Maximal rate was registered on June 23 at 0.8034 and minimal on June 3 at 0.8034. The oscillation between the maximal and minimal rate made up 7 points

In June, the rate of euro, unlike the US dollar, deccreased in Azerbaijan through sharp fluctuations. The currency fell by 26 points (from 1.137 AZN/EUR to AZN/EUR 1.1344). The monthly minimum of rate - 1.1095 EUR/AZN - took place on June 16, monthly maximum of rate - 1.1486 EUR/AZN on June 3. The fluctuations between maximal and minimal significance constituted 391 points

As a result of currency auctions on USD/AZN_TOD in June 2009, Baku inter-bank currency exchange determined 5 banks-leaders of currency stock exchange market in accordance with share of concluded deals headed by the International Bank of Azerbaijan, the bank said.

ASB joint-stock commercial banks, Texnika Bank, AGBank and commercial Yapi Kredi Bank Azerbaijan CJSC joined leading dealers of organized currency market.

A list of banks-leading operators of exchange market of June 2009 is indicated below:

* Deals of the Azerbaijani Central Bank were not indicated in data..

Roughly 21 banks participated in BBVB auction in June 2009. Roughly 40 trade sessions were conducted in report month in Exchange E-auction system. Roughly 61 deals were registered. 

Total volume of currency USD/AZN auction hit 85.47 million manat or $106,363 million in report month.

Swap_USD/AZN turnover hit 8.062 million manat or $10 million.

Average rate of dollar to manat hit 0.8062 manat.

EUR/AZN turnover hits 0.395 million manat.

Total amount of auctions in currency increased 7.7 million manat or 9 percent in report month compared to May indices.

Average daily turnover of exchange E-system of USD/AZN auction hits $5.318 million. But average amount of each deal hits $1.744 million.  

As a result of 6 months, total volume of currency hits 1.409 billion manat. It 13.77 percent more compared to amount of currency auctions in January-June 2008.

Exchange rate of national currency on USD/AZN_TOD reduced 0.04 percent from 0.8025 to 0.8028 manat per $1 in report month. Average rate of dollar to manat hit 0.8033 manat per $1 in June compared to 0.8029 manat as a result of May 2009.

Monetary market

As of July 1, the Central Bank of Azerbaijan stated drop in broad money base by 20.7 percent and 0.6 percent drop over the relevant period of 2008, as compared to a 44.27 percent-increase in 2008.

As of July 1, the reserve money amounted to 3.935.6 million manat compared to 3.880.5 million manta as of June 1, $4.963.9 as of January 2009.

As of July 1, money base in manat made up 3.888.9 million manat compared to 3.820.5 million as of June 1, 4.781.3 million as of Jan. 1, 2009.

In 2009 it decreased by 18.7 percent, but increase by 3.7 percent as compared to 2008. Money base cleared of seasonal factors (3.830.4 million manat), decreased by 12.5 percent in 2009 (4.372.9 million manat as of beginning of 2009), but increased by 3.8 percent as compared to the same period of 2008 (3.688.4 million manat). The bank reserves reduced by 61.8 percent since the beginning of the year and 62.3 percent as compared to the compared to period of 2008.

The Azerbaijani Central Bank ascertained reduction of money supply (M2) by 61.2 million manat or by 1.2 percent and 1. 21 billion manat or 19.9 percent in annual calculation in the first year of 2009, the bank said on Aug.3.

Growth for June is amounted to 60.8 million manat (1.3 percent).

M2 index was 4,872 million manat as of July 1, 2009 compared to 4811,2 million manat as of June 1, 2009, 6,081 million manat as of Jan.1, 2009 and 4933.2 million manat as of July 1, 2008.

Moreover, volume of cash money supply (M0) increased by 42.9 percent or (1101.7 million manat ) in annual calculation.

M0 index was 3486.4 million manat as of July 1, 2009 compared to 3396.7 million manat as of June 1, 4145.7 million manat as of Jan.1, 2009 and 3193.8  million manat as of July 1, 2008.

Extended Money Supply (M3) was 6693.9 as of July 1, 2009 compared to 6.612 million manat as of June 1, 8494.2 million manat as of Jan.1, 2009 and 7.337 million manat as of July 1, 2008. In June the figure increased by 1.24 percent, in January to June reduced by 21.2 percent and in annual calculation dropped by 8.8 percent.

Transaction money (M1) was 4198.8 as of July 1, 2009 compared to 4150.6 million manat as of June 1, 5.145 million manat as of Jan.1, 2009 and 4117.8 million manat as of July 1, 2008. In June the figure increased by 1.16 percent, in January to June reduced by 18.4 percent, and in annual calculation by 2 percent.

Parameters of the monetary market, mln AZN

Credit market

In June 2009, Azerbaijani banks increased crediting of economy by 1.7 percent and decreased by 9.8 percent in January-June and increased by 4.8 percent in annualized pace, a source in the Central Bank of Azerbaijan (NBA) said.

According to the CBA, as of July 1, banks issued credits worth 6.463 million manats (3.469 million manats in national currency and 32.993 million manats in hard currency) compared to 6.356 million manats to June 1 (3.446 million manats in national currency and 2.909 million manats in hard currency) and 7.163million manats (3.649 million in national and 3.514 million in hard currency) on Jan.1, 2009 and 6.166 million manats (3.278 million manats and 2.887 million manats) on July 1, 2008.

As for June 1, 2009 the share of loans were granted in national currency was 53.7 percent and in foreign currency - 46.3 percent (a 24.6-percent increase).

As many as 242.8 million manats of lending out of the total portfolio are overdue as compared to 209.2 million manats on June 1, 159.8 million manats on Jan.1, 2009 and 99.9 million manats on July 1, 2008. Statistics of the overdue credits doesn't include analogous loans of non-bank credit organization Aqrarkredit.

Short-term credits made up 2.119 million manats (including 127.8 million manats of overdue loans) compared to 2.113 million manats (including 112.2 million manats of overdue loans) on June 1, and 2.295 million manats (96.7 million manats of overdue loans) on Jan. 1 in 2009. Volume of short-term loans in the economy increased by 0.3 percent in June and decreased by 7.7 percent in January-June. As of July 1, 2009, as many as 41.5 percent of short-term credits and 39.7 percent of overdue credits were in hard currency.  

Long-term crediting made up 4.344 million manats (including 114.9 million manats of overdue loans) as compared to 4.242 million manats (including 97 million overdue loans) on June 1, and 4.867 million manats (63.1 million manats) on Jan. 1, 2009. Volume of long-term loans in the economy increased by 2.4 percent in June and dropped by 10.7 percent in January-June. As of June 1, 2009, as many as 48.7 percent of long-term credits and 30.8 percent of overdue credits were in hard currency.

According to the CBA, as of July 1, 2009, the only state bank (International Bank of Azerbaijan) in the country issued 2.555 million manats of credits with specific weight of 39.5 percent (increase by 3.03 percent as of June). Private banks issued credits worth 3.732 million manats with specific weight of 57.7 percent (increase by 0.9 percent as of June), the rest 2.7 percent accounts for non-bank loan organizations (they issued 176.1 million manats).

As of July 1, loan portfolio of banks with foreign participation made up 1.944.5 million manta, including 343.19 million manta of loan allotted by foreign banks.

As of July 1 2009 the average rate on bank lending to the economy in national currency made up 17.12 percent compared to 17.45 percent on Jan. 1 and 17.76 percent - on July 1, 2008, the Central Bank of Azerbaijan said. The average rate on bank lending in hard currency made up 17.59 percent compared to 14.52 percent on Jan. 1 and 14.11 percent on July 1 2008, the bank said.

As of July 1, the average rate on bank lending to enterprises in national currency amounted to 14.80 percent compared to 14.87 percent on Jan. 1 and 15.55 percent on July 1 January 2008. The average rate on bank credits to corporate clients in hard currency equaled 15.01 percent compared to 12.37 percent on Jan. 1 and 11.52 percent on July 1 2008.

In this period, the average rate on bank loans to individuals in national currency amounted to 21.19 percent compared to 21.53 percent on Jan. 1 and 20.94 percent on July 1 2008. The average rate on bank loans to individual clients in hard currency was 22.67 percent compared to 21.52 percent and 21.05 percent respectively.

Banking sector

Due to the deepening global financial crisis, the Azerbaijani banks limited opportunities to attract financial resources from abroad, and to increase the capacity to attract inward investment, the government considered appropriate to increase the amount of compensation up to 30,000 manats for their stimulation.

Azerbaijan's parliament has approved amendments to the law on "Deposit insurance" to increase the maximum limit of insurance of bank deposits through the Azerbaijan Deposit Insurance Fund (ADIF) five times - up to 30,000 manats.

The amendments to the Law will boost the public confidence and increase the amount of deposit base.

Depositary base of Azerbaijani banks decreased 3.7 percent in June, 24.2 percent in January-June and 21.9 percent in annualized pace, the Central Bank of Azerbaijan (CBA) said.

The CBA said as of July 1, total sum of bank deposits and deposits by enterprises and individuals hit 3.416 billion manat compared to 3.423 billion manat on June 1 and 4.505 billion manat on Jan. 1 2009 and 4.372 million manat in early July 2008. About 1.287 million accounted for manat and 2.128 million manat for currency.

In June, deposits by individuals increased 1.1 percent and juridical entities - 1.9 percent. The deposits by individual clients increased 1.6 percent, corporative clients reduced 28.1 percent in January-June 2009. Deposits by individuals increased by 16.4 percent, while deposits by corporative clients dropped by 45.3 percent in the annualized pace.

As of July 1, the deposits of individuals hit 1.934 million manat from the previous 1.912 billion manat on June 1 and 1.903 million manat in January and 1.661 on July 1, 2008.  Deposits of legal entities totaled 1.482 billion manat in early July compared to 1.510 billion manat as of June 1 and 2.602 billion manat as of January 1 and 2.710 million manat as for July 1, 2008.

As of July 1, the deposits by individuals in national currency hit 696.6 million manat and 1.237 million manat in hard currency, by juridical entities - 590.9 million manat and 891.2 million manat in hard currency.

As for July 1, 2009, an average rate on deposits in manat was 11.45 percent compared to 11.28 percent on June 1 and 12.08 percent - early July 2008, the Central Bank of Azerbaijan (CBA) said.

An average rate on deposits in foreign currencies amounted to 10.77 percent compared to 10.56 percent and 9.63 percent, respectively.

As for July 1, the average rate on individuals' deposits in manat stood at 12.75 percent compared to 12.42 percent on June 1 and 12.75 percent on July 1, 2008. The average rate on individuals' deposits in foreign currencies amounted to 12.53 percent compared to 12.31 percent and 12.97 percent, respectively.

In early July, the average rate on enterprises' deposits in manat stood at 8.36 percent versus 8.67 percent on June 1 and 10.50 percent on July 1, 2008. The average rate on corporate clients' deposits in foreign currency amounted to 6.19 percent versus 6.09 percent and 5.11 percent respectively.

The capitalization of the banking sector of Azerbaijan grew 0.7 percent in January-June 2009, and 9.1 percent compared with the beginning of the year, the Central Bank of Azerbaijan (CBA) said. The total capital of banks is 1 859.69 million manat.

According to statistics provided by the Central Bank, as of 1 July 2009, the capital of 41 banks exceeded 10 million manat compared to 43 banks as of the beginning of the year. Accordingly, the share of this category of banks in the total capital of all banks fell from 98.6 percent to 97.6 percent.

Four banks with the special weight of 2.1 percent have formed their capital between 5 and 10 million manats, one bank - 3.5 and 5million manats (0.3 percent).

46 banks held a license for banking activities in the country. Their number reduced as a result that the license of two banks, Poctbank and Atlantbank, is invalid. The CBA liquidated the licenses of these two banks from 9 July. Permission for banking activity was provided to Nakhchivanbank and Azfinans Bank.

Currently 23 banks operate in Azerbaijan with the participation of foreign capital. In seven of them the share of foreign capital is 50 to 100 percent, in 14 banks - up to 50 percent, and there are two local branches of foreign banks.

The number of banks functioning abroad is 9, including 6 representations, two subsidiaries and one branch. Also four representations of foreign banks function in Azerbaijan.

Number of Azerbaijani banks operating with profit increased from 38 to 39 in June compared to increase for two in June 2008, the Azerbaijani Central Bank said on July 27.

Total profit of bank system increased 45.4 percent compared to July 1, 2008 and hit 146.13 million manat. Total volume of bank profit increased 13.3 percent in June.

Number of unprofitable banks reduced 1 compared to May and early 2009. As a result, losses of nine banks hit 8.03 million manat or 48.4 percent less than index of July 1, 2008.  

Financial results of bank activity in million manat (after paying taxes):  

Financial results of bank activity in million manat (after paying taxes):  

Stock market

In January-June 2009, turnover of corporate securities in Azerbaijan was 200.6 million manat which is by 24.4 percent tops the figure in the same period of 2008, the State Committee on Securities reported.

Turnover of stakes was 155.5 million manat with a 9.7-percent increase from 2008 and growth of the primary stake market was 49.8 percent.

Turnover of the corporate bonds was 45.08 million manat with a 132.5-percent increase. The basis of the growth rate of this figure comprises growth in the secondary market for corporate bonds by 29.6 times.

In January-June, turnover of the market for government securities amounted to 2.33 billion manat, which is 40.9 percent lower than the same period last year.

Market size of government bonds rose by 182.8 percent, reaching 399.4 million manat, and notes market of the country's Central Bank decreased by 76.2 percent and was 283.66 million manat.

Operations on REPO and reverse REPO was 1.645 billion manat.

Total volume of the Azerbaijani securities market was 2.356 billion manat in January-June, 2009 with a 32-percent decrease from the same period in 2008.

The total volume of transactions for the period of January-June 2009 for all securities traded in Baku Stock Exchange was 2 502.73 million manat. This amount is 37.79 percent lower than the same indicator for the corresponding period of last year, the exchange said on July 2.

The 93.02 percent out of the total volume made by the transactions with the government securities.

The main part of the fall comes from the government securities market. Particularly, the primary and secondary market of Notes were down by 76.92percent and 73.60percent, respectively. Moreover the volume of Repo transactions decreased by 36.77percent. Overall the government securities market fell by 40.86percent.

The overall corporate securities market increased for 2.01 times. Particularly, the secondary market of corporate bonds increased for more than 3.8 times.

The highest growth rate was observed in the secondary market of equities, which jumped 237 times. Additionally, the volume of primary market for equities and bonds increased by 49.80percent and 26.86percent, respectively.

There is an increase in trading activity of both Treasury Bills' primary and secondary markets for 2.07 and 8.6 times, respectively.

(January-June 2009)

Abbreviations:

GB - Government bonds

AR MF - Ministry of Finance of Azerbaijan Republic

AR CB - Central Bank of Azerbaijan Republic

GS - government securities

In June Baku Stock Exchange placed entire amount of T-bills, presented as book-entry, ensured T0bills of the Azerbaijan Mortgage Fund functioning at the Cental Bank of Azerbaijan. The intila amount of bonds put for auction made up 15 million manat. Total amount of applications submittedby eight investors made up 21.991 million manat.

Issue of bonds of the Mortgage Fund was registered at the State Securities Committee on May 29. the total issue of bonds is 55 million manat at net price of 1,000 manat each.

Interest rate on mortgage bonds is 3 percent per annum. The clearing off date is May 10, 2016.