Monetary market (January-July 2010)

In 2010, the Central Bank of Azerbaijan (CBA) implemented its policy in terms of a slow recovery of global economic growth, uneven running in the world, increasing the instability in international financial and currency markets, maintaining favorable conjuncture for oil market and stabile growth dynamics of the economy.

Pre-crisis measures taken by the Central Bank of Azerbaijan (CBA), as well as effective package of measures to enhance financial stability enabled to achieve one of the main goals - financial stability.

Unlike most countries, the cases of bankruptcy or financial disasters were not observed in the banking sector of Azerbaijan. Preventive measures by the Central Bank allowed the country's banking sector to be prepared to the global crisis.

Due to this, during the crisis, the banking sector had no problems with the implementation of obligations before contractors. The banking system continues to successfully carry out its primary function, that is a function of financial intermediation, demonstrating stable growth dynamics. Last year the community deposits grew by about 34 percent and the loan portfolio by 38 percent.

The growth of deposits once again testifies the high public confidence in the banking sector. The exchange rate of manat in relevant to major convertible currencies was protected from devaluation, which ultimately prevented the rise in prices, reduction of welfare and impairment of deposits.

The results achieved in promoting stability of the system were also highly assessed by the international financial institutions. In addition, the international rating agency Fitch in May 2010 raised the country's sovereign rating to investment rating (BBB-).

The Central Bank will continue the policy of strengthening stability and financial stability of the banking sector, as well as institutional development.

Currently, CBA is not considering closing banks, since the financial situation of institutions that form the banking sector is stable and does not cause fears.

Currency market and manat rate

In 2010, the Central Bank of Azerbaijan (CBA) continues its policy in terms of a slow recovery of global economic growth, uneven running in the world, increasing the instability in international financial and currency markets, maintaining favorable conjuncture for oil market and stabile growth dynamics of the economy. During the post-crisis period, the country will also need a stable manat to accelerate economic development and eliminate the consequences of the crisis.

In terms of sharp volatility of the world's leading currencies, rate of manat has changed at 0.04 percent against the U.S. dollar, and in general remained at a stable level. Fundamental macroeconomic factor of the stability of rate of the manat against the U.S. dollar was a significant balance of payments surplus. Stable exchange rate of manat, as before, in the first half of this year allowed to prevent the growth of inflation, external debt obligations of economic entities, dollarization, and, in general, to maintain the real incomes of the population.

In July official exchange rate of the national currency with regards to dollar rose by 3 points. The rate of dollar dropped from 0.8039 manat per USD to 0.8036 per USD.

The exchange rate of dollar changed by dropping, but fluctuated strongly. Maximal rate was fixed in 0.8039 manat per USD in the beginning of July and minimal at 0.8035 on July 20. The margin rate between the maximum and minimum figure was 4 points.

Rate of euro rose in Azerbaijan in July. The currency rate rose by 68 points (from 0.9814 manat per euro to 1.0494 manat to euro). Monthly minimum rate was 0.9814 euro per manat was fixed on July 1, monthly maximum rate was 1.0494 euro per manat marked on July 30. Fluctuation between maximal and minimum significance made up 68 points.

As a result of trading on the currency section USD / AZN_TOD in July 2010, the Baku Interbank Currency Exchange detemined the top five banks - leading operators of the stock market, led by the International Bank of Azerbaijan (IBA), a statement said.

Leading dealers include Joint-Stock Commercial ASB Bank, Joint-Stock Commercial Bank Respublika, Ltd. Bank Standard and Joint-Stock Commercial AccessBank. There is a list of banks - leading operators of the stock market in July 2010:

Banks

of total volume (%)

International Bank of Azerbaijan

34,72 percent

ASB Bank

23,23 percent

Bank Respublika

2,48 percent

Bank Standard

2,13 percent

AccessBank

1,88 percent

Deals of the Azerbaijani Central Bank are not indicated

About 10 banks participated in trades of currency section in July 2010. About 44 trading sessions were conducted and 29 deals were registred.

Total trading volume of currency section in the reporting month on USD / AZN totaled 88.96 million manat, or $110.817 million. These include the instrument Swap_USD/AZN_TOD_1Week. Turnover amounted to 8.042 million manat, or $ 10 million. The average dollar rate to manat on this instrument is 0.8042 manat.

Turnover on EUR / AZN totaled 0.201 million manat.

Total trading volume in the currency section increased by 54.6 million manat or 61,5 percent compared to the June indices.

Average daily turnover in the stock electronic trading system USD / AZN reached about $4.044 million, whereas the average amount of each transaction amounted to $3.068 million.

Exchange rate of national currency instrument USD / AZN_TOD in the reporting month increased by 0.04 percent - from 0.8024 to 0.8021 manat to $1. This average rate of dollar compared to manat was in July is 0.8026 manat per $1 compared to 0.8037 manat in late June 2010.

Monetary market

Amid essential tendencies of economic cycle, with regard to maintain the business activity and economic growth the CBA maintained parameters of percentage corridor, obligatory norms of reserving, sources of increasing money mass.

The Central Bank of Azerbaijan (CBA) noted the increase in money supply (M2) by 4 percent in July and 35.4 percent compared to July 2009, the CBA reported.

So, as of late July, the rate of M2 was 6,892 billion manat compared to 6,629.4 billion as of late June and 5,091.6 billion as of Aug.1, 2009.

The amount of cash money supply (M0) in late July hit 4,811.4 billion manat compared to 4,587.3 billion manat as of late June and 3,657.5 million manat as of Aug.1, 2009.

As of late July, Broad Money Supply (M3) totaled 9,054.5 billion manat compared to 9,082.5 billion manat as of late June, 7,582.4 billion manat as of Aug.1, 2009.

The transaction money (M1) amounted to 5,756.5 billion manat compared to 5,544.1 billion manat as of late June and 4,365.5 million manat as of Aug.1, 2009.

Parameters of monetary market, in mln manat

Amount, 01.07.2010

Money mass in extensive understating (М3)

9054,5

Money mass on manat (М2)

6892

Cash in manat (М0)

4811,4

Non-cash in manat

2080,6

Loan market

The banks increased lending to the economy of Azerbaijan by 19.7 percent in July 2010 compared to the same period of 2009, the Central Bank of Azerbaijan (CBA) said.

As of Late July, 2010 the banks provided loans totaling 8656.2 million manat (including 5357.6 million manat in national currency and 3293.6 million in hard currency) compared to 8840.7 million manat (5311.3 million manat in national currency and 3529.4 million manat in hard currency) to 2009, 7229.2 million manat (3856.5 million manat and 3372.7 million manat) as of Aug.1, 2009.

In July 2010, the share of loans provided in national currency was 61.9 percent, in foreign currency - 38.1 percent.

Of the total portfolio of loans, 400 million manat were overdue compared to 408.6 million manat as of July.1, 262.4 million manat as of Aug.1, 2009. Statistics of overdue loans does not include similar loans of non-bank credit institution Aqrarkredit.

Short-term loans as of late July amounted to 2401.5 million manat compared to 2266.8 million manat as of late June, 2295.9 million manat as of Aug.1, 2009. In July the amount of short-term credit in the economy increased by 5.9 percent but 13.5 percent compared to July 2009.

Long-term loans amounted to 6249.7 million manat compared to 6492.9 million manat as of July 1, 5112.6 million manat as of Aug.1, 2009. In July the amount of long-term loans decreased by 3.7 percent, compared to July 2009 - by 22.2 percent.

As of late July, the only state bank of the country (the International Bank of Azerbaijan) granted loans totaling 3829.1 million manat with a specific weight of 44.2 percent (decreased by 5.4 percent in July), and private banks - 4644.7 million manat with a specific weight of 53.7 percent (increased by 0.7 percent). The remaining 2.1 percent fall on the share of non-bank credit organizations, which provided loans of 182.4 million manat.

In July commercial banks of Azerbaijan increased the amount of consumer crediting by 2.1 percent amid similar decrease in the total amount of lending,

According to the CBA, on Aug. 1, 2010 commercial banks issued consumer loans in the amount of 2.560.6 million manat compared to 2.507.8 million as of July 1, 2.328.9 million manat as of Jan. 1, 2010 and 2.334.9 million manats as of beginning of 2009. As a result, on Aug. 1 lending farms in Azerbaijan reached its historical maximum.

It ensured 29.6 percent of total loan portfolio of banks (8.656.2 million manat). Lending trade and services (23.4 percent of total portfolio), which reached the historical maximum (2.029 million manat) portrayed a relative competition to the consumer lending.

As of August 1, bank lending to industry and production (620.8 million manat or 7.2 percent of the total portfolio), construction and real estate (609.6 million manat, or 7 percent), agriculture (415.8 manat or 4.8 percent) also reached its historical maximum.

As of Aug.1, the average rate on bank credit to the economy of Azerbaijan in national currency amounted to 15.93 percent compared to 16.06 percent July 1, 15.34 percent Aug 1, 2009, the Central Bank of Azerbaijan (CBA) said.

As of Aug.1, the average rate on bank lending in hard currency was 17.53 percent compared to 17.12 percent as of July 1 and 16.39 percent as of Aug.1.

In early August, the average rate on bank lending of a legal entity in national currency amounted to 14.37 percent compared to 14.46 percent July 1, 12.74 percent Aug.1, 2009. The average rate on bank loans to corporate clients in hard currency was 14.70 percent compared to 14.53 percent as of July 1, 13.79 percent Aug. 1, 2009.

During the reported period, the average rate on bank lending of an individual entity in national currency amounted to 19.61 percent compared to 19.91 percent July 1 and 20.83 percent Aug. 1, 2009. The average rate on bank loans for individual clients in hard currency was 23.26 percent compared to 23.17 percent and 22.19 percent respectively.

Banking sector

In July, the deposit base of Azerbaijani banks declined by 6.6 percent, but increased by 0.3 percent compared to July 2009, the Central Bank of Azerbaijan (CBA) said.

According to the CBA, at the end of July the total amount of bank deposits and deposits of legal and physical entities amounted to 4401.4 million manat compared to 4711.4 million manat in late June, about 4390.4 million manat - at the beginning of August 2009. About 1958.5 million manat manat fell to manat funds, and 2442.9 million manat - the currency.

In July deposits of physical entities increased by 6 percent, while the amount of corporate deposits declined by 21.6 percent. Compared to July 2009, deposits of individual customers increased by 35.8 percent and corporate deposits - by 29.5 percent.
As of the end of July, the amount of individual deposits in the banks of the country amounted to 2716.3 million compared to 2562.8 million manat as of the end of June, 2000.8 million manat as of August 1, 2009.

As of late July, the amount of deposits of legal entities totaled 1685.1 million manat compared to 2148.6 million manat as of the end of June, 2389.6 million manat as of August 1, 2009.

As of August 1, 1212.1 million manat (965.6 million by the beginning of the year) of deposits of individuals were made in the national currency, and 1.504 billion manat (1369.2 million manat) - in hard currency. Of the deposits of legal entities, 746.4 million manat (950.2 million manat) of deposits was made in manat and 938.8 million manat (1369.1 million manat) - in hard currency.

In July the individual deposits at banks increased by 153.5 million manat (from 2562.8 million manat as of July 1) and deposits by legal entities decreased by 463.5 million manat (from 2148.6 million manat).

 

As of Aug.1, average interest rate on deposits in manat hits 11.69 percent compared to 11.81 percent as of July 1, 11.27 percent as of Aug.1 of 2009, the Azerbaijani Central Bank said.

Average rate on deposits in foreign currency amounted to 11.02 percent compared to 10.95 percent and 9.38 percent respectively.

As of Aug. 1 the average rate on deposits of physical entities in manat hit 12.68 percent compared to 12.81 percent as of July 1, 12.53 percent as of early August 2009. Average rate on deposits of individual customers in foreign currency amounted to 12.52 percent compared to 12.54 per cent, 12.30 per cent respectively.

As of early August, the average rate on deposits of legal entities in manat hit 6.88 percent compared to 6.73 percent as of July1 and 8.26 percent as of early August 2009. Average rate on deposits of corporate clients in foreign currency amounted to 6.01 percent compared to 5.78 percent and 4.85 percent respectively.

Capitalization of the Azerbaijani banking sector increased by 0.8 percent and 3.4 percent compared in 2009 to 2073.92 million manat in July, the Central Bank of Azerbaijan (CBA) said.

According to the CBA, as of July 2010, capital of 41 banks exceeded 10 million manat compared to 42 banks as of late July 2009. Weight of this category of banks in an aggregate amount of all banks' capital decreased from 98.4 percent to 97.8.

Three banks' capital (weight of 1.8 percent) was formed from 5 million manat to 10 million manat. But one bank (0.2 percent) paid it from 3.5 million manat to 5 million manat and one bank (0.2 percent) paid it to 3.5 million.

Total assets of Azerbaijani banks as of Aug.1, 2010 amounted to 11.82 billion manat, which is 3 percent lower compared to early July, and 1.3 percent more compared to the figure in early 2010, the Central Bank of Azerbaijan said.

Banks' investments amounted to 895.2million manat, increased in August by 0.4 percent, loans given to customers - 8156.28 million manat (reducing by 2.3 percent). The volume of loans and deposits issued by the financial sector amounted to 500.34 million manat, reducing by 4.5 percent.

Funds on correspondent accounts for the period amounted to 727.67 million manat, reducing by 23.2 percent. Cash of Azerbaijani banks as of Aug. 1, 2010 amounted to 463.1 million manat, increasing by 10.1 percent.

Total liabilities of Azerbaijani banks as of Aug. 1, 2010 amounted to 9.745.36 million manat, reducing by 3.7 percent in June. About 4.318.81 million manat falls to deposits, and 4.841.47 million manat - loans and deposits received from the financial market.

The number of profitable banks in Azerbaijan increased to 30 in July.

The figure remains unchanged from June and is nine banks less than during the same period in 2009, the Central Bank of Azerbaijan (CBA) reported.

Total profits in the banking sector declined by almost 55.2 percent compared to July 2009, and increased by 3.1 percent compared to the previous month to 72.69 million manat.

Bank Financial Results (After Tax) in million manat:

Periods

The number of banks operating profitably

The total profit of the banking system (on profitable banks)

The number of banks operating in loss

The total loss of the banking system (on unprofitable banks)

Total profit (+) or loss (-) obtained by banks

01-08-2008

35

135.54

9

14.96

120.58

01-08-2009

39

171.01

7

8.91

162.10

01-08-2010

30

94.84

17

22.15

72.69

Stock market

The total volume of transactions for the period of January - August 2010 for all securities traded in Baku Stock Exchange was AZN 1.177 billion manat.

The market of corporate securities rose by 21.6 percent compared to the same period of last year, amounting to 286.4 million manat. This is explained with the 2.4 times increase in amount of transactions in corporate bonds, and the number of transactions increased by 2.4 times up to 149.

Government securities market decreased 65 percent, reaching 890.47 million manat. This was affected by 3.4 times decline in the repo transactions, although the number of transactions decreased slightly (by 6.9 percent).

Comparative table on the results of trades of Corporate Securities at BSE

(January-August 2010)

Market segments

2010 (31.08.10)

2009 (31.08.09)

Percentage ratio

Volume of transactions,

AZN

Number of transactions

Volume of transactions

AZN

Number of transactions

Corporate bonds- (placement)

63,580,402.10

76

32,580,343.08

35

195.15%

Corporate bonds - (secondary market)

112,099,779.29

73

39,149,873.29

26

286.33%

CBs Total

175,680,181.39

149

71,730,216.37

61

244.92%

Stocks - (placement)

105,847,030.96

942

129,020,247.40

1,265

82.04%

Stocks -

(secondary market)

4,871,319.96

1,400

34,836,005.22

2,077

13.98%

Stocks Total

110,718,350.92

2,342

163,856,252.62

3,342

67.57%

CS Market Total

286,398,532.31

2,491

235,586,468.99

3,403

121.57%

Comparative table on the results of trades of Corporate Securities at BSE

(January-August  2010)

Market segments

2010 (31.08.10)

2009 (31.08.09)

Percentage ratio

Volume of transactions,

AZN

Number of transactions

Volume of transactions,

AZN

Number of transactions

GB - (AR MF) (placement)

141,016,523.06

59

330,494,678.57

187

42.67%

GB - (AR MF) (secondary market)

82,132,035.24

42

139,423,136.70

74

58.91%

GB Total

223,148,558.30

101

469,917,815.27

261

47.49%

Notes (AR CB) - (placement)

137,466,475.80

117

245,753,672.03

156

55.94%

Notes (AR CB) - (secondary market)

5,564,936.87

2

67,504,812.02

39

8.24%

Notes Total

143,031,412.67

119

313,258,484.05

195

45.66%

Repo operations

524,290,763.14

512

1,771,231,865.60

550

29.60%

GS Market Total

890,470,734.11

732

2,554,408,164.92

1,006

34.86%

Abbreviations:

GB - government bonds

GS - government securities

CB- corporate bonds

CS- corporate securities

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