Monetary market in Azerbaijan (january-october 2010)

Integration into the global economy remains the main direction of the policy of the Central Bank of Azerbaijan (CBA). In this case, the banking system should not allow excessive risks, contributing to a positive impact on the economy, and maintaining reliability system. In other words, the policy of the CBA will be determined by the optimal combination of dynamics and stability, to a much greater extent reflecting the level of macroeconomic risks.

Currency market and manat rate

In October the official exchange rate of the national currency with regards to dollar rose by 19 points. The rate of dollar dropped from 0.8026 manat per USD to 0.8007 per USD.

The selected policy of maintaining a stable exchange rate has created conditions for the preservation of low inflation, curbing the growth of dollarization and preventing the crisis on the balance sheets of banks and business entities. The policy to preserve the stability of the national currency has prevented a sharp price rise in imports of goods intended for the development of local production, protected populations' deposits from the from depreciation, curbed the growth of debt on loans in foreign currency.

Thus, the dollar exchange rate during the month gradually fell. The maximum rate was fixed at the beginning of the month at 0.8026 manat per dollar and the minimum - at the end of the month (0.8007). Fluctuations between maximum and minimum values was 19 points.

Rate of euro rose in Azerbaijan in October. The currency rate increased by 171 points (from 1.0959 manat per euro to 1.113 manat to euro). Monthly minimum rate was 1.0956 euro per manat was fixed on Oct. 5, monthly maximum rate was 1.1278 euro per manat marked on Oct. 14. Fluctuation between maximal and minimum significance made up 322 points.

On results of trades in currency section on tool USD/AZN_TOD Baku Interbank Currency Exchange (Baki Banklararasi Valyuta Birjasi - BBVB) defined five banks - leading operators of exchange market of hard currency on October 2010.

The International Bank of Azerbaijan (IBA) has headed five bank-leaders of exchange currency market in accordance with shares of transactions concluded by him. "ASB", " Royal Bank ", "AccessBank", " Turan Bank " and "Yapi Kredi Bank Azerbaijan" also included in the number of the leading dealers of organized currency market. In accordance with it below is the list of banks - the leading operators of exchange market of hard currency in October.

BANKS

OF THE TOTAL (%)

IBA

34.36%

ASB

25.21%

Yapi Kredi Bank Azerbaijan

9.40%

Royal Bank

4.50%

Turan Bank

4.27%

*Data do not include transactions by the Central Bank of Azerbaijan.

In total 13 banks have taken part in the trades of currency section of the BBVB in October 2010. In accounting month in "Bourse E-System of Trades" (BEST) 42 trading sessions are conducted and 27 transactions are registered.

The total volume of trades of currency section in accounting month on USD/AZN has made 46,816 million manats or $58,500 millions. And also the turnover on tool Swap_USD/AZN_ has made 334, 830 manat. The average rate of dollar to manat on this tool has made 1,1161 manats.

In comparison with indicators of September in accounting month the total volume of trades in currency section has grown on 21,573 million manat or 1.9 times.

The average daily turnover in "Bourse E-System of Trades" on USD/AZN reached approximately $ 2.786 millions, then that the average volume of each transaction has made $2,167 millions.

The exchange rate of national currency on tool USD/AZN_TOD in accounting month has consolidated on 0.5% from 0.8032 to 0,7994 for $1. Thus the US dollar average rate in consideration to manat has made in October 0.8003 manat for $1, against 0.8033 manat following the September results of current year.

Monetary market

The Central Bank of Azerbaijan (CBA) noted the increase in money supply (M2) by 2.2 percent in October and 35.7 percent compared to October 2009, the CBA reported.

So, as of late October, the rate of M2 was 7314,5 million manat compared to 7156,1 million manat as of late September and 5388,5 million manat as of Nov. 1, 2009.

The amount of cash money supply (M0) in late October hit 4942,6 million manat compared to 4897,4 million manat as of late September and 3670,3 million manat as of Nov.1, 2009.

As of late October, Broad Money Supply (M3) totaled 9619,9 million manat compared to 9,390   million manat in late September and 7675,6 million manat as of Nov.1, 2009.

The transaction money (M1) amounted to 5999,9 million manat as of October compared to 5901,7 million manat as of late September and 4539 million manat as of Nov.1, 2009.

Parameters of monetary market, in mln manat

Объем, октябрь 2010

Money mass in extensive understating (М3)

9619,9

Money mass on manat (М2)

7314,5

Cash in manat (М0)

4942,6

Non-cash in manat

2371,9

Loan market

Azerbaijani banks increased lending to the economy in October by 1.4 percent, compared to October 2009 - by 13.8 percent.

So, according to the CBA, as of Nov. 1, banks issued 9065.2 million manat, including 5680.5 million in national currency and 3384.8 million in hard currency.

In October, the share of loans in national currency amounted to 62.7 percent, in foreign currency - 37.3 percent.

Of the total portfolio, loans worth 454 million manat were overdue compared to 448.5 million manat as of Oct. 1, about 290 million manat as of Nov. 1, 2009. Statistics of overdue loans does not include similar loans of non-bank credit institution Aqrarkredit.

As of the end of October, the short-term loans amounted to 2516.9 million manat compared to 2486.5 million manat as of the end of September, 2264.7 million manat as of Nov. 1 last year. In October the amount of short-term credit in the economy increased by 1.2 percent, while compared to October 2009 - by 11.3 percent.

Short-term loans in manat totaled 1458.5 million manat, long-term - 4.222 billion manat. Of the total loans in foreign currency, 1058.4 million manat were short-term, 2326.3 million manat - long-term.

Long-term loans amounted to 6548.3 million manat compared to 6450.1 million manat as of Oct. 1, 5699.1 million manat - Nov. 1, 2009. In October the amount of long-term loans increased by 1.5 percent, while compared to October 2009 - 14.9 percent.

As of late October, the only state bank of the country (the International Bank of Azerbaijan) granted loans totaling 3938.5 million manat with a specific weight of 43.4 percent (decreased by 0.6 percent in October), and private banks - 4935.1 million manat with a specific weight of 54.4 percent (increased by 0.4 percent). The remaining 2.2 percent fall on the share of non-bank credit organizations, which issued loans worth 191.6 million manat.

As of Nov. 1, the average rate on bank lending to the Azerbaijani economy in national currency amounted to 14.06 percent compared to 14.1 percent on Oct. 1, and 16.23 percent on Nov. 1, 2009.

The average rate on bank lending in foreign currency was 16.34 percent compared to 16.21 and 18.35 percent respectively.

In early November, the average rate on bank lending of a legal entity in national currency amounted to 11.73 percent compared to 11.77 percent by October 1, and 14,4 percent as of November 2009. The average rate on bank loans of a corporate customer in freely convertible currency was 13.22 percent compared to 13.16 percent on Oct. 1, and 16.06 percent as of November 2009.

During the reporting period, the average rate on bank lending of a physical entity in national currency amounted to 19.48 percent compared to 19.45 percent on October 1 and 20.73 percent as of November 2009. The average rate on bank credit of an individual client in freely convertible currency amounted to 22.92 percent compared to 23.01 and 23.93 percent respectively.

Banking sector

Over last two years, population's deposits in Azerbaijani banks grew by more than 60 percent. Despite that the world economy experienced a crisis period, the Azerbaijani banks have fulfilled all obligations to clients. Population's deposits, which are the main indicator of banking sector, increased in 2009 by 29 percent, over 9 months of this year - by 22 percent, while cumulative growth exceeded 60 percent.

Depositary base of Azerbaijani banks increased by 3.3 percent or 159.2 million manat in October or 14.4 percent or 612.9 million manat compared to the same period in 2009, the Central Bank of Azerbaijan (CBA) said. Deposit base has risen by 220.2 million manat, or 4.7 percent since the beginning of the year (as of Jan. 1, it was 4.654.2 million manat).

Based on the CBA data, as of November 1, total sum of bank deposits and deposits by legal and physical entities hit 4.874.4 million manat compared to 4.715.2 million manat as of October 1 and 4.261.5 million manat as of early November 2009. About 2229,8 million accounted for manat and 2644,8 million manat for currency.

In October, deposits by physical entities increased by 3.2 percent and legal entities by 3.7 percent. The deposits by individual clients increased by 35.8 percent. The deposits by corporate clients were reduced by 7 percent.

The deposits of physical entities hit 2.887.5 million manat for the reporting period compared to 2.798.3 million manat as of early October and 2.125.6 million manat as of November 1, 2009.

The deposits of legal entities totaled 1.986.9 million manat compared to 1.916.8 million manat and 2.135.9 million manat.

As of Nov.1, the average rate on deposits in manat amounted to 10.98 percent compared to 11.21 percent as of Oct.1, 11.91 percent as of Nov.1, 2009, the Central Bank of Azerbaijan (CBA) said.

Average rate on deposits in foreign currencies amounted to 10.5 percent compared to 10.41 percent and 10.89 percent, respectively.

As of Nov.1, the average rate on deposits of individuals in manat was 11.96 percent compared to 12.1 percent as of Oct.1, 13.21 percent as of early November 2009. Average rate on deposits from individual customers in foreign currencies amounted to 12.16 percent compared to 12.08 percent and 12.59 percent, respectively.

As of early November, the average rate on deposits of legal entities in manat was 6.5 percent compared to 6.02 percent as of Oct.1, 7.05 percent as of Nov.1, 2009. Average rate on deposits from corporate clients in foreign currency amounted to 5.72 percent compared to 5.58 percent and 5.81 percent respectively.

The number of profitable banks in Azerbaijan increased to 31 in October. The figure reduced by 5 compared to October 2009 and increased by 1 compared to the previous month.

Total profits in the banking sector declined by almost 60.2 percent compared to October 2009, and by 2.1 percent compared to the previous month. The figure hit 92.74 million manat.

The number of unprofitable banks decreased by one, compared to September and increased by 6 by October last year. As a result, the loss of 16 banks amounted to 41.21 million manat, or 2,9 percent more than in September, and almost 3.6 times more than for the corresponding period of last year.

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

01-11-2008

37

213,07

8

15,35

197,72

01-11-2009

36

244,45

10

11,47

232,98

01-11-2010

31

133,95

16

41,21

92,74

During October, the capitalization of the banking sector in Azerbaijan rose by 0.8 percent, since the beginning of the year - by 7.4 percent to 2,152.35 million manat.

Stock market

The total amount of transactions for the period of January-October 2010, for all securities traded in Baku Stock Exchange was 1.46 billion manat, which decreased by more than twice compared to the same period of 2009, the Stock Exchange said today.

This is due to a decline in transactions with corporate bonds in 2.36 times, while the number of transactions increased by 1.98 times to 178.

The government securities market decreased by 59.7 percent, reaching 1123.99 million manat. This decline has affected the transactions with state bonds of the Finance Ministry, which declined by 47.87 percent, repo transactions - in 3.4 times.

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

(January to October 2010):

Market segments

2010 (31.10.10)

2009 (31.10.09)

Percentage ratio

Volume of transactions,

AZN

Number of transactions

Volume of transactions,

AZN

Number of transactions

Corporate bonds- (placement)

72,899,260.59

88

43,736,844.08

52

166.68%

Corporate bonds - (secondary market)

138,262,949.12

90

45,610,410.90

38

303.14%

CBs Total

211,162,209.71

178

89,347,254.98

90

236.34%

Stocks - (placement)

120,266,868.96

1,796

139,862,847.40

1,272

85.99%

Stocks - (secondary market)

5,407,398.35

1,676

35,353,707.92

2,614

15.30%

Stocks Total

125,674,267.31

3,472

175,216,555.32

3,886

71.73%

CS Market Total

336,836,477.02

3,650

264,563,810.30

3,976

127.32%

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

(January to October 2010):

Market segments

2010 (31.10.10)

2009 (31.10.09)

Percentage ratio

Volume of transactions,

AZN

Number of transactions

Volume of transactions,

AZN

Number of transactions

GB - (AR MF) (placement)

210,292,967.70

92

420,964,084.83

226

49.96%

GB - (AR MF) (secondary market)

86,831,231.89

46

149,045,985.50

85

58.26%

GB Total

297,124,199.59

138

570,010,070.33

311

52.13%

Notes (AR CB) - (placement)

170,440,933.81

136

270,734,277.15

174

62.96%

Notes (AR CB) - (secondary market)

5,564,936.87

2

67,504,812.02

39

8.24%

Notes Total

176,005,870.68

138

338,239,089.17

213

52.04%

Repo operations

649,862,165.63

644

1,874,808,344.66

654

34.66%

GS Market Total

1,122,992,235.90

920

2,783,057,504.16

1,178

40.35%

Abbreviations:

GB - government bonds

GS - government securities

CB- corporate bonds

CS- corporate securities

The National Depository Center of Azerbaijan noted that 57.7 percent of turnover of the securities market in the country in January-October 2010 was formed through operations on additional issuance of stocks.

According to the NDC, during 10 months of 2010, 5,944 transactions were concluded with securities in total amount of 410.31 million manat, including 1,076 transactions amounting to 39,765,000 manat in October.

The National Depository Center (NDC) at the Azerbaijani State Securities Committee registered 210 stock transactions for the sale of shares in the amount of 9.8 million manat at the contract price and in the amount of 18.11 million manat- at face value in October, the NDC said.

The depository center registered 17 non-stock exchange transactions in the amount of 12.47 million manat at a nominal price.

Os of Nov. 1, the exchange rate of manat was 0.8005 per $1, and in accordance with it, the nominal volume of turnover of securities amounted to $512.568 million. Turnover does not include transactions of the Ministry of Finance and Central Bank of Azerbaijan.

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