Review of monetary sector in Azerbaijan (January-February 2011)

Currency reserves of the Central Bank of Azerbaijan continued increasing in February 2011, reaching 4.6 of the figure at the beginning of the year in January to February.

In 2009 the bank spent 15.7 percent of its currency reserves or $961.4 million, while in 2010 their increase reached $1.246 million or 24.1 percent, so the bank could compensate the loss of 2009 and achieve the net rise over the two years in the amount of $284.5 million.

According to the CBA, as of March 1, 2011 the amount of the bank's currency reserves made up $6.705 million (new absolute record) compared to $6.567 million as of February 1 and $6.408 million as of January 1, 2011, $5.176 million as of January 1, 2010 and $6.137 million as of January 1, 2009.

Currency market and rate of manat

The International Monetary Fund (IMF) supports a policy of the Central Bank of Azerbaijan on moving to greater exchange rate flexibility, the new head of IMF mission to the country. Macroeconomic and monetary policy conducted by the country are adequate and we agree with them.

The signs of overheating in 2011 call for monetary policy to be tightened. The recent policy rate increase and the move to greater exchange rate flexibility are appropriate steps, and should be accompanied with greater policy coordination, transitioning to an inflation targeting framework, and enhancing banking system's ability to deal with exchange rate risk.

The International Bank of Azerbaijan maintained its leadership in February 2011, which he conquered from ASB in October 2010 during the currency trading sessions at the Baku Interbank Currency Exchange (BBVB).

Without deals of the Central Bank of Azerbaijan, 33.63 percent of the currency turnover fell on the IBA in February 2011.

The top five also included ASB, YapiKredi Bank Azerbaijan, UniBank and AGBank

In total 14 banks took part in the 40 currency trading section of the BBVB in February. The total volume of transactions amounted to 110,051 million manats or $138.582 million, which is up by 47.3 million or 1.8 times compared to January.

The average daily turnover on USD/AZN system reached approximately $6.929 millions, when the average volume of each transaction has made $3.38 million.

Exchange rate of national currency on tool USD/AZN_TOD in accounting month has increased by 0.3 percent from 0.795 to 0.7927 for 1 USD. Thus the US dollar average rate in consideration to manat made up 0.7941 manat for 1 USD in February compared to 0.7961 manat in January.

Monetary market

The Central Bank of Azerbaijan (CBA) noted the increase in money supply (M2) (cash in circulation (outside banks) and remainders in the domestic currency on accounts of non-financial organizations, financial (excluding credit) organizations and phyiscal entities) by 1.9 percent in February and 35.1 percent compared to the same period of 2010, the CBA reported.
So, as of March 1, 2011, the rate of M2 was 7907,7 million manat compared to 7763,8 million manat as of early February and 5853.1 million manat as of March 1, 2010.

The amount of cash money supply (M0) as of March 1, 2011 hit 5363,1 million manat compared to 5266,8 million manat as of early February and 4083,9 million manat as of March 1, 2010.
As of March, Broad Money Supply (M3) totaled 10272,6 million manat compared to 10107,3 million manat in early February and 8132,6 million manat as of March 1, 2010.

The transaction money (M1) amounted to 6555,5 million manat as of March compared to 6542,3 million manat as of early February and 4982,5 million manat as of March 1, 2010.

Parameters of monetary market, in mln manat

As of March 1, 2011 the volume of reserve money in Azerbaijan made up 6.120.5 million manat. The figure increased by 1.7 percent, while it reduced by 6.5 percent since the beginning of the year. The figure rose by 30.8 percent in an annual calculation .

According to the CBA, as of Feb. 1, 2011 reserve money in manat made up 6.015.3 million, as of Jan. 1 - 6.520.9 million manat and 4.677.8 million manat as of March. 1, 2010.

As of March 1, reserve money in manat made up 6.099.5 million manat compared to 5.960.6 million manat as of February 1, 6.397.1 million manat as of January 1 and 4.658.1 million manat as of March 1, 2010.

Money in circulation made up 5.685.1 million manat in this period, whereas the figure was 5.563.5 million manat as of February 1, 5.793.2 million manat as of January 1, 4.359.1 million manat as of March 1, 2010. In turn, bank reserves constituted 431.4 million manat (449.5 million, 725.5 million manat and 311.8 million manat respectively).

Money base, cleared off seasonal factors, summed up 6.178.6 million manat as of end February. As of February 1, the figure was 6.018.3 million manat, 5.766.9 million manat as of January 1, and 4.735.5 million manat as of March 1, 2010.

Cash money mass in circulation with regard to money base was 92.89 percent in this period compared to 92.49 percent as of end January, 88.84 percent as of beginning of the year and 93.19 percent as of end February 2010.

Credit market

Azerbaijani banks increased lending to the Azerbaijani economy by 0.03 percent in February and by 9.7 percent compare to February 2010, the Central Bank of Azerbaijan (CBA) reported.

As of early March, the banks provided loans totaling 9.152.8 billion manat (including 5.888.6 billion manat in national currency and 3.264.2 billion in hard currency) compared to 9.149.8 billion manat (5.876.9 billion manat in national currency and 3.272.9 billion manat in hard currency) as of January and 8.343.5 billion manat (4.852.7 billion manat and 3.490.8 billion manat) as of March 1, 2010.

Of the total portfolio, loans worth 509.4 million manat ( 5.6 percent to the total volume of loans ) were overdue compared to 497 million manat (5.4 percent) as of Feb.1, about 358.4 million manat (4.3 percent) as of March 1, 2010. Statistics of overdue loans does not include similar loans of non-bank credit institution Aqrarkredit.

Short-term loans as of early March amounted to 2.501.4 billion manat ( including overdue loans worth 258.3 million manat ) compared to 2.551.3 billion manat ( including overdue loans worth 253.9 million manat ) as of Feb.1, about 2.210.1 billion manat (177.7 milion) as of March 1, 2010. February, the amount of short-term credit in the economy decreased by 2 percent, but increased by 13.2 percent compared to February 2010 . Some 40.9 percent short-term credit and 37.2 percent of overdue loans were in hard currency as of late February.

Long-term loans amounted to 6.651.5 billion manat ( including overdue loans worth 251.1 million manat ) compared to 6.598.5 billion manat (243 million) as of Feb.1, about 6.133.3 billion manat (180.7 million) as of March 1, 2010. In January, the amount of long-term loans increased by 0.8 percent, compared to January 2009 - by 8.4 percent. As of March 1, some 33.7 percent of long-term loans and 27.1 percent of overdue loans were in hard currency.

As of early March, the only state bank of the country (the International Bank of Azerbaijan) granted loans totaling 3.941.3 billion manat with a specific weight of 43.1 percent (increased by 0.5 percent in February), and private banks - 5.002.7 million manat with a specific weight of 54.7 percent (decreased by 0.3 percent). The remaining 2.3 percent fall on the share of non-bank credit organizations, which received loans worth 208.9 million manat.

As much as 23.4 percent, or 2.144.2 million manat of the loan borrowed for the Azerbaijani economy accounted for trade and services, 10.7 percent or 979.7 million manat for development of power engineering, chemistry and natural resources, 4.8 percent or 439.8 million manat for agriculture and refinery, 7.1 percent or 647.6 million manat for construction and real estate, 7.5 percent or 685.8 million manat for industry an production, 4.9 percent or 448.5 million manat for transport and communication. The house farms received 30 percent of the loan or 2.748.3 million manat. At the same time, 0.5 percent or 43.5 million manat of the loan fell on other fields of economy.

In February 2011, the average rate on bank lending to the economy of Azerbaijan in national currency amounted to 16.43 percent compared to 16.4 percent in January and 16.37 percent in December, 2010, the Central Bank of Azerbaijan reported.

Average interest rate on bank lending in hard currency amounted to 16.89 percent compared to 16.86 percent and 17.31 percent, respectively.

In February, the average rate on bank lending to legal entities in national currency hit 14.46 percent compared to 14.40 percent in January and December, 2010. The average rate on bank credits to corporate clients in hard currency was 13.71 percent compared to 13.63 percent in January and 14.20 percent in December, 2010.

In this period, the average rate on bank lending to physical entities in national currency amounted to 19.67 percent compared to 19.85 percent in January and 19.84 percent in December, 2010. Average interest rate on bank credit to the individual clients in hard currency was 23.80 percent compared to 23.87 percent and 23.73 percent respectively.

Banking sector

Depositary base of Azerbaijani banks grew by 0.5 percent in February and decreased by 4.4 percent since early 2011, the Central Bank of Azerbaijan (CBA) said.

Based on the CBA data, as of March 1, total sum of bank deposits and deposits by legal and physical entities hit 5.209 billion manat compared to 5.182 billion manat as Feb.1 and 5.449 billion manat as of early 2011. About 2.429.2 billion manat fell to manat and 2.780.5 billion manat to currency.

The deposits of physical entities grew by 2.3 percent in February, the deposits of legal entities decreased by 2 percent. The deposits by individual clients increased by 29.7 percent as of early 2011.

The deposits by corporate clients decreased by 2.95 percent.

The deposits of physical entities totaled 3.143 billion manat as of March 1 compared to 3.072 billion manat as of Feb.1 and 3.029.8 billion manat as of Jan.1, 2011.

The deposits of legal entities totaled 2.067 billion manat as of early March compared to 2.109.7 billion manat by early February and 2.419 billion manat as of Jan.1, 2011.

In February 2011, 1.488 million manat (47.3 percent) of individuals' savings and deposits were realized in national currency, while 1.655 million manat (52.7 percent) in hard currency. Roughly 941.4 million manat of legal entities' deposits were realized in manat and 1.125.5 million manat in hard currency.

Improvement in the structure of the deposit per term of placing testifies for increase in confidence in the country's banking sector. Community long-term loans constituted 2.529 million manat or 80.5 percent of the total amount of individuals' deposits and funds on claim 614.1 million (19.5 percent) in February.

In February, the average rate on deposits in manat amounted to 11.14 percent compared to 11.16 percent in January and 11.11 percent in December.

Average rate on deposits in foreign currencies amounted to 11.89 percent compared to 12.35 percent and 11.64 percent, respectively.

As of March 1, the average rate on deposits of individuals in manat was 11.79 percent compared to 11.83 percent in January, 2011 and 11.79 percent in December, 2010. Average rate on deposits from individual customers in foreign currencies amounted to 12.08 percent compared to 12.12 percent and 12.27 percent, respectively.

As of early March, the average rate on deposits of legal entities in manat was 6.43 percent compared to 6.27 percent in January and 6.19 percent in December, 2010. Average rate on deposits from corporate clients in foreign currency amounted to 7.18 percent compared to 5.07 percent and 6.27 percent respectively.

The number of banks operating at a profit, amounted to 31, decreasing by 2 in Azerbaijan in February 2011 compared to 2010. It decreased by 1 compared to the previous month, the Central Bank of Azerbaijan (CBA) said.

The total profit of the banking system in February 2011 decreased by 28.39 percent, and increased twice compared to January 2011. Increase in banking sectors' liabilities is linked with rise in deposit base and loan portfolio.

The number of unprofitable banks in relation to January reduced by two and on an annualized basis increased by one bank. As a result, the loss of 13 banks amounted to 10.26 million manat, or 36.4 percent less than the figure in January.

Financial results of banks (after paying tax) in million manat:

The capitalization of Azerbaijan's banking sector increased by 1 percent in February 2011. It increased by 9.7 percent and hit 2.190.31 million manat compared to the same period of 2010, the Central Bank of Azerbaijan (CBA) said.

According to the CBA statistics, the number of banks with capital exceeding 10 million manat, hit 40 units as of February 2011, decreasing by two units compared to December 2010 and by 1 unit compared to January 2011. The weight of this category of banks in the total capital of all banks in the country in February hit 98.5 percent. The figure hit 98.9 percent in January and 98.9 percent in December 2010.

The capital of three banks (with weight of 1.3 percent) is formed in the range from 5 million manat to 10 million manat, one bank (0.2 percent) - from 3.5 million manat up to 5 million manat.

Stock market

The total turnover of transactions on all instruments at Baku Stock Exchange (BSE) for January-February 2011 totaled 872.61 million manat, increasing by 3.2 times compared to the same period of last year, a statement said.

The corporate securities market increased by 54.53 percent compared to the same period of last year. It hit 77.98 million manat. This is stipulated by the increased volume of transactions in corporate bonds by 2.5 times, while the number of transactions increased by 1.6 times - up to 46.

The state securities market increased by 3.57 times up to 794.6 million manat. This happened as a result of the sharp increase of operations by 4.02 times and the number of transactions increased by 2.2 times.

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

( January -February 20 11 )

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

( January -February 20 11)

Abbreviations

GB - government bonds

GS - government securities

CB- corporate bonds

CS- corporate securities

The National Depository Center (NDC) at the Azerbaijani State Securities Committee registered 269 stock transactions for the sale of shares in the amount of 27.7 million manat at the contract price and in the amount of 27.2 million manat - at par value in February, the NDC said.

The Depository Center registered 45 non-stock exchange transactions in the amount of 4.998 million manat at a nominal price and 16 transactions on the additional issue in the amount of 75.5 million manat at a nominal price. The volume of registered stock exchange transactions exceeded the non-stock ones by 5.4 times in February.

Securities in the amount of 4.02 billion manat are deposited in the NDC.