Azerbaijan's banking sector in 2012 was characterised by stability and moderate development except for two banks Birlikbank's and Royal Bank's withdrawal from the market. Birlikbank's bankruptcy passed quietly, but Royal Bank's closure led to a historic event in the sector.
Taking into account that Royal Bank was a member of the Azerbaijani Deposit Insurance Fund, its bankruptcy was the first insurance case for the fund. At present most of the compensation has been paid to cover the insured deposits of physical entities of the former bank.
Texnikabank has faced some difficulties this year. After rebranding, it was renamed as Bank Technique. After the management was changed on May 2012 and re-named in August 2012, the bank's structural offices were reassessed Today, the results obtained in connection with Bank Technique's activity, can be described as positive.
The remaining 42 players of the Azerbaijani banking sector peacefully coexisted in the market and brought the financial indices to the Basel-III requirements, while the Azerbaijani Central Bank has not announced its decision to increase the minimum amount of the total capital of banks from 10 million manat to 50 million manat. The decision will come into force from January 1, 2014.
Consequently, the banks with inadequate amounts of capital have a year to improve. This event which may be called the culmination of this year has caused a stir in the country's financial sector which will continue into 2013. Many banks have already begun to implement strategies to correspond with the new capital requirement and gradual capitalisation. Some of them do it by placing shares on the stock market, whilst others use the potential of existing shareholders and some individuals are negotiating a merger.
The issue of privatization of the International Bank of Azerbaijan was withdrawn from the agenda in 2012.
The CBA also completed a draft of the state programme to develop non-cash payments in the country until 2017.
The main directions of the programme are expanding the infrastructure for electronic payments, strengthening the institutional base, improving the efficiency of their use, education of the population on these issues and more active involvement of the population and economic entities in the use of these services.
Active work was carried out on the installation of POS-terminals in Baku, Ganja and Sumgayit this year. By the end of 2015, POS-terminals will be installed in villages and townships of the country.
This year the interest of international financial institutions and foreign banks in the Azerbaijani banking market was retained. Due to an increase of the investment attractiveness of the Azerbaijani banking market, the Central Bank of Azerbaijan continues to receive appeals from those who want to invest in the country's banking system.
For instance, Turkish İsh Bankası expressed its firm intention to acquire a bank in Azerbaijan. In turn, this year Azerbaijan itself became the shareholder of ECOBANK. The Trade and Development Bank of the Economic Cooperation Organisation (ECO) was founded by Iran, Pakistan and Turkey in 2005. Currently the bank consists of 10 members, including Azerbaijan.
Another event that took place this year, but will show its impact next year, was a decrease of the discount rate from 5.25 per cent to five per cent by the Central Bank within the preservation of price and financial stability. This step by the CBA facilitates replenishment for commercial banks, thus encouraging credit expansion. In turn, this will lead to a decrease in interest rates next year, the lower the rate is, the lower will be the value of the commercial bank's loans and the low costs of loans contribute the growth of the economy.
Foreign exchange reserves held by the Central Bank of Azerbaijan (CBA) reached $11.694.75 billion as of 2012. The Central Bank's reserves increased by 11.6 percent in 2012 or $1.213.3 billion. The Central Bank plans to increase its foreign exchange reserves up to $ 15 billion by the end of 2013.
Currency market and manat rate
Manat stability had a positive impact on the macroeconomic and financial stability, strengthening confidence in the national currency and reducing the dollarization level of the economy. In 2012, the Central Bank conducted the exchange rate policy the regulated exchange rate regime. Supply exceeded demand in the currency market, due to the large surplus of the balance of payments. The Central Bank carried out a currency intervention at the amount of $ 1.5 billion in these circumstances to prevent significant appreciation of the rate and to neutralize the negative impact on the competitiveness of non-oil sector in 2012. As a result, during 2012, the exchange rate of manat compared to the U.S. dollar remained stable and strengthened by 0.2 percent.
In 2012, the euro exchange rate compared to the manat increased and decreased. The exchange rate of the European currency in Azerbaijan increased from 1.0178 manat per euro from the beginning of the year to 1.0377 manat per euro by the end of the year amid the positive news about the economy in the eurozone. Therefore, it strengthened by 2 percent.
Foreign exchange market
In December 2012, the total volume of currency section of the Baku Interbank Currency Exchange (BBVB) on USD / AZN reached 63.73 million manat or 81.223 million in dollars. The total volume of trading in currency increased by 1.927 million manat or 3 percent during this period compared to November.
The average daily turnover in stock exchange electronic trading system on USD / AZN in December reached about $3.692 million, while the average amount of each transaction was $2.461 million.
Around 13 banks participated in the currency trades. Around 44 trading sessions were conducted and 33 transactions were registered in "Bourse E-System of Trades" (BEST) during this month.
As of 2012, the total volume of electronic trading with foreign currencies at BBVB hit 738.149 million manat. The total trading volume on the U.S. dollar in BEST hit 737.837 million manat ($ 940 million).
The trading volume on EUR / AZN in 2012 hit 0.312 million manat (0.3 million EUR).
Around 486 trading sessions were held in BEST system in 2012. Around 20 banks participated there.
The exchange rate of national currency on USD / AZN_TOD in the reporting period dropped by 0.23 percent - from 0.7838 manat to 0.7856 manat per USD. The average exchange rate of the U.S. dollar compared to the manat was 0.7846 manat per $1 in December.
Azerbaijani monetary market
The CBA's important task is to govern the money supply at an adequate level of macroeconomic and financial stability in terms of a continuous growth of foreign exchange reserves and high liquidity of the banking system.
The Azerbaijani Central Bank stressed an increase in all units of the money supply as of 2012 compared to a similar period of 2011. This is a result of the influence of two factors: the increase in the quantity of money in circulation and the rate of their turnover.
According to the Azerbaijani Central Bank, by the end of 2012, the M2 money supply, that is the currency in circulation outside banks and balances in the domestic currency on accounts of non-financial and financial organisations, excluding credit organisations and individuals, increased by 25.54 per cent compared to 2011.
This means that last year the M2 figure was 13.806 billion manat versus 10.997 billion manat in 2011.
The indicator of cash currency in circulation (M0) was 9.256 billion manat compared to 7.158 billion manat in 2011.
Broad money supply (M3) in 2012 amounted to 16.775 billion manat, or 20.66 per cent more than in 2011 (13.903 billion manat).
Transaction money (M1) in 2012 amounted to 11.107 billion manat compared to 8.824 billion manat in 2011.
Parameters of the money market, mln manat
|
Volume, 01/01/2013 |
|
|
Broad Money Supply (М3) |
16775.3 |
|
Money supply in manat (М2) |
13806.4 |
|
Currency in circulation (M0) |
9256.6 |
|
Non-cash in manat |
4549.8 |
The monetary base in Azerbaijan in 2012 showed continued growth by the year-end with the expansion of the monetary base in the country totalling 10.660 billion manat.
According to the Azerbaijani Central Bank's statistics data, the annual monetary base increased by 25.6 per cent. For comparison: in 2011, the rate was 8.489 billion manat.
According to the Central Bank of Azerbaijan, as of January 1, 2013, the monetary base totalled 10.515 billion manat compared to 8.275 billion manat by January 1, 2012.
During this reporting period, the money in circulation amounted to 9.777 billion manat, while as of January 1, 2012 this figure was 7.658 billion manat.
The bank reserves amounted to 868.6 million manat, or 5.1 per cent more than in early 2012 (826.4 million manat).
The ratio of the mass of cash in circulation to the money base was 91.7 per cent as of January 1, 2013 compared to 90.2 per cent as of January 1, 2012.
Azerbaijani credit market
Azerbaijani banks increased lending to the Azerbaijani economy by 27.8 percent in 2012, the Azerbaijani Central Bank's statistics report said.
According to the CBA, as of 2012, the banks delivered loans totaling 12.720.5 billion manat (including 8.522.8 billion manat in national currency (67 percent) and 4.197.7 billion manat in freely convertible currency (33 percent)
As of 2011, the figure was equal to 9.950.3 billion manat (6.426.5 billion in national currency and 3.523.8 billion manat in freely convertible currency).
Of the total portfolio, loans worth 748.8 million manat (5.9 percent) were overdue compared to 633.8 million manat as of January 1, 2012.
Statistics of overdue loans does not include similar loans of non-bank credit institution Aqrarkredit. Overdue loans increased by 18.14 percent as of 2012.
The share of overdue loans in Azerbaijani banks is moderate. According to the CBA, no disturbing situations with these loans are observed.
Short-term loans as of 2012, amounted to 3.885.1 billion manat (including overdue loans worth 385.4 million manat) compared to 3.051.2 billion manat (including overdue loans worth 326.2 million manat) as of 2011.Short-term credit in the economy increased by 27.33 percent in 2012. As of early Jan. 2013, 35.3 percent of short-term loans were in freely convertible currency (1.370.8 billion manat).
Long-term loans amounted to 8.835.4 billion manat (including 363.4 million manat overdue loans) as of 2012 compared to 6.889.1 billion manat (307.6 million overdue loans) as of 2011.
The long-term loans increased by 28.1 percent as of 2012. As of early January 2013, 32 percent of long-term loans accounted for freely convertible currency (2.826.9 billion manat).
According to the CBA, as of 2012, the only state bank of the country (the International Bank of Azerbaijan) granted loans totaling 4.137.1 billion manat with a specific weight of 32.5 percent, and private banks - 8.262.3 billion manat with a specific weight of 65 percent. The remaining 2.5 percent fall to the share of non-bank credit organizations, which delivered loans worth 321.1 million manat.
The loans given to the population in Azerbaijani regions hit 1.546.12 billion manat as of 2012 or 12.15 percent of the total volume of the loan portfolio of the banks.
According to the CBA, the figure was equivalent to 11.174.4 billion manat in Baku, including 7.378.3 billion manat as loans in national currency.
The interest rate of loans averaged 15.4 percent in 2012, including 14.7 percent in Baku.
The amount of crediting was equivalent to 366.3 million manat (average interest rate of 17.8 percent) in the Absheron economic region, 339.5 million manat (22.1 percent) in the Aran region, 37.4 million manat (22.2 percent) in the Mountain Shirvan region, 334.13 million manat (20.4 percent) in the Ganja-Gazakh region, 132.25 million manat (19.7 percent) in the Guba-Khachmaz region, 136.22 million manat (24.5 percent) in the Lenkoran region, 95.47 million manat (23.8 percent) in the Sheki-Zagatala region, 14.9 million manat (22.1 percent) in the Upper Karabakh region, 2.9 million manat (17.8 percent) in the Kalbajar-Lachin region, 87.05 million manat (12.6 percent) in the Nakhchivan region.
Most of all loans are granted to households in Azerbaijan. According to the CBA, as of 2012 households received 33.9 percent or loans worth 4.316.7 billion manat. The sphere of trade and services (20.8 percent or 2.649.3 billion manat) ranks second, the industrial and production sector (10.2 percent or 1.297.6 billion manat) ranks third.
It should be stressed that real estate and construction sector ranked third in terms of delivered loans during eleven months of 2012. As of the year, it obtains 10 percent of the total lending volume of the Azerbaijani real sector. It hits 1.270.3 billion manat in nominal terms.
About 4.3 percent or 546.2 million manat accounted for agriculture and processing, 6.3 percent or 805.9 million manat - transport and communications, 3.9 percent (496.7 million manat) - power engineering, natural resources, 0.5 percent or 58.5 million manat of loans - rest areas.
Loans amounting to 74.77 million Manat, or more than $95 million were delivered through the Azerbaijan Mortgage Fund (AMF) under the Central Bank of the country in 2012, the AMF said today.
The total volume of refinancing the loans given by the banks in 2012 hit 91.15 million Manat. The AMF placed bonds to the amount of 36 million Manat during the year.
Mortgage loans worth more than 420 million Manat (95.64 million Manat - in 2011, 97.08 million Manat - in 2010, 76.9 million Manat - in 2009, 70.2 million Manat - in 2007, 5.6 million Manat - in 2006) were delivered in 2006-2012 through AMF.
Around 72% of the total volume of given loans (41% of borrowers aged 18-29, 31% - 30-35 years old) fell to young people and families. Around 28% of the loans fell to borrowers over 36 years old.
Currently the maximum amount of a common mortgage loan through the AMF is 50,000 Manat at a rate of 8% with a payback period of 25 years. Terms under the social mortgage it is 35,000 Manat at an annual rate of 4% with a payback period of 30 years. The initial payment under the social mortgage is 15%, whilst the conventional loan is 20%.
Conditions of mortgage lending are as follows; loans must be issued in Azerbaijani Manats and only to Azerbaijani citizens and the mortgage can only be for an apartment or private house. The volume of mortgage lending must not exceed 80% of the market price and the monthly payment must not exceed 70% of the debtor's monthly income. It is compulsory to take out an agreement on life insurance.
Preferential conditions are granted to family members of war victims, national heroes, internally displaced persons, civil servants with at least a three years' experience, PhDs, those making special contributions to sport as well as to the military with at least a three-year service term. Each family having the right to such a mortgage can only use the opportunity once.
There are 27 authorized banks belonging to the Mortgage Fund, 20 insurance companies and 13 appraisal organizations, all are participants of the mortgage market.
Azerbaijani banking sector
As of 2012, the depositary base of Azerbaijani banks increased by 13.25 per cent.
According to statistical data from the Central Bank of Azerbaijan (CBA) published on its website, the total amount of bank deposits and deposits of indiviual and legal entities totalled 10.699.2 billion manat in 2012 compared to 9.447 billion manat in 2011.
Of this, 5.062.5 billion is cash in manat, of which 1.981.1 billion manat - deposit poste restante and 3.081.4 billion manat - term deposits. The funds in foreign currency amounted to 5.678.9 billion manat (1.645.1 billion manat and 3.991.6 billion manat, respectively).
Individual deposits increased by 24.12 per cent in 2012, while the volume of legal entities' deposits increased 4.86 per cent.
The volume of physical entities' deposits hit 5.113.4 billion manat in 2012 compared to 4.119.8 billion manat in 2011.
According to the Central Bank, around 2.963.8 billion manat (57.96 per cent) were placed by the population in the national currency of manat and 2.149.6 billion manat in freely convertible currency.
As of 2012, the volume of deposits of financial institutions amounted to 2.783 billion manat compared to 2.519.5 billion manat in early 2012.
The volume of deposits of non-financial institutions totalled 2.802.9 billion manat compared to 2.807.6 billion manat in early 2012. The volume of legal entities' deposits totalled 5.585.9 billion manat compared to 5327.1 billion manat as of early 2012.
Cash deposits of Azerbaijan's population in the national currency exceed cash deposits in foreign currency in 2012. It should be stressed that the same situation was in December, November and August.
As of 2011, 2.281.6 billion manat (55.4 percent) of the population were placed in the national currency - manat, 1.838.1 billion manat - in freely convertible currency.
Deposits of the population, drawn to the banking system from the Azerbaijani regions (areas of the country, except for Baku), as of 2012 amounted to 359.11 million manat or 7.02 percent of total volume of bank deposits.
The volume of deposits on Baku amounted to 4.754.3 billion manat, while the deposits in national currency hit 2.693.1 billion manat. The average percent rate in the country during this period was 8.4 percent while 8.5 percent in Baku.
The amount of deposits on Absheron economic region amounted to 109.86 million manat, with an average rate of 9.2 percent, Aran - 55.15 million manat at 5.4 percent, the Mountain-Shirvan - 8.3 million manat at 6.8 percent, Ganja -Gazakh - 76.01 million manat at 7.7 percent, Guba-Khachmaz - 25.6 million manat at 7.2 percent, Lankaran - 27.56 million manat at 7.3 percent, Sheki-Zagatala - 22.6 million manat at 6.1 percent, the Upper Karabakh - 8.16 million manat at 3.5 percent, Kalbajar-Lachin - 1.8 million manat at 6.3 percent, Nakhchivan - 24.03 million manat at 3.3 percent.
As of 2012, the volume of deposits of financial institutions amounted to 2.783 billion manat compared to 2.519.5 billion manat in early 2012. The volume of deposits of non-financial institutions totalled 2.802.9 billion manat compared to 2.807.6 billion manat in early 2012. The volume of legal entities' deposits totalled 5.585.9 billion manat compared to 5327.1 billion manat as of early 2012.
As of Jan. 1, 2013, Azerbaijani banks increased the rate on deposits of legal entities in manat, but reduced the rates for the same deposits in freely convertible currency.
According to the Azerbaijani Central Bank's statistics report, the average rate on deposits in manat as of Jan. 1, 2013 was 9.99 percent compared to 10.26 percent as of Jan. 1, 2012.
The average rate on deposits in foreign currency amounted to 10.18 percent compared to 11.11 percent as of early 2012.
As of Jan. 1, 2013, the average rate on physical entities' deposits in manat was 10.25 percent compared to 10.76 percent as of early Jan. 1, 2012. The average rate on individual clients' deposits in foreign currency amounted to 10.75 percent compared to 11.27 percent as of early 2012.
As of early 2013, the average rate on legal entities' deposits in manat was 6.95 percent compared to 5.60 percent as of Jan. 1, 2012. The average rate on corporate clients' deposits in foreign currency was 3.69 percent compared to 7.02 percent as of early 2012.
Banks' financial activity
As of 2012, around 43 banks operated in Azerbaijan: 42 commercial banks and one state bank. There are 22 banks with foreign capital compared to 23 banks as of 2011. This is connected with the revocation of Royal Bank's license on banking activity in July, which was declared bankrupt. The share of foreign capital in six of them hits from 50 to 100 percent, in 14 banks - up to 50 percent. Two local branches of foreign banks also operate.
The Azerbaijani Central Bank (CBA) stressed exceeding the total profit of profitable banks over the total loss of unprofitable banks threefold as of 2012.
According to the Central Bank's report on the financial stability as of 2012, around 33 banks' profit hit 195.51 million manat, and losses of 10 banks - 65.5 million manat. This allowed the banking system to earn 130.01 million manat of net profit.
During the year, the number of profitable banks increased by three and the total profit of the sector increased by 19.6 percent. Accordingly, the number of unprofitable banks reduced by 4 and the total loss reduced by 4.9 times.
The maximum profit of the banking system was registered in 2009 - at the level of 269.57 million manat, earned by 39 banks. The greatest loss was obtained in 2011 at the amount of 322.51 million manat, while the number of unprofitable banks reached 14.
The biggest net profit amount was earned by banks in 2009 at the amount of 252.98 million manat.
Last year, the Central Bank revoked Royal Bank's license, which has been declared bankrupt.
Financial results of the banks' activity (after paying taxes) in million manat
|
Periods |
Number of profitable banks |
The total profit of the banking system (profitable banks) |
Number of unprofitable banks |
The total loss of the banking system (unprofitable banks) |
Total profit (+) or loss (-) obtained by banks |
|
Dec. 31,2011 |
30 |
163,52 |
14 |
- 322,51 |
- 158,99 |
|
Dec.31,2012 |
33 |
195,51 |
10 |
- 65,50 |
130,01 |
Azerbaijani banks' total assets, as of January 1, 2013, amounted to 17.643 billion manat, increasing by 24.2 percent compared to early 2012. According to the CBA, the top five banks in the country have total assets of 10.462 billion manat, or 59.3 percent of total banking assets, 61.9 percent (9.3 billion manat) of the total liabilities of the market, 50.2 percent (1.29 billion manat) of the total capital of the whole market.
Around 5.175 billion manat (29.3 percent), 3.387 billion manat of liabilities (22.4 percent), 0.64 billion manat of total capital (24.9 percent) fall to the share of banks ranking 6-15.
Around 1.317 billion manat of assets (7.5 percent), 1.88 billion manat of liabilities (12.5 percent), 0.468 billion manat of total capital (18.2 percent) fall to the banks ranking 16-30.
Only 3.9 percent of total volume of assets (689.3 million manat), 3.1 per cent of liabilities (471.6 million manat), 6.7 percent of total capital (172.1 million manat) fall to the share of banks ranking higher 31.
Lending to the economy by the top five banks in the country is equal to 6.057 billion manat (56.7 percent of the total volume of loans) compared to 2.617 billion manat (24.5 percent) among the banks ranking 6-15 in the country, 1.594 billion manat (14.9 percent) among the banks ranking 16-30.
Around 412.6 million manat (3.9 percent) fall to the share of banks ranking 31-43.
Around 54.8 percent (2.833.6 billion manat) of the population's deposits and 64.5 percent (1.637.1 billion manat) of legal entities' deposits are concentrated in the top five banks in the country.
Around 30.5 percent (1.574.7 billion manat) of individual clients' deposits and 25.8 percent (655 million manat) of corporate clients' deposits fall to the share of banks ranking 6-15.
Around 12.7 percent (657.6 million manat) of the population's deposits and 13.2 percent (9.2 million manat) of legal entities' deposits have been accumulated in the banks ranking 16-30.
The remaining 105.2 million (two percent) of deposits and 13.2 million manat (0.5 percent), of deposits are in the banks ranking higher 31.
Assets of the banking system had positive dynamics in 2012. They were equal to 13.946.81 billion manat at the beginning of the year. The assets have increased by 26.5 percent since the beginning of 2012.
The loans delivered to customers at the amount of 10.681.3 billion (annual growth of 20.7 percent), investments (1.600.9 billion manat, increasing by 30.8 percent) and the funds at correspondent accounts (1.444.1 billion manat, increasing by 8.06 percent) is the basis of the assets of the banking sector (60.5 percent). Loans and deposits delivered to the financial sector amounted to 696 million manat (with an increase of 22.6 percent).
The deposits (7.710.9 billion manat) have the main share (43.7 percent) in the structure of liabilities, increasing by 15.55 percent compared to 2011. Loans and deposits obtained from the financial sector accounted for 5.172.1 billion manat, increasing by 18.8 percent.
As of 2012, the total liabilities of the Azerbaijani banking sector increased by 27.56 percent and hit 15.088.13 billion manat. The figure amounted to 11.828.33 billion manat as of early 2012.
The capital of Azerbaijani banks continued increasing in 2012, although there are banks in the banking sector that do not meet minimum regulatory capital requirements (10 million manat).
According to the CBA, there are 41 banks with capital exceeding 10 million manat as of 2012. The share of this category of banks in the total volume of capital of all banks in the reporting period was 99.5 percent.
One bank's capital (with a weight of 0.3 percent) was formed in the range of 5 million manat to 10 million manat, another bank (0.2 percent) - from 3.5 million manat to 5 million manat.
Stock market
The total turnover of transactions on all instruments on Baku Stock Exchange (BSE) in 2012 totaled 9 billion manat, or by 6.79 percent more compared to the same period of 2011.
Such an increase in stock market in the country is ensured by increasing the state securities market by 20.48 percent, while the corporate securities market reduced by 46.95 percent.
The state securities market reached 8.094 billion manat influenced by the increase in repo transactions by 18.58 percent and growth of operations with the notes of the Central Bank by 18.6 percent.
The volume of the corporate securities market was 908.11 million manat in 2012.
Comparative table on the results of trades on corporate sector at BSE (January-December 2012)
|
Market segments |
Dec. 31, 2012 |
Dec. 31, 2011 |
Percentage ratio |
||
|
Volume of transactions, AZN |
Number of deals |
Volume of transactions, AZN |
Number of deals |
||
|
Corporate bonds- (placement) |
60 713 670,00 |
81 |
198 871 740,45 |
94 |
30,53% |
|
Corporate bonds - (secondary market) |
343 409 666,86 |
131 |
530 327 302,36 |
119 |
64,75% |
|
Stocks - (placement) |
488 028 562,76 |
548 |
974 388 229,10 |
137 |
50,09% |
|
Stocks - (secondary market) |
15 958 952,50 |
3 413 |
8 353 613,96 |
3 424 |
191,04% |
|
CS Market Total |
908 110 852,12 |
4 173 |
1 711 940 885,87 |
3 774 |
53,05% |
Comparative table on the results of trades on state sector at BSE (January-December 2012)
|
Market segments |
Dec. 31, 2012 |
Dec. 31, 2011 |
Percentage ratio |
||
|
Volume of transactions, AZN |
Number of deals |
Volume of transactions, AZN |
Number of deals |
||
|
GB - (AR MF) (placement) |
141 740 610,04 |
72 |
239 076 694,36 |
133 |
59,29% |
|
GB - (AR MF) (secondary market) |
25 713 253,59 |
23 |
41 570 251,84 |
41 |
61,85% |
|
Notes (AR CB) - (placement) |
859 032 852,54 |
227 |
642 520 868,19 |
279 |
133,70% |
|
Notes (AR CB) - (secondary market) |
210 732 784,43 |
37 |
12 552 213,77 |
6 |
1678,85% |
|
Repo operations |
6 856 471 656,45 |
948 |
5 781 971 756,98 |
1 309 |
118,58% |
|
GS Market Total |
8 093 691 157,05 |
1 307 |
6 717 691 785,14 |
1 768 |
120,48% |
Abbreviations:
- GB - government bonds,
- GS - government securities,
- CB - corporate bonds,
The turnover of the Azerbaijan's securities market increased by 6% in 2012, reaching 9.422 billion Manat.
"The stock market's activity was continued in 2012 against the background of the policy on maintaining one-digit inflation and growth in financing from the capital markets," the report says. "As a result, from January-November 2012, stock market turnover accounted for 37% of GDP, or 5% points higher than in the same period of 2011".
The government securities market grew by 20% to 8.1 billion Manat last year. Sterilization transactions performed as functions of the Azerbaijani Central Bank to preserve price stability had an impact on transaction dynamics through note and accompanying repo transactions.
Last year, the primary market for note trading rose by 34%, while the secondary market grew by 17 times. In general, the market grew 63%, surpassing one billion Manat. Along with this, the volume of repo-transactions with notes hit 6.8 billion Manat, increasing by 19%.
"Despite the conservative borrowing policy the Finance Ministry pursued starting at the beginning of last year, this trend changed in the second half of the year, resulting in 62.5% growth in drawings attracted by the state between July and December compared to the same period in 2011. In general, the market grew by 50.6%, reaching 130.4 million Manat", the committee's report said.
During the year, the volume of transactions with the Finance Ministry's bonds declined by 40%, up to 167.45 million manat. According to the report, the market for private companies' shares revived. Thus, in 2012, the amount of drawing the funds from the stock market by private companies increased by 24.4% to 186.4 million manat.
"The growth of activity in the secondary stock market gave rise to a doubling of this market, however, the distribution of shares of the large state-owned enterprise to the amount of 824.6 million Manat (80% of the stock market) at the end of 2011, in general, led to a relative decline in the stock market last year by 42% to 599.3 million Manat.
During the reporting period, a reduction in the volume of transactions with the bonds of the Azerbaijan Mortgage Fund had a negative impact on the corporate bond market. These transactions make up a large part of the primary market, and are distinguished by high liquidity in the secondary market.
According to the report, in 2012 the volume of issued mortgage bonds fell by 12.5%, the primary market fell by 53%, and the secondary market fell by 42%. As a result, the volume of transactions in the primary market for corporate bonds fell by 38%, the secondary market fell by 31%, and in general, this segment of the market declined by 35% to 729.4 million manat.
In 2012, the State Securities Committee completed significant processes to improve capital market infrastructure. It became easier to carry out the transactions. Time and expenses spent on them sharply reduced. The signed contracts have become more stable. Funding from the capital markets has turned into more favorable financing as opposed to other sources.
The Azerbaijani State Securities Committee approved the rules of preventing abuses in the securities market, which are included in the state register of legal acts of the country, in late 2012. The regulations have been prepared in accordance with international best experience and will create an opportunity to prevent abuses in the securities market, to increase transparency, including effective control of transactions at the stock market.