In June 2016, foreign exchange reserves of the Central Bank of Azerbaijan (CBA) decreased to $4,283.9 million, or by $400,000 (0.01 percent) as compared to May, according to the CBA statistical data posted on its website.
The foreign exchange reserves of the Central Bank started to decrease in July 2014.
At the very beginning, this process was going slowly, but starting from December 2014 the volume of currency reserves decreased sharply as the demand for the US dollar supply increased in the country.
The foreign exchange reserves’ reduction is due to CBA’s intervention to the currency market for keeping the exchange rate of manat against the US dollar at a stable level.
Currency market and manat rate
The CBA does not interfere in the regulation of the manat rate against the US dollar. The CBA will remain faithful to the policy of floating rate of the national currency. The rate of national currency is based on supply and demand on the foreign exchange market, as well as on the basis of internal and external fundamental factors.
The CBA may intervene [through currency interventions] in the rate regulation only if there are serious problems. Minor fluctuations in the exchange rate of manat are not such a problem for the CBA to intervene in the regulatory process. Similar fluctuations of the rate are observed in the currencies of many countries, including Russia, Kazakhstan and other countries. This is a normal process.
The CBA holds auctions for the sale of currency twice a week on Tuesdays and Thursdays. Along with the CBA currency interventions, the Azerbaijani State Oil Fund (SOFAZ) also sells dollar assets to the banks. The exchange rate of manat is set on the basis of inter-bank transactions on the foreign exchange market.
The manat rate was daily weakening against the US dollar in June 2016. So, the official exchange rate as of early June 2016 was set at 1.4918 manat against 1.5394 manat as of late June 2016.
Azerbaijani monetary market
The money supply rate (M2) (cash in circulation (outside the banks) and remainders in the national currency on the accounts of legal entities (excluding credit organizations) and physical entities) reached 9.81 billion manat in June 2016 increasing by 2.2 percent for the month but decreasing by 10.7 percent for the year, the Azerbaijani Central Bank’s (CBA) report said.
According to the report, the amount of cash money supply (M0) decreased by 10.8 percent for the year from 6.36 billion manat to 5.67 billion manat. M0 increased by 1.6 percent compared to the previous month.
As of late June 2016, Broad Money Supply (M3) totaled 20.85 billion manat or almost 10.6 percent more compared to the same period of 2015 and by 1.1 percent more than in the previous month, the report said.
The transaction money (M1) decreased by 3.4 percent for the year and reached 8.02 billion manat increasing by 3.5 percent compared to May, the report said.
Parameters of monetary market, in billion manat:
|
Volume, June 2016 |
|
|
Money mass in extensive understating (М3) |
20 851,5 |
|
Money mass on manat (М2) |
9 806,5 |
|
Cash in manat (М0) |
5 670,9 |
|
Non-cash in manat |
4 135,6 |
As of July 1, 2016, the bank reserves in Azerbaijan amounted to 2.014 billion manats, which is by 3 times more compared to June 2015 (718.3 million manat), the CBA’s report said.
The expanded monetary base in Azerbaijan totaled 8.338 billion manat as of July 1, 2016.
In annual terms, the monetary base in Azerbaijan increased by 6.8 percent. For comparison, as of late June 2015, this figure was 7.806 billion manat. The monetary base increased by 10.3 percent in Azerbaijan compared to early 2016 (7.561 billion manat).
As of July 1, 2016, the monetary base in manat amounted to 7.689 billion manat versus 7.597 billion manat as of July 1, 2015.
In the mentioned period, the volume of money in circulation amounted to 6.307 billion manat, while this figure was 7.084 billion manat as of July 1, 2015.
The ratio of the mass of cash in circulation to the monetary base was 75.6 percent as of July 1, 2016, decreasing by 16.8 percent compared to the same index as of July 1, 2015.
Azerbaijan’s loan market
The credit portfolio of Azerbaijani banks slightly increased by 1.3 percent up to 18.434 billion manat in June 2016.
Azerbaijani banks decreased lending for the economy by 9.1 percent compared to June 2015.
The banks issued over a half of loans worth 9.570 billion manat (51.9 percent) in the national currency, while the rest part – 8.863 billion manat (48.1 percent) in foreign currency.
This ratio hit 73 and 27 percent in early 2015. But the share of foreign currency loans began increasing, reaching 49.3 percent as of the year after the February devaluation of the manat.
However, the Supervisory Body has established a moratorium on the issuance of consumer loans in foreign currency to the individuals who do not have foreign exchange earnings and bank deposits since April 2016 and imposed a ban on mortgage loans in foreign currency since May. Moreover, some banks have started to convert dollar-denominated loans into manat ones. As a result, the share of manat loans began to grow gradually. For comparison, some 50.9 percent of the loan portfolio of banks accounted for the loans in national currency in March 2016, 51.8 percent in April and 53.2 percent in May.
The volume of overdue bank loans increased by 1.7 percent and reached 1.540 billion manat in Azerbaijan in June 2016 compared to May.
The share of the loans in the loan portfolio of banks was 8.4 percent compared to 8.3 percent as of late May.
As of July 1, 2016, the volume of short-term loans amounted to 4.06 billion manat (including overdue loans worth 518.6 million manat) increasing by 4.3 percent for the year (a 2.3 percent decrease) and 8.6 percent per annum (6.2 percent growth).
The volume of long term loans increased by 0.5 percent for the month and 10.06 percent up to 14.375 billion manat for the year (including 1021.2 million manat of overdue loans).
The credit portfolio of the state banks in Azerbaijan reached 5.878 billion manat with the specific weight of 31.9 percent, while private banks issued loans worth around 12.007 billion manat with a specific weight of 65.1 percent. Some 4.706 billion manat of the amount account for the banks with foreign capital.
The remaining 3 percent accounted for the share of non-bank credit organizations which issued 548.9 million manat. This index remained unchanged for the last two months.
There are 37 banks, including two state-owned, and 157 non-bank micro-finance organization, including 109 credit unions in Azerbaijan.
According to the report, the largest part of the total loan portfolio of banks – 37.5 percent accounts for the household lending.
According to the report, the trade and services sector (14.5 percent or 2.681 billion manats) ranked second, the construction and real estate sector (14.2 percent or 2.621 billion manats) ranked third in the total loan portfolio of banks.
The industry and production sector received 7.2 percent of the total volume of lending, which is 1.326 billion manat.
Some 6.9 percent (1.273 billion manats) accounted for the loans issued in transport and communication, 2.3 percent (424.8 million manats) - agriculture and processing, 2.1 percent (388.9 million manats) - energy, chemistry, and natural resources, 15.3 percent (2.805 billion manat) – for other spheres, the report said.
The loans given to the population in Azerbaijan's districts totaled 2.736 billion manat as of June 2016, or 14.8 percent of the banks' total loan portfolio and 17.5 percent less than in the same period of 2015, the report said.
The loans worth 15.697 billion manat were issued in Baku. The loans in national currency (manat) amounted to 7.707 billion manat.
For comparison, the loans amounting to 16.978 billion manat were issued in Baku in June 2015. Some 9.143 billion manat of this amount accounted for the loans in national currency.
The average interest rate on loans throughout the country was 11.2 percent in June 2016, while in Baku this index stood at 9.8 percent.
The lending volume in the Absheron economic district totaled 580.8 million manat at an average rate of 16.2 percent.
In other economic districts the lending index was as follows: Aran – 719 million manat at a rate of 21.2 percent, Mountainous Shirvan – 94.7 million manat at a rate of 20.9 percent, Ganja-Gazakh – 584.5 million manat at a rate of 18.9 percent, Guba-Khachmaz – 185.5 million manat at a rate of 20.3 percent, Lankaran – 232.5 million manat at a rate of 21.8 percent, Shaki-Zagatala – 180.3 million manat at a rate of 20.9 percent, the Upper Karabakh – 47.7 million manat at a rate of 17.9 percent, Kalbajar-Lachin – 1.1 million manat at a rate of 15.8 percent, Nakhchivan – 110.4 million manat at a rate of 12.6 percent.
Azerbaijani banks increased the average interest rate on loans in national currency and reduced the rate on loans in foreign currency in June 2016.
The average rate on loans issued in national currency amounted to 12.53 percent in June compared to 12.43 percent in May.
The average interest rate on loans reached 13.98 percent in June 2015.
The average rate on loans in freely convertible currency made up 9.81 percent in June 2016 compared to 10.19 percent in May 2016 and 12.47 percent in June 2015.
The legal entities received manat loans on an average rate of 8.5 percent in June compared to 8.28 percent in May 2016 and 8.89 percent in June 2015.
The average rate on bank lending to the corporate clients in foreign currency amounted to 5.5 percent in June 2016 compared to 5.73 percent in May and 8.8 percent in June 2015.
As of June 2016, the average rate on manat loans to physical entities amounted to 16.58 percent compared to 16.72 percent in May and 18.22 percent as of July 1, 2015.
The average rate on bank lending to the individual customers in foreign currency was 19.07 percent compared to 19.30 percent and 20.58 percent accordingly.
Mortgage lending
Some 4.4 million manat were allocated from the state budget to finance social mortgage through the Azerbaijan Mortgage Fund (AMF) in June compared to 4.7 million manat in the same period of last year.
According to the report, all the funds were fully used to refinance the mortgage loans issued by the banks earlier.
Some 23.1 million manat were allocated for social mortgage from the state budget in 2016.
No loans were issued by the banks in June, just like in May, while the mortgage lending amounted to 56.5 million manat in the same period of 2015. The mortgage bonds were not placed.
The average monthly amount of the loan, issued by the AMF authorized banks, reached 40882.6 manat in June (this figure amounted to 40.584 manat in June 2015), the average term of the loan - 280 months (279 months), the average annual interest rate - 6.7 percent (6.73 percent a year earlier), the average monthly payment - 296.3 manat (297.4 manat).
According to the report by Azerbaijan Mortgage Fund OJSC, Zaminbank has once again topped the ranking of Azerbaijani banks in mortgage lending, having increased its portfolio by 41 credit in the second quarter of 2016. According to the report, as of June 30, 2016 the number of active loans of the bank has reached 1631.
At the end of 2015, AGBank was the leader in mortgage lending in Azerbaijan with 1432 active loans. However, since the first quarter of 2016, Zaminbank has become the leader. AGBank dropped to the second position, and kept it on the results of the second quarter, during which the portfolio of the bank reduced by four credits. Whereas in the first quarter, the bank signed only seven mortgage contracts.
Xalq Bank has the similar situation, this bank has occupied the third place, its portfolio increased by 12 contracts - to 1,270 active mortgage contracts in the first quarter of 2016, and reduced by four credits in the second quarter of 2016.
Comparative table on the number of active credit agreements:
|
Banks |
First half of 2016 |
2015 |
Bank’s position (first half of 2016) |
Bank’s position (2015) |
|
Zaminbank |
1 631 |
944 |
1 |
8 |
|
AGBank |
1 435 |
1 432 |
2 |
1 |
|
Xalq Bank |
1 266 |
1 262 |
3 |
2 |
|
Demirbank |
1 247 |
1 253 |
4 |
3 |
|
Bank Standard |
1 181 |
1 184 |
5 |
4 |
|
Muganbank |
1 105 |
1 101 |
6 |
5 |
|
Nikoil Bank |
1 088 |
1 065 |
7 |
7 |
|
Unibank |
1 086 |
1 083 |
8 |
6 |
|
Bank Respublika |
790 |
794 |
9 |
9 |
|
AFB Bank |
691 |
676 |
10 |
10 |
In general, the AMF’s authorized credit organizations issued 17,997 mortgage loans worth more than 730.8 million manat from 2006 up till now.
According to the new mortgage loan issuance order, approved in June 2016, an ordinary mortgage loan will be issued only to Azerbaijani citizens and only in the national currency for a term from 3 years to 25 years, while preferential mortgage - up to 30 years to purchase a residential area, owned by the citizen. Interest rates on conventional mortgage must not exceed eight percent, while 4 percent per annum in preferential mortgage loan.
The maximum amount of the mortgage loan (including preferential) is determined by Azerbaijan Mortgage Fund JSC and must not exceed the cost of repaired housing with an average of 100 square meters in zone #7 in Baku. Annual interest rates on the loan are determined by the company’s Supervisory Board.
The amount of preferential mortgage loan must be 85 percent of the cost of purchased housing by the date of the loan issuance, except for cases when a borrower appeals to decrease the loan amount. The amount of conventional mortgage loan must not be less than 75 percent and more than 85 percent of the cost of purchased housing by the moment of the loan issuance, except for the cases when a borrower appeals to decrease the loan amount.
The monthly payment for a mortgage loan must not exceed 70 percent of a debtor's monthly income. The age of the borrower must not exceed the retirement age according to the legislation. An agreement on life insurance is required.
The family members of war victims, national heroes, internally displaced persons, civil servants with at least a three years' experience, teachers of secondary schools with at least a five-year service term, PhDs, doctors of science and those having special merits in sport as well as the military with at least a three-year service term can use the preferential conditions. Each family having the right to such a mortgage can only use the opportunity.
At present, the authorized banks of the Azerbaijan Mortgage Fund are 28 banks.
The participants of the mortgage market are 19 insurance companies [in total, 25 companies] and 16 appraisal organizations.
Azerbaijan’s banking sector
The economic cycles, seasonal factors and the attitude of investors, dictated by a variety of causes, impact on the dynamics of deposits.
The total volume of deposits increased by 0.9 percent in June and 28.2 percent for the year, by reaching $23.366 billion. Some 18.743 billion manat or 80.2 percent of the funds were in a freely convertible currency, while the remaining funds - in manat.
The share of deposits in foreign currency began increasing in a total portfolio of banks after the devaluation in February 2015. So, some 51.7 percent of the banks' deposit base was formed in January 2015 through the deposits in foreign currency. However, as of 2015, this figure reached 81.6 percent.
The highest level of dollarization is observed in the structure of deposits of financial institutions. As of June, some 87.4 percent of all deposits of legal entities were stored in foreign currency. The non-financial organizations stored only 75.4 percent of deposits in foreign currency. The physical entities stored 80.6 percent in foreign currency.
The Azerbaijani financial and non-financial organizations in June 2016 increased deposits in domestic banks by 3 and 1.7 percent up to $6.031 billion and $9.519 billion for the month, respectively.
The deposits of financial institutions increased by 5.6 percent, while non-financial institutions - almost doubled for the year compared to June 2015.
The deposits of the population also increases. The deposits amounted to 7.815 billion manat in June 2016, which is 3.3 percent more than in May and 2.1 percent - in June 2015.
The population’s deposits, attracted to Azerbaijan’s banking system from the country’s districts (except for Baku), totaled 483.9 million manat in June 2016, that is, 6.2 percent of the total bank deposits, the report said.
The volume of deposits in Baku was 7.331 billion manat, while some 1.275 billion manat (17.4 percent) accounted for the deposits in the national currency.
The foreign currency savings of the residents of Azerbaijani districts amounted to 241.9 million manat (half of total deposits in the districts) in the reporting period.
As of June 2016, the average interest rate throughout the country and Baku amounted to 5.7 percent.
Thus, the Absheron economic region is still the leader on such indices as attracting the population’s deposits by the banks (149.8 million manat, average rate – 6.1 percent per annum).
During this period, the volume of deposits in the Aran economic region – 79.2 million manat at a rate of 5 percent, Mountainous Shirvan – 12.1 million manat at a rate of 6.1 percent, Ganja-Gazakh – 109.1 million manat at a rate 5.6 percent, Guba-Khachmaz – 34.3 million manat at a rate of 5.6 percent, Lankaran – 36.8 million manat - the rate of 6.7 percent, Sheki-Zagatala – 29.5 million manat - the rate of 4.5 percent, Upper Karabakh – 7.05 million manat – 3.5 percent, Kalbajar-Lachin – 0.22 million manat – 9.9 percent, Nakhchivan – 25.8 million manat – the average rate of 3.1 percent.
The average interest rate on deposits in Azerbaijani banks increased in national currency and remained unchanged in foreign currency in June 2016 compared to May 2016, the report said. The average rate on bank deposits in manat made up 7.85 percent in June 2016 compared to 7.78 percent in May 2016 and 8.86 percent in June 2015.
The average rate on deposits in foreign currency amounted to 5.42 percent as of July 1, 2016 compared to 5.42 percent in May 2016 and 8.47 percent in June 2015.
The banks drew deposits of legal entities in manat in the amount of 5.57 percent per annum in June 2016 compared to 5.49 percent and 6.50 percent in May 2016 and June 2015 accordingly.
The funds on the accounts denominated in the foreign currency brought 3.50 percent to legal entities in June 2016, 3.17 percent in May 2016 and 4.13 percent in June 2015.
As of July 1, 2016, the average interest rate on deposits of physical entities in manat made up 9.04 percent compared to 8.95 percent as of June 1 and 9.70 percent as of July 1, 2015.
The interest rates on deposits of physical entities in foreign currency are as follows: 6.73 percent in June 2016, 6.94 percent in May 2016 and 9.48 percent in June 2015.
Financial activity of banks
Liabilities of the banks to the Central Bank of Azerbaijan (CBA) increased by 3.17 times during the year and as of July 1, 2016, amounted to 6.92 billion Azerbaijani manats, said the CBA report on the results of the 1H2016.
The volume of liabilities increased by 28.6 percent compared to early 2016, and decreased by 0.4 percent in July 2016.
Commercial banks’ liabilities to regulator amounted to 2.18 billion manats in 1H2016, 5.41 billion manats – in early 2016 and 6.95 billion manats – in late June 2016.
The growth of liabilities is related to the attraction of additional funds from the CBA to keep their liquidity after manat’s devaluation (manat’s rate decreased by almost 100 percent during 2015).
The volume of CBA’s foreign liabilities has remained unchanged – at the level of 700,000 manats since early 2015.
Official international reserves of the regulator decreased by almost twofold – from $8.52 billion to $4.28 billion during the year.
Net liabilities of the CBA to the government increased by 33 percent and totaled 5.93 billion manats during the reporting period, compared to the same period of 2015.
The volume of liabilities was 4.46 billion manats in 1H2015.
Payment card market
The total turnover on payment cards via ATMs and POS-terminals in June 2016 amounted to 1.046 billion manat (6.2 percent more than in the same period of 2015) and the total number of transactions – 6.987 million or by 0.50 percent less for the year, according to the report.
The number of transactions on debit cards equaled 6.079 million units totaling 903 million manat during the reporting period. Of the total number of transactions, 202,000 transactions amounting to 54 million manat were implemented on debit cards via ATMs within the country, and around 289,000 transactions amounting to 39 million manat via POS-terminals. The number of payment cards in Azerbaijan decreased by 10.2 percent in June and reached up to 5.467 million units compared to the same period of 2015.
Of the total number of cards, 4.685 million units accounted for debit cards, in particular, 2.493 million - social cards, 1.529 million - salary cards, 663,000 - other cards. The number of credit cards was 782,000.
As of July 1, 2016, as many as 2,592 ATMs operated in the country of which 1,425 are located in Baku and 1,167 in other cities and districts of the country. The total number decreased by 111 units or 4.1 percent for the year compared to June 2015.
The number of POS-terminals amounted to 73,222 units of which 42,063 are installed in Baku and 31,159 units in other cities and districts as of late June 2016. The number of POS-terminals has decreased by 7,375 units or 14.9 percent for the year.
Stock market
The total turnover of exchange transactions on all instruments at the Baku Stock Exchange reached 1.86 billion manat in January-June 2016, that is, 3.66 times less than in the same period of 2015.
The volume of the state securities market increased by over 14.8 times during the period and totaled 259.17 million manat, while the turnover of corporate securities market decreased by 31 times and reached 44.4 million manat, the Baku Stock Exchange said.
The volume of derivatives market decreased by 3.4 times and reached 1.55 billion manat.
Comparative table on the trades results in the state and corporate sectors at the Baku Stock Exchange:
|
Market segments |
Jan.-June 2016 |
Jan.-June 2015 |
||
|
Volume of transactions (AZN) |
Number of deals |
Volume of transactions (AZN) |
Number of deals |
|
|
I. State securities market |
259 173 678,91 |
107 |
17 459 725,71 |
9 |
|
State bonds of finance ministry |
259 173 678,91 |
107 |
17 459 725,71 |
9 |
|
Initial placement |
166 195 804,99 |
74 |
0 |
0 |
|
secondary market |
92 977 873,92 |
33 |
17 459 725, 71 |
9 |
|
Notes (Central Bank) |
- |
- |
0 |
0 |
|
Initial placement |
- |
- |
0 |
0 |
|
secondary market |
- |
- |
0 |
0 |
|
II. Market of shares |
6 456 656,27 |
1 014 |
136 802 912,08 |
2 068 |
|
Initial placement |
5 072 000,00 |
6 |
133 686 472,35 |
101 |
|
secondary market |
1 384 656,27 |
1 008 |
3 116 439,73 |
1 967 |
|
III. Debt market |
37 960 422,84 |
57 |
1 240 700 392,15 |
420 |
|
Mortgage bonds (Initial placement) |
- |
- |
21 180 671 |
6 |
|
Mortgage bonds (secondary market) |
17 663 473,52 |
8 |
1 060 260 363,74 |
124 |
|
Other corporate bonds (initial placement) |
4 158 571,85 |
27 |
12 984 004,95 |
45 |
|
Other corporate bonds (secondary market) |
16 138 377,47 |
22 |
146 275 352,46 |
245 |
|
- including market makers |
- |
- |
158 520 382,89 |
178 |
|
IV. Repo transactions |
0,00 |
0 |
110 620 218,64 |
95 |
|
Repo transactions of the Central Bank |
- |
- |
32 217 600,76 |
30 |
|
Other repo transactions |
- |
- |
78 402 617,88 |
65 |
|
V. Derivatives market |
1 552 826 373,07 |
20 838 |
5 281 831 619,56 |
33 498 |
|
- Currency |
1 508 737,19 |
18 303 |
5 206 201 254,47 |
29 610 |
|
- goods |
44 089 183 |
2 535 |
75 630 365,09 |
3 888 |
|
Total |
1 856 417 131,09 |
22 016 |
6 787 414 868,14 |
36 090 |