Currency reserves of the Central Bank of Azerbaijan (CBA) increased by almost $680.2 million (15.9 percent) in June 2017 as compared to June 2016, and amounted to $4,964.1 million.
CBA’s reserves increased by $138.7 million (2.9 percent) for the month. During 2016, the currency reserves decreased by over $1 billion, or by 20.78 percent as compared to 2015.
A stable increase in the CBA’s currency reserves by $989.7 million has been observed since early 2017.
Currency market and manat rate
A fully floating exchange rate regime has been observed in Azerbaijan for six months. During this time the CBA did not resort to serious interventions to maintain the manat rate. First, there was a period of destabilization, which was connected with the expectations of the market participants. This led to a significant decrease in the cost of manat.
However, then the market itself settled the rate and it stabilized. Today, the foreign exchange market is a market of supply, rather than demand. The pressure is made to appreciate the manat rate. Taking into account Azerbaijan's strategic goals, appreciation of the manat in the medium term may create problems for the balance of payments, given the current measures to reduce imports and support exports.
The exchange rate of manat against the dollar increased by 3.9 percent in January-June 2017. The lowest exchange rate of dollar for January-June 2017 was observed in May 26-June 1. It was 1.7020 USD/AZN May 26 and remained at this level until June 1.
The exchange rate of the manat against the euro decreased by 4.45 percent in January-June 2017.
EUR/AZN rate decreased by 2.41 percent in June 2017 (In May 2017, the exchange rate of the manat against the euro decreased by 2.817 percent).
Azerbaijani monetary market
The money supply rate (M2) (cash in circulation (outside banks) and remainders in the national currency on accounts of non-financial organizations, financial organizations (excluding credit organizations) and physical entities) amounted to 11.44 billion manats in June 2017 increasing by nearly 16.6 percent for the year.
The indicator of cash money supply in circulation (M0) amounted to 6.77 billion manats in Azerbaijan in 2017 that is by 19.4 percent more than in 2016 (5.67 billion manats), according to a CBA report.
The report says that the M0 indicator rose by nearly 3.5 percent as compared to May 2017.
As of June 2017, Broad Money Supply (M3) totaled 20.97 billion manats or by 0.6 percent more compared to June 2016 and by 0.5 percent more than in May 2017.
Meanwhile, Transaction Money (M1) increased by 15.5 percent for the year and by 3.7 percent – up to 9.26 billion manats as compared to May 2017.
Parameters of monetary market, in billion manats:
|
Monetary market parameters |
Volume, June 2017 |
|
Money mass in extensive understating (М3) |
20,973 |
|
Money mass on manat (М2) |
11,435.9 |
|
Cash in manat (М0) |
6,777.4 |
|
Non-cash in manat |
4,658.5 |
The bank reserves in Azerbaijan amounted to 3.14 billion manats as of July 1, 2017, which exceeds the bank reserves’ amount in the country as of June 2016 by 56.2 percent (2.01 billion manats), read a CBA report.
The report said that the broad monetary base in Azerbaijan as of late June 2017 amounted to 10.53 billion manats or by 26.3 percent more compared to the same period of 2016. For comparison: this figure amounted to 8.34 billion manats as of June 2016.
According to the CBA, as of July 1, 2017, the monetary base in manats amounted to 8.27 billion manats compared to 7.69 billion manats as of July 1, 2016.
The volume of currency in circulation amounted to 7.35 billion manats during the reporting period, while this figure stood at 6.31 billion manats as of July 1, 2016.
The ratio of cash in circulation to monetary base as of July 1, 2017 amounted to 69.9 percent, decreasing by 5.7 percentage points compared to late June 2016.
Azerbaijan’s loan market
As of early July 2017, the Azerbaijani credit organizations’ loans totaled 13.88 billion manats, which is by 24.7 percent less compared to the same period of last year, the CBA report said.
The volume of loans, issued by the Azerbaijani credit organizations, decreased by 6.2 percent for the month, said the report.
Loans in Azerbaijan’s national currency prevail in the structure of issued loans.
Some 57.3 percent (7.96 billion manats) of all loans account for those loans. During the year, their volume decreased by 16.8 percent. The remaining funds are foreign currency loans (42.7 percent, or 5.92 billion manats), their volume decreased by 33.2 percent compared to June 2016.
This ratio was 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, Azerbaijan’s Financial Market Supervisory Authority 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 2016.
Some banks began to convert dollar loans into manat loans.
In June 2017, the volume of overdue loans in Azerbaijani national currency reached 917.3 million manats, which is by 17.8 percent more compared to June 2016.
The share of overdue loans in Azerbaijani manat reached 6.6 percent of the loan portfolio of the country’s banks and non-banking credit organizations as of January-June 2017, the report said.
In June 2017, overdue loans in foreign currency amounted to 893.4 million manats, which is by 17.4 percent more compared to June 2016, and the share of these loans reached 6.4 percent.
In general, the total volume of overdue loans in Azerbaijan amounted to 1.81 billion manats (17.5 percent increase for the year) with a 13 percent share.
As of late June 2017, the volume of short-term loans amounted to 2.86 billion manats (including overdue loans worth 380.2 million manats), the volume of long term loans amounted to 11.02 billion manats (including overdue loans worth 1.43 billion manats).
According to the CBA, the loan portfolio of the state banks in Azerbaijan amounted to 3.86 billion manats, and their share in the loan portfolio of the country’s banks and non-banking credit organizations was 27.8 percent.
Private banks issued loans worth 9.63 billion manats, and their share amounted to 69.3 percent. Some 3.94 billion manats of these loans account for the share of banks with foreign capital. The rest 2.9 percent accounted for the non-bank credit organizations which issued 399.2 million manats.
Lending to the fields of energy, chemistry and natural resources in Azerbaijan increased by 41.1 percent in June 2017 as compared to the same period of 2016 and decreased by 1.4 percent as compared to May 2017, according to a CBA report.
The report says that 548.8 million manats accounted for the share of loans in this sector. The specific weight of loans, issued for the projects in the sphere of energy, chemistry and natural resources, was 4 percent. In June 2016, this figure was 388.9 million manats (2.1 percent).
A major part of loans still accounts for consumer loans in Azerbaijan – 5.09 billion manats (decrease by 26.3 percent as compared to the same figure in 2016). The figure decreased by 1.5 percent as compared to May 2017.
The reduction in consumer lending in Azerbaijan began after the first devaluation of Azerbaijan’s national currency – the manat [on February 21, 2015, when the exchange rate of the US dollar against the manat increased by almost 34 percent].
However, a lion’s share of banks’ total loan portfolio – 36.7 percent – still accounts for the share of consumer loans [as of June 2017]. This figure was 37.5 percent in June 2016.
The sphere of trade and services (15.7 percent or 2.18 billion manats) ranks second and is followed by the industrial and production sector (7.5 percent or 1.04 billion manats).
In June 2017, the amount of loans for transportation and communication totaled 1.02 billion manats (7.4 percent). Construction and real estate sphere accounted for 6.4 percent (891.9 million manats), while agriculture and processing sphere accounted for 3.1 percent (433.9 million manats) during the period.
The loans issued to the population in the Azerbaijani districts in June 2017 amounted to 2.19 billion manats, or 15.8 percent of the total loan portfolio of banks, which is by 20.1 percent less than in the same period of 2016.
According to the CBA, the loans worth 11.69 billion manats were issued in Baku in June 2017 that is by 5.3 times more than in the districts. Some 6.43 billion manats (55 percent of total lending volume in Baku) accounted for the loans in national currency.
For comparison: as of June 2016, borrowers received loans worth 15.7 billion manats in Baku, of which 7.71 billion manats accounted for the loans in national currency. The average annual interest rate on loans in the country as of June 2017 was 11.3 percent, while 9.9 percent in Baku.
|
Districts |
Lending volume |
Average interest rate |
|
|
Thousand manats |
Including manats |
||
|
Absheron |
464,508.3 |
322,102.3 |
15.7 |
|
Aran |
542,045 |
362,052 |
21.9 |
|
Mountain Shirvan |
78,013.6 |
53,142 |
21.6 |
|
Ganja-Gazakh |
467,438.5 |
317,315.6 |
18.6 |
|
Guba-Khachmaz |
161,534.7 |
114,612.2 |
19.3 |
|
Lankaran |
191,407.8 |
120,650.6 |
21.5 |
|
Seki-Zagatala |
146,457.4 |
105,056.8 |
21.3 |
|
Upper-Karabakh |
37,597.5 |
32,252.8 |
16.9 |
|
Kalbajar-Lachin |
1,024.5 |
789.1 |
12.3 |
|
Nakhchivan |
103,761.8 |
102,176.4 |
9 |
The average interest rate on deposits in Azerbaijani banks decreased in national currency, while increased in foreign currency in June 2017 compared to June 2016, the report said.
The average rate on deposits in manat amounted to 12.4 percent in June 2017 compared to 12.34 percent in May 2017 and 12.53 percent in June 2016.
The average rate on loans in freely convertible currency amounted to 9.84 percent in June 2017 compared to 8.88 percent in May 2017 and 9.81 percent in June 2016.
The legal entities received manat loans at an average rate of 8.82 percent in June 2017 compared to 8.91 percent in May 2017 and 8.5 percent in June 2016.
The average rate on bank lending to the corporate clients in foreign currency amounted to 6.89 percent in June 2017 compared to 5.92 percent in May 2017 and 5.5 percent in June 2016.
As of June 2017, the average rate on manat loans to physical entities amounted to 15.86 percent compared to 15.71 percent in May 2017 and 16.58 percent as of June 2016.
The average rate on bank lending to the individual customers in foreign currency was 15.97 percent compared to 16.08 percent and 19.07 percent accordingly.
Mortgage lending
Azerbaijan Mortgage Fund (AMF) issued loans worth 11.9 million manats in June 2017.
According to the CBA report, in June the volume of refinancing of loans issued by banks earlier amounted to 9.2 million manats. Since the beginning of the year, 24.2 million manats has been transferred from the state budget to the AMF.
The average monthly amount of the loan delivered by the AMF’s authorized banks was 42,612.1 manats in June 2017 (40,882.6 manats in June 2016). The average period of the loan is 280 months (280 months a year earlier). The average annual interest rate is 6.67 percent (6.7 percent a year earlier). The average monthly amount for payments is 305.6 manats (296.6 manats a year earlier).
In general, AMF’s authorized lending institutions have issued 19,601 mortgage loans worth 830.35 million manats since 2006 and 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 house, 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 not exceed 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 people, 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 loan can use it only once.
Around 24 out of 31 banks in the country, as well as 17 insurance companies [in total 22] and 13 appraisal organizations are the authorized banks of the Azerbaijan Mortgage Fund.
Azerbaijan’s banking sector
As of June 2017, the total amount of deposits of physical and legal entities drawn by the Azerbaijani credit organizations amounted to 21.6 billion manats.
The deposit base of banks grew 0.03 percent in June 2017 and decreased by 7.6 percent per annum.
The amount of deposits in the Azerbaijani national currency – manat reached 5.02 billion manats as of June 2017, 2.54 billion manats of which accounted for demand deposits, 2.48 billion manats - term deposits, the report said.
According to the report, the deposits in freely convertible currency reached 16.58 billion manats including 5.8 billion manats - demand deposits, 10.78 billion manats - term deposits.
Thus, as of July 1, 2017, 23.2 percent accounted for the deposits in manats, 76.8 percent of the total deposit base of banks accounted for foreign currency.
According to the report, the physical entities' deposits exceeded 6.91 billion manats in June 2017. Most of the physical entities' deposits accounted for the ones in the foreign currency – 73.4 percent or 5.07 billion manats, the report said.
According to the report, the population’s deposits increased by 0.9 percent for the month and decreased by 11.6 percent per annum.
The total volume of the legal entities’ deposits in Azerbaijani banks reached 14.69 billion manats or by 5.5 percent (15.55 billion manats) less than in June 2016, the report said.
As of July 1, 2017, the amount of the Azerbaijani financial organizations’ deposits reached 4.73 billion manats compared to 6.03 billion manats as of July 2016.
The amount of the Azerbaijani non-financial organizations’ deposits reached 9.96 billion manats compared to 9.52 billion manats as of June 2016.
The population’s bank deposits in Azerbaijani districts (except for Baku) totaled 564.93 million manats as of July 1, 2017, that is, 8.2 percent of all deposits, the report said.
According to the CBA report, the share of bank deposits in districts was 6.2 percent (483.93 million manats) as of late June 2016.
As of early July 2017, the amount of deposits in Baku amounted to 6.34 billion manats.
According to the report, the national currency savings of the residents of Azerbaijani districts amounted to 6.91 billion manats as of late July 1, 2017.
In June 2017, the average annual deposit rate throughout the country and in Baku reached 4.4 percent.
Distribution of bank deposits in Azerbaijani districts:
|
Districts |
Amount of deposits (thousand manats) |
Average interest rate (%) |
|
Absheron |
160,744 |
6.4 |
|
Aran |
103,999.3 |
4 |
|
Mountain Shirvan |
13,996.5 |
4.7 |
|
Ganja-Gazakh |
122,385.5 |
5.3 |
|
Guba-Khachmaz |
40,203.3 |
5 |
|
Lankaran |
44,896.3 |
5.5 |
|
Seki-Zagatala |
35,424.3 |
3.9 |
|
Upper-Karabakh |
10,316.5 |
2 |
|
Kalbajar-Lachin |
567.9 |
5 |
|
Nakhchivan |
32,397.7 |
2.3 |
The average interest rate on deposits in Azerbaijani banks increased in national currency and decreased in foreign currency in June 2017 compared to June 2016, the report said.
The average rate on deposits in manats amounted to 8.26 percent in June 2017 compared to 7.16 percent in May 2017 and 7.85 percent in June 2016.
The average rate on deposits in foreign currency amounted to 3.71 percent in June 2017 compared to 3.79 percent in May 2017 and 5.42 percent in June 2016.
The banks drew deposits of legal entities in manats in the amount of 4.35 percent per annum in June 2017 compared to 4.04 percent in May 2017 and 5.57 percent in June 2016.
The funds on the accounts denominated in the foreign currency brought 2.86 percent to legal entities in June 2017, 2.87 percent in May 2017 and 3.5 percent in June 2016.
As of July 1, 2017, the average interest rate on deposits of physical entities in manats made up 11.75 percent compared to 11.32 percent as of late May 2017 and 9.04 percent as of June 2016.
The interest rates on deposits of physical entities in foreign currency are as follows: 4.36 percent in June 2017, 4.47 percent in May 2017 and 6.73 percent in June 2016.
Financial activity of banks
The banking sector of Azerbaijan completed the first half of 2017 with a net profit of 84.9 million manats, according to a banking sector outlook of the country’s Financial Market Supervisory Authority (FIMSA).
For the month, the profit of banks declined by 52.4 percent. For the fifth consecutive month, Azerbaijani banks have maintained profitability after losses of 1.7 billion manats in 2016 and 496 million manats in January 2017.
Revenues of the banking sector in January-June 2017 amounted to 1.47 billion manats, including interest income of almost 1.01 billion manats. The expenses of banks amounted to 958.7 million manats. At the same time, banks allocated another 408.9 million manats to create reserves for covering possible losses on assets.
Also, banks paid 17.4 million manats as a profit tax.
As of July 1, 2017, the capitalization of Azerbaijan’s banking sector reached 2.71 billion manats, which is 42.6 percent more than at the beginning of the year.
According to the report, since early 2017, the assets of Azerbaijani banks decreased by 4.46 percent to almost 30.04 billion manats.
A decrease in lending may be called the main reason for the reduction in assets, which in turn is caused by the transfer of another volume of troubled assets of the International Bank of Azerbaijan to the Aqrarkredit non-bank credit institution in May 2017.
Thus, for the six months of this year, banks reduced volumes of lending from 15.9 billion manats to 13.46 billion manats. At the same time, during the first half of the year, banks significantly increased investments in securities by 7.5 times to 3.1 billion manats.
The liabilities of banks in the reporting period amounted to 27.3 billion manats (a 7.5 percent reduction from the beginning of the year), and the deposits of customers amounted to 16.7 billion manats (a 1.8 percent increase).
There are 31 banks, including two state-owned ones in Azerbaijan.
Payment card market
The total turnover on payment cards via ATMs and POS-terminals amounted to 1.25 billion manats in Azerbaijan in June 2017 or by 19 percent more than in June 2016, said the CBA’s report.
According to the report, the total number of transactions with payment cards reached 8.12 million units increasing by 16.2 percent for the year.
The number of transactions on debit cards reached 7.4 million units totaling 1.14 billion manats during the reporting period. Of the total number of transactions, 5.1 million transactions amounting to 976 million manats were implemented on debit cards via ATMs within the country, and 635,000 transactions amounting to 91 million manats via POS-terminals.
As much as 726,000 transactions worth 107 million manats were made on credit cards in June 2017. Of the total number of transactions on credit cards, 157,000 transactions worth 34 million manats were implemented via ATMs and there were 238,000 transactions worth 28 million manats via POS-terminals.
The number of payment cards in Azerbaijan increased by 0.7 percent in June 2017 and reached up to 5.51 million units compared to June 2016.
Of the total number of cards, 4.95 million units accounted for debit cards, in particular, 2.49 million - social cards, 1.71 million - payroll cards, 0.75 million - other cards. The number of credit cards was 562,000.
As of July 1, 2017, as many as 2,501 ATMs operated in the country of which 1,358 are located in Baku and 1,143 in other cities and districts of the country. The total number decreased by 91 units or 3.5 percent for the year compared to June 2016.
The number of POS-terminals amounted to 70,019 units of which 39,759 are installed in Baku and 30,260 units in other cities and districts as of late June 2016.
The number of POS-terminals has decreased by 3,203 units or 4.4 percent for the year.
Stock market
The total turnover of exchange transactions on all instruments at the Baku Stock Exchange exceeded 4.36 billion manats in January-June 2017, that is, by 2.4 times more than in January-June 2016.
The volume of the state securities market totaled 1.11 billion manats (4.3 times more for the year), while the turnover of corporate securities market reached 1.06 billion manats (23.8 times more).
The volume of derivatives market amounted to nearly 2.2 billion manats (41.7 percent more).
Comparative table on the trades results in the state and corporate sectors at the Baku Stock Exchange:
|
Market segments |
Jan.-June 2017 |
Jan.-June 2016 |
||
|
Volume of transactions, AZN |
Number of deals |
Volume of transactions, AZN |
Number of deals |
|
|
I, State Securities Market |
1 106 388 681,17 |
310 |
259 173 678,91 |
107 |
|
State bonds of finance ministry |
330 154 022,94 |
209 |
259 173 678,91 |
107 |
|
Initial placement |
301 272 850,86 |
165 |
166 195 804,99 |
74 |
|
secondary market |
28 881 172,08 |
44 |
92 977 873,92 |
33 |
|
Notes (Central Bank) |
776 234 658,23 |
101 |
0 |
0 |
|
Initial placement |
776 234 658,23 |
101 |
- |
- |
|
secondary market |
- |
- |
- |
- |
|
II, Market of shares |
650 493 053,59 |
725 |
6 456 656,27 |
1014 |
|
Initial placement |
649 121 094,93 |
6 |
5 072 000,00 |
6 |
|
secondary market |
1 371 958,66 |
719 |
1 384 656,27 |
1 008 |
|
III, Debt market |
394 957 044,80 |
484 |
37 960 422,84 |
57 |
|
Mortgage bonds (Initial placement) |
125 357 099,50 |
19 |
- |
- |
|
Mortgage bonds (secondary market) |
161 769 732,72 |
21 |
17 663 473,52 |
8 |
|
Other corporate bonds (initial placement) |
- |
- |
4 158 571,85 |
27 |
|
Other corporate bonds (secondary market) |
107 830 212,58 |
444 |
16 138 377,47 |
22 |
|
- including market makers |
881 625,00 |
- |
1 687 722,86 |
- |
|
IV, REPO transactions |
11 577 467,73 |
17 |
0,00 |
0 |
|
Repo transactions of the Central Bank |
- |
- |
- |
- |
|
Other repo transactions |
11 577 467,73 |
17 |
- |
- |
|
V, Derivatives market |
2 199 908 524,07 |
36 506,00 |
1 552 826 373,07 |
20 838,00 |
|
- currency |
2 013 183 426 |
32 846 |
1 508 737 190 |
18 303 |
|
- goods |
186 725 098 |
3 660 |
44 089 183 |
2 535 |
|
Total |
4 363 324 771,36 |
38 042,00 |
1 856 417 131,09 |
22 016,00 |
The Azerbaijani National Depository Center registered 1,176 stock exchange transactions for the purchase and sale of securities worth 427.95 million manats in January-June 2017, which is by 3.56 times more than in January-June 2016.
Some 196 off-exchange transactions worth almost 458 million manats were registered in January-June 2017 (an increase by 3.57 times for the year).
Some 337 transactions on additional emission worth 2.2 billion manats were registered for six months. The volume of such transactions increased by 59.29 percent compared to January-June 2016.
The volume of transactions as of January-June 2017:
|
Concluded agreements |
The number of exchange transactions |
Exchange transactions, volume in manats |
The number of off-exchangetransactions |
Amount of off-exchange transactions |
The number of transactions on additional emission |
The amount of transactions on additional emission |
|
|
January |
2 |
183 |
17 879 720 |
13 |
641 720 |
9 |
648 562 500 |
|
February |
3 |
253 |
155 609 805 |
32 |
184 170 140 |
34 |
270 400 100 |
|
March |
2 |
149 |
51 428 900 |
71 |
313 018 |
54 |
202 992 500 |
|
April |
4 |
196 |
68 580 169 |
21 |
4 323 223 4 |
80 |
235 991 900 |
|
May |
3 |
221 |
52 125 408 |
29 |
270 117 784 |
86 |
351 035 010 |
|
June |
2 |
174 |
82 323 634 |
30 |
2 750 019 |
74 |
518 006 195 |