PremiumMONETARY-CREDIT SECTOR

Major tendencies in different segments of monetary-credit system in August:

• The rate of manat in regard to world leading currency - US dollar got consolidated in the currency market.

• In August money mass in expanded implication (M2) and M3 grew considerably in the monetary market;

• In August the Azerbaijani banks increased crediting in economy.

• Deposit base of the Azerbaijani banks grew,

• Trading sessions on placement of T-bills were held in the stock market. The NBA continued the placement of short-term notes in the Baku Stock Exchange.

Currency market and rate of AZM

In September exchange of AZM rate grew 29 manats and dropped from 4622.00 manats to 4693 in regard to USD.

Maximal rates were fixed on 1, 15 and 16 September. The fluctuations between maximal and minimal figures made up 45 points.

In August the exchange rate of euro dropped by 166,22 manats (5701.47 manats per euro to 5535.25 manats per euro).

Amount of currency trading sessions at BBVB in September 2005

As of totals of trading sessions in the currency section the Baku Interbank Currency exchange defined 5 leader banks in September 2005. The leader-banks of the currency exchange market were the International Bank of Azerbaijan (33.08%), Rabitabank stock-investment bank (27.29%), Bank Standard stock-commercial bank (5.51%), Bank of Baku stock-commercial bank (3.61%), and Azerigasbank stock-investment bank (3%).

A total of 28 banks participated in the auctions held at the BBVB in September 2005. In this period 44 auctions were held at the electron exchange system (BEST) and 118 deals were concluded. In September the amount of trading sessions on USD made up 499,088bn manats, or $108,781m.

In August amount of deals with RUR made up 459,107m manats, which rising 3.33 times and was 12.68% up as compared to last year. In January to September the turnover of the currency section exceeded $561,218m.

Money market

In October monthly pace of money mass rose 1.3%, while in 2005 a cut made up 22.695%. As of 1 October 2005 money mass (M2) made up 4193.7bn manats, against 4139.8bn manats of 1 September and 3418bn manats as of 1 January 2005.

In September the amount of cash money (Рњ0) grew 5.34%, while in 2005 a drop made up 26.31%. As of 1 October M0 turned out at 3016.4bn manats against 2863.6bn manats fixed as of 1 September and 2389bn manats fixed as of 1 January 2005.

In September the amount of non-cash money grew 7.75%, drop in 2005 was equal to 14.4%. As of 1 October non-cash funds grew to 1177.3bn manats against 1276.2bn manats fixed as of 1 September and 1029bn manats fixed as of 1 January 2005.

Parameters of monetary market, in bn AZM

In September net international reserves (NIR) of the National Bank of Azerbaijan (NBA) grew 6.8%, while since he beginning of the year it has grow 18.96%. As of 1 October 2005 the NIR has amounted to 5710.5bn manats against 5346.9bn manats as of 1 September and 4800.2bn manats as of 1 January 2005.

The net internal assets (NIA) comprised 3637.8bn manats against 3801.8bn manats as of 1 September and 2715.1bn manats as of 1 January 2005. on 1 October the expanded money mass (M3) was fixed at 9348.3bn manats against 9148.8bn manats as of 1 September and 7515.2bn manats as 1 January 2005.

Under the PRGF the government and the IMF accorded the minimal level of NIR of the NBA: on 30 June 2005 - 4,994trln manats, on 31 September 2005 - 5,332trln manats, on 31 December 2005 - 5,663tln manats.

The forecast expanded money mass (M3) was accepted as follows: on 30 June 2005 - 7,375trln manats (in AZM - 3,578trln manats), on 31 September 2005 - 7,793trln manats (in AZM - 3,812trln manats), 31 December 2005 - 8,401trln manats (in AZM - 4,499trln manats).

Credit market

In September the Azerbaijani banks increased crediting economy by 2,999%, while it grew 25.84% in 2005.

As of 1 October 6225.692bn manats of total credits (including 3897,478bn manats un national currency and 2328,213bn manats) were allocated against 6044.406bn manats as of 1 September and 4947,302bn as of 1 January 2005. Overdue credits and loans comprised 315,977bn manats as of 1 October against 287,328bn manats as of 1 September and 275,271bn manats as of 1 January 2005. The statistics of overdue credits does not include the similar loans allotted by non-bank credit organization Agrarkredit.

The short-term credits comprised 3897.5bn manats (including 234.7bn manats of overdue loans) against 3886.6bn manats (including 215.5bn manats of overdue loan) as of 1 September and 3503.9bn manats (208.7bn manats) as of 1 January 2005. The long-term credits constituted 2328.2bn manats (81.3bn manats) against 2157.8bn manats (71.8bn manats) as of 1 September and 1443.4bn manats (66.6bn manats) as of 1 January 2005.

As of 1 September two public banks allocated credits for 2984.9bn manats (+2.87% in July and +31,77% in 2005), private banks вЂ" 3036.1bn manats (+3.33% in September and +34.46% for 2005). As of 1 October credit portfolio of banks with foreign capital made up 1213.1bn manats (+2.75% and +59% respectively), including 110.4bn manats loaned by foreign banks (+6.36% and +5.84% respectively).

As of 1 October average annual rate of banking crediting the economy comprised 15.97% in national currency against 15.81% as of 1 September and 15.55% as of 1 January 2005. With consideration of inflation rate of 2.3% in January to June, real rate was equal to 13.67%. The average annual rate on banking crediting the economy made up 18.24% in foreign currency against 17.63% as of 1 June and 18.96% as of 1 January 2005.

As of 1 October the average annual rate of banking crediting of legal entities made up 14.88% in national currency against 14.8% as of 1 June and 16.06% as of 1 January 2005, while real rates вЂ" 12.58%. The average annual rate of banking credit of legal entities constituted 16.56% in foreign currency against 15.91% as of 1 September and 17.12% as of 1 January 2005.

As of 1 September average annual rate on banking crediting of physical entities comprised 18.5% in national currency against 18.28% as of 1 September and 14.22% as of 1 January 2005, while real вЂ" 16.2%. Average annual rate of banking crediting of physical entities made up 21.56% in foreign currency against 21.49% as 1 August and 22.89% as of 1 January 2005.

Banking sector

In September deposit base of Azerbaijani banks dropped 0.74% due to fall in deposits of legal entities, while since the beginning of the year it dropped 23.52%.

As of 1 October the total amount of bank deposits and savings of legal and physical entities made up 6331.9bn manats against 6282.5bn manats as of 1 September against 5126.3bn manats as of 1 January 2005. 1177.2bn manats of the total sum fell on manat reserves, while 5154.7bn manats on hard currency. In September growth of deposits in manat made up 7.75% while currency deposits fell 2.9%.

As of totals of September 2005 average statutory capital of the Azerbaijani bank dropped from 28.2bn manats to 27.13bn manats against 23.9bn manats as of beginning of the year and normative requirement for $3.5m as of aggravate capital of the bank, the National Bank of Azerbaijan announced. In September the net of branches of the banks grew 1.9%.

As of 1 October 43 banks had had 369 branches against 363 branches of 44 banks as of 1 August against 350 branches (44 banks) as of 1 January 2005.

In September the statutory capital of banks dropped from 1156.1bn manats to 1166.52bn manats, or 0.9%, while this year the statutory capital comprised only 10.99%. The capital of 41 commercial banks grew in September from 1016.1bn manats to 1026.52bn manats. The capital of two state banks was maintained at the level of 140bn manats. As of 1 October 2005, 28.45bn manats of statutory capital falls per bank in average.

The total capital of 17 banks with foreign participation grew in September from 463.6bn manats to 473.2bn manats and their share in entire statutory capital comprised 40.57%, while net foreign investments (226.1bn manats) comprised only 19.38% of the total sum.

Stock market

In September the Ministry of Finances held two auctions on placement of T-bills. The auction with issue of 150bn manats resulted in the placement of 82.9bn manats (55.3% of the issue). Average sustained profitability rate of the auction comprised 11.66%, or lower than the annual inflation ratio which comprised 11.2%.

In August the National Bank of Azerbaijan (NBA) held 5 auctions on placement of short-term notes. The emitter succeeded to place only 130.3bn manats (72.4% of the issue) of the total (180bn manats). The low interests on the notes are explained with their low profitability rate, which does not cover the annual inflation ratio. The average sustained profitability rate on the results of three September auctions comprised 11.2% per annum.

No deal was fixed in the corporate shares and bills market in September