The foreign exchange (FX) reserves of the Central Bank of Azerbaijan (CBA) fell by $618.2 million (12.3 percent) to $4.398 billion in January 2016 as compared to December 2015, according to CBA statistical data.
CBA's foreign exchange reserves have declined by $9,359.8 million (68 percent) since early 2015.
The foreign exchange reserves of the CBA have been declining since July 2014.
Earlier, the decline of the foreign exchange reserves was going on slowly (around $20-50 million). But their volume started to sharply reduce in December 2014, due to an increase in demand for dollar supply in the country.
However, the growth of foreign exchange reserves resumed in May-June 2015. In May, the CBA's forex reserves rose by $42.9 million (0.51 percent) compared to April, up to $8.43 billion, and by $89.4 million (1.06 percent) in June.
But, after slight growth, the reduction of foreign exchange reserves of the CBA continued.
The foreign exchange reserves' reduction is due to an intervention carried out by the CBA on the foreign exchange market to keep the rate of manat against the US dollar at a stable level.
So, the reserves declined by $ 18.7 million in July, $1.19 billion in August, $300.7 million in September, $180.1 million in October and $589 million in November.
The CBA has started restructuring the banking sector, implementing measures to strengthen its financial stability and risk management, the bank's Chairman Elman Rustamov said during the expanded board meeting dedicated to the results of 2015.
"Using a proactive approach to banking supervision and prudential regulation, not having allowed accumulation of additional risks in the sector, regulatory frameworks have been adapted to the new situation and countercyclical mode has been applied regarding the requirements to banks," said Rustamov.
He said that the countercyclical approach used by the CBA and supporting measures made it possible to manage risks at an adequate level, and banks have shown resilience to shocks thanks to the formed capital and institutional buffer.
Banking sector in Azerbaijan is stable in general and is characterized by high indexes, Rustamov said.
He made the remarks during the meeting of the parliamentary committee on economic policy.
He went on to add that at this stage, Azerbaijan needs to neutralize the shocks caused by the state of global economy.
He said that in the whole, banking sector of the country is stable.
"Except for one or two banks with weak performance, the level of capital and liquidity is high," he said. "We don't deny that there are some problems as well. But the situation is under control, and the proposed bills will create conditions for more efficient and flexible management."
The licenses of Bank of Azerbaijan, Gandja Bank, United Credit Bank, NBCBank, Atrabank and Caucasus Development Bank were liquidated upon the CBA decision in January.
The banks could not fulfill obligations to creditors and did not manage current activity prudentially and reliably.
The decision was made due to the fact that these banks have violated the minimum requirement for total capital and can not meet its obligations to creditors, as well as their activities are not consistent with prudential rules, and management of banks did not meet the reliability.
Currently, some 37 banks have banking licenses in Azerbaijan.
Currency market and manat rate
The average manat rate has been determined on the basis of inter-bank transactions on the foreign exchange market since January 2016. CBA and SOFAZ (State Oil Fund of Azerbaijan) began to hold auctions to meet the needs in the currency. CBA holds auctions three times a week - on Monday, Wednesday and Friday.
Exchange of currency in the amount exceeding $500 will be carried out in Azerbaijan only if the identity card is available, as provided by the rules of organizing foreign currency exchange offices and operations approved by the CBA.
The new rules came into force since January 6, 2016.
The rules regulate foreign currency exchange in banks, their branches and offices, local branches of foreign banks and the national postal operator. The previous rules didn't apply to the currency exchange offices in post offices and local branches of foreign banks.
In accordance with the rules, each foreign exchange transaction (or other services) is entered into the bank's system, and the client receives a bank statement.
Azerbaijani monetary market
The money supply rate (M2) (cash in circulation (outside banks) and remainders in the domestic currency on accounts of non-financial organizations, financial (excluding credit) organizations and physical entities) decreased by over twofold in January 2016 compared to January 2015, the CBA's report said.
As of January 2016, M2 hit 7.936 billion manat compared to 16.236 billion manat as of February 1, 2015.
M2 reduced by 7.9 percent compared to the previous month.
The amount of cash money supply (M0) decreased by 52 percent during a year and amounted to 4.485 billion manat compared to 9.348 billion manat as of late January 2015. M0 decreased by 6.1 percent compared to the previous month.
As of January 2016, Broad Money Supply (M3) totaled 19.965 billion manat or 2.9 percent less compared to January 2015 (20.568 billion manat) and by 6.4 percent less as of late 2015 (21.319 billion manat).
The transaction money (M1) decreased by 46.6 percent during a year and amounted to 6.273 billion manat compared to 12.830 billion manat as of January 2015 and by 9.1 percent compared to December 2015 (6.897 billion manat).
Parameters of monetary market, in billion manat:
|
Volume, Jan. 2016 |
|
|
Money mass in extensive understating (М3) |
19964,6 |
|
Money mass on manat (М2) |
7936,5 |
|
Cash in manat (М0) |
4485,0 |
|
Non-cash in manat |
3451,5 |
As of February 1, 2016, the bank reserves in Azerbaijan amounted to 1.72 billion manats (AZN), which exceeds the same period of 2015 more than twice (604.5 million manats), the CBA's report as of late January 2016 said.
The expanded monetary base in Azerbaijan totaled 6.68 billion manats as of Feb. 1, 2016.
In annual terms, the monetary base in Azerbaijan decreased by 38 percent. For comparison, as of late January 2015, this figure was 10.76 billion manats. The monetary base reduced by 11.6 percent in Azerbaijan compared to December 2015 (7.56 billion manats).
As of February 1, 2016, the monetary base in manats amounted to 5.79 billion manats versus 10.55 billion manats as of February 1, 2015.
In the mentioned period, the volume of money in circulation amounted to 4.95 billion manats, while this figure was 10.15 billion manats as of Feb. 1, 2015.
The ratio of the mass of cash in circulation to the monetary base was 74.2 percent as of February 1, 2016, decreasing by 21.3 percent compared to the same index as of February 1, 2015.
Azerbaijan's loan market
Azerbaijani banks increased lending to the economy by 14.02 percent in January 2016 compared to the same period of 2015. In January, the credit portfolio of banks slightly decreased by almost 2.5 percent.
According to the CBA, as of February 1, 2016, the banks issued loans worth 21.19 billion manat, including 10.21 billion manat (48.2 percent) in the national currency, 10.98 billion manat (51.8 percent) in foreign currency.
This ratio hit 73 and 27 percent in January 2015, but 60 and 40 percent accordingly in January-February, 59.17 и 40.83 percent accordingly in the first quarter, 55.9 and 44.1 percent accordingly in the second quarter.
The share of foreign currency loans began increasing, reaching 49.3 percent as of 2015 following the devaluation of the manat in February.
The loans of the total portfolio of banks were overdue by 1.3 billion manat loans (6.2 percent) compared to 1.03 billion manat (5.55 percent) in January 2015.
The statistics of overdue loans does not include similar loans of Aqrarkredit non-banking credit institution.
During the year, the share of overdue loans increased by 26.2 percent. The amount of overdue loans decreased by 12.8 percent in January.
As of February 1, 2016, the volume of short-term loans amounted to 5 billion manat (including overdue loans worth 459.8 million manat) increasing by 32.1 percent during a year.
The volume of long term loans increased by 10.2 percent up to almost 16.2 billion manat (including 854.7 million manat of overdue loans).
The credit portfolio of the state banks in the country hit 7.7 billion manat with the specific weight of 36.4 percent, while private banks issued loans worth around 12.9 billion manat with a specific weight of 60.8 percent.
The remaining 2.8 percent fell to the share of non-bank credit organizations which issued 595.5 million manat, according to the CBA.
Azerbaijani banks decreased the consumer lending volume to 8.07 billion manat in January 2016 or by 3.7 percent less than in December 2015, said the CBA's report.
The consumer lending volume increased by 4.5 percent during the year.
A decrease in consumer lending in Azerbaijan in mid. 2015 began after the first devaluation of the manat rate [the dollar rate increased by almost 34 percent February 21, 2015.
The consumer lending increased by almost nine percent in February. The banks reduced the consumer crediting volume by 1.4 percent in March, 1.2 percent in April, 1.88 percent in May, 1.97 percent in June and 1.5 percent in July.
The consumer lending decreased by 0.4 percent in November (compared to October).
However, the largest part of the total loan portfolio of banks - 38.1 percent (as of January) accounts for the consumer loans.
The construction and real estate sector (14.5 percent or 3.07 billion manat) ranked second on the share in the total loan portfolio of banks. The trade and services (13.7 percent or 2.9 billion manat) ranked third.
Around 8.9 percent was directed to the industry and production. In nominal terms it amounts to 1.88 billion manat.
The share of transport and communication hit 7.1 percent (1.5 billion manat), agriculture and processing reached 2.1 percent (441.1 million manat), energy, chemistry, and natural resources - 1.5 percent (310.3 million manat).
The loans given to the population in Azerbaijan's districts totaled 3.31 billion manat as of January 2016, or 15.6 percent of the banks' total loan portfolio and 4.75 percent more than in the same period of 2015, the CBA says.
Some 34.74 percent or 1.15 billion manat of this amount issued to the population in the regions of the country accounted for the foreign currency.
The loans worth 17.87 billion manat were delivered in Baku. Here the loans in national currency (manat) amounted to 8.04 billion manat.
For comparison, Baku granted loans amounting to 15.4 billion manat in January 2015. Some 11 billion manat accounted for the loans in national currency.
The average interest rate on loans throughout the country was 13 percent in January 2016, while in Baku this index stood at 11.5 percent.
The lending volume in the Absheron economic district totaled 679.3 million manat at an average rate of 18.6 percent.
In other economic districts the lending index was as follows: Aran - 866.2 million manat at a rate of 22.5 percent, Mountainous Shirvan - 121.9 million manat at a rate of 22.4 percent, Ganja-Gazakh - 687.3 million manat at a rate of 20.5 percent, Guba-Khachmaz - 245.2 million manat at a rate of 21.5 percent, Lankaran - 293.3 million manat at a rate of 23.4 percent, Shaki-Zagatala - 220 million manat at a rate of 21.7 percent, the Upper Karabakh - 67.5 million manat at a rate of 19.6 percent, Kalbajar-Lachin - 6.03 million manat at a rate of 19.8 percent, Nakhchivan - 123.5 million manat at a rate of 14.4 percent.
Azerbaijani banks reduced the average interest rate on loans in national and foreign currency in January 2016.
The average rate on bank lending to the Azerbaijani economy in national currency amounted to 13.36 percent in January 2015 compared to 13.6 percent in the previous month.
The average interest rate on loans hit 13.71 percent as of February 1, 2015.
The average rate on bank lending in freely convertible currency made up 12.37 percent in January compared to 12.53 percent in the previous month.
The average rate was 14.28 percent as of February 1, 2015.
The average rate on bank lending to the legal entities in national currency amounted to 9.25 percent compared to 9.72 percent in December 2015 and 9.74 percent as of February 1, 2015.
The average rate on bank lending to the corporate clients in freely convertible currency amounted to 8.78 percent in January 2016 compared to 9.22 percent as of February 1, 2015.
As of January 2016, the average rate on bank lending to physical entities in national currency amounted to 17.5 percent compared to 17.46 percent in December 2015, 18.59 percent as of February 1, 2015.
The average rate on bank loans to the individual customers in freely convertible currency was 20.65 percent compared to 20.72 percent and 22.27 percent in early 2015.
Mortgage lending
The Azerbaijan Mortgage Fund (AMF) under the CBA delivered loans amounting to 600,000 manat in January 2016.
According to the CBA's report, as compared to January 2015, this index decreased by seven times compared to January 2015.
The total amount of refinancing the loans issued by the banks earlier amounted to 4.2 million manat in January.
The funds have not been transferred from the state budget to the AMF for the first month of the year.
The average amount issued by AMF authorized banks is 40.879 manat (this figure amounted to 40.174 manat in January 2015), the average term of loan issue - 280 months (278 months), the average interest rate is 6.71 percent (versus 6.77 percent in 2015), and the average monthly payment is 297.3 manat (297.4 manat).
In general, the AMF authorized credit organizations have delivered 17,992 mortgage loans worth 730.56 million manat since 2006 up till now.
Currently, the maximum amount of a common mortgage loan through the AMF is 50,000 manat at a rate of 8 percent with a payback period of 25 years. Terms under the social mortgage are 50,000 manat at an annual rate of 4 percent with a payback period of 30 years. The initial payment under a social mortgage is 15 percent, whilst a conventional loan is 20 percent.
Conditions of mortgage lending are as follows: Loans must be issued in Azerbaijani AZN 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 percent of the market price and the monthly payment must not exceed 70 percent of the debtor's monthly income. It is compulsory to have 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 and 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
At present, the authorized banks of the Mortgage Fund are 32 banks as of 2015.
The participants of the mortgage market are 21 insurance companies [in total, 26 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.
As of February 1, 2016, the total amount of bank deposits and deposits of physical and legal entities drawn by the credit organizations of Azerbaijan totaled 22.611 billion manat, the CBA's report says.
According to the CBA report, the deposit base of banks decreased by 3.63 percent in January, while in annual terms - by 49.4 percent.
For comparison, as of early 2015, the total amount of deposits in Azerbaijani banks amounted to 23.463 billion manat, as of Feb.1, 2015 - 15.135 billion manat.
The deposits in national currency - manat amounted to 3.950 billion manat, of which 1.853 billion manat - demand deposits, 2.097 billion manat - term deposits.
According to the report, during the period, the deposits in freely convertible currency amounted to 18.661 billion (4.993 billion manat - demand deposits, 13.668 billion manat - term deposits).
Thus, as of February 1, 2016, the deposits in manat hit 17.5 percent, while in foreign currency - 82.5 percent of the total deposit base of banks. For comparison, as of January 2015, some 48.4 percent was formed through manat deposits, while 51.6 percent of the banks' deposit base was formed through the deposits in foreign currency.
The volume of the physical entities' deposits in Azerbaijani banks amounted to 8.643 billion manat. The vast majority accounted for the foreign currency deposits (83.5 percent or 7.221 billion manat.
An increase in the deposits in foreign currency is directly connected with the devaluation processes in the economy. So, as of 2015, the official rate of the manat versus the US dollar decreased by 97.6 percent.
The population's bank deposits decreased by 830.6 million manat in January 2016 or by 8.8 percent. They increased by 1.552 billion manat per annum or by 21.4 percent.
For comparison: as of January 1, 2016, the volume of the physical entities' deposits in Azerbaijani banks amounted to 9.474 billion manat, as of February 1, 2015 - 7.121 billion manat.
As of January 2016, the volume of the financial organizations' deposits hit 7.167 billion manat compared to 4.247 billion manat in January 2015.
The volume of the non-financial organizations' deposits hit 6.801 billion manat compared to 3.767 billion manat in January 2015.
The total volume of the legal entities' deposits in the country's banks amounted to 13.968 billion manat or by 74.3 percent more than in January 2015 - 8.014 billion manat.
The population's deposits, attracted to Azerbaijan's banking system from the country's districts (except for Baku), totaled 567.02 million manat in January 2016, or 6.5 percent of the total bank deposits.
The volume of deposits in Baku was 8.07 billion manat, while some 1.21 billion manat accounted for the deposits in the national currency.
The foreign currency savings of the residents of Azerbaijani regions amounted to 356.26 million manat (62.8 percent of total deposits in the regions) in the reporting period.
As of January 2016, the average interest rate throughout the country hit 7.3 percent.
Thus, the Absheron economic region is still the leader on such indices as attracting the population's deposits by the banks (175.53 million manat, average rate - 8.1 percent per annum).
During this period, the volume of deposits in the Aran economic region - 83.67 million manat at a rate of 6 percent, Mountainous Shirvan - 14.8 million manat at a rate of 7.2 percent, Ganja-Gazakh - 135.23 million manat at a rate 7.6 percent, Guba-Khachmaz - 36.12 million manat at a rate of 6.9 percent, Lankaran - 40.96 million manat - the rate of 7.4 percent, Sheki-Zagatala - 31.36 million manat - the rate of 5.3 percent, Upper Karabakh - 20.93 million manat - 5.0 percent, Kalbajar-Lachin - 2.21 million manat - 6.2 percent, Nakhchivan - 26.16 million manat - the average rate of 4.3 percent.
The Azerbaijani banks decreased interest rates on deposits both in national and foreign currency in January 2016, the report said.
The average rate on deposits in manat made up 7.75 percent as of Feb. 1, 2016 compared to 8.08 percent as of Jan. 1, 8.82 percent as of Feb. 1, 2015.
The average rate on deposits in foreign currency amounted to 7.67 percent versus 8.06 percent as of Jan. 1, 8.93 percent as of Feb. 1, 2015.
The average rate on deposits of legal entities in manat made up 5.86 percent as of February 1, 2016 versus 5.82 percent as of January 1, 5.66 percent as of February 1, 2015.
The funds on the accounts denominated in the freely convertible currency brought legal entities 3.72 percent, 4.81 percent and 4.36 percent respectively.
As of Feb. 1, 2016, the average interest rate on deposits of physical entities in manat made up 8.9 percent, while it was 9.14 percent as of Jan. 1, 9.41 percent as of Feb. 1, 2015.
The interest rates on deposits of physical entities in foreign currency are as follows: as of Feb. 1, 2016 - 8.66 percent, 8.83 percent and 10.05 percent.
Financial activity of banks
According to the CBA, as of February 1, the assets of Azerbaijani banks amounted to 33.777 billion manat compared to 34.906 billion manat a month earlier. The bank assets decreased by 3.23 percent in January 2016.
According to the CBA, as of February 1, the capital of Azerbaijani banks amounted to 3.591 billion manat.
The CBA does not disseminate the data on the banking capital as of January 1, 2016. The bank's capital decreased by 630.6 million manat or 14.9 percent compared to December 1, 2015, and in annual terms - by 734.1 million manat or 17 percent.
For comparison: as of December 2015, the bank's capital amounted to 4.222 billion manat, as of February 1 - 4.325 billion manat and as of January 1, 2015 - 4.270 billion manat.
Payment card market
The total turnover on payment cards via ATMs and POS-terminals in January 2016 amounted to 878 million manat (2.4 percent less than in the same period of 2015) and the total number of transactions - 5.9 million or by 7.3 percent less during the year, according to the CBA report.
The number of transactions on debit cards equaled 4.92 billion units totaling 702 million manat during the reporting period.
Of the total number of transactions, 3.6 million transactions amounting to 594 million manat were implemented on debit cards via ATMs within the country, and around 334,000 transactions amounting to 62 million manat via POS-terminals.
As much as 1.02 million transactions worth 176 million manat were made on credit cards during this period.
Of the total number of transactions on credit cards, 251,000 transactions worth 69 million manat were implemented via ATMs and there were 350,000 transactions worth of 54 million manat via POS-terminals.
The number of payment cards in Azerbaijan decreased by 10.41 percent in January and hit 5.4 million units compared to the same period of 2015.
Of the total number of cards, 4.6 million units were debit cards, in particular, 2.4 million - social cards, 1.44 million - salary cards, 690,000 - other cards. The number of credit cards was 809,000.
As of February 1, 2016, as many as 2,573 ATMs operated in the country of which 1,424 are located in Baku and 1,149 in other cities and regions of the country. Their total number decreased by 45 units or 1.72 percent during a year compared to January 2015.
The number of POS-terminals amounted to 78,452 units of which 44,807 are installed in Baku and 32,777 units in other cities and regions as of late January 2016.
The number of POS-terminals has increased by 3,868 units or 5.18 percent during a year.
Stock market
The derivatives determined the turnover of the Baku Stock Exchange in January 2016 as in 2015.
According to the Baku Stock Exchange, as of January 2016, its turnover amounted to 174.4 million manat on 1,739 deals compared to 1.934 billion manat on 7,469 transactions in January 2015. This was an absolute record of the monthly turnover in the entire history of the stock exchange.
As of January 2016, the derivatives formed the basis of the BSE turnover - 136.73 million manat on 1,653 deals compared to 1.575 billion manat on 6,971 transactions in January 2015.
The currency derivatives hit 128.5 million manat on 1,390 deals in January 2016 compared to 1.539 billion manat on 6,052 transactions in January 2015.