Currency reserves of the Central Bank of Azerbaijan (CBA) decreased by $127.2 million (3.08 percent) to $4.005,5 million in October 2016 as compared to September.
The CBA’s currency reserves have decreased by 1.011,2 million manat, or by 20.2 percent since early 2016.
CBA’s currency reserves have begun reducing since July 2014. The reduction was at a slower rate (in the range of $20-50 million) at the beginning, but a sharp decline in the volume of reserves began in December 2014 due to an increase in demand for dollar in the country.
During 2016, the volume of currency reserves increased by 0.9 percent in March, by 1.35 percent in April, by 3.97 percent in May and by 0.7 percent in August.
Currency market and manat rate
In October 2016, the CBA, in order to ensure more flexible participation of banks in the currency market, decided to introduce a new mechanism of holding auctions on currency sale that allows banks to apply both for the purchase and sale of foreign currency.
Under a new mechanism, the official rate of manat is set, based on the weighted average rate in accordance with the transactions concluded with commercial banks in the interbank foreign exchange market and in auctions.
Buyers and sellers can place their bids at the auctions, which are held on Bloomberg trading platform at the initial rate, announced by the auction organizer.
The rate of manat to the dollar will vary taking into account the ratio of demand and supply of currency and the auction will end in accordance with the exchange rate which was set following the recent trading session.
On the days when no auction is held, manat’s official rate against the US dollar will be set based on the weighted average rate formed in the currency market on the basis of the currency purchase and sale transactions between banks.
The exchange rate of dollar to manat was 1.5610 AZN in early 2016. It reached the record level of 1.6456 AZN for the reporting period on March 11 and 1.6381 AZN by late October.
Azerbaijani banks sold $253.81 million in October 2016. According to the CBA report, the sale of dollars increased by almost 14 percent compared to the previous month, while decreased by more than twofold compared to October 2015.
The banks bought $159.27 million in October 2016, which is 1.5 percent more than in September and 45.2 percent less than in October 2015.
Volume of foreign exchange operations in October 2016
|
Currency |
Purchase (thousand standard unit) |
Sale (thousand standard unit) |
|
US dollar |
159 267,8 |
253 808,1 |
|
pound sterling |
635,1 |
4 141,1 |
|
euro |
8 609,3 |
47 863,7 |
|
Russian ruble |
1 045 584,4 |
196 448,8 |
The amount of pounds sterling purchased by banks decreased by 5.3 percent compared to September 2016 and increased by 2.9 times compared to October 2015.
The amount of pounds sterling sold by the banks decreased by 4.7 percent for the month and by 27.6 percent compared to October 2015.
The banks decreased the purchase of euros by 2.7 times in October 2016 compared to September and by 30.5 percent compared to October 2015. The banks decreased the sale of euros by almost 18 percent for the month. The index decreased by almost 39 percent for the year.
The banks decreased the purchase of Russian rubles by 2.9 percent for the month, while their volume increased by 27.1 percent compared to October 2015.
The banks increased the sale of Russian rubles for the month by 13.6 percent and by 2.2 times for the year.
There are 32 banks, including two state-owned banks, in Azerbaijan.
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 9.44 billion manat as of November 1, 2016 decreasing by 7.1 percent for the month and increasing by almost 18 percent for the year.
The amount of cash money supply (M0) increased by 5.8 percent for the year from 5.43 billion manat to 5.74 billion manat. M0 increased by 1.1 percent compared to the previous month.
As of October 2016, Broad Money Supply (M3) totaled 20.12 billion manat or 15.9 percent more compared to October 2015 and by 0.1 percent less than in late September 2016.
The transaction money (M1) increased by 13.1 percent for the year, while decreased by 2.3 percent and amounted to 8.16 billion manat compared to late September.
Parameters of monetary market, in billion manat:
|
Monetary market parameters |
Volume, October 2016 |
|
Money mass in extensive understating (М3) |
20 122,6 |
|
Money mass on manat (М2) |
10 679 |
|
Cash in manat (М0) |
5 742,3 |
|
Non-cash in manat |
4 936,7 |
The bank reserves amounted to 2.48 billion manat in Azerbaijan as of November 1, 2016, or by 84.04 percent more than in October 2015 (1.35 billion manat).
The report said that the broad monetary base in the country as of November 1, 2016, amounted to 8.79 billion manat or by 19.5 percent more compared to the same period of 2015.
For comparison: this figure amounted to 7.36 billion manat as of October 2015. The monetary base increased by 19.5 percent in Azerbaijan compared to early 2016 (7.56 billion manat).
According to the CBA, as of November 1, 2016, the monetary base in manat amounted to 7.45 billion manat compared to 7.06 billion manat as of October 1, 2015.
The volume of currency in circulation amounted to 6.29 billion manat during the reporting period, while this figure stood at 5.99 billion manat as of November 1, 2015.
The ratio of cash in circulation to monetary base as of November 1, 2016 amounted to 71.5 percent, decreasing by 10 percentage points compared to late October 2015.
Azerbaijan’s loan market
The volume of overdue bank loans reached 1,375.6 million manat (8.7 percent) in Azerbaijan in late October 2016.
The volume of overdue bank loans increased by 5.66 percent for the year and reduced by almost 14 percent for the month.
According to the CBA, the credit organizations’ loans amounted to 15.82 billion manat in October, decreasing by 14.8 percent for the year and 5.75 percent for the month.
The loans in national currency prevail in the structure of issued loans. Some 53.8 percent (8.5 billion manat) of the loan portfolio of banks and non-bank credit organizations account for those loans.
The volume of those loans decreased by 25 percent for the year and by 3.8 percent compared to September.
Foreign currency loans (46.2 percent or 7.31 million manat) account for the remaining funds.
The volume of those loans increased by 0.35 percent compared to October 2015 and decreased by almost 8 percent for the month.
This ratio reached 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 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 of November 1, 2016, the volume of short-term loans amounted to 3.3 billion manat (including overdue loans worth 393.1 million manat).
The volume of long term loans amounted to 12.5 billion manat (982.5 million manat).
According to the CBA, the credit portfolio of the state banks reached 5.5 billion manat with the specific weight of 34.9 percent, while private banks issued loans worth around 9.8 billion manat with a specific weight of 62.1 percent. Some 4.25 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 473.4 million manat.
Azerbaijani banks reduced the issuance of consumer loans up to 5.91 billion manat in October 2016, which is by 4.6 percent less than in September.
According to the CBA report, consumer lending decreased by 21.8 percent for the year.
The consumer lending volumes decreased in Azerbaijan after the first devaluation of the manat rate [the dollar rate increased by almost 34 percent February 21, 2015].
However, the largest part of the total loan portfolio of banks - 37.3 percent (as of October) still accounts for the consumer loans.
According to the report, the trade and services sector (15.7 percent or 2.48 billion manat) ranked second, the construction and real estate sector (11.5 percent or 1.82 billion manat) ranked third in the total loan portfolio of banks.
The industry and production sector received 1.21 billion manat (7.7 percent of the total lending volume).
Some 7.4 percent (1.16 billion manat) accounted for the loans issued in transport and communication, 2.5 percent (402.8 million manat) - agriculture and processing, 2.3 percent (366.4 million manat) - energy, chemistry, and natural resources, the report said.
The loans given to the population in Azerbaijan's districts totaled 2.48 billion manat in October 2016, or 15.7 percent of the banks' total loan portfolio and 22.7 percent less than in the same period of 2015.
According to the report, the loans worth 13.34 billion manat were issued in Baku.
The loans in national currency (manat) amounted to 6.82 billion manat (51.1 percent).
For comparison, the loans amounting to 15.35 billion manat were issued in Baku in late October 2015. Some 8.94 billion manat (58.2 percent) of that amount accounted for the loans in national currency.
The average interest rate on loans throughout the country was 11.1 percent in October 2016, while in Baku that index stood at 9.5 percent.
The lending volume in the Absheron economic district totaled 516.89 million manat at an average rate of 16.2 percent.
In other economic districts the lending index was as follows: Aran – 609.31 million manat at a rate of 21.9 percent, Mountainous Shirvan – 93.21 million manat at a rate of 21.4 percent, Ganja-Gazakh – 526.48 million manat at a rate of 19.3 percent, Guba-Khachmaz – 188.97 million manat at a rate of 19.5 percent, Lankaran – 219.21 million manat at a rate of 21.5 percent, Shaki-Zagatala – 176.77 million manat at a rate of 20.9 percent, the Upper Karabakh – 42.17 million manat at a rate of 18.1 percent, Kalbajar-Lachin – 1.12 million manat at a rate of 13.2 percent, Nakhchivan – 105.02 million manat at a rate of 13.2 percent.
Azerbaijani banks decreased the average interest rate on loans in national currency and foreign currency in October 2016 compared to the previous month.
According to the report, the average rate on loans issued in national currency amounted to 12.24 percent in October compared to 12.42 percent in September.
The average interest rate on loans reached 13.23 percent in October 2015.
The average rate on loans in freely convertible currency made up 9.63 percent in October 2016 compared to 10.1 percent in September 2016 and 13.24 percent in October 2015.
The legal entities received manat loans on an average rate of 8.33 percent in October compared to 8.3 percent in September 2016 and 9 percent in October 2015.
The average rate on bank lending to the corporate clients in foreign currency amounted to 5.74 percent in October 2016 compared to 6.08 percent in September and 9.05 percent in October 2015.
As of October 2016, the average rate on manat loans to physical entities amounted to 16.2 percent compared to 16.48 percent in September and 17.68 percent as of November 1, 2015.
The average rate on bank lending to the individual customers in foreign currency was 18.45 percent compared to 18.59 percent and 21.45 percent accordingly.
Mortgage lending
Some 4.6 million manat was allocated from the Azerbaijani state budget to the Azerbaijan Mortgage Fund (AMF) in October 2016 to finance the social mortgage, which is 7 percent more than in October 2015, said the report.
The total volume of refinancing the loans issued by banks earlier was 0.8 million manat in October.
The budgetary funds obtained by the AMF for social mortgage since early 2016 exceeded 41.3 million manat. In general, 50 million manat are envisaged for these purposes in the state budget in 2016.
During October, as in the previous five months, Azerbaijani banks didn’t issue any mortgage loan, while in January-October 2015, the volume of mortgage lending totaled 500.4 million manat.
The mortgage bonds were not placed in October 2016 and during the whole year. The suspension of mortgage lending is associated with the reorganization of the AMF, the fund will continue issuing loans after the approval of the relevant legal acts.
The average monthly amount of the loan issued by the authorized banks of the AMF amounted to 40,882 manat in October 2016 (this figure amounted to 40,783.2 manat in October 2015).
The average loan period is 280 months (280 months), the average annual interest rate is 6.7 percent (6.71 percent a year earlier), and the average amount of payments is 295.7 manat (297.1 manat).
In general, the AMF’s authorized credit organizations issued 18,049 mortgage loans worth almost 734 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 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 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 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.
At present, the authorized banks of the Azerbaijan Mortgage Fund are 19 banks.
The participants of the mortgage market are 15 insurance companies [in total, 24 companies] and 2 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 amount of deposits in the country's banks amounted to 5,445.2 million manat in October 2016, increasing by 11.6 percent for the month.
The amount of deposits in the Azerbaijani national currency – manat reached 24.5 percent in October compared to 21.4 percent as of late September.
Over 52.5 percent of manat deposits accounted for demand deposits, the rest amount - term deposits, the report said.
According to the report, the deposits in freely convertible currency decreased by 6.6 percent up to 16,782.2 million manat for the month (5,098.6 million manat - demand deposits, 11,683.6 million manat - term deposits).
The share of the deposits in freely convertible currency in the banks’ deposit base decreased from 78.6 percent to 75.5 percent for the month, the report said.
Thus, as of early November, total deposits of physical and legal entities in the country's banks amounted to 22,227.4 million manat (a 2.7 percent decrease for the month and a 29.6 percent increase for the year).
According to the report, the physical entities' deposits reached 7,413.1 million manat in October 2016.
Most of the physical entities' deposits accounted for the ones in the foreign currency – 81.1 percent or 6,015.5 million manat, the report said.
According to the report, the population’s deposits decreased by almost 5.1 percent for the month and increased by 3.3 percent per annum.
The total volume of the legal entities’ deposits in Azerbaijani banks reached 14,814.3 million manat or by 9,977.6 million manat (48.5 percent) more than in October 2015, the report said.
As of early October, the amount of the Azerbaijani financial organizations’ deposits reached 5,317 million manat compared to 5,049.8 million manat in October 2015.
The amount of the Azerbaijani non-financial organizations’ deposits reached 9,497.2 million manat compared to 4,927.8 million manat in October 2015.
The population’s deposits, attracted to Azerbaijan’s banking system from the country’s districts (except for Baku), totaled 490.36 million manat in January-October 2016, that is, 6.6 percent of the total bank deposits, the report said.
According to the CBA report, the share of bank deposits in districts was 7.6 percent (567 million manat out of 8.64 billion manat) in the same period of 2015.
As of early November 2016, the amount of deposits in Baku amounted to 6.9 billion manat, while the deposits in the national currency - 1.14 billion manat.
According to the report, the foreign currency savings of the residents of Azerbaijani districts amounted to almost 235.1 million manat or 47.9 percent of all deposits in the banks in the districts in the reporting period.
For comparison, this figure amounted to 237.87 million manat in September or 49.8 percent of total deposits in the districts.
As of October 2016, the average interest rate throughout the country and Baku reached 4.9 percent.
Distribution of bank deposits in Azerbaijani districts:
|
Districts |
Amount of deposits (thousand manat) |
Average interest rate (%) |
|
Absheron |
162 417,8 |
5,8 |
|
Aran |
76 803,5 |
4,5 |
|
Mountain Shirvan |
13 652,6 |
5,1 |
|
Ganja-Gazakh |
99 842,4 |
5,7 |
|
Guba-Khachmaz |
28 299,5 |
5,5 |
|
Lankaran |
37 194,2 |
6,4 |
|
Seki-Zagatala |
28 402,3 |
4,4 |
|
Upper-Karabakh |
8 100,8 |
3,8 |
|
Kalbajar-Lachin |
294,1 |
9,4 |
|
Nakhchivan |
35 356,6 |
3,0 |
The average interest rate on deposits in Azerbaijani banks decreased in national currency and foreign currency in October 2016 compared to September, the report said.
The average rate on bank deposits in manat made up 6.31 percent in October 2016 compared to 8.75 percent in September 2016 and 8.46 percent in October 2015.
The average rate on deposits in foreign currency amounted to 4.72 percent in October 2016 compared to 5.12 percent in September 2016 and 8.51 percent in October 2015.
The banks drew deposits of legal entities in manat in the amount of 3.77 percent per annum in October 2016 compared to 5.93 percent in October 2015.
The funds on the accounts denominated in the foreign currency brought 3.2 percent to legal entities in October 2016, 3.77 percent in September 2016 and 5.23 percent in October 2015.
As of November 1, 2016, the average interest rate on deposits of physical entities in manat made up 10.09 percent compared to 9.94 percent as of October 1 and 9.41 percent as of November 1, 2015.
The interest rates on deposits of physical entities in foreign currency are as follows: 5.64 percent in October 2016, 6.02 percent in September 2016 and 9.21 percent in October 2015.
Liabilities of local banks to the CBA increased by 55.7 percent for the year and as of Nov. 1, 2016, amounting to 7,507 million Azerbaijani manat.
The volume of liabilities increased by 39.7 percent as compared to early 2016, and increased by 3.6 percent during October.
In January-October 2015, liabilities of commercial banks to the CBA totaled 4,822.5 million manat, in early 2016 – 5,375 million manat, in late September – 7,243.5 million manat.
The increase 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 changed for the first time since early 2015; it increased by more than three times and amounted to 2.2 million manat.
The CBA’s official international reserves decreased by 41.4 percent – from $6,834.6 million to $4,005.5 million during the year.
During the period, net liabilities of the CBA to the Azerbaijani government increased by 1.8 percent and totaled 6,594.8 million manat, as compared to the same period of 2015.
For comparison: the volume of liabilities reached 6,475.4 million manat as of January-October 2015.
Payment card market
The total turnover on payment cards via ATMs and POS-terminals amounted to 1.07 billion manat in Azerbaijan in October 2016 or by 4 percent more than in October 2015.
According to the report, the total number of transactions with payment cards reached almost 7.11 million units decreasing by 4.01 percent for the year.
The number of transactions on debit cards reached 6.26 million units totaling 939 million manat during the reporting period.
Of the total number of transactions, 4.6 million transactions amounting to 804 million manat were implemented on debit cards via ATMs within the country, and around 423,000 transactions amounting to 76 million manat via POS-terminals.
As much as 847,000 transactions worth 132 million manat were made on credit cards in October 2016.
Of the total number of transactions on credit cards, 169,000 transactions worth 48 million manat were implemented via ATMs and there were 256,000 transactions worth 31 million manat via POS-terminals.
The number of payment cards in Azerbaijan decreased by 6.2 percent in October 2016 and reached up to 5.33 million units compared to October 2015.
Of the total number of cards, 4.64 million units accounted for debit cards, in particular, 2.51 million - social cards, 1.51 million - salary cards, 0.62 million - other cards. The number of credit cards was 688,000.
As of November 1, 2016, as many as 2,442 ATMs operated in the country of which 1,316 are located in Baku and 1,126 in other cities and districts of the country. The total number decreased by 269 units or 9.9 percent for the year compared to October 2015.
The number of POS-terminals amounted to 68,152 units of which 38,289 are installed in Baku and 29,863 units in other cities and districts as of late October 2016.
The number of POS-terminals has decreased by 8,780 units or 11.4 percent for the year.
Stock market
The total turnover of exchange transactions on all instruments at the Baku Stock Exchange reached 4.4 billion manat in January-October 2016, that is, twofold less than in the same period of 2015.
According to the BSE, derivatives are still driver of the turnover. The volume of derivatives decreased by 1.64 times.
The derivatives formed the basis of the BSE turnover - 3,602.568 million manat in January-October 2016 compared to 5,892.841 in 2015.