Azerbaijani Banks are looking for the ways of effective positioning at the market

A relatively low pace of economic growth hinders the growth of money supply in economy. In April volume of money supply increased by 61 million AZN or 0.5% and totaled 11202.4 million AZN. During the past 12 months volume of AZN in economy increased by 3026 million AZN or 37%, but since early year its growth was rather moderate.

According to the Azerbaijan Central Bank, in April the sum of cash beyond the bank system increased by 71.5 million AZN or 1% up to 7312.8 million AZN, volume cashless AZN decreased by 132.5 million AZN or 3.3% to 3889.6 million AZN. By January 1, 2012 total volume of cash in circulation reached 7658.5 million AZN or up 32.5% against a year earlier. At present share of cashless settlements in payments makes 7% in our country (25% in Turkey, 35% in Russia and 40-45% in Baltic countries). During a short period number of POS terminals in the country increased by several times. As other governments, our government will have to take special measures, for instance, announce a maximum amount of money, after which the deal should be only in cashless form.

In April a wide index of money supply increased by 26.3 million AZN or 0.2% and totaled 14346.2 million AZN. The volume of foreign currency in the banks increased by 87.4 million AZN or by 2.9% to the equivalent of 3143.8 million AZN. During a year foreign currency expanded by 21.7%. The share of manat resources in the total money mass constituted 85.1%, up 9.2% against the index of May 1, 2011.

In April a total volume of money base dropped by 2.9% and during a year it increased by 33% up to 8223 million AZN. During a month the AZN base dropped by 201.8 million AZN or 2.4% and totaled 8145.9 million AZN.

By July 1, 2012 official currency resources of the Central Bank of Azerbaijan (CBA) totaled $11046.3 million. According to CBA, in June 2012 currency resources expanded by $154.4 million or 1.4% and since early year increased by $564.8 million or 5.4%. The AZN rate is strictly controlled.

From January to April 2012 total incomes of the banks operating in Azerbaijan reached 518.16 million AZN, up 83.37 million AZN or 19.2% against the same period last year. The reserve allocations to the assets increased by 55.55 million AZN by 2.1 times against January-April last year and reached 103.94 million AZN. Annual profit of the banks before taxation totaled 17.34 million AZN, almost twice less against January-April 2012. During an year final profit of the banks reduced by 2.3 times and totaled 13.6 million AZN.36 banks worked with profit and their total net profit was equal to 82.18 million AZN and their number increased by two. CBA Vice President Hagani Abdullayev said that adequacy of capital of the banking system is above the minimum demand by 4-5% and almost half of the assets is liquid. Reduction of incomes of the banks is explained by their caution.

In April 2012 the banks’ liability of credits borrowed from CBA reduced by 62.9 million AZN or by 2.9% to 2129.7 million AZN. During a year this index increased by 9.3% and since early year by 4.8%. In other words, support of the banking sector by CBA continues.

In May 2012 total assets of Azerbaijani banks increased by 79 million AZN or by 0.5% up to 14820.9 million AZN. Since early year bank assets increased by 6.3% and during a year by 1679.8 million AZN or 12.8%.

According to CBA, by June 1, 2012 credit investments totaled 10333.4 million AZN, increased by 1.5% this month and by 21.1% during the past year.

In May population’s deposits in the banks increased by 2.9 Million AZN and totaled 4341.7 million AZN. Since early year this index increased by 5.4% and by 31% during 12 months.

Aggregate capital of the banking sector dropped by 85 million AZN or 4% and totaled 2070.2 million AZN.

The ways of privatization of IBA are being evaluated, some banks are looking for the ways of effective positioning at the market. Among them is the leading corporate bank of Azerbaijan – Pasha Bank. It has recently acted as a co-manager of issue of Euro bonds worth $150 million by Baghlan Group company, which has 33.33% share in the oil production company Bahar Energy Limited. Therefore, Pasha Bank has become the first co-manager of a big issue of international bonds among private banks of Azerbaijan. (Lead manager of issue of bonds of BNP Paribas). The banks has been preparing to this experience for almost two years and now it has experience of placement of bonds of local companies (4 issues worth $90 million). One should bear in mind that the bank is under a high patronage and this is one of the reasons of its success, considering its good management. Looking at Standard Bank, we understand that it is difficult for the bank to work once it is deprived of such a support.

Insurance market also showed good results during six months. Azer Bayramov, Deputy Finance Minister, said last year growth of this market constituted 37%, but during 6 months this year insurance increased by 67%.

There are clear attempts to strengthen their activities at the securities market. State Securities Committee has opened the tender documents for assessment of the tender proposals of the pretenders for the consultation services within the project “Upgrade of Capital Market in Azerbaijan.” Three companies – Corporate Solutions, Deloitte & Touche LLC and Turkiye Kapital Bazarlari – participated at the tender. The volume of the credit agreement with the World Bank for this purpose is $12 million.

The Committee has been working on the standard acts regulating activities of professional participants of the market for management of investors’ assets. The innovations will help to develop the market. But there are no limitations for the operating company – inadmissibility of placement of client’s capital for purchase of own or related to it companies, security of controlled assets not related to management of liability and etc. However, the rewards are described very clearly. Two companies – Standard Capital LLC and UniCapital open-type JSC – have licenses for management of assets at the securities market in Azerbaijan.

The State Securities Committee has revised the standards of the depository activities. The tariffs for providing depositary services have been also revised. Three companies – National Depository Centre, Baku Stock Exchange and Corporate Trust Agency – have licenses for providing depository services in Azerbaijan.

In the near future the market will be regulated by the updated law on securities.

The state obligations and bonds with the right of recall become popular at the stock market. The reason is a rather high profitability of these papers. The profitability of the first ones reached 5% (demand exceeded supply by 3.3 times) and the second ones – 4%. But profitability of notes did not exceed 1.42%.