CBA: Azerbaijan's economy keeps attractiveness for foreign investment

Source: AzerNews

Azerbaijan's economy and banking sector retained their attractiveness for foreign investors in the first quarter of 2013, according to a report of the Central Bank of Azerbaijan (CBA) on financial stability in the country.

The amount of funds attracted from non-resident banks and international financial institutions in the first three months of 2013 increased by 1.9 percent and amounted to 2.311 billion manats (over $2.94 billion).

"Along with that, the volume of funds drawn from abroad was retained at an acceptable level, accounting for 14.9 percent of the total commitment," the report says.

The volume of deposits of non-residents during this period increased 13 percent.

Overall, the share of domestic assets in the shape-up of banks' resource base in January-March 2013 remained high, the central bank said.

In Q1 banks' liabilities rose 4.9 percent to 15.826 billion manats, while the total amount of bank deposits increased 13.3 percent, reaching 11.012 billion manats, which is 69.6 percent of the banks' liabilities.

During the reporting period, deposits in the banking system of the country grew by 8.3 percent, reaching 5.563 million manat, and their share in total liabilities of banks was at 35 percent.

The CBA sees positive changes in the structure of deposits. The amount of deposits placed for a period of less than one year amounted to 2.124 billion manats in the reporting period, increasing by 34.2 million since the beginning of the year.

The volume of long-term deposits (for a term exceeding one year) increased 286.2 million manats, amounting to 2.267 billion manats.

The volume of deposits in the national currency increased 10 percent to reach 3.260 billion manats in Q1 2013.

According to the central bank, the deposits of legal entities in January-March 2013 amounted to 5.476 billion manats. The share of corporate deposits in the total number of deposits amounted to 49.3 percent.

As of January 1, 2013, 43 banks were operating in Azerbaijan.

Furthermore, the report says that the liquidity level of banks in the fulfillment of obligations to creditors and borrowers remained at an acceptable level.

The share of highly liquid assets in the total banking assets remained at a level above the minimum (10 percent), making up 14 percent. The acid-test ratio was 69 percent, exceeding the minimum 30 percent limit of the central bank, the report says.

The average daily balance of highly liquid assets has increased 16.5 percent this year to hit 2.498 billion manats.

As of April 1, 2013, the share of cash, nostro accounts and government securities in the structure of highly liquid assets accounted for 31.4 percent, 27.8 percent and 15.9 percent, respectively. The share of banks' accounts at the CBA held in liquid assets was 25 percent at the end of the reporting period.

The CBA also regarded the quality of the loan portfolio of the domestic banking sector in Q1 2013 as acceptable.

The share of overdue loans in the total portfolio made up 6 percent at the end of the reporting period.

Overall, the stress tests conducted by the CBA on a regular basis show that preventive control and improvement of the risk management systems in the banking sector can be maintained at an adequate level of asset quality.

"Maintaining liquidity at an acceptable level and the ongoing process of capitalization of banks increase the resistance of the system to possible shocks," the CBA report says.