EBRD voices interest for induration of Azerbaijani banks

Source: AzerNews

The European Bank for Reconstruction and Development (EBRD) has announced its interest in facilitating the consolidation of Azerbaijani banks.

Head of the EBRD Baku office Neil McKain said that the bank has already notified its partner banks and the Central Bank of Azerbaijan (CBA) about its commitment to participate in the consolidation process.

"If we receive relevant proposals, we will readily consider them," McKain told Trend news agency.

CBA announced the start of the process of consolidation of the local banks in late 2012.

Currently, Azerbaijani banks are required to have a total capital of no less than 10 million manats (over $12.7 million). However, the new requirements of the CBA will take effect from January 1, 2014, and from then onward the total capital should be at least 50 million manats.

In general, the CBA has identified the following development options for the banks: capitalization, consolidation or conversion into NBCOs or going out of business.

McKain went on to say that the Azerbaijani banking sector has achieved much, but there is still a lot of work to be done.

"The situation on the financial market of the country is good, but it does not mean it needs no improvements," McKain said.

The banking system of the country already has a successful practice of banks' consolidation with the assistance of the EBRD. For instance, the present UniBank was formed through a merger in 2002 of two commercial banks, MBank and Promtexbank, and the EBRD acquired a 15 percent stake. This was followed by a merger of the Bank of Baku with IlkBank in 2005.

Four or five banks on the Azerbaijani market have already started talks on merging their assets. By mid-2013 the first agreement on consolidation of bank assets is expected to be reached.

The number of banks operating in Azerbaijan with capital exceeding 10 million manats reached 41 in Q1 2013. Their number was 42 in the first quarter of last year.

Meanwhile, the share of banks with capital worth 3.5 million manats to 5 million manats in the total capital of all banks made up 0.3 percent.

The number of profitable banks increased by three and the total profit of the sector increased 58.3 percent compared to Q1 2012.

The number of unprofitable banks went down by four and the total loss was halved.

43 banks operate in Azerbaijan.

Speaking about the bank's activity in Azerbaijan, McKain said the EBRD is involved in ten projects implemented in the real and financial sectors in 2013.

"We are working on projects in the fields of agriculture, building materials, food processing and others," McKain said.

The EBRD's activity in Azerbaijan focuses on the following key areas: industry, commerce and agribusiness, finance and energy, and infrastructure.

Priority areas include increasing investments in the country's non-oil sector, funding financial sector development and support for small business.

Recent EBRD activities in Azerbaijan include the first energy efficiency loan to a local bank, a loan to the largest domestic mineral water bottler, three credit lines for small businesses and a major road upgrade project.