Banking sector capitalization shows significant growth
By Mirsaid Ibrahimzade
It is proved that the prospects for the development of any bank are largely determined by its capitalization level. Lack of proper development inhibits both individual banks and the banking sector as a whole.
The capitalization of the banking sector of Azerbaijan reached 4.599 billion manats ($2.705 billion) during the first half of 2019, which is a 17.8 percent growth of 695.7 million manats ($409.2 million) compared to the same period last year, Azerbaijan’s Financial Market Supervisory Authority (FIMSA) said in a report.
Foreign experience in the capitalization of banking institutions indicates that an increase in bank capitalization is a positive factor, but different methods of raising capital are used for each economic system.
In general, to increase the level of bank capitalization, measures such as attraction of new shareholders, including foreign investors, to increase the bank’s capital, as well as development of their affiliate network, should be taken.
FIMSA’s report reads that the total assets of the banks as of June 30, 2019 went up by 7.1 percent compared to the same period last year, reaching 29.98 billion manats ($17.63 billion).
The total liabilities of Azerbaijan’s banking sector increased by 5.4 percent to 25.38 billion manats (14.92 billion). Deposits made up the largest share of liabilities at 74.2 percent, or 18.831 billion manats ($11.077 billion) (an increase of 9.14 percent). The volume of deposits of individuals amounted to 8.633 billion manats, and those of legal entities – to 10.197 billion manats ($5.998 billion).
The liabilities of banks to the Central Bank decreased by more than twice, to 207.7 million manats ($122.1 million).
The money supply increased by seven percent in Azerbaijan compared to early 2019, which is an acceptable indicator for regulating the inflation rate.
Moreover, the net profit of the banking sector at the end of June 2019 amounted to 433.4 million manats ($254.94 million), which is almost 12 times higher than last year's figure.
Profit was formed through interest income of 962.1 million manats ($565.9 million) (including 692.1 million manats ($407.1 million) of interest income from loans) and non-interest income of 364.5 million manats ($214.4 million).
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Mirsaid Ibrahimzade is AzerNews’ staff journalist, follow him on Twitter: @MirsaidIbrahim1
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