BAKU

Azerbaijan’s banking sector is starting to show signs of recovery as the economy rebounds from the global shock of the COVID-19 pandemic, though it still reported lower profits than a year earlier.

Lenders reported a fall in total net profit of 13.1 percent year-on-year of 273.2 million manats ($160.7 million) in the period of January to May 2021, but an increase from the 194.7 million manats reported a month earlier, according to central bank data.

The Central Bank said that the operating profit of the banking sector rose by 14.2 percent year-on-year to 411.2 million manats in the first five months of 2021. Total assets rose by 5.5 percent to 33.8 billion manats, while total liabilities increased by 6.2 percent to 29.6 billion manats. Banks’ liabilities to the Central Bank declined by 0.8 percent to 371.3 million manats.

Azerbaijan’s economy, traditionally reliant on oil and gas, was hit hard by the COVID-19 pandemic, as lower demand for oil and problems with curbing supply hurt global oil prices. Restrictions to curb the spread of the virus also impacted domestic consumption and spending as the economy shrank.

Now restrictions have eased, the economy is rebounding, prompting Azerbaijan’s government to say earlier this month it may raise its forecast for economic growth this year. GDP grew 0.8 percent in the first five months of 2021 from a year earlier, expanding for the first time since February 2020. In January-April, the economy shrank o.2 percent.

The bank loan portfolio rose by 3.8 percent year-on-year to 14.7 billion manats as of June 1, 2021, the central bank said. Total capitalisation rose by 1.1 percent to 4.8 billion manats. The deposit portfolio increased by 6.5 percent to 22.1 billion manats, including deposits by individuals, which rose by 5.4 percent to 8.5 billion manats. Deposits by legal entities increased by 7.1 percent to 13.1 billion manats.

There are 26 banks in Azerbaijan, including 12 with foreign capital. The largest bank by assets, the state-owned International Bank of Azerbaijan (IBA), reported a drop in its net profit of 17 percent year-on-year to 36.752 million in 2020, according to its annual report.