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Financial news
Bulletine Finance 

2017 August 18 ( Friday )  16:27:02
Print version
Русский Azərbaycan


Banks Lose Customers

Baku / 18.08.17 / Turan: The Azerbaijani banking community has established another anti-record: only in July the volume of the client base of domestic banks decreased by more than 80 thousand people or 1.4%, amounting to 5,612,810. This is stated in the CBA report. Of these, 5,534,553 or 98.6% are physical persons, and 78,257 or 1.4% are legal entities. Entrepreneurs are 210,533 people or 3.8% of bank customers.

This situation was also observed in June this year: the number of bank customers - individuals reduced by 1.4%, but legal entities grew by 0.4%, and entrepreneurs - by 2.4%. At the beginning of the year, the client base of the country's credit institutions numbered about 6 million people.

Thus, the outflow of borrowers and deposits from banks is still ongoing. At the same time, the banks themselves went into austerity, changing the scheme of lending. According to the CBA, the portfolio of banks in the first half of this year for loans extended to customers in Baku decreased by 16.5% - to 11 billion 688 million 206.3 thousand manats. The volume of loans granted to borrowers amounts to 84.2% of all banks' credit investments. In general, in Baku loans are issued by banks on average at a rate of 9.9% per annum. In Azerbaijan, loans are issued on average at a rate of 11.3% per annum.

The volume of lending by client banks in the regions of Azerbaijan as of July 1, 2017 amounted to 2 billion 193 million 789,100 manats. It is a decline by 10.3% compared with the beginning of the year. In the regions, banks prefer lending to legal entities and individuals at rates of 18.6% - 21.9% per annum.

Commenting on the situation in this area for Turan IA, Samir Aliyev, expert of the Economic Initiatives Assistance Center, noted that the figures released indicate a strengthening of negative trends in this sector. The reason for the outflow of capital from banks should be sought in shocks in this sector - the closure and merger of banks, litigation in connection with non-return of deposits, loss of confidence in these structures, and a review of the position of investors regarding the profitability of investing funds. Many clients transfer funds to the most reliable tools - the acquisition of real estate. At the same time there is a migration of customers - from small to the largest banks.

According to the expert, deposits were considered attractive when interest rates were high before the devaluation. So people made deposits for a long time. However, the financial crisis forced borrowers to save their savings; moreover, banks were forced to revise the yield on deposits downward. All these factors influenced the choice of small and large investors.

"The main factor in the outflow of capital is the reliability of the bank. It cannot be avoided. Customers go to foreign banks or the real estate market. If a person does not have confidence in the bank, then no interest can attract him to this bank. People go for reliability, which interests them already more than the interest rate," Aliyev said.

As for the forecasts for the banking sector, then, according to the expert, they are very disappointing: it is expected to reduce deposit rates, increase the value of loans and reduce profits and the level of trust in banks by clients. The reason is the change in the model of consumer behavior and stagnation in the economy, as evidenced by the decline in the GDP by 1%. This situation will not change in a short time.

It is well known that the country's economy and the banking sector are closely interrelated. On the one hand, the banking sector plays an important role in ensuring the efficient allocation of financial resources, on the other - the macroeconomic environment has an impact on the state and stability of the banking sector. The government of Azerbaijan should invest in the real sector of the economy, which is the base where a product is created to ensure the functioning of the financial sector.

Audit Companies KPMG and PwC Fined in USA

Baku / 18.08.17 / Turan: The auditing companies KPMG and PwC entering the Big Four have been fined in the US and the UK for a substandard audit of $ 6.2 million and £ 5.1 million. Thus, the myth of the professionalism and objectivity of large auditors is collapsing, said the banking expert Akram Hasanov, who is also the Chairman of the Bank Standard Creditors" Committee.

"We should also get KPMG prosecuted for checking the financial statements of the largest bankrupt banks - Bank Standard and Tekhnika Bank," he said in an interview with Turan IA, noting that the company has become a figurant of a high-profile case involving overvaluation of the assets of an oil and gas company. Thus, KPMG and PwC have been subjected to fines of millions of pounds sterling due to the errors made during their independent control. KPMG was fined more than $ 6.2 million by the US Securities and Exchange Commission (SEC) due to the poor audit of the oil and gas company Miller Energy Resources in 2011.

The company is accused of ignoring the fact that the value of some of the assets of the firm for which the financial assessment was conducted was overestimated 100 times. In addition, the British Council for Financial Reporting fined PwC for violations in the audit of RSM Tenon Group, conducted in the fiscal year 2011. PwC should now pay 5.1 million pounds sterling. According to Bloomberg, this is the biggest penalty for the regulator"s entire operation. It is reported that PwC should also cover the expenses of the British Financial Reporting Council in the amount of 500,000 pounds sterling.

In Azerbaijan, the bankruptcy of two major banks, Bank Standard and Tekhnika Bank, has also raised questions about the activities of this company. "Until 2012, the external auditor of the above-mentioned financial institutions was PwC. Then this company"s employee Vugar Aliyev moved to KPMG and took his old clients there. It is thanks to him that these banks have not been well audited in recent years," the expert believes.

Earlier, it was reported about the readiness of the Audit Chamber of Azerbaijan to conduct appropriate checks in the company. This information appeared immediately after the letters sent on behalf of the suffered creditors of Bank Standard to the Audit Chamber, as well as the Embassy of Switzerland, where KPMG is registered, and the Netherlands, where its head office is located.

"The Ambassador of the Netherlands said he sent my application to the head office of the company, and the Audit Chamber reported that an unscheduled audit of quality control would be carried out in this institution, as this decision was made at the Board meeting. We will be notified about the results of the audit and, therefore, the public will be informed about this," the expert promised. -0----

Demir Bank’s Loss in H1 of 2017 Exceeded AZN Eight Million

Baku / 18.08.17 / Turan: Assets of Demir Bank in the first half of 2017 compared to the same period of 2016 decreased by 52.582 million manats or 9.8%, amounting to 485.517 million manats.

Over the reporting period, the bank"s liabilities decreased by 41.613 million manats or 8.5% and amounted to 447.919 million manats.

The value of deposits in the bank decreased by 21% or 39.354 million manats and amounted to 148.888 million manats.

In particular, the call deposits of individuals decreased from 17.220 million to 13.448 million manats, and those of legal entities decreased from 18.616 million to 13.599 million manats. Timed deposits of individuals decreased from 152.281 million to 121.551 million manat, and those of legal entities increased from 124,000 manats to 289,000 manats.

For the specified time the Bank reduced the debt to the Central Bank from 37 million manats to 17 million manats.

The Bank"s capital for the reporting period decreased by 10.970 million manats or 22.6% and totals 37.597 million manats.

In the first half of the year the Bank suffered a loss of 8.450 million manats. ---71D

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