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YapıKredi Bank Azerbaijan
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February 22, 2013
Content
Azerbaijan: The fastest growing economy in the region
Azerbaijani Banking System & Business environment
YapıKredi Bank Azerbaijan
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Country Information
• Area: 86,600 sq. km.
• Population: (2013f) 9.3 million
• GDP per capita (2013f): 7,850$
• Life expectancy (2013f): 71.32
• Literacy rate : 99.5
• Capital: Baku
• Language: Azeri
• Capital: Baku
• Other main cities: Ganja, Sumgayit
•Currency: Manat (1 USD = AZN 0.78)
BBB-
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Country highlights
Economic Growth: Azerbaijan has increased its economic
potential since 2006, owing to buoyancy in the oil sector. The
country has enjoyed comfortable economic boom following
high oil prices. Since 2010 there has been a marked shift in
the underlying economic dynamics, with considerable
movement toward developing the non-oil sector. The
country’s GDP growth averaged 10 per cent between 2007
and 2012.
International Relations: Azerbaijan is focused on resolution of Nagorno-Karabakh conflict and energy issues.
Relations with European countries, which have long-standing economic and other ties will remain strong.
Azerbaijan has multilateral diplomatic relationships with United Nations, OSCE, Council of Europe, NATO,
European Union, OIC, GUAM, UNESCO, OAS. Azerbaijan was elected as one of the members of the Human Rights
Council established by General Assembly.
Political Stability: President Ilham Aliyev avails power as the country’s higher executive authority. He will
remain in the office until the president elections, October 2013.
Inflation: 12-month inflation has declined sharply in 2012, to 1.1%, mainly driven by a fall in global food prices.
Exchange Rate: Manat has been stable, having slow appreciating trend against US dollar last years in nominal
terms. In 2012 is was at around 0.78.
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National Accounts
Real GDP Growth
10.8
5.0
9.3
6.2
1.1
3.5
1.2
0.1
2008a
2009a
2010a
2011a
2.1
1.5
2012a
2013f
2014f
2015f
2016f
99.7
2008
2008
145
2015
2016
119.6
123
127.1
109.9
116.9
2009
2010
2011
2012
2013
2014
13,320
13,570 14,150 14,470
GDP per head (US$ at PPP)
11,360
139.2
134.3
12,360
2009
12,990
13,120
2010
2011
2012
2013
2014
2015
Azerbaijan's government finances are solid.
The assets of SOFAZ accounted for USD 34.1
billion as of 2013, January 1.
2017f
GDP (US$ bn at PPP)
157
2017
14,870 15,880
2016
The remarkable growth performance over
2006-2012 reflects gains in term of trade and
an improvement in macroeconomic
management, notably on the fiscal front.
2017
Source: Economist Intelligence Unit
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GDP per head at market exchange rates
amounted US$ 6,627 in 2012, behind Russia
(US$ 13,130) and Kazakhstan (US$ 10,982) in
the Commonwealth of Independent States
(CIS).
Per capita GDP increased from 11.3 thousand
US dollars in 2008 to 13.3 thousand dollars in
2012 which is quite very high for a transition
country.
The authorities will continue to pursue
policies aimed at diversifying the economy
away from its reliance on oil, with only limited
success.
National Accounts
GDP share in South Caucasus (%)
Armenia
One of the important
objectives facing Azerbaijan
is to boost the economic
development of rural areas
and to improve the
agricultural output at
previous levels.
12%
Georgia
17%
Azerbaijan
% share in
Total GDP
71%
0%
20%
40%
60%
Stock of FDI, US$ bln
14.9
10.3
11.7
13.2
2011a
2012a
2013f
2014f
Current Account Balance (% of GDP)
16,453
80%
20.9
18.9
16.9
2015f
2016f
FDI flows to Azerbaijan are
dominated by oil and gas
sectors
2017f
17,146
15,132
15,040
10,175
7,608
6,672
6,665
5,074
3,342
33.7
2008a
29
23
2009a
2010a
29.7
2011a
12.7
2012b
10.8
2013c
Source: Economist Intelligence Unit
5
2014c
2015c
16.6
4.2
7
9.9
2016c
2017c
Economic outlook (Oil & Gas Sector)
• Crude oil reserves ~6 bln. Barrels (Jan. 2013)
• Largest field is ACG field ~ 80% of total oil output (~4.8 bln
barrels of reserves)
• ACG field is operated by AIOC, a consortium of 10 petroleum
companies (incl. SOCAR) led by BP
• Country’s profit share in ACG project estimated to be $200
bln (lifetime 2004-2025).
•In 2012 production slightly decreased for technical reasons.
• There are 3 export pipelines, but most ( 80%) is exported via
BTC pipeline.
•Natural gas is mainly produced in two offshore fields, the ACG
and Shah Deniz
•Proven gas reserves of ~30 trillion cubic feet (Tcf) as of
Jan.2011 (~ 849.5 billion cu m )
•Total recently discovered gas in Absheron field with estim.
several trillion cubic feet of gas reserves.
•Shah Deniz is expected to have a peak capacity of 560 Bcf in
addition to the 315 Bcf in Phase1, making it one of the largest
gas development projects in the world. It is expected to start
producing in 2017 and will eventually supply European
markets with natural gas.
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Population
Population by age group (BOP/THS)
Age group
Total
2000
2005
2010
2011
2012
8032.8
8447.4
8997.6
9111.1
9235.1
0-14
2545.6
2198.1
2030.7
2032.4
2052.5
15-24
1464.1
1737.5
1844.4
1821.8
1789.0
25-59
3603.6
3964.4
4587.5
4729.4
4862.3
419.5
547.4
535.0
527.5
531.3
59+
10000.0
64+
25-64
5000.0
15-24
0-14
0.0
2000
2005
2010
2011
2012
2011
2012
2013
Personal disposable income (US$ bn)
25.7
27
28.4
Household consumption (US$ bn)
24.9
26.3
28.6
Household consumption per head (US$)
2,730
2,840
3,060
Exports of goods & services (% change)
1.0
1.7
2.6
Imports of goods & services (% change)
2.5
1.5
2.3
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Despite all the positive results
reached to macroeconomic stability
in Azerbaijan, there are still a number
of problems to be tackled like the
improvement of the economic and
social situation of the population, the
heterogeneous distribution of
incomes, and the diversification of
the economic structure.
As a result of rapid economic growth,
nominal incomes of the population
increased by 7.6 times, from USD
5.09 billion in 2000 to USD 39.0
billion in 2012. In average
percentage, this is more than 3 times
higher than average inflation on the
same period.
Multinationals and the largest local companies
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Agenda
Azerbaijan: The fastest growing economy in the region
Azerbaijani Banking System & Business environment
YapıKredi Bank Azerbaijan
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General information on banks
2010
Number of banks
state banks (The International Bank of Azerbaijan)
private banks
Number of bank branches ****
Number of bank divisions
Bank assets (mln USD) *
Loans (mln USD) **
Household loans (mln USD)
Household savings (mln USD)
Capital (Gross - mln USD) ***
2011
2012
45
1
44
644
120
44
1
43
666
161
43
1
42
643
163
16,657
11,244
3,384
3,797
2,378
18,129
12,208
4,215
5,238
2,398
21,428
15,341
5,124
9,464
3,144
* IBA is the biggest bank with more than 35 per cent of the market share
* Top five banks account for 65 percent of the sector in terms of asset size, while top ten make 79 per cent
** Financial penetration accounts for 23 per cent of the GDP (2012)
** Financial penetration accounts for 65 of non-oil GDP (2012)
*** Minimum regulatory capital to be raised fivefold to 50 mln AZN from 2014, while now is 10 mln AZN
****Kapital Bank has the biggest branch network with 89 branches
In terms of assets, over 2012, the banking sector grew by 18%, from USD 18.1 billion to USD 21.4 billion. We accounted for
1.36% of market share in 2012, ranking 18th in terms of assets.
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Main Taxes
Corporate taxation
Azerbaijani legal entities are subject to a profit tax of 20% on their worldwide
income. Nonresidents are taxed on Azerbaijan-source income at the same rate.
Profit tax is imposed on a company’s operating profits, computed as the difference
between total taxable income and deductible expenses. Companies operating in the
oil and gas sector are mainly governed by PSAs and HGAs.
Dividend withholding tax
Dividends received Azerbaijani companies and permanent establishments of foreign
companies located in Azerbaijan are only subject to withholding tax at a rate of 10%
VAT taxes
The standard VAT rate is 18%, although some transactions are exempt (e.g. financial
services) or zero-rated. VAT in Azerbaijan is similar to that in most European VAT
systems, with tax levied on the supply of most goods and services, and the import of
goods. VAT payers are entitled to recover the amount of VAT paid on purchases
(input VAT) that exceeds the VAT received from their taxable supplies (output VAT).
Simplified tax
The simplified tax rate is 4% and 2% of gross revenue for Baku and the surrounding
regions, respectively. Persons with a turnover less than AZN 120,000 in the period of
12 months have a right to register as simplified taxpayers.
Individual income tax
Rates are progressive up to 25%. Up to 2,500 AZN, the rate is 14% and over 2,500 is
25% (350AZN + 25% of the amount exceeding 2,500 AZN). There is also 3% withheld
from the gross salary of the employee for The State Protection Fund.
Social taxes
An employer is required to make contributions to the State Social Protection Fund
on behalf of its employees on the of 22%.
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Business climate (SWOT)
 Strengths
* Attractive natural resource endowment
* Geographical location
* Stable macroeconomic situation
* Growing economy
* Political stability
* Competitive labor costs
 Weaknesses
* Shadow Economy
* Difficult business environment (monopolies,
oligopolies, weak legal system, unofficial
payments)
* Economy’s dependence on energy sector.
* Underdevelopment of non-oil sector
 Opportunities
* Potential to become regional economic and
financial centre
* Diversification of economy (non-oil sector)
* New oil & gas discoveries
(In Nov., 2010 new gas field “Umid”
was discovered, est. reserves: 200 bln m3,
estim. revenue $30-40 bln )
 Threats
* Escalation of Armenia-Azerbaijan conflict
* Volatility of oil prices
* Oil reserves might be less that reported
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Agenda
Azerbaijan: The fastest growing economy in the region
Azerbaijani Banking System & Business environment
YapıKredi Bank Azerbaijan
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Brief history
1998
1998/11
2000/01
2001
2002/05
2005/09
2007/02
2008/02
2008/07
2008/08
2009/01
2009/12
2010
2011
2012
2012
2013
2013/04
2013/05
Kocbank Azerbaijan CJSC was established
Applied to National Bank of Azerbaijan for Banking License
Banking license was issued by National Bank of Azerbaijan
Merging protocol was signed between Koc Group and Unicredit Group
Establishment of Koc Financial Services (KFS): Partnership
Agreement was signed between
Koc Group and Unicredit Group with the partnership of %50 each
Koc Financial Services acquired YapiKredi Bank A.S.
The name of KocBank Azerbaijan was changed as YapiKredi Bank
Azerbaijan CJSC
YapiKredi Invest Azerbaijan LLC was established
New Head Office building was opened in Baku
First branch out of Baku opened in Ganja city
5th branch, named Azadlıg, was opened in Baku.
Two new branches, named Sabail and Ahmedli opened
Sumgayit Branch opened
Babek Branch opened
Dernegul and Nerimanov Branches opened and number of branches reached to 11 (+1).
Worldcard brand introduced in Azerbaijan
Start of expanding Retail Banking Business
J. Jabbarli, M. Acami Branches opened.
Babek Plaza Branch opened and number of branches reached to 14 (+1).
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Key Financial Information
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Geographical Presence and Future Expansion Plan
Current positions
Possible future sites
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Other Projects
Retail Banking Business Expansion
• A greater concentration on retail development
• Competitive environment analysis and overall retail business
improvements
• Improving ADC and Increasing branch network
• High Level Positioning
YapiKredi Banking Academy
• YapiKredi Banking Academy was established in Azerbaijan in 2012
• Yapi Kredi Turkey’s Academy supports and maintains its activity
• Focused to enhance competency levels to enhance quality and
sales potential
• Other trainings and classes on various issues
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Cards Payment Systems-World
World Loyalty Program has been introduced in the market
in September 2012.
In 9 months;
• 40K Worldcards were sold (7% MS) which placed Yapi
Kredi as the 3th biggest player in the market.
• 1.270 POS terminals were deployed which placed Yapi
Kredi as 1st in loyalty POS terminal market.
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Services
 Lending
 Cash-in-Transit Service
 Project and Investment Financing
 Safe-deposit boxes
 Deposits
 Cheques
 Fund Management Services
 Statements
 Trade Finance Instruments
 Brokerage through YK
Invest Azerbaijan
 POS Terminals
 Plastic Cards (World
Card brand just
launched)
 ATM
 Money Order Service
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YapiKredi Bank Azerbaijan is an excellent choice for International
Customers for several reasons :
Wide correspondent
banking network
Leading banking
experience
Professionalism of
Yapikredi
Many foreign
companies in
portfolio
Strength of UCI
Network
Wide range of Product
Memberships
 AMCHAM (American Chamber of Commerce Azerbaijan)
 Azerbaijan Banks Association
 AZIPS (Azerbaijan Interbank Payment System)
 SWIFT
 Western Union
 Baku Interbank Currency Exchange
 Baku Stock Exchange through YK Invest Azerbaijan
 National Confederation of Entrepreneurs of Azerbaijan
 Master Card
 ATIB (Azeri-Turkish Businessmen Association)
 Azericard
 Bloomberg
 Reuters
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