The increasing use of digital banking is expected to raise Azerbaijani banks’ fees and commissions, as well as support cost efficiency, as lenders look to reduce branch networks and headcount.
In the first half of 2021, the volume of internet banking transfers increased by 58.5%, reaching a value of 59 billion manat ($34.7bn), compared with the first half of 2020, according to the Central Bank of Azerbaijan, as reported by Trend. Digital banking accounted for about 65% of all money transfers in the first half of 2021, with individuals making 25.5 million transfers worth a total 93.3 billion manat.
“An increase in non-cash transactions would boost banks’ fee and commission income,” wrote Olga Ulyanova, an analyst at Moody’s, in a report ‘Azeri banks’ cost efficiency will benefit from increasing volume of digital banking’.
At the country’s largest bank, International Bank of Azerbaijan (IBA), net fee and commission income fell 7% year-on-year to $35.8m in 2020, according to The Banker Database. However, rival lender Kapital Bank’s net fee and commission income rose 5% year-on-year to $58m.
According to Moody’s, Azerbaijani banks have been looking at reshuffling and optimising their distribution networks. However, according to The Banker Database, the number of branches has either held steady or risen over the past five years. The number of branches at IBA has remained at 36 between 2016 and 2020, while the number of bank branches at Kapital bank has increased from 90 to 102 during the period.
Net fee and commission income at leading Azerbaijani banks