Main cause of banks` losses becomes known - interesting approach from Ekrem Hasanov


February 20, Fineko/abc. az. I don't trust banks' financial statements.

The relevant statement was made to website ABC.AZ by banking expert Ekrem Hasanov, when commenting on the growth of operating profit of 14 out of the 30 banks operating in Azerbaijan compared with 2018.

According to the expert, actually there are more banks working with losses. Hasanov thinks that the main cause why banks suffer damage is that they cannot repay loans and must create more reserves.

He noted that in fact, banks operating with losses have the opportunity to get out of profit: "Let's say the bank gives loans for AZN 100 million. AZN 50 million of those loans are not repaid. Lawsuits have been going on for years. According to Central Bank’s rules, a 100% reserve should be created here. The bank must spend additional money. This is a loss. But tomorrow, after paying off this loan through the court, by selling the collateral and in another form, the reserve will return to its place. That is, AZN 50 million will not be lost. The point is that this damage could be reduced if banks operating with losses solve their problem loans. Therefore, first of all, you need to know the true quality of those loans. If the non-repaid loan has a good collateral guarantee, it will be repaid eventually and will come out of the loss to the bank."

By Elmir Murad