Moody's improves outlook for Azerbaijan's banking system

The decision reflect the recent stabilisation in banks’ asset quality and liquidity and improving profitability and capitalisation, the ratings agency says in its new Banking System Outlook on Azerbaijan. Azerbaijan’s relatively stable macroeconomic environment has supported the banking sector, which also has growth opportunities due to the low banking penetration in the country

Moody’s also considers that problem loans have peaked at 15%-17% of gross loans, and are likely to remain at this level for the rest of the year. However, Moody’s points out that while key outlook drivers have stabilised, this stabilisation occurred at a very weak level and there remain
difficult challenges. As a result, Azerbaijan’s average Bank Financial Strength Rating (BFSR) remains at E+.

"Azerbaijan’s oil-based economy remains sensitive to external shocks, and the banks’ credit-risk appetite remains high, evidenced through significant lending concentrations, related-party exposures, and a high share of FX loans," says Lev Dorf, Moody’s lead analyst for Azerbaijani banks and author of the report, in a statement.

Additionally, the risk-management and underwriting standards of Azerbaijani banks remain sub-par.


/APA/