Baku, Azerbaijan, May 25
By Anvar Mammadov – Trend:
Azerbaijani banks should increase their reserves to cover problem loans, Maria Malyukova, analyst of the Moody’s Investors Service international ratings agency, said at the Moody's Annual Azerbaijan Summit in Baku May 25.
The reserves of Azerbaijani banks should be increased due to the growth of the share of problem loans in the banks’ total loan portfolio, she said.
According to the information regarding six banks, which are rated by Moody’s (International Bank of Azerbaijan, Kapital Bank, Xalq bank, Bank Respublika, Bank of Baku and Bank VTB (Azerbaijan)), the share of problem loans (which remained overdue for more than 90 days) of these banks amounted to 30 percent of their total loan portfolio as of late 2016, while it amounted to 16 percent as of late 2015, she noted.
Given this, the coverage level for these loans is insignificant and amounts to 10.6 percent, Malyukova noted.
She said that the growth of the share of problem loans is observed against the background of reduction of lending volumes.
“As of late 2016, the loan portfolio of Azerbaijani banks decreased by 24 percent,” she added. “This tendency continued in the first quarter of 2017 as well. The reduction in lending in this period was 9.5 percent.”