BAKU, Azerbaijan, Aug.20
By Zeyni Jafarov - Trend:
Azerbaijani banking sector’s capital level is solid, the Moody's international rating agency told Trend.
"On the one hand, the coronavirus-induced loan restructuring will continue, for some time, to exert negative pressure on Azerbaijani bank’s asset quality metrics and, therefore, their profitability. On the other hand, the sector’s capital level is solid, partially because of the deleveraging we observed in 2020, which will provide a sound buffer for the banks not only to absorb any expected credit losses, but also to start growing their balance sheets as the economy recovers," said Moody's.
The agency noted that the weighted average deposit rating assigned by Moody’s to Azerbaijani banks is B1, which, for instance, is below that measure for Kazakhstan, in line with that for Armenia and above that for Turkey (see illustration below).
"However, the deposit ratings of a three out of five rated banks, namely International Bank of Azerbaijan, Kapital Bank and Xalq Bank, benefit from the government support, while without the support uplift the weighted average baseline credit assessment, which is the measure of rated banks’ standalone financial strength, is b2, one notch lower than the deposit ratings. However, all of the rated banks’ deposit ratings carry a positive outlook on Moody’s expectation that Azerbaijan’s improving operating environment for banks and their borrowers will, over time, translate into banks’ strengthening their financial fundamentals."
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