Fitch mentions recent improvement of Azerbaijan’s banking sector

The Azerbaijani banking sector has improved in recent years, but is still fairly weak, reflected by Fitch's Banking System Indicator score of 'b'.

The non-performing loan ratio fell to 2.9 per cent at end-2022, from 6.1 per cent in end-2020, helped by strong loan growth, Report informs, citing the Fitch rating report.

Return on average equity was 17.3 per cent in 2022 and is likely to remain above 15 per cent this year, Tier 1 capital is adequate at 15.2 per cent, and there is a low Russian presence in the sector.

The deposit dollarisation ratio fell to 48 per cent at end-2022, from 60 per cent at end-1H20, but is well above the peer group median of 19 per cent, and we view regulatory oversight as improving but still with several weaknesses.

Government on-lending and guarantees fell 9pp in 2022 to 16.6 per cent of GDP, and 80 per cent relate to the 2017 restructuring of the International Bank of Azerbaijan and the Southern Gas Corridor project.