Azerbaijan's banking industry is showing signs of recovery from a protracted correction, supported by favorable commodity prices stimulating credit demand alongside a material improvement in asset quality, Report informs, citing S&P Global Ratings.
"In our view, the institutional framework in Azerbaijan remains relatively weak, despite improvements in certain regulatory aspects. We see high market distortions, with a few larger banks dominating. Volatile bank funding markets, challenging access to wholesale funding for most banks, and a lack of long-term financing still represent challenges for the sector, the economists at the S&P Global Ratings said.
According to the agency, supportive oil price dynamics benefits Azerbaijan's economic, fiscal, and balance-of-payments performance: "In our view, regional geopolitical developments--including the Russia-Ukraine war and Azerbaijan's confrontation with Armenia--and the deteriorating global economic outlook present additional risks to Azerbaijan's economic performance."