Fitch: Azerbaijani banking sector’s key indicators improved

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

“The non-performing loan ratio fell to 2.9% at end-2022, from 6.1% at end-2020, helped by strong loan growth.

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

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

As for the government on-lending and guarantees, their share fell 9pp in 2022 to 16.6% of GDP, and 80% relate to the 2017 restructuring of International Bank of Azerbaijan, and the Southern Gas Corridor project where there has been a reduction in contingent liability risk.