Moody's: "Ratio of problem loans of Azerbaijani banks is lowest in CIS"

The ratio of the total capital of the Azerbaijani banks to measured risk assets is 25%. Azerbaijan is a leader among the countries of the Commonwealth of Independent States (CIS) for this indicator, Report informs, referring to Moody's "Banks - Emerging Markets 2022 Outlook."

According to the document, this figure is 17% in Kazakhstan, 16% in Uzbekistan, 13% in Armenia, 12% in Belarus, 11.5% in Russia, and 11% in Ukraine. In general, banks in the CIS countries have enough capital and liquidity to withstand unexpected financial stress.

The ratio of problem loans of Azerbaijani banks to total loans is 8%, and the ratio of reserves for possible losses to total loans is 9%.

The countries with the highest ratio of problem loans to total loans in the CIS region are Ukraine (55%), Belarus (15%), and Kazakhstan (13%). The ratio of reserves of banks of these countries to total loans for possible losses is 49%, 10%, and 11%, respectively.

According to Moody's, the lending forecast of banks in the CIS region is expected to be "positive" in 21%, "stable" in 71%, and "negative" in 8%. The rating agency downgraded the outlook for Turkish banks to "negative".

"The quality of bank assets will stabilize in most developed countries, while banks in Latin America, Africa, Turkey, and the CIS are actively creating reserves for possible losses on loans against increasing risks.

Due to the recovery of the business, the share of overdue loans in the CIS, especially in Ukraine, is expected to improve, and the share of overdue loans will fall from 50% in 2020 to 35%.

Profitability will benefit from high-interest rates in most countries and the continued expansion of business as economic activity returns to normal.

The fact that banks in Latin America and Turkey are more dependent on market financing exposes banks to market volatility. However, Latin American banks are less dependent on international capital markets.

Low market financing and high liquidity levels remain the strong side of lending in Asian, CIS, and African banks.

Shareholder payments will return to normal, but banks in developing countries have strong domestic profits to support stable capital levels,” the Agency said.