Moody’s improves outlook on country’s banking sector
By Mirsaid Ibrahimzade
Moody's Investors Service has changed the outlook on the banking system of Azerbaijan from stable to positive.
According to the agency's experts, the ongoing economic growth and unprecedented state support for households are the main factors that influenced the assignment of a positive forecast for the banking sector of Azerbaijan.
The agency expects acceleration of economic growth in Azerbaijan to 3 percent in 2019-2020, taking into account favorable world prices for energy resources, export growth and an increase in the share of the non-oil sector in the structure of the economy.
It prognosticates that government reforms will have a positive effect on the growth of the country's economy. However, the agency notes the economy’s vulnerability to changes in oil prices.
By the end of 2020, the share of problem loans in the banking sector of Azerbaijan will fall below 10 percent, according to forecasts of Moody’s.
The agency expects further improvement in the quality of banking assets due to the “clearing” of bank balance sheets and support of households by the state.
According to Moody’s baseline scenario, due to the increase in bank profits and the growth of risk-weighted assets, the capital adequacy ratios of the banking system will be generally stable.
The government’s readiness to support not individual banks, but the entire banking sector with improved monetary and fiscal policies remains an important factor.
Moreover, according to Moody’s forecasts, the profitability of banks will increase as credit costs decline. Liquidity in manats is improved due to dollarization of liabilities throughout the banking system and government support.
However, the high level of dollarization of deposits will continue, although there is a downward trend.
--
Mirsaid Ibrahimzade is AzerNews’ staff journalist, follow him on Twitter: @MirsaidIbrahim1
Follow us on Twitter @AzerNewsAz