Moody's maintains stable outlook on Azerbaijan's banking system

Moody
# 29 April 2014 10:35 (UTC +04:00)

Baku – APA-Economics. The outlook on Azerbaijan's banking system remains stable, says Moody's Investors Service in a new report published.

The outlook, which has been stable since August 2010, reflects Moody's expectation that, over the next 12-18 months, banks will continue to benefit from a favourable operating environment, stable asset quality and sufficient capital buffers.

Moody's also expects that demand for credit will be maintained by Azerbaijan's robust economic growth, which will, in turn, help banks maintain lending margins and profitability. However, these supportive factors are counterbalanced by the system's structural weaknesses, including the economy's persistent lack of diversification resulting from its still strong reliance on oil production, banks' limited access to long-term funding, and high single-name concentrations.

In Moody's view, relatively stable oil prices in the coming 12-18 months will continue to support the government's efforts to grow the economy's non-oil sectors. In Moody's "central" scenario, Azerbaijan's GDP will increase by 5.0% in real terms in 2014, compared with 5.8% in 2013, driven by continued strong performance in the non-oil economy which benefits from generous public spending. Overall, Azerbaijan's supportive macroeconomic conditions remain a key factor that underpins the stable outlook.

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