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Moody's says banking system outlook has changed to negative from stable for Azerbaijan

30 June 2015 07:56 (UTC +04:00)

Baku. Musa Ahmadov – APA Economics. The banking system outlook has changed to negative from stable for Azerbaijan (Baa3 stable), says Moody's report “Banking System Outlook: Azerbaijan”, reflecting the impact of lower global oil prices and currency devaluation on the operating environment for banks, as well as on their asset quality, capital, profitability, and funding.

Moody's report says that alongside the weak operating conditions, the local-currency devaluation in February of this year is credit negative for banks.

“Banks' asset quality will deteriorate following the local-currency devaluation, as most foreign-currency loans in Azerbaijan are to borrowers that do not have foreign-currency revenues. Moreover, higher inflation reducing consumer spending power and seasoning of banks' loan books amidst a slowdown in lending growth will also contribute to an increase in problem loans,” says the report.