We expect economic growth in 2018 will strengthen in Russia, Ukraine, Kazakhstan, Belarus and Azerbaijan.
However, our sector outlook for Azerbaijan is still negative, due to continued asset quality pressure.
In Kazakhstan and Azerbaijan the authorities took important steps in 2017 to resolve large banks, with the completion of large bad loan buy-outs from Kazkommertsbank and International Bank of Azerbaijan. But many other lenders still need to increase provisioning for their large portfolios of restructured and foreign-currency loans. Some medium-sized banks in Kazakhstan have benefitted from state capital support to address this, but in Azerbaijan lenders often remain dependent on regulatory forbearance.
The stable outlooks in Georgia, Armenia, Kazakhstan are driven by expected trends in bank fundamentals, as bank ratings in these markets are less tied to the sovereign, and the stable outlook in Azerbaijan reflects the already low levels of banks' ratings.