The banking sector of Azerbaijan has improved, but is still fairly weak, reflected by Fitch's Banking System Indicator score of 'b', APA reports citing the Fitch Ratings.
The non-performing loan ratio fell to 3.5% in July, from 3.8% at end-2022, helped by strong loan growth.
Capitalization remains adequate at 17.8%, and the sector remains profitable, supported by rising loan portfolio interest income, while the interest-rate increase does not affect funding costs due to the prevalence of demand deposits. Deposit dollarisation fell to 42% in July from 60% at end-1H20 but is well above the peer group historical median of 35%; foreign-currency loans fell to 19% of the sector loan book from 35% in that period.
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