Consolidation of the banking sector in Azerbaijan will continue in 2018, Moody’s told APA-Economics.
According to the agency, the main issue for troubled banks is shortage of capital as a result of deteriorated asset quality following currency devaluation: ‘At risk of closure are those bank’s which don’t comply with the regulatory minimum capital adequacy ratios, and can’t resolve it either by capital injections from the shareholders or merger with stronger players. We believe that consolidation of the banking sector will continue in 2018 with exit of weak players’.
‘The current outlook on Azerbaijani banking sector is negative and it reflects our expectation of how banks’ creditworthiness will evolve in this system over the next 12 months. This outlook reflects our view that banks will continue to face solvency risks amid a challenging business environment. Although higher oil prices have supported a gradual economic recovery and a stabilization in the manat, banks continue to face high levels of problem loans and shortage of local currency funding’, the agency said.