“Our sector outlooks are now stable in Russia, Armenia and Ukraine, where we do not expect further significant weakening of banks' financial metrics. Sector outlooks in Kazakhstan, Azerbaijan and Belarus remain negative. These countries have experienced sharp currency depreciations and foreign-currency (FC) lending is high, while regulators have yet to fully quantify asset-quality risks and promote recapitalisation. Outlooks in Georgia and Uzbekistan remain Stable.
Russian banks' sector outlook mirrors the stabilisation in the Russian economy and the rouble.
Azerbaijan's banks face capital and liquidity pressures from currency mismatches and asset-quality deterioration in heavily dollarised loan books: “Material capital shortfalls and large losses mean we expect further bank failures and clean-up measures next year. However, substantial state support for International Bank of Azerbaijan remains in place and we expect the clean-up of the bank's balance sheet to be completed next year”.