BAKU, Azerbaijan, October 7. The main reason for the decline in banking sector profitability is the increase in caution, Executive Director of the Central Bank of Azerbaijan (CBA) Shahin Mahmudzade said at a press conference on the financial stability report, Trend reports.

He noted that the main issue to be considered in the sustainability of the banking sector is capital adequacy.

The capital adequacy of the banking sector has increased and is around 18 percent.

Mahmudzade also said that the decline in the profitability of the banking sector is due to an increase in both interest and non-interest expenses.

"Compared to the same period last year, interest and non-interest income increased by 21 percent (411 million manat or $241 million) and 13 percent (101 million manat or $59 million), respectively, while interest and non-interest expenses grew by 55 percent (302 million manat or $177 million) and 16 percent (203 million manat or $119 million).

In recent months, the rise in deposit interest rates, as well as an increase in banks' operating expenses, have led to higher both interest and non-interest costs for the sector," added the official.

Meanwhile, during the first half of 2025, the net profit of the banking system decreased by six percent (37 million manat or $20 million) compared to the same period last year, totaling 577 million manat ($341 million). Against the backdrop of reduced profitability, the return on assets dropped by 0.4 percentage points to 2.1 percent.

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