Azerbaijan's Banking Sector To Maintain Steady Profitability, Moody's Reports

The profitability of Azerbaijani banks is expected to remain at a stable level, AzerNEWS reports, citing the report of the international rating agency Moody's.

Moody's latest report indicates that the average ratio of net income to tangible assets among rated Azerbaijani banks is forecast to stay around 2–3 percent. This outlook is supported by resilient net interest margins, stable income from fees and commissions, and controlled provisions for credit losses.

“The increase in margins in recent years reflects the rising share of higher-yield loans among retail borrowers and small and medium-sized enterprises. Economic recovery continues to stimulate strong credit demand from these segments. However, while the Central Bank of Azerbaijan has lowered interest rates, putting downward pressure on returns from interest-earning assets, fierce competition for customers keeps funding costs relatively rigid, which could narrow margins. Additionally, the increase in mandatory reserves will somewhat limit the still-high profitability,” the report notes.

The report reiterates that the profitability of Azerbaijani banks is expected to remain stable overall.

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