BAKU, Azerbaijan, Feb.25. Benign operating environment and strong government support keep the outlook for Azerbaijan’s banking system positive, Trend reports via Moody’s.
“We maintain a positive outlook on the Azerbaijani banking system, reflecting a continued benign operating environment and strengthening government support.
Favourable operating conditions will support asset quality and profitability over the next 12-18 months, and tightening regulatory requirements will support capital ratios and improve liquidity management. Asset quality will benefit particularly from rising income levels in Azerbaijan (Baa3 positive) and expansion of the non-oil economy, where banks do most of their business, which will also drive credit growth. The banks' robust capital buffers and continued solid profitability will help them maintain good loss-absorption capacity and ample liquidity. The government's ability and willingness to support the banking sector, in particular the largest banks, will remain strong," reads the latest report.
Moody's analysts note that the government's improving creditworthiness, as reflected in the positive sovereign outlook, means the largest banks' depositors will continue to benefit from government support.
"With total reserves accumulated by the sovereign wealth fund, state Oil Fund of the Republic of Azerbaijan, and the central bank exceeding 108% of GDP as of December 2025, the government is well placed to support the economy and the highly dollarised banking system, which is small, with total assets at about 44% of GDP," the report says.