BAKU, Azerbaijan, February 17. S&P Global, the international credit rating agency, has forecasted that the banking sector in Azerbaijan, along with Georgia, Armenia, Kazakhstan, and Uzbekistan, will remain stable throughout this year, as it did in 2024, Trend reports.
According to the agency, a double-digit increase in lending (15 percent) and stable asset quality will continue to support the profitability and capital levels of banks in the region.
"The region still enjoys favorable economic growth prospects, high credit demand, especially in the retail segment, strong financing and liquidity indicators, and solid profitability, with stable capital buffers, which will support the ratings in 2025," the report states.
Regulatory frameworks have undergone significant fortification in Kazakhstan and Azerbaijan in recent years.
The report also notes that the human and capital flows due to the Russia-Ukraine war have had less impact on Azerbaijan and Kazakhstan, with the economic growth of these countries being less affected.
Within the framework of the Financial Sector Development Strategy for 2024-2026, several initiatives for the modernization of financial institutions' regulation and supervision have been introduced in Azerbaijan in recent years.
The report highlights key risks, including rising geopolitical tensions, more pronounced global or regional economic slowdowns than expected, sharp increases in retail lending, rapid growth in housing prices that could escalate imbalances, as well as increasing risks related to digitalization, climate change, and cyber threats.
"Azerbaijan's banking sector is expected to see an approximately 15 percent increase in its loan portfolio in 2025 due to oil prices. The private sector's debt burden remains the lowest among regional countries, with household debt to GDP at 14 percent and corporate debt to GDP at 10 percent. Starting from March 1, 2025, the Central Bank will require an additional 0.5 percent countercyclical capital buffer, as the credit gap indicator [the difference between the credit-to-GDP ratio and its long-term trend] exceeds 2 percent.
We project that inflation-adjusted housing prices will rise by around 5 percent to 10 percent in 2025," the report concludes.
S&P Global Ratings, an American credit rating agency and subsidiary of S&P Global, possesses over 150 years of experience, 135 billion data points, and a team of 1,500 credit analysts providing financial research and analysis on equities, fixed-income instruments, and commodities. The entity, functioning as a credit rating agency, assigns credit ratings to the debt of both public and private entities, as well as to public debtors, including governmental agencies and municipalities.
