BAKU, Azerbaijan, February 17. The delinquency ratio in Azerbaijan's banking sector decreased to a historically low level of 1.8 percent of the total loan portfolio at the end of 2023, a significant decline from the level of 2.9 percent recorded at the end of 2022, Trend reports.
According to Fitch Ratings, this success was due to a significant increase in loan disbursements, active loan repayments, and write-offs.
"Capitalization of Azerbaijani banks has declined but remains at adequate levels, with the sector's Tier 1 capital adequacy ratio at 13.5 percent by end-2023 (compared to 15.2 percent by end-2022). Profitability remained strong, driven by high returns on assets and moderate funding costs, driven by the dominance of current accounts in the deposit base. The share of deposit dollarization declined to below 40 percent in 2023, approaching the historical average of 35 percent. Loans in foreign currency also declined to 19 percent of total industry loans by end-2023 (compared to 20 percent by end-2022)," the information of the agency says.
Meanwhile, the total assets of the banking system of Azerbaijan as of December 31, 2023, are estimated at 49.1 billion manat ($28.8 billion) (growth for the year by 4.5 percent).
To note, Fitch Ratings has affirmed Azerbaijan's long-term foreign currency Issuer Default Rating (IDR) at 'BB+' with a 'Positive' outlook.
The rating is underpinned by a very strong external balance sheet, the lowest sovereign debt among peers, and the flexibility of funding from large sovereign wealth fund assets.
The positive outlook reflects the continued strengthening of external and fiscal buffers due to higher-than-budgeted energy prices, as well as prospects for tighter spending restraint in the energy sector.
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