BAKU, Azerbaijan, July 10. Moody's announced rating actions for five Azerbaijani banks: International Bank of Azerbaijan, Kapital Bank OJSC, Xalq Bank OJSC, Bank Respublika JSC, and Bank of Baku OJSC, Trend reports.
The agency's decision follows an upgrade in the outlook for Azerbaijan's government long-term issuer rating from "Ba1 stable" to "Ba1 positive," alongside an improved macro profile for the country's banking system. This upgrade is attributed to a stronger operating environment for Azerbaijani banks, driven by the country's increasing economic resilience and the banks' consistently high solvency and liquidity ratios.
"The enhanced macro profile of Azerbaijan's banking system reflects the country's strengthened economic position. Consequently, our assessment indicates more favorable credit conditions for Azerbaijani banks, which has put upward pressure on their financial strength (BCA). These rating actions signify our belief that the country's non-oil economy, where the banks primarily operate, will continue to grow due to the government's ongoing diversification efforts.
Azerbaijan has shown significant progress in economic diversification compared to other oil producers, with higher aggregate real non-oil GDP growth since 2017, which has accelerated in recent years. Azerbaijani banks are set to benefit from these improved economic conditions and a favorable operating environment, which will enhance business opportunities, support sustainable profitability, and maintain good asset quality, thereby strengthening their standalone credit profiles. Additionally, better financial sector regulation in the country will bolster the banking sector's resilience," Moody's notes.