S&P Global Ratings has affirmed the ratings of Azerbaijani banks at “bb-“, Report informs referring to the agency.
Azerbaijan’s banking sector benefits from favorable macroeconomic conditions, on the back of high commodity prices that are stimulating credit demand and an improvement in asset quality. The agency emphasizes that credit growth in Azerbaijan is highly correlated to oil prices and GDP growth.
“Loans increased by about 20% in 2024, driven by both retail and corporate loans. We expect that infrastructure investments and a decline in a key policy rate could result in double-digit lending growth over 2025-2026. Additionally, we estimate that inflation-adjusted property prices rose 10%-15% last year, to be followed by our expectation of high single-digit growth in 2025. Banks’ modest exposure to the construction industry (about 5% of total loans at end-2024) and mortgages (15% at the same date) somewhat mitigate the risk,” reads the report.
Specifically, the regulators enacted a new corporate governance standard for banks, a regulation limiting related party transaction, and a regulation on liquidity risk management aligned with Basel III requirements.
“In 2025-2026, the regulators’ plan includes transitioning to risk-based supervision, revising capital adequacy framework to align it with Basel III requirement, and strengthening requirements for banks’ stress testing. If these initiatives are implemented effectively, we think they could further strengthen regulation and supervision for banks in Azerbaijan,” reads the report.
