Moody`s: Azerbaijan`s banking system is most vulnerable on CIS area

05.02.2019,16:46


February 5, Fineko/abc.az. Moody`s has published a report on the comparative state of the banking systems of the CIS countries.

The rating agency says that according to the comparative analysis, the most vulnerable on the CIS area are the banking systems of Ukraine and Azerbaijan. However, the conditions in these countries, as well as in the entire CIS region, are improving amid the sustainable economic recovery.

"Russian banks have the highest basic credit rating among the CIS countries - ba3. They are little dependent on external funding that was the result of sanctions that limited Russian banks’ access to foreign markets, and occupy the second place among the CIS counterparts in terms of liquid resources and asset quality," the report says.

According to the report, the banks of Ukraine and Azerbaijan demonstrate the weakest creditworthiness as a whole. The weighted average basic credit rating of Ukrainian and Azerbaijani banks is at the lowest level caa1 among the CIS countries that is partly conditioned by the high level of problem loans.

"The operating environment is improving throughout the CIS region amid the recovery in the growth rates of the CIS economies. We expect the CIS countries to show economic growth in the next two years after the period of economic recovery in 2017-2018. Our forecast for the banking sector of the CIS countries is positive," the report says.

The Moody's report also says that the quality of Ukrainian banks’ assets is much lower than in banks of other CIS countries, but it is improving. Ukrainian banks have the highest level of problem loans among the CIS counterparts, and according to our estimates, it reached 60% at the end of 2018. The second indicator belongs to Kazakhstan, where the share of problem loans makes up 17%. However, as well as in other countries, the situation on this index is improving.

"The Azerbaijani banking system demonstrates the highest capital adequacy ratio (in general), due to assistance provided by the state to the largest bank. The Azerbaijani banking sector demonstrates the highest level of capitalization that is linked mainly by the state's assistance to the country's largest bank - the International Bank of Azerbaijan," the report says.

Ukrainian banks have the lowest profitability, but it is improving. Ukrainian banks, which have been unprofitable for four years, returned to profitability in 2018 and will remain profitable in 2019 as borrowing costs decline and revenue increases. Uzbek banks are the most dependent on market funding.

At the end of 2018 the share of market funding in the banks of Uzbekistan was, according to our estimates, 60% - this is the highest figure among the CIS countries.

 

Keywords: Moody