17:34 - 2.08.2024

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August 2, Fineko/abc.az. The banking system of Azerbaijan is recovering after a long correction.

ABC.AZ reports that this is stated in S&P Global Ratings’ assessment on the banking sector of Azerbaijan.

The favorable dynamics of commodity prices stimulated credit demand, which led to improvement in asset quality. The banking system is expected to continue the recovery process with a high level of lending in 2021-2023.

According to S&P, profitability of country's banking sector will be stable: "We forecast profitability in 2024 in accordance with the levels of 2023. The return on equity (RoAA) of the sector will be 2.1% in 2024-2025. Our expectation is based on new credit growth aimed at retail products, normalization of the cost of risk and control of operating expenses."

S&P also expects moderate deterioration in asset quality. Thus, non-performing loans are projected to grow from 2.7% at the end of April 2024 to 3.5% over the next 24 months. The Agency attributes this to the fact that the growth dynamics of sector's loan portfolio is lower than in previous years, and expects banks to face additional reserve requirements.

Thus, S&P forecasts a 13% growth in the loan portfolio in 2024-2025. In 2023, this figure was 18%. In 2024-2025, loan losses will remain at the level of 1.0% -1.2% of the portfolio.