Moody’s: Azerbaijan’s banking sector consolidation will continue

Azerbaijan’s banking sector consolidation will continue, Report informs referring to Moody’s Investors Service.

Market positions of the largest banks, particularly Pasha Bank, Kapital Bank and Xalq Bank, have strengthened, benefitting from a flight to quality amid the closures of 15 banks in recent years, IBA's financial rehabilitation and deleveraging by smaller banks.

‘The four largest banks have been profitable since 2017, with IBA reporting the highest pre-tax income thanks to government support measures. These banks generate the bulk of sector profit. The rest of the banking sector has been unprofitable at least since 2016, which results in persistent pressure on capital, limited asset growth and a widening gap with the largest banks’, the agency said.

Moody’s also said that smaller banks usually have weaker bargaining power and limited access to the largest corporates and their employees: ‘This pushes them to target higher-risk clients, particularly SMEs, entrepreneurs and non-payroll retail customers’.