Moody’s: Stable manat, tight lending requirements in Azerbaijan help reduce risks

The international rating agency Moody’s predicts that the high level of asset quality of banks in Azerbaijan will be maintained in 2025-2026, Report informs.

"Asset quality will remain good in the next 12-18 months. Loan performance will benefit from favorable economic conditions, with robust performance in non-oil sectors and rising total income levels in Azerbaijan strengthening many borrowers' debt-repayment capacity.

Nonperforming loans (NPLs) remained at a historical low of 2.4% of gross loans as of December 2024 (2.6% in 2023 and 3.8% in 2022), while reserve coverage of NPLs was above 200%. The tight regulatory framework for consumer lending and the stable manat will also support the performance of foreign-currency loans, which decreased to 16% of total loans as of year-end 2024 from around 30% in 2020.

In response to accelerating credit growth in 2024, the Central Bank of Azerbaijan (CBA) has introduced a 0.5% countercyclical buffer on banks starting March 1, 2025," Moody's noted.

Moody’s believes that the banking sector of Azerbaijan will be able to quickly adapt to the new requirements of the regulator.