Fitch has already taken negative rating actions on Azerbaijani banks, but the Outlooks on most remain Negative due to possible further pressure. “Sector average non-performing loans (NPLs; 90 days overdue) increased only moderately to 9.5% in 2015 (2014: 8.3%), but there are significant additional downside asset quality risks due to the economic recession. Asset quality is also undermined by a high share of restructured loans (around 15% at end-2015) and sizeable accrued interest at some banks,” says Fitch Ratings’ report.
Fitch generally views Azerbaijani banks` capitalisation as weak. “Profitability in 2015 was negative as most banks booked one-off translation losses on currency devaluation. The banking sector remains reliant on funding from the central bank and other state-related entities, says the report.
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