Moody’s Investors Service has downgraded the ratings of four Azerbaijani banks, and warned about the deterioration in their performance (14 June).
The banks are Xalq Bank, Bank Respublika, Bank of Baku, and VTB Azerbaijan – each of which plays a significant role in the national financial system.
Outlooks on the long-term local- and foreign-currency deposit ratings of all four banks remain negative, according to a statement published on the agency’s website.
The downgrading is the result of the unfavorable operating conditions and the negative impact of the devaluation of the manat, which have led to “deteriorated asset quality, net losses due to heightened credit costs and/or foreign exchange losses, materially eroded capital buffers and vulnerable funding and liquidity”.
Moody’s anticipates continued pressure on Azerbaijani banks. This is due to the likelihood of lending and net losses, the high dollarization of funding, strong pressure on bank reserves, and strict regulation requiring additional recapitalization.
