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Moody's Maintains Stable Outlook on Azerbaijan's Banking System

The outlook on Azerbaijan's banking system remains stable, says Moody's Investors Service in a newly report published. The outlook, which has been stable since August 2010, reflects Moody's expectation that, over the next 12-18 months, banks will continue to benefit from a favorable operating environment, stable asset quality and sufficient capital buffers.

Moody's also expects that demand for credit will be maintained by Azerbaijan's robust economic growth, which will, in turn, help banks maintain lending margins and profitability.

In Moody's view, relatively stable oil prices in the coming 12-18 months will continue to support the government's efforts to grow the economy's non-oil sectors. In Moody's "central" scenario, Azerbaijan's GDP will increase by 5.0% in real terms in 2014, compared with 5.8% in 2013, driven by continued strong performance in the non-oil economy which benefits from generous public spending. Overall, Azerbaijan's supportive macroeconomic conditions remain a key factor that underpins the stable outlook.

Moody's expects most banks' funding and liquidity profiles to remain stable over the outlook period, supported by sufficient levels of liquid assets and low reliance on market borrowings against the background of slower loan growth along with growing customer deposits. Moreover, the Azerbaijan's banking system's cross-border funding is mostly derived from bilateral or international financial institution (IFI) arrangements, which Moody's considers more stable than market funding.

Source: Moody's

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