“Fitch”: Levels of loan and deposit dollarization decreased in Azerbaijan

Mon 10 Dec 2018 18:20 GMT | 22:20 Local Time

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Dollarization in Azerbaijan’s banking system decreased in 2016-1H18, Report informs citing Fitch Ratings 2019 Outlook: CIS & Georgian Banks.

According to the agency, the high-loan dollarization puts pressure on asset quality as not all borrowers have foreign-currency revenue to service debts: ‘The key risk for the banking system stems from the still high levels of loan and deposit dollarization’.

According to the experts, deposit dollarization constrains banks’ ability to extend loans in local currency.

‘We estimate that the sector average NPL ratio stabilized at about 20% and reserve coverage improved to about 70% at end-1H18 from 51% at end-2016. However, banks also have significant volumes of restructured loans, which are currently classified as performing. We expect banks to continue gradual NPL recognition over the next few years, reserving these out of pre-impairment profit', the agency said.

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