Moody's raises forecast for Azerbaijan's banking system to "stable"

The outlooks on the Azerbaijani banking systems have been changed to stable from negative to reflect the improving economic outlook one year on from the start of the coronavirus pandemic, Report informs, citing Moody's Investors Service.

The changes in the banking system outlooks reflect our expectation that the gradual lifting of pandemic restrictions and recovering global oil prices will underpin GDP growth and ease operating conditions for banks and their borrowers," said Yaroslav Sovgyra, Associate Managing Director at Moody's in Moscow.

Moody's also revised its outlook for the banking system in Russia and Kazakhstan to stable from negative, reflecting an improved economic outlook one year after the outbreak of the coronavirus pandemic.

According to Sovgyra, Nonetheless, business conditions will still be challenging as government support measures are gradually withdrawn, and recovery paths remain uneven across the CIS region.

Banking System Outlooks represent Moody's assessment of fundamental credit conditions that will affect the creditworthiness of banks in a given system over the next 12-18 months.

Concurrently, Moody's has maintained its stable outlooks on the Ukrainian and Uzbek banking systems and kept its negative outlooks for the banking systems in Armenia and Belarus.

The stable outlook on the Ukrainian banking system reflects the gradual economic recovery along with the banks' solid capital levels and ample liquidity. The stable outlook also reflects a stable outlook for Ukraine's sovereign rating, to which the health of the country's banks is closely linked.

The outlook on the Uzbek banking system has been maintained at stable through the pandemic as the country's economy has demonstrated strong resilience to the coronavirus-induced shocks, and it will see a swift recovery in 2021.

"Maintaining the negative outlooks on the banking systems in Belarus and Armenia reflects Moody's view that the two countries' political uncertainty, coupled with the coronavirus fallout, will hinder their economic recovery prospects, negatively affecting banks' business activities. Simultaneously, the two countries' governments' capacity to give support to the domestic banking systems will remain limited," the agency said in a statement.