S&P: Azerbaijan’s Banking Sector on Path to Sustainable Development Thanks to Reforms, Credit Growth

Jerusalem, 7 May, 2025 (TPS-IL) -- (AZERTAC) – A new report by the international rating agency S&P Global Ratings emphasizes that Azerbaijan’s banking sector has demonstrated positive development in the region, amid recent reforms and sustained credit growth.

AZERTAC reports that the risk assessment of Azerbaijan’s banking sector has been upgraded from “stable” to “positive”. This is the result of regulatory and supervisory reforms carried out within the framework of the Financial Sector Development Strategy covering 2024-2026.

S&P forecasts a 15 percent credit growth in the banking sector in 2025. The main drivers of this growth are the expansion of retail lending and investments in infrastructure projects. The agency says that the share of problem loans in the total loan portfolio is projected at 3 percent in 2024, 3.2 percent in 2025, and 3.4 percent in 2026, which indicates relative stability in the sector’s asset quality.

Banks’ funding through core customer deposits has strengthened, resulting in a reduced need for external borrowing. This is seen as a factor further strengthening financial stability.

At the same time, S&P notes that there are still weaknesses in the areas of governance and transparency compared to international standards. However, the reforms implemented create a basis for progress in this direction. According to the agency’s final conclusion, the Azerbaijani banking sector will continue its stable and sustainable development in 2025.