Fitch discloses impact of sanctions against Russia on Azerbaijan's banking sector

Russian sanctions resulted in a moderate but manageable disruption to Azerbaijan's banking sector activity largely via correspondent relations with Russian banks (whereas the sole Russian subsidiary within Azerbaijan, VTB, accounts for just 0.6% of sector assets), said Fitch Ratings Agency, Report informs.

"The sector is still relatively weak, reflected by Fitch's Banking System Indicator score of 'b', despite some improvement in credit fundamentals in recent years. The non-performing loan ratio has fallen to 4%, and the sector is profitable, liquid, and adequately capitalized, with a Tier 1 ratio of 17.1% at end-1Q22. While the deposit dollarisation has fallen 10pp since end-2019 to 51%, it is well above the 'BB' median of 18%, and Azerbaijan's largest bank, IBA, is constrained by a large open currency position, equivalent to 59% of regulatory capital," Agency noted.