Azerbaijani banking sector incurs €800mn in losses in 2016

Azerbaijani banking sector incurs €800mn in losses in 2016
Central Bank of the Republic of Azerbaijan.
By bne IntelliNews February 6, 2017

Azerbaijan’s banks incurred AZN1.667bn (€800mn) in losses in 2016, the country’s financial regulator reported on February 3.

The regulatory body did not elaborate on the reasons behind the high losses, but the ongoing economic and banking crisis in the country, characterised by currency depreciation, depressed lending activity and widespread defaults on foreign currency-denominated loans, are to blame for the banking sector’s poor performance in 2016.

Half of the 32 banks in the country have not released their financial results for 2016, therefore estimates of the held sector-wide bad assets are difficult to make. However, some observers believe that the rate of non-performing loans could exceed 20% and even 30% of total lending, almost four times higher compared to the official figure of 8% at end-November.

Baku revoked the licenses of a dozen banks in 2016 over poor capitalisation and the violation of prudential lending norms. The lenders were mostly small and unable to cope with external pressures on their operations, but some, like Bank Standard, are more substantial and caused significant dissatisfaction among customers whose deposits were temporarily frozen.

Furthermore, Baku had to bail out the country’s largest bank, the International Bank of Azerbaijan, in 2015 and purchase some AZN10bn worth of bad loans from it in order to clean up its balance sheet.

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