The international rating agency Moody’s Ratings doesn't rule out continued consolidation of Azerbaijan's banking sector in the medium term, Junior Vice President of Moody’s Ratings Lev Dorf told Report.
He recalled that since 2014, the number of banks in the country has decreased from 45 to 22, which indicates an ongoing consolidation process caused by both market and regulatory factors.
"The five largest banks account for more than half of all banking assets, while the remainder is distributed among 17 banks competing with each other in a highly fragmented environment," the analyst noted.
According to him, historically, large banks have had an advantage in working with corporate clients due to greater access to liquidity and resources, while small banks had more limited access to liquidity and competed for more expensive sources of funding.
"Since last year, the regulator has been taking measures to balance the market. In particular, additional requirements were introduced to limit the concentration of liabilities. However, factors such as increased regulation, competition, and the need to invest in digitalization may contribute to further consolidation among smaller banks, which find it more difficult to adapt to rapidly changing market conditions,” Dorf explained.
He also emphasized that the improvement in the macroeconomic situation and operating environment over the past 2-3 years had a positive impact on the credit ratings of Azerbaijani banks.
"Increased profitability, a decrease in the volume of problem assets, improved business diversification, high liquidity and capital adequacy contributed to the positive revision of the ratings. An additional factor was the upgrade of Azerbaijan's sovereign rating to investment grade Baa3 with a positive outlook in July this year," said Moody's Junior Vice President.
As of July 1, 2025, the total assets of the banking sector of Azerbaijan reached 56.73 billion manats ($33.370 billion), which is 12.7% more than in the same period last year. The five largest banks - ABB, Kapital Bank, PASHA Bank, Xalq Bank and Bank Respublika - account for 41.83 billion manats ($24.605 billion), or 73.7% of the total assets.
The total deposit portfolio of these five banks as of July 1 amounted to 28.518 billion manats ($16.775 billion), or 76.34% of the total deposit portfolio in the banking sector, which reached 37.353 billion manats ($21.972 billion) as of the reporting date (with an annual growth of 6.2%).
Their loan portfolio as of the same date amounted to 17.36 billion manats ($10.211 billion) - 60.97% of the total loan portfolio of Azerbaijani banks, the volume of which reached 28.472 billion manats ($16.748 billion, an annual growth of 11.96%).
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