"According to the data of the Central Bank of Azerbaijan (CBA), the level of overdue loans is about 15 percent. If we add to this the loans with signs of impairment, then this figure will be 25-30 percent. This is our approximate assessment, but in 1Q2018, there were some positive trends in this sector," said the expert of the rating agency Petr Paklin.

He made the remarks at the annual summit on Azerbaijan in Baku May 24. Paklin also noted the improvement of the situation with the capitalization of the banking sector of Azerbaijan.

"The capitalization of the banking sector of Azerbaijan has significantly improved. Here, not only the contribution by the state injections, but also the funds of foreign and local shareholders should be noted," Paklin said, adding that the ratio of capital to the assets of the banking sector has doubled, as compared to 2016.

Paklin said it is a positive fact that the banks of Azerbaijan continue to increase capital.

"According to our data, at the end of 2017, four banks did not formally meet the minimum capital requirements of the regulator. But already in 2018, some of these banks partially or completely solved this problem," Paklin said.

The expert also noted that, this year the agency expects growth in demand for loans due to the improvement of the operating environment and further economic growth in Azerbaijan.

"Overall, the operating environment has improved and the economy is returning to growth. Accordingly, we expect an increase in demand for loans. The retail segment has already seen such growth. Apparently small and medium-sized businesses will be the next," said Paklin.

As of early April 2018, Azerbaijan's credit organizations reduced loan disbursements by 0.8 percent up to 11,663.5 million manats compared to the fourth quarter of 2017, the Azerbaijani Central Bank said in a report.

According to the report, the amount of overdue loans increased by 5.1 percent up to 1,710.2 million manats for the year. The share of overdue loans increased from 13.8 percent to 14.66 percent for the same period.

The annual conference of Moody's international rating agency kicked off in Baku May 24. The conference has been dedicated to the discussion of Azerbaijan's sovereign rating and the short-term and long-term impact of low oil prices on the country's economy, trends in the country’s banking sector and in the world oil market.

A workshop on simulation of the rating assignment process will be also held during the conference.

(1.7 manats = $1 on May 24)

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