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Moodyâ€™s assigns Caa1/Np/E ratings to Azerbaijanâ€™s NBC Bank

19 December 2008 07:51 (UTC +04:00)

Baku. Nijat Mustafayev â€“ APA-Economics. Moodyâ€™s Investors Service has assigned a Caa1 long-term and Not Prime short-term local and foreign currency ratings and an E bank financial strength rating ("BFSR") to NBC Bank.
The outlook on the long-term local and foreign currency ratings is stable.
NBC Bankâ€™s E BFSR, which translates to a Baseline Credit Assessment of Caa1, is based on the bankâ€™s fundamental credit strength, which, in Moodyâ€™s view, is constrained by (i) its small and limited franchise, which to a substantial extent is reliant on the bankâ€™s key shareholderâ€™s car- selling business; (ii) weak liquidity position, high refinancing risk driven by increasing reliance on interbank borrowings and limited access to diversified funding sources; (iii) the untested (through the cycle) nature of NBC Bankâ€™s rapidly growing loan portfolio; and (iv) relatively weak corporate governance practices.
At the same time, the ratings are supported by the bankâ€™s entrenched position in the car financing segment and its strong capitalisation.
According to Moodyâ€™s, any possible upgrade of NBC Bankâ€™s ratings will be contingent on the bankâ€™s ability to improve its liquidity position by developing its core funding base, reduce its reliance on market funding and diversify its business away from financing of the key shareholderâ€™s car-selling business. Moodyâ€™s notes that the bankâ€™s local and foreign currency deposit ratings do not factor in any expectation of systemic support in the event of a stress situation given NBC Bankâ€™s very low market shares and relative importance to the countryâ€™s banking system. Although support from the bankâ€™s shareholders cannot be ruled out, its extent and timeliness are uncertain. Consequently, the long-term deposit ratings are at the same level as the bankâ€™s Caa1 Baseline Credit Assessment. NBC Bank was established in 1992 by its shareholder and Chairman of the Supervisory Board, Nuru Aliyev. The bank ranked 29th in terms of total assets (0.4% market share), 12th by consumer loans and 33rd by customer deposits as at 30 June 2008. Headquartered in Baku, Azerbaijan, NBC Bank reported -- under IFRS -- total assets and shareholdersâ€™ equity of US$33.8 million and US$13.2 million, respectively, as at 31 December 2007.