Finance

Home page

Finance

Fitch upgrades International Bank of Azerbaijan ratings

29 December 2012 07:08 (UTC +04:00)

Baku. Vahab Rzayev – APA-Economics. Fitch Ratings has downgraded International Bank of Azerbaijan's (IBA) Long-term Issuer Default Rating (IDR) to 'BB' from 'BB+' and removed the rating from Rating Watch Negative (RWN). The Outlook on the IDR is Stable. At the same time, the agency has upgraded IBA's Viability Rating (VR) to 'b-' from 'f'.

IBA's IDRs continue to be driven by Fitch's view that there is a moderate probability of support for the bank, if needed, from the Azerbaijan authorities. This view factors in IBA's majority (50.2%) state ownership, its large domestic franchise (the bank accounts for 35% of sector assets), substantial funding from state-owned corporations (30% of deposits at end-Q312), the bank's relatively small size relative to the sovereign's available resources and the potentially significant reputational damage for the authorities in case of IBA's default.

Fitch believes that the authorities are likely to continue to provide small-scale capital support, and also make liquidity available, as required. IBA's overdraft facility from the central bank has been recently increased to AZN150m from AZN100m. In addition, the bank's draft medium-term financial plan foresees AZN200m of additional equity injections to be completed by end-2015.

IBA's ratings may be downgraded further if (i) the Azerbaijan authorities fail to provide timely capital and/or liquidity support to IBA in case of renewed pressure on the bank's stand-alone credit profile, or (ii) a downgrade of Azerbaijan's 'BBB-' sovereign Long-term IDRs. A downgrade may also follow if the state's share falls below 50%, although Fitch views IBA's privatization as unlikely to happen before 2014, at the earliest. Upside potential for the ratings is very limited. An upgrade of the VR is unlikely in the foreseeable future, and would require a resolution of asset quality problems or a recapitalisation of the bank.