Finance

Finance

Fitch changes AccessBankâ€™s rating

10 March 2016 08:11 (UTC +04:00)

The Outlook on the banks is Negative.

The downgrade of AB's Long-term IDR to 'BB+' from 'BBB-' and Support Rating to '3' from '2' reflects the revision of Azerbaijan's Country Ceiling to 'BB+' from 'BBB-'.

This in turn reflects Fitch's view of an increase in transfer and convertibility risks - in line with the weakening of the sovereign credit profile - which could constrain the ability of AB to utilise support from its International Financial Institution (IFI) shareholders to service its foreign currency obligations. Fitch continues to view the propensity of the IFIs to provide support to AB as high.

The support considerations take into account (i) the IFIs' strategic commitment to microfinance lending in developing markets; (ii) the IFIs' direct ownership of AB, stemming from their participation as founding shareholders; (iii) the significant integration of IFI guidelines into AB's risk management; and (iv) Fitch's expectation that a full exit of the IFIs from the bank in the next few years is unlikely. The Negative Outlook on AB's IDRs reflects that on the sovereign.

At end-2015, AB's loans 30 days overdue surged to 7.4% of gross loans from 0.8% at end-2014. Restructured loans also increased sharply to 28% from 0.5% at end-2014. According to management, most of the restructured loans are FX-denominated loans, where AB has extended maturities and reduced interest rates so that monthly instalments for borrowers in manat terms are unchanged following the devaluation.