Finance

Finance

Fitch downgrades IBA rating

10 March 2016 08:01 (UTC +04:00)

The Outlook on the bank is Negative.

The affirmation of IBA's Support Rating Floor (SRF) and Long-term IDR at 'BB' balances the weaker ability of the authorities to provide support to the bank

The affirmation of IBA's Support Rating Floor (SRF) and Long-term IDR at 'BB' balances the weaker ability of the authorities to provide support to the bank, as reflected by the sovereign downgrade with Fitch's view of a now stronger propensity of the authorities to support, due to a considerable improvement in the support track record. The latter is reflected in (i) the AZN3bn clean-up of IBA's balance-sheet, executed through buy-outs of impaired loans, which was finalised in January 2016; and (ii) a planned AZN500m equity injection, which will support IBA's solvency and also increase the Ministry of Finance's stake in the bank to above 80%, from 51.1% at present.

Although IBA's non-performing loans (NPLs, 90 days overdue) comprised a moderate 7% of end-2015 gross loans, Fitch views underlying asset quality as vulnerable, at least based on a review of IBA's largest loans. Fitch does not expect IBA's profitability to improve in the near-term.