Moody's notes a deteriorating trend in asset quality given worsened economic conditions and weakened borrower creditworthiness. The bank has been actively restructuring its foreign currency loan book following prescription from the central bank. It managed to reduce its currency exposure through transfer of unhedged US dollar loans into local currency during 2015, thus decreasing the share of foreign currency loans to 28% as of December 1, 2015, from 44% at year-end 2014.
Moody's expect a further increase in the bank's problem loans and credit costs due to the seasoning of the loan book, which will negatively affect profitability.
The rating agency estimates that following the manat devaluation in December, the bank's capitalization level dropped by around three percentage points, given the revaluation of remaining foreign currency assets and LLRs.
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