Finance

Finance

Problem loans account for 20% of system-wide gross loans in Azerbaijan

02 May 2016 09:57 (UTC +04:00)

According to the estimates, even though the relatively small size of the Azeri banking sector limit the negative credit implications for the sovereign, the banks' weak credit standing add to the headwinds facing the economy and poses an additional threat to the government's balance sheet, as the banking system may require additional financial support. The largest bank in the country, state-owned International Bank of Azerbaijan (IBA; deposit ratings Ba3 stable, BCA b3), benefits from financial support from the state. Specifically, IBA's credit standing was supported in 2015 by the transfer of problematic assets totaling Manat 3.0 billion (around 5.5% of GDP in 2015) to the state non-credit organization Aqrakredit, which issued bonds in the same amount guaranteed by the state and purchased by the central bank. The bank anticipates additional bad assets transfer and capital injection of Manat 500 million from the state in 2016, which will further improve its capitalization.