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Moody's affirms Azerbaijani Kapital Bank's long-term rating

Business Materials 24 January 2016 14:46 (UTC +04:00)
Moody's affirmed Kapital Bank's current BCA at b1 and long-term deposit ratings at Ba3, whereas changed the outlook to negative from stable.
Moody's affirms Azerbaijani Kapital Bank's long-term rating

Baku, Azerbaijan, Jan. 24

By Anvar Mammadov - Trend:

Moody's affirmed Kapital Bank's current BCA at b1 and long-term deposit ratings at Ba3, whereas changed the outlook to negative from stable.

The proportion of loans more than 90 days overdue has been relatively stable over the first three quarters of 2015, at 6.7% as of October 1, 2015 (7.7% at year-end 2014). However, the rating agency notes a surge in restructured loans to 11.7% of loans, while loans overdue by more than 30 days grew to 8.1% of loans as of Q3 2015, according to the bank's management data.

Moody's expects a further worsening trend in asset quality following the change in the currency regime and slowdown of economic activity, the statement said.

Almost half of Kapital Bank's loan was to retail customers as of Q3 2015, although related risk is partially mitigated by its focus on more creditworthy customers, e.g. employees of corporate clients, government bodies, and budget recipients, whose cash flows are captured by the bank. Furthermore, Kapital Bank has a relatively moderate level of foreign currency exposure compared to peers, at 25% of gross loans as of Q3 2015, which are granted mainly to government-related issuers.

Moody's expects the bank to remain profitable in the next 12 months, although it will be under pressure from an increasing provisioning burden and higher funding costs. The bank's capital cushion is sound with regulatory total capital and Tier 1 ratios of 19.5% and 14.7%, respectively, as of January 1, 2016.

Kapital Bank, one of the largest retail banks in Azerbaijan, is also owned by PASHA Group.

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