Baku, Azerbaijan, May 9
By Elena Kosolapova - Trend:
Fitch Ratings has upgraded Azerbaijan-based AGBank's (AGB) foreign currency Long-Term Issuer Default Rating (IDR) to 'CCC' from 'RD' (Restricted Default) and its VR (Viability Rating) to 'ccc' from 'f'.
"The rating actions follow the completion of recapitalisation measures," the agency said May 7.
Fitch says that the downgrade of AGB's Long-term and short-term foreign currency IDRs to 'RD' follows the completion of 77 million manat recapitalisation of the bank on March 31, 2016. Fitch understands that AGB largely used the funds of its depositors for recapitalisation by means of an exchange of deposits for equity (including 49 million manat of deposits from existing shareholders, their family members and other related parties and 28 million manat of third-party deposits).
The official exchange rate is 1.51 AZN/USD as of May 9.
According to Fitch, the recapitalisation was conducted to avoid bankruptcy. Fitch estimates AGB's regulatory total capital ratio (CAR) was around one percent before the recapitalisation, well below the regulatory minimum of 10 percent.
Fitch estimates AGB's Fitch Core Capital (FCC) to equal 16 million manat or three percent of risk-weighted assets.
"The bank's total capital ratio is 16.6 percent," the agency said.
However, the bank's capital position remains vulnerable and is significantly undermined by sizable unreserved non-performing loans (NPLs; loans 90+ days overdue) and accrued interest on them equalling to 69 million manat; weak core profitability (the bank has been loss-making on a cash basis for several years and return to break-even performance is unlikely in the near term); and 40 million manat receivable from AGB's shareholders and key customers. However, according to AGB's management, a part of the debt has been partially repaid in April and could be fully repaid in May.
AGBank has been operating in Azerbaijan since 1992. Among the shareholders are the International Finance Corporation, Kazimir Partners company, as well as physical entities Chingiz Asadullayev and Farzulla Yusifov.
At present, the bank's capital is 102.2 million manat.