Baku, Azerbaijan, Sept. 15
By Azad Hasanli – Trend:
The State Oil Fund of Azerbaijan (SOFAZ) has placed a deposit of $2 billion in the International Bank of Azerbaijan (IBA), according to the report of the International Monetary Fund (IMF) published Sept. 15.
Azerbaijani government continues to render financial support to the IBA, the IMF report said.
“SOFAZ deposits have been used to repay some of IBA’s most expensive foreign currency liabilities (about $1 billion), with the remaining foreign debt ($3 billion) on a more sustainable path.”
The IBA also expects the [Azerbaijani] government to inject 500 million manats in new capital, the IMF report noted.
In addition, the Central Bank of Azerbaijan (CBA) has provided 1 billion manats in subordinated loans to IBA. Finally, in order to provide IBA with an income stream, 3 billion manats were deposited in the CBA at 5 percent interest rate, according to the report.
At the end of2014, the Azerbaijani Ministry of Finance owned 51 percent of IBA shares, the report said.
The Azerbaijani government’s share increased to 85 percent by late 2015, according to the report.
“Once an additional capital injection is finalized in late 2016, the government will own about 95 percent of IBA’s shares,” the IMF report noted. “Nevertheless, the ultimate goal is to completely privatize the bank within five years.”
On July 15, 2015 the President of Azerbaijan Ilham Aliyev has signed a decree on the measures for rehabilitation related to the preparations for privatizing the state-owned shares of the International Bank of Azerbaijan JSC.
The shortcomings in the management, investment and loan policy of the International Bank of Azerbaijan in recent years, as well as financing of less efficient, risky investment projects worsened the bank's financial state, caused increase in the share of distressed assets and reduced its liquidity, said the decree.
In order to overcome the current situation, restore the bank's financial position and ensure its sustainability, the distressed assets of the bank were transferred to the state-owned Aqrarkredit CJSC non-banking credit organization.
Bonds for three billion manats were issued under the state guarantee to ensure IBA's liquidity instead.
A joint CBA-Ministry of Finance preliminary audit of IBA’s loan portfolio found approximately 7 billion manats in bad assets (70 percent of total assets), according to the report.
In mid-2015, the first tranche of IBA’s bad assets (2.5 billion manats) was transferred to Aqrarkredit CJSC in late 2015, and an additional 4.6 billion manats have been moved in 2016, the IMF report said.