Baku, Azerbaijan, Aug. 8
By Azad Hasanli - Trend:
Fitch Ratings has placed International Bank of Azerbaijan's (IBA) Long-term foreign currency Issuer Default Rating and Viability Rating on Rating Watch Positive, said the message posted on the website of the agency.
The possible upgrade of the rating is connected with the buy-out of problem assets and IBA's subsequent privatization.
Azerbaijani President Ilham Aliyev signed a decree on July 15 on measures to restore the financial position of IBA for the preparation of the bank's privatization.
The state non-bank financial institution "Agrarkredit" JSC will release government-guaranteed bonds and use the proceeds of the issue for the acquisition of a number of impaired and/or high-risk assets from IBA, according to the decree.
Subsequent clarifications were made by the bank's management to Fitch that this will involve a substantial buy-out of problem assets at book value by the end of 2015.
If the clean-up is completed as planned, Fitch is likely to revise IBA's Support Rating Floor up to 'BB+' and upgrade the bank's support-driven Long-term Issuer Default Rating and senior debt rating by one notch to the same level, the bank said.
The Rating Watch Positive on IBA's Viability Rating reflects the potentially significant improvements in the bank's asset quality, capitalization and liquidity position after the asset buy-out. Fitch may upgrade IBA's Viability Rating by one or two notches, depending primarily on the quality of the bank's remaining assets and Fitch's view of the bank's risk appetite and lending strategy following the asset transfer and recent change in management.
IBA's support-driven ratings continue to reflect potential support for the bank, if needed, from the Azerbaijan authorities. This view factors in IBA's high systemic importance, stemming from its large domestic franchise (the bank accounts for 35 percent of sector assets) and substantial funding from state-owned corporations (1.5 billion manats or 15 percent of late 2014 liabilities); the bank's majority (51.07 percent) state ownership, etc.
The International Bank of Azerbaijan was established in January 1992.
The bank's main shareholder is the Azerbaijani government, which holds 51.07 percent of shares, while private individuals and legal entities hold the remaining shares.