Standard & Poor's Grants Credit Ratings to First Azerbaijani Bank

Azerbaijan, Baku, 4 Dec. / Trend , corr.N.Ismayilova / Standard & Poor's, the international rating company granted  credit ratings of contractor - long term 'B-' and short term 'C' to the Azerbaijani AGBank (AGB). The projection is 'Stable'. AGB is the first bank in Azerbaijan, which was granted the rating of Standard & Poor's

"AGB rating reflects high economic and branch risks in Azerbaijan in terms of the global financial crisis and reduction of oil prices, as well as limited client base and time-unproved loan portfolio," Viktor Nikolski, the credit analyst of Standard & Poor's, said.

The positive rating factor includes an acceptable rate of profitability of main types of bank activity, as well as adequate capitalization.

AGB is not a large commercial bank with AZN 195mln ($239mln) aggregated assets as for 30 Jun 2008. Bank takes the ninth place due to the size of assets among Azerbaijani banks. The key client basis of the bank makes up small and medium enterprises, industrial and construction companies, as well as representatives of medium class and well-provided private persons.

AGB ratings reflect its own solvency and do not include additional steps for external support in extraordinary situation. The profitability of bank is on acceptable level. The indicated quality of assets of AGB is good, the agency reported.  

The limited client base and insufficient diversification of resource base limit the financial flexibility of bank; however, capitalization is on the acceptable level.

The projection of 'Stability' reflects the expectation that bank will demonstrate progress in building of its client base, supporting adequate profitability and relatively stable indexes of capitalization.

"The increase of rating will depend on enduring high operation indexes, progress in perfection of risk-management system and improvement of the operational environment. Despite the current ratings will weaken the financial portfolio of bank, we can take negative rating actions if the weakening will be more dramatic, than we expect," Nikolski said.  

Bank belongs to the chairman of the Supervision Council of bank Chingiz Asadullayev by 48% and his business partner. Bank's minority shareholders are the American Kazimir Investment LTD (10%) and IFC (International Finance Corporation; IFC AAA/Stable/A-1+; 17.5%). Despite the fact that the main shareholders are loyal to develop AGB, their ability to lend bank support is not checked in the terms of stress situations.

The profitability of bank is on the acceptable level; the profitability of assets (ROA) was 2.7% in 2007 and 2.9% in the first half of 2008. Positive characteristics are high percent margin and rapid development of business.

As for 30 Jun 2008, problematic loans (NPL; with delay of payments more than 90 days) remained at the satisfactory level, being 4% of joint loan portfolio. Overdue credits (with delay of payments more than 30 days) they were 1%, what is high value, reflecting the low payment ratio in the country

As for 30 Jun, wholesale deposits made up 43%of total liabilities. Liquidity is on the adequate ration and cash assets made up 13% of aggregated assets.

Capitalization is on the acceptable rate and it increased in the result of infusion of capital by Kazimir Investment LTD and undistributed profit in the first half of 2008. Despite the ratio of corrected joint capital (ATE) to assets reached high value in 14% (as for  30 Jun), rapid increase of assets will exert pressure on capitalization of the bank

On 4 Dec, the official currency rate is 0.8092 AZN/USD.

Have any feedback? Contact our journalist at: capital@trend.az

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