Moody's changes IBA's long-term rating to 'stable'
Azerbaijan, Baku, August 10 / Trend N. Ismayilova /
Today International Rating Agency Moody's changed the forecast of a long-term rating on deposits in local currency Baa3 for the International Bank of Azerbaijan (IBA) from a "negative" to "stable" and a long-term rating of a subordinated debt in foreign currency Ba1, the agency said. The rating agency also confirmed all ratings of the bank.
Rating actions reflect the continuing support rendered by the Azerbaijani government to the Azerbaijani bank in funding, capital and business flows.
Moreover, direct governmental support for IBA large borrowers, which face financial problems, helps to support the asset quality and liquidity of the IBA. It allowed avoiding erosion of capital.
Moody's notes that the government's ability to assist the IBA in case of necessity is supported by improved prospects for its financial situation, as well as an adequate level of foreign reserves, in their turn, supported by high oil revenues.
Long-term deposit rating Baa3 and long-term subordinated debt rating Ba1 differs from the basic assessment of the creditworthiness of the bank at the level of B2. This is based on a very high probability of systemic support in case of necessity.
About 50.2 percent stake of IBA is state owned. It is the largest and only state-controlled bank in the country. IBA holds a dominant position in the banking sector with total assets of $4.7 billion. It testifies for its market share by volume of total banking assets, loans and deposits (44 percent, 47 percent and 43 percent respectively, as of 2009). The bank plays an important role in the implementation of public investment and economic policy, acting as agent of the government to finance large-scale projects of national importance for Azerbaijan.
According to Moody's, IBA demonstrated reasonable financial indices in 2009. The bank was able to generate a steady stream of commissions and interest income sufficient to cover the increased security. It is expected to stabilize in 2010.
Moody's previous rating of IBA was granted June 23, 2009. The rating agency downgraded the global ratings of IBA: long-and short-term ratings on deposits in local currency Baa3/Prime-3 from Baa2/Prime-2, and long-term subordinated debt in foreign currency to Ba1 from Baa3 by assigning negative forecast for these ratings.