Moody’s assigns international rating to Bank of Baku
Azerbaijan, Baku, Nov.30 / Trend, N.Ismayilova /
Moody's Investors Service has today assigned the following global scale ratings to Bank of Baku OJSC: an E+ bank financial strength rating (BFSR), and B2 long-term and Not-Prime short-term local and foreign currency deposit ratings. The outlook on the long-term global scale ratings is stable, the Agency said today.
According to Moody's, Bank of Baku's ratings are constrained by the bank's relatively small size and currently limited -- albeit growing -- franchise. In addition, Bank of Baku's ratings reflect its increasing credit risk appetite as demonstrated by recent rapid growth and its focus on the risky segment of the retail loan market, the so-called "express loans".
At the same time, Moody's notes that Bank of Baku's ratings are supported by: (i) the high granularity of its loan book and funding base; (ii) satisfactory financial fundamentals including asset quality, liquidity and profitability; and (iii) sufficient capitalisation to absorb expected credit losses.
According to Moody's, visible improvement of Bank of Baku's franchise along with demonstration of a sustained track record of satisfactory financial fundamentals may have positive rating implications. However, any mismanagement of the bank's growth strategy -- resulting in a significant deterioration of asset quality and financial fundamentals, or loss of market franchise -- could potentially negatively affect Bank of Baku's ratings.
Moody's notes that Bank of Baku's local and foreign currency deposit ratings do not factor in any probability of shareholder or systemic support in the event of a stress situation. Although support from the bank's shareholders cannot be ruled out, its extent and timeliness are uncertain, the Agency's experts say.
The principal methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007.
Headquartered in Baku, Azerbaijan, Bank of Baku reported total assets of $227.6 million, shareholders' equity of $40.9 million and net income of $7.6 million, according to its audited IFRS financial statements at year-end 2009.