Azerbaijan, Baku, March 30 / Trend /
Standard & Poor's Ratings Services said it had revised its outlook on Azerbaijan-based AGBank to stable from negative. At the same time, the long- and short-term counterparty credit ratings were affirmed at 'B-/C', the agency's press release says on Friday.
"We note that, overall, amid the easing economic environment, AGBank has improved the credit quality of its loan portfolio," the report says.
According to the agency, the bank has managed to achieve better funding diversification by shifting toward a higher share of customer deposits in liabilities, as well as increasing maturities of its wholesale borrowings.
Standard & Poor's bases its ratings on AGBank on the bank's "moderate" business position, "moderate" capital and earnings, "moderate" risk position, "average" funding, and "adequate" liquidity, as our criteria define these terms. The stand-alone credit profile (SACP) is 'b-'.
"Under our bank criteria, we use the Banking Industry Country Risk Assessment (BICRA) economic and industry risk scores to determine a bank's anchor, the starting point in assigning an issuer credit rating," the report says.
According to the report, the anchor for a commercial bank operating only in Azerbaijan is 'b+'. Azerbaijan's economic risk score is '8' and its industry risk score is '9'.
The stable outlook reflects our expectation that the bank will reduce the amount of existing problem loans, with increasing provisioning levels, and maintain current levels of capitalization and profitability.
"We could raise the ratings on AGBank if an improvement in the bank's operating environment is significant and durable enough to trigger a revision of our BICRA assessment on Azerbaijan. We could also consider a positive rating action if we see significant improvements in the bank's business position, or more material reduction in the level of nonperforming loans than we currently expect," the report says.
"We may take a negative rating action if we see the switch toward a more risky lending policy that resulted in rapid capital erosion, or worsening of the funding and liquidity position," the press release says.