Azerbaijan, Baku, Jan. 30 / Trend A. Akhundov /
Fitch Ratings has affirmed Azerbaijan-based Pasha Bank's (PB) Long-term foreign currency Issuer Default Ratings (IDRs) at 'B+', with a Stable Outlook, Fitch Ratings said today.
Long-term foreign-currency IDR: affirmed at 'B+'; Outlook Stable
Short-term foreign-currency IDR: affirmed at 'B'
Viability Rating: affirmed at 'b+'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
The affirmation of PB's ratings reflects minor changes in PB's risk profile since the last review of the bank in September 2012.
"The bank's ratings are constrained by the highly cyclical, oil dependent and structurally weak Azerbaijani operating environment," the message said. "The major bank specific issues remain PB's limited retail deposit franchise and short track record; potential contingent risks arising from the construction business of the broader group; notable political risk and uncertainty in respect to the long-term sustainability of the bank's sizeable related party funding."
At the same time, the ratings also consider PB's currently solid financial metrics, reflected in a sizable capital and liquidity buffer, and so far reasonable performance and asset quality. The latter should be considered in the context of limited track record, however, the message said.
Fitch understands that the bank's shareholder structure may benefit the bank in terms of potential liquidity support, favourable regulatory treatment and potential equity support if needed. However, such support cannot be relied upon at all times, in the agency's view, given the bank's limited systemic importance and policy role. Hence PB's Support Rating and SRF were affirmed at '5' and 'No Floor', respectively, the message said.
Downside pressure on PB's ratings could arise if the capital and liquidity positions deteriorate significantly, for example from materialization of contingent risks from other group assets, or from fast credit growth, which is not anticipated by Fitch at present. PB's Support Rating and SRF could be upgraded if there was a marked increase in PB's systemic importance and the depth of its franchise, or if the Azerbaijan authorities more clearly demonstrate their readiness to support the country's non state-owned banks. However, Fitch views such changes as unlikely in the near term, the message said.
Upward rating action would require an extended track record of sound performance and improved transparency of the group's construction business.
PASHA Bank was established in June, 2007 and operates under a license of the Central Bank of Azerbaijan dated Jan.28, 2007.
The bank, along with Pasha Insurance, PASHA Life, Pasha Travel and Pasha Construction, is included in the Pasha Holding Company which is actually an investment company, rather than a classic holding company.
Kapital Bank is also included in the structure of the Pasha Group. The Holding owns 99.75 per cent of the shares in Kapital bank.