Fitch affirms 4 Azerbaijani privately-owned banks

Fitch affirms 4 Azerbaijani privately-owned banks

Azerbaijan, Baku, March 14 / Trend /

Fitch Ratings has affirmed the Long-term foreign currency Issuer Default Ratings (IDRs) of Azerbaijan-based Unibank's (UB) and Demirbank's (DB) at 'B', and Atabank (AB) and AGBank (AGB) at 'B-', Fitch Ratings said today.

The Outlook on AGB has been revised to Negative. The Outlooks on the other banks are Stable.

Unibank's and Demirbank's 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

Atabank's and AGBank's 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 affirmations reflect the currently stable macroeconomic environment, as high oil prices support Azerbaijan's commodity-driven economy, and the banks' largely stable credit metrics.

The spill-over effects of high oil prices on the non-oil economy have provided some growth opportunities for the banks and also supported the gradual resolution of post-crisis asset quality problems, Fitch said.

Liquidity across the sector has been stable, underpinned by monetary expansion, which has supported deposit growth. Wholesale funding of private banks is mainly sourced from development institutions, remains limited in volume and reasonably diversified by maturity.

Credit risks relate mainly to slowly-amortising corporate loan books, but asset quality metrics have been stable at UB, DB and AB, and all three banks could fully reserve reported problem assets without breaching minimum regulatory capital requirements. AGB continued to report relatively weaker asset quality: non-performing loans (NPLs) net of accrued interest ticked up to 15% at end-2012 (from 12% at end-2011) and they could not have been fully absorbed through available impairment reserves and capital.

All four banks face emerging capital constraints, resulting from loan growth, weak profit generation (driven by margin compression and limited operational scale) and limited new equity injections, the message said.

DB and UB appear better positioned to improve profitability by expanding into higher-margin retail lending. However, fast retail growth (20%-40% at both banks in 2012) entails significant credit risks, although both banks have recently strengthened their risk management capabilities. The success of the banks' retail expansion strategies will depend on their ability to contain credit losses and rising operating costs (the latter particularly high at UB, with a cost/income ratio above 70% in 2012).

Capital constraints have become more acute for AGB and AB, which need to increase their regulatory capital to the new minimum requirement of AZN50m by end-2013 from AZN43m and AZN35m, respectively, at end-2012. Fitch understands that both banks have preliminary agreements with their current shareholders for capital injections during the year to address these shortfalls, but these plans have yet to be implemented.

The Negative Outlook on AGB's IDRs reflects the ongoing weakening of the bank's solvency due to operational losses, as measured on a cash basis. AGB's pre-impairment result net of accrued but not received income has been a negative 10% of starting equity during 2012. The build-up on the balance sheet of accrued interest mean that at end-2012, together with the unreserved part of reported NPLs, this was almost equal to the bank's regulatory capital. In Fitch's opinion, the bank's dependence on regulatory forbearance with respect to loan provisioning is increasing.

Upside potential for the four banks' ratings is currently limited, primarily as a result of structural issues affecting the operating environment (including high economic cyclicality, weak institutional development, generally immature corporate governance and political risks). Gradual improvements in the operating environment, a strengthening of the banks' franchises and an extended track record of sound performance could give rise to upward rating pressure over time.

The banks' ratings could come under downward pressure if there was a large and sustained drop in oil prices, although this scenario is not expected in the near term. An intensification of capital pressures as a result of fast growth and/or an increase in impairment charges would also be credit negative, if not offset by capital injections. Failure of either AB and AGB to meet the new minimum regulatory capital requirement by end-2013 would also be credit negative, although by itself would be unlikely to result in downgrades given potential regulatory forbearance (at least in the short term) for banks with moderate capital shortfalls.

AGB's ratings could be downgraded if pressure on the bank's solvency increases further as a result of continued pre-impairment cash-based losses and/or recognition of additional loan problems. Conversely, Fitch could revise AGB's Outlook back to Stable if capitalisation strengthens as a result of equity injections or improved performance and internal capital generation.

The SRFs of 'No Floor' and '5' Support Ratings for each of the banks reflect their relatively limited scale of operations, as a result of which extraordinary support from the Azerbaijan authorities cannot be relied upon, in Fitch's view. The potential for support from private shareholders cannot be reliably assessed. Fitch does not expect any revision of the banks' SRFs or Support Ratings in the foreseeable future, the message said.

The official exchange rate is 0,7848 AZN/USD on March 14.

Zarif urges South Korea to release Iran's blocked assets
Zarif urges South Korea to release Iran's blocked assets
Iranian parliament shares grief of relatives of victims of Khojaly tragedy
Iranian parliament shares grief of relatives of victims of Khojaly tragedy
Iran's Rouhani asks US to pave way for talks
Iran's Rouhani asks US to pave way for talks
Loading Bars
Latest
29 years later: Azerbaijan marks tragic date of Khojaly genocide
ByteDance agrees to $92 million privacy settlement with U.S. TikTok users
Global COVID-19 deaths surpass 2.5 mln - Johns Hopkins University
Georgia approves draft agreement with largest oil company in Eastern Europe
Kazakhstan decreases exports to Belarus year-on-year
UAE resumes issuing travel visa for Iranians
Head of parliamentary committee talks agricultural activity in liberated Azerbaijani lands
AZAL to start to make special flights from Baku to Kyiv
OSCE PA Vice-President names Azerbaijan's challenges in post-Karabakh conflict period
Khojaly genocide - criminal act committed against mankind, against humanity, MP says
Azerbaijani FM, Israeli ambassador discuss prospects for development of bilateral co-op (PHOTO)
Russian journalists horrified by Azerbaijani Aghdam city's destruction
Netherlands Trading House may open in Azerbaijan
Supplies of 'Iskander' missiles to Armenia must be stopped – Russian expert
Baku hosts meeting with Pakistani military delegation
Pakistani FWO talks interest to co-op with Azerbaijan in infrastructure projects
Azerbaijani president receives Signify representatives via video format (PHOTO)
OSCE MG should support post-conflict rehabilitation of Azerbaijani territories - OSCE PA VP
Chairperson-in-Office of OSCE looks to visit Azerbaijan
Italy's share in Azerbaijani oil export in 2020 disclosed
Azerbaijani satellites to provide HD broadcasting to West Africa region
Hungary-Azerbaijan cooperation on ACG, Baku-Tbilisi-Ceyhan pipeline can expand to new areas
Khazar Consortium opens again tender for service maintenance in Turkmenistan
Conversations ongoing on potential projects between Turkmenistan, UK
Uzbekistan’s fiscal policy to continue supporting economic recovery - Fitch Ratings
Payment card turnover in Azerbaijan continues to grow
Azerbaijan’s crude oil export to China up
Hungary eyes including Azerbaijani gas in country’s future energy mix
Azerbaijani market of great interest to Russian Perm region's business circles
Azerbaijan reports 142 more COVID-19 recoveries
Azerbaijan discloses volume of foreign trade operations with Russia in Jan. 2021
Azerbaijan to use new 'cloud' technologies in audit during 2021 - Chamber of Auditors
Volume of loans issued by Georgian commercial banks down
Uzbek-Korean JSC announces tender for transport services
OSCE ready to deploy mediation missions for sustained peace in Azerbaijani liberated territories - president
CNPC in Turkmenistan opens tender for provision of gas leakage detection services
Fitch projects share of state-owned banks in Uzbekistan to reduce
"Sign of Khojaly" film demonstrated within "Justice for Khojaly" campaign (VIDEO)
OIC SecGen pays tribute to those who lost their lives in Khojaly genocide
Reconstruction of Azerbaijan’s liberated lands to deepen economic co-op with Hungary
Moderna sees $18.4 billion in sales from COVID-19 vaccine in 2021
Swiss agriculture technologies to be introduced in Kazakhstan's Almaty
Tesla short-sellers sitting on $3.5 billion weekly profits
Azerbaijani FM receives Pakistani FWO's Director General (PHOTO)
Resident of Azerbaijan's liberated Jabrayil district injured as result of mine explosion
Georgia creating new council to develop state enterprise reform strategy
Uzbekistan approves investment agreements on construction of wind farms in Bukhara region
Iran's raw steel exports shrink
Dutch company sets up concrete production plant in Uzbekistan’s Tashkent region
Georgian Railway to resume passenger transportation
Azerbaijan records growth of debit cards in January 2021
Azerbaijani company signs contracts for transportation of aluminum products to Turkey
Russia increasing supplies to Turkey along BTK railway
Main share of Czech investments in Georgia falls on energy sector
Oil refining volumes decrease in Kazakhstan year-on-year
Azerbaijan communications ministry working on stabilizing Internet in districts
Azerbaijan’s Azerishig, MERKABA-SOFT companies sign contract
Payments of Azerbaijani insurance companies double
Data on cotton yarn sales on Turkmenistan’s exchange in Jan.2021
Kazakhstan's national oil&gas company reports lower annual oil transportation volumes
Kazakhstan's KazMunayGas sees decrease in 2020 oil extraction
Azerbaijan sees Jan.2021 growth of national currency deposits in local banks
Georgia plans to hinder construction of plastics recycling plant in Kutaisi FIZ
Iran reveals COVID-19 data for February 25
AzTV will investigate historical assasinations (PHOTO)
Kazakhstan eyes to host meeting of Turkic Council countries' energy ministers in 2022
Zarif urges South Korea to release Iran's blocked assets
UK eager to restart U.S. talks on tariff removal
Saipem expects capex to rise in 2021
Central Bank of Azerbaijan announces winner of tender for survey on household plans
Central Bank of Azerbaijan shares data on revenues of Azerbaijani insurance companies
Number of trucks crossing through Iran's Jolfa border checkpoint revealed
German companies eye 'green economy' dev't projects in Kazakhstan
Kazakh investors interested in several sectors of Turkish economy
Assets of pawnshops and microcredit organizations in Uzbekistan increase
Kazakhstan's major copper company reveals its 2021 production guidance
Turkey's activity on Turkmenistan’s exchange in Jan.2021
Azerbaijani president takes part in ceremony of providing families of martyrs, disabled with apartments (PHOTO)
Details of import-export via Iran's Bushehr Province announced
President Ilham Aliyev attends opening of Shaghan Rehabilitation Pension (PHOTO)
KAZ Minerals provides update on Baimskaya Project in co-op with Russia
Military coup attempt in Armenia - PM inviting supporters to Republic Square
Uzbek agriculture ministry to create system to monitor irrigated lands
Pashinyan dismisses head of General Staff
Armenian General Staff demands Pashinyan's resignation
Azerbaijani banks' foreign currency demand down
Azerbaijan privatizes several district public properties via auctions
Turkmenistan prepares to host transport conference for landlocked developing countries
Bakcell launches internet package for online education and work
Iran starts exporting products from Tombak port
Georgian PM appoints Vice PMs
Extraction from Iran's South Pars gas field exceeds plan
Kazakhstan's KAZ Minerals reports increase in revenues
TOP-5 trading partners of Azerbaijan in Jan. 2021
Georgia to extend grace period for auto importers
Saipem’s capex down, net financial debt up in 2020
Kazakh national atomic company's subsidiary opens tender to repair vehicles
Saipem sees decrease in revenues due to slowdown of projects
Barclays lifts 2021 oil price outlook on tighter U.S. supply view
Azerbaijani MFA comments on statements by Luxembourg's FM
All news