Azerbaijan, Baku, May 30 / Trend A. Akhundov /
Moody's notes that International Bank of Azerbaijan's asset quality notably improved, Moody's said today.
Moody's rating action is largely based on International Bank of Azerbaijan's audited financial statements for 2012, prepared under IFRS.
According to the audited IFRS report, the absolute amount of non-performing loans (NPL, defined as loans 90+ days overdue) decreased by around 21% following the repayment of some large problem loans, and accounted for around 7.6% of gross loans in 2012 (2011:
12.4%), while restructured loans decreased by 28% in nominal terms and represented 7.3% of gross loans (2011: 13%). Moreover, loan-loss reserves accounted for 11.9% of gross loans at year-end 2012, thereby providing sufficient coverage (around 155%) of NPLs, the statement said.
Moody's expects International Bank of Azerbaijan's asset quality to remain stable over the next 12-18 months, supported by the favourable operating environment.
Moody's also notes that during 2012 International Bank of Azerbaijan strengthened its capital position and returned to compliance with the minimum regulatory capital adequacy level of 12%.
In 2012, International Bank of Azerbaijan's net profit increased to AZN53 million up from AZN19 million in 2011. This improvement was due to: (1) increased pre-provision income supported by the growing loan book and stable net interest margin, and (2) lower loan loss provisions on the back of improving asset quality.
Moody's says that International Bank of Azerbaijan benefits from a high probability of systemic support, based on its 50.2% government ownership, large market shares and systemic importance for Azerbaijan's economy.
The bank's standalone bank financial strength rating (BFSR) of E+ is equivalent to a standalone baseline credit assessment (BCA) of b3.
The outlook change to stable from negative on International Bank of Azerbaijan's supported ratings is driven by the change in outlook on the bank's standalone BFSR, the statement said.
However, a material increase of the bank's core capital levels, a reduction in borrower concentration, and ability to maintain adequate liquidity, asset quality and profitability indicators could have positive rating implications in the longer term.
The official exchange rate is 0,7846 AZN/USD on May 30.