Baku, Azerbaijan, Jan. 19
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Moody's Investors Service has assigned the following ratings to VTB Bank (Azerbaijan) (VTBAZ): local- and foreign-currency deposit ratings of Ba3, standalone bank financial strength (BFSR) rating of E+/Stable (equivalent to a b2 baseline credit assessment [BCA]), and Not-Prime short-term deposit ratings.
The bank's long-term global deposit ratings are under review for downgrade in line with the corresponding review on the parent - Russia-based Bank VTB JSC, whose standalone BFSR and long-term debt and deposit ratings were placed on review for downgrade on 23 December 2014 in response to the ongoing severe deterioration in Russia's operating environment and financial market conditions, Moody's said.
VTBAZ's Ba3 long-term local currency deposit rating incorporates the rating agency's assessment of a high probability of parental support from Russia-based Bank VTB JSC (deposits Baa3; under review for downgrade; BFSR D- under review for downgrade/BCA ba3). As a result, VTBAZ's deposit ratings receive two notches of uplift above its b2 BCA, the statement says.
VTBAZ's standalone E+ BFSR is supported by the bank's close integration into the VTB group, which benefits the bank in terms of operational, capital and funding support. At the same time, VTBAZ's standalone creditworthiness is currently constrained by challenging operating conditions in Azerbaijan given recent drop in oil prices, bank's modest business position in the domestic banking sector, its high credit risk appetite.
VTBAZ's current business position is constrained by its relatively modest domestic market share of around 1% by assets and limited customer franchise. However, the bank demonstrates active business growth, with a planned average annual loan growth rate of around 60% for the next three years and a target to rank among the top five Azerbaijani banks, the statement says.
VTBAZ plans to diversify its funding base in the future by increasing the volume of customer deposits (both corporate and retail) and issuing local bonds.
Moody's considers upward rating action unlikely in the next 12-18 months. Deposit ratings could also be revised downward if pressure on the VTBAZ's standalone BCA intensifies following worsening operating environment resulting in material asset quality deterioration with problem loans exceeding the market average, thereby constraining capital adequacy.
While assessing the bank's activity, Moody's took into account its financial position as of September 30, 2014. During this period, the total assets of the bank amounted to 269 million AZN.
VTB Bank (Azerbaijan) JSC is a subsidiary of VTB Bank JSC. Shareholders of VTB Bank (Azerbaijan) JSC are: VTB Bank JSC and AtaHolding JSC. VTB Bank (Azerbaijan) JSC provides services to clients of corporate business, small business and private clients. Today, the bank is represented by 12 branches and the Office of customer service at the head office.
The official exchange rate is 0.7844 AZN/USD Jan. 19.
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