Fitch to upgrade Azerbaijani bank’s ratings in case of successful recapitalization
Baku, Azerbaijan, March 19
By Azad Hasanli - Trend:
Fitch Ratings international ratings agency can upgrade the rating of Azerbaijan's AGBank if its recapitalization is implemented without any losses, said the message on the agency's website.
Fitch Ratings says that the upside and downside risks for the ratings of AGBank remain balanced following the bank's recent announcement of a 100 million manats of recapitalization plan.
However, the bank's ratings could be downgraded if the recapitalization plan is not implemented, or is implemented in such a way that it effectively results in losses for some of the bank's senior third-party creditors.
"According to AGBank's statement, equity support of 80 million manats will be injected by early April, while the remaining 20 million manats will be raised within a year. The new capital is to be provided partly by the bank's current shareholders and partly by its key clients," said the message.
While evaluating the results of participation of the bank's creditors in its recapitalization, Fitch would consider whether the customers are related entities or third parties; and whether any effective conversion of deposits into equity is voluntary or involuntary, according to the message.
To achieve reported compliance with minimum capital ratio requirements of the Central Bank, [50 million manats] Fitch estimates that the bank needs 32 million manats of new capital.
"This calculation is based on AGBank's end-2015 statutory accounts, when it reported a total capital ratio of just 0.9 percent. However, additional pressure on the capital position stems from the bank's sizeable unreserved non-performing loans (loans overdue by 90 days or more), which, including accrued interest, Fitch estimates at 87 million manats at end-2015," said the agency.
AGBank started to operate in Azerbaijan in 1992. The bank's shareholders are: the International Finance Corporation, Kazimir Partners company, as well as individuals - Chingiz Asadullayev and Farzulla Yusifov.