Fitch withdraws Azerbaijani bank’s ratings
Baku, Azerbaijan, Nov. 11
By Anvar Mammadov – Trend:
The international Rating Agency Fitch Ratings has downgraded the Azerbaijani DemirBank’s ratings, as well as withdrawn the bank’s ratings for commercial reasons, the rating agency said.
Fitch has downgraded and withdrawn the following ratings of the bank:
- Long-term foreign-currency issuer default rating (IDR) downgraded to 'CCC' from 'B-';
- Short-term foreign-currency issuer default rating (IDR) downgraded to 'C' from 'B';
- Viability rating (VR) downgraded to 'f' from 'ccc'.
The agency has also withdrawn the support rating affirmed at '5' and the support rating floor affirmed at 'No Floor'.
“The downgrade of DemirBank's VR to 'f' reflects Fitch's view that the bank has failed, as reflected by a material capital shortfall. Based on the bank's end-2015 IFRS accounts, which were published after the previous rating action in September 2016, its Fitch Core Capital ratio had fallen to just 2.4 percent at that date, and is likely to have come under additional pressure in 1H2016 due to further asset quality deterioration,” the agency said.
The agency believes that the bank requires external influx of capital to restore its solvency.
“DemirBank has announced plans for a 50 million manat equity injection, but this may be insufficient to restore the bank's solvency, given its sizable unreserved non-performing loans (90 days overdue, principal only) and accrued interest equalling to 118 million manat and 30 million manat respectively,” Fitch said.
DemirBank, the first commercial bank of Azerbaijan, started to operate in 1989.
Such major international financial organizations as the European Bank for Reconstruction and Development, the Netherlands Development Finance Company are among its shareholders.
As of the end of the first quarter of 2016, the volume of DemirBank’s assets totaled 548.61 million manats (official exchange rate for Nov. 11 is 1.6869 AZN/USD). The bank’s credit portfolio amounted to 401.02 million manat, while authorized capital is 21 million manats.