Azerbaijan, Baku / corr. Trend I.Khalilova / Fitch Ratings has today upgraded Azerbaijan-based Azerdemiryolbank's ("Azerdemir") Issuer Default rating ("IDR") to 'B-' (B minus) from 'CCC+' and Short-term rating to 'B' from 'C'. The Individual 'D/E' and Support '5' ratings are affirmed. The Outlook on the IDR remains Stable, mentioned in the statement of Fitch.
The upgrade reflects Azerdemir's significant business growth, although its size remains very small by international standards. It also reflects the bank's improving funding profile, including through international borrowings. In addition, the upgrade takes into consideration its reasonable profitability and asset quality to date and very low related-party exposures. However, there are still considerable concentrations in the loan book, and rapid loan growth in a still relatively high-risk operating environment entails high credit risks and may put pressure on capitalization.
Upside to the ratings is limited in the near term, but a substantial expansion of the bank's franchise without compromising asset quality, a reduction of loan concentrations and a strengthening of capitalization would be positive for the bank's credit profile.