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Standard & Poor's predicting growth in Azerbaijani Pasha Bank's 2021-22 capitalization

Finance Materials 21 January 2021 17:52
Standard & Poor's predicting growth in Azerbaijani Pasha Bank's 2021-22 capitalization

BAKU, Azerbaijan, Jan.21

By Zeyni Jafarov - Trend:

Standard & Poor's (S&P) Global Ratings agency has determined the outlook on Azerbaijani Pasha Bank OJSC's long- and short-term ratings as ‘stable’ and affirmed them at the level of ‘B+/B', Trend reports on Jan.21 citing the S&P’s report.

PASHA Bank's capitalization ratios will improve in 2021-2022 thanks to planned equity injections and a growth in retained earnings, said the report.

The ‘Stable’ outlook on the bank's ratings reflects S&P’s expectations such as a significant market share in the corporate segment of the Azerbaijani banking sector, large reserves of liquidity, and a stable customer deposit base that will maintain the bank's credit quality over the next 12 months.

According to the agency, corporate deposits and deposits of private clients remain to be the main source of funding for PASHA Bank, since it focuses on working in the banking sector’s corporate segment.

In the meantime, customer accounts remained stable in 2020 and the bank has large reserves of liquidity (a broad ratio of liquid assets was about 47 percent by mid-2020), which largely reduces the risk of potential volatility of deposits.

As the agency noted, the bank's creditworthiness continues to be positively affected by a significant share of the corporate lending market in Azerbaijan, despite difficult and uncertain operating conditions due to the COVID-19 pandemic and falling oil prices.

“However, the rating of PASHA Bank may be downgraded in the event of deterioration in the quality of its assets, which will cause a growth in the share of bad assets to a level significantly exceeding the indicators of comparable Azerbaijani financial institutions, as well as a significant excess of the volume of losses on loans,” S&P pointed out. “A negative rating action is also possible in the event of liquidity gaps due to a significant outflow of deposits.”

"In the long term, a positive rating action is possible if our forecast risk-adjusted capital ratio (RAC) stably and consistently exceeds seven percent," concluded the agency.

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