Fitch Affirms IBA at BB ; Outlook Stable
OREANDA-NEWS. June 22, 2009. Fitch Ratings has affirmed International Bank of Azerbaijan’s (IBA) Long-term Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook and the Individual Rating at 'D/E'. A full list of rating actions is provided at the end of this commentary, reported the press-centre of IBA.
The IDRs of IBA reflect a moderate probability of support from the Azerbaijani authorities if needed. In Fitch’s opinion, the Azerbaijani authorities would have a very high propensity to support the bank based on IBA’s systemic importance for the country’s banking system and overall economy, as well as the majority ownership (50.2%) by the Ministry of Finance. The sovereign’s ability to provide support is reflected in its Long-term IDR of 'BB+' with a Stable Outlook (see ‘Fitch Affirms Azerbaijan at 'BB+'; Outlook Stable’ dated 2 June 2009 on www.fitchresearch.com) and IBA’s Long-term IDR is equalised with that of the sovereign.
The Individual Rating reflects risks arising from IBA’s weakening asset quality (rising NPLs and high portion of overdue loans), its thin capital, some mid-term foreign refinancing risk, substantial balance sheet concentrations and regular waivers granted by the Central Bank of Azerbaijan. At the same time, Fitch notes the breadth of IBA’s local franchise, its long-standing expertise in servicing large local corporates and good profitability to date.
IBA’s performance is susceptible to general macroeconomic trends given its position as the largest lender in the sector. The loan book is highly concentrated by borrower, and loans to state-related entities represent about half of the loan book (the regulator frequently allows the bank to breach limits on largest exposures to state-related companies). At end-April 2009, impaired loans, defined as loans in the lowest three regulatory categories, made up 6.1% of gross loans.
However, according to management estimates, a further 5.5% of gross loans were over 90 days overdue but not classified as impaired, while loans one day overdue but not classified as impaired were a large 26.1%. These loans are not considered by the bank as impaired due to a number of mitigating factors, including some form of state support being provided to the borrower and collateral coverage which is viewed as sufficient. The tier 1 and total regulatory capital ratios were 9.0% and 13.1%, respectively, at end-April 2009, while the reserves / loans ratio was 10%, providing no more than moderate loss absorption capacity.
Any movement in IBA’s IDRs could result from a change in the sovereign’s rating or if Fitch’s view on the state's propensity or ability to support the bank changes materially. Downward pressure on the Individual Rating could arise from a sustained deterioration in asset quality metrics, and therefore greater pressure on capitalization.
IBA dominates all segments of the Azerbaijani banking system with market shares at end-2008 of 43% of assets and 26% of retail deposits. Privatisation of the bank is unlikely in the near-term
Rating actions:
Long-term foreign currency IDR: affirmed at 'BB+'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Individual Rating: affirmed at 'D/E'
Support Rating: affirmed at '3'
Support Rating Floor: affirmed at 'BB+'
Комментарии