The agency has also downgraded IBA`s Viability Rating (VR) to `f` from `b-`. The affirmation of IBA`s IDRs, Support Rating and SRF reflects Fitch`s view that the Azerbaijan sovereign (BB+/Negative) has a high propensity to provide support to the bank, if needed. The Negative Outlook on IBA`s ratings reflects that on the sovereign.
The downgrade of IBA`s VR to `f` reflects Fitch`s view that the bank has failed. This in turn reflects the agency`s view that the asset purchases completed in 1H16 revealed a material capital shortfall, given the very large volume of weakly-reserved exposures being transferred. The AZN10bn of transfers reported in the 1H16 IFRS accounts was considerably more than the AZN3bn initially planned when Fitch reviewed the bank`s ratings in March 2016.
Fitch understands that the following support measures are being planned to improve IBA`s solvency: (i) a AZN500m equity injection, equal to 90% of end-1H16 FCC, by end-2016 (although this may be fully or largely offset by losses in 2H16); (ii) further credit risk transfers, as outlined above; and (iii) various measures to help reduce the foreign currency position, including the purchase of the latest loan exposures for US dollars and the conversion of accounts of state-related depositors into local currency.
Fitch Affirms International Bank of Azerbaijan at `BB`
23 November 2016
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Fitch Ratings has affirmed International Bank of Azerbaijan`s (IBA) Long-Term Issuer Default Ratings (IDRs) at `BB`. The Outlook is Negative, AzVision.az reports citing to Fitch’s website.
