Devaluation "Lowered" Rating of Bank of Baku

From stable to negative rating downgraded the forecast of Bank of Baku, according to the international agency Moody's Investors Service. The estimate of the long-term issuer rating for foreign and local currency maintained at B1. Short-term deposit rating affirmed at Not-Prime. Basic credit rating is also maintained at B1, and evaluation of counterparty risk at the level of Ba3 (CR) / Not-Prime.

The agency's experts come from the expected pressure on the quality and profitability of its assets, which is associated with a high degree of consumer credit, deteriorating service foreign currency debt, as well as with a reduction in real income individuals as a result of acceleration of inflation caused by the February devaluation of the manat. This means that the negative trend in asset quality will continue to affect the profitability of Bank of Baku in the near future.

The Agency believes that the quality of bank assets fell after the increase in the value of gross loans (last year by 6.0%, in 2013 - by 1.7% and in 2012 - by 1.5% compared with a year earlier) . The devaluation of the manat also affects the quality of assets, as a large part of the bank's foreign currency loans (28% of the total portfolio at the end of last year) actually provided without warranty. Consumer inflation also affects the real income of individuals and their ability to service debt.

According to experts of the agency, robust capital adequacy, adequacy of reserves (123% of the volume of problem loans) will allow this credit structure to absorb losses for at least the next 12-18 months, the leverage ratio will be reduced, and risk assets will be reduced. At the same rating for the half year it will not be changed for the better because of the negative forecast.

At the time of the verdict, net profit amounted to 40.7 million manat, total assets - 728 million manat, and capital - 128.3 million AZN. --17D-