Fitch Affirms AccessBank at "BB +"

Fitch Ratings affirmed the long-term Issuer Default Rating ("IDR") AccessBank in foreign currencies at the "BB +". The rating outlook is 'Stable'.

Confirmation of IDRs and Support rating reflects Fitch AccessBank the moderate probability of support from the availability of international financial institutions, which are its shareholders, in particular KfW ("AAA" / "Stable" outlook, the proportion of 20%), the European Bank for Reconstruction and Development (" AAA "/" Stable "outlook, 20%) and the International Finance Corporation (" IFC ", 20%). At the same time, Fitch notes some uncertainty as to which, if necessary, timely support will always be provided with the fragmented nature of the shareholder structure and the limited strategic value of the bank for the international financial institutions, own it, and because of their intention to gradually reduce its share in the bank in the medium term. For these reasons, AccessBank support rating was affirmed at "3", and the long-term IDR - at "BB +".

If, according to Fitch, there is a marked weakening willingness to provide support, may be followed by reduction of IDR, as in the case of lowering a few levels of the sovereign rating of Azerbaijan ("BBB-" / forecast "Stable"). Currently, however, neither of these scenarios is expected by the agency. The rating of the upside potential of AccessBank is limited in the foreseeable future.

Stability rating of AccessBank "b +" is deterred by potential cyclical indicators and asset quality, associated with highly volatile, structurally weak and dependent on the oil economy of the country. Fitch believes that in the event of a significant and prolonged downturn of the economy difficulties, in particular, may find the borrowers of the bank segment of small and medium businesses. Significant dependence of AccessBank funding from the financial markets is also a negative factor for the credit.

Among the positive factors of stability rating reflects good net profit, strong liquidity, supported by rapidly depreciable and relatively liquid loan portfolio, good asset quality and performance to date, as well as significant loss absorption capacity.

AccessBank asset quality indicators remain favorable. Thus, loans overdue by 90 days accounted for only 0.7% of the loan portfolio at the end of 2012, and the write-off and restructured loans were at 0.6% and 0.5% respectively. Fitch notes that the average rate of bad loans in the segment of small and medium business in Azerbaijan is approaching 10%, and calls into question the sustainability of good asset quality in the longer term. Weak quality of financial information on borrowers AccessBank in the small and medium business requires strict control over the quality of assets, which is becoming more complex with the growth of the portfolio, while the ability to select the best borrowers are reduced due to increased competition in the sector.

As a mitigating factor playing a significant margin of safety in the form of a bank's capital cushion (end of 2012 the capital stock at AccessBank was sufficient to withstand losses on loans to a maximum of 14%), as well as in the form of profit before provision for loan losses (equal to more 6% of loans), the current unfunded comfortable (4%) and reasonable opportunity to reduce leverage. At the same time, Fitch notes that the bank has not yet passed the test of time in deep prolonged recession, despite a positive history in the crisis in the 4th quarter of 2008 - Q1. 2009

Fitch is concerned about the significant dependence on funding AccessBank being involved in the financial markets (more than 55% of liabilities at the end of 2012, including 17% raised directly by shareholders), but points as a positive factor for the diversification of its good to creditors and deadlines maturity with moderate refinancing needs of 60 million for 2013 covering latter had liquidity reserves at a level of 1.1 x at the end of 2012

Generation of internal capital from AccessBank remains good (return on average equity (ROAE) and return on average assets (ROAA) in 2012 were at a high level, respectively, 3.5% and 17%), however, is probably fall slightly in the short term with the growth of competition. In addition, the bank intends to pay a dividend equal to approximately 40% of the annual profit since 2012 at the same time retained earnings should continue to be sufficient to maintain regulatory capital ratios (24.8% at end-2012) is significantly higher regulatory minimum (12%) with the credit growth target of 20%.

The pressure on the bank's ratings downward may arise substantial reduction of capitalization, for example, due to a sharp deterioration in asset quality due to a noticeable weakening of the economy of Azerbaijan, in particular, in the case of significantly lower oil prices.

The rating of upside potential in the near future of AccessBank is limited and is likely to require significant improvement of the operating environment. At the same time, a long history of good performance, and a gradual reduction of dependence on funding raised on the financial markets, would be positive aspects to the creditworthiness of the bank. -15D -