Fitch: improving capitalization Bank Technique can have a positive impact on the ratings

Fitch Ratings notes that the ratings of Bank Technique (further - Bank Technique, the former Technikabank), Azerbaijan, can be upgraded if the bank successfully implements measures to recapitalize. However, the significant risks associated with the implementation of these plans, and their limited scope means that the upgrade is still is uncertain and will be in the event of a moderate.

Long-term Issuer Default Rating ("IDR") of Bank Technique is "CC" and its stability rating of "f" currently reflects a sharp deterioration in the liquidity and capital reduction in Q2. In 2012 after the arrest of one of the key shareholders of the bank (see post "Fitch Downgrades Technikabank to 'CC'" / "Fitch downgraded to the level of Technikabank" CC "from May 21, 2012 at www.fitchratings.com and www.fitchratings.ru).

After these events, World Wines, the controlling shareholder of Bank Technique, currently owns 75 per cent stake, has introduced a new management team, which worked to improve the financial position of the bank. First, it is expected that the World Wines and Kazimir Investment Caspian Fund (owns a share of 10%) will hold a capital contribution to the bank in the amount of AZN 16 million in Q1, 2013. Second, Bank Technique informed Fitch of agreement to sell part of the collateral for which it was levied on impaired loans, potentially provide a net profit of 65 million manat. Furthermore, it may be achieved positive effect of capitalization of 10 million manat, if Bank Technique sells its subsidiaries (including the leasing company).

Fitch believes these plans realistic, but notes that the overall impact of these measures on capital of 91 million manat, which is slightly lower capital in the amount of AZN 112 million, which estimated the agency required the bank at the end of Q3, 2012 for compliance with the regulatory requirements for minimum capitalization of 12%. However, the management of the bank is also planning to reduce the leverage on the balance sheet by refinancing some of the largest loans in other banks, which will greatly reduce the assets weighted by risk. Management expects that in the case of implementation of all these measures, the bank will perform in the country of the regulatory capital adequacy requirements by the end of Q1, 2013.

Fitch plans to undertake a review of the bank's ratings after it will be possible to assess the success of the implementation of the above measures, possibly in Q1, 2013. Positive rating actions are possible if the bank will strengthen its capitalization and will be reviewed again by the Agency as a financial institution with strong positions. In the case of delays or uncertainties with the recapitalization in the future long-term IDR Bank Technique can be confirmed at "CC". IDR may be downgraded to default level, if there is further weakening of the bank's liquidity without providing a external support from shareholders or the central bank, if the Bank Technique will be unable to service their obligations. -15D -