International Experts Waiting for Deterioration of Bank Assets in Azerbaijan

Credit ratings of the three largest private banks of Azerbaijan, including their long-term prospects, have been revised by the international agency Standard & Poor`s, waiting downgrade.

Thus, forecasts of Capital Bank and PASHA Bank, under the control of the Pashayev family, fell from stable to negative levels. Long-term and short-term credit ratings of Mugan Bank are defined at the level of B- / C. Revision of ratings is associated with a reduction in sovereign credit ratings of Azerbaijan from 'BBB- / A-3 to BB + / B'.

The reasons for strengthening risk for the development of the local banks are the fall in world oil prices, on which depend the exports of the local economy, the expected two-fold reduction of GDP, and twice the weakening position of the manat as a result of the devaluation.

The agency’s analysts have lowered the level of the quality of the Azerbaijani banking sector assets, putting it not in group 8, as before, but in group 9. If the government could maintain afloat the private financial sector before, it is now itself in a quandary. Because of this, the problematic, extended and restructured loans can grow (if at the end of last year they were at the level of 7%, by the end of the year this figure may reach 23-25% of the total loan portfolio of banks).

"Reducing the confidence of depositors, creditors and borrowers to manat has led to an increase in foreign exchange imbalances, as for 2015, more than 80% of customers converted their deposits in manat into foreign currency deposits. This trend may continue in the future, putting additional pressure on the financial performance of banks and liquidity management in the banking sector," the S & P analysts say. --17D-