Moody�s Lowers Ratings of Four Azerbaijani Banks

Baku / 16.06.17 / Turan: The international rating agency Moody"s Investors Service downgraded the basic credit rating and long-term deposit ratings of four Azerbaijani banks, the agency said.

The agency downgraded long-term deposit ratings in local and foreign currency of Khalg Bank to B3 from B2, Bank Respublika - to B3 from B2, Bank of Baku - to Caa1 from B3, VTB Bank (Azerbaijan) - to B3 from B2. Moody"s also lowered the basic credit rating of Khalg Bank to caa1 from b3, Bank Respublika - to b3 from b2, Bank of Baku - to caa1 from b3, VTB Bank (Azerbaijan) - to caa3 with caa1.

Moody"s retained a negative outlook on the ratings of these banks. According to the agency, the rating actions reflect the deterioration of the financial foundations of Azerbaijani banks amid prolonged unfavorable working conditions and the negative impact of the devaluation of the manat, in particular, a significant deterioration in the quality of assets, net losses due to increased credit costs and foreign exchange losses, etc. The agency said the conditions for lending are limited by a very high level of dollarization, the lack of liquidity in local currency, a volatile client deposit base and limited and expensive access to capital markets.

Moody"s expects that pressure on Azerbaijan"s banks will continue, given the credit prospects and net losses, a high load on reserves and more stringent regulation, requiring additional capitalization, as well as high dollarization. The ratings of bank deposits of Moody"s represent opinions on the ability of the banks to timely and fully repay their obligations on deposits in foreign and / or local currency.

"In the long term, the long-term deposit rating of each of the four banks is assessed as negative. It is reported on the growth of problem loans up to 25%. It is indicated that Bank Respublika belongs to the head of the Central Bank Elman Rustamov, i.e. even the institution, which belongs to the country's chief banker, faces difficulties.

In any country, banks are the circulatory system and the heart of the economy. Now the blood flow has been disturbed and reduced to the engine of the economy, which is in intensive care, and just about to lose consciousness. It is the easiest and most accessible language that could explain the criticality of the situation to officials with ties and in armchairs. So holding a Formula 1 in the country is roughly like a creative wedding dance of a person with heart problems. First you need to be treated, and then dance at weddings," the economist Natig Jafarli said about this.

Khalg Bank received a banking license on December 30, 2004 and is one of the five leading banks in Azerbaijan in terms of assets. The shareholders of the bank are three legal entities.

Bank Respublika was established on February 17, 1992 and is one of the top ten banks in Azerbaijan. Among the shareholders of the bank are the largest financial institutions of Germany - Investment Corporation DEG, a member of the banking group KfW, and SIDT, a member of the financial group Sparkassen-Finanzgruppe. In general, 84% of the bank"s shares belong to entrepreneur Natig Guliyev and his family members.

The Bank of Baku was established in 1994 and is one of the top ten banks in Azerbaijan.

In November 2008, the Central Bank of Azerbaijan approved a deal to acquire a 51% stake in the Azerbaijani AF Bank by the Russian Vneshtorgbank (VTB). In the structure of the bank"s shareholders 51% of shares belong to JSC VTB Bank, 48.99% - to the Ata Holding group of companies, and 0.01% to an individual. -0--