Baku. 15 July. REPORT.AZ/ Despite mounting fiscal strains, Azerbaijan's government continues to provide support to state-owned International Bank of Azerbaijan (IBA), which is helping the lender manage heightened risks stemming from the country's challenging operating environment. Report informs, Moody's international rating agency stated. The IBA report of the agency published on July 14 declares that support measures will continue to underpin the bank's asset quality, capitalization and liquidity amid Azerbaijan's ongoing economic downturn.
According to the Moody's, IBA's dependence on government support will remain high. "Authorities have transferred bad assets from the bank's balance sheet to a state-owned non-banking company Aqrakredit CJSC, and plan to inject AZN500 million ($333 million) in capital by the end of 3Q2016. In addition, IBA is currently negotiating with the government the ways of hedging its open currency position. Without these measures, the bank's asset quality metrics and capitalization would be significantly weaker, and we expect the government will maintain this level of support as it prepares to privatize the bank at some point in the coming years", the agency says.
The agency reminds that the bank had already reduced its dependence on market funding to 44% of total liabilities, as of year-end 2015, from 50% in 2014, by repaying debt, and as a result its upcoming refinancing needs are now more contained. "IBA plans to transfer more bad assets to the government in 2016 and receive cash in return, which will further boost its liquidity cushion, while strengthening its funding profile by repaying its expensive foreign-currency borrowings by the end of the year", Moody's says.
"Since the government signed a degree laying out a rehabilitation plan for IBA in July 2015, the bank transferred to a state-owned nonbanking company Aqrakredit AZN2.5 billion of bad assets in 2015 and agreed to transfer another AZN5.7 billion in problem loans in 2016, according to audited IFRS. The factual amount of transferred bad assets totaled AZN7.5 billion given exchange rate difference and also included problem assets of bank's subsidiaries: IBA Moscow and Joint Leasing Company. As of today, IBA has fully completed the assets transfer and received cash in return from Aqrakredit", agency says.
"In addition, the government plans to inject AZN 500 million into IBA this year, bringing its ownership stake in the bank to 95%", the report declares.