Fitch: IBA should continue to receive sufficient state support

Baku. 31 January. REPORT.AZ/ Fitch Ratings says, International Bank of Azerbaijan's (IBA, BB/Negative/f) capital support needs have increased significantly as a result of substantial losses posted in the bank's end-2016 regulatory accounts, Report informs referring to the Fitch agency's official website.

"IBA's 'BB' Long-Term Issuer Default Rating (IDR) and senior debt rating reflect Fitch's view that the bank should continue to receive sufficient support from the Azerbaijan authorities to ensure it can service its obligations to creditors.

BA reported a AZN 1.4 billion net loss for 2016 and negative AZN0.7 billion equity at end-2016. The losses were mostly driven by AZN 1.1 billion of currency translation losses resulting from the bank's large short unhedged currency position (AZN 6 billion at end-2016). AZN depreciated 13% against USD during 2016 (including a 10% drop in 4Q16). A further 5% fall in January 2017 means that IBA may need to book additional translation losses of around AZN 300 million", the agency stated. 

"IBA's liquidity buffer at end-2016 comprised around USD 400 million in foreign currency and AZN5 billion (USD2.7 billion equivalent) in local currency, although IBA's ability to exchange these deposits into foreign currency (and thus improve the bank's FX position and foreign currency liquidity) is currently uncertain. The Central Bank of Azerbaijan (CBA) currently provides only limited amounts of foreign currency to the banking sector to reduce pressure on the exchange rate.

If IBA suffers renewed delays with provision of capital or liquidity support (not Fitch's base case) then the bank's ratings may be downgraded. The Negative Outlook on IBA reflects that on the Azerbaijan sovereign", the report reads.