Fitch Ratings keeps Atabank's rating stable

Baku. 5 July. REPORT.AZ/ Fitch Ratings says that the recently completed merger of Azerbaijan's Atabank OJSC (AB; B-/Negative/b-) with Caspian Development Bank (CDB) has no immediate impact on AB's ratings. 

Report informs, this reflects Fitch's base case view, based on public disclosure, that the positive impact from the higher capital ratios of the merged bank is counterbalanced by recent loan deterioration, meaning the post-merger credit profile is likely to be still commensurate with the 'B-' rating level. 

"The transaction was completed in May 2017, as a result of which CDB was merged into AB and ceased to exist as a separate legal entity. Before the merger, AB was owned by OJSC "Ata Holding" (AH), and CDB by Synergy Group OJSC (SG), with AH and SG both owned by the same group of people close to the Azerbaijani authorities. After the merger, control over the merged bank was transferred to SG, which subsequently injected AZN20 million of equity into AB", Fitch Ratings reports.

"Negatively we view the significant weakening of asset quality, mainly attributable to the pre-merger AB, whose non-performing loans (NPLs, 90+ days overdue) increased to around 30% of gross loans at end-2016 (based on IFRS accounts) from 13% at end-2015, while CDB reported negligible NPLs at end-2016. Fitch estimates that the combined NPL ratio for the merged bank should be around 23%, while reserve coverage (based on end-2016 IFRS accounts) would have been about 55%", agency says.