Baku. 31 July. REPORT.AZ/ Change in outlook is due to a decrease in the quality and a reduction in the profitability of the bank's assets. Among other reasons, the agency indicates weakening of the creditworthiness of customers, currency risks, rising inflation and increase the cost of financial resources.
Moody's says that the negative trend in asset quality in the future will have a significant impact on the bank's profit. The increase of consumer loans in recent years, after the February devaluation reduced the quality of assets. Share of consumer loans in foreign currency is 28% of the total loan portfolio of Bank of Baku. The agency notes that, the acceleration of inflation reduces the income of borrowers, thus complicates the process of paying their credit debts.
At the same time, the agency appreciates the growth rates for the primary profit to the average value of assets from 11.9% in 2013, to 13.1% in 2014, the decline in the cost to income ratio from 36.8% in 2013 to 33 8% in 2014. Despite this, it is predicted that due to the cost of local credit in the next 12-18 months, the bank does not receive profits or she is a minor.
The agency notes that, in the next 12-18 months, the bank will be able to cover the losses due to the fact that the Tier I capital of the bank at the end of 2014 was 12.4%, capital adequacy ratio - 21.3% and the coverage ratio of NPLs stands at 123%.
The report says that the increase in the rating of the bank in the next 12-18 months is not possible, however, may be change again in outlook from 'negative' to "stable". This will depend on improving the quality of assets and increase of the capitalization.
Moody's International Raiting Agency downgraded the deposits raiting outlook of Azerbaijani based 'Bank of Baku' OJSC from stable to negative.
Report informs referring to the agency, Moody's kept the bank's long term national and foreign currency raitings at B1.