Moody's reveals factors to improve Int'l Bank of Azerbaijan's credit profile

The positive outlook on the International Bank of Azerbaijan's long-term deposit ratings reflects the expectations that the bank's credit profile will continue to benefit from improving economic conditions and a favorable operating environment which will translate into stronger business opportunities, supporting its robust profitability and good asset quality, as reflected in the rating activity of Moody's Ratings (Moody's), Report informs.

Moody's noted the gradually improving IBA’s asset quality indicators in recent years with the problem loan ratio decreasing to 3.3% in 2023 from 4.6% in 2022 and a strong capital position with Tangible Common Equity (TCE)/Risk-Weighted Assets (RWA) ratio of 26.5% in 2023.

In addition, the agency highlighted the bank's robust profitability metrics (the net profit over tangible assets increased to 2.7% in 2023 from 2.1% in 2022 and ample liquidity and decreasing reliance on market funding.

Moody's upgraded the bank's BCA to ba3 from b1 and its long-term deposit ratings to Ba2 from Ba3. The outlook on the Ba2 long-term deposit ratings remains positive.

The upgrade of the bank's BCA to ba3 from b1 is driven by a combination of improved operating conditions in Azerbaijan, reflected in Moody's raising the country's banking system Macro Profile to "Weak" from "Weak-" and the bank's strengthened solvency profile.

The upgrade of International Bank of Azerbaijan's local and foreign currency long-term bank deposit ratings to Ba2 from Ba3 follows its BCA upgrade.

International Bank of Azerbaijan 's long-term deposit ratings of Ba2 are based on the bank's BCA of ba3 and Moody's assessment of a high probability of government support from the Government of Azerbaijan in case of need, based on the bank's government ownership and its status as the largest bank in the country with large market shares in both loans and customer deposits. This support translates into one-notch rating uplift to the bank's long-term deposit ratings from its ba3 BCA.