Rating of 'Pasha Bank' may be downgraded during a year

Baku. 18 February. REPORT.AZ/ "Standard & Poor's" affirmed 'BB-/B' long- and short-term counterparty credit ratings on PASHA Bank. The outlook on the bank remains negative, Report informs. 

'The affirmation reflects our view that PASHA Bank still has a sound market position and strong capital buffer, which could provide some protection against the tough market conditions. We also consider that the bank has high importance in the domestic banking sector and therefore may receive extraordinary government support if needed. Rating weaknesses include a worsening loan loss track record and uncertainties regarding the bank's future NPL levels, highly concentrated loan book, and funding base.

The negative outlook reflects our concerns about potential further asset quality deterioration due to unfavorable economic conditions in Azerbaijan.

This could lead to higher provisioning needs and increased pressure on the bank's capital.

We may lower our ratings on PASHA Bank in the next 12 months if asset quality deteriorated by more than we currently expect and remains substantially weaker than that of peers for a long period, with NPLs exceeding 20% of the loan book. We could also consider a downgrade if the risk-adjusted capital (RAC) ratio declined below 10%, due for example to increased provisioning needs and the absence of capital support from shareholders.

The likelihood of a positive rating action in the next 12 months is currently remote because of the highly challenging operating conditions in Azerbaijan.

We might revise the outlook to stable if we see that the workout of NPLs is progressing faster than we expect and the bank has maintained its strong capital', the rating agency says.