S&P assesses activity of Kapital Bank and Azer-Turk Bank, affirms their ratings

The international rating agency S&P Global Ratings confirmed the long-term and short-term credit ratings of Kapital Bank OJSC at the level of BB-/B with a positive outlook.

Report informs citing the assessment of the bank that the long- and short-term ratings on Kapital Bank reflect its sound market share in the domestic banking sector, especially in retail lending, a liquid balance sheet, and stable diversified depositor base.

"This is offset by its relatively modest franchise in a global context with increasing concentration on consumer loans. The positive outlook on Kapital Bank reflects our expectation that it could continue to outperform most domestic and international peers in terms of profitability, capitalization, and asset quality in the next 12 months," the message says.

The agency said it could raise the ratings over the next 12 months if Kapital Bank continues to demonstrate sound performance with stable asset quality, high capital buffers, adequate liquidity, and sustainable risk-adjusted returns in line with those of higher-rated peers.

"We could revise the outlook to stable over the next 12 months if the bank's rapid growth puts material pressure on its capitalization and asset quality, and/or its profit generation significantly lags asset growth," the agency said.

S&P also confirmed the long-term and short-term issuer credit ratings (ICR) of Azer-Turk Bank OJSC at the level of B+/B, with the ratings outlook stable.

"The long- and short-term ratings balance Azer-Turk Bank's overall small domestic market position and rapid growth in consumer and mortgage lending, which is consuming its capital, with majority ownership by the government, which is positive for its reputational and business development. They also account for the planned changes in the bank's strategy over the next few years," the agency said.

The stable outlook over the next 12 months reflects our expectations that the bank's business and financial profiles will remain stable under its new growth strategy, it noted.

"In our view, a positive rating is unlikely over the next 12 months. Beyond then, we could raise the ratings if the bank achieves substantial domestic market share, which will require significant time, while preserving its capital and asset quality metrics. We could lower the ratings over the next 12 months if the bank's new strategy puts material pressure on its capitalization and asset quality," the agency said.