S&P: Due to the pandemic, Pasha Bank's loan portfolio to increase by 8-9% over year

The capitalization of Pasha Bank OJSC is expected at the level of about 5-6% during the year due to high dividend payments and the fact that shareholders do not plan any injections into Tier 1 capital to support the bank's growth.

A message by the international rating agency S&P Global Ratings confirming the credit rating of the bank at B+/Stable/B reads, Report informs.

"We expect the bank's consolidated loan portfolio to increase yoy by around 8-9% over the next 12 months due to pandemic-related customer service disruptions and only a modest forecast for GDP growth over the next three years. This is still considered a good indicator compared to our forecast for the banking system at the level of 10-12%.

S&P believes that Pasha Bank's credit profile continues to improve thanks to its strong position in the corporate lending market of Azerbaijan as the third-largest domestic bank.

"Nevertheless, the concentration of individual clients in loans and deposits remains high. The bank's funding profile remains focused on corporate and high net worth individuals due to Pasha Bank's emphasis on corporate banking. The bank maintains a large liquidity buffer, which basically reduces the risk of potential depositor volatility. We believe that Pasha Bank is of great systemic importance given its large market share and its important role in servicing large and medium-sized corporations in Azerbaijan."

The stable outlook for Pasha Bank is based on the agency's expectation that a solid customer base in Azerbaijan, large liquidity cushion, and stable customer deposits will support its credit profile over the next 12 months.

"A positive rating action is unlikely over the next 12 months as it would require the bank to strengthen its capitalization either through a significant capital increase or a significant reduction in dividend payouts, so our RAC forecast will increase to more than 7%. We will also monitor the bank's ability to adequately recognize and secure its NPLs, maintain asset quality at least at the system average level, and maintain adequate liquidity," S&P said.