Moody's downgrades ratings of major Azerbaijani bank

Moody's Investors Service has today downgraded the following global scale ratings of the International Bank of Azerbaijan: long-term local currency deposit rating to Ba3 from Ba1, long-term foreign currency deposit rating to Ba3 from Ba2, long-term foreign currency senior unsecured debt rating to Ba3 from Ba1, and long-term foreign currency subordinated debt rating to B1 from Ba2. Concurrently, Moody's affirmed the bank's stand-alone bank financial strength rating (BFSR) of E+, which is equivalent to a standalone credit assessment of B3. The outlook on long-term ratings and the BFSR is negative, the agency's website reported on Friday.

Moody's rating action is largely based on the International Bank of Azerbaijan's audited financial statements for 2011 and the first six months of 2012, prepared under the IFRS.

The negative outlook on the International Bank of Azerbaijan's supported ratings is driven by the negative outlook on the bank's stand-alone BFSR -- which reflects the negative pressure on the bank's financial fundamentals due to (1) low capitalisation which, together with its low pre-provision profit, leads to a weak loss absorption capacity; and (2) weak asset quality which could potentially result in higher loan loss reserves, thus exerting further pressure on the
bank's capital.

The downgrade of the International Bank of Azerbaijan's supported ratings to Ba3 is driven by Moody's assessment of a reduced probability of systemic support for the bank to "high" from "very high".

The International Bank of Azerbaijan is the largest bank in the country and is currently 50.2% owned by the government.