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By Trend

Fitch Ratings has affirmed International Bank of Azerbaijan's (IBA) Long-Term Issuer Default Ratings (IDRs) at 'BB'. The Outlook is Negative. The agency has also downgraded IBA's Viability Rating (VR) to 'f' from 'b-'.

Fitch's view of the likelihood of support is based on: IBA's strategic state ownership (the government holds a 55 percent share in IBA directly plus an additional 27.3 percent through a state-controlled non-banking entity); IBA's high systemic importance as reflected by its considerable market shares and substantial funding from retail depositors and state-controlled companies; the sovereign's sizable FX reserves ($39bn at end-1H16) and significant financial flexibility.

The Agency reported that IBA remains highly reliant on wholesale funding (32 percent of end-1H16 liabilities), which is mostly sourced from foreign banks. Customer funding is dominated by placements of local state-controlled companies (37 percent of end-1H16 liabilities).

IBA
Long-Term Foreign Currency IDR: affirmed at 'BB'; Outlook Negative
Short-Term Foreign Currency IDR: affirmed at 'B'
Viability Rating: downgraded to 'f' from 'b-'
Support Rating: affirmed at '3'
Support Rating Floor: affirmed at 'BB'
Senior unsecured debt: affirmed at 'BB'

In July 2015, President Ilham Aliyev signed a decree on the measures for rehabilitation related to the preparations for privatizing the state-owned shares of the International Bank of Azerbaijan JSC.

IBA's distressed assets had been removed from its balance sheet and transferred to Agrocredit in 2015 to recover financial position of the bank. Bonds worth 3 billion manats ($1.8 billion) were issued under state guarantee to provide the bank with liquid funds.

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