By Nigar Abbasova
The restructuring and further privatization of the International Bank of Azerbaijan (IBA), which is the largest bank and financial services group in Azerbaijan and the region, remains one of the principal issues in the banking sector of the country.
Finance Minister Samir Sharifov said that the ultimate goal of recovering the IBA is reduction of its assets and liabilities, while its privatization should become the next step. Sharifov underlined that the recovery is a quite difficult process and it is too early to talk about its completion.
“Unfortunately, the improper operation of the bank’s previous management has led to a large amount of external debt. The bank’s liabilities are formed in foreign currency, while the assets are issued in manats [the bank’s troubled assets were transferred to Aqrarkredit CJSC and bonds under state guarantee were issued instead of this]. However, the inflow of such volume of national currency to the market may negatively affect its exchange rate. Therefore, the recovering process is correlated with the current macroeconomic situation,” he said, underlining that the main objective is to prepare the bank for privatization.
The preliminary audit conducted by the CBA jointly with the Finance Ministry revealed that the volume of bad assets amounted to some 70 percent of all assets.
The shortcomings in the management, investment and loan policy of the bank in recent years, as well as financing less efficient and risky investment projects deteriorated the financial state of the bank, and triggered increase in the share of distressed assets and reduced its liquidity.
Sharifov said that the bank’s assets and liabilities will be substantially reduced and the bank will be ready for privatization with healthy assets after the recovery.
IBA's distressed assets had been removed from its balance sheet and transferred to the state-owned, non-banking credit organization Agrocredit 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. The bank transferred bad assets worth 2.5 billion manats ($1.5 billion) in 2015, while the left amount of 4.6 billion manats ($2.8 billion) was transferred in 2016.
The State Oil Fund (SOFAZ) placed a deposit worth $2 billion in the bank, while some $1 billion of the sum was used for the fulfillment of IBA’s foreign liabilities. The volume of foreign liabilities of the bank currently stands at $3 billion. Moreover, the government is expected to contribute additional sum of 500 million manats ($306 million) for the recapitalization of the bank. Finance Ministry of the country, which acts as a shareholder on behalf of the government will increase its share up to 95 percent till late 2016. The ministry possessed a 51 percent share in 2016, while the level increased up to 85 percent in 2015.
Head of the country’s Financial Market Supervisory Body (FMSB), Rufat Aslanli earlier said that the government has resolved the majority of IBA's problems, but the privatization process takes some time, and the implementation of privatization in 2016 is not realistic.
The International Bank of Azerbaijan was founded in January 1992.
Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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