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By Trend

The recently completed merger of Azerbaijan's Atabank OJSC (AB; B-/Negative/b-) with Caspian Development Bank (CDB) has no immediate impact on Atabank’s ratings, Fitch Ratings said in its report.

This reflects Fitch's base case view, based on public disclosure, that the positive impact from the higher capital ratios of the merged bank is counterbalanced by recent loan deterioration, meaning the post-merger credit profile is likely to be still commensurate with the 'B-' rating level.

Fitch will conduct a further detailed analysis (including with reference to non-public disclosure) in the course of an upcoming rating review to take a more definitive view on the bank's post-merger credit profile and consider potential rating implications.

The transaction was completed in May 2017, as a result of which CDB was merged into Atabank and ceased to exist as a separate legal entity. Before the merger, Atabank was owned by OJSC "Ata Holding" (AH), and CDB by Synergy Group OJSC (SG). After the merger, control over the merged bank was transferred to SG, which subsequently injected 20 million manats of equity into Atabank.

“We take a positive view of the increased capitalization of the merged bank. Atabank’s regulatory tier 1 and total capital ratios increased to 21.4 percent and 22.9 percent, respectively (regulatory minimums are 5 percent and 10 percent) at end-5M17 from 12.8 percent and 14.2 percent at end-4M17,” said Fitch. “ The improvement was mainly due to the merger with CDB, whose assets were a quarter of Atabank’s while capital ratios were much higher (above 40 percent), as well as the additional capital contribution from SG.”

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