Moody’s: Positive trends in reduction of share of problem loans observed
By Sara Israfilbayova
About a third of the total assets of Azerbaijan’s banking sector accounts for the International Bank of Azerbaijan (IBA).
Moody’s international credit rating agency’s expert Petr Paklin made the remarks at an annual summit on Azerbaijan on May 24 in Baku, adding that 31 percent of total assets accounted for IBA.
“This is eight percentage points less than at the end of 2016. Thirty percent more account for the country’s three biggest private banks, namely, PASHA Bank, Kapital Bank and Xalq Bank. The assets of the remaining 26 Azerbaijani banks make up 39 percent of the total amount,” the expert noted.
According to Azerbaijan’s Financial Market Supervisory Authority (FIMSA), the total amount of assets of the country’s banks amounted to 27.9 billion manats ($16.41 billion) in January-March 2018, which is 0.5 percent less than at the beginning of the year.
He went on to say that the amount of the assets of the International Bank of Azerbaijan (IBA), restructured up till now, has reached about 15 billion manats ($8.82 billion).
“To date, the government has restructured 14.7 billion manats ($8.65 billion) of the toxic assets of the IBA, which has positively impacted the entire banking sector of the country, which is a positive trend,” Paklin said.
The International Bank of Azerbaijan, founded in 1992, is at the stage of recovery from July 2015, which is connected with the preparation for the privatization of the state-owned shares of the bank. To restore the bank’s financial position, its troubled assets moved to the non-bank credit institution Aqrarkredit. In exchange for troubled assets, the NBCO provides IBA with liquid funds. At the same time, the IBA’s foreign obligations have recently been restructured.
As many as 95.2 percent of the bank’s shares belong to the government of the country.
Further, touching upon non-performing loans Paklin said that according to the Central Bank of Azerbaijan (CBA), the level of overdue loans is about 15 percent. If we add loans with signs of impairment, this figure will be 25-30 percent, which is our approximate estimate, but in the first quarter of 2018 in this sector certain positive trends were observed.
Paklin also underlined the improvement of the situation with the capitalization of the banking sector of Azerbaijan.
“The capitalization of the banking sector in Azerbaijan has improved significantly, not only due to contributions from the state, but also from foreign and local shareholders,” Paklin said, adding that the ratio of capital to banking sector assets doubled compared to 2016.
According to Paklin, positive is the fact that Azerbaijani banks continue to increase capital.
The expert also noted that this year the agency expects the growth in demand for loans through improved operating environment and further economic growth in Azerbaijan.
“In general, the operating environment has improved and the economy is returning to growth, and we are expecting an increase in demand for loans, which is already growing in the retail segment. Apparently, the next will be small and medium-sized businesses,” Paklin noted.
In turn, Moody’s international credit rating agency’s expert Christian Fang said that Azerbaijan is still greatly dependent on oil exports.
“Despite the measures taken in the country to diversify the economy, the oil and gas sector still has a high share in the economy, in particular, in exports and the government’s revenues,” Fang stressed, adding that over 70 percent of industrial production, 90 percent of exports and about 60 percent of the government’s revenues still account for the oil and gas sector.
“The increase in gas exports caused by the commissioning of the Southern Gas Corridor and the increase in its capacity by 2020 will allow receiving about half of the funds currently received from oil exports, through revenues from the sale of natural gas,” he underlined.
The annual conference of Moody’s international rating agency kicked off in Baku May 24. The conference has been dedicated to the discussion of Azerbaijan’s sovereign rating and the short-term and long-term impact of low oil prices on the country’s economy, trends in the country’s banking sector and in the world oil market.
A workshop on simulation of the rating assignment process will be also held during the conference.
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Sara Israfilbayova is AzerNews’ staff journalist, follow her on Twitter: @Sara_999Is
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