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Moody's Investors Service has taken rating actions on six Azerbaijani banks.

Moody's affirmed OJSC XALQ BANK's current BCA at b3, Bank Respublika's B2, Kapital Bank's current BCA at b1.

The outlook was changed to negative from stable.

Moody's downgraded VTB Bank's (Azerbaijan) (VTBAZ) BCA to caa1 from b2 and long-term deposit ratings to B2 from B1 with a negative outlook.

Moody's downgraded OJSC Bank of Baku's BCA to b3 from b1 and the long-term deposit ratings to B3 from B1 with a negative outlook.

The agency also downgraded Unibank's BCA to b3 from b2 and the long-term deposit ratings to B3 from B2 with a negative outlook.

The rating actions reflect the negative impact of the depreciation of the Azerbaijani manat on the banks' asset quality, profitability and funding after the introduction in December 2015 of a free-floating exchange rate regime, as well as heightened dollarization of the banks' funding profiles.

Conversely, improvements in the Azerbaijan operating environment and/or banks' demonstrated resilience could enable a return to stable outlooks on the ratings, Moody's said.

LIST OF AFFECTED RATINGS

The following rating actions were taken:

VTB Bank (Azerbaijan)
- Baseline Credit Assessment (BCA) and Adjusted BCA were downgraded to caa1/b2 from b2/b1
- Long-term LC and FC Deposit ratings were downgraded to B2 from B1, outlook remains Negative
- Short-term LC and FC Deposit ratings were affirmed at NP
- Long-term Counterparty Risk Assessment was downgraded to B1(cr) from Ba3(cr)
- Short-term Counterparty Risk Assessment was affirmed at NP(cr)
- Outlook, Remains Negative

OJSC Bank of Baku
- Baseline Credit Assessment (BCA) and Adjusted BCA were downgraded to b3 from b1
- Long-term LC and FC Deposit ratings were downgraded to B3 from B1, outlook remains Negative
- Short-term LC and FC Deposit ratings were affirmed at NP
- Long-term Counterparty Risk Assessment was downgraded to B2(cr) from Ba3(cr)
- Short-term Counterparty Risk Assessment was affirmed at NP(cr)
- Outlook, Remains Negative

UniBank Commercial Bank
- Baseline Credit Assessment (BCA) and Adjusted BCA were downgraded to b3 from b2
- Long-term LC and FC Deposit ratings were downgraded to B3 from B2, outlook changed to Negative from Stable
- Short-term LC and FC Deposit ratings were affirmed at NP
- Long-term Counterparty Risk Assessment was downgraded to B2(cr) from B1(cr)
- Short-term Counterparty Risk Assessment was affirmed at NP(cr)
- Outlook, Changed To Negative From Stable

OJSC XALQ BANK
- Baseline Credit Assessment (BCA) and Adjusted BCA were affirmed at b3
- Long-term LC and FC Deposit were affirmed at B2, outlook changed to Negative from Stable
- Short-term LC and FC Deposit ratings were affirmed at NP
- Long-term Counterparty Risk Assessment was affirmed at B1(cr)
- Short-term Counterparty Risk Assessment was affirmed at NP(cr)
- Outlook, Changed To Negative From Stable

Joint Stock Commercal Bank Respublika
- Baseline Credit Assessment (BCA) and Adjusted BCA were affirmed at b2
- Long-term LC and FC Deposit ratings were affirmed at B2, outlook changed to Negative from Stable
- Short-term LC and FC Deposit ratings were affirmed at NP
- Long-term Counterparty Risk Assessment was affirmed at B1(cr)
- Short-term Counterparty Risk Assessment was affirmed at NP(cr)
- Outlook, Changed To Negative From Stable

Kapital Bank OJSC
- Baseline Credit Assessment (BCA) and Adjusted BCA were affirmed at b1
- Long-term LC and FC Deposit ratings were affirmed at Ba3, outlook changed to Negative from Stable
- Short-term LC and FC Deposit ratings were affirmed at NP
- Long-term Counterparty Risk Assessment was affirmed at Ba2(cr)
- Short-term Counterparty Risk Assessment was affirmed at NP(cr)
- Outlook, Changed To Negative From Stable

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