Moody’s: Authorized capital of Azerbaijan’s Bank Respublika to be increased

Moody’s: Authorized capital of Azerbaijan’s Bank Respublika to be increased
  • Clock-gray 09:02
  • calendar-gray 15 June 2017

The Moody’s Investors Service international ratings agency has said that the downgrade of Azerbaijan-based Bank Respublika's BCA to b3 from b2 and downgrade of its long-term deposit ratings to B3 from B2 with a negative outlook reflects the bank's heightened credit costs given worsened asset quality, its loss-making performance and its need for additional capital support in light of its provisioning requirements and a further tightening in capital regulation.

 

Given that the bank's recurring pre-provision income is unlikely to cover additional provisioning expenses, it will require new capital. In order to support the bank's capitalization, shareholders provided AZN20 million Tier 1 capital injection in Q3 2016, and plan to inject additional AZN 20 million within the next three months, according to the Moody’s report.

 

Moody's believes that this will help to absorb new provisioning charges in 2017, but will leave the absolute amount of capital buffer limited, just above the minimum regulatory requirement.

 

“The bank's total regulatory capital amounted to AZN52 million (vs the minimum regulatory amount of AZN) as of end 2016 and Tier 1 and total capital adequacy ratio (CAR) accounted for 10.8% and 17.6% respectively (vs the minimum of 5% and 10%) as of the same date under local GAAP. A further tightening of capital requirements and a potential asset quality deterioration will further exacerbate the need for external capital support,” said the report. 

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