Concurrently, Moody's has downgraded the bank's standalone Baseline Credit Assessment (BCA) to ca from b3, and the Counterparty Risk Assessment (CRA) to Ba3(cr) from Ba2(cr). The short-term deposit ratings were affirmed at Not-Prime, while short-term CRA affirmed at NP(cr). The outlook on the long-term deposit and senior unsecured ratings is negative.
The downgrade of IBA's BCA to ca reflects its significantly weakened standalone financial position with reported negative capital as of end-2016.
The bank has not been able to hedge its FX risks with the government in time, as it was previously anticipated. Consequently, even following the recently completed state capital injection of AZN600 million as of 23 January 2017, the bank's estimated capital position is still negative, given the previously accumulated FX losses in 2016 and continued manat depreciation of around 8% in January 2017, which can results in additional AZN470 million FX losses in January 2017 according to our calculations.
Compliance with the regulatory capital requirements is a covenant for certain foreign debt contacts. Bank's total foreign borrowings comprised around AZN4 billion ($2.1 billion) as of end-2016. IBA currently has tight liquidity in foreign-currency amounting to AZN830 million (USD430 million) as of end January 2017.