S&P Rates Azerbaijan-Based AGBank 'B-/C'; Outlook Stable
MOSCOW (Standard & Poor's) Dec. 2, 2008--Standard & Poor's Ratings Services said today that it had assigned its 'B-' long-term and 'C' short-term counterparty credit ratings to Azerbaijan-based AGBank. The outlook is stable. This is the first bank in Azerbaijan rated by Standard & Poor's.
"The ratings reflect the high economic and industry risk in Azerbaijan, accentuated by global financial turmoil and falling oil prices, as well as the bank's limited customer franchise and unseasoned loan portfolio," said Standard & Poor's credit analyst Viktor Nikolskiy.
Positive rating factors include the bank's adequate core profitability and capitalization.
AGBank is a small private commercial bank, ranking ninth among Azerbaijani banks by size, with total assets of Azerbaijan manat 195 million ($239 million) on June 30, 2008.
The ratings on AGBank reflect its stand-alone credit quality, and do not include any uplift for extraordinary external support.
The bank has adequate profitability and its reported asset-quality indicators are good.
A limited corporate franchise and lack of funding diversification constrain the bank's financial flexibility, but capitalization is adequate.
The stable outlook reflects our expectation that AGBank will continue to show progress in building its franchise and maintaining adequate profitability and relatively stable capitalization.
"An upgrade would depend on the bank's demonstrating longer track record of positive operating performance and progress in advancing the enterprise risk management framework, along with improvements in Azerbaijan's operating environment," said Mr. Nikolskiy.
Although the current ratings already incorporate the probability of some weakening in the bank's financial profile, we would consider a negative rating action if that deterioration were greater than we expected.