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Moody's changes outlook on Unibank's B2 ratings to stable from negative (Azerbaijan)

November 9, 2011 Moody's Investors Service
London, 09 November 2011 -- Moody's Investors Service has today changed to
stable from negative the outlook on the B2 long-term foreign and local
currency deposit ratings of Unibank. The standalone bank financial
strength rating (BFSR) of E+ and Not-Prime short-term local and foreign
currency deposit rating were affirmed.

Moody's assessment is based on Unibank's audited financial statements for
2010 prepared under IFRS and unaudited interim statements for Q3 2011
under IFRS.


According to Moody's, the outlook change to stable from negative is
driven by (i) a sustained trend of improving profitability in 2011, (ii)
stabilisation of Unibank's asset quality; and (iii) the rating agency's
expectation that Unibank, given the stabilised operating environment in
Azerbaijan, will be able to restore its market share, and its asset
quality and profitability will remain satisfactory in the medium term.

Moody's notes that during the first nine months in 2011, Unibank's loan
portfolio grew by almost 27% as the bank increased its business activity
in response to the improving credit conditions in Azerbaijan, restoring
its market position.

Moody's observed a sustained trend of Unibank's improving profitability
in 2011, and expects its financial results to remain satisfactory in the
medium term.

Unibank posted net profit of AZN4.5 million (US$5.7 million) for Q3 2011
under unaudited IFRS following a net loss of AZN8 million in 2010 (under
audited IFRS). In Moody's view, Unibank's profitability in the medium
term will be supported by an increased loan portfolio, stabilised asset
quality and healthy net interest margin.

Moody's also notes a stabilisation of Unibank's asset quality. According
to the bank's unaudited IFRS, the level of non-performing loans (loans
90+ days overdue) decreased to 14% as at 30 September 2011 from 16% gross
loans in 2010, and is expected to further gradually decrease in 2011-2012
due to new lending and problem loan recoveries.

Moody's explained that Unibank's ratings have limited upward potential in
the short to medium term. Any possible upgrade of Unibank's ratings will
be contingent on the bank's ability to strengthen its franchise, while
also demonstrating a sustained track record of improvement in financial
fundamentals. Conversely, downward pressure could be exerted on Unibank's
ratings by any material adverse changes in the bank's risk profile,
particularly any significant weakening of the bank's liquidity position
or deterioration of its asset quality.


The methodologies used in this rating were Bank Financial Strength
Ratings: Global Methodology published in February 2007, and Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology published in March 2007. Please see the Credit Policy page on
www.moodys.com for a copy of these methodologies.

Domiciled in Baku, Azerbaijan, Unibank reported -- as at 31 December 2010
-- total assets of US$465 million and shareholders' equity of US$53
million, according to audited IFRS.

  • Full name
    OJSC Unibank Commersial Bank
  • Registration country
  • Industry