Fitch views International Bank of Azerbaijan positively

Fitch Ratings said it revised its outlook for the International Bank of Azerbaijan to positive from stable and affirmed the BB- ratings on the bank and its $1 billion of 3½% senior unsecured notes due in September 2024.

“Fitch has revised the outlook on the b+ operating environment score for Azerbaijani banks to positive from stable. This captures our expectation that the financial stability in a highly cyclical Azerbaijani economy will continue to improve, due to stronger financial profiles of domestic banks and tighter regulatory oversight. The latter is also leading to a moderation of legacy asset-quality risks,” the agency said in a press release.

The bank, owned by the government, is Azerbaijan’s largest with 26% of the sector’s assets and 20% of sector loans as of June 30.

“The bank's annualized net interest income rose to 4.9% of average earning assets (including cash and cash equivalents) in 1H23 (2022: 3.9%). Coupled with good operating efficiency (cost/income ratio was 41%), this led to a strong pre-impairment profit, covering a high 11% of average gross loans. As a result, IBA's annualized operating profit/risk-weighted assets (RWAs) ratio was a high 6.4% in 1H23 (2022: 6.6%). We expect the bank's operating profitability to moderate in the medium term, but to remain strong,” Fitch said.

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