Azerbaijan eyes privatisation of its largest lender

By bne IntelliNews November 25, 2016

The Azerbaijani government will communicate a privatisation plan for the country's largest bank, International Bank of Azerbaijan (IBA), in 2017, Rufat Aslanli, chairman of the country's financial markets regulator, said on November 24 according to Trend news agency.

In 2015, the authorities took over IBA's management, which had incurred billions in non-performing loans (NPLs), a problem that was accentuated by a 50% devaluation of the Azerbaijani manat. In addition to giving out loans to politically connected individuals, IBA, which holds 35% of the banking sector’s assets, had a flawed business model that saw it borrowing internationally in foreign currency and lending in manats. Authorities invested over AZN2bn in the lender in 2015.

Earlier this week, ratings agency Fitch downgraded the lender's viability rating from 'b-' to 'f' after confirming that authorities had spent AZN10bn (€5.42bn)), three times more money that initially anticipated, to clean up IBA's non-performing loan portfolio and other problem assets. In Fitch's view, the downgrade amounted to a recognition that the bank had failed.

According to Aslanli, the first order of business would have to be reducing IBA's assets in the first half of 2017 because its sheer size is a “threat to the banking system”.

Aslanli was also upbeat about the prospects of the financial sector, the restructuring of which was almost complete, he added. The financial regulator had reportedly carried out stress tests at existing lenders in recent months, and they all performed well.

Baku has closed a dozen or so smaller lenders since January because they did not comply with capitalisation and liquidity regulations.

 

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