BAKU, Azerbaijan, Nov. 30
By Tamilla Mammadova – Trend:
Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of JSC Tera Bank at B+, Trend reports via the Fitch.
The Outlook is Negative - reads the official statement from Fitch Ratings.
According to Fitch, impaired loans declined to 3.9 percent of gross loans at end-3Q2020 from 6.2 percent at end-2019 due to write-offs in the legacy gold-pawn portfolio, which contracted to 2 percent of gross loans. Fitch Ratings assess the coverage of impaired exposures by specific Lower Limb Assessment Score (LLAs) as a reasonable 39 percent.
“Stage 2 loans increased to 17 percent of gross loans from 3 percent in the same period (mainly in SME and micro-lending), 11 percent covered by specific LLAs. At the same impaired loans were fully covered by total LLAs. Pre-impairment profit was resilient at 3.2 percent of average loans in 9M2020 but almost entirely consumed by increased Listed Investment Companies (LICs) equal to 2.8 percent of average loans (adjusting for write-offs of a large gold-pawn loan). This resulted in an operating profit to regulatory Risk-weighted asset (RWA) ratio of marginally above zero in 9M2020, down from 2.5 percent in 2019. The ratio of FCC to regulatory RWA declined to 13.1 percent at end-9M2020 from 15.1 percent at end-2019 driven by resumed loan growth in 3Q2020 amid lari devaluation and weak internal capital generation,” the statement reads.
According to Fitch Ratings, Tera is primarily funded by customer deposits (75 percent of end-3Q2020 liabilities). Other funding sources include loans from International Financial Institutions (9 percent), repo with the National Bank of Georgia (7 percent), and subordinated debt (6 percent). Refinancing risks appear manageable in light of moderate upcoming wholesale funding maturities (4 percent of liabilities in the next 12 months). The bank's liquidity buffer covered a reasonable 17 percent of customer accounts at end-3Q2020.
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