BAKU, Azerbaijan, December 11. Moody's Investors Service ("Moody's") has today affirmed Azerbaijani OJSC Xalq Bank's (Xalq Bank) B1 long-term local and foreign currency bank deposit ratings and changed the outlook on these ratings to positive from stable, Trend reports.
Simultaneously, the company confirmed the bank's b2 BCA and Adjusted BCA, NP short-term local and foreign currency bank deposit ratings, Ba3/NP long-term and short-term local and foreign currency CRRs, and the Ba3(cr)/NP(cr) long-term and short-term CR Assessments.
The bank's BCA and Adjusted BCA at b2 demonstrate a consistent track record of increasing asset quality, lowering loan concentrations, and maintaining adequate capital. Long- and short-term CRRs at Ba3/NP, as well as long- and short-term CR Assessments at Ba3(cr)/NP(cr), have been confirmed, following the confirmation of long- and short-term deposit ratings at B1/NP.
"The change to positive from stable in the outlook on the long-term bank deposit ratings reflects Moody's expectation that Xalq Bank''s standalone credit profile, and in particular its asset quality and profitability, will further improve in the next 12-18 months", Moody's noted.
The bank has materially decreased the share of its problem loans and improved provisioning coverage thanks to partial repayments and write-offs of its legacy corporate portfolio over the past three years.
Furthermore, Moody's expects Xalq Bank's problem loan ratio will not exceed 4-5 percent by the end of 2024.
"The current loan portfolio is of better credit quality than 2-3 years ago thanks to lower credit concentrations and lower exposure to foreign currency denominated loans. Concurrently, the share of foreign currency loans fell to 44 percent of total as of Q3 2023 from 76 percent at the end of 2019. Robust capital adequacy remains one of Xalq Bank's key credit strengths, providing a buffer against asset-quality weakness. As of year-end 2022 the bank reported TCE/RWA ratio at 18.9 percent", Moody's said.
In addition, Moody's expects a moderate expansion of the bank's loan book in the next 12-18 months amid modest economic growth expected at 1-2 percent in 2023-2024.
According to Moody's, Xalq Bank's TCE/RWA ratio will not fall below 17 percent in the next 12-18 months.
