Moody's Investors Service has placed on review for downgrade Bank Technique OJSC's Caa1 long-term local and foreign-currency deposit ratings and caa2 baseline credit assessment (BCA), reflecting the rating agency's view that the bank's capital cushion, undermined by a heavy one-off foreign-currency revaluation loss in February of this year, will not be replenished in a sufficient and timely manner. At the same time, Moody's has affirmed the Not-Prime short-term global local and foreign-currency deposit ratings.
Moody's notes that Bank Technique has received verbal regulatory forbearance to breach capital adequacy ratios and has applied for a AZN15 million subordinated loan from the Central Bank of the Republic of Azerbaijan (CBAR) to replenish its capital position. The bank's controlling shareholder may also make a capital contribution, but the timing, amount and form of its support remain uncertain.
Moody's rating review placement follows the sudden erosion of the bank's capital cushion following a significant one-off foreign-currency revaluation loss, which caused total and Tier 1 capital adequacy ratios to subsequently fall below the regulatory threshold under local standards. Moody's therefore considers that (1) Bank Technique requires extraordinary support, despite the regulatory waiver; and (2) financial support in form of subordinated debt either from CBAR or controlling
shareholder will likely be received.
Bank Technique experienced the material foreign currency revaluation loss of around AZN25 million in February, which hit the bank's Tier 1 and total regulatory capital ratios, falling to 5.2% and 7.1%, respectively as of 1 March 2015, below the regulatory thresholds of 6% and 12%, respectively. The bank held an unhedged open short position in foreign currency equaling 14% of assets or 124% of equity as of 1 February 2015, according to local accounting standards.
www.ann.az
Follow us !
