Moody's assigns first-time Ba3 ratings to VTB Azerbaijan

The bank's long-term global deposit ratings are under review for downgrade in line with the corresponding review on the parent - Russia-based Bank VTB JSC,

whose standalone BFSR and long-term debt and deposit ratings were placed on review for downgrade on 23 December 2014 in response to the ongoing severe deterioration in Russia's operating environment and financial market conditions.

VTBAZ's Ba3 long-term local currency deposit rating incorporates the rating agency's assessment of a high probability of parental support from Russia-based Bank VTB JSC (deposits Baa3; under review for downgrade; BFSR D- under review for downgrade/BCA ba3). As a result, VTBAZ's deposit ratings receive two notches of uplift above its b2 BCA.

VTBAZ's standalone E+ BFSR is supported by the bank's close integration into the VTB group, which benefits the bank in terms of operational, capital and funding support. At the same time, VTBAZ's standalone creditworthiness is currently constrained by challenging operating conditions in Azerbaijan given recent drop in oil prices, bank's modest business position in the domestic banking sector, its high credit risk appetite as evidenced by rapid loan growth and pressure on asset quality upon loan book seasoning amid worsening operating environment.

The rating action is based on VTBAZ's audited IFRS accounts for the period 2011-13, Q3 2014 IFRS accounts reviewed by the auditors, and information provided by the bank's management.