Despite policy changes from the Central Bank of Azerbaijan (CBA), the International Bank of Azerbaijan (IBA) is expected to withstand the CBA's devaluation of the manat, Fitch Ratings said on Wednesday.
In a move to improve what the CBA calls "international competitiveness," it set the exchange rate against the dollar at 1.05 as opposed to the 0.78 that it was set at previously.
Despite this change, the ratings agency does not expect the IBA to see significant losses because the bank closed its short-open currency position, amounting to approximately $1.4 billion, with 17 percent of that having been converted to U.S. dollars.
"IBA will probably need further support, in addition to that already received, to offset the impact of the depreciation of the manat and restore its capital ratios," Fitch Ratings said. "However, we expect capital contributions and/or continued regulatory forbearance to be forthcoming, and hence do not anticipate negative rating action as a result of the weakening of the bank's solvency."