| BAKU, March 17
BAKU, March 17 State-owned International Bank of
Azerbaijan (IBA) will need more government aid to clean up its
balance sheet and is unlikely to be privatised as envisaged
under a 2015 rescue plan for at least two years, an official and
After an order from Azeri President Ilham Aliyev, the
finance ministry and central bank decided in 2015 to transfer
bad and risky loans made by IBA, Azerbaijan's largest bank, to
Aqrarkredit, a state-owned non-banking credit organisation.
The International Monetary Fund wants the government to
gradually sell off its stake following the reorganisation, but a
senior Azeri official said there are no firm plans in place yet.
"It's too early to talk about privatisation," Rustam
Tahirov, strategic services department head at Financial Market
Supervision Agency, told Reuters.
"The initial plan right now is to finalise reorganisation by
the end of this year."
Several Azeri banks have lost their licences after bad loans
soared and capital dwindled as a collapse in the price of oil,
the Soviet republic's main export, caused a sharp economic
downturn and currency slump.
Some 10 billion manats ($5.8 billion) of bad loans have been
shifted to Aqrarkredit so far and IBA chairman Khalid Ahadov
said in February he expected the government to take on another
$3 billion this quarter.
The government increased its stake in IBA to 76.73 percent
after injecting additional capital in December via a share
issue. IBA holds around a third of Azerbaijan's banking assets.
Dmitri Vasiliev, director of financial institutions at
credit rating agency Fitch, said the government "will need to
inject additional capital for a while, until and unless IBA
builds up a new loan book".
"We view IBA as failed institution right now and it will
take time to build a new loan book in an environment like this,
because loan growth is not here."
Vasiliev said the support package for IBA may also include
reducing its foreign-currency liabilities by converting them
into local currency or through hedging.
Fitch has estimated that some 1.1 billion of the bank's 1.4
billion manat net loss in 2016 resulted from currency,
The manat has lost 55 percent of its value against the
dollar since 2014, when oil prices began to collapse. After
first abandoning a currency peg for an exchange rate corridor,
the central bank opted in January to let the currency float
freely to save state reserves from depleting.
Nariman Mannapbekov, the Asian Development Bank's country
manager for Azerbaijan, said that "according to my information,
there is no plan to privatise IBA this year" and that the chance
IBA will be privatised within two years "is very small".
"I'm sceptical that it might happen in 2018 as after a
clean-up they need to pass an international audit, do a due
diligence," Narimanov added.
(Editing by Catherine Evans)