International of Bank Azerbaijan

News - May 2010: Fitch upgrades IBA's international credit rating to investment grade.

Deposit Rates:

The website of International Bank of Azerbaijan describes their terms and conditions of its deposit plans. The minimum deposit accepted by IBA for foreign deposits is equivalent of US$ 100,000. Smaller deposits are permitted, but they then require personal physical visit by the client to open the bank account.

Current interest rates as from 1 Oct 2011 (reduced twice since Dec 2010):-

• Azerbaijan Banking-sector 2007.
• IBA Corporate presentation Q3 - 2009.

According to Fitch, these rating actions follow the increase of the long-term IDR of Azerbaijan from the grade «BB +» to «BBB-» with «stable» forecast of May 20, 2010.

The rating upgrade of the International Bank of Azerbaijan reflects Fitch's view of the high probability of support from national authorities as appropriate in view of the bank’s systemic importance to the banking system of Azerbaijan and the economy as a whole, as well as the fact that the majority owner of the bank (50.2%) is the Ministry of Finance of Azerbaijan. In addition, the rating action takes into account the moderate size of the bank relative to available state resources to support this financial institution since at the end of the first quarter of 2010, total liabilities of the International Bank of Azerbaijan made up 4,7 billion manat, or 14% of GDP in 2009 or 46% of the revenue of the central government in 2009. On the same date, the currency liabilities of the bank (the equivalent of 3.7 billion dollars) accounted for 17% of total sovereign wealth funds and official foreign exchange reserves and the foreign portion of these liabilities (equivalent to 1.3 billion dollars, of which 53% - a duty to the Middle East Bank) remained at a moderate level of 6% from the size of sovereign wealth funds and currency reserves.

There is a Government Deposit Insurance Scheme for 30,000 Manats (approx USD 36,000) per account for banks in Azerbaijan. That aside, the International Bank of Azerbaijan is the only State majority owned bank in the country. According to its credit rating, it is widely assumed that the State will assist the bank in event of default.

The State has foreign exchange reserves of more than 5 x the foreign debt of the country and more than 12 x foreign debt of all the banks. The continued inflow of petrodollars from 0.8 million barrels of oil exported daily ensure the State has the ability to easily repay all any foreign debt. Even at $35 per barrel, Azerbaijan had a 4% GDP growth rate in first half of 2009.

⇒ Read about the Azerbaijan economy.

Fitch in June 2009, reaffirmed its rating of default for the International Bank of Azerbaijan a foreign currency of BB+ and short-term rating "B" with outlook "Stable". This rating reflects the higher capability of the Azerbaijan authorities to support the bank if necessary.

Moody's in June 2009 assigned IBA a long-term foreign currency deposit rating of "Ba2 stable". Moody's has changed the outlook on the long-term foreign currency deposit rating of IBA to "stable" from "positive" following the recent change in outlook on Azerbaijan's Ba2 foreign currency deposit ceiling to stable from positive. Moody's notes that IBA's long-term foreign currency deposit rating remains constrained by the country ceiling.

Standard & Poor's has not yet rated IBA.

The Asian Development Bank in December 2007 deemed IBA credit worthy of an unsecured subordinated loan of USD 40 million to bolster IBA's tier-2 capital at LIBOR + 3.8% p.a. for 8 years.

IBA's Eurocurrency loan clients are local entities developing the oil industry, who are prepared to pay high rates for loans for domestic owned projects instead of joint ventures or profit share agreements with foreign corporations. With shortage of foreign finance and high demand for loans, IBA can offer high deposit rates. The bank owns the largest insurance and telecommunication companies, and owns 6% of the local stock exchange.