ARKA News Agency, Armenia
Jan 11 2008
Fitch ratings assigns rating `BB’ forecast `Stable’ to Armenia’s
`Akba-Credit Agricole Bank
YEREVAN, January 11. /ARKA/. Fitch Ratings international ratings
agency gave Armenia’s `AKBA-Credit Agricole Bank’ long-term issuer
default rating `BB’ forecast `Stable’, short-term issuer default
rating `B’, individual rating `D’ and support rating `3′, reports the
official site of `Fitch Ratings’.
According to the report, the ratings of the Armenian bank reflect
moderate probability of receiving support, if needed, from the
biggest shareholder Credit Agricole S.A. French group (with long-term
issuer default rating `AA’, forecast `Stable’).
According to Fitch, even through the Credit Agricole S.A. group owns
the smaller package of the Armenia bank’s shares (28%), still it can
provide support to `AKBA-Credit Agricole Bank’ if needed bearing in
mind associating the brands, and active involvement of the group in
creating and monitoring of the bank that has not much grown yet. Yet,
Fitch stress that the minor package of the group and low priority of
the Armenian market may reduce the probability of receiving support.
The agency also pointed out a limited probability of receiving
support from the Armenian authorities if needed as the bank controls
considerable segment in agricultural lending (Armenia has long-term
`BB-`, `positive’ forecast issuer default ratings both in foreign and
national currency).
Individual rating reflects small scale of `AKBA-Credit Agricole Bank’
as per the international standards, high risks of operation
environment, rapid growth of the bank’s assets and large share of
lending in foreign currency. At the same time, Fitch says, the rating
takes into account good quality of AKBA management, considerable
client database in Armenia, high profitability from the main
activities, traditionally good quality of assets, strong
capitalization and adequate liquidity position.
According to the Fitch report, the potential for improving the bank’s
long-term issuer default rating is limited and is possible only if
the share of the Credit Agricole S.A. group in the Armenian bank is
increased and/or if the group gives respective assurance of its
willingness to support the bank if needed.
Raising the country ceiling of Armenia from the current `BB’ level
would also be a requirement for improving the long-term issuer
default rating of `AKBA Credit-Agricole Bank’, Fitch says.
The long-term issuer default rating may be downgraded if Fitch
changes its opinion on the willingness of Credit Agricole S.A. group
to support `AKBA-Credit Agricole Bank’ or if Armenia’s country
ceiling is lowered (which is not expected taking into account the
current `Positive’ forecast by sovereign ratings).
The potential for improving the individual rating of `AKBA-Credit
Agricole Bank’ is currently limited due to small size of the bank and
high operation risks in Armenia. Yet, according to the rating agency,
further successful expansion of the client database, along with
maintaining the quality of assets and adequate capitalization, may be
a positive factor in the credit rating.
According to Fitch, considerable losses in credits may be a potential
reason for lowering the rating, but currently the bank has
considerable `reserve’ of own means to absorb such losses.
`AKBA-Credit Agricole Bank’ closed joint stock company is the third
biggest bank of Armenia in value of assets and lending volume. As of
the end of the 3rd quarter of 2007 the bank’s share on these
indicators was 10% and 12% respectively. Apart from that, the bank
was the leader in the rural lending segment (70% of the market). AKBA
has 21 branches in Armenia; the number of the branches is expected to
reach 47 by the end of 2009.
`AKBA-Credit Agricole Bank’ closed joint stock company (former Farmer
Mutual Support Bank of Armenia) was founded in 1995 and was
registered on March 29 1996. The bank was founded within the EU TACIS
program.
In September 2006 Credit Agricole French banking group purchased 28%
of the bank’s shares. The remaining shares belong to 10 associations
of farmer mutual support involving over 45,000 farmers.
According to the official information, as of the end of September
2007, the total capital of `AKBA-Credit Agricole Bank’ was 20.4bln
Drams, total assets were 68.9bln Drams, balance sheet profit – 3.7bln
Drams and profit was 2.3bln Drams by the end of January-September
2007 period. ($1=307.15Drams). -0–