BAKU/SEPT. 19 (The Bulletin) — Azerbaijani media said that The European Bank for Reconstruction and Development (EBRD) was potentially interested in buying a stake in its largest bank, the International Bank of Azerbaijan (IBA).

Suma Chakrabarti, the EBRD’s president, was in Baku earlier in the month, although he doggedly denied the EBRD’s interest in IBA.

“I was there last week, we spoke to Azerbaijani President Ilham Aliyev, we said we would be happy to help in restructuring and refocusing of this bank,” he was quoted as saying.

The speculation has been triggered by comments from senior government officials who said that they wanted to sell off chunks of IBA, which restructured $3.3b of debt earlier this year, in 2018.

Azerbaijan’s government effectively bailed out IBA this year by increasing its stake in the bank, which dominates the Azerbaijani banking market, to 76.7% from 55%. Azerbaijan’s economy has been particularly badly hit by a fall in the price of oil since mid-2014 and has fallen into a recession. 

Bad loans at banks have also multiplied and in May, Moody’s the ratings agency, said that the government had spent 18% of its GDP on propping up its banking sector.

The EBRD has a history of intervening in the financial sector in Central Asia and the South Caucasus. Earlier this year it agreed to increase its stake in Azerbaijan’s Unibank to help it stave off bankruptcy.

ENDS

— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.

— Copyright the Central Asia & South Caucasus Bulletin 2017