AZE.US
A banking expert has linked VTB Azerbaijan’s decision to reduce its charter capital by 221.1 million manats ($130 million) to international sanctions on its Russian parent company and a possible need to redirect funds to Russia.
VTB Azerbaijan recently approved a reduction in its charter capital from 315.8 million manats ($185.8 million) to 94.7 million manats ($55.7 million).
The bank said the decision was intended to align its capital structure with current financial indicators and allow dividend payments to shareholders.
It stressed that its capital would remain above the required minimum and said it has ended every financial year with a profit since 2020 while maintaining financial stability.
Banking expert Akram Hasanov told Valyuta.az that companies generally reduce their charter capital under two scenarios.
Under Azerbaijani law, he said, a company must lower its charter capital when the value of its net assets falls below the registered amount. This typically means that part of the capital has already been lost as a result of financial losses.
The second scenario arises when shareholders decide to withdraw part of their money from the business.
“In the first case, the funds are effectively no longer there because they have been lost. In the second case, the money exists, but shareholders want to take it out of the business,” Hasanov said.
“This may indicate that they do not assess the company’s future prospects highly.”
He noted that reducing charter capital is not common in Azerbaijan’s banking sector, where lenders generally seek to increase capital to expand their operations.
Commenting specifically on VTB Azerbaijan, Hasanov suggested that the decision could be viewed in the context of sanctions imposed on the Russian banking group.
“VTB is a Russian bank operating under sanctions and may see limited prospects for its activities in Azerbaijan,” he said.
“From this perspective, the capital reduction could also be interpreted as the Russian VTB withdrawing part of its funds from Azerbaijan. Given the current situation in Russia, the bank may need that money there.”
Hasanov emphasized, however, that this was his interpretation of the possible motives behind the move. VTB Azerbaijan has not said that the capital reduction is connected to sanctions or the transfer of funds to Russia.
The expert added that the Central Bank of Azerbaijan requires banks to maintain at least 50 million manats ($29.4 million) in aggregate capital. As long as a bank remains above that regulatory threshold, the reduction does not in itself create a legal or supervisory problem.
“The main question concerns the bank’s future prospects,” Hasanov said. “Banks usually increase capital when they plan to expand their operations, rather than reduce it.”
AZE.US