Fitch affirms six foreign-owned Russian banks at 'BBB+', outlook stable
MOSCOW. Nov 18 (Interfax) - Fitch Ratings has affirmed the long-term Issuer Default Ratings (IDRs) of Russia's OJSC Nordea Bank (NBR), SEB Bank JSC (SEBR), Credit Agricole CIB ZAO (CAR), HSBC Bank (RR) LLC (HSBCR), ING Bank (Eurasia) ZAO (INGR) and Danske Bank's (Russia) (DBR) at 'BBB+', the agency said in a statement.
The rating outlooks are stable.
The banks' Long-term IDRs reflect Fitch's view of the high probability that the banks will be supported, if ever needed, by their financially strong parent financial institutions, Fitch said.
The banks are fully owned by Nordea Bank AB ('AA-'/Stable), Skandinaviska Enskilda Banken AB (A+/Stable), Credit Agricole (A/Stable), HSBC Bank Plc (AA-/Stable), ING Bank NV (A+/Negative) and Danske Bank (A/Stable), respectively. Fitch's view on the high propensity of the parent banks to support their subsidiaries takes into account the full ownership, the high level of integration (and in most cases rather fungible balance sheets), common branding (implying high reputational risks) and the very low cost of potential support, in case of need, given the insignificant share of the Russian entities in the respective groups' total assets.
Fitch classifies all the six banks as subsidiaries of 'limited importance' for their parent banks due to the very small size of the former relative to their respective groups (less than 1% of consolidated assets in each case) and the parent banks' limited focus on the Russian market. The banks' ratings are therefore likely to remain at least two notches below those of their ultimate parents. The ratings of NBR, SEBR, HSBCR and INGR, which are more than two notches below those of their parent banks, are constrained by the Russian Country Ceiling.
Fitch has not assigned Viability Ratings to the subsidiary banks because of the high level of management and operational integration with the parent banks. This integration includes, to varying degrees at different banks, parent guarantees provided for subsidiary credit exposures, active participation of the parent banks in the subsidiaries' credit approval processes, significant funding provided by parents to subsidiaries, high dependence of subsidiary business origination on the broader group, and significant fungibility between parent and subsidiary balance sheets.
Each of the six subsidiaries could be downgraded if (i) the Russian Country Ceiling is downgraded, together with Russia's sovereign ratings; (ii) the parent bank is downgraded to 'A-' or below; (iii) the parent bank sells its Russian subsidiary to a more lowly-rated owner; or (iv) Fitch changes its view of the willingness of the parent to support its subsidiary. However, Fitch does not currently anticipate any of these scenarios.
The ratings of NBR, SEBR and HSBCR could be upgraded if Russia's Country Ceiling is upgraded. However, an upgrade of the Country Ceiling would be unlikely to result in an upgrade of INGR (because of the Negative Outlook on ING Bank NV) or CAR and DBR (because of the level of the parent bank ratings).
The rating actions are as follows:
OJSC Nordea Bank, SEB Bank JSC and Danske Bank (Russia)
Long-Term IDR: affirmed at 'BBB+'; Outlook Stable
Short Term IDR: affirmed at 'F2'
National Long Term Rating: affirmed at 'AAA(rus)'; Outlook Stable
Support Rating: affirmed at '2'
Credit Agricole CIB ZAO
Long-term foreign and local currency IDRs: affirmed 'BBB+'; Outlook Stable
Short-term foreign and local currency IDRs: affirmed 'F2'
National Long-term rating: affirmed 'AAA(rus)'; Outlook Stable
Support Rating: affirmed '2'
HSBC Bank (RR) LLC
Long-term foreign and local currency IDRs: affirmed 'BBB+'; Outlook Stable
Short-term foreign currency IDR: affirmed 'F2'
National Long-term rating: affirmed 'AAA(rus)'; Outlook Stable
Support Rating: affirmed '2'
ING Bank (Eurasia) ZAO
Long-term foreign and local currency IDRs: affirmed 'BBB+'; Outlook Stable
Short-term foreign currency IDR: affirmed 'F2'
National Long-term rating: affirmed 'AAA(rus)'; Outlook Stable
Support Rating: affirmed '2'
Senior unsecured debt: assigned at 'BBB+'
Senior unsecured debt National Rating: assigned at 'AAA(rus)'
HSBC Bank was Russia's 89th largest bank by assets, according to the Interfax-100 ranking at the end of Q3 2013, Nordea - 26th, ING - 29th, Credit Agricole - 97th, CEB - 26th and Danske Bank - 242nd.
