19 Nov 2009 14:11

Moody's confirms Ba3/Aa3.ru ratings of Credit Europe Bank, Russia

MOSCOW. Nov 19 (Interfax) - Moody's Investors Service has confirmed the Ba3 long-term deposit and senior unsecured debt ratings of Credit Europe Bank Ltd, Russia (CEB Ltd), thus concluding the review of the ratings initiated on 27 March 2009, the agency said in a press release.

Meanwhile, Moody's affirmed the E+ bank

financial strength rating (BFSR) and Not Prime short-term ratings. The Ba3 long-term debt and deposit ratings carry a negative outlook while the E+ BFSR carries a stable outlook.

At the same time, Moody's Interfax Rating Agency confirmed CEB Ltd's Aa3.ru long-term national scale credit rating. Moscow-based Moody's Interfax is majority owned by Moody's, a leading global rating agency.

"The confirmation of CEB Ltd's long-term debt and deposit ratings follows the confirmation of the ratings of its parent, Credit Europe Bank N.V. (rated D/Ba2 negative outlook/Not Prime). Although the bank has

significant exposure to consumer lending and has a high proportion of foreign currency-denominated corporate loans, we regard its capitalisation as adequate within its BFSR category of E+," says Semyon Isakov, a Moscow-based Moody's Assistant Vice President-Analyst and lead

analyst for CEB Ltd.

At the same time, Moody's notes that CEB Ltd's E+ BFSR continues to be constrained by the deteriorating operating environment in Russia, which is exerting pressure on the bank's financial fundamentals and capital. In addition, more difficult access to market refinancing combined with the bank's historically high dependence on market sources for funding continue to challenge its business model, including its efficiency profile and liquidity.

The negative outlook on the bank's long-term deposit and debt ratings reflects the negative outlook on the ratings of the parent and the adverse pressure on CEB Ltd's balance sheet. Moody's says that CEB Ltd's long-term deposit and debt ratings continue to benefit from a high probability of shareholder support, resulting in a one-notch uplift from the B1 baseline credit assessment (which maps directly from the BFSR).

Moody's previous rating action on CEB Ltd was on 27 March 2009 when the bank's long-term debt and deposit ratings were downgraded to Ba3 and placed on review for possible further downgrade while its BFSR was downgraded to E+ with a stable outlook. CEB Ltd's Not Prime short-term ratings were affirmed.

Domiciled in Moscow, CEB Ltd is a wholly owned subsidiary of Credit Europe Bank N.V., a Netherlands-based niche player specialised in commodity and structured trade finance lending and consumer finance, mainly in emerging markets. CEB Ltd reported total assets of RUB60.5 billion (US$2.0 billion) and shareholders' equity of RUB11.5 billion (US$368 million) at the end of H1 2009, based on IFRS accounts reviewed by auditors, Moody's said.

The bank was Russia's 53rd largest by assets, according to the Interfax-100 ranking at the end of the third quarter of 2009.