Fitch affirms five Russian banks at IDR 'B'
MOSCOW. Nov 13 (Interfax) - Fitch Ratings has today affirmed five Russian banks - Bank Saint Petersburg (BSP) , Credit Bank of Moscow (CBOM) , Evrofinance Mosnarbank (EVMB), National Reserve Bank (NRB) and Roseurobank (REB) - at Long-term Issuer Default (IDR) 'B', the agency said in a press release.
The Outlooks on EVMB, NRB and REB are Stable, reflecting those banks' considerable loss absorption capacity, while those on BSP and CBOM are Negative, reflecting their more moderate capital buffers. A full list of rating actions is provided at the end of this commentary.
EVMB's asset quality remained satisfactory at end-Q309, with NPLs (loans overdue by 90 days or more) equal to 2.8% of the portfolio and restructured loans comprising 4.3%. Following a significant de-leveraging of the balance sheet in Q209-Q309, the regulatory capital ratio rose further to a strong 34% at end-Q309, while liquidity is comfortable, with highly liquid assets equal to more than 60% of customer funding. At the same time, EVMB's ratings remain constrained by its limited franchise and concentrated balance sheet, and significant uncertainties remain in respect to the bank's future strategy, ownership structure and potential policy role.
Loan impairment has increased significantly at NRB, with NPLs rising to 16.8% at end-Q309 and restructured loans comprising a further 6% of the portfolio. In addition, market risks have increased again following the acquisition of an approximately 20% stake in Aeroflot from the broader National Reserve Corporation (NRC). At end-Q309, securities holdings accounted for about 40% of total assets, with Aeroflot and Gazprom shares comprising 50% and 33% of the portfolio, respectively. However, NRB's capital base (regulatory capital ratio of 43% at end-Q309) remains sufficient to absorb considerable losses in both the loan and securities portfolios, while liquidity is supported by the availability of Central Bank of Russia (CBR) funding, either on an unsecured basis or through refinancing of the Aeroflot/Gazprom stakes.
At end-Q309, loans overdue by more than 30 days at REB accounted for 7.4% of the portfolio, while restructured loans comprised 6% of gross loans, mainly due to one large exposure. REB's borrower concentrations have been decreasing, but still remain high, with the top 20 loans accounting for 115% of end-Q309 IFRS equity. The regulatory and Basel total capital ratios were a solid 22.4% and 31.9% respectively, at end-Q309, following significant loan book contraction in Q209-Q309 and receipt of RUB1.9bn of subordinated facilities from shareholders and Vnesheconombank ('BBB'/Negative), while reserve coverage of loans overdue by 30 days was a sound 166%. Highly liquid assets comprised a large 26% of the balance sheet at end-Q309, while unused CBR facilities are significant and upcoming wholesale funding redemptions moderate.
Reported loan impairment at BSP remains low, with NPLs of 2% at end-H109 and restructured loans running at 6.6%. At the same time, the high proportion of construction/real estate lending and rapid growth prior to the economic crisis make the risk of a future increase in loan impairment recognition somewhat higher than at most other Russian banks, in Fitch's view. Loss absorption capacity is also moderate by current market standards, with the end-Q309 regulatory capital ratio standing at 13.7%, tier 2 capital comprising a large (41%) share of the total and the reserves/loans ratio able to rise from 7.4% to 12% before a breach of regulatory capital requirements.
However, BSP's liquidity position is currently satisfactory (highly liquid assets at end-Q309 covered several times the USD125m eurobond, which matures at end-November 2009) and the bank's solid regional franchise in Saint-Petersburg, broad deposit base and high cost efficiency are also positive for the bank's credit profile. If BSP successfully places its planned USD200m convertible preference share issue in December 2009 and is able to maintain satisfactory asset quality ratios in coming quarters, then the Outlook may be revised back to Stable.
CBOM's reported levels of NPLs and restructured loans were significantly lower than many peers, at 3.4% and 4.6%, respectively, at end-Q309. During 2009 the bank's capitalisation has been supported by a RUB3bn equity injection and improved pre-impairment performance, with the regulatory capital adequacy ratio standing at 13.8% at end-Q309. At the same time, Fitch views CBOM's loss absorption capacity as moderate, with the bank able to increase its reserves/loans ratio to 12% from the actual level of 6.1% at end-Q309 without breaching minimum capital requirements. In addition, although the liquidity position is currently stable, the bank faces some refinancing risk, as big-ticket wholesale funding maturing during 2010 is equal to a significant 14% of assets. That said, if CBOM is able to maintain moderate loan impairment ratios and a satisfactory liquidity position as it pays down / refinances its wholesale funding in 2010, the Outlook could be revised to Stable.
The rating actions are as follows:
Bank Saint Petersburg
Long-term foreign currency IDR: affirmed at 'B'; Outlook Negative
Senior unsecured debt: affirmed at 'B' Recovery Rating at 'RR4'
Subordinated debt programme: affirmed at 'CCC'
Short-term foreign currency IDR: affirmed at 'B'
Individual Rating: affirmed at 'D'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'B-'
Credit Bank of Moscow
Long-term foreign currency IDR: affirmed at 'B'; Outlook Negative
Short-term foreign currency IDR: affirmed at 'B'
Individual Rating: affirmed at 'D'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No floor'
National Long-term Rating: affirmed at 'BBB-(rus)'; Outlook Negative
Evrofinance Mosnarbank
Long-term foreign currency IDR: affirmed at 'B'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Individual Rating: affirmed at 'D'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No floor'
National Long-term Rating: affirmed at 'BBB(rus)'; Outlook Stable
National Reserve Bank
Long-term foreign currency IDR: affirmed at 'B'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Individual Rating: affirmed at 'D'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No floor'
National Long-term Rating: affirmed at 'BBB-(rus)'; Outlook Stable
Rosevrobank
Long-term foreign currency IDR: affirmed at 'B'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Individual Rating: affirmed at 'D'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No floor'
National Long-term Rating: affirmed at 'BBB-(rus)'; Outlook Stable
In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs.