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Global Credit Research - 15 Sep 2010
Moscow, September 15, 2010 -- Moody's Investors Service has today affirmed the following ratings
of Nomos Bank (Nomos): the D- bank financial strength rating
(BFSR), Ba3/Not-Prime long- and short-term
foreign currency deposit ratings, as well as the senior unsecured
debt rating of Ba3 and the bank's subordinated debt rating of B1.
All these ratings carry a stable outlook. At the same time,
Moody's Interfax Rating Agency has affirmed the Aa3.ru long-term
national scale credit rating of Nomos. Moscow-based Moody's
Interfax is majority owned by Moody's, a leading global rating
Moody's has also affirmed the E+ BFSR, Ba3/Not-Prime
long- and short-term local and foreign currency deposit
ratings of Bank of Khanty-Mansiysk (BKhM). All ratings carry
a stable outlook. Concurrently, Moody's Interfax Rating Agency
has affirmed the bank's Aa3.ru long-term national scale
rating. National scale ratings do not have a specific outlook.
The rating affirmations follow the recent announcement that Nomos intends
to acquire a 51.27% stake in BKhM. Moody's
expects the transaction to be finalised by year-end 2010.
While Moody's notes that this transaction is expected to lead to
some deterioration of Nomos's financial fundamentals, the
rating agency does not expect the result of such deterioration to be sufficiently
significant to warrant a downgrade. Furthermore, Moody's
believes that BKhM's stand-alone credit risk profile --
assessed in the BFSR of E+, mapping into a Baseline Credit
Assessment (BCA) of B2 -- is unlikely to change immediately as a
result of the transaction.
As a result of the transaction, Moody's expects Nomos's
capital adequacy ratio to drop considerably from over 20% to a
lower, albeit still adequate level. Moody's also notes
that Nomos's shareholders have demonstrated an ability and willingness
to provide both on-going and extraordinary capitalisation,
and Moody's expects the bank to receive further capital injections
in 2011. During the global financial crisis the bank has demonstrated
a good ability to quickly de-risk its balance sheet, thus
also easing pressure on capital. Additionally, the rating
agency also expects Nomos's liquidity position to deteriorate as
a result of this transaction because the currently abundant liquidity
cushion is expected to reduce to a more sustainable level and is expected
to remain sufficiently adequate to meet moderate stresses. The
agency also notes that the bank's liquidity management proved effective
to meet the challenges of the operating environment.
Moody's observes that the notable risks of BKhM -- such as
related-party risk and significant market risk appetite --
are not sizeable enough to drive Nomos's ratings into the lower
rating category. At the same time, Moody's expects
the market risk appetite of the merged bank to reduce as the current level
of market risk at BKhM is not in line with the strategic priorities of
Nomos's shareholders and management. Related-party
transactions may be diluted -- as partially represented by lending
to related entities of the Khanty-Mansiysk regional administration
(KhMAO) -- which is expected (i) to be restricted due to a change
in shareholder structure (N.B. Nomos is also owned by a
group of foreign shareholders -- PPF and J&T groups -- which
together control 49% of Nomos) and (ii) to be more in line with
Nomos's historically moderate related-party lending risk
In addition, Moody's notes that integration risk is significantly
mitigated by the fact that a stake in BKhM is to be acquired by Nomos's
controlling shareholder, IST group, thus mitigating possible
negative consequences that could arise as a result of the shareholder
At the same time, Moody's cautions that if the transaction
is not completed as announced (e.g. the purchase price is
raised) -- which could negatively impact Nomos's financial
fundamentals -- the rating could be subject to a downward revision.
In addition, the ratings could also be downgraded if integration
risk materialises (e.g. inability to obtain control of BKhM),
but this is not regarded as a central scenario.
Bank of Khanty-Mansiysk
Moody's views positively the possibility that Nomos will introduce
more rigorous risk management practices in BKhM leading to a decrease
in market risk appetite, single-name concentrations and volume
of related-party transactions, which are currently the major
constraining factors to BKhM's BFSR. However, the rating
agency expects implementation risk and would view favourably a track record
of positive changes in the risk-taking culture of BKhM which will
be incorporated into the ratings.
BKhM's Ba3 local and foreign currency deposit ratings benefit from a two-notch
uplift from its BCA of B2 as a result of Moody's assessment of a moderate
probability of support from the bank's home region, KhMAO (rated
Baa3). The support considerations are driven by the bank's social
and economic importance as the largest retail deposit taker in the region
(where it has close to a 20% market share), and by the regional
authorities' management oversight of the bank's business and history of
providing support in recent years. Following Nomos's consolidation
of a 51.27% stake in BKhM, Moody's does not
consider that regional support could be withdrawn altogether, as
the bank will continue to maintain its regional focus and visibility in
the home region; thus Moody's expects BKhM to remain a socially
important player, receiving support in case of need.
Any evidence of the region intending to reduce its stake in BKhM or diminish
its management oversight over the bank could result in Moody's adjusting
downwards its assessment of the probability of regional support for BKhM.
Such an outcome would likely be a result of close integration between
Nomos and BKhM, and thus could lead to an incorporation of parental
support from Nomos, substituting a dilution of regional support.
Moody's previous rating action on Nomos was on 29 July 2010 when
the rating agency changed the outlook on the bank's ratings to stable
Moody's previous rating action on BKhM was on 18 December 2009 when
the rating agency assigned Ba3/Not Prime/E+/Aa3.ru first-time
ratings to the bank.
The principal methodologies used in rating Nomos and BKhM are "Bank
Financial Strength Ratings: Global Methodology", published
in February 2007, and "Incorporation of Joint-Default
Analysis into Moody's Bank Ratings: A Refined Methodology",
published in March 2007, which can be found at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating Nomos and BKhM can also be found in
the Rating Methodologies sub-directory on Moody's website.
Headquartered in Moscow, Russia, Nomos reported -- at
year-end 2009 -- total consolidated assets (audited) of US$9.2
billion and total shareholders' equity of US$1.2 billion.
Nomos is mainly a corporate bank with the majority of operations concentrated
in Moscow, although it has moderate regional presence in over 30
Headquartered in Khanty-Mansiysk, BKhM reported total consolidated
IFRS assets (audited) of US$4.3 billion as at 31 December
2009 and total equity of US$620 million.
Asst Vice President - Analyst
Financial Institutions Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
Financial Institutions Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
Moody's Eastern Europe LLC
Moody's affirms ratings of Nomos Bank and BKhM following acquisition announcement (Russia)
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