Action follows the change of the outlook on Ukraine's Caa1 sovereign rating to positive from stable and the change in the country's Macro Profile to 'Very Weak+' from 'Very Weak'
London, 27 November 2019 -- Moody's Investors Service ("Moody's") has today affirmed the ratings,
baseline credit assessments (BCAs), adjusted BCAs and counterparty
risk assessments (CR Assessment) of seven Ukrainian banks (Privatbank,
Savings Bank of Ukraine, Ukreximbank, Raiffeisen Bank Aval,
Pivdennyi Bank, JSCB, Sberbank PJSC, Prominvestbank)
and changed the outlook on the long term local (LC) and foreign-currency
(FC) deposit ratings and where applicable senior unsecured debt ratings
to positive from stable.
The rating action follows Moody's change of outlook on Ukraine's Caa1
sovereign debt rating to positive from stable on November 22, 2019
https://www.moodys.com/research/Moodys-changes-Ukraines-outlook-to-positive-from-stable-affirms-Caa1--PR_413591
and the following change in the country's Macro Profile to 'Very Weak+'
from 'Very Weak'.
Specifically, Moody's has:
(1) Changed the outlook on the local and foreign-currency long
term deposit and where applicable senior unsecured debt ratings to positive
from stable on the ratings of seven banks (Privatbank, Savings Bank
of Ukraine, Ukreximbank, Raiffeisen Bank Aval, Pivdennyi
Bank, JSCB, Sberbank PJSC, Prominvestbank).
(2) Affirmed the BCAs and adjusted BCAs of seven banks (Privatbank,
Savings Bank of Ukraine, Ukreximbank, Raiffeisen Bank Aval,
Pivdennyi Bank, JSCB, Sberbank PJSC, Prominvestbank).
(3) Affirmed the long-term LC and FC deposit ratings of seven banks
(Privatbank, Savings Bank of Ukraine, Ukreximbank, Raiffeisen
Bank Aval, Pivdennyi Bank, JSCB, Sberbank PJSC,
Prominvestbank).
(4) Affirmed the long-term LC senior unsecured debt ratings of
one bank (Savings Bank of Ukraine);
(5) Affirmed the long-term FC senior unsecured debt ratings of
two banks (Savings Bank of Ukraine and Ukreximbank);
(6) Affirmed the FC subordinated debt rating of one bank (Ukreximbank);
(7) Upgraded the National Scale Ratings (NSRs) of four banks (Savings
Bank of Ukraine, Pivdennyi Bank, JSCB, Sberbank PJSC,
Prominvestbank) and affirmed NSRs of one bank (Raiffeisen Bank Aval).
(8) Affirmed the long-term CR Assessments of seven banks (Privatbank,
Savings Bank of Ukraine, Ukreximbank, Raiffeisen Bank Aval,
Pivdennyi Bank, JSCB, Sberbank PJSC, Prominvestbank).
(9) Affirmed the long-term counterparty risk ratings (CRRs) of
seven banks (Privatbank, Savings Bank of Ukraine, Ukreximbank,
Raiffeisen Bank Aval, Pivdennyi Bank, JSCB, Sberbank
PJSC, Prominvestbank);
(10) Affirmed the short-term ratings and assessments of seven banks
(Privatbank, Savings Bank of Ukraine, Ukreximbank, Raiffeisen
Bank Aval, Pivdennyi Bank, JSCB, Sberbank PJSC,
Prominvestbank);
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
(1) POSITIVE OUTLOOK ON THE SOVEREIGN RATING AND THE CHANGE IN THE MACRO
PROFILE TO ' VERY WEAK+' FROM 'VERY WEAK' REFLECT IMPROVING OPERATING
ENVIRONMENT IN UKRAINE AND EXERT UPWARD PRESSURE ON BANKS' RATINGS
Moody's rating methodology for banks includes an assessment of each individual
country's operating environment, expressed as a Macro Profile,
which is designed to capture system-wide factors that are predictive
of the propensity of banks to fail. The Macro Profile assigned
to each bank informs the financial factors, which are key inputs
into the determination of each bank's BCA. Moody's has changed
Ukraine's Macro Profile to "Very Weak+" from "Very Weak" to reflect
the improvements in the country's economic strength and banks' funding
conditions. Ukrainian banks' funding conditions improved in recent
years and will remain stable over the next 12-18 months,
supported by growing deposits (84% of total liabilities as of 1
October 2019), ongoing gradual de-dollarization (the share
of FC deposits moderated to 41% at 1 October 2019 from 58%
at the end of 2014) and reduced reliance on market funding: Ukrainian
banks' external debt declined to around $5 billion as of
30 June 2019, compared to $19 billion at the end of 2014.
(2) BANK-SPECIFIC FACTORS
-- PIVDENNYI BANK, JSCB
The affirmation of Pivdennyi Bank, JSCB's ratings and change
in the outlooks on its deposit ratings to positive from stable follow
the sovereign rating action on Ukraine and the improvement of the Ukrainian
banking system's Macro Profile to "Very Weak+" from "Very Weak".
The bank's BCA is now constrained by the sovereign rating level
and reflects: (1) improving asset quality driven by repayments,
write-offs and new lending with the level of problem loans decreasing
to around 10% of gross loans at 30 June 2019 from 13% at
year-end 2018; (2) a track record of profitability in recent
years with further strengthening in the first half of 2019; and (3)
limited reliance on market funding and ample liquidity cushion (around
30% of total assets at 30 June 2019).
-- PRIVATBANK
The affirmation of Privatbank's ratings and change in the outlooks
on the bank's deposit ratings to positive from stable follow the
sovereign rating action on Ukraine and the improvement of Ukrainian banking
system's Macro Profile to "Very Weak+" from "Very Weak". The
bank's BCA is constrained by the sovereign rating and reflects (1) the
high inter-linkage between the bank's standalone credit fundamentals
and sovereign creditworthiness, given the bank's high direct exposure
to sovereign debt (in total, around 60% of total assets or
over 400% of the bank's equity at 30 June 2019); (2) material
improvement in profitability metrics in 2019, driven by strengthened
recurring revenues and reduced credit cost; and (3) the bank's low
reliance on market funding and high level of liquid assets (over 70%
of total assets at 30 June 2019).
-- PROMINVESTBANK
The affirmation of Prominvestbank's ratings and the change of outlook
on the bank's deposit ratings to positive from stable is driven
by the recent strengthening of the bank's capital position and its
return to profitability, which improve the recovery prospects for
the bank's creditors. Prominvestbank has significantly reduced
both its loan book and deposit base, and as a result the bank's
standalone TCE/RWA reached a very high 26.9% and its liquid
assets (cash and due from banks) more than covered the customer deposits
as of 30 September 2019. The bank turned profitable in the first
half of 2019, with annualized recurring pre-provision income
in the first half of 2019 at 0.6% of tangible assets and
earnings additionally supported by write-backs of reserves and
one-off gains.
At the same time, Prominvestbank's BCA remains constrained by the
bank's high level of problem loans (96% of gross loans as
of 30 September 2019, effectively making problem loans workout the
only focus of the bank's business model), its dramatically
reduced customer franchise and limited opportunities for business development,
due to sanctions imposed on the bank by the government of Ukraine.
Prominvestbank's long-term local-currency deposit rating
benefits from one notch of uplift, due to Moody's assessment of
a moderate probability of affiliate support from the bank's parent,
Russia's VEB.RF (Baa3 stable). This assessment is
constrained by VEB.RF's intention to sell the subsidiary and the
track record of support, which has not always been timely and sufficient,
yet it is underpinned by VEB.RF's full control and ownership
of Prominvestbank and the Ukrainian government's sanctions effectively
precluding the sale of Prominvestbank.
-- RAIFFEISEN BANK AVAL
The affirmation of Raiffeisen Bank Aval's ratings and the change of outlook
on the bank's deposit ratings to positive from stable follows the
sovereign rating action on Ukraine and the improvement of the Ukrainian
banking system's Macro Profile.
Raiffeisen Bank Aval's BCA remains constrained by the sovereign
rating level, while it is underpinned by the bank's sound
financial fundamentals. In particular, the bank has demonstrated:
(1) a good capital buffer, with its total regulatory capital adequacy
ratio amounting to a high 15.6% as of 30 June 2019,
(2) improving asset quality (problem loans declined to 10% of gross
loans as of 30 June 2019 from 21% as of year-end 2017),
(3) strong recurring and bottom-line profitability on the back
of a high net interest margin (9.4% annualized for the first
half of 2019) and reduced credit costs; and (4) solid funding profile,
with limited reliance on market funding.
Moody's continues to incorporate a moderate probability of affiliate support
for Raiffeisen Bank Aval from the bank's parent, Raiffeisen Bank
International AG (long-term bank deposits A3 / senior unsecured
A3 Stable, BCA baa3), resulting in a one-notch uplift
to the bank's long-term local-currency deposit rating.
-- SAVINGS BANK OF UKRAINE
The affirmation of Savings Bank of Ukraine's ratings and the change
of outlook on the bank's deposit ratings to positive from stable
follows the sovereign rating action on Ukraine and the improvement of
the Ukrainian banking system's Macro Profile. The positive outlook
is aligned with that on the sovereign rating, which reflects Moody's
assessment of a very high probability of government support for the bank's
deposits.
The affirmation of Savings Bank of Ukraine's BCA reflects:
(1) the high inter-linkage between the bank's standalone credit
fundamentals and sovereign creditworthiness, given the bank's high
direct exposure to sovereign debt and bonds guaranteed by the state (over
60% of the bank's assets as at 30 June 2019); and (2) Savings
Bank of Ukraine's high level of problem loans, modest capital buffer
and profitability, counterbalanced by its high level of liquid assets.
-- SBERBANK PJSC
The affirmation of Sberbank PJSC's ratings and the change of outlook on
the bank's deposit ratings to positive from stable is driven by
the improvement of the Ukrainian banking system's Macro Profile,
combined with the recent strengthening of the bank's capital position
and its return to profitability. Sberbank PJSC has benefited from
extensive capital support from its parent, Russia's Sberbank
(long-term bank deposits Baa3 / Backed senior unsecured Baa3 /
BCA ba1): the Ukrainian subsidiary received capital injections of
UAH8.3 billion in 2018 and UAH3.3bn in 2019 (via conversion
of parental funding into equity), following which the bank's
TCE/RWA ratio reached a very high 35.9% as of 30 September
2019. The bank's return on assets turned positive and amounted
to an annualized 0.5% for the first nine months of 2019,
thanks to improved cost efficiency and reduced loan loss provisions.
At the same time, Sberbank PJSC's BCA remains constrained by the
bank's high level of problem loans (77% of gross loans as
of 30 September 2019) and its limited opportunities for business development,
due to sanctions imposed on the bank by the government of Ukraine.
The bank's long-term local-currency deposit rating benefits
from one notch of uplift, due to a moderate probability of affiliate
support from Sberbank. This assessment is constrained by Sberbank's
intention to sell the subsidiary, yet it is underpinned by the recent
track record of support, the full control and ownership by Sberbank
and reputational risks stemming from sharing Sberbank's brand in Ukraine.
-- UKREXIMBANK
The affirmation of Ukreximbank's ratings and the change of the outlook
on the bank's deposit ratings to positive from stable follow the
sovereign rating action on Ukraine and the improvement of the Ukrainian
banking system's Macro Profile. The positive outlook is aligned
with that on the sovereign rating, which reflects Moody's assessment
of a very high probability of government support for the bank's deposits.
The affirmation of the bank's BCA reflects: (1) the high inter-linkage
between the bank's standalone credit fundamentals and sovereign creditworthiness,
given the bank's high direct exposure to sovereign debt and bonds guaranteed
by the state (over 50% of the bank's assets or 9-10x of
the bank's equity as at 30 June 2019); (2) strengthened recurring
profitability; and (3) a high level of liquid assets (over 50%
of total assets at 30 June 2019).
FOREIGN CURRENCY DEPOSIT RATINGS
Moody's affirmed Caa2 FC deposit ratings of seven banks with a positive
outlook. The FC deposit ratings of seven banks continue to be constrained
by the country's FC bank deposit ceiling.
WHAT COULD MOVE RATINGS UP OR DOWN
For the majority of the affected banks, their deposit or debt ratings
are in line with the Ukrainian sovereign rating or constrained by the
country ceiling. Therefore positive rating actions on these financial
institution ratings would be driven by a higher sovereign rating and country
ceiling. The rating outlooks could be changed to stable if the
outlook on Ukraine's sovereign debt rating were to be revised to stable.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Moody's does not have any particular governance concerns for the
Ukrainian banks affected by this rating action and does not apply a corporate
behaviour adjustment to any of these banks. Nevertheless,
governance is highly relevant to all banks and requires ongoing monitoring.
The most relevant social risks for banks in Ukraine arise from the country's
adverse demographics, which impact the banks' customer base
and weigh on the growth prospects of both the banking system and the broader
economy. Finally, in terms of environmental considerations,
Ukrainian banks have a low exposure to environmental risks, in line
with Moody's general view for the banking sector.
LIST OF AFFECTED RATINGS
THE SPECIFIC RATING ACTIONS IMPLEMENTED TODAY ARE AS FOLLOWS:
Issuer: Pivdennyi Bank, JSCB
..Upgrades:
.... Long-term NSR Counterparty Risk
Rating, Upgraded to A3.ua from Baa1.ua
.... Long-term NSR Bank Deposit Rating,
Upgraded to Ba1.ua from Ba2.ua
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed caa1
.... Baseline Credit Assessment, Affirmed
caa1
.... Long-term Counterparty Risk Assessment,
Affirmed B3(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed B3
.... Short-term Counterparty Risk Ratings,
Affirmed NP
.... Long-term Bank Deposit Rating
(Foreign Currency), Affirmed Caa2, Changed to Positive from
Stable
... .Long-term Bank Deposit Rating
(Local Currency), Affirmed Caa1, Changed to Positive from
Stable
.... Short-term Bank Deposit Ratings,
Affirmed NP
..Outlook Actions:
.... Outlook, Changed To Positive From
Stable
Issuer: Privatbank
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed caa1
.... Baseline Credit Assessment, Affirmed
caa1
.... Long-term Counterparty Risk Assessment,
Affirmed B3(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed B3
.... Short-term Counterparty Risk Ratings,
Affirmed NP
.... Long-term Bank Deposit Rating
(Foreign Currency), Affirmed Caa2, Changed to Positive from
Stable
... .Long-term Bank Deposit Rating
(Local Currency), Affirmed Caa1, Changed to Positive from
Stable
.... Short-term Bank Deposit Ratings,
Affirmed NP
..Outlook Actions:
.... Outlook, Changed To Positive From
Stable
Issuer: Prominvestbank
..Upgrades:
.... Long-term NSR Counterparty Risk
Rating, Upgraded to Baa3.ua from Ba2.ua
.... Long-term NSR Bank Deposit Rating,
Upgraded to B1.ua from B2.ua
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed caa2
.... Baseline Credit Assessment, Affirmed
caa3
.... Long-term Counterparty Risk Assessment,
Affirmed Caa1(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed Caa1
.... Short-term Counterparty Risk Ratings,
Affirmed NP
... .Long-term Bank Deposit Ratings,
Affirmed Caa2, Changed to Positive from Stable
.... Short-term Bank Deposit Ratings,
Affirmed NP
..Outlook Actions:
.... Outlook, Changed To Positive From
Stable
Issuer: Raiffeisen Bank Aval
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed b3
.... Baseline Credit Assessment, Affirmed
caa1
.... Long-term Counterparty Risk Assessment,
Affirmed B3(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed B3
.... Short-term Counterparty Risk Ratings,
Affirmed NP
.... Long-term NSR Counterparty Risk
Rating, Affirmed A3.ua
.... Long-term Bank Deposit Rating
(Foreign Currency), Affirmed Caa2, Changed to Positive from
Stable
... .Long-term Bank Deposit Rating
(Local Currency), Affirmed B3, Changed to Positive from Stable
.... Short-term Bank Deposit Ratings,
Affirmed NP
.... Long-term NSR Bank Deposit Rating,
Affirmed A3.ua
..Outlook Actions:
.... Outlook, Changed To Positive From
Stable
Issuer: Savings Bank of Ukraine
..Upgrades:
.... Long-term NSR Counterparty Risk
Rating, Upgraded to A3.ua from Baa1.ua
.... Long-term NSR Bank Deposit Rating,
Upgraded to Baa3.ua from Ba1.ua
.... Long-term NSR Senior Unsecured
Regular Bond/Debenture, Upgraded to Baa3.ua from Ba1.ua
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed caa1
.... Baseline Credit Assessment, Affirmed
caa1
.... Long-term Counterparty Risk Assessment,
Affirmed B3(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed B3
.... Short-term Counterparty Risk Ratings,
Affirmed NP
.... Long-term Bank Deposit Rating
(Foreign Currency), Affirmed Caa2, Changed to Positive from
Stable
... .Long-term Bank Deposit Rating
(Local Currency), Affirmed Caa1, Changed to Positive from
Stable
.... Short-term Bank Deposit Ratings,
Affirmed NP
.... Long-term Senior Unsecured Regular
Bond/Debenture, Affirmed Caa1, Changed to Positive from Stable
..Outlook Actions:
....Outlook, Changed To Positive From
Stable
Issuer: Sberbank PJSC
..Upgrades:
.... Long-term NSR Counterparty Risk
Rating, Upgraded to A3.ua from Baa1.ua
.... Long-term NSR Bank Deposit Rating,
Upgraded to Ba1.ua from Ba2.ua
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed caa1
.... Baseline Credit Assessment, Affirmed
caa2
.... Long-term Counterparty Risk Assessment,
Affirmed B3(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed B3
.... Short-term Counterparty Risk Ratings,
Affirmed NP
.... Long-term Bank Deposit Rating
(Foreign Currency), Affirmed Caa2, Changed to Positive from
Stable
... .Long-term Bank Deposit Rating
(Local Currency), Affirmed Caa1, Changed to Positive from
Stable
.... Short-term Bank Deposit Ratings,
Affirmed NP
..Outlook Actions:
....Outlook, Changed To Positive From
Stable
Issuer: Ukreximbank
..Affirmations:
.... Adjusted Baseline Credit Assessment ,
Affirmed caa1
.... Baseline Credit Assessment , Affirmed
caa1
.... Long-term Counterparty Risk Assessment,
Affirmed B3(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed B3
.... Short-term Counterparty Risk Ratings,
Affirmed NP
.... Long-term Bank Deposit Rating
(Foreign Currency), Affirmed Caa2, Changed to Positive from
Stable
... .Long-term Bank Deposit Rating
(Local Currency), Affirmed Caa1, Changed to Positive from
Stable
.... Short-term Bank Deposit Ratings,
Affirmed NP
.... Long-term Senior Unsecured Regular
Bond/Debenture, Affirmed Caa1, Changed to Positive from Stable
.... Long-term Subordinate Regular
Bond/Debenture, Affirmed Caa2
..Outlook Actions:
....Outlook, Changed To Positive From
Stable
The principal methodology used in these ratings was Banks Methodology
published in November 2019. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1174796.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Svetlana Pavlova, CFA
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
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