Moscow, September 08, 2009 -- Moody's Investors Service has today taken rating actions on five
Ukrainian banks, as follows: the Bank Financial Strength Ratings
(BFSRs) of OTP Bank Ukraine, Raiffeisenbank Aval, UkrSibbank
and Ukrsotsbank were downgraded by one notch with a negative outlook,
whilst debt, deposit and National Scale Ratings (NSRs) of these
banks were affirmed. The BFSR of VAB Bank was downgraded by one
notch with a stable outlook, whilst its local currency deposit and
foreign currency debt ratings have been downgraded by two notches and
foreign currency deposit rating was downgraded by one notch with a negative
outlook. These rating actions conclude a rating review initiated
by Moody's on 2 April 2009.
The following ratings have been downgraded:
- OTP Bank Ukraine: BFSR to D- from D
- Raiffeisen Bank Aval: BFSR to D- from D
- UkrSibbank: BFSR to D- from D
- Ukrsotsbank: BFSR to D- from D
- VAB Bank: BFSR to E from E+, local currency
deposit rating to Caa1 from B2, senior unsecured debt rating to
Caa1 from B2 and national scale rating (NSR) to Ba2.ua from A3.ua.
Today's rating actions do not affect the following ratings of the
aforementioned issuers:
- OTP Bank Ukraine: Long-term local currency deposit
rating of Ba1, foreign currency deposit rating of B3, short-term
Not Prime deposit and debt ratings and NSR of Aa1.ua.
- Raiffeisen Bank Aval: Long-term local currency deposit
rating of Ba1, foreign currency deposit rating of B3, local
currency debt rating of Ba1, short-term Not Prime deposit
and debt ratings, national scale debt rating of Aaa.ua and
national scale deposit rating of Aa1.ua.
- UkrSibbank: Long-term local currency deposit rating
of Ba1, foreign currency deposit rating of B3, foreign currency
debt rating of B1, short-term Not Prime deposit and debt
ratings and NSR of Aa1.ua.
- Ukrsotsbank: Long-term local currency deposit rating
of Ba1, foreign currency deposit rating of B3, local currency
debt rating of Ba1, foreign currency debt rating of B1, short-term
Not Prime deposit and debt ratings and NSR of Aa1.ua.
- VAB Bank: Short-term Not Prime deposit rating.
Today's rating action concludes the review for possible downgrade
initiated by the rating agency on 2 April 2009. The review was
driven by Moody's concerns about the potential impact of the enduring
economic downturn in Ukraine on these banks' asset quality and financial
performance, putting a further negative pressure on the banks'
capital levels.
When concluding the review, Moody's applied a number of scenarios
(base-case and stressed) to the banks' loan books to assess
the impact of currently reported as well as anticipated deterioration
of asset quality on the banks' capitalisation and profitability.
The application of these scenarios has revealed that the asset quality
deterioration experienced by Ukrainian banks was mostly in line with Moody's
previous expectations for the base-case scenario, although
for some asset classes (in particular, foreign-currency-denominated
mortgages and car loans) the level of delinquencies is approaching stressed
scenario levels as detailed in Moody's Special Comment "Estimating
Bank Credit Losses for Financial Institutions in the CIS" published
in July 2009. The on-going de-leveraging pursued
by these banks is also reducing the banks' ability to generate earnings
and absorb future credit losses.
Moody's further notes that an additional factor contributing to
the rating agency's expectation of asset quality deterioration is
denomination of significant amounts of loans (varies from 54% to
91%, depending on a bank) and liabilities (varies from 65%
to 92%, depending on a bank) of these banks in foreign currencies,
mainly in US dollars, whereby the notable weakening of the Ukrainian
hryvnia has materially impacted the ability of these banks' borrowers
to repay their foreign currency loans, contributing to further substantial
increase in non-performing loans (NPLs) and loan loss provisioning
charges by the affected banks.
Based on these developments, Moody's anticipates that even
after taking into account already announced and accomplished capital injections
by these Ukrainian banks in 2009, the capital position of these
banks has been weakened and is unlikely to be restored to the previous
level in the short-to-medium term, thus weakening
the banks' stand-alone credit risk profiles and thus necessitating
the downgrades of these banks' BFSRs.
Moody's further commented that it has affirmed debt and deposit
ratings of OTP Bank Ukraine, Raiffeisenbank Aval, UkrSibbank
and Ukrsotsbank, as these ratings continue to be underpinned by
parental support provided to these banks by their parent banks,
all being large EU banking groups. Moody's believe that parental
support is likely to be forthcoming for these Ukrainian banks due to the
reputational risk considerations by the respective parent banks and due
to continued strategic fit of these bank's operations into their
parent bank strategies.
The last rating actions for OTP Bank Ukraine and VAB Bank was on 12 May
2009 when the long-term global foreign currency deposit ratings
of the these banks were downgraded to B3 from B2 with a negative outlook
following Moody's rating action on the sovereign ceiling for foreign
currency bank deposits for Ukraine.
The last rating actions for Ukrsotsbank was on 12 May 2009 when the long-term
global foreign currency deposit rating was downgraded to B3 from B2 with
a negative outlook, the long-term foreign currency debt rating
was downgraded to B1 (from Ba3) with a negative outlook, and the
local currency debt rating was downgraded to Ba1 from Baa3, following
Moody's rating action on the sovereign ceiling for foreign currency
bank deposits and foreign and local bonds for Ukraine.
The last rating actions for UkrSibbank was on 12 May 2009 when the long-term
global foreign currency deposit rating was downgraded to B3 from B2 with
a negative outlook, and the long-term foreign currency debt
rating was downgraded to B1 (from Ba3) with a negative outlook,
following Moody's rating action on the sovereign ceiling for foreign
currency bank deposits and bonds for Ukraine.
The last rating actions for Raiffeisen Aval was on 12 May 2009 when the
long-term global foreign currency deposit rating was downgraded
to B3 from B2 with a negative outlook, the local currency debt rating
was downgraded to Ba1 from Baa3, and the national scale rating was
downgraded to Aa1.ua from Aaa.ua, following Moody's
rating action on the sovereign ceiling for foreign currency bank deposits
and foreign and local bonds for Ukraine.
The principal methodologies used in rating the issuers --OTP Bank
Ukraine, Raiffeisen Bank Aval, UkrSibbank, Ukrsotsbank,
VAB Bank -- 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 and available
on 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 this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
website.
Headquartered in Kiev, Ukraine, OTP Bank Ukraine's assets,
as reported under IFRS, amounted to US$4.5 billion
as of year-end 2008.
Headquartered in Kiev, Ukraine, Raiffeisenbank Aval reported
IFRS total assets of US$8.8 billion at the year-end
of 2008.
Headquartered in Kiev, Ukraine, UkrSibbank reported IFRS total
assets of US$7 billion at year-end 2008.
Headquartered in Kiev, Ukraine, Ukrsotsbank reported IFRS
total assets of US$6.4 billion at year-end 2008.
Headquartered in Kiev, Ukraine, VAB Bank reported --
under local accounting standards -- total assets of US$1 billion
as at year-end 2008.
London
Reynold R. Leegerstee
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moscow
Yaroslav Sovgyra
VP - Senior Credit Officer
Financial Institutions Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
Moody's concludes ratings review of five Ukrainian banks
