London, 24 January 2020 -- Moody's Investors Service (Moody's) today concluded its review for
downgrade on the long-term ratings of Interprombank, JSCB
(Interprombank). Moody's has downgraded to Caa2 from Caa1
the bank's long-term ratings. Long-term Counterparty
Risk Assessment was also downgraded to Caa2(cr) from Caa1(cr).
Following the downgrade, the long-term deposit ratings carry
a negative outlook. Moody's also affirmed the bank's
ca Baseline Credit Assessment (BCA) and Adjusted BCA, Not Prime
short-term deposit ratings, Not Prime(cr) short-term
Counterparty Risk Assessment (CRA), and Not Prime short-term
Counterparty Risk Ratings (CRRs). A full list of affected ratings
can be found at the end of this press release.
RATINGS RATIONALE
The downgrade of the bank's ratings reflects increased risk for
the bank's senior creditors following the ongoing deterioration
in liquidity metrics as well as the recent ruling of the Russian arbitrage
court on US$55 million financial claims filed against the bank
by a third party.
The Russian arbitrage court recently ordered that Interprombank has to
repay US$55 million (RUB3.4 billion), i.e.
more than a half of the bank's core regulatory Tier 1 capital,
to a third party on financial claims where Interprombank is alleged to
be a financial guarantor. While Interprombank rejects that it issued
any such guarantees and appealed the court ruling, the risk for
creditors has, in Moody's view, increased. In
case of Interprombank's failure to successfully appeal the court's
ruling, its core Tier 1 capital, that stood at 9.99%
of risk-weighted assets as of 31 December 2019, would fall
below the regulatory minimum, whereas its liquid assets are currently
not sufficient to make such payment.
According to the monthly regulatory filings, Interprombank's
overdue loans to corporate clients have recently sharply increased,
requiring the bank to recognize loan loss reserves and decreasing the
bank's regulatory core Tier 1 capital down to RUB6.1 billion
as of 1 January 2020 from RUB6.4 billion as of 1 October 2019.
Meanwhile, deposit base continued to shrink, requiring Interprombank
to deleverage. As of 31 December 2019, highly liquid assets
(cash and cash equivalents) stood at just about 3% of total assets.
While high solvency risks have been already captured in the bank's
BCA of ca, until recently, risks for depositors and senior
creditors were somewhat offset by the structure of the bank's balance
sheet with a large volume of equity and subordinated debt. In addition,
Moody's also took into account potential support that the bank might
receive and was recently receiving from its shareholders whose deposits
comprise a large portion of liabilities, underpinning Moody's
positioning of the bank's long-term ratings three notches
above the bank's Aadjusted BCA of ca. The observed recent
negative credit developments increase liquidity risks and, therefore,
the potential volume of cash injections required to support the bank.
Given the heightened uncertainty regarding further possible injections
from the shareholders, Moody's revised downwards its assessment
of risk for senior creditors. The persistent negative pressure
on the bank that leads to business contraction and weak client confidence,
as reflected in the ongoing shrinkage of the deposit base, was also
reflected in the negative outlook.
WHAT COULD MOVE THE RATINGS UP/DOWN
Various actions undertaken by the bank's shareholders and management
aimed at improving the bank's liquidity and solvency could lead
to an upgrade of the bank's BCA and the long-term ratings.
The bank's long-term ratings and its BCA could be also upgraded
in the event of a significant improvement in liquidity and asset risk.
Interprombank's ratings may be downgraded should the bank fail to
stabilize liquidity and solvency, were not able to resolve its litigation
favourably, or face adverse regulatory action leading to its closure
or inability to service its liabilities on a timely basis.
LIST OF AFFECTED RATINGS
..Issuer: Interprombank, JSCB
Downgrades:
.... Long-term Counterparty Risk Assessment,
Downgraded to Caa2(cr) from Caa1(cr)
.... Long-term Counterparty Risk Ratings,
Downgraded to Caa2 from Caa1
.... Long-term Bank Deposit Ratings,
Downgraded to Caa2 from Caa1, Outlook Changed to Negative from Ratings
Under Review
Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed ca
.... Baseline Credit Assessment, Affirmed
ca
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Short-term Counterparty Risk Ratings,
Affirmed NP
.... Short-term Bank Deposit Ratings,
Affirmed NP
Outlook Action:
....Outlook Changed to Negative from Ratings
Under Review
PRINCIPAL METHODOLOGY
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.
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.
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.
Semyon Isakov
Vice President - Senior 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
