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Rating Action:

Moody's downgrades National Bank Trust and Investment Bank Trust to B2/Baa1.ru

Global Credit Research - 27 Nov 2008
Moody's downgrades National Bank Trust and Investment Bank Trust to B2/Baa1.ru

Ratings of National Bank Trust are on review for further downgrade; ratings of Investment Bank Trust will be withdrawn

Moscow, November 27, 2008 -- Moody's Investors Service has today downgraded the long-term foreign and local currency deposit ratings and foreign currency senior unsecured debt ratings of both National Bank Trust (NBT) and Investment Bank Trust (IBT) to B2 from B1. The ratings of NBT have been placed on review for possible further downgrade, whilst the ratings of IBT will be withdrawn. The banks' Not Prime short-term foreign and local currency ratings and E+ bank financial strength ratings (BFSRs) have been affirmed. The outlook on the BFSRs is stable.

At the same time, Moody's Interfax Rating Agency has downgraded the long-term national scale credit ratings of NBT to Baa1.ru from A1.ru. Moscow-based Moody's Interfax is majority-owned by Moody's, a leading global rating agency.

The following ratings of IBT will be withdrawn: the B2 long-term foreign and local currency ratings, B2 foreign currency senior debt rating, the E+ BFSR and the Not Prime short-term foreign and local currency ratings.

The downgrades follow the significant outflow of deposits that NBT -- the surviving bank of the two merged entities -- has suffered (accounting for 27% of retail deposits and 50% of corporate deposits since September 2008), forcing it to revert to the Central Bank of Russia as the lender of last resort, which has provided 25% of the bank's liabilities as of mid-November.

In Moody's view, the significant shrinkage of the bank's funding base resulting from the deposit outflow has demonstrated the high vulnerability of its funding to adverse macroeconomic events and depositor sentiment. The downgrades reflect the rating agency's concerns that, although the bank has managed to stabilise the deposit outflow in November, there remains a significant likelihood that a further deterioration in macroeconomic conditions in Russia will weaken the bank's liquidity profile and franchise to a notable extent.

Moody's also believes that the bank is likely to experience a substantial deterioration in asset quality in both its corporate and retail loan books (which were expanded under relatively aggressive standards) if the operating environment continues its deteriorating trend. The level of impaired retail loans is already significant and increasing as a proportion of the overall loan book.

The withdrawal of IBT's ratings follows the announcement that the merger between the two banks has been finalised with IBT ceasing to exist as a separate legal entity.

In the event that the bank fails to withstand the continuing deterioration in the operating environment with increasing reliance on central bank funding and weakening asset quality, Moody's will likely conclude the rating review by downgrading the ratings further. Conversely, if the bank is acquired by a stronger entity, Moody's will confirm the ratings or potentially place them on review for possible upgrade.

Moody's previous rating action on NBT and IBT was in September 2008, when the outlook was changed to stable from positive.

NBT is headquartered in Moscow, Russian Federation, but the majority of its business is located in the country's regions, supported by its wide regional branch network. It had total consolidated assets of RUB89.1 billion and total equity of RUB14.6 billion under IFRS at end-Q3 2008, and ranked among the top 50 largest banks by total assets.

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
Vladlen Kuznetsov
Asst Vice President - Analyst
Financial Institutions Group
Moody's Eastern Europe
Telephone: +7 495 641-1881
Facsimile: +7 495 641-1897

No Related Data.
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