The rating actions follow a sovereign downgrade of Belarus
Moscow, April 04, 2011 -- Moody's Investors Service has today downgraded to B3 from B2 the
long-term foreign currency deposit ratings of six Belarusian banks:
(i) Belarusbank, (ii) Belagroprombank, (iii) Belinvestbank,
(iv) Belpromstroibank, (v) Bank Moscow-Minsk and (vi) Minsk
Transit Bank. Moody's also downgraded to B2 from B1 the local-currency
deposit ratings of the three state-owned banks: Belarusbank,
Belagroprombank, Belinvestbank, and to B1 from Ba3 the local
currency deposit rating of privately owned Bank Moscow-Minsk.
The local currency deposit rating of Belpromstroibank was affirmed at
Ba3 and the local currency deposit rating of Minsk Transit Bank was affirmed
at B2. The outlook on B3 long term foreign currency deposit ratings
of all six rated banks is negative, driven by the negative outlook
on foreign currency ceiling for Belarus. The outlooks on local
currency deposit ratings of five banks (Belarusbank, Belagroprombank,
Belinvestbank, Minsk Transit Bank and Bank Moscow-Minsk)
are negative, whilst the outlook on Belpromstroibank is stable.
A full list of the affected ratings is included at the end of this press
release.
RATINGS RATIONALE
Today's downgrades were prompted by:
1. The downgrade of the country's foreign-currency
deposit ceiling to B3 from B2 which affected the foreign currency deposit
ratings of all rated banks.
2. The downgrade of the Belarus government's debt rating
to B2 from B1 which reflects the negative impact of the country's
limited capacity to support its banking system, causing the repositioning
of the country's systemic support indicator (SSI) to B2 from B1,
which affected the three state-owned banks' long-term
local currency deposit ratings.
3. Re-assessment of parental support assumptions for Bank
Moscow-Minsk.
ACTION ON FOREIGN CURRENCY DEPOSIT RATINGS DUE TO LOWERING OF COUNTRY
CEILING
The downgrade of all six rated banks' long-term foreign currency
deposit ratings is due to the recent downgrade of the country's
foreign currency deposit ceiling to B3 from B2. As a result,
all foreign currency deposit ratings remain constrained by the corresponding
ceiling at B3, which reflects moratorium risks on foreign currency
deposits that currently exist in Belarus within the context of declining
foreign currency assets held by the National Bank of Belarus (NBB).
LOCAL CURRENCY DEPOSIT RATINGS
The downgrade of the Belarus government's debt rating has prompted
Moody's to lower Belarus's systemic support indicator (SSI),
which is the measure Moody's uses to determine bank rating uplift
due to systemic support considerations. The SSI denotes the country's
capacity to provide support to its banking system beyond that indicated
by its own rating level, as it incorporates a range of tools at
its disposal (financial and non-financial).
By lowering Belarus's SSI to B2 from B1, the deposit ratings
of three state-owned banks (Belarusbank, Belagroprombank
and Belinvestbank) were downgraded to B2 from B1.
The downgrade of the long-term local currency deposit rating of
Bank Moscow-Minsk to B1 from Ba3 is driven by the re-assessment
of parental support assumptions from very high to moderate. Lowering
of the support assumptions was triggered by the possible change of ownership
structure of the bank's parent Bank of Moscow (Baa2/Prime-2/D,
negative), whereby Bank of Moscow is likely to be eventually controlled
by Russia's Bank VTB (Baa1/Prime-2/D-). If
this materialises, the strategic fit of Bank Moscow-Minsk
to the VTB group may become more questionable because VTB already owns
a bank in Belarus. Also, VTB's D- BFSR is lower
than that of Bank of Moscow (D) which is currently used as an anchor for
parental support.
The B2 local currency deposit ratings of Minsk Transit Bank and the Ba3
of Belpromstroibank were affirmed at their current levels. The
rating of Belpromstroibank continues to incorporate (i) parental support
which has been re-assessed from high to very high; and (ii)
systemic support, which has been reassessed from high to low.
The re-assessment of parental support for Belpromstroibank is triggered
by increased strategic fit of the bank to its parent Sberbank (A3/Prime-2/D+,
stable) and increased commitment to support its Belarusian subsidiary.
Sberbank is a majority owner of Belpromstroibank and has announced capital
and funding plans towards the bank. In addition, Sberbank
has recently increased a liquidity line and it conducts regular monitoring
of Belpromstroibank's liquidity position.
STANDALONE BANK FINANCIAL STRENGTH RATINGS
Moody's has affirmed the E+ BFSR of all six rated banks despite
the increasing pressure from the operating environment on the Belarusian
banking system.
The BCAs of five banks (Belarusbank, Belagroprombank, Belpromstroibank,
Bank Moscow-Minsk and Minsk Transit Bank), were affirmed
at B2. The affirmations of Belarusbank and Belagroprombank reflect
the perceived high importance of these two banks to the government,
given their strong policy roles. Moody's continues to believe
that the government is likely to provide significant ongoing capital and
liquidity support to these two banks, thus better positioning them
in the event of possible deterioration in the operating environment.
At the same time, the BCAs of two foreign-owned subsidiaries
(Belpromstroibank and Bank Moscow-Minsk) benefit from strong ongoing
parental support, while affirmation of the B2 BCA of Minsk Transit
Bank is a result of the bank's strong capital base and good liquidity
profile, which place it favourably to withstand potential stress
in the economy without any ongoing support.
Moody's has lowered the BCA of Belinvestbank to B3 from B2 (which
still maps to an E+ BFSR) because of (i) its weak capital buffer
and low provisioning cushion which may not be sufficient to absorb credit
losses if these were to materially increase, (ii) the possibility
of reduction in ongoing capital and liquidity support by the government
to the bank as the government may consider disposing of Belinvestbank
in the medium term, and (iii) the higher risk profile of the loan
book. All of these factors significantly expose Belinvestbank to
risks of deterioration in the operating environment.
OUTLOOKS
The long-term local currency deposit ratings of four rated Belarusian
banks (Belarusbank, Belagroprombank, Belinvestbank,
Minsk Transit Bank) have been assigned negative outlooks to take account
of considerable downside risks reflected in the potential deterioration
in the operating environment which is likely to affect the Belarusian
banking system. Moody's believes that the financial fundamentals
of the banking system (which are currently adequate) are likely to come
under pressure in the near to medium term, following the worsening
of the country's operating and macroeconomic environment.
The negative outlook on Bank Moscow-Minsk's local currency
deposit rating is additionally explained by the negative outlook on the
parent's D BFSR.
The stable outlook assigned to Belpromstroibank's long-term
local currency deposit rating takes into account the strong financial
fundamentals of its parent, reflected in Sberbank's Ba1 BCA
and its strong commitment to support the bank despite possible deterioration
in the operating environment which counterbalances the expected pressure
on its standalone financial strength.
The BFSRs of five rated banks carry a stable outlook, while the
BFSR of Belinvestbank, which is perceived to be more weakly positioned
to meet the challenges of worsening operating and macroeconomic environment,
carries a negative outlook.
BANK RATINGS AFFECTED BY TODAY'S RATING ACTION:
Belarusbank:
- BCA and BFSR affirmed at B2 and E+, respectively
- Long-term local currency deposit rating downgraded to
B2 from B1
- Long-term foreign currency deposit rating downgraded to
B3 from B2
E+ BFSR carries a stable outlook, while long-term ratings
carry a negative outlook.
Belagroprombank:
- BCA and BFSR affirmed at B2 and E+, respectively
- Long-term local currency deposit rating downgraded to
B2 from B1
- Long-term foreign currency deposit rating downgraded to
B3 from B2
E+ BFSR carries a stable outlook, while long-term ratings
carry a negative outlook.
Belinvestbank:
- BCA lowered to B3 from B2, E+ BFSR is affirmed
- Long-term local currency deposit rating downgraded to
B2 from B1
- Long-term foreign currency deposit rating downgraded to
B3 from B2
All the above ratings carry a negative outlook
Belpromstroibank:
- BCA and BFSR affirmed at B2 and E+, respectively
- Long-term local currency deposit rating is affirmed at
Ba3
- Long-term foreign currency deposit rating downgraded to
B3 from B2
E+ BFSR and Ba3 long-term local currency deposit rating carry
a stable outlook, while long-term foreign currency deposit
rating carries a negative outlook.
Bank Moscow-Minsk:
- BCA and BFSR affirmed at B2 and E+, respectively
- Long-term local currency deposit rating downgraded to
B1 from Ba3
- Long-term foreign currency deposit rating downgraded to
B3 from B2
E+ BFSR carries a stable outlook while long-term ratings carry
a negative outlook.
Minsk Transit bank:
- BCA and BFSR affirmed at B2 and E+, respectively
- Long-term local currency deposit rating affirmed at B2
- Long-term foreign currency deposit rating downgraded to
B3 from B2
E+ BFSR carries a stable outlook while long-term ratings carry
a negative outlook.
PREVIOUS RATING ACTIONS & PRINCIPAL METHODOLOGIES
The principal methodologies used in this rating were Bank Financial Strength
Ratings: Global Methodology published in February 2007, Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology published in March 2007, and Moody's Guidelines
for Rating Bank Hybrid Securities and Subordinated Debt published in November
2009.
Moody's previous rating actions on the three of the six Belarus
banks were implemented on 14 July 2009 when it downgraded the long-term
global local currency (GLC) deposit ratings as follows: Belarusbank
-- to B1 from Ba1; Belagroprombank --
to B1 from Ba1; and Belinvestbank -- to B1 from Ba2.
At that time, the rating agency also lowered the BCA of Belarusbank
to B2 from B1.
Moody's previous rating action on Belpromstroibank was implemented
on 14 May 2010 when it upgraded the long-term global local currency
deposit rating to Ba3 from B1.
Moody's previous rating action on Bank Moscow-Minsk was implemented
on 9 July 2009 when it downgraded the global scale long-term local
currency rating to Ba3 from Ba2 and assigned a negative outlook.
Moody's previous rating action on Minsk Transit Bank was implemented
on 27 November 2008 when it has assigned first-time B2 long-term
and Not Prime short-term local and foreign currency deposit ratings
and an E+ BFSR. At that time, a stable outlook was assigned
on all ratings.
All banks affected by today's review are headquartered in Minsk,
Belarus:
- Belarusbank reported unaudited total assets of US$15.1
billion as of end-September 2010
- Belagroprombank reported unaudited total assets of US$8.4
billion as of end-September 2010
- Belpromstroibank reported audited total assets of US$2.9
billion as of end-December 2010
- Belinvestbank reported audited total assets of US$2.5
billion as of end-December 2010
- Bank Moscow-Minsk reported unaudited total assets of US$538
million as of end-September 2010
- Minsk Transit bank reported audited total assets of US$237
million as of end-December 2010
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Moscow
Vladlen Kuznetsov
Asst Vice President - Analyst
Financial Institutions Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
London
Yves Lemay
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
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Moody's downgrades ratings of six Belarusian banks