London, 13 July 2017 -- Moody's Investors Service, ("Moody's") has
today placed on review for upgrade Siauliu Bankas, AB (Siauliu Bankas)
local- and foreign-currency Ba1/NP long- and short-term
deposit ratings, its ba3 baseline credit assessment (BCA),
as well as its long- and short-term counterparty risk (cr)
assessment of Baa3(cr)/P-3(cr). The review for upgrade has
been prompted by improvements in the standalone credit performance of
the bank, as well as increased visibility around the integration
process following the partial acquisition of failed Lithuanian bank Ukio
Bankas in 2013.
During the review period, Moody's will assess Siauliu Bankas'
ability to sustain its positive trajectory through a full economic cycle,
focusing on: (1) the extent to which the bank will be able to maintain
or even continue to improve its recently strengthened profitability,
capitalization and asset quality beyond Lithuania's currently favourable
operating environment, taking into account its comparatively fast
loan growth; (2) whether the risks and complexity related to the
acquisition of Ukio in 2013 have dissipated, thus increasing the
visibility and predictability of Siauliu Banka's financial performance.
See the end of this press release for a full list of affected ratings
RATINGS RATIONALE
The review for upgrade has been prompted by Siauliu Bankas' strong
financial performance in recent periods, particularly with respect
to asset quality, profitability, and capitalization.
The problem loans to gross loans ratio decreased to 7.2%
at year-end 2016, down from 10.0% in 2015 and
12.4% in 2014. This reflects an improving operating
environment, borrowers' improved balance sheets and the bank's
efforts to resolve legacy non-performing assets. Profitability
has also improved with net income over tangible assets ratio increasing
to 1.77% in 2016 from 1.17% in 2015,
due to increasing business volumes and public investment initiatives.
Together, the lower cost of risk and stronger profitability drive
the bank's capital generation abilities, with the Tangible
Common Equity to Tangible Banking Assets (TCE/TBA) ratio increasing to
15.85% at year-end 2016 from 12.59%
in 2015.
Against the backdrop of these strengths, the review period will
also allow Moody's to assess the risks associated with the relatively
aggressive growth strategy pursued by the bank (10%-15%
annual growth rate) and, most importantly, the risk of reversal
in the exceptionally favourable operating conditions prevailing in Lithuania
at this juncture, with ultra-low interest rates across the
Eurozone despite a dynamic domestic economy in Lithuania and emerging
inflation.
WHAT COULD CHANGE THE RATINGS UP/DOWN
The ratings are currently on review for upgrade. Siauliu Bankas'
ratings would be upgraded, possibly by more than one notch,
if Moody's expects the bank to be able to continue to unwind its
portfolio of problem loans, maintain its robust capitalization and
stable profitability, while smoothly completing the integration
process of Ukio Bankas' assets.
Currently, there is no downward pressure on the ratings, but
it could develop if the operating environment deteriorated significantly,
or if the bank's fundamentals deteriorated considerably from current
levels.
LIST OF AFFECTED RATINGS
Issuer: Siauliu Bankas, AB
Placed On Review for Upgrade:
....LT Bank Deposits (Local & Foreign
Currency), currently Ba1, Outlook Changed To Rating Under
Review From Stable
....ST Bank Deposits (Local & Foreign
Currency), currently NP
....Adjusted Baseline Credit Assessment,
currently ba3
....Baseline Credit Assessment, currently
ba3
....LT Counterparty Risk Assessment,
currently Baa3(cr)
....ST Counterparty Risk Assessment,
currently P-3(cr)
Outlook Action:
....Outlook, Changed To Rating Under
Review From Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. 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 or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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.
Niclas Boheman
Asst Vice President - Analyst
Financial Institutions Group
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
Sean Marion
MD - Financial Institutions
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