London, 01 September 2020 -- Moody's Investors Service, ("Moody's") today
placed all long-term ratings and assessments of Belarusbank,
Belagroprombank JSC (Belagroprombank) and Belinvestbank on review for
downgrade. The outlooks on the long-term deposit ratings,
as well as the issuer outlooks, were changed to review down from
stable. Concurrently, Moody's affirmed two banks'
short-term Counterparty Risk (CR) Assessments of Not Prime(cr)
and short-term Counterparty Risk Ratings (CRRs) of Not Prime (NP),
as well as three banks' short-term deposit ratings of Not
Prime (NP).
For a detailed list of ratings affected, please refer to the end
of this Press Release.
RATINGS RATIONALE
THE REVIEW FOR DOWNGRADE REFLECTS POTENTIAL FOR POLITICAL INSTABILITY
TO SPILL OVER INTO LIQUIDITY AND ASSET-QUALITY RISKS
The rating action was driven by social risk considerations, namely,
the risks for the banking sector's liquidity stemming from the political
instability. Since the country's presidential elections on
9 August, there has been widespread social unrest in Belarus (B3
stable). This heightened political instability is reflected in
the interbank market and the behaviour of some depositors which increases
pressure on bank liquidity. In addition, prolonged political
turmoil would be disruptive for economic activity, already damaged
by the coronavirus outbreak, and thus cause a more significant than
expected deterioration in asset quality in the coming months.
The review for downgrade of the banks' ratings thus reflects the
potential for political instability to spill over into both liquidity
and asset-quality risks for banks.
On 12 August, the country's central bank, the National
Bank of the Republic of Belarus (NBRB), said that banks' retail
depositors increased withdrawals and moved cash savings to foreign currencies
from the Belarusian ruble. The magnitude of the outflows is currently
moderate, but if intensified, such outflows could have a material
impact on banks' standalone creditworthiness, given the importance
of retail customer deposits as one of the banks' key funding sources.
These rising liquidity risks are partially mitigated by the three banks'
solid liquidity cushions and the fact that a large portion of Belarus
banks' retail deposits have longer maturities and cannot be withdrawn
on demand. The NBRB will continue to provide liquidity to the system,
and these three state-owned banks are likely to benefit from extraordinary
support from the government of Belarus in case of need. However,
this does not fully mitigate the risk of currency and maturity mismatches,
because the banks' foreign-currency (FX) liquid assets do
not fully cover their FX short-term liabilities. Moreover,
the NBRB and the government are less able to support the banking system
with FX liquidity because the sovereign has only modest foreign-currency
reserves.
Moody's further expects the three banks' problem loans to
increase in the coming months, as the disruption to economic activity
from the political turmoil and strikes adds to the pressure resulting
from the coronavirus outbreak. In particular, the performance
of foreign-currency loans will likely deteriorate as the borrowers'
repayment capacity will be undermined by the near-30% depreciation
of the Belarusian ruble since the beginning of the year.
SPECIFIC ANALYTICAL FACTORS FOR THE AFFECTED BANKS
-- BELARUSBANK
The review for downgrade of Belarusbank's long-term ratings and
assessments reflects the potential for political instability to spill
over into liquidity and asset-quality risks for the bank.
Belarusbank's liquidity cushion, while solid, is the
lowest among the three banks. Its asset-risk profile is
closely linked to the sovereign credit risk, given the bank's high
direct and indirect credit exposure to the sovereign via government bonds
and loans to state-owned companies.
Belarusbank's B3 long-term local currency deposit rating incorporates
its b3 (review down) Baseline Credit Assessment (BCA) and Moody's assessment
of a very high probability of government support, which, however,
results in no rating uplift. Belarusbank's long-term foreign
currency deposit rating of Caa1 is capped by Belarus' foreign currency
deposit ceiling of Caa1.
-- BELAGROPROMBANK JSC
The review for downgrade of Belagroprombank's long-term ratings
and assessments reflects the potential for political instability to spill
over into liquidity and asset-quality risks for the bank.
Belagroprombank's liquidity cushion is only marginally higher than
that of Belarusbank, while its asset-quality is weaker,
despite similarly strong linkage to the sovereign credit risk.
Belagroprombank's B3 long-term local currency deposit rating incorporates
its caa1 (review down) BCA and Moody's assessment of a very high probability
of government support, which provides a one-notch rating
uplift to the local currency deposit rating from the BCA. Belagroprombank's
long-term foreign currency deposit rating of Caa1 is capped by
Belarus' foreign currency deposit ceiling of Caa1.
-- BELINVESTBANK
The review for downgrade of Belinvestbank's long-term ratings and
assessments reflects the potential for political instability to spill
over into liquidity and asset-quality risks for the bank.
Compared to its peers, the bank has a larger liquidity cushion,
lower problem loans and higher loan loss reserves coverage, but
weaker earnings generation. Its exposure to the sovereign and state-owned
enterprises has recently reduced, but remains substantial.
Belinvestbank's B3 long-term local currency deposit rating
incorporates its caa1 (review down) BCA and Moody's assessment of a high
probability of government support, which provides a one-notch
rating uplift. Belinvestbank's long-term foreign currency
deposit rating of Caa1 is capped by Belarus' foreign currency deposit
ceiling of Caa1.
THE FOCUS OF THE REVIEW
The review for downgrade on the three banks' ratings will focus
on the stability of the country and its financial system, including
but not limited to the magnitude of deposit outflows, their impact
on the banks' liquidity positions and their ability to provide customers
with unrestricted access to their funds.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A positive rating action on the three banks' ratings is currently
unlikely, given the review for downgrade. However,
the ratings may be confirmed if there are no substantial deposit outflows,
their liquidity remains solid and credit losses do not result in a material
deterioration of the banks' capital positions.
A significant deterioration of the banks' liquidity or capital positions
would result in a downgrade of their BCAs. The banks' long-term
deposit ratings could be downgraded in case of severe deterioration of
their standalone credit profiles, restrictions on payments to customers
or a downgrade of the sovereign rating.
LIST OF AFFECTED RATINGS
..Issuer: Belagroprombank JSC
On Review for Downgrade:
.... Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently caa1
.... Baseline Credit Assessment, Placed
on Review for Downgrade, currently caa1
.... Long-term Counterparty Risk Assessment,
Placed on Review for Downgrade, currently B3(cr)
.... Long-term Counterparty Risk Rating,
Placed on Review for Downgrade, currently B3
.... Long-term Bank Deposits (Local
Currency), Placed on Review for Downgrade, currently B3,
Outlook Changed To Rating Under Review From Stable
.... Long-term Bank Deposits (Foreign
Currency), Placed on Review for Downgrade, currently Caa1,
Outlook Changed To Rating Under Review From Stable
Affirmations:
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Short-term Counterparty Risk Rating,
Affirmed NP
.... Short-term Bank Deposits,
Affirmed NP
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Belinvestbank
On Review for Downgrade:
.... Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently caa1
.... Baseline Credit Assessment, Placed
on Review for Downgrade, currently caa1
.... Long-term Counterparty Risk Assessment,
Placed on Review for Downgrade, currently B3(cr)
.... Long-term Counterparty Risk Rating,
Placed on Review for Downgrade, currently B3
.... Long-term Bank Deposits (Local
Currency), Placed on Review for Downgrade, currently B3,
Outlook Changed To Rating Under Review From Stable
.... Long-term Bank Deposits (Foreign
Currency), Placed on Review for Downgrade, currently Caa1,
Outlook Changed To Rating Under Review From Stable
Affirmations:
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Short-term Counterparty Risk Rating,
Affirmed NP
.... Short-term Bank Deposits,
Affirmed NP
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Belarusbank
On Review for Downgrade:
.... Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently b3
.... Baseline Credit Assessment, Placed
on Review for Downgrade, currently b3
.... Long-term Bank Deposits (Local
Currency), Placed on Review for Downgrade, currently B3,
Outlook Changed To Rating Under Review From Stable
.... Long-term Bank Deposits (Foreign
Currency), Placed on Review for Downgrade, currently Caa1,
Outlook Changed To Rating Under Review From Stable
Affirmations:
.... Short-term Bank Deposits,
Affirmed NP
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are unsolicited.
a.With Rated Entity or Related Third Party Participation:
NO
b.With Access to Internal Documents: NO
c.With Access to Management: NO
For additional information, please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
Items color coded in purple in this Press Release relate to unsolicited
ratings for a rated entity which is non-participating.
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.
Svetlana Pavlova, CFA
Asst Vice President - 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
Yaroslav Sovgyra, CFA
Associate Managing Director
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
