London, 27 December 2018 -- Moody's Investors Service has today taken rating actions on four Ukrainian
banks. These follow the recent improvement in the creditworthiness
of the Government of Ukraine, reflected in Moody's upgrade of Ukraine's
sovereign bond rating to Caa1, with a stable outlook, from
Caa2 (positive outlook) on 21 December 2018. (Please see "Moody's
upgrades Ukraine's rating to Caa1 from Caa2, outlook changed to
stable from positive" https://www.moodys.com/research/Moodys-upgrades-Ukraines-rating-to-Caa1-from-Caa2-outlook-changed--PR_393443).
The rating actions were driven by (1) high inter-linkages between
the sovereign creditworthiness and standalone credit fundamentals of the
three government owned banks, (2) improvement in banks' standalone
credit profiles, and (3) Moody's expectations that Ukrainian
banks' creditworthiness will gradually improve, driven by improving
asset quality and profitability.
Moody's has changed the outlooks to stable from positive on the affected
banks' ratings.
Specifically, Moody's has:
(1) Upgraded the Baseline Credit Assessments (BCAs) of four banks (Privatbank,
Savings Bank of Ukraine, Ukreximbank and Pivdennyi Bank JSCB);
(2) Upgraded the long-term Local Currency (LC) deposit ratings
of four banks (Privatbank, Savings Bank of Ukraine, Ukreximbank
and Pivdennyi Bank JSCB);
(3) Upgraded the Foreign Currency (FC) deposit ratings of four banks (Privatbank,
Savings Bank of Ukraine, Ukreximbank and Pivdennyi Bank JSCB);
(4) Upgraded the long-term LC senior unsecured debt rating of one
bank (Savings Bank of Ukraine);
(5) Upgraded the long-term FC senior unsecured debt ratings of
two banks (Savings Bank of Ukraine and Ukreximbank);
(6) Upgraded the FC subordinated debt ratings of one bank (Ukreximbank);
(7) Upgraded the National Scale Ratings (NSRs) of two banks (Savings Bank
of Ukraine and Pivdennyi Bank JSCB);
(8) Upgraded the long-term Counterparty Risk Assessments (CR Assessments)
of four banks (Privatbank, Savings Bank of Ukraine, Ukreximbank
and Pivdennyi Bank JSCB);
(9) Upgraded the long-term Counterparty Risk Ratings (CRR) of four
banks (Privatbank, Savings Bank of Ukraine, Ukreximbank and
Pivdennyi Bank JSCB).
Moody's has changed the outlooks to stable from positive on the affected
banks' ratings.
RATINGS RATIONALE
OPERATING ENVIRONMENT
The macro profile for Ukrainian banks remains "Very Weak" as economic
conditions and operating environment in Ukraine remain generally stable.
Moody's expects annual GDP growth averaging 3% in 2019-2020
and believes that a combination of better economic conditions and more
stable local currency will help to stimulate credit demand and improve
the repayment capacity of existing borrowers, supporting banks'
profitability. In addition, lower geopolitical risk have
enhanced the stability of bank deposits reducing pressure on liquidity.
--- BANK-SPECIFIC FACTORS
-- PRIVATBANK
The upgrade of state-owned Privatbank's LC deposit rating to Caa1
with a stable outlook from Caa2 (positive outlook), FC deposit rating
to Caa2 with a stable outlook from Caa3 (positive outlook) and the upgrade
of the bank's BCA to caa1 from caa3 is driven by the upgrade of the Ukraine's
sovereign rating and strengthened standalone financial fundamentals.
The upgrade of the bank's BCA is in turn driven by (1) the high inter-linkage
between the bank's standalone credit fundamentals and sovereign creditworthiness,
given the bank's high direct exposure to sovereign debt (in total,
over 60% of total assets or 640% of the bank's equity at
Q3 2018); (2) improved asset quality metrics as a result of increased
problem loans coverage with reserves to around 90%; (3) material
improvement in profitability metrics in 2018, driven by strengthened
recurring revenues and reduced credit cost; and (4) the bank's low
reliance on market funding and high level of liquid assets (over 50%
of total assets at Q3 2018).
-- SAVINGS BANK OF UKRAINE
The upgrade of state-owned Savings Bank of Ukraine's long-term
LC deposit and long-term LC and FC senior unsecured debt ratings
to Caa1 with a stable outlook from Caa2 (positive outlook), the
bank's FC deposit rating to Caa2 with a stable outlook from Caa3 (positive)
and the upgrade of the bank's BCA to caa1 from caa2 is driven by the upgrade
of the sovereign rating. The changes reflect in turn: (1)
the high inter-linkage between the bank's standalone credit fundamentals
and sovereign creditworthiness, given the bank's high direct exposure
to sovereign debt, bonds guaranteed by the state, and state-owned
companies including Naftogaz (in total, 64% of the bank's
total assets or 893% of the bank's equity at Q3 2018); (2)
improved coverage of problem loans; and (3) high level of liquid
assets (over 50% of total assets at Q3 2018).
-- UKREXIMBANK
The upgrade of state-owned Ukreximbank's long-term
LC deposit and FC senior unsecured debt ratings to Caa1 with a stable
outlook from Caa2 (positive outlook), the bank's FC deposit rating
to Caa2 with a stable outlook from Caa3 (positive outlook), FC subordinated
debt rating to Caa2 from Caa3 and the bank's BCA to caa1 from caa2 is
driven by the upgrade of the sovereign rating. The upgrade of the
bank's BCA reflects: (1) the high inter-linkage between the
bank's standalone credit fundamentals and sovereign creditworthiness,
given the bank's high direct exposure to sovereign debt and bonds guaranteed
by the state (over 62% of the bank's assets or 1200%
of the bank's equity as at Q3 2018); (2) improved coverage of problem
loans, (3) strengthened recurring profitability in 2018; and
(4) high level of liquid assets (over 50% of total assets at Q3
2018).
-- PIVDENNYI BANK, JSCB
The upgrade of Pivdennyi Bank, JSCB's (Pivdennyi) long-term
LC deposit rating to Caa1 with a stable outlook from Caa2 (positive outlook),
FC deposit rating to Caa2 with a stable outlook from Caa3 (positive outlook)
and the bank's BCA to caa1 from caa2 follows the sovereign rating action
on Ukraine, which lifts the previous rating constraints and reflects
the bank's (1) asset quality improvement driven by repayments,
write-offs and new lending; (2) track record of profitable
performance in recent years and strengthened recurring profitability in
2018; and (3) limited reliance on market funding and ample liquidity
cushion (around 30% of total assets at Q3 2018).
STABLE OUTLOOK
The stable outlooks on the long-term ratings of these four Ukrainian
bank ratings reflect the stable outlook on the sovereign rating and Moody's
expectations for a steady performance of these banks over the next 12-18
months.
FOREIGN CURRENCY DEPOSIT RATINGS
Moody's has upgraded FC deposit ratings with a stable outlook of four
banks to Caa2 following the change in the country's FC deposit ceiling
to Caa2 from Caa3. The FC deposit ratings of the banks continue
to be constrained by the country's FC bank deposit ceiling.
WHAT COULD MOVE THE RATINGS UP/DOWN
Moody's considers that banks' ratings could be upgraded following further
improvement of the country's macro-economic environment,
combined with an improvement in banks' standalone credit profiles and/or
positive rating action(s) on the sovereign ratings/ceilings.
Conversely, negative pressure on the banks' ratings could
result from (1) increased volatility in the operating environment,
leading to growing pressure on the banks' standalone credit profiles,
increasing insolvency risk and/or (2) negative rating action(s) on the
sovereign ratings.
THE SPECIFIC RATING ACTIONS IMPLEMENTED TODAY ARE AS FOLLOWS:
..Issuer: Ukreximbank
Upgrades:
.... Adjusted Baseline Credit Assessment,
Upgraded to caa1 from caa2
.... Baseline Credit Assessment, Upgraded
to caa1 from caa2
.... Counterparty Risk Assessment, Upgraded
to B3(cr) from Caa1(cr)
.... Counterparty Risk Rating, Upgraded
to B3 from Caa1
.... Subordinate Regular Bond/Debenture,
Upgraded to Caa2 from Caa3
.... Senior Unsecured Regular Bond/Debenture,
Upgraded to Caa1 from Caa2, Changed To Stable From Positive
.... Deposit Rating (Foreign Currency),
Upgraded to Caa2 from Caa3, Changed To Stable From Positive
.... Deposit Rating (Local Currency),
Upgraded to Caa1 from Caa2, Changed To Stable From Positive
Outlook Actions:
....Outlook, Changed To Stable From
Positive
..Issuer: Privatbank
Upgrades:
.... Adjusted Baseline Credit Assessment,
Upgraded to caa1 from caa3
.... Baseline Credit Assessment, Upgraded
to caa1 from caa3
.... Counterparty Risk Assessment, Upgraded
to B3(cr) from Caa1(cr)
.... Counterparty Risk Rating, Upgraded
to B3 from Caa1
.... Deposit Rating (Foreign Currency),
Upgraded to Caa2 from Caa3, Changed To Stable From Positive
.... Deposit Rating (Local Currency),
Upgraded to Caa1 from Caa2, Changed To Stable From Positive
Outlook Actions:
....Outlook, Changed To Stable From
Positive
..Issuer: Savings Bank of Ukraine
Upgrades:
.... Adjusted Baseline Credit Assessment,
Upgraded to caa1 from caa2
.... Baseline Credit Assessment, Upgraded
to caa1 from caa2
.... Counterparty Risk Assessment, Upgraded
to B3(cr) from Caa1(cr)
.... Counterparty Risk Rating, Upgraded
to B3 from Caa1
.... NSR Counterparty Risk Rating, Upgraded
to Baa1.ua from Baa3.ua
.... Senior Unsecured Regular Bond/Debenture,
Upgraded to Caa1 from Caa2, Changed To Stable From Positive
.... NSR Senior Unsecured Regular Bond/Debenture
, Upgraded to Ba1.ua from B1.ua
.... Deposit Rating (Foreign Currency),
Upgraded to Caa2 from Caa3, Changed To Stable From Positive
.... Deposit Rating (Local Currency),
Upgraded to Caa1 from Caa2, Changed To Stable From Positive
.... NSR Deposit Rating, Upgraded to
Ba1.ua from B1.ua
Outlook Actions:
....Outlook, Changed To Stable From
Positive
..Issuer: Pivdennyi Bank, JSCB
Upgrades:
.... Adjusted Baseline Credit Assessment,
Upgraded to caa1 from caa2
.... Baseline Credit Assessment, Upgraded
to caa1 from caa2
.... Counterparty Risk Assessment, Upgraded
to B3(cr) from Caa1(cr)
.... Counterparty Risk Rating, Upgraded
to B3 from Caa1
.... NSR Counterparty Risk Rating, Upgraded
to Baa1.ua from Baa3.ua
.... Deposit Rating (Foreign Currency),
Upgraded to Caa2 from Caa3, Changed To Stable From Positive
.... Deposit Rating (Local Currency),
Upgraded to Caa1 from Caa2, Changed To Stable From Positive
.... NSR Deposit Rating, Upgraded to
Ba2.ua from B1.ua
Outlook Actions:
....Outlook, Changed To Stable From
Positive
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113601.
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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Lev Dorf
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service, 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
