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Rating Action:

Moody's takes rating actions on subsidiaries of three Russian financial institutions

22 Oct 2014

Actions follow corresponding changes to the parents' supported ratings

London, 22 October 2014 -- Moody's Investors Service has today taken rating actions on the supported senior unsecured debt and deposit ratings of subsidiaries of the following three Russian Financial Institutions: Bank VTB, JSC, Sberbank and Vnesheconombank.

These rating actions follow Moody's downgrade of the long-term deposit, debt and issuer ratings of the respective Russian parents on 20th of October, 2014. For additional information, please refer to the related announcement: https://www.moodys.com/research/--PR_310781

Specifically, the actions affected the supported senior unsecured and deposit ratings of the following international and domestic subsidiaries of VTB Group (namely, VTB Bank (Austria) AG, VTB Bank (Deutschland) AG, VTB Capital plc, VTB24, VTB Bank (Armenia), and Bank of Moscow), one subsidiary of Sberbank located in Kazakhstan (SB Sberbank JSC), and one domestic subsidiary of Vnesheconombank (SME Bank). These subsidiaries' supported ratings benefit from Moody's assessment of parental support uplift.

The standalone ratings -- i.e., bank financial strength ratings (BFSRs) and the corresponding baseline credit assessments (BCAs) -- of these subsidiaries were not affected by this rating action.

For a full list of affected ratings, please refer to the end of this press release.

RATINGS RATIONALE

The downgrade of the Russian parents' long-term deposit, debt and issuer ratings has prompted a similar downgrade of the subsidiaries' supported ratings, driven by the reduced capacity of the parent's to provide support. At the same time the rating agency notes the demonstrated willingness of these banks to provide assistance to their domestic and international subsidiaries in the context of ongoing volatility.

--- VTB Group's subsidiaries

The supported ratings of the domestic and international subsidiaries of VTB Group incorporate Moody's assessment of the very high probability of support from the parent, whose ratings, in turn, benefit from Moody's assessment of systemic support being provided in the event of need. Moody's believes that any systemic support from the Russian government in the event of need (directly or indirectly through VTB) will benefit the group's subsidiaries given (1) the government's majority ownership of VTB Group; and (2) the strong track record of this support being extended to the group and its subsidiaries from the Russian government and the Central Bank of Russia (CBR).

- VTB Bank (Austria) AG

Moody's downgraded VTB Bank (Austria) AG's supported long-term deposit ratings to Ba1 from Baa3, with a negative outlook. The negative outlook on the supported rating is aligned with the outlook on the support provider's rating.

- VTB Bank (Deutschland) AG

Moody's affirmed VTB Bank (Deutschland) AG's Ba1 supported long-term deposit ratings, and the outlook on this rating was changed to negative from stable. The outlook is now aligned with the outlook on the parent's long-term ratings.

- VTB Capital Plc

Moody's downgraded VTB Capital plc's supported long-term ratings to Ba1 from Baa3 with a negative outlook. The negative outlook on the supported rating is aligned with the outlook on the support provider's rating.

- VTB24

Moody's downgraded VTB24's long-term deposit and LC Senior secured ratings to Baa3 from Baa2 with a negative outlook. The negative outlook on the supported rating is aligned with the outlook of the support provider's rating.

- VTB Bank (Armenia)

Moody's downgraded VTB Bank Armenia's long-term local currency deposit rating to Ba2 from Ba1 with a stable outlook. The current outlook reflects the fact that the bank's supported rating is not sensitive to one notch of downgrade in the support provider's ratings.

- Bank of Moscow

Moody's affirmed Bank of Moscow's Ba1 supported long-term deposit ratings, Ba1 senior unsecured bond ratings and Ba3 subordinate debt rating. Concurrently, the outlook was changed to negative from stable, and the outlook is now aligned with the outlook on the parent's long-term ratings.

- SB Sberbank JSC -- subsidiary of Sberbank

Moody's changed outlook on SB Sberbank's long-term foreign and local-currency deposit ratings to negative from stable. The outlook is now aligned with the outlook on the parent's long-term ratings.

- SME Bank -- subsidiary of Vnesheconombank

The deposit and debt ratings of SME Bank incorporate Moody's assessment of the very high probability of support being provided by the parent in the event of need, whose ratings, in turn, benefit from Moody's assessment of systemic support. Moody's believes that any systemic support from the Russian government in the event of need (directly or indirectly through Vnesheconombank) will benefit SME Bank given that (1) SME Bank is a fully owned subsidiary of Vnesheconombank; (2) SME Bank is utilised as a major government conduit to support the country's small and medium-sized enterprises; and (3) there is a track record of such support being extended to SME Bank from the Russian government and Vnesheconombank.

Moody's downgraded SME Bank's supported long-term deposit and debt ratings to Baa3 from Baa2 with a negative outlook. The outlook on the supported rating is now aligned with the outlook on the support provider's rating.

WHAT COULD MOVE THE RATINGS UP/DOWN

Moody's considers that upward pressure on the long-term ratings of these subsidiaries is unlikely given the negative outlook on the parents' ratings. The supported ratings of these subsidiaries would be negatively affected if the ratings of their respective parents were downgraded.

The subsidiaries' standalone credit profiles -- as expressed by their BFSRs and BCAs -- could come under pressure in the event of any further deterioration in their financial fundamentals and risk-absorption capacity, given the challenging domestic operating environment, as indicated by the negative outlooks on most of these banks' BFSRs.

LIST OF AFFECTED RATINGS

The following ratings have been downgraded and placed on negative outlook:

-SME Bank's LC Senior unsecured and LC/FC deposit ratings to Baa3;

-VTB24's LC Senior secured and LC/FC deposit ratings to Baa3;

-VTB Bank (Austria) AG's LC/FC bank deposit ratings to Ba1;

-VTB Capital plc's LC/FC bank deposit ratings to Ba1;

The following ratings have been downgraded and placed on stable outlook:

-VTB Bank (Armenia)'s LC bank deposits rating to Ba2;

The following ratings have been affirmed and placed on negative outlook:

-VTB Bank (Deutschland) AG's LC/FC bank deposit ratings at Ba1;

-Bank of Moscow's LC/FC Senior unsecured and LC/FC bank deposits at Ba1; FC Senior Unsecured MTN at (P)Ba1; FC Subordiate rating at Ba3;

-Kuznetski Capital S.A.'s FC Backed subordinate rating at Ba3;

-SB Sberbank JSC's LC/FC bank deposit ratings at Ba2;

The following adjusted bca's were affected:

-SME Bank's adjusted BCA was changed to baa3;

-VTB24's adjusted BCA was changed to baa3;

-VTB Bank (Austria) AG's adjusted bca was changed to ba1;

-VTB Capital plc's adjusted bca was changed to ba1;

-VTB Bank (Armenia)'s adjusted bca was changed to ba2;

The following short-term ratings have been downgraded:

-SME Bank's FC short-term deposit rating to Prime-3;

-VTB24's LC/FC short-term deposit ratings to Prime-3;

-VTB Bank (Austria) AG's LC/FC short-term deposit ratings to Not Prime;

-VTB Capital plc's LC/FC short-term deposit ratings to Not Prime;

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Global Banks published in July 2014. Please see the Credit Policy 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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 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 analyst and the Moody's legal entity that has issued the ratings.

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.

Irakli Pipia
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Yves J Lemay
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454

Moody's takes rating actions on subsidiaries of three Russian financial institutions
No Related Data.
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