December 16, 2005 | Cbonds
|MOODY'S ASSIGNS B2/NP/E+ RATINGS TO URALVNESHTORGBANK (RUSSIA); OUTLOOK POSITIVE FOR DEPOSIT RATING, STABLE FOR FSR; MOODY'S INTERFAX ASSIGNS A3.ru NATIONAL SCALE RATING |
Moody's Investors Service has assigned the following global scale ratings to Uralvneshtorgbank ("UVTB"): B2 long-term and Not-Prime short-term foreign currency deposit ratings and an E+ (E plus) Financial Strength Rating (FSR). The outlook is positive for the B2 rating and stable for the E+ rating. At the same time, Moody's Interfax Rating Agency has assigned an A3.ru long-term national scale rating (NSR) to UVTB. Moscow-based Moody's Interfax is majority-owned by Moody's, a leading global rating agency.
According to Moody's and Moody's Interfax ("Moody's"), the B2/NP/E+ global scale ratings reflect UVTB's global default and loss expectation, while the A3.ru national scale rating reflects the standing of the bank's credit quality relative to its domestic peers.
The ratings reflect UVTB's position as the third largest bank by assets in Russia's Sverdlovsk region and the sixth largest bank in the Urals Federal District and its fairly strong positioning in its home market -- especially in the industrially developed Sverdlovsk and Chelyabinsk regions -- with ambitions to entrench its positions in the other large Urals regions. However, as is the case in many Russian regions, the state-owned Sberbank (Baa2/Prime-2/D-, stable) is by far the largest player in this region and the largest local banks -- including UVTB -- still enjoy relatively modest single-digit market shares, although these are gradually rising for some institutions.
Nonetheless, in Moody's view, UVTB has above-average potential to strengthen its market shares as it is growing more rapidly than most of its peers on all fronts and is perhaps the most active provider of consumer loans -- in the form of unsecured personal instalment loans -- in the regions in which it has a presence. However, the bank faces tougher competition than, for example, Novosibirsk-based Sibacadembank (B1/NP/E+, stable), which is affiliated with UVTB through its major shareholder (Mr. Igor Kim), giving rise to a heightened execution risk for its strategy.
UVTB follows a universal banking model and is developing both retail and corporate business lines with a strong emphasis on segments such as personal and SME lending, various retail deposit products and money transfer business, where significant scope for growth exists. In addition, Moody's notes that the potential business combination with Sibacadembank (which would give rise to consolidation of financial statements according to IFRS) is likely to benefit UVTB and is one of the major reasons for the positive outlook on its deposit rating.
Moody's said that the B2/NP foreign currency deposit ratings reflect the low predictability of support from the bank's principal shareholders -- three individuals who acquired control of the bank in spring 2004, one of whom controls about 46% of the bank's shares. Although such support is possible, Moody's notes that its predictability is relatively low.
According to Moody's, the bank's FSR of E+ incorporates (i) the bank's clear-cut strategy executed by the experienced management team; (ii) the strengthening franchise and growing profitability following the ownership change; (iii) the currently robust asset quality and improving granularity of the loan portfolio; (iv) moderate related-party exposure, (v) improving profitability as the bank expands the share of higher-yield consumer lending and attains greater economies of scale; and (vi) a satisfactory liquidity position.
However, Moody's explains that this rating is constrained by (i) the bank's relatively short track record in its present format; (ii) the natural concentration of business within the regional boundaries, which renders the bank vulnerable to the health of the local economy; (iii) certain large single-party concentrations still present in the corporate loan book; (iv) earnings volatility stemming from the market risk exposure; (v) the significant reliance on relatively expensive retail deposit funding; (vi) the competitive threats from existing and new rivals; and (vii) the potential difficulties associated with the bank's operating environment.
Uralvneshtorgbank is headquartered in Yekaterinburg, the administrative centre of the industrially developed Sverdlovsk region in the Russian Federation, and reported total assets of US$427 million in accordance with IFRS (unaudited) as of 30 September 2005.
Company: Ural Bank of Foreign Trade
|Full company name||Uralvneshtorgbank|
|Country of risk||Russia|
|Country of registration||Russia|