×
Texting is available for authorized users.
Please register or log in at the website.
×
Your request for online training has been sent. Cbonds managers will be in touch with you shortly. Thank you!

Fitch Affirms Russian Bank VTB’s and Four Subsidiaries’ IDRs; Downgrades VTB Europe’s Individual Rating to ‘C/D’

January 29, 2008 | Сbonds

Fitch Ratings-London/Moscow-29 January 2008: Fitch Ratings has today affirmed the Long- and Short-term Issuer Default ratings (IDRs) of Russian JSC VTB Bank (VTB) and four of its subsidiaries, Bank VTB 24 CJSC (VTB24), VTB Bank (Europe) Plc (VTBE), VTB Bank (France) SA (VTBF) and Russian Commercial Bank (Cyprus) Ltd. (RCBC). Fitch has also affirmed VTB’s and VTBF’s Individual ratings at ‘C/D’ and assigned VTB24 an Individual rating of ‘D’. At the same time, Fitch has downgraded VTBE’s Individual rating to ‘C/D’ from ‘C’. A full list of rating actions is detailed below.

The affirmation of VTB's IDRs, as well as the Stable Outlook for its Long-term IDR, reflects Fitch’s view of the likelihood of support for VTB from the Russian state if needed. VTB’s IDRs will continue to depend on its status, ownership and importance to the Russian banking system.

VTB’s Individual rating reflects risks associated with rapid asset growth and considerable equity investments, which add volatility to earnings. Operational and integration risks relating to its large number of geographically spread subsidiaries have also been considered. However, Fitch also acknowledges the bank’s growing franchise, currently adequate asset quality, satisfactory liquidity and improved capitalisation following the IPO in May 2007. Fitch does not expect the Individual rating to change in the near future. However, reduced integration risks, decreased loan concentrations and greater transparency surrounding the largest credit exposures, subject to it being able to address Fitch’s concerns about the bank’s potential involvement in directed lending, would be positive for the bank’s credit profile.

VTB24 is the retail / small business arm of the VTB group. VTB24’s IDRs reflect Fitch’s view of the high probability of support being forthcoming from VTB if required. VTB group owns 100% of VTB24’s shares.

VTB24’s Individual rating reflects its sound capital position and reasonable asset quality to date, albeit the loan portfolio is still young and unseasoned. Earnings performance, however, is modest, being affected by expenses related to the branch network expansion.

VTBE’s IDRs and Support rating reflect Fitch’s view of the high probability of support, in case of need, from VTB. The VTB group currently owns a 92% stake in VTBE.

The downgrade of VTBE’s Individual rating reflects its weakened earnings capacity due to significant upfront costs associated with the development of investment banking and Fitch’s concerns about a high employee turnover that heightens operating risks and may further depress the bank’s already modest profitability. At the same time, Fitch acknowledges that there is potential for a solid investment banking business within VTB, for which VTBE is to become the main distribution platform, although a lot will depend on VTB/VTBE’s ability to hire qualified personnel. More generally, the Individual rating considers the bank’s exposure to Russia, reliance on wholesale funding and volatile trading operations, which were a source of losses in 2007. However, the Individual rating also takes into account VTBE’s adequate capitalisation, UK domicile and thus strong regulation, adequate liquidity and well-controlled credit risk.

VTBF’s IDRs and Support rating reflect Fitch’s view of the high probability of support from VTB, in case of need. VTB group currently owns an 80% stake in VTBF. Fitch notes that the sale of the stake in VTBF by VTBE to VTB Bank (Austria) AG should not affect VTBF’s IDRs.

The Individual rating reflects VTBF’s strong capitalisation; reasonable liquidity, underpinned by funding from VTB group banks; and the strong French regulatory environment. However, it also considers VTBF’s relatively undiversified funding base, high borrower concentration levels, exposure to emerging market (specifically Russian) risks and modest, albeit improving, core profitability. The latter, however, may be artificially enhanced by VTB, which regulates pricing on transactions it originates, to realise VTBF’s significant tax benefits.

RCBC’s ratings are based on potential support from its 100% parent, VTB, and factor in the guarantee provided by VTB and the very high level of integration of RCBC with VTB.

VTB:
Long-term IDR: affirmed at 'BBB+'; Outlook Stable
Long-term local currency IDR: affirmed at 'BBB+'; Outlook Stable
Short-term IDR: affirmed at 'F2'
Support rating: affirmed at '2'
Support Rating Floor: affirmed at ‘BBB+’
Individual rating: affirmed at 'C/D'
National Long-term rating: affirmed at ‘AAA’(rus); Outlook Stable

VTB24:
Long-term IDR: affirmed at 'BBB+'; Outlook Stable
Short-term IDR: affirmed at 'F2'
Support rating: affirmed at '2'
National Long-term rating: affirmed at ‘AAA’(rus); Outlook Stable
Individual rating: assigned at 'D'

VTBE:
Long-term IDR: affirmed at 'BBB'; Outlook Stable
Short-term IDR: affirmed at 'F3'
Support rating: affirmed at '2'
Individual rating: downgraded to 'C/D' from ‘C’

VTBF:
Long-term IDR: affirmed at 'BBB'; Outlook Stable
Short-term IDR: affirmed at 'F3'
Support rating: affirmed at '2'
Individual rating: affirmed at ‘C/D’

RCBC:
Long-term IDR: affirmed at 'BBB'; Outlook Stable
Short-term IDR: affirmed at 'F3'
Support rating: affirmed at '2'

Company: VTB

Full company nameBank VTB (PJSC)
Country of riskRussia
Country of registrationRussia
IndustryBanks

Share:

Similar news:
minimizeexpand
Cbonds is a global fixed income data platform
  • Cbonds is a global data platform on bond market
  • Coverage: more than 170 countries and 250,000 domestic and international bonds
  • Various ways to get data: descriptive data and bond prices - website, xls add-in, mobile app
  • Analytical functionality: bond market screener, Watchlist, market maps and other tools
×