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Fitch Upgrades Russia’s Housing Finance Bank to ‘B-’; Outlook Stable

February 01, 2008 | Сbonds

Fitch Ratings-London/Moscow- 1 February 2008: Fitch Ratings has today upgraded the ratings of Russia’s Housing Finance Bank (HFB) to Long-term Issuer Default (IDR) 'B-' (B minus) from ‘CCC’, Short-term IDR 'B' from ‘C’ and National Long-term ‘BB-(BB minus)(rus)’ from ‘B+(rus)’. Fitch has also affirmed HFB’s other ratings at Individual ‘D/E’, Support ‘5’ and Support Rating Floor ‘No Floor’. The Outlooks for the Long-term IDR and National Long-term rating remain Stable.

The upgrade follows the recent assignment of a ‘BB-’ (BB minus) Long-term IDR to Moscow-based residential developer OJSC PIK Group (PIK), with whom HFB is affiliated. HFB’s operations are highly dependent on those of PIK, to whom it has substantial contingent credit risk exposure and on whom it relies to a significant degree for funding and liquidity. More than half of HFB’s loan portfolio consists of pre-mortgage loans, granted for acquisition of flats being constructed by PIK. HFB’s upgrade also reflects a change in the bank’s asset structure, with lending now focused primarily on pre-mortgage and mortgage loans to individuals, rather than direct related-party corporate exposures. HFB’s ratings are also supported by its low reported loan impairment to date and solid capital ratios.

At the same time, HFB’s ratings continue to be constrained by its weak independent franchise, small size and a funding base which is very short-term and highly concentrated on related parties, making liquidity potentially vulnerable. The ratings also take into account the bank’s poor overall performance, due to network expansion expenses and rising funding costs, as well as its rapid asset growth. In the medium term, these factors will continue to weigh on HFB’s profitability, which is expected to be at best moderate.

Upside potential for the ratings is currently limited, but a broadening of HFB’s franchise, diversification of funding by source and tenor and improved profitability would be positive factors for the bank’s credit profile. Downward pressure could result from a considerable worsening of asset quality as a result of a downturn in the real estate market, a major liquidity shortfall and/or material deterioration of capitalisation.

HFB is a Moscow-based bank, operating through 29 outlets (including 22 in other Russian regions), and primarily focused on home loans. HFB is jointly and wholly beneficially owned by Kirill Pisarev and Yury Zhukov, who also together control an 84% stake in PIK.

Company: Housing Finance Bank

Full company nameClosed Joint Stock Company "Housing Finance Bank"
Country of riskRussia
Country of registrationRussia


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