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Fitch Affirms Orgresbank at ‘A-’; Outlook Stable

February 01, 2008 | Cbonds

Fitch Ratings-London/Moscow-01 February 2008: Fitch Ratings has today affirmed the ratings of Russia's Orgresbank (Orgres) at Long-term Issuer Default (IDR) 'A-' (A minus), Short-term IDR 'F2', Individual 'D', Support '1' and National Long-term 'AAA (rus)'. The Outlooks on the Long-term IDR and National Long-term rating are Stable.

Orgres’s IDRs, Support and National Long-term ratings are driven by potential support from its main shareholder, Nordea Bank AB (“Nordea”, rated ‘AA-‘/’F1+’/Stable) in case of need. The Individual rating reflects risks associated with very rapid loan growth, high loan concentrations, weak diversification of the funding base and moderate target capital ratios. However, it also considers Orgres’ good asset quality to date, sound earnings performance and significant ongoing improvements in risk management following the acquisition by Nordea. Capital ratios are also currently solid following an equity injection in January 2008.

In case of need, Orges would first turn to Nordea for support. In Fitch’s view, given Nordea’s ability and propensity to provide support, there is a high probability that support would be forthcoming, if required. Further upward movement in Orgres’ Long-term IDR would require an upgrade of Russia’s Country Ceiling, while a downgrade of the Country Ceiling or Nordea’s IDR could result in a downgrade for Orgres.

Upward pressure on the Individual rating is unlikely in the near-term given the pace of growth and dependence on funding from Nordea, but a fall in loan concentration levels supported by gradual diversification of the funding base would be positives for the stand-alone credit profile. Failure to manage the risks of very rapid growth or default of some of the larger borrowers could result in downside for the Individual rating.

Orgres is a mid-sized Moscow based bank, with RUR46bn (USD1.8bn) of assets as of 30 September 2007. The bank is 75.01%-owned by Nordea, the leading financial institution in the Nordic region. After the change in ownership in Q107, the bank has focused on strengthening corporate and retail lending, as well as development of a wider range of services in such areas as investment banking, asset management, private banking and brokerage. Presently, the bank’s activities are primarily concentrated on corporate lending, the rapid growth of which has mainly been supported by low-cost, long-term funding from Nordea.

Company: Nordea Bank

Full company nameOJSC Nordea Bank
Country of riskRussia
Country of registrationRussia
IndustryBanks

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