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Fitch Affirms Russia’s Vnesheconombank

February 07, 2008 | Cbonds

Fitch Ratings-London/Moscow-7 February 2008: Fitch Ratings has today affirmed the ratings of Russia's Vnesheconombank ("VEB") at Long-term Issuer Default (IDR) 'BBB+', Short-term IDR 'F2', Support '2' and Support Rating Floor 'BBB+'. The Outlook for the Long-term IDR is Stable.

VEB’s IDRs are equalised with those of the Russian sovereign, reflecting Fitch’s view of the extremely high propensity of the Russian authorities to provide support in case of need. This view is based on VEB’s status as a policy bank and important new role as a national development bank with the goals of promoting the competitiveness and diversification of the Russian economy.

Although VEB’s balance sheet is likely to change significantly as it evolves into its role as a development bank, it is currently highly concentrated, both in terms of loan exposures and occasional substantial equity investments. VEB has also been active during the last few years in financing the acquisitions by Russian state-owned companies of oil and gas assets; these large transactions compromise VEB’s balance sheet integrity and expose the bank to substantial credit risk. VEB’s considerable securities trading activities have also resulted in high earnings volatility, while interest income has come under pressure from higher funding costs.

The bank’s capital and liquidity profiles are strong following a RUR180bn equity injection from the state at end-2007, and VEB is currently an important supplier of liquidity to the Russian banking sector. Furthermore, reported loan impairment has been low to date, supported by favourable economic conditions.

VEB was established by the Russian State and in 2007 was assigned the role of a development bank. It continues to perform agency functions for foreign debt payments and for pension savings management, but these functions are to be transferred to other agencies.

Company: VEB

Full company nameState Development Corporation «VEB.RF»
Country of riskRussia
Country of registrationRussia


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