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Fitch Affirms Russia’s MBRD at ‘B+’; Outlook Stable

February 26, 2008 | Cbonds

Fitch Ratings-London/Moscow-22 February 2008: Fitch Ratings has today affirmed the ratings of Russia's Moscow Bank for Reconstruction and Development (MBRD) at Long-term Issuer Default (IDR) 'B+' , Short-term IDR 'B', Individual 'D/E', Support '4' and National Long-term 'A-(A minus) (rus)'. The Outlooks on the Long-term IDR and National Long-term rating are Stable.

MBRD’s IDRs, Support and National Long-term ratings are driven by potential support, in case of need, from its main shareholder, Sistema JSFC (Sistema, rated ‘BB-(BB minus)’, Outlook Stable) which holds an approximately 99% stake. The future direction of the bank's ratings is likely to depend on Sistema's Long-term IDR and Fitch's view of the parent's propensity to support MBRD.

The Individual rating reflects risks associated with very rapid loan growth, especially in the retail segment, the very high level of related-party funding and weak capitalisation. However, it also considers MBRD’s improved profitability, reasonable asset quality to date, strengthened third-party franchise on the assets side of the balance sheet and reduced related party lending.

An upgrade of the Individual rating could result from a reduction in dependence on funding from Sistema and its subsidiaries, improved capitalisation and further improvement of profitability. Failure to manage the risks of rapid growth, leading to deterioration in asset quality and further deterioration of capitalisation could result in rating downside.

MBRD is a medium-sized Russian bank and has been operating since 1993. The bank’s core focus has been on servicing the needs of Sistema. The bank is developing third-party business, rapidly diversifying into the retail segment and expanding into the regions, both organically and by acquisitions. At end-9M07 MBRD had 155 outlets across 31 Russian regions.

Company: MTS Bank

Full company namePublic Joint-Stock Company "MTS Bank"
Country of riskRussia
Country of registrationRussia
IndustryBanks

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