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S&P: Russian International Industrial Bank L-T Raised To 'BB-'; S-T Affirmed At 'B'; Outlook Stable

February 28, 2008 | Cbonds

MOSCOW (Standard & Poor's) Feb. 28, 2008--Standard & Poor's Ratings Services said today that it raised its long-term counterparty credit rating on Russia-based International Industrial Bank (IIB; or Mezhprombank in Russian) to 'BB-' from 'B+'. At the same time, the short-term counterparty credit rating was affirmed at 'B'. The outlook is stable.

"The upgrade reflects the bank's progress in building its lending and asset base while maintaining financial performance, liquidity, and capitalization at healthy levels," said Standard & Poor's credit analyst Elena Romanova. "It also reflects IIB's reduction of concentrations in lending, funding, and related parties."

The ratings are constrained by the bank's weak funding structure and strategy, characterized by still-high single-name concentrations and lack of stable, long-term sources. An unclear diversification strategy, particularly in retail banking; underdeveloped risk management; and vulnerabilities associated with Russia's overall risky operating environment also constrain the ratings.

These negative factors are somewhat mitigated by IIB's historically strong capitalization, ability to maintain sufficient liquidity and decent growth under adverse market conditions, healthy revenue structure, and efficient cost management.

IIB ranks among Russia's top 20 banks by assets and top 10 by capital, with Russian ruble (RUR) 133 billion ($5.3 billion) in assets at Dec. 31, 2007.

"We expect IIB to benefit in the medium-term from its expanding geographic presence, business diversification, and franchise," said Ms. Romanova. "The bank will also face growing credit, funding, and operational risks as a result of this strategy, however."

The ratings could be raised if the bank shows good progress in meeting its strategic aims and improves its funding structure toward more long-term and stable sources, while maintaining financial performance and capitalization at adequate levels.

The ratings could come under pressure, however, if the bank's financial or commercial profiles or funding structure deteriorate significantly, or concentrations on the asset or liability sides post a visible increase, or capital comes under severe pressure.

Company: International Industrial Bank

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Country of riskRussia
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