International rating agency Moody's Investors Service has assigned the following ratings to Sovcombank: long-term local currency and foreign currency deposit ratings of B1, short-term rating of Not Prime, BCA and adjusted BCA of b1, long-term CRA of Ba3(cr) and short-term CRA of NP(cr). The stable outlook was set for long-term deposit ratings, the agency specified in a press release.
As the agency noted, the long-term deposit ratings at B1 and BCA of b1 reflect the bank's strong potential of loss absorption (high rates of return before provisions, a solid capital cushion and sufficient provisions provide a substantial safety net that will allow the bank to withstand any possible deterioration in asset quality), first asset quality indicators that are bolstered by broad diversification of the portfolio and the bank's focus on major corporate customers with a solid credit portfolio and on sub-sovereign borrowers, adequate positions of funds and liquidity, but, in the meantime, the bank's exposure to the market risk.
Moody's also upgraded Baltinvestbank's ratings, namely long-term local currency and foreign currency deposit ratings from Caa3 to Caa1, with the rating outlook cut from positive to stable, BCA and adjusted BCA from ca to caa2 and caa1, respectively, and long-term CRA from Caa2(cr) to B3(cr).
The bank's short-term deposit ratings were affirmed at Not Prime, and short-term CRA at Not Prime(cr).
The bank's BCA and adjusted BCA were upgraded as the bank obtained financial support from the Deposit Insurance Agency to solve problems related to asset quality, capital and liquidity, and also with an ownership shakeup (Absolut Bank purchased over 99.99% of Baltinvestbank as part of the rehabilitation program) and its integration into Absolut Bank Group.
The stable outlook for the deposit ratings Moody's explains by expectations of a gradual recovery in Baltinvestbank's internal possibilities to generate profit as a result of implementing its new development strategy with a focus on small and mid-sized businesses, and retail banking operations (in particular, the bank said it resumed auto loans), to make a better use of the network of branches and cross sales of Absolut Bank products.
Moreover, Moody's affirmed Bank Vozrozhdenie's long-term local currency and foreign currency deposit ratings at B1, changing the outlook from negative to stable. The bank's BCA and adjusted BCA were affirmed at b1, short-term deposit ratings at Not Prime, long-term and short-term CRA at Ba3(cr) and Not Prime(cr), respectively.
The affirmation of long-term deposit ratings at B1 with a stable outlook reflects the bank's credit portfolio, which has stabilized in recent months, its recovering profitability and the agency's expectations that the bank's credit expense will fall over the next 12-18 months. The agency specified that stabilization with bad debt, rising net interest income and stringent cost control helped Bank Vozrozhdenie improve net income to the annual average of 1.3% over the past two reporting quarters.
