Fitch affirmed Subsidiary Bank Sberbank of Russia (Kazakhstan) ratings and withdrawn Bank VTB (Kazakhstan) ratings at the bank initiative
24.01.14 12:02
/Fitch Ratings, Moscow/London, January 22, 14, Fitch Ratings English
translation, KASE headline/ – Fitch Ratings has affirmed Kazakhstan-based
Subsidiary Bank Sberbank of Russia OJSC’s (SBK) Issuer Default Ratings (IDR)
at ‘BBB-’ with a Stable Outlook and upgraded its Viability Rating (VR) to
‘bb-’ from ‘b+’.
Fitch has also withdrawn without affirmation Subsidiary JSC VTB Bank
(Kazakhstan)'s (VTBK) ratings, as the bank has chosen to stop participating
in the rating process. Fitch will no longer provide ratings or analytical
coverage of VTBK. A full list of rating actions is at the end of this
commentary.
KEY RATING DRIVERS - SBK'S IDRS, SUPPORT RATING, SUPPORT RATING FLOOR, DEBT
RATINGS AND NATIONAL RATING SBK's IDRs are based on the high probability of
support from its owner, Sberbank of Russia (Sberbank, BBB/Stable), if needed.
Sberbank’s propensity to support SBK would likely be high, in Fitch's view,
given the full ownership, the strategic importance of Sberbank’s expansion
in the CIS region and internationally, the moderate cost of any potential
support, significant potential reputational risks arising from a subsidiary
default, Sberbank's strong track record to date of supporting its subsidiaries,
including SBK, and the solid government relations between Russia and Kazakhstan.
The one-notch differential between Sberbank’s and SBK’s IDRs reflects the
cross-border ownership, some operational independence of the Kazakh subsidiary
and SBK’s so far limited contribution to Sberbank's operations (less than 2%
of consolidated assets), although Fitch understands that Sberbank considers
development of SBK an important part of its international expansion.
RATING SENSITIVITIES - SBK'S IDRS, SUPPORT RATING, SUPPORT RATING FLOOR, DEBT
RATINGS AND NATIONAL RATING SBK's ratings would likely be upgraded or downgraded
in case of similar rating action on the parent or if Fitch’s view of support
propensity changes.
KEY RATING DRIVERS - SBK'S VR
The upgrade of SBK's VR to ‘bb-’ from 'b+' reflects the continuing strengthening
of the bank's domestic franchise; its track record of robust performance driven
by solid margins and low funding costs. It also reflects the low level of
problem loans, albeit the recent rapid loan growth (47% in 2013) may result in
asset quality deterioration as the loan book seasons, and the ordinary benefits
of support, including reasonable capitalisation maintained through timely
capital injections by the parent.
SBK’s asset quality compares well with large Kazakh banks. At end-9M13,
reported non-performing loans (NPLs; more than 90 days overdue) were a low
2.6% and covered by provisions equal to 3.3% of the portfolio. However, Fitch
considers that some of the top 25 loans (amounting to 7% of gross loans), are
potentially risky although not NPLs. Positively, SBK's available capital buffer
and robust pre-impairment profitability (4.3% of average total assets in 9M13,
annualised) are sufficient to fully cover these exposures in a downside
scenario.
SBK reported a reasonable 12.7% regulatory total capital adequacy ratio at end-
2013, supported by a KZT7.5bn equity injection from Sberbank in December
2013 and earnings retention.
On the funding side, SBK relies on corporate deposits, which tend to be sticky,
with the loans/deposits ratio standing at 92% at end-3Q13. However, the bank
plans to gradually increase the share of market funding.
RATING SENSITIVITIES - SBK'S VR
SBK's VR has limited upgrade potential from its current level given the somewhat
unseasoned loan book and further growth challenges. A sharp deterioration in
asset quality and loss absorption capacity could lead to a downgrade.
SBK is the fifth-largest bank in Kazakhstan, focusing primarily on corporate
business. Sberbank currently owns virtually 100% of SBK.
The rating actions are as follows:
SBK
Long-Term foreign currency IDR: affirmed at 'BBB-'; Outlook Stable
Long-Term local currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-Term foreign currency IDR: affirmed at 'F3'
Viability Rating: upgraded to 'bb-' from 'b+'
Support Rating: affirmed at '2'
National Long-Term Rating: affirmed at 'AA(kaz)'; Outlook Stable
Senior unsecured debt rating: affirmed at 'BBB-(EXP)'
Senior unsecured debt National Rating: affirmed at 'AA(kaz)(EXP)'
Subordinated debt rating: affirmed at 'BB+'
Subordinated debt National Rating: affirmed at 'AA-(kaz)'
VTBK
The following ratings have been withdrawn without affirmation:
Long-Term foreign currency IDR: 'BBB-'; Negative Outlook
Short-Term foreign currency IDR: 'F3'
Long-Term local currency IDR: 'BBB-'; Negative Outlook
Support Rating: '2'
National Rating: 'AA(kaz)'; Negative Outlook
Senior unsecured debt rating: 'BBB-'
Senior unsecured debt National Rating: 'AA(kaz)'
Contacts:
Primary Analyst (SBK)
Aslan Tavitov
Associate Director
+7 495 956 7065
Fitch Ratings CIS Limited
26 Valovaya Street
Moscow 115054
Primary Analyst (VTBK)
Roman Kornev
Associate Director
+7 495 956 7016
Fitch Ratings CIS Limited
26 Valovaya Street
Moscow 115054
Secondary Analyst (SBK)
Roman Kornev
Associate Director
+7 495 956 7016
Secondary Analyst (VTBK)
Aslan Tavitov
Associate Director
+7 495 956 7065
Committee Chairperson
Alexander Danilov
Senior Director
+7 495 956 9901
Media Relations:
Julia Belskaya von Tell, Moscow,
Tel: +7 495 956 9908,
julia.belskayavontell@fitchratings.com
[2014-01-24]