Wednesday, September 24, 2008

S&P Downgrades Russian Banks

After taking Russia’s credit rating down a notch at the end of last week, the Standard & Poor’s agency has lowered its long-term ratings outlook for seven companies in the financial sector. S&P announced yesterday that the long-term outlooks of six banks – Soyuz, Petrokommerts, Rosbank, Transcreditbank, Rusfinanbank and Surgutneftegazbank – and the National Factoring Co. have been downgraded from positive to stable. Now no Russian banks have a positive S&P long-term outlook rating.
S&P analyst Evgeny Tarzimanov explained that “Our actions were motivated by the crisis in trust and liquidity spreading through the Russian banking sector. It will be harder now for banks to show the same level of profit and ensure the same level of business growth. In addition, conditions for the attraction of new funding and the refinancing of old debts have deteriorated.”Soyuz now has a rating of ruA- and the National Factoring Co. ruBBB. Petrokommerts, Rosbank and Transcreditbank are among the banks that the Finance Ministry has been placing budget funds with. Analysts note that it is good for the banks that only their outlooks, and not their ratings themselves, have been changed. They predict that that move is also on its way. Moody’s agency has already downgraded the long-term deposit ratings of Svyaz Bank and KIT Finance for national and foreign currency three levels to Caa2. KIT Finance is the only financial institution whose difficulties have been made public so far. Soyuz Bank’s problems were indirectly confirmed last week when its main shareholder, Basic Element, transferred 5.7 billion rubles to it. S&P also placed Renaissance Capital Holdings on its list of banks for possible downgrading to a negative rating yesterday. Fifty percent of the shares in that bank were recently acquired by Mikhail Prokhorov’s ONEXIM Group at just above nominal cost. Analysts see that deal as a sign of hardships at that bank as well.


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