S&P: Belarusian Belagroprombank Rated 'B+/B' On Very High Likelihood Of Extraordinary Government Support; Outlook Negative

MOSCOW (Standard & Poor's) May 28, 2010--Standard & Poor's Ratings Services said today that it had assigned its 'B+' long-term and 'B' short-term local and foreign currency counterparty credit ratings to Belagroprombank JSC, based in the Republic of Belarus (foreign currency B+/Negative/B, local currency BB/Negative/B). The outlook is negative.

"The ratings on Belagroprombank reflect the macroeconomic imbalances and high-risk operating environment for banks based in Belarus, as well as the bank's high dependence on state deposits, limited funding and lending diversification, and its plans for rapid asset growth during economic recession," said Standard & Poor's credit analyst Sergey Voronenko.

These negative factors are partly mitigated by a very high likelihood of extraordinary government support, the bank's strong domestic market position, adequate capitalization, and limited wholesale market funding.

Belagroprombank is the second-largest bank in Belarus, and specializes in agriculture.

According to our methodology, we classify the bank as a government-related entity and factor into our ratings a "very high" likelihood of timely and sufficient extraordinary government support for Belagroprombank, based on our assessment of the bank's:

 "Very important" role for the local economy as the largest lender to the strategic agricultural sector, employing about one-third of Belarus' working population and representing 8% of its GDP in 2009; and

 "Very strong" link with the government, given its full ownership and strong track record of support to Belagroprombank.

We incorporate one notch of uplift above the stand-alone credit profile into the long-term ratings on the bank to reflect this expected support.

"The negative outlook mirrors that on Belarus and reflects low levels of external liquidity owing to very high current account deficits, which in turn represent risks for the predominantly state-owned Belarusian banking sector and economy," said Mr. Voronenko.

Further rating actions on the bank could result from changes to the sovereign foreign currency ratings and transfer and convertibility (T&C) assessment (see "Criteria For Determining Transfer And Convertibility Assessments", published May 18, 2009, on RatingsDirect), but not necessarily, as they are not automatically linked.

Should we lower the sovereign foreign currency ratings and T&C assessment, it would likely trigger a similar rating action on the bank. Moreover, if we see the likelihood of timely and sufficient extraordinary government support reducing, it might also lead us to downgrade the bank, if the bank's stand-alone credit profile had not improved.

The possibility of ratings upside in the near-term is low and would be possible only if we raised the sovereign foreign currency ratings and T&C assessment.


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