BELARUS NEWS AND ANALYSIS
DATE:
07/07/2009
Fitch Revises Four Belarusian State-Owned Banks' Outlooks to Negative
Fitch Ratings-London/Moscow-7 July 2009: Fitch Ratings has today revised the Outlooks of four Belarusian state-owned banks, Belarusbank, Belagroprombank, BPS-Bank and Belinvestbank, to Negative from Stable. The agency has simultaneously affirmed all the banks' ratings. A full rating breakdown is provided at the end of this comment.
The Negative Outlooks reflect the weakening ability of the Belarusian authorities to support the banking system, in case of need. They also take into account the potential for a marked deterioration in the banks' stand-alone financial profiles in the event of a sharp economic downturn, reduced state support for the corporate sector and/or a further marked depreciation of the BYR.
While the Belarusian economy's performance has been relatively robust in a regional and global context so far, growing 1.1% in Q109 y-o-y, the agency has concerns about the sustainability of this growth given the role of state-directed lending in Belarus's financial system and the reported accumulation of inventory at some enterprises. Fitch also notes the ongoing erosion of Belarus's official international reserves, and their reduced coverage of Belarusian banks' foreign currency liabilities, amid uncertain prospects for the financing of the country's external deficit in 2009. The deterioration in Belarus's sovereign financial position could reduce the authorities' ability to support state-owned banks, in case of need, while weaker external finances could lead to renewed downward pressure on the BYR. This in turn could spark further depositor flight into foreign currency savings and/or from the banking system, which would damage financial stability and increase the risk of heightened exchange rate and economic weakness. At the same time, financial support received from the International Monetary Fund and Russia, and the potential for further support in the future, remains a significant mitigating factor for Belarus's sovereign and external finances, and therefore also for the credit profiles of the state-owned banks.
The reported asset quality of state-owned banks remains good, with loans overdue for more than 90 days representing less than 1% of gross loans at end-May 2009 for each of the four banks referenced in this comment. However, Fitch notes that the ability of certain large Belarusian companies to service their bank debt increasingly depends on state support. The retail banking segment is performing relatively well, supported by the low level of unemployment and a moderate level of household debt, but would also be significantly negatively affected in case of an economic downturn.
The capitalisation of state-owned banks was supported by BYR3.1tr (then USD1.4bn) of new equity in December 2008, mostly received in the form of government bonds. However, new capital is being consumed by continuing loan portfolio growth, especially at the two largest banks, Belarusbank and Belagroprombank, and Fitch considers loss absorption capacity at the four state-owned banks to be only moderate relative to the credit risks they may face in case of a further deterioration in the macroeconomic environment. The banks' liquidity positions are dependent on the stability of customer deposits and, to varying degrees, the ongoing provision of government funding to finance loan growth.
Fitch will shortly publish separate commentaries on each of the four banks referenced in this comment.
The individual rating actions are as follows:
Belarusbank
Long-term Issuer Default Rating (IDR): affirmed at 'B-'; Outlook revised to Negative from Stable
Short-term IDR: affirmed at 'B'
Support Rating: affirmed at '5'
Individual Rating: affirmed at 'D/E'
Support Rating Floor: affirmed at 'B-'
Belagroprombank
Long-term IDR: affirmed at 'B-'; Outlook revised to Negative from Stable
Short-term IDR: affirmed at 'B'
Support Rating: affirmed at '5'
Individual Rating: affirmed at 'D/E'
Support Rating Floor: affirmed at 'B-'
BPS-Bank
Long-term IDR: affirmed at 'B-'; Outlook revised to Negative from Stable
Short-term IDR: affirmed at 'B'
Support Rating: affirmed at '5'
Individual Rating: affirmed at 'D/E'
Support Rating Floor: affirmed at 'B-'
Belinvestbank
Long-term IDR: affirmed at 'B-'; Outlook revised to Negative from Stable
Short-term IDR: affirmed at 'B'
Support Rating: affirmed at '5'
Individual Rating: affirmed at 'D/E'
Support Rating Floor: affirmed at 'B-'
Source:
http://www.cbonds.info/all/eng/news/index.phtml/params/id/437451
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