BELARUS NEWS AND ANALYSIS
DATE:
07/07/2009
Fitch Comments on Belinvestbank Outlook Change
Fitch Ratings-London/Moscow-07 July 2009: Fitch Ratings' Outlook revision of Belarus-based Belinvestbank's (BIB) B- Long-term Issue Default Rating (IDR) to Negative from Stable formed part of a more general review of Belarusian state banks. This review took into account the heightened risks stemming form the weaker outlook for Belarusian sovereign finances and the Belarusian economy (for details see the commentary dated 7 July 2009 "Fitch Revises Four Belarusian State-Owned Banks' Outlooks to Negative"). A full list of BIB's ratings is provided at the end of this release.
BIB's Long-term and Short-term IDRs are underpinned by potential support from the Belarusian authorities, given its state ownership, its policy role in supporting the manufacturing sector and significant systemic importance. The Negative Outlook on BIB, as for three other state-owned banks, reflects the weakening ability of the Belarusian authorities to support the banking system, in case of need.
BIB's Individual Rating of 'D/E' reflects the risks arising from the bank's considerable share of foreign currency (FX) loans and relatively high borrower concentrations, as well as the bank's moderate loss absorption capacity. However, it also considers the currently reasonable liquidity position. Fitch notes the potential for a marked deterioration in the BIB's stand-alone financial profile in case of a sharp economic downturn, reduced state support for the manufacturing sector and/or a further marked depreciation of the Belarusian Ruble (BYR).
Tier 1 and total regulatory capital ratios were 11.3% and 15.6%, respectively, at end-May 2009. Fitch's estimates that at end-May 2009 the bank could have raised the ratio of impairment reserves/loans to 12% (from the current 1.8%), before capital ratios would have fallen to the regulatory minimum, absent any further BYR devaluation. Fitch notes that BIB's loss absorption capacity would be further reduced in case of significant BYR devaluation given the bank's high share of FX loans (38% at end-May 2009).
Reported non-performing loans (NPLs -loans overdue by more than 90 days) made up a still-low 0.5% of the loan book at end-May 2009 (0.3% at end-2008). Although NPLs are fully covered by reserves, the considerable share of FX loans, significant borrower concentrations (the largest 20 borrowers accounted for 26% of the loan book at end-Q109) and the high dependence of asset quality on the health of the state-owned corporate sector are viewed as weaknesses in the current environment. The liquidity position is currently reasonable with cash, securities and interbank placements accounting for 21% of BIB's assets at end- May 2009.
BIB is the fifth largest bank in Belarus, primarily focused on serving corporates and participating in state lending programmes. At end-Q109, the bank held 6.8% of system assets, a 5.5% market share in retail deposits and a 6.2% market share in corporate lending. The largest shareholders of BIB are the state property committee (86.2% of equity), and the National Bank of the Republic of Belarus (6.5%).
Rating actions:-Long-term IDR: affirmed at 'B-' ; Outlook changed 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-' (B minus)
Contacts: James Watson, Moscow Tel.: +7 495 956 9901; Svetlana Petrischeva Tel: +44 207 682 71 31.
Media Relations: Marina Moshkina, Moscow, Tel: +7 495 956 9901, Email: marina.moshkina@fitchratings.com; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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