Fitch: Belagroprombank Outlook Change

Fitch Ratings-London/Moscow-07 July 2009: Fitch Ratings says that the revision of the Outlook on Belarus-based Belagroprombank (BAPB) to Negative from Stable, announced by the agency earlier today, formed part of a more general review of Belarusian state-owned banks. The rating action took into account the heightened risks stemming form the weaker outlook for Belarusian sovereign finances and the Belarusian economy (for further details, please see the 7 July 2009 comment entitled "Fitch Revises Four Belarusian State-Owned Banks' Outlooks to Negative" , which is available on the agency's public website, A full breakdown of BAPB's ratings is provided at the end of this comment.

BAPB's Long- and Short-term IDRs are underpinned by potential support from the Belarusian authorities, given its state ownership, its policy role in supporting the agricultural sector and significant systemic importance. The Negative Outlook on BAPB, as for three other state-owned banks, reflects the weakening ability of the Belarusian authorities to support the banking system, in case of need.

BAPB's Individual Rating of 'D/E' reflects the risks associated with the still strong growth of the loan portfolio in a challenging operating environment, government influence on BAPB's operations, the high single industry loan concentration and a relatively weak liquidity profile. It also considers BAPB's capital ratios, which are materially higher than those of its peers, low individual borrower concentrations and its modest level of foreign currency (FX) lending. Fitch notes the potential for a marked deterioration in BAPB's stand- alone financial profile in the event of a sharp economic downturn and/or reduced state support for the agricultural sector.

Exposure to agriculture amounted to 55% of BAPB's total loans at end-May 2009, with related industries accounting for another quarter of the loan book. Reported asset quality benefits from government support to the agricultural sector - loans overdue for 30 days and above amounted to only 0.7% of gross loans at end-May 2009 and were 3.7x covered by regulatory impairment reserves. FX lending was only 16% of gross loans at end-May 2009, while exposure to the largest 20 borrowers was also reasonable (by CIS standards) at 21% of total loans and 74% of equity at end-May 2009. However, fast loan book growth (17% in 5M09; 87% in 2008) in a weakening economic environment may expose BAPB to sharp asset quality deterioration, in particular should the government scale back its support to the agricultural sector.

Tier 1 and total regulatory capital ratios (23.4% and 27.2%, respectively at end-May 2009) provide for significant loss absorption capacity which is, however, being consumed by fast growth. Fitch estimates that at end-May 2009, BAPB could have raised its level of regulatory reserves to an estimated one quarter of the loan book (from the actual level of 2.5% at end-May 2009) before its capital ratio would have fallen to the regulatory minimum, absent any further Belarussian Ruble (BYR) devaluation. Fitch also notes that further BYR devaluation would not have the same effect on BAPB's loss absorption capacity as for other state-owned banks because of the lower share of FX loans in BAPB's portfolio.

BAPB's liquidity profile continues to suffer from maturity mismatches of assets and liabilities, but has been consistently supported by the Belarusian authorities, with the share of National Bank of the Republic of Belarus (NBRB) and central government funding standing at 55% of liabilities at end-Q109.

BAPB is 99.7% owned by the state and focuses on lending to the agricultural sector under government programmes. It is the second-largest bank in Belarus with a market share in total banking system assets of about 24% at end-May 2009.

The rating actions announced by Fitch earlier today were as follows: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-'

Contacts: Svetlana Petrischeva Tel: +44 (0) 20 7682 71 31; James Watson, Moscow Tel: +7 495 956 9901.

Media Relations: Marina Moshkina, Moscow, Tel: +7 495 956 9901, Email:; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email:

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, ''. 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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