Fitch Affirms BTA Bank (Belarus) at 'CCC'; off RWN

Fitch Ratings-London/Moscow- 11 November 2009: Fitch Ratings has today affirmed BTA Bank Belarus's (BTAB) Long-term Issuer Default Rating (IDR) at 'CCC', and removed it from Rating Watch Negative (RWN). A Negative Outlook has been assigned to the IDR. A full list of rating actions is provided at the end of this announcement.

The removal of the RWN reflects Fitch's view that the ongoing restructuring of the liabilities of BTAB's parent bank, BTA Kazakhstan (BTA; Long-term IDR 'RD') is unlikely to have an immediate, direct impact on the fulfilment by BTAB of its obligations. This reflects the exclusion of BTAB from the restructuring process, the bank's reduced reliance on BTA for non-equity funding, and the ongoing recapitalisation of BTAB by BTA.

BTAB has already received from BTA USD11.8m for a share capital increase and expects to receive a further USD10.9m in the form of equity or subordinated debt by end-2009 when the share issue is expected to be completed. This will allow the bank to comply with the new Belarusian regulatory requirement, effective from 1 January 2010, that banks attracting retail deposits should have minimum regulatory capital of EUR25m. The fact that BTAB operates in a different jurisdiction to BTA, and the bank's small business volumes relative to its parent, also help to reduce the risk of any direct, immediate impact on BTAB from the restructuring process.

The Negative Outlook reflects Fitch's concerns over the long-term prospects of BTAB's business, given its limited franchise in the domestic market, high concentrations on the balance sheet, the challenging operating environment and uncertainty over BTA's strategy post-restructuring and long-term commitment to the Belarusian market.

BTAB's ratings reflect its standalone credit profile. Although reported asset quality remained adequate with NPLs (loans overdue by 90 days) accounting for 1.3% of the loan book at end-Q309, the loan portfolio remains highly concentrated (the top 20 borrowers at end-Q309 constituted 45% of gross loans), unseasoned and largely foreign currency-denominated (72% at end-Q309), which leaves potential for further asset quality deterioration in the current difficult economic environment. BTAB has reorganised its liabilities structure in favour of customer funding, which grew to 72% of non-equity funding at end-Q309; however, it remains concentrated. Fitch is informed by BTAB that by early November 2009 the bank had repaid all its interbank borrowings (mainly to the parent) and currently subordinated debt (USD4m) and trade finance deals (USD5.5m) are the only outstanding obligations (owed to BTA and other foreign banks).

At end-Q309, the bank's tier 1 Basel I capital ratio was 17%. Fitch estimates that BTAB's tier 1 Basel I capital ratio would have been 33% at end-Q309, if the first part of the capital injection (USD11.8m) had been included in equity at that time.

BTAB is 99.3%-owned by BTA and focuses on SME and retail lending. At end-Q309, BTAB had USD91m in assets, and held 0.3% of system assets and retail deposits.

Rating actions as follows:

Long-term IDR affirmed at 'CCC'; removed from RWN; assigned Negative Outlook

Short-term IDR affirmed at 'C'; removed from RWN

Individual affirmed at 'E'

Support affirmed at '5'

In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs.

Outstanding issues:

1 issue(s) outstanding worth BYR 10 000 000 000

1 issue(s) outstanding worth USD 5 000 000


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