(The following statement was released by the rating agency)
MOSCOW, July 10 (Fitch) Fitch Ratings has affirmed Russia-based
(UTB) Long-term Issuer Default Rating (IDR) at 'B-' with Stable
Outlook. A full
list of rating actions is available at the end of this
KEY RATING DRIVERS
UTB's ratings reflect the bank's weak asset quality, narrow
moderate capitalisation. At the same time the ratings reflect
pre-impairment profitability and currently comfortable liquidity
Asset quality risks stem less from high non-performing loans
(NPLs; more 90 days
overdue), which are fully reserved, than from weakly provisioned
loans. The former accounted for 13.8% of gross loans at
end-2013, while a
further 7.3% of bad loans were transferred to debt collection
companies with the
bank retaining credit risk. Both categories were fully covered
impairment reserves which equaled 22% of total loans. However,
loans, which would otherwise be NPLs, accounted for another
14.7% of loans and
were weakly reserved.
Fitch Core Capital (FCC) ratio stood at a reasonable 15.2% at
regulatory Tier 1 ratio was much tighter at 7.4% at end-4M14,
mainly because the
former includes property revaluation reserves, and due to a
risk component under regulatory rules. Total regulatory capital
ratio was 14.1%
at end-4M14, allowing the bank to increase impairment reserves
by only 4% (up to
a maximum 19%) before breaching the minimum required 10% capital
ratio which is
a small buffer for the bank's high restructured loans.
Pre-impairment profit was reasonable at 5.4% of average gross
loans in 2013,
offering additional loss absorption capacity. However, this was
cover impairment charges in 2013, leading to moderate
bottom-line losses. The
bank also showed a small loss in 5M14 regulatory accounts.
UTB's liquidity is comfortable with liquid assets covering 40%
of total customer
accounts (main source of funding representing 95% of total
UTB's ratings could be downgraded if asset quality and capital
greater pressure. Upside potential is currently limited taking
into account the
narrow franchise and weak asset quality.
The ratings are as follows:
Long-term IDR: affirmed at 'B-', Outlook Stable
Short-Term IDR: affirmed at 'B'
Viability Rating: affirmed at 'b-'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
National Long-term rating: affirmed at 'BB-(rus)', Outlook
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Additional information is available at www.fitchratings.com.
Applicable criteria, 'Global Financial Institutions Rating
Criteria', dated 31
January 2014, are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
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